Strategy: sell the investment property, make additional carry-forward concessional contributions to super to reduce the capital gains tax, pay off their mortgage, use the bring forward non-concessional contributions to put as much as possible into super, change the investment options in super to a mix of passively invested Australian and International shares (reviewing this as they get older), and then every year continue to maximise their concessional contributions into super.
Outcome: They will be able to reduce work now, have enough in super in the next six to eight years to stop work completely and draw a pension from their super that will allow them to lead a comfortable life forever. Simple but effective.
Background: Couple, 38 years old, fully offset mortgage, $150,000 in super each, one partner earning $500,000 a year and the other not working, wanting to upgrade their family home and build wealth.
Strategy: Invest through a structure that provides asset protection and tax benefits. Borrow to upgrade their home and debt recycle at least $100,000 each year to reduce the non-tax deductible mortgage as soon as possible. Contribute $200,000 (to their investment vehicle) in the first year and then $100,000 each year after to invest in property and Australian and international Exchange Traded Funds (ETFs). In year one, they will use the $200,000 as a deposit to buy an investment property, and then in year two, they will use the $100,000 to buy ETFs. In year three, they will buy another investment property; in year four, they will buy more ETFs and repeat this for the next 12 to 15 years.
Outcome: they will live in the house they want; they will have enough assets accumulated in the next 15 years to provide them with a passive income of around $150,000 for the rest of their lives.
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