Beating the Taxman - strategies for traders to minimise tax

[insider]

Has anybody been keeping up with the news about John Farnams record producer being jailed for 15 months for 'tax avoidance' schemes? I thought tax avoidance was OK but not evasion...

 

[Kathmandu]

I noticed that Berumada is in the middle of North and South America, Europe and Africa... That's probably the best place for a Tax Haven... It's sooo close to everything

Vanuatu is nice this time of year

http://www.pkfvanuatu.com.vu/vanuatu_tax.html

http://www.mooresrowland.com/vanuatu international companies and offshore finance center.html

D

 

[insider]

I think Glenn wheatly couldn't keep his mouth shut...

 

[ZacR]

Insider - avoidance and evasion are exactly the same thing, worded differently and both are illegal.
Tax MINIMISATION however, is perfectly legal when done properly. But when it comes down to it, as the amount of tax you pay the government increases, the more money you should be earning yourself anyway.
Wouldn't it better to focus your energy into making more money from investing as opposed to all the effort and trouble that comes along with tax avoidance etc.
I personally am happy enough to pay the government 30 - 45 cents in the dollar as long as it means everything else is going in my pocket.

 

[theasxgorilla]

Wouldn't it better to focus your energy into making more money from investing as opposed to all the effort and trouble that comes along with tax avoidance etc.

Thats exactly what the ATO wants you to think which is why you will do what you will do and others will do what they will do.

I understand that most people struggling to build up an asset base for their families would not want to risk a run in with the ATO, but this doesn't alter the facts about how they operate.

 

[theasxgorilla]

Has anybody been keeping up with the news about John Farnams record producer being jailed for 15 months for 'tax avoidance' schemes? I thought tax avoidance was OK but not evasion...

I hadn't been keeping up with it, but from just doing a quick recap now it would seem this is the real deal. Tax evasion. If they're using tax avoidance in the media or elsewhere then they're just blurring the lines, perhaps without knowing better or perhaps even on purpose. I wouldn't trust the <harsh 4 letter word here> in a million years. You can arrange your affairs to avoid tax. Perfectly legal and as far as I'm concerned if you don't do it you're either ignorant, or lazy, or both. The ATO modus operandi depends on people being both in this country.

 

[ZacR]

You cannot in any legal way AVOID tax. You can just decrease the amount you have to pay. In fact I swear there is a saying - Death and .......

 

[theasxgorilla]

You cannot in any legal way AVOID tax. You can just decrease the amount you have to pay. In fact I swear there is a saying - Death and .......

You're speaking in absolutes ie. avoid ALL tax. I agree...in a world full of VAT or GST or MOMS or whatever name it goes by it's practically impossible to avoid paying some tax.

In anycase...your world, your reality.

 

[insider]

I have to talk to an accountant about tax minimization... I think people will like this term more

 

[insider]

So far it seems the best way is to set up a company and taxed at 30%

 

[baxter]

Wow - this has been an awesome thread. It even inspired me enough to join the forums

I currently trade full-time and am now about to start trading both on my personal accounts and also under a company structure. The reason for this is that I'm happy to pay tax on personal income tax scale which gives me the benefit of accessing the $6000 tax free threshold and then the 15% rate up to $30,000 this FY 07/08. However once $30,000 is hit, there is good reason to switch to trading on my company accounts.

I'll be paying 30% as well, but there is no limit on this. If I earn another $100,000 it's all taxed at 30%. Compare this to earning another $100,000 on my personal accounts and I start getting taxed at 40% plus. Plus, from my recent investigations on the ATO website there are additional benefits which I will be able to use under a company structure (such as having the company purchase a vehicle) - but which I haven't finished looking at yet. I also plan on keeping the money that I make by the company, in the company as trading capital, and so not making distributions.

Anyone else doing this already? Any difficulties in acutally setting up company trading accounts - I know some institutions such as COMSEC charge a small amount to set up a company account where they don't for a personal account?

It certainly seems like an efficient way of minimising tax.

Cheers, Baxter.

 

[insider]

Wow - this has been an awesome thread. It even inspired me enough to join the forums

I currently trade full-time and am now about to start trading both on my personal accounts and also under a company structure. The reason for this is that I'm happy to pay tax on personal income tax scale which gives me the benefit of accessing the $6000 tax free threshold and then the 15% rate up to $30,000 this FY 07/08. However once $30,000 is hit, there is good reason to switch to trading on my company accounts.

