Husband & Wife Doctors Save $42,534 in Tax

Objectives: 
The two doctors are self-employed and operate through their practice company.  When they visited their accountant, they said they would like to payout their $500,000 private mortgage as quickly as possible, and restructure their affairs to save some tax as well.

Facts: 

• Family taxable income $880,000.
• SMSF with $800,000 cash at bank.
• They own $8m worth of property with $4m debt (family home plus 4 rental properties).
• Current tax paid – $277,500.

Accountant’s Advice:

• Tax Strategy 1: Salary Packaging Private Motor Vehicles – This involves transferring the 3 family motor vehicles into the practice company.
• Tax Strategy 74: Transfer Personal Investments into Super – This involves selling the $500,000 of ASX shares that are personally owned by the doctors to the family SMSF. This results in the $30,000 annual dividend income being taxed at 15% in the SMSF, versus 49% in their personal names. This strategy also results in $500,000 of cash being withdrawn from the SMSF and used to repay their private home mortgage. This saves $20,000 in non-deductible interest expense pa.
• Tax Strategy 85: $20,000 Asset Write-Off – Transferring the 3 motor vehicles to the practice company creates a $50,000 tax deduction.

Results:

• Pays out their private home mortgage.
• Reduces family tax expense from $277,500 to $234,966 per year (saving $42,534).
• Provides for their retirement.