As an accountant and business advisor, one thing I have noticed over time is that the rich take advice and happily pay a fair rate for it.
When the poor want advice, the first question they ask is how much is it going to cost?
They don’t care to understand the savings, which can be monumental over a lifetime.
Not only do the rich get richer, but the poor get poorer.
The poor not only become financially poorer due to mistakes they unwittingly make by doing it themselves, they also lose the opportunity to learn from new experiences.
As property investing is so rife in Australia, a good example is the difference between those that receive advice and those that don’t.
Below is a real life example:
Ownership of 8 properties, all based in Queensland, resulting in land tax payable of over $40,000 a year! The client did not want to invest in different states, therefore paying more land tax than would be the case if they invested across QLD, NSW and VIC. They chose not to invest in different structures, contributing to an increased land tax bill. They said the cost of attending to the accounting for the structures would consume all their land tax savings - which is just not true.
As they invested in the one state, they do not benefit from the Sydney and Melbourne markets which have displayed higher capital growth in the past when compared with Brisbane. In addition, they are, overexposed to the Brisbane market, which can be fickle at times (think 2011 floods).
The client hasn’t taken advantage of quantity surveyor reports, which conservatively would reduce their tax bill by $20,000 a year. That’s per year!!
All properties are held personally, which means their investment assets are personally exposed and not protected.
As they haven’t structured their investments correctly, they can’t distribute any profits to their children to take advantage of lower marginal tax rates, or distribute profits to a company to limit tax to 30%.
They did not use the self-managed superannuation fund structure to reduce income tax further. They prefer investing in their own name where they may pay tax as high as 45% rather than 15% in super. They also can’t take advantage of the tax free nature of super in their retirement because they don’t have any!
They have contaminated deductible loans by drawing down on them for personal use, and paid off their home loan which is non-deductible debt.
All up, by better structuring and asset selection, the client could conservatively save over $60,000 per year.
For me, that is a hell of a lot of money that could be put towards paying down debt or investing in another property.
However, they were reluctant to pay a fee for professional advice regarding their structure, as they have an ingrained view that professionals are too expensive.
They also found the talk of different structures too complicated, and didn’t take the time to educate themselves or ask further questions, as they didn’t want me to send an invoice for explaining it to them in more detail.
Only utilising a few components of this advice would have saved thousands of dollars per year, well in excess of any fee I could charge.
Remember, price is what you pay, value is what you get. It pays to take advice.
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