Strategy of the month! Payment of CGT Liabilities....
Sell off 50% of the managed funds that you own to release cash of $175,000. This will create a ‘simple’ taxable event of $175,000 capital gain (assuming there is no cost
base). Tax on the gain at 48.5% is equal to: $175,000 = $84,875 concessional tax treatment (50% of gain), means the gain is now $87,500, thus the tax on the capital gain at 48.5% is some $42,437. This ‘concessional tax treatment’ is because you have owned these assets for > 12 months so this is now calculated at the concessional rate of 50%, hence $42,437 tax is due. You do not wish to pay more tax than is necessary and as such wish to pursue a strategy that will reduce approximately 75% of the tax that you have to pay. This is because you believe “it to be fair to pay some tax …”.
Implementation of the Strategy
You have decided to include forestry in your investment portfolio because of the good returns that forestry generates over the medium to long term and because there are some tax benefits attributed to investing in a MIS.
As such and based on your comments that to pay some tax “is fine”. An investment in Rewards Group Teak and Sandalwood forestry projects to the value of $63,000 inclusive of GST is recommended and is as follows:
|6 Teak units
||$39,600 (inc GST)|
|6 sandalwood units
||$30,000 (inc GST)|
||$69,600 (inc GST)|
You use $6,900 dollars cash as a deposit.
You lodge a BAS and receive some $6,327 GST refund. This effectively makes the up front cash required of $633.
Your net tax deduction that you are able to claim is now $63,272 and assuming that you are paying ‘top marginal tax rates’, as you are on your income and accordingly the capital gain, this should save you approximately 48.5% tax on your income and gains.
Accordingly this should put some $30,687 ‘back in your pocket’.
Plus the GST of $6,327 ‘back in your pocket’.
This results in the following existing/ new position reconciliation:
The new position is calculated as follows:
|50% of gain
|Rewards tax deduction
|New assessable gain
|Tax @ 48.5% on gain
This makes you some $30,687 better off!!!
Now, what do you do with the $163,250 windfall benefit from selling down part of your investment portfolio?
Strategy of funds application
Use the GST benefit to pay off $6,327 from the $62,640 loan that you have selected to be on a 12 months interest free terms.
The monthly repayments are some: $5,282.04, so the GST will cover the first month’s payment and leave you with some $950 for ‘personal spending purposes, enjoy a small part of your windfall gain’.
Thereafter you have 11 more payments to make totalling some $58,102.44
This leaves you with a ‘net, net’ position at the end of 12 months of some $105,147
Use these funds to pursue options such as:
Pay out your mortgage of $50,000 and use the balance to purchase an appropriate fixed interest, SECURE, property backed income stream. The income generated can also be used to dollar cost average ‘back into Australian equities or managed funds…’.
Use the $105,147 as a substantial down payment on a suitable property investment in a suitable coastal region that may experience
strong demand and capital appreciation in the years to come…
You choose and recommend the strategy!!! By using the Rewards Teak and Sandalwood projects you create CHOICES for you and your clients that they may not have previously thought about accessing.
As well you create a high value, low volume forestry investment
for their portfolio. This provides diversification and
forecasted future income. Check for available agribusiness
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indications of performance returns are historical and can not be
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