How Our Tax Return Process Helped Michael Save $32,263 p.a. in Taxes and Amass an Investment Portfolio of $4,037,000

3 highly effective strategies that lowered his taxes, eliminated non-tax deductible debt and increased his wealth


Michael’s journey with Tax Effective

Michael, an IT Consultant came to us to get his tax returns prepared and lodged.

He had all his expenses itemized in a spreadsheet and handed them over to his new Tax Effective accountant. However, as with most new clients, he was missing costly tax deductions that he didn’t realize were claimable.

He went through our unique tax interview process, and by end of the meeting, we’d maximized his tax return and had a complete picture of where he stood from a tax and financial prospective.

We asked Michael what was important to him from a tax and financial point of view?

What we found out about Michael

Michael was frustrated.

He jumped from accountant to accountant, expecting to find a tax expert that would do more than just enter his tax return data. Sound familiar?

Michael told us the following:

  • He was paying around $67,000 in income tax per annum and wanted to know how he could legally reduce it.
  • He’d just purchased a new property and was in the process of selling his old one but wasn’t sure if he was doing the right thing.
  • He wanted to grow his family wealth, but wasn’t sure how.
  • At some point, he wanted to upgrade his property and build the home of his dreams.
  • He only had $40,000 in his superannuation fund.


The Challenges

With this information at hand, we created a list of challenges that Michael faced.

1. Michael had no strategy in place to reduce the tax on his sizeable income.

2. He had few assets beyond the property that he owned.

3. As a contractor, he wasn’t under any obligation to contribute to his super.

4. He had a high non tax-deductible home loan, which carried a bunch of separate problems:

  • When he upgraded his home, his loan would increase significantly.
  • His tax bill coupled with his cost of living expenses meant he couldn’t save money to repay the loan quickly.
  • He’d end up with little in the way of extra funds to invest for growing his wealth.


Sticking to this course wouldn’t help Michael achieve his dream. He’d spend his entire working life paying too much tax and repaying his home loan.

This would prevent him from growing his wealth.

We needed to act quickly and efficiently. And that meant creating three tax effective strategies to solve his problems, as an add-on to his tax return.

Tax Strategy #1 - Debt Reduction

Michael needed a debt reduction strategy to help with his aim of buying and building his dream home in the future.

The key issue came down to whether Michael should sell his old home to reduce the debt on the property he’d just bought.

It seems like the smart strategy. But after crunching the numbers, we found that selling the old property wouldn’t reduce his debt by very much.

So, we started looking at the benefits of keeping the old property. By putting it on the rental market, maintaining it would allow Michael to save approximately $5,000 in tax per year.

By adding these tax savings to the anticipated rental income we worked out that he’d only have to outlay $3,977 per year to cash flow his old property.

That meant Michael would just need to wait for a capital gain of 1% to break even. After that, further gains would generate a profit.

We estimated 7.2% per annum of capital growth over the span of 10 years. 

Instead of selling the old property, Michael started renting it out to turn it into a debt reduction asset.

We also helped him to restructure his principal and interest home loan. Michael repaid $6,230 of the principal each year before coming to us. This reduced his tax deductibility options.

To remedy this, we restructured the loan into an interest-only mortgage. The money saved on principal repayments for the loan, plus any surplus savings, was redirected into an offset facility for the new property.

By reducing his non-tax deductible debt as opposed to his tax deductible investment debt, we increased his return on investment (ROI) by 100%.

Tax Strategy #2 - Wealth Accumulation

The amount Michael paid in loans, taxes and living expenses left him with some savings, however this was insufficient for accumulating wealth if invested on its own.

And the dream property he intended to buy added another wrinkle. Any strategy that we created would need to take this into account.

We examined his expenses to find out how much he could save per year. Combined with his home equity, we hoped to use these savings to form the backbone of his strategy. We got to work on accumulating wealth into two buckets.

Bucket #1 – Buying Two Residential Investment Properties

Michael had a healthy surplus income. So, we devised a strategy that would leverage some of this income for investment.

Our strategy called on him to buy a pair of investment properties. This would provide him in excess of $30,000 in tax deductions.

