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
ASIC has released the results of its first adviser exam to be held in 2025, with 241 candidates attempting the test.
Quarterly Wealth Data analysis has uncovered positive improvements in financial adviser numbers compared with losses in the prior corresponding period.
Holding portfolios that are too complex or personalised can be a detractor for acquirers of financial advice firms as they require too much effort to maintain post-acquisition.
As the financial advice profession continues to wait on further DBFO legislation, industry commentators have encouraged advisers to act now in driving practice efficiency.
