Like most of the western world you are probably paying too much tax. Here's a plan to help you fight the taxman.
 
How do you save $90,000.00 in tax?
 
Lets say I have $10,000 to invest at 30% p.a. (annual return) and your marginal rate in Australia is 48.5% and in the USA 38%. Let’s also consider a country with a zero tax- rate.

	Australia	USA	Zero Rate Country
Value in 10 Years	$42,067	$55,061	$137,858

Here’s what you do.

1. Work out how much you need to retire (for our free retirement calculator Click here)
2. Set up an investment vehicle in a country that has a tax treaty with yours but which does not tax investment income until it is realized
3. Fund your investment vehicle (preferably from your employer or company as part of a salary sacrifice)
4. Get advice and choose your investments as you do now 

These structures require a high expertise level, competent tax personnel and reliable professionals. You should not attempt to implement this strategy without the help of experienced professionals. We can introduce you to these professionals when you are sure you want to learn more. 
 
Want a bit more detail? Read on…….
 
Broadly speaking the taxation systems in the U.S., U.K. Canada and Australia are the most aggressive in the world. The taxman seeks to tax all things that move. It has to be this way due to the fact that, among other things, our populations are aging and real wages are falling. Take the case of the Australian government - their budget requires 60% of all revenue to support social security and health, forget about defense, roads etc, etc.

It is also based on the fact that as a resident of a particular country you are taxable on your world wide income, while people and or entities who are not residents, are taxable only on income which is generated in the country in question. For example, property comes out of the ground and source can be no more certain than that, while on the other hand contracts with foreigners have to be examined to determine their source.
 
Now consider the Australian tax system. The marginal rate of 48.5% cuts in at $60,001. Compare that with the USA where the maximum rate is 38% approximately and cuts in at over $A500,000.00. (If you are from the US don’t get too excited yet).
 
Just imagine how much more saving you can do and quality of life you may have if you had all the distance from $60,000 up to $500,000 at rates less than 48.5%. Additionally imagine all the savings you could have if you could retain 100% less 38% than if you can retain 100% less 48.5%
 
Let us give you an example.
 
Let’s say I have $10,000 to invest at 30% p.a. (annual return) and my marginal rate in Australia is 48.5% and in the USA 38%. Let’s also consider a country with a zero tax- rate.

 

	Australia	USA	Zero Rate Country
Value in 10 Years	$42,067	$55,061	$137,858

At the end of 10 years you would have built your investment to $ 42,067 in Australia but in the USA it would be $55,061. It naturally follows if you need a loan you ask the American!
 
Let's expand the Zero Rate Country out a little further:

Yr	Capital	Interest	Total
1	$10,000	$3,000	$13,000
2	$13,000	$3,900	$16,900
3	$16,900	$5,070	$21,970
4	$21,970	$6,591	$28,561
5	$28,561	$8,568	$37,129
6	$37,129	$11,139	$48,268
7	$48,268	$14,480	$62,749
8	$62,749	$18,825	$81,573
9	$81,573	$24,472	$106,045
10	$106,045	$31,813	$137,858
11	$137,858	$41,358	$179,216
12	$179,216	$53,765	$232,981
13	$232,981	$69,894	$302,875
14	$302,875	$90,863	$393,738
15	$393,738	$118,121	$511,859

Notice the amount of $137,858 after 10 years has increased to $511,859 within a further 5 years.
 
This raises three points:

1. The power of compounding is in the tail. The longer you can employ your funds, the greater your lifestyle can be in time
2. Your ability to get ahead in life will be curtailed within Australia (in this example) while the Government takes 48.5% of your disposable income
3. Your disposable income becomes your savings ability only at the dollar point that your household necessities are covered, and that will always line up with your marginal rate.

So let us see the same table for Australians who are trying to save from their marginally taxed dollar

Yr	Capital	Interest	After Tax @ 48.5%	Available Total
1	$10,000	$3,000	$1,455	$11,545
2	$11,545	$3,464	$1,680	$13,329
3	$13,329	$3,999	$1,939	$15,388
4	$15,388	$4,616	$2,239	$17,765
5	$17,765	$5,330	$2,585	$20,510
6	$20,510	$6,153	$2,984	$23,679
7	$23,679	$7,104	$3,445	$27,337
8	$27,337	$8,201	$3,978	$31,561
9	$31,561	$9,468	$4,592	$36,473
10	$36,473	$10,931	$5,302	$42,067
11	$42,067	$12,620	$6,121	$48,566
12	$48,566	$14,570	$7,066	$56,070
13	$56,070	$16,821	$8,158	$64,732
14	$64,732	$19,420	$9,419	$74,733
15	$74,733	$22,420	$10,874	$86,280

Is this not absolutely unbelievable!!!!!!!!!!!?
 
You are only able to build your investment $76,723.00 compared to the alternative $511,859 above. Has your mind shifted to the view that “that could be the final crunch for my retirement life style”.
 
Oh and by the way, in the U.S.A. you would have $129,202.00. It’s still a VERY long way from $511,859.00, don’t you agree?
 
Life is all about getting ahead, however, in the days of big brother we have to be extremely certain to do that legally. To rely on not being caught by non-disclosure means you only have one line of defense, and unfortunately non-disclosure is also a fraud.
 
There are a number of structures available on the world arena and they will substantially be a creature of the local country. However consideration will have to be taken of the rules at home. Australia is a great example to use, as it has taken a lot of its tax legislation from the UK and USA experience.
 
Australia legislates to accrue income to Australian citizens who substantially control the foreign entity.  The income is taxed as the entity earns it, on income that is passive, or investment in nature. Australia has double taxation agreements with a number of countries and there exists three basic categories of countries by which Australia offers differing treatments tax wise. The best treatment is offered to countries with tax systems deemed comparable with Australia’s and the worst to those with low or no tax rates.
 
Probably the most satisfactory structure will be a company, trust or superannuation fund, depending on your country of residence, as these structures best blend with the fact that you may be a resident for tax purposes. The issues to face with a company are whether you have to accrue your income as you go with your Australian income, pay tax at some future date or receive certain types of dividend in an exempt manner into your Australian structure.
 
Superannuation Funds (offshore only types) have the ability to earn funds offshore, compound those returns tax free and then at retirement, which is not necessarily all that late in life, repatriate funds home in a very tax efficient manner.
 
To summarize;

1. Income tax rates reduce your ability to save for retirement
2. When the tax is collected, is the biggest determinant of how much you give the taxman
3. A structure which defers the collection of the tax allows you to take full advantage of the compounding effect of your investments
4. There are a number of structures available which legally allow you to pay tax at the end of the investment period as opposed to during the investment period
5. Savings for the average person can be in the hundreds of thousands of dollars
6. The amount of these savings will be the biggest determinant of your lifestyle in retirement 

The plan is to invest through the right structure in a jurisdiction that allows you to pay little or no tax at least until you use the money, so that you benefit from the compounding returns on your investments.
 
The result is that on quite small amounts of investment your net return is significantly increased.
 
What would you rather retire on $86,280 or $511,859?
 
Don’t you think the extra money would make a VERY, VERY big difference to your lifestyle in retirement?
 
These structures require a high expertise level, competent tax personnel and reliable professionals. You should not attempt to implement this strategy without the help of experienced professionals. We can introduce you to these professionals when you are sure you want to learn more. 

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