And after combining his tax saving with the rental income, both investment properties would cost him a total of approximately $7,000 per annum, which he could easily fund.

If Michael had used this $7,000 to repay his home loan, he’d only achieve a return on investment of $420 per annum. However, if the two investment properties grew by a minimal amount, he would generate a gain of between $35,000 and $50,000 per annum.

That’s already a massive difference.

That initial $7,000 outlay opened the door for tax effective long-term wealth accumulation.

Bucket #2 - Managed Share Fund Contributions

We also created a managed share fund for Michael.

We told Michael that regular contributions would help with both diversification and liquidity. A managed share fund would also provide further investment income.

Finally, the capital growth the fund achieved would help him repay the loan debts he’d accumulate in the future. The aim here was to ensure that buying his dream property had as little an impact as possible on Michael’s lifestyle.


Tax Strategy #3 - Retirement

The lack of money in Michael’s super also presented some problems. He had no tax effective wealth accumulation strategy in place for his retirement.

We convinced Michael to start making regular super contributions for the following reasons:

  • He would only pay 15% tax on the portion of income he added to his super, rather than 47%. That’s an overall saving of 68%.
  • This 15% rate would also apply to any earnings he generated from his investments. That means a higher ROI and more retirement savings.


Michael took our advice and used our tax deduction strategies to build his super up to $250,000.

We then advised him to establish a self-managed super fund (SMSF).

Placing enough money into his SMSF allowed Michael to use the money as a deposit plus costs to purchase an investment property and borrow the remaining funds to complete the purchase. It also allowed him to diversify his super to invest into a portfolio of exchange traded funds.

In one fell swoop, Michael increased his super’s value from $250,000 to $700,000.

The tax deductions he made due to his investments also cancelled out a bulk of tax he would have paid on his investment income and super contributions.

The use of the SMSF also means that Michael will save hundreds of thousands of dollars in the future. He’ll pay no income or capital gains tax if he sells his investments when he retires.

Best of all, his rental income, coupled with his super contributions, meant he faced no out-of-pocket expenses.

The End Result

Michael saved hundreds of thousands of dollars due to the tax effective strategies that we recommended. His results include:

  • Over $250,000 in savings on his taxes
  • The creation of a diverse and self-funded portfolio worth over $4 million.
  • The creation of structures that will save him hundreds of thousands of dollars in capital gains tax.


Our strategies also helped Michael to achieve his dream.

Michael found the perfect block of land for his dream home. He paid $1.7 million for the land and spent $850,000 on building his property.

Michael managed to fund his purchase by selling:

  • His main residence
  • One of his investment properties
  • His managed share funds


This allowed him to pay down all but $200,000 of the loan he took out to fund the purchase. Today, he has his dream home as well as a separate asset base worth over $4 million.


Frustrated with the amount of tax you pay?

Here’s the simple fact about Michael’s results.

He would not have been able to achieve them if he’d continued on his previous course. His accountant would not have created these strategies for him.

Michael wouldn’t be able to use his savings to become financially independent.

He wouldn’t have built his asset base and he’d have spent hundreds of thousands of dollars extra in tax.

This is what sets Tax Effective Accountants apart.

We don’t just do what every accountant does.

Instead, we take a close look at your personal situation. From there, we leverage over 20 years of experience to develop a solution that works specifically for you.

It all lies in our proactive approach. We’re constantly on the search for ways to drive your tax bill down and help you to build wealth. This means we create flexible plans that we can adapt to changes in regulations. But at all times, these plans work for our clients.

And the proof is truly in the pudding.

For over 20 years and counting, we’ve worked with thousands of Australians who wish to pay less tax and become financially comfortable.

Our work has generated millions of dollars in tax savings and hundreds of millions of dollars in wealth for our clients.

Most importantly, we work within the industry’s regulations. Everything that we do is 100% legal and above board. You won’t have to worry about regulatory issues when you work with Tax Effective Accountants.

The Bottom Line

It’s almost impossible to minimise taxes and build a secure financial future when you follow the standard methods. You just end up constantly repaying debt and paying taxes without accumulating wealth.

Let’s begin building a strategy together that will significantly decrease your tax, reduce non-tax deductible debt and rapidly grow your wealth.