Splitsville ahead of tax time? It’s actually a savvy solution.
I don’t mean divorce, of course. I’m talking about income splitting. As your trusted financial adviser, I’ve got some suggestions for your consideration ahead of tax time.
Why is income splitting worth consideration? Our marginal tax rate system in Australia means couples who split their income pay less in tax… quite a lot less in tax, and subsequently retain disposable income. For example, a couple in which one person earns $200,000 a year whilst the other earns nothing has about $14,000 less to spend than a couple in which each earns $100,000.
Some ways to maximise your tax benefits include your plans regarding studying, parenting and investing.
Consider whose name your investments should be under as it may be most tax-effective for the partner on the lower income to own the investments.
Rather than one parent working full-time while the other stays at home, consider a scenario where each parent works three or four days per week.
If one member of the couple wants to study, they can be financially supported by the other. Total household income will be reduced during that time.
Let’s talk about effective financial planning ahead of EOFY.