Where to Put $50k to Reduce Taxable Income

macadamia on 02/02/2024 - 16:39
Last edited 02/02/2024 - 18:28

hello OzBarginers
disclaimer: I'm not asking for financial advice rather suggestions to look into and do my own research…
I have about $50k sitting in an ING savings account at the moment earning 5.5% but paying marginal tax rate of 32.5% on that so really only earning 3.7675%

I have a plan to take extended time off work in a year or two and thus will have a significantly reduced personal income for the time.

So I'm looking for somewhere to park the money until then in something like an edit:ETFs!, that will have little to no interest/dividend earnings rather have safe and modest capital growth of around 5% (bonds?). The aim being to reduce the income it earns in current financial year and have a capital gains event that will happen when my income is much lower.

PS- No crypto!

Financial

Comments

  • Muzeeb on 02/02/2024 - 16:43
    +22

    jv bonds
    Bsb: 420 069
    Acc: 6942069420

    Muzeeb on 02/02/2024 - 16:43 (Collapsed - Offtopic. Show)
    • Jimothy Wongingtons on 02/02/2024 - 17:00
      +5

      also has 6.9% cashback in the form of JV bucks - kind of the same as normal dollars. but fun - and only useable at JV world Australia, JV world New Zealand, and JV world Brazil*

      • BewareOfThe Dog on 02/02/2024 - 17:42
        +2

        You also get a signed book of dad jokes by @jv

        • mskeggs on 02/02/2024 - 18:00
          +6

          This seems more legit than a lot of the crypto stuff that makes the front page.

      • DashCam AKA Rolts on 02/02/2024 - 18:30
        +4

        That makes €‎ent$. Cheers.

    • bloom on 02/02/2024 - 19:08
      +3

      Didn’t use any bold which leaves me suspicious

      • yadq on 04/02/2024 - 15:40

        bold move

  • Drakesy on 02/02/2024 - 16:52
    -1

    Outside of an offset account.

    ETF's are the safest/best bet.

    • bemybubble on 02/02/2024 - 16:53

      Yea but they want EFTs. Send your bank deets

  • brad1-8tsi on 02/02/2024 - 16:52
    +6

    S&P 500 ETF: IVV is where I park mine. Almost no distributions. A bit volatile but I don't get overly concerned about that.

  • Cluster on 02/02/2024 - 16:54
    +5

    Term deposit with annual payment? Time it so the payout occurs in a financial year beneficial to you.

  • AustriaBargain on 02/02/2024 - 16:57
    -5

    Gift it to me, if you gift money you can take it off your taxable income.

    • CrowReally on 02/02/2024 - 17:08
      -1

      I know this is a joke answer, but you know that's not actually true, right?

      • AustriaBargain on 02/02/2024 - 17:10
        -5

        Well I'll gladly pay the tax on it for you if you gift it to me. Actually I'll give you a tax invoice and you can pay me 50k for a five second consult which you can deduct as a business expense.

        • CrowReally on 02/02/2024 - 17:16
          -1

          Uh huh. This idea is consistent with your usual output, but I suppose that's what makes it a joke (imagine paying someone with thoughts like that for advice etc)

  • bargain huntress on 02/02/2024 - 17:14

    PS- No crypto!

    Silly

    Dollar cost average into bitcoin

    • mskeggs on 02/02/2024 - 18:01
      +1

      Lol.

  • wiipantz on 02/02/2024 - 17:17

    Marginal tax policy is a bit rough IMHO

    In terms of hiding assets use a spouse was one method?
    Super is an option potentially but will only cover so much plus you want easy access…
    High yeild investment AMG?

    Or ETF / Bonds with your partner or trust depending, in saying that if you just stick it in the Bank is an easy win of sorts if inflation curbs enough.

    Fair question, g'luck

    • macadamia on 02/02/2024 - 18:32
      -2

      right! if I earn bank one year and want to take half the next year off I should be able to average my income over the two year period.

  • JimmyF on 02/02/2024 - 17:24

    Put it all on Black… Either make your problem go away, or make it twice as bad.

    • brendanm on 02/02/2024 - 17:49
      +3

      Luckily it wouldn't be twice as bad, as gambling winnings are non-taxable.

      • JimmyF on 02/02/2024 - 18:30

        Winnings not, but the 'interest' from said winnings are.

  • brendanm on 02/02/2024 - 17:32
    +1

    Do you have a mortgage?

    • macadamia on 02/02/2024 - 19:22
      +1

      I do but it's small and already fully offset

      • BLAIL on 05/02/2024 - 08:42

        couldn't you just pay some/all of it off? Or am I missing something?

      • Inertia-g on 10/02/2024 - 09:45

        Have you looked in to debt recycling to turn your bad debt into good debt?

  • mskeggs on 02/02/2024 - 18:06
    +1

    An investment with limited income but capital returns in three years time would be your best bet.
    That sounds like real estate, if you listen to the spruikers, but I wouldn’t recommend it with such a short window.
    Maybe a share market ETF targeting growth (as opposed to income). A lot of US shares focus on capital gain rather than dividends.

