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Family Trusts - a legal way to pay less tax
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Disclaimer: i am not an accountant or financial adviser. this is general knowledge only and not advice. you should seek advice with a professional who can tailor that advice to your personal circumstances.
Hi fiaustralia - i wanted to bring the idea of starting a family trust to your attention. This is one thing that i find many people overlook, or don't consider when planning their long term investing.
A family trust allows your investment assets to be managed for the benefit of your family and yourself. Like all trusts, a family trust must pay out all of its capital gains and income at the end of the year. However, family trusts have complete discretion as to how they pay these funds out. Let's consider an example:
John's salary places him in the 37% tax bracket (earning between $90k to 180k). John's wife however is in the 32.5% tax bracket. They have three children, one is 18, one is 16, and one is 12.
That year John's investment portfolio (that he has cleverly positioned inside his family trust) pays out $40,000 in a combination of capital gains* from sold positions and dividend income. If John was to pay tax on that at his marginal rate (37%) he would pay $14,800 to the tax man.
Let's improve that.
First of all, each child under the age of 18 can earn a tax free income of $416. That means that the family trust can prepare a note that it has distributed $416 (or paid expenses on their behalf) to the two younger children. that means $832 of our investment gain is now tax free, and we still have $39,168 to deal with.
What if we distributed it to John's wife? - at her tax rate (32.5%) - she'd pay $12,729. So we've already saved $2,071 over John paying the tax. But we have a better option still!
What if we distributed it to the child who has turned 18? - well then we can distribute the entire thing nominally in his name. the tax paid on this would be.. $3,572+(32.5%x(39,168-37,000) = $4,276. This is before we consider the benefits of any franking credits as well.
So there's a super quick example to show you how a family trust can save you tax in the long run. these post tax funds can then be plowed back into the family trust and allowed to compound.
This only scratches the surface of what you can do with advanced tax planning - e.g. corporate beneficiaries and div7a loan shenanigans. I'd highly recommend speaking to a good accountant for formal advice on a family trust and how it could benefit you if you have significant (say $100k+) savings outside of super.
*=for simplicity the cgt discount has already been applied
Top Comment: Yeah, but what's old mate paying to set up the trust and maintain it?
Refugee family claims Canadian tax dollars are being wasted on overpriced temporary home
Main Post: Refugee family claims Canadian tax dollars are being wasted on overpriced temporary home
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An organization hired by the federal government, called Polycultural, is paid to help resettle refugees. The Talash family were shown a semi-detached house in Mississauga. Polycultural would sign for the rental at a cost of $4,500 a month in taxpayer dollars.
CTV National News found other semi-detached homes in the same area renting for $1,500 less. To the Talash family, the home appeared rundown and overpriced.
We're all getting fucked and nobody cares, and nobody will stop it because there's no accountability.
Providing a 1098 to borrower as lender in family mortgage
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We made a mortgage/loan secured by a primary residence to a family member in 2022. There is no escrow account involved. We're supposed to provide a 1098 to the borrower.
Is the 1098 we provide to the borrower supposed to be an exact copy of the 1098 we file to show interest payments, or is it supposed to be filled in differently? Thank you.
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You don't sound like a business, you should not file a 1098.
Who Must File
File this form if you are engaged in a trade or business and, in the course of such trade or business, you receive from an individual $600 or more of mortgage interest (or $600 or more of MIP, if section 163(h)(3)(E) applies for the reporting year) on any one mortgage during the calendar year.
https://www.irs.gov/instructions/i1098#en_US_2022_publink27977qd0e305
Prince Charles and his family will pay no inheritance tax. The poor do. Is this fair?
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Charles and family has just inherited massive wealth. Billions, lands and companies. He can spend the money on whatever he likes. Promoting homeopathy or Prince Andrew’s legal problems.
If your mother worked her entire life and left you a small family holding you’d be forced to pay around 40% in tax, and some of that tax would go to subsidise the monarchy.
Is this really fair?
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Of course it's not fair.
Neither it's fair that the rich can put their money in a trust fund and avoid paying tax that way.
The question is what are you doing about it? Are you voting for politicians who are advocating tax reforms?
is 62k rand per month (pre tax) enough for a family of 3?
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Hello folks, greetings from US
I was considering moving my family from the US to Capetown over the next year or so and before i went down this path of research i had a few questions
- Does anyone whose migrated from US to Cape have experience getting a perm visa? I was considering a work visa but if there are other options lmk please
- With a small child (1yr old) we have to start planning for their schooling, are you satisfied with the level of education in Cape?
- Can we get by on my salary? no plans to buy home as of now but with Rent/Food/Medical/Toddler/Auto i would like to know if anyones in my situation
I am black if that matters
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Hi,
I have a wife and kid (1.5 year old), live in Durbanville (a suburb of Cape Town) and now make 60k.
- No
- Apparently we have some of the best education in the world.. We'll be sending our guy to Reddam when the time comes.. school is pricey af from what I hear..
- My bond payments are around 17k a month. We're all on medical aid (only hospital plan) 5-6k. Paid off car so no payments there.. we seem to come out fine every month.
About to become a family - tax advice
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Howdy
Wife and I about to have a kid. Two young professionals, household income of 260k living in Brisbane. We both have investment properties in our own names and a joint PPOR. No non-property debt, about 100k cash and extra contributions going into super.
Is there a place we can go to better understand the tax deductions and entitlements available for the next 5 years of our life? Child care, income distribution etc?
Mainly wondering, maximizing household tax implications of my wife not having income yet ensuring these deductions are not lost for her IP. Can I claim these deductions as the single provider?
Any general advice from others in a similar scenario? Happy to read general thoughts on family finance!
Cheers
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Are you me? My wife and I are in the position where we're thinking of spawning soon. Also Brisbane, also non-property debt free DINKS with good jobs.
One question I keep asking my wife is "how do you know what we're entitled to?".
Do Centrelink run sessions where they talk you through FTB stuff, or how to apply for Baby Bonus, and that type of stuff?
If you do get good leads, OP, please keep us all informed as I too would be keen to learn
Changes to capital-gains tax may prompt doctors to quit, CMA warns
Main Post: Changes to capital-gains tax may prompt doctors to quit, CMA warns
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Not widely known, but doctors are able to incorporate - it's the trade-off the government made that stops increasing healthcare costs in exchange for lower personal taxes (most corporations that are sub $500k are taxed at 12.5%, and then respective payments from that corp to doctor are taxed as dividends). Some doctors likely just keep as much funds in the corporation until retirement comes around. But at some point, they need to withdraw those funds which are taxed as dividends / capital gains.
So this raising of capital gains tax has a direct impact on those doctors who incorporated. Just not sure where they will go or what they will do if they quit...
Paying taxes as an aupair
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I’m am in the process of matching with USA family’s (I’m from UK) and I am worried about the taxes part of it. How does it work, how much does it cost? Am I right in understanding your pay check isn’t taxed but there is a tax season? This is all new to me and I’m scared. If I do it wrong do they cancel the visa?
Top Comment: Au Pairs should save approximately 10% of their stipend for taxes. If you arrived in October 2024, you’d be responsible for paying taxes for time earning money October through December 2024. Taxes are paid by April of the following year, in this example April 2025. We always recommend to our Au pairs to get a savings account and a checking, and make sure to put $20 in the savings weekly.