Saving tax

I earn $70,000 a year and have $1.5m in shares returning about $55,000 a year in dividends. I have an $80,000 mortgage and no other debts.

I would like to borrow to invest in a unit to gain some tax relief. How much should I borrow so that I reduce my tax to zero or close to it?

ANSWER:

Unfortunately negative gearing doesn’t save much tax because the income from the assets you buy tends to negate the interest on the loan.

You have given no indication of your age but it would be a wise strategy if possible to progressively move your shares to a self managed superannuation fund where the income tax is just 15 per cent.

Of course you would need to take CGT into your calculations before doing this.  One possibility would be to salary sacrifice your salary down to a very small amount and cash in some shares to live on.