How to retire early... or simply survive

[tech/a]

Do you really think that someone getting tax free super of say $100k per year (no dependents) should get a refund on franking credits when someone working, trying to raise a family and earning $100k would pay $24k in tax is fair ?

Yes of course it’s fair.

He was in the same place as struggle street at some time!

 

[SirRumpole]

Yes of course it’s fair.

He was in the same place as struggle street at some time!

Can't really make generalised comments on an issue like this. If you earn $x from whatever sources you should pay tax on it.

 

[Value Collector]

That's a lot different to someone earning $100k and paying no tax.

I am saying two people in the same situation

eg Identical people drawing the same superannuation,

Person A - earns $18,000 bank interest pays no tax

Person B - Earns $18,000 inside a company, gets $12,600 dividend with a $5,400 franking credit.

Would you allow person A to keep the full $18,000 Interest tax free, while refusing to allow person B to claim back their $5,400 tax credit?

If you do, you are allowing person A to have $18,000 to spend, while only allowing person B to have $12,600.

That would be crazy considering they are in identical positions.

 

[Wysiwyg]

Now I feel I am working more for society rather than myself more than ever. Remember the harder one works and as a duh, byproduct of harder work the more money earned, the more you owe society. I don't know what fair is anymore. Better off sittin' on ur ass and get other people to provide for you.

 

[tech/a]

Can't really make generalised comments on an issue like this. If you earn $x from whatever sources you should pay tax on it.

Why not?

If you can take advantage of the law which is current why shouldn’t you.
Super is based on the premise that eventually we have many self funded.
If over time you place yourself in that position then why shouldn’t you be able to maximise your position.

 

[Value Collector]

and the imputation credits would still be of value, as they would still count as 'tax paid' and therefore allow the individual to generate income over and above the $18,000 before they would need to pay any income tax on top of tax the company has already paid.

That paragraph makes we think you don't really understand the process?

Interest income is interest paid to you by the bank, on the balance of your cash savings.....nothing to do with company profits, it is income generated by a different type of asset. It is taxed at MTR of the individual, or whichever entity earns the interest.

whats the difference?

Both are just earnings you get by deploying capital productively.

-----------------------

If you don't think company profits should be taxed based on the investors MTR, then how do you propose to get around double taxation?

The only way would be to make dividends not taxable at the personal level, so they pay the 30% company rate and then any dividends paid from Net profit after tax get passed onto the investor tax free.

 

[Value Collector]

The confusion is where you originally stated someone receives a dividend of $18,000.....well they haven't received $18k. They have received $12,600.

The $5,400 is an imputation credit which they won't necessarily receive, in terms of a cash payment.....this is what we are discussing!

I never said they received a dividend of $18,000. I said their share of the companies distributed earnings were $18,000.

the process works like this.

1, Company earns $18,000 in share holder profits.

2, Company pays $5,200 in tax

3, Company pays $12,600 as dividend with $5,400 franking credit = $18,000

4, Investor declares $18,000 income on tax return.

5, tax office says no tax is payable on the $18,000

6, Tax office hands back the $5,200 franking credits

7, Investor now has $18,000 to spend, just as if they earned $18,000 in bank interest.

 

[SirRumpole]

If over time you place yourself in that position then why shouldn’t you be able to maximise your position.

People can always maximise their position according to the law, that doesn't mean the law can't or shouldn't be changed in different economic conditions. Tax law has changed many times over time.

 

[Skate]

I never said they received a dividend of $18,000. I said their share of the companies distributed earnings were $18,000.

the process works like this.

1, Company earns $18,000 in share holder profits.

2, Company pays $5,200 in tax

3, Company pays $12,600 as dividend with $5,400 franking credit = $18,000

4, Investor declares $18,000 income on tax return.

5, tax office says no tax is payable on the $18,000

6, Tax office hands back the $5,200 franking credits

7, Investor now has $18,000 to spend, just as if they earned $18,000 in bank interest.

A simple explanation that's spot on the mark..

An extract from: https://www.fool.com.au/2018/03/16/why-shorten-is-wrong-and-right-on-dividends/ explains it in a little more detail.

Consider three people, all of whom have SMSFs in pension phase, and who — according to the current tax rules — pay 0% tax:

1. Banking Betty,
2. Rental Richard and
3. Dividend Davina.

(a) Banking Betty deposits $100,000, and earns $2,000 each year in interest. Betty doesn’t pay any tax.

(b) Rental Richard has a $100,000 property that pays him $2,000 each year in rent. Richard doesn’t pay any tax.

(c) Dividend Davina buys $100,000 worth of shares that earned a profit of $2,000. The company paid tax of $600, so Davina gets $1,400. Davina doesn’t pay any tax.

See the difference here?

Because Davina’s investment is in the form of shares in a company, she gets less than the other two. Even though she’s not supposed to pay any tax, the company paid tax, so she gets less.

