Executives and business owners in the mining and resources industry with lower-earning spouses have unique opportunities to enhance wealth creation and build a secure financial future. If most of your assets, including vested share scheme shares, are held in your name, or if you have a significantly higher superannuation balance than your spouse, strategic financial planning can provide significant benefits.
By optimising superannuation contributions and restructuring investment assets, you can reduce tax liabilities and accelerate wealth creation. These strategies can help you achieve early financial independence and make the most of your financial situation. However, not utilising these opportunities can result in higher tax burdens and missed chances for financial growth.
Maximising Wealth Through Superannuation Contributions
One effective strategy for reducing tax liabilities and achieving financial independence sooner is to optimise superannuation contributions. By being strategic in regard to your spouse’s super, you can reduce the overall tax burden for your family while enhancing your combined retirement savings.
Spouse Contributions:
Making contributions to your spouse’s super fund can lower the taxable income for the higher-earning spouse, leading to potential tax savings. These contributions are especially advantageous if your spouse’s income is below the threshold for receiving the maximum tax offset. You could receive a tax offset of up to $540 per year by making a super contribution on behalf of your spouse (married or de facto).
Contribution Splitting:
When one partner has a higher super balance than the other, splitting eligible contributions from the previous financial year can help manage super savings and other benefits more effectively. This could be of significant benefit if your spouse is older, as this may provide earlier access to superannuation or allow you to commence a tax free pension account earlier.
Government Co-Contributions:
Making after-tax contributions to your spouse’s super fund may qualify them for government co-contributions, boosting retirement savings.
Concessional Contributions:
Depending on your spouse’s level of employment income, business income or investment income, there may be an opportunity for them to make tax effective contributions to superannuation. This not only reduces personal income tax payable, but also allows an accumulation of assets in a tax effective manner. This can often be overlooked for business owners, who may not be making the most of the superannuation tax savings available to not only themselves but also their spouse.
Furthermore, if they have a low superannuation balance, they may be able to catch up unused tax effective contributions from prior financial years.
Smart Asset Restructuring for Tax Savings
Restructuring investment assets can significantly reduce your overall tax burden by holding income-generating assets (including vested executive share schemes) and having future capital gains in your spouse’s name. This strategy can lead to substantial tax savings for your family.
Tax Benefits:
Transferring investment assets to your lower-earning spouse, results in the income generated from these assets being taxed at a lower rate. This reduces the overall tax payable by your family. This approach is particularly beneficial for high-income earning executives and business owners looking to optimise their tax position.
Capital Gains Tax (CGT) Implications:
Future asset sales can also be more tax-efficient when assets are held in your spouse’s name. Having a lower income earning spouse may result in capital gains tax incurred upon the sale of assets being lower, resulting in significant tax savings.
Mitigating Legal Liability Risks
Retaining assets in the name of the higher-income earner, who may hold significant legal liabilities due to their professional role as an executive or business owner, poses a risk. By restructuring and transferring these assets to your spouse, you can protect your family’s wealth from potential legal claims. This strategic move not only reduces risk but also enhances the financial security of your family.
Avoiding Financial Pitfalls by Optimising Strategies
Failing to leverage financial planning strategies can lead to significant drawbacks for executives and business owners with lower-earning spouses. Without strategic planning, income from investment assets, including ESS, held in the higher-income earner’s name is taxed at higher rates. This results in paying more in income and capital gains tax.
Additionally, not utilising superannuation contributions and investment restructuring opportunities means missing out on valuable tax savings. Moreover, if there is an age gap between spouses, contribution splitting allows for earlier, tax-effective access to super funds.
Take Control of Your Financial Future Today
By leveraging effective financial planning strategies, executives and business owners in mining and resources with lower-earning spouses can significantly reduce tax liabilities and enhance wealth creation. By consulting with a professional, you can effectively implement key strategies such as optimising superannuation contributions and restructuring investment assets. This guidance is essential for achieving early financial independence and securing a prosperous future for your family.
Take charge of your current financial situation and contact us for a consultation. To learn more, please contact James Marshall on +61 (0) 7 3007 2000 or email contact@resourcesunearthed.com.au to organise a 20-minute no-obligation discussion.
To learn more about James, visit this link.
Resources Unearthed is a solutions hub that connects senior executives, established professionals, and business owners in mining and resources with proven specialist advisers.
Stratus Financial Group and its advisers are Authorised Representatives of Fortnum Private Wealth ABN 54 139 889 535 AFSL 357306. This advice is general and does not take into account your objectives, financial situation, or needs. You should not act on it without first obtaining professional financial advice specific to your circumstances.
*Please note: For financial advice and services relating to this matter that are not offered under the Fortnum Private Wealth AFSL, in accordance with our collaborative advice model, when required, such matters are referred to appropriately qualified professionals.
