This one move could reduce your tax bill—find out what the rich aren’t telling you!
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Tax planning isn't just for the wealthy—it's a strategy that can help anyone keep more of their hard-earned cash.
While the rules can be overwhelming, knowing the key moves that the rich make can put you on a path to saving big.
So, what do the experts know that the rest of us don’t? Let’s dive in.
Tax season doesn’t have to be a headache, but for many, it often ends up in the ‘too hard’ basket.
The key to reducing your tax bill is understanding the strategies that successful people use to their advantage.
While the rules might seem complicated, these experts have figured out the right moves.
Wealthier individuals typically use a few key strategies that not only save them money but also help them grow their wealth.
Let’s take a closer look at the main methods the wealthy use to save tax—and how they might work for you.
Franking Credits
When you purchase shares or ETFs, you're essentially buying a small piece of a company.
With this ownership comes the right to receive dividends—your share of the company's profits.
What many don’t realise is that most companies pay tax on their profits before distributing dividends.
As a result, the dividends come with a franking credit attached, which can be used to offset your tax.
These franking credits help lower the tax on your investment income and, in some cases, reduce the tax on your salary too.
For example, on $100,000 in investment income made up of dividends with franking credits, you’d receive tax credits of $42,857.
Negative Gearing
One way Australians build wealth through property is by using borrowed money.
If you borrow to invest in property, the interest on the loan and the related costs are tax-deductible.
This is known as negative gearing, and it's a popular strategy used by those with large property portfolios.
In addition to tax savings, borrowing to invest gives you access to an asset you might not otherwise afford.
For example, with a $1 million investment property, you could save at least $11,315 in tax each year.
Tax Structures
Investing through tax structures like family trusts or investment bonds can save you money on tax.
By using these structures, the income from your investments isn't taxed at personal rates, which can be as high as 47 per cent.
Instead, it’s taxed at a lower rate depending on the structure.
For instance, an investment bond could tax dividend income at a maximum rate of 30 per cent, and if held for 10 years or more, you won’t pay capital gains tax.
On $100,000 of annual income from such investments, that’s a potential tax saving of $17,000 each year.
Expert Advice
Wealthy individuals know that having the right experts by their side is crucial for maximising their tax savings.
A good adviser can help you make smart decisions and avoid costly mistakes that come from getting the timing wrong.
Strategy, timing, and expert guidance are key components of financial success.
The Wrap
Tax-saving strategies aren’t just for the rich—they’re accessible to anyone willing to learn how to use them.
The four methods above have proven successful for many wealthy individuals, and with the right advice, they could help you reduce your tax bill and increase your wealth.
But like anything important, it requires taking action to see results.
Understanding these strategies can be the difference between paying more tax than necessary or keeping more of your income to invest, save, or enjoy.
In a previous story, we explored how many Australians are missing out on potential savings by overpaying on their superannuation tax.
If you haven't already, make sure to check it out for some important insights that could save you even more.
You might be surprised by how much you could be keeping.
Now that you know how the wealthy save on tax, which strategy would you be most interested in trying? Share your thoughts in the comments below!
While the rules can be overwhelming, knowing the key moves that the rich make can put you on a path to saving big.
So, what do the experts know that the rest of us don’t? Let’s dive in.
The key to reducing your tax bill is understanding the strategies that successful people use to their advantage.
While the rules might seem complicated, these experts have figured out the right moves.
Unlock the tax-saving secrets the wealthy use daily. Image source: Ben Nash
Wealthier individuals typically use a few key strategies that not only save them money but also help them grow their wealth.
Let’s take a closer look at the main methods the wealthy use to save tax—and how they might work for you.
Franking Credits
When you purchase shares or ETFs, you're essentially buying a small piece of a company.
With this ownership comes the right to receive dividends—your share of the company's profits.
What many don’t realise is that most companies pay tax on their profits before distributing dividends.
As a result, the dividends come with a franking credit attached, which can be used to offset your tax.
These franking credits help lower the tax on your investment income and, in some cases, reduce the tax on your salary too.
For example, on $100,000 in investment income made up of dividends with franking credits, you’d receive tax credits of $42,857.
Negative Gearing
One way Australians build wealth through property is by using borrowed money.
If you borrow to invest in property, the interest on the loan and the related costs are tax-deductible.
This is known as negative gearing, and it's a popular strategy used by those with large property portfolios.
In addition to tax savings, borrowing to invest gives you access to an asset you might not otherwise afford.
For example, with a $1 million investment property, you could save at least $11,315 in tax each year.
Tax Structures
Investing through tax structures like family trusts or investment bonds can save you money on tax.
By using these structures, the income from your investments isn't taxed at personal rates, which can be as high as 47 per cent.
Instead, it’s taxed at a lower rate depending on the structure.
For instance, an investment bond could tax dividend income at a maximum rate of 30 per cent, and if held for 10 years or more, you won’t pay capital gains tax.
On $100,000 of annual income from such investments, that’s a potential tax saving of $17,000 each year.
Expert Advice
Wealthy individuals know that having the right experts by their side is crucial for maximising their tax savings.
A good adviser can help you make smart decisions and avoid costly mistakes that come from getting the timing wrong.
Strategy, timing, and expert guidance are key components of financial success.
The Wrap
Tax-saving strategies aren’t just for the rich—they’re accessible to anyone willing to learn how to use them.
The four methods above have proven successful for many wealthy individuals, and with the right advice, they could help you reduce your tax bill and increase your wealth.
But like anything important, it requires taking action to see results.
Understanding these strategies can be the difference between paying more tax than necessary or keeping more of your income to invest, save, or enjoy.
In a previous story, we explored how many Australians are missing out on potential savings by overpaying on their superannuation tax.
If you haven't already, make sure to check it out for some important insights that could save you even more.
You might be surprised by how much you could be keeping.
Now that you know how the wealthy save on tax, which strategy would you be most interested in trying? Share your thoughts in the comments below!
