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Edition 16 – Why Paying Tax Is A Good Thing

Not many people like to pay tax. In actual fact, most people groan if, at the end of the year, they end up with a tax bill. Actually, groan is not the word. Sometimes, the words are unprintable!

My argument is this. If you’re paying tax, you’re making money. Simple as that.

People that don’t pay tax are generally not making enough money to pay tax.

Personally, I’d prefer to be making money.

If you’re making money, you’re able to do things such as:

  1. Build wealth.
  2. Increase the capital value of your business.
  3. Save for your retirement.
  4. Pay down business debt faster.
  5. Insulate your business against any future financial shocks.
  6. Use money to pay off your mortgage faster.
  7. Have nice cars, go on nice holidays and live in a nice home.
  8. Build a lifestyle for yourself and your family.
  9. Provide for your children.
  10. Look after other members of your family that may be less fortunate.
  11. Donate to charities and organisations whose causes you believe in.

There’s also a greater good to paying taxes.

We are fortunate to live in one of the wealthiest countries in the world.

I distinctly remember travelling in the USA in 2012 and being asked by someone where I was from. My accent had thrown them! When I proudly mentioned Australia, their immediate response was “Oh! The rich country!”

We have a very high standard of health care in Australia, despite what gripes we may have about hospital waiting lists and the availability of specialists.

We live in a safe environment where, by world standards, crime is low.

None of this is to mention the level of poverty that you see when you travel to third world countries and which we rarely see in Australia.

Even clean drinking water straight from the tap, which we take for granted, is not standard in some so called sophisticated first world countries in Europe.

Our tax system isn’t perfect. It could actually do with some further reform.

However, by and large, it is working.

If we all pay tax, we’re all creating wealth, building secure financial futures and setting our country up for a brighter 21st¬†century.

Which is why, recently, the microscope has been applied to large, foreign owned corporates and how little tax they are paying in Australia.

Or even blue blood Australian companies that have set up complicated financial and ownership arrangements in lower tax countries that, in essence, strip profits and tax revenues out of Australia.

But that’s a topic for another time.

If you’re paying tax, you’re making money. Making money gives you so many choices for so many different aspects of your life.

I’d rather be paying tax, making money and be armed with choices than paying no tax, making no money and stuck with a choice that I’ve had no decision in arriving at.

This Week’s Tip

Focus on the upside, the profit and not the downside, the tax. In most business structures, you will still retain 70% of all profit inside of the business. That will build wealth inside and outside of your family business.