How the Wealthy Play the Game of Tax

by Kelvin Davis

One of the things that separates the wealthy from the middle class is how they play the Game of Tax. Most people strictly follow the laws set by the government not realizing that there are loopholes you can use, like how the wealthy continuously look for one that would benefit their pockets.

From my years in business, I learned that there are only two main things you need to know when playing the Game of Tax:

  1. How much tax you need to pay
  2. When you should pay it


How much tax you need to pay            

When it comes to taxes, less is more. Paying less taxes gets you more purchasing power and more cash to reinvest. Knowing how much tax you need to pay will have to start with financial literacy – different countries, different entities, and different incomes have different tax rates. I suggest brushing up on your knowledge or have an accountant teach you the fundamental rules.

In the Australian taxation system, income tax is collected on your earned income, passive income, and portfolio income. Earned income is your personal income and is taxed highest. Passive income refers to property income which has depreciation, amortisation and special building write-off allowing for tax advantages. Portfolio income on the other hand are capital gains. This income type also has tax advantages.

Being smart about your income stream as well as where you keep your money will give you the ability to leverage on taxes. When your money is kept in property investments and stock market shares, you get higher income with lower taxes.


When you should pay tax

Technically, there’s only two ways to pay tax – before expenses and after expenses. You pay tax before expenses on your personal money, which is classified as personal and taxable income. Businesses and corporations, however, pay tax after overall expenses allowing them to spend the currency with 30%-50% more value. How does this translate to your daily financial transactions?

Anytime you take out money from your business and transfer it to your own name, you are then subjected to paying the common applicable (costly) income tax. The secret is keeping your money outside of your personal accounts, only moving the necessary amount to your name.

Note that I am not recommending breaking any laws – but you should know how to use this rule to your advantage. Your personal expenses can be charged as business expenses, but to change your tax you have to change your facts. As long as you make sure that you are not breaking any law while doing so you’ll be able to enjoy your money more.