01 – Tax is a state of mind

Tax permeates financial planning principles. It’s everywhere. Australians pay tax on income and on capital gains. The purpose of investing is to generate income and capital gains. So tax is everywhere.

Tax is complex. It’s probably the most complex area of law impacting commercial endeavors. Full time practitioners take decades of daily practice and study to get across the issues. Many never get there. The most they realistically achieve is a sub-specialty or two: they focus on just a few areas of the tax law, rather than the entire tax law, because this is all that is realistically achievable. There is just too much to know.

It’s virtually impossible for a financial planner to be a tax expert. There is too much for a part-time tax person to know. ASIC’s tax adviser (financial) designation[1] is in some ways a dangerous designation: it can create a false sense of tax confidence, with advisers unknowingly overreaching their competency. They do not know what they do not know.

So, how can you make sure you have got the tax side of things covered? What is your solution?

The first part of the solution is to adopt a tax state of mind, and constantly ask  “What is the tax effect of this strategy? Can this tax position be improved? Is there something I do not know about in this strategy? Have I made a mistake? Have I missed something? Self-doubt and uncertainty, coupled with an inquiring mind and lots of questions, can work tax wonders.

The second part of the solution is to read this manual. This manual explains what we see as being the big issues for financial planners; the tax concepts you must be aware of; the 20% of knowledge that will create 80% of your results.

The third part of the solution is to always double check your tax advice with Dover Legal. Don’t hesitate to ask for help, or to refer a difficult question on. A competent professional knows the limits of their knowledge and expertise and that it is in the client’s best interests to get a second opinion. And you know Dover Legal is always on your side.

Further relevant reading

You can read further on tax efficient investing here: The Dover Way. Tax Efficient Investing.

You can read further on tax planning for financial planners here: The Dover Way. Tax Planning for Financial Planners.

[1] You can read about ASIC’s tax adviser (financial) designation here: ASIC on financial advisers providing tax advice.

The Dover Group