TAX

Grueller

https://www.boards.ie/discussion/comment/119809599#Comment_119809599

A new 42k hilux if in the high tax bracket costs €21k from in the hand income. Keep her 8 years and that is €50 per week. Not much with 3 boxes of fags a week. Then lads say a new vehicle is madness. If all other cap allowances are used it makes a bit of sense.

minerleague

Do you end up paying the same amount of tax over a long period anyway? For example if you put a lump sum into pension in a good year to reduce income tax will you pay that tax when you retire and draw down the pension? Surely Revenue dont let money slip through the net or is company tax low just to entice multinationals and farmers piggyback on that ?

Tonynewholland

https://www.boards.ie/discussion/comment/119809655#Comment_119809655

The director's loan and the retirement relief are the big bonus of a company. It could always change in time. Your right about the pension when your getting the old age pension and maybe still doing a bit of farming you could easily be pushed into the high tax rate again when drawing down your pension.

Tonynewholland

https://www.boards.ie/discussion/comment/119809632#Comment_119809632

The jeep would still be worth that after 8 years

KAMG

https://www.boards.ie/discussion/comment/119809655#Comment_119809655

Not necessarily. A person can access 25% of the value of pension at a certain age tax free. Then the amount taken after that is taxed at their marginal rate when taken. So maybe at top rate. But in most cases not. As the farm would usually have been passed on by then.

Bass Reeves

https://www.boards.ie/discussion/comment/119809655#Comment_119809655

You have to understand pensions. Ideally you look at them longterm you are getting tax free gain for all those years. There is a few thing to remember. When your kids finish college you will tend to have a lot of excess income you can put in substantial funds then however present rules are changing.

Remember what ever size fund you have you can take 25% of it tax free up to a sum of 200k(800k fund) and the next 300k( 2 million fund not that any of us will) you pay 20% tax at present.

When you access the lump sum you have to take 4% a year every year minimum of the remaining funds

Example you have a 500k fund you can take 125k tax free. That leaves 375k which at 4%/year gives you an approximate income of 15k/year. If you had no other income you pay no tax. Let's assume you add the present OAP you would be paying about 2500/year and that would be if you spouse had a similar income.

wrangler

I'm just sorting mine at the moment, you can draw up to 15% per annum if it's an active retirement fund.

Big advantage is that if you die the remaining money goes to your estate whereas if you go the pension route it's only guaranteed for five years if you die in less than five years

Tonynewholland

There's nothing stopping the government from dipping their hands in private pensions again when they get hungry.

KAMG

https://www.boards.ie/discussion/comment/119809865#Comment_119809865

I don't really know what your point is. Sure, there is nothing to stop the Government doing anything in reality.

amacca

https://www.boards.ie/discussion/comment/119809895#Comment_119809895

Not to put words in another posters mouth but I assume the point/sentiment is could you be putting money into a pension only to have it taken off you down the line ...so better to spend it now or invest it in other things that are harder to take away....

Personally I don't subscribe 100% to this as its fear based .... I invest in a pension for the tax relief and hope it won't be raped too badly by govt decisions.....but I wouldn't put all my eggs in one basket, a mix of asset types is your friend just as a mix of stocks/shares is a good idea long term in a (pension)fund

straight

https://www.boards.ie/discussion/comment/119809632#Comment_119809632

Shiny metal is the last thing I'd buy to save tax. Buildings/facilities/pension would be my choice.

Tonynewholland

https://www.boards.ie/discussion/comment/119809895#Comment_119809895

My point is obvious. A levy was put on private pensions not so long ago.

KAMG

https://www.boards.ie/discussion/comment/119810247#Comment_119810247

Yes they did. About 12 years ago during the crash. The economy was in bits. Record unemployment. The IMF were in. A far cry from 2022 Ireland thankfully.

My point is there is no point worrying about what might happen. People should base their decisions on current laws etc.

Tonynewholland

https://www.boards.ie/discussion/comment/119810394#Comment_119810394

Finished 7 years ago.

