Tax attacks are rising for wealthier Aussies, but protection is possible

There are ways to make yourself slippery prey for governments wanting to eat into your wealth by lifting taxes.

Smokers must be the simplest target for a government wanting to take money from its people.

Taxes on cigarettes surge every year, and packets are adorned with gruesome images and messaging telling smokers how tobacco will kill them.

Since 2020 the price of cigarettes has jumped almost 40 per cent, and research that landed in my inbox last week declared that Australia is the world’s most expensive country for smokers.

An international study by a British company called Vape Superstore says Aussies spend an average $7852 annually on smokes, 12 per cent of our average salary, while New Zealand was second at around $6400.

It says one in 10 Australian adults say they are smokers, which is a pretty sizeable target for government wanting to tax them more and more and justify it because smoking is unhealthy.

But a bigger, broader target continues to grow – Australians with above-average wealth.

They are typically retirees, real estate investors, business owners and those who are trying to build enough wealth during their lifetime so they don’t have to worry about pension handouts later on.

We’ve recently seen it with planned new superannuation taxes and the watering down of the Coalition’s previously-legislated stage three tax cuts for higher income earners.

We may see it again soon with the federal budget in a couple of weeks, and a federal election next year.

Labor’s Robin Hood ideology – take more money from the rich and distribute it to those with smaller bank balances – has been proven by its policies, real and proposed – such as previous promises to abolish negative gearing and mess around with franking credits.

But Labor’s not alone.

Previous Coalition federal governments hurt property investors by ripping away many of their depreciation claims, and banning tax deductions for travel to visit their assets. Governments of both persuasions are increasingly chasing the hearts of Middle Australia, and that means well-off people are easy prey.

Governments grab more money through tax increases and rule changes. Picture: iStock

Views on how governments tax their people seem to be split across the political spectrum – lefties versus conservatives, and the angry fanatics wearing blinkers on the far side of both left and right will stubbornly ignore sensible arguments.

This divide is sad and unhelpful but a continuing reality.

If you’re relatively well-off, chances are all governments are going chase for more of your money using tax in the coming years, and Labor will probably come at you with more gusto.

You can make yourself a smaller target for tax attacks in a few ways:

• Diversify your assets and investment strategies. That way if the government comes after one part of your wealth, you will still have other stuff that’s not in the firing line.

• Learn the rules about how you are impacted through income tax, business tax and superannuation. There is plenty of free information online through government agencies, super funds and investment and advice platforms.

• Get professional advice from accountants and financial planners. They’re not salespeople trying to flog you products – they live and breathe taxation rules and can direct you and your wealth towards strategies to avoid losing too much.

• Use superannuation wisely. It’s still the most tax-effective structure to hold your life savings, despite constant government tinkering. There are many super strategies that deliver people tax deductions for contributions, incentives involving free government money, and the potential to avoid paying any tax in retirement.

Being prepared for the inevitable changing rules and money grabs will help you keep more of your own money, and not give governments a free ticket to strip your wealth.