Most commonly, a significant capital gain arises if you sell a high value investment property, or your business is acquired, sold or floated. If you don’t have any capital losses to offset your gain it can be disheartening to hand over hundreds of thousands of dollars to the tax man.
Consider a little-known tax deduction
Although there’s no way to keep the full value of the gain for yourself, you can make a special tax deductible donation to a charity to reduce the CGT bill. One very interesting option is to set up a PAF or Private Ancillary Fund, whereby you can retain some control over how the assets are managed and distributed.
What is a Private Ancillary Fund?
A PAF is a charitable trust which invests donated money or assets and then distributes minimum amounts each year to eligible charities. It allows you to create your own charitable foundation to support a chosen charity in a sustainable way over the long term.
Who is this appropriate for?
If you feel motivated to support a cause in a significant way, then a PAF could be an ideal vehicle to maximise your impact while minimising tax.
This could also be considered as a legacy-creating alternative to lump sum charity bequests.
For advice about private ancillary funds or other financial matters, contact Brendon on 9908 9888 or firstname.lastname@example.org.