Livestock Agent Reduces Taxable Income by $75,000

 

 

Objectives:  

 

 

Mathew is a self-employed livestock agent operating in Harvey, WA. Mathew’s twin objectives are to purchase a farm to breed cattle and save tax.

Facts:

•  Mathew’s livestock agency business produces $200,000 profit pa.
• 300,000 super balances (Mathew and Jane).
• Farm cost $600,000.

Accountant’s Advice: 

• Tax Strategy 68: Establish a Family SMSF – This involves establishing a SMSF with Mathew and Jane as members. Their $300,000 current public offer super balances are then rolled over into the new SMSF.
• Tax Strategy 193: Purchase a Farm in your SMSF – This involves the SMSF purchasing the $600,000 farm using the $300,000 cash balances plus a $300,000 loan.
• Tax Strategy 12: Concessional Super Contributions – This involves Mathew and Jane contributing $50,000 into the SMSF ($25,000 each). They will then continue making the maximum deductible super contributions for the next 6-7 years until the $300,000 loan is paid out.

Results:

• Mathew and Jane can purchase a farm to operate a cattle breeding business. This would not be financially possible without utilising their current super balances.
• The SMSF leases the farm back to Mathew to operate his farming business. Mathew receives a $25,000 tax deduction for the farm rental payments made.
• The SMSF only pays 15% tax on the rental income received.
• Mathew’s taxable income is reduced by $75,000 pa, saving $30,850 tax pa. The SMSF will be subject to approximately $8,000 tax pa.