"Tax is the single largest expense that most Australians will face over their lifetime - bigger even than paying off the family home. This means employing successful strategies to reduce your tax is essential to get ahead in wealth creation."
One of the most effective strategies to reduce tax is borrowing funds to invest - or 'gearing'. According to the accountants at Enhance Financial Partners, gearing has the potential to reduce your tax bill in a number of ways.
- The interest cost of your investment loan may be tax-deductible.
- The interest cost can be paid up to 12 months in advance. This effectively brings forward next year's tax deductions to improve your immediate cash flow. This strategy is particularly useful if your income is likely to be higher in this financial year.
- If the loan is used to purchase Australian shares, you may receive a credit for tax already paid at the company level.
- You can unlock capital to purchase additional assets, without creating a Capital Gains Tax liability.
"Gearing is effective not only because it reduces your tax bill, but because it also has the potential to accelerate your wealth creation - by borrowing additional funds, you can purchase more assets and generate more income,"
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