    I guess $50k is a too little to do real tax structuring, but if no income every 4 years was repeated, you might look at ways to channel your income to maximise the CGT discount.

  • Ryk on 02/02/2024 - 18:46
    +1

    partner's account?

  • Dollar General on 02/02/2024 - 19:00
    -1

    Even after paying tax you are still ahead and you’re not happy.

    I don’t get the extremes people go to for tax minimisation instead of seeking out income growth.

    • Pcosmic on 02/02/2024 - 19:08
      +3

      It's called tax optimisation

      • Dollar General on 02/02/2024 - 19:12
        +2

        So buy an ETF that could go down in value just to save a few hundred bucks at the most

    • brendanm on 02/02/2024 - 19:19
      +1

      People don't like to see their money wasted.

      • Dollar General on 02/02/2024 - 19:29
        +1

        First rule of wealth creation is to maximise returns not minimise tax, which you can implement a strategy simultaneously

        • brendanm on 02/02/2024 - 20:09
          +1

          ETF would arguably maximise returns over having the money sitting in a savings account, with the added benefit of being eligible for capital gains discount.

  • Ghost47 on 02/02/2024 - 19:59

    What is your income going to be? Because you can still earn $18.2k and not pay any tax due to the tax free threshold.

    If you want to aim for growth over income and are ok with some risk via an ETF then go for something like IVV which is focussed on US companies (therefore more growth focussed). There are other ETFs out there that could suit you like DHHF, which is diversified globally and also includes Australia and the distributions are therefore partially franked. VGS is also another option for a globally diversified ETF ex Aus.

    Looking at the distributions between the two they don't seem to be much different in nominal terms especially after IVV had a stock split sometime in late 2022.

  • mike6969 on 03/02/2024 - 07:18
    +1

    Super?

  • jetblack on 03/02/2024 - 08:17

    Calculation depends on your expected marginal tax rate at the point you sell… IF you go down to 20% you stand to save… About $300 in taxes a year with this plan. That's a big if.
    The effort and risk doesnt seem worth it to me

  • Inertia-g on 03/02/2024 - 08:25

    A couple of years is too short a timeframe to really do anything significant, however, some things worth looking in to:
    - there are several LICs that are authorised by ATO to have a Dividend Share Substitution Plan- DSSP (instead of using dividends to purchase shares, shares are substituted for dividends). This means the additional shares are effectively acquired at $0, so significant CGT implication if/when you sell, but if you sell when you have no PAYG, you may pay zero tax (if cgt was under the threshold, which on $50k investment it would be). An example of one of these LICs is AFI (I have set up trusts for my kids purchase small amounts of this each year to avoid the punitive tax on investment income for minors)

    • a highly franked share to reduce tax impact, such as one of the Big 4, possibly an ETF like VAS

    However, as mentioned, your horizons for needing the money is probably too short to really look at shares. It will be hard to beat the ING returns

  • joshash on 03/02/2024 - 08:27

    What some people do who want to save money… and I'm not encouraging tax evasion here - is they buy physical gold and store it in a safe deposit box.
    When it comes time to sell it, they sell for cash and side step capital gains tax.
    If they had bought a gold ETF, they'd pay capital gains tax.

    There is a spread on the sale and purchase of physical gold - but it's less than capital gains tax.

    Please remember to pay your tax.

  • spurf on 03/02/2024 - 09:19
    +1

    Your investment time frame is too short IMHO to be investing in equities based ETFs. There is no guarantee you will have a capital gain and can easily end up with a capital loss when you plan to liquidate your investment. Bonds don't generally have a significant capital component in their returns. Instead, you will be receiving regular payments that will be treated no differently from a tax perspective than your interest payments currently. I'd personally wear the $893.75/annum tax than risk having not enough money to live on when your income drops.

  • md333 on 03/02/2024 - 12:36
    +2

    Obvious answer is a term depost with interest paid at maturity. Select the term to pay out in your low tax year.
    Currently TD interest rates are a little lower than HISA, but that is largely due to interest rates being expected to go down, so you could end up ahead at the end of a year or two.

    Good info on the best term deposit options on whirlpool https://forums.whirlpool.net.au/thread/30x1jv22?p=103

  • ihbh on 03/02/2024 - 13:52

    BRK doesn't pay dividends.

  • scanuck on 03/02/2024 - 15:41

    Park it in someone you trust offset

    Really trust

    Agree on an off market fee for the troubles

    • blitz on 07/02/2024 - 23:54

      Park it in someone

      That sounds kind of messy, medically speaking. How would you make a withdrawal?

  • runamuck on 04/02/2024 - 18:26

    It's only 50k not 500k, just pay your tax as it's not that much anyway.

  • BOzBargains on 09/02/2024 - 08:18

    I think it’s too short term for ETFs. You may not get that much capital growth over the short term and there is risk that you could have capital losses. Bonds would be safer on this time frame but I think the simple option which someone else mentions is a long term term deposit. Very safe, you can time the cash flow or even stagger them over multiple months/yrs.

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