This article was originally published on AcuityMag.com on January 30th, 2023

Australian accountants can do more to minimise their clients’ tax liabilities. That’s the view of Damon Bensein, senior private wealth advisor at financial services experts Elston, who says SMSFs, insurance and philanthropy are three key areas often overlooked when it comes to reducing tax.

While accountants may have a wealth of knowledge about SMSFs, they’re legally limited to providing factual information to their clients about their super options. The Corporations Act 2001, states that an Australian Financial Services (AFS) licence is required to provide advice on the subject.

“The role of financial planners and wealth advisors is to collaborate with accountants to firstly identify the right SMSF tax structure for their clients,” says Bensein. “The second component is figuring out how to get money in there in a tax-effective way.”

Investing clients’ money wisely can translate into important savings when it comes to tax time. “It’s possible to invest the money so the client owns the assets directly,” says Bensein. “That improves franking credit outcomes, which means less tax. Knowing how long they’ve owned an asset is also relevant as there are CGT discounts if it’s longer than 12 months.”

Another aspect is figuring out which entity should own the asset as it could trigger reasonably large capital gains over a period of time.

Optimising insurance

Life cover, trauma insurance, total and permanent disability (TPD) insurance and income protection insurance all provide valuable opportunities for tax benefits.

“Some people have default cover for income protection in their super, but it really doesn’t take advantage of the tax benefits,” he says. “Having income protection in your own name means the tax man will pay for a portion of the premium.

“There’s also the issue of accessibility. Someone might have an income protection policy in their super, but they may not be able to access it. It’s important that the preservation rules around money in super be considered.

Another key component is TPD. There’s a benefit in having some TPD in super, but accessibility and taxes should be considered. Having some TPD in the client’s name as well as a component in super could give them the best benefit.

Smart philanthropy

Many people choose causes close to their hearts when they make charitable donations, but they might be missing out on significant tax deductions.

“When clients’ assets aren’t structured around their giving, they sometimes make donations they’re not able to claim as a tax deductions, so it’s important to understand the criteria.

“More importantly, if there’s the sale of an asset or some sort of capital gains tax event, charitable giving can potentially provide clients with a way to trigger a beneficial tax deduction, and rather than the money going to the tax man, they’re using it to help do good.”

Click here to sign up for a free webinar on how it can optimise your clients’ SMSF investments and improve after-tax outcomes. If you would like more information, please call 1300 ELSTON or contact us.