Grueller

https://www.boards.ie/discussion/comment/119810105#Comment_119810105

Public sector pension here. New parlour 3 years ago, new cubicles this year and next, all land that neede it drained in 2014, calf feeder last year, 1km of new roadways last year. Next up is another slatted tank and a machinery shed. After that the 16 year old jeep might get a look in.

Bass Reeves

https://www.boards.ie/discussion/comment/119810011#Comment_119810011

I would not put all my eggs in one basket either. Retirement for many of us will be totally different to what many expect. People are healthier and fitter now than 20 years ago.

Many may semi retire. While dairy will have different issues a person with a drystock operations if it generates a fairly decent income could use it as part of there retirement plan. I have a couple of small rental properties.andvhave picked up short term work pre and post COVID.

While yes the government did dip into pension funds back 10ish years ago. The levy was a total of 2.7% over 6 years. In general pension funds gain 4-5% per year over a longer term.

If you spread that levy over 10 years it was 0.27%/year. If you spread over 20 years it was 0.135%. Taking tax relief and compounded gain it was equivalent to a tax of 0.05% per year on the fund.

If lads want to worry about that then I will leave them at it.

I be much more worried about other tax changes than that one

Tonynewholland

https://www.boards.ie/discussion/comment/119813294#Comment_119813294

It's still over 5k on 200k pension pot. It's naive to think it won't happen again the way the workers to retired ratio is going.

Bass Reeves

https://www.boards.ie/discussion/comment/119813681#Comment_119813681

That 200k pension pot is probably made up as follows. 70-80k of tax free gain, 120-130 of contribution of which 48-52k is income tax relief. So owner put in about 72-76k in contributions

I am not naive it could happen again. However it might not happen either. Its probably a 50/50 chance. Its probably a one in 20-30 year event at best.

You are of the attitude that one should completely disregard pension investment because of an event that happened once in most pensions total life.

As for that 200k pension it would still have gained in value and been worth 240-250k if there was no contributions or withdrawal in that time.

Its called cutting off your nose to spite your face

AckwelFoley

A good friend of mine in the US once said to me when I was moaning about a big tax bill, He said, if you're paying taxes, you're making money.

Ultimately, you have to pay tax, but as mentioned, capital write-offs means you're spending money to avoid tax, BUT, if you're improving your asset and benefiting from the expenses, ie, better machinery better jeep etc, you're better spend that money than not, and end up paying taxes on income without any improvement to your asset or way of life.

The priority spend would be on infrastructure, and operations.. ie something that increases valie of the asset and / or something that increases efficency, secondary to that would be heated seats in the wagon

A good accountant pays for themselves. An accountant that's intimately familiar with agri business

wrangler

https://www.boards.ie/discussion/comment/119813747#Comment_119813747

I think you're being optimistic with your figures again, it's heavily taxed coming out unless you've no other source of income.

Admittedly the recession hit my pension fund at the real wrong time but it recovered a good bit because I waited to 70.

Your figures sound like a guy selling pension and then adds ''the value of your fund can rise as well as fall'' pfft

Bass Reeves

https://www.boards.ie/discussion/comment/119814088#Comment_119814088

Taking that lad with a 200k pension fund, when he goes to draw it this is approximately what will happen

He can take 25% or 50k as a tax free lump sum. There is 150k left you have tomtakeca minimum of 4%/ year starting within 12 months.

Assuming the person qualifies for a full OAP and he takes the 4% (6k)every year his tax liability will be a few hundred euro.

Where pensions catch people tax wise is where they are substantial funds ( above 500k) and where they probably have other investments and decide to wait until 65 or beyond to retire.

A lot of people can over find pensions and not retire early enough. However even u. The most extreme cases after taking the 25% lump sum. Even if they go over the 200k threshold they will get substantially more out than they invested.

If you want to avoid Irish tax move abroad Portugal for I stance gives you the option of a 10% flat tax on pensions payments.

For instance if you had a 2 million euro pot and took the 500k over there you would pay 50k instead of 60k on it. Your could make substantial draw downs for ten years at 10%. This would be advantageous where you were accessing this pension income at the higher rate in Ireland.

There is always solutions if you look for them