Alistair and Victoria were referred to us by a friend 5 years ago. They were seeking an accounting firm that could help them minimise their taxes and grow their wealth further, something their existing accountant wasn’t able to help them with.
They were living off their dividend and interest income of approximately $642,560 per annum.
They had an unencumbered family home, a share portfolio valued at approximately $7,200,000 and savings of $1,300,000 in Alistair’s name. And they had no debt.
The problems before we got involved
- Alistair had no tax plan in place and was paying in excess of $275,080 per annum in income taxes
- The bulk of Alistair’s share portfolio consisted of a handful of listed bank shares which were in a significant capital gains position
- Alistair lacked sufficient diversification which put his wealth at risk in the event that one or more of his shares suffered a significant drop in share price
- They had minimal funds in super accumulating in a low tax environment
- Their existing accountant was providing only a basic tax return service and didn’t have the expertise to help them reduce their taxes or further accumulate wealth
- Whilst they wanted to expand their wealth, they had no interest in managing their investments themselves and required expertise and someone they can trust to manage, grow and protect their family wealth
How Tax Effective helped Alistair and Victoria
- We conducted a detailed financial analysis to discover exactly what Alistair and Victoria wanted their wealth to do for them over the short, medium and long term
- Based on their life and financial goals, we customised a financial roadmap that outlined a step-by-step tax and wealth management plan which consisted of 3 separate asset buckets with their own strategies designed to grow wealth and fund their life goals today and in the future
- We established a higher income savings account and transferred their cash into Victoria’s name, as she was not working and earning taxable employment or investment income
- We used the equity in their home loan and helped them purchase four investment properties in Alistair’s name over a 4-year period
- We established a property and investment trust and purchased an additional two self-funding investment properties and a large portfolio of exchange traded funds
- We established a self-managed super fund and made a non-concessional contribution into the fund.
- We also established 3 limited recourse borrowing arrangements to their SMSF and used the proceeds to purchase two investment properties and a portfolio of exchange traded funds
- We negotiated significant interest rate discounts with two major banks and structured their loans to provide maximum tax efficiencies and reduce the cost of their asset buckets by tens of thousands
- We established a risk management plan to protect Alistair and Victoria from unexpected life events, interest rate rises and negative market downturns
The result so far
Since adopting our recommendations 5 years ago, Alistair & Victoria have achieved the following results
- We have successfully reduced Alistair and Victoria’s ongoing taxes by over $95,000 per annum
- By establishing 3 asset buckets, we helped Alistair and Victoria increase their investment assets by in excess of $6,800,000 above their original share portfolio and cash holdings
- The additional asset buckets have achieved a net return of $2,102,462
- Alistair and Victoria now have a self-funding portfolio of assets valued at approximately $17,000,000 which will benefit from compound growth over time and significantly increasing their family wealth over time
- Alistair and Victoria still have a substantial surplus cash flow which is being redirected into tax-free loan offset facilities to reduce debts until such time that we reallocate them to additional investments
Post becoming clients
We meet with Alistair and Victoria once a quarter to monitor the progress of their asset buckets to see how they are tracking towards their personal financial and life goals.
By monitoring their progress, we are able to factor in any life changes, their surplus cash flow and savings and identify additional tax planning and investment opportunities that can enhance their current and future wealth.
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