Last week two clients called with problems.
Martin, a small business owner, is in receipt of a transition to retirement pension from his Superannuation Fund, as well as income from his business. His wife Eva is in receipt of a taxable superannuation pension.
Over the years, Eva has built up a share portfolio giving her an income of $24,000 and franking credits of $10,285. The couple asked if we could structure a method to improve their tax position.
We took the following actions:
– Established a self-managed super fund for them (we could not use Martin’s present Fund)
– Made a non-deductible contribution up to $450,000 to the Fund on behalf of Eva which was by way of transfer of her share portfolio into the Fund. Eva is under 65 years of age and this transfer meant she no longer paid tax on the dividend income.
– Commenced to pay Eva a transition to retirement pension out of the Fund, which meant the income earned by the Fund became tax-free.
In this way, part of Eva’s income as well as part of Martin’s income became tax-free.
To learn more about how a Self-Managed Super Fund can improve your tax position, join Sid Edwards CA from Abby Practice at a free seminar at the Asquith Golf Club on 22 November 2011.