Time to rethink - case study
Case study
Let's consider a potential client, Marlene aged 58, who's looking for your guid-ance in establishing a retirement income.
Case study
Let's consider a potential client, Marlene aged 58, who's looking for your guid-ance in establishing a retirement income. Marlene earns $10,000 in fully franked dividends from shares she bought for $70,000 that are now worth $140,000. We'll assume she isn't employed and that she's eligible to make super contributions. The fully franked dividends produce a franking credit of about $5,600.
Your immediate strategy is to sell the shares and contribute the proceeds to su-per which she will claim as a personal tax deduction. Her taxable income will be $10,600 ($10,000 +5,600 + 70,000 - 75,000). Marlene will pay no tax on this income as the imputation credits will eliminate any tax. For 1999/00 is the last year where if you don't use all the imputation credits you loose them (from 2000/01 onwards imputation credits become fully refundable for individuals, com-plying super funds and life insurance companies). This means that Marlene will waste about $4,800 in franking credits.
For superannuation surcharge purposes, her Adjusted Taxable Income will be $85,600. This means she will have to pay super surcharge at about 7.4% on her $75,000 deduction ($5,550).
So this really good strategy has produced a tax bill of over $10,000.
Recommended for you
A former licensee director, who failed to report an adviser’s fee-for-no-service conduct, has been banned for three years by ASIC.
Coastal Advice Group chief executive, Daniel Brown, has said the firm has no intention of slowing down, with plans to do as many as 15 acquisitions in the next 12 months.
The RBA has handed down its much-anticipated rate decision, following widespread expectations of a close call.
Two national advice businesses have merged to form a leading holistic advice business with $2.5 billion in funds under management.
