The Ultimate Guide to Protecting Your Income and Assets

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Updated: 08 May 2024
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Insuranceopedia Staff
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Your income and assets are things you should always safeguard. They signify your wealth and net worth—and it’s in your best interest to ensure that they’re used and stored for the betterment of your current quality of life and financial future.

Having said that, this can be easier said than done for some folks. Many individuals fall into the trap of bad financial habits and inadvertently reduce their financial ceiling because of things they haven’t been properly looking after or optimizing.

If you want to keep your income and assets in safe hands, this guide will give you six tips to help you protect your income and assets in today’s economy. But keep in mind that this article is not a substitute for professional financial advice.

Let’s jump right into it.

Buy income protection insurance

Income protection insurance is a type of insurance that covers a portion of your lost income during sickness or injury. It’s a good way to continue earning money when you’re off of work fighting a disability.

This type of insurance has payouts in two periods divided by the sixth month period. Any time before that, income protection insurance can pay 90% of your pre-tax income.

After six months (assuming you’re still disabled and can’t work normally), income protection insurance will pay up to 70% of your pre-tax income.

For instance, if you’ve met with a car accident that has caused you to stay in the hospital for a few months, income protection insurance covers up to 90% of the income earned during that period as if you were at work. This is a different insurance coverage from your standard medical insurance.

Income protection insurance is typically helpful for self-employed people or people with dependents who rely on income to live. You can also choose between an agreed value policy (% of salary from the start of the contract) or an indemnity value policy (% of salary when you make the claim).

Australian citizens typically already have income protection insurance through their super fund. That said, you can also buy one from an insurance broker or company. Just make sure you are eligible for it and pay the taxes for payments received in claims from this insurance policy.

You can check this TPD taxation calculator by Curo Financial Services to calculate your expected tax estimate.

Declare tax-deductible transactions

If you’re a business owner, you should aim to maximize your tax benefits as much as you can. This can help you protect your personal income by reducing your required tax payments.

You need to be meticulous when filing your taxes. This applies whether you’re a small or big company. This will help you look like a legitimate and legally-operating business. It’ll also, more importantly, help you not get in trouble with the law.

Hiring a professional accountant is highly recommended if you want to ensure your financial actions are within the bounds of the law.

They can also help you arrange your funds to ensure that more of your hard-earned money is retained in your business due to more accurate tax deductions.

By doing this, you can retain more of your capital and cash and not needlessly spend extra on taxes. That said, you have to ensure that you’re doing it the right way to not deal with filing errors and penalties.

Uphold sound saving practices

If you want to see your bank account retaining more money each month, then you have to be deliberate with how you spend your money daily.

What we mean by this is to avoid making needless purchases. For instance, if you want to buy a Starbucks coffee for $5 when you can make one at home for a dollar, then always pick the latter one unless there’s a special occasion.

While the progress of saving can take time, it is a great way to secure your financial future and simultaneously help teach patience and resilience in tough and trying times.

In doing this, you can also protect more of your income as your money won’t be left spent on random and impulsive purchases.

When saving, be sure to put your money in a high-yielding interest savings account.

Many digital-based banking accounts work because their lack of physical facilities directly translates to better interest rates (due to lower fees needed to operate).

This means your money can be protected against inflation while still being relatively easy to access, unlike time deposits and stocks.

Separate business and personal entities

If you’re running a business, it’s crucial that you set up a limited liability corporation at the minimum if you want to keep your personal life and business life private.

While the grind can be time-consuming, it’s critical to avoid blurring the boundaries between personal and private practice—especially in the legal sense of the word.

Having an LLC helps stop creditors and debtors from seizing personal assets for payment in the non-zero event of your company going bankrupt.

Something as simple as the business structure type can make all the difference in starting your next business from scratch or a spiraling pitfall of debt.

That said, many specifics of the LLC business structure may influence whether it’s a good fit or not for your company. It’s important that you go through this with a professional before choosing this structure.

Nevertheless, the philosophy stands: by separating your business and personal life, you can protect your income and assets from either side.

Employ spousal ownership for some assets

Another way to prevent creditors from chasing after you is by getting your spouse to own the asset under their name.

Besides lower housing fees like reduced stamp duty and a tax deduction, having a spouse can also help you protect your assets.

By having your property or asset under your spouse’s name (assuming they’re at low risk of being seized or hospitalized), you can also avoid having creditors chasing some of your assets (assuming you’re the high-risk spouse) like properties.

Utilize discretionary trusts

Another way to make it harder for creditors to claim your assets is by setting up a trust for a trustee, particularly a discretionary trust.

This trust is discreet and essentially allows the trustee to decide how much beneficiaries should earn. They then divide the assets according to the settlor’s wishes.

To make one, make sure that you’re a lawful citizen and do the following. First, choose your trustee—ideally someone related to you. Then, contact professional pest control to clean the mess in our house.

If you don’t have one yet, you must open an Australian Bank Account as well as an ABN and TBN for the trust.

By making a discretionary trust, you can give your valuable assets to one person in a legally binding fashion. This, in turn, helps you combat shield asset overuse as well as lowers the tax burden needed to be paid.

Best of luck in keeping your income and assets safe, everybody!

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