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Proper tax planning can avoid unnecessary tax!

It is important however to consider all possible ramifications of using tax structures or investment strategies that focus on tax saving.

When considering investment strategies it is important to focus on overall investment return, not just tax savings now. For example, borrowing to invest allows you to claim a tax deduction for the interest payments. At best this reduces your “borrowing cost” by 48.5%. Therefore, you need to factor in the remaining 52 cents in the dollar “borrowing cost” against your investment return.

When considering tax structures like trusts, companies and self managed super funds you should consider the legal responsibilities of these structures. It is not always “tax now” that should be the main consideration. Often, without proper planning tax structures can leave you with Capital Gains Tax liability, succession planning and estate planning issues and the fact that tax losses are locked within the structure and cannot be passed onto the individual taxpayer.

These are but a few of the things to consider. Before you proceed with the implementation of these structures consider advice from more than one source, often combining legal, accounting and financial planning.

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