Tax

The impact tax has on our options is an important part to include, as it can change which option is best for a particular comparison.

The key is minimising tax is not the focus, instead its best to focus on the best after tax return.

Comments

Post a Comment

Popular posts from this blog

DIV 293 Tax

I'm considering the impact of DIV 293 on my possible IP sale, so lets see what its all about. DIV 293 tax is a fun one as it works on the lessor of two amounts. Thus some funky things occur. Now lets put aside the very good point that focusing on reducing tax is a terrible strategy, and focus on reducing tax. Formula If  DIV 293 Income > $250K  then DIV 293 applies. If  Super < Income + Super - $250K  then  Super Assessed  Else  Income + Super Assessed Note:  Income  on this page means all DIV 293 Income excluding Super. Hold My Triple Venti Half-Caf Soy Latte Wait a second, I see something... = Super > DIV293 Income + Super - $250K = Super - Super > DIV293 Income + Super - $250K - Super  (Subtract Super both sides) = 0 > Income - $250K  (Eliminate) = Income - $250K < 0  (Reverse) = Income - $250K + $250K < 0 + $250K  (Add $250K both sides) = Income < $250K Oh, I did not expect to simplify what it t...
Read more

Finance Battle: HISA vs FHSSS

Image
In this lineup let's see the difference in FHSSS and HISA. FHSSS $10K put into FHSS ends up as $8,500. Lets assume 4% deeming rate, so you can withdraw =$8,500 x 104% = $8,840. Now you withdraw with MTR 32%: = 8,840 x (100% - 32% + 30%) = $8,663.2 MTR 39%: = 8,840 x (100% - 39% + 30%) = $8,044.4 MTR 47%: = 8,840 x (100% - 47% + 30%) = $7,337.2 HISA $10K income into HISA. Lets assume 5.5% return. MTR 32%: = 10,000 x (100 - 32%) x (100% + 5.5% x (100% - 32%)) = $7,054 MTR 39%: = 10,000 x (100 - 39%) x (100% + 5.5% x (100% - 39%)) = $6,304 MTR 47%: = 10,000 x (100 - 47%) x (100% + 5.5% x (100% - 47%)) = $5,454 FHSS Relative Improvement Relative to HISA So how much better if FHSS after just 1 year? MTR 32%: = (8,663.2 - 7054) / 7054 = 22.8% MTR 39%: = (8,044.4 - 6304) / 6304 = 27.6% MTR 47%: = (7,337.2 - 5454) / 5454 = 34.5% ANZ FHSS Calculator This calculator compares over 4-7 years which is an improvement over my above calculation. I believe it also includes the impact of the withdr...
Read more

Debt Recycling and the Offset Fallacy

Image
A common miss-conception that caught me out for longer than I want to admit is the difference in 'making money' and 'no longer spending money'. When you use your offset you are 'no longer spending money', however I mistakenly thought of it as 'making money'. This meant I often miss-calculated investing while I have a mortgage. Credit Card Think of your credit card. If you spend $1,000 you start paying interest. If you repay the $1,000 you stop paying interest. Now the question, are you saving 20% pa x $1,000 forever by paying off the credit card? How do we account for the interest we no longer pay because we paid the credit card off?  I ignore it, and this applies to my offset too. The Offset Fallacy The example that made me see offsets differently was to imagine my current situation, lets say I've got a $200K mortgage with $100K in the offset. Now imagine you are debt free, and go and borrow $200K, park $100K in the offset and spend $100K on a nice ...
Read more