Freedom First

CHAPTER 17Free to grow

Free from the Income Trap — working for growth.

So I’d given David a lot to think about with tax, and had taken him from straight-line ‘deduction thinking’ to thinking three-dimensionally: realising the power that being in control of more levers afforded him to make more choice, such as moving income up and down, backwards and forwards, or ‘transforming’ it entirely.

The last bit — working for growth — David found particularly interesting.

In one conversation he admitted that when he started his business he’d only been thinking in terms of how much income he could make doing it.

But now he had another goal: a goal that made facing higher tax rates in his second year more bearable.

Instead of just making enough to get by, he could be building up a nest egg for his future — without ever having to set aside money to ‘save’ for retirement.

The business he was building had a value. His business was an asset. And assets are taxed differently.

• In Australia if you are nearing retirement and you’ve been in business for over 15 years you can sell your business for up to $6 million dollars tax free.
• If you sell when you are younger, even if you have been in business for less than 15 years, you can still get a 50 per cent discount on capital gains for the sale of ‘active assets’ like a business.
• Up to $500 000 of capital gains can be put straight into a retirement account at any age without paying tax on it at all.
• Or you can defer the ‘capital gains’ from the ...