Under current rules, she’d get the $600 back, delivering on the current government policy of a 0% tax rate, and equalising the return for each of those investors.

CONCLUSION: Bill Shorten, in effect, is penalising people for owning shares.

 

[SirRumpole]

CONCLUSION: Bill Shorten, in effect, is penalising people for owning shares.

Based on your analysis I'd say you are correct. But Shorten is obviously playing to his electorate who most likely aren't big share owners just like the Libs played to theirs by wantonly extravagant schemes like 15% tax on super contributions and tax free super for over 60's and the franking rebate.

 

[Wysiwyg]

Based on your analysis I'd say you are correct. But Shorten is obviously playing to his electorate who most likely aren't big share owners just like the Libs played to theirs by wantonly extravagant schemes like 15% tax on super contributions and tax free super for over 60's and the franking rebate.

Resorting to humour in this debate or do you seriously believe that everyone should be government supported after their working life?

 

[SirRumpole]

Resorting to humour in this debate or do you seriously believe that everyone should be government supported after their working life?

Of course not but an income of $100k + super tax free is putting an unnecessary burden on those still working to pay for it.

 

[Bill M]

CONCLUSION: Bill Shorten, in effect, is penalising people for owning shares.

Yes 100% correct. Currently the wife and I are self funded, maybe we should put all of our $$$ into cash and get a measly 2%. Then draw it down, spend up big on holidays, buy new cars and blow the lot. When we turn 65 put our hands out and get free public money and health coverage for the rest of our lives at the publics/governments expense, is this what that D!CKHEAD SHORTEN wants? No brains that bloke, sorry.

 

[lindsayf]

Yes 100% correct. Currently the wife and I are self funded, maybe we should put all of our $$$ into cash and get a measly 2%. Then draw it down, spend up big on holidays, buy new cars and blow the lot. When we turn 65 put our hands out and get free public money and health coverage for the rest of our lives at the publics/governments expense, is this what that D!CKHEAD SHORTEN wants? No brains that bloke, sorry.

No need to apologise for stating a fact

 

[Toyota Lexcen]

yes you should Bill M, i think the pension for couple about 850/wk

 

[luutzu]

You've got a lot to thank your Dad for, firstly he was a business owner, which gave you the frame of mind not to be scared of owning your own business.

Secondly he obviously showed you that owning a business, wasn't all pi$$ and skittles.

Thirdly you had the brains, to work out, you put F all in you get F all out.

There is a lot of people with your background, that blow the family fortune, and there are a lot of people from poor backgrounds that break through the glass ceiling.

The problem is the current crop of idiots, both Labor and Liberal, want everybody to believe they can make it through higher education whether they can or can't.
As long as it keeps them off the dole, it's good.
It is time the Government realised privatisation has been a disaster, and took it back in house, it just means the taxpayer is paying wages rather than the dole.
Let's be honest a lot of failed ex Government businesses, if re established, would be great employers and skill generators.
By the way I'm no spiv, just love nice engineering, never owned a big cube V8 when all my mates did, I drove a 1969 Toyota Crown, that took balls in a mining town.
Now you know the scenario.lol

I drives a Suzuki Swift. Grey, plain model. And I like it too. Dam it!

It's a manual so there's some manliness in it I guess.

btw, why so against higher education? I know it's mostly shite but it does do a lot of good, especially for those from working class/poor background. And for those luckier ones who doesn't really need it to get a higher paying job, they might enroll into one or two electives, get assigned a weird book or two and could change their life (for the better).

The cost is practically nothing. It's a lot cheaper than a year in juvee. And the worst that could come from sending kids there is that they end back on a "lowly" job but would have learn a thing or two, read a few good books and put it to use here and there.

 

[Wysiwyg]

Of course not but an income of $100k + super tax free is putting an unnecessary burden on those still working to pay for it.

Okay I do see your point that at a certain level, income doesn't need tax relief. Introducing thresholds would work do you think?

 

[SirRumpole]

Introducing thresholds would work do you think?

Yep.

 

[luutzu]

So what ?

I'm beginning to think you're a commie Rumpole.

Reading the ABC for news... now this thing against corporate (no)taxes.

Was going through an annual report where another company made "a loss" for the year. But its operating cash, cash that it collects for Goods and services, was positive... really, massively positive.

So why or how is it making a loss and the gov't will now have to refund the tax it collected during the year.

It's in the non-cash "impairment" of its assets. Are the assets damaged? Got stolen, burnt down? How the heck do you claim $800,000,000 in "impairment"?

Because business aren't as good lately and those assets don't earn as much so they're worth less, i.e. "impaired".

I'm pretty sure I understand and interpret that negative "expense" correctly.

 

[SirRumpole]

I'm beginning to think you're a commie Rumpole.

Not as much as you comrade.