I'll be paying 30% as well, but there is no limit on this. If I earn another $100,000 it's all taxed at 30%. Compare this to earning another $100,000 on my personal accounts and I start getting taxed at 40% plus. Plus, from my recent investigations on the ATO website there are additional benefits which I will be able to use under a company structure (such as having the company purchase a vehicle) - but which I haven't finished looking at yet. I also plan on keeping the money that I make by the company, in the company as trading capital, and so not making distributions.

Anyone else doing this already? Any difficulties in acutally setting up company trading accounts - I know some institutions such as COMSEC charge a small amount to set up a company account where they don't for a personal account?

It certainly seems like an efficient way of minimising tax.

Cheers, Baxter.

Wow Baxter... So you're saying you can choose whether to be taxed under a company or personal income tax? How quick is it to setup one of these, I'm with Comsec?

 

[theasxgorilla]

It certainly seems like an efficient way of minimising tax.

Howdy Baxter,

I'm not an accountant, although there are some on this site, but something I would consider in your situation is that a company does not receive the CGT discount for holding a position more than 12 months. 40c becomes 20c if you hold for more than 12 months. Depending on your trading style this may not even apply to you.

ASX.G

 

[Broadside]

You can arrange your affairs to avoid tax. Perfectly legal and as far as I'm concerned if you don't do it you're either ignorant, or lazy, or both. The ATO modus operandi depends on people being both in this country.

Alternatively you are happy to make a contribution back to the society which gave you this opportunity. I know we have already argued over ethics but frankly people who choose to pay their fair share shouldn't be categorised the way you have done.

 

[theasxgorilla]

Alternatively you are happy to make a contribution back to the society which gave you this opportunity. I know we have already argued over ethics but frankly people who choose to pay their fair share shouldn't be categorised the way you have done.

I suppose that is why there is no capital gains tax for non-residents then.

 

[Broadside]

just be grateful not everyone tries to avoid tax, because our society would be the poorer for it.

 

[theasxgorilla]

just be grateful not everyone tries to avoid tax, because our society would be the poorer for it.

Hmmm. You're probably not receiving the point of my post. I'll quote William J. Berstein as he explains it better than I could hope to:

"If individuals cannot keep what they earn, they will not produce. If, on the other hand, those who produce the most are allowed to keep what they earn, inequalities will increase, and as inequality rises, societal well-being deteriorates."

I am actually all for redistributionist taxation. I want societal well-being. But that is not what this thread is about. It's about strategies to minimise tax which deals with the former part of that quote.

Societal well-being is as much about bringing the middle and lower classes up as it is taxing the upper class. And one way to improve middle and lower class standard of living is to ensure that the money they earn is not unnecessarily filtered through the inefficiencies of government.

You don't realise it and the ATO has a conflict of interest with it, but it's actually in Joe Average's best interest to try and reduce his own tax. Lest it turn into government spending. When the Goverment spends a dollar it seems to always get less for it than the public would spending that same dollar.

 

[Broadside]

Hmm, as I read it the point of your post was that people who didn't avoid tax were ignorant or lazy or both. Some people choose not to minimise tax because they see it as a way of giving something back - now you may choose to avoid tax and "give back" in other ways, or not, but the categorisation is completely out of order. If everyone took the tax avoidance path, the level of services and welfare support would be in disarray. Or should it just be a survival of the fittest free for all with no safety nets in place?

I would rather support some people who bludge on welfare if it means those genuinely in need are cared for. Even as it stands at the moment, people with intellectual disabilities etc have minimal support from the government, as do their families. If you think avoidance of tax will help situations like that - and that is but one example - then we agree to disagree. You have your ethics and I have mine. It doesn't mean I am lazy or ignorant.

 

[theasxgorilla]

You have your ethics and I have mine. It doesn't mean I am lazy or ignorant.

Okay, just so I understand your moral-high-ground perspective and to help me to also put into perspective if you're also possibly some sheep short in your top paddock, are you telling me you make no deductions or any attempt at deductions on your tax return? You just pay up?

 

[Broadside]

I claim deductions, I don't avoid tax by all means possible e.g. offshore accounts and trusts....I have the means to do so, I choose not to.