Episode Details

According to the ATO, over 70% of people engage the services of a tax agent/accountant. However, according to Blackrock, only 15% of Australians have a relationship with a financial advisor.

I believe that many people would benefit from having both. In fact, to crystallise the most value it is imperative that they have a close working relationship. To make my point, I would like to share some real-life stories about how integrated financial advice and tax advice can be and the value created when the approach is seamless.

I believe that lots of people are missing a lot of financial opportunities simply because they don’t have the right advisors. This is such an easy problem to solve. The key point of this blog is that tax and financial planning are so heavily interrelated and if not looked after properly, many opportunities could be missed.

Real-life stories

I could list all the pros and cons of having an advisory team that can provide both financial and tax advice, but I think that is both boring and relatively unconvincing. Instead, I have shared some stories below about some clients we have worked with recently. Whilst their financial circumstances are all different, I think they do demonstrate how interlinked tax and financial advice can be.

Use of tax losses

I was working on a plan for a new client. He has made some investment in the past that didn’t work out how he had hoped, and as a result had a lot of carried forward tax losses in a unique type of trust (hybrid discretionary trust and not a type we would typically recommend using). Part of the client’s financial plan included investing in shares and I wanted to investigate whether we could somehow utilise these carried forward tax losses.

The manager of our tax business was able to quickly review the trust deed, arrange a lawyer to draft documents to change the structure of the trust and confirm we can use the losses. This helped me finalise the plan (share investments will be owned by the trust) and has resulted in a great saving for the client and far less tax compliance risk for the client.

Start super pension to save tax

Whilst preparing SMSF financial statements for some clients, our accountant noticed that one of the members just had a birthday and as such reached her preservation age. He came and spoke to me and asked if we should therefore convert her account into pension phase as it then attracts a zero tax-rate. Of course, I agreed. A close working relationship, and our strong focus on finding ways to add value, have resulted in a perfect outcome for this client.

Structure of investments

This client was self-employed and had a company with a reasonable amount of retained profits in it. If we paid the profit out of the company (via declaring a dividend), the client would have paid more tax. Whilst formulating their investment strategy, our accountant and I considered how best to utilise these “trapped” profits. Considering we were going to recommend the client invest in a property, we advised the client to purchase that property as tenants-in-common such that the company owned 20% of the property and the clients owned the rest (in personal names). This allowed the clients to put that money to good use without crystallising additional tax liabilities (and it helped them avoid messy Div. 7A loan compliance issues).

Structure of super contributions to ensure you get a tax deduction

If you are self-employed, making super contributions can become messy and if you get it wrong, you might miss out on a tax deduction. Often, from a financial planning