Friday, October 16, 2009

Passive Income

So today I want to talk about passive income. Wow so many people have a lot to say about passive income. But I am not sure I agree with a lot of them. So what I will be doing is defining what I mean by passive income, I also have a feeling that I will start to use a different term as ‘passive’ not quite gel for me.
From the looking around that I have done, I think the term ‘passive income’ is used a lot because the American IRS use it as a defined term meaning: [Passive activities are trade or business activities in which you do not materially participate. In general, all rental activities are passive activities, even if you do materially participate. You materially participate in an activity if you are involved in the operation of the activity on a regular, continuous, and substantial basis] from: http://www.irs.gov/taxtopics/tc425.html accessed 16/10/09. Being an aussie I better check the ato site – they say: [passive income from investments such as rental property and share holdings or similar publicly traded investments that do not constitute a business.] http://www.ato.gov.au/businesses/content.asp?doc=/content/18059.htm accessed 16/10/09. Well they seem pretty similar. Hmm now that I have thought about it – my phraseology or nomenclature is basically irrelevant – or more likely incorrect and lead to paying more tax, because at the end of the day I want to end up with more income and paying less income – so the key thing would be for me to ensure I ‘learn the words’ as Robert Kiyosaki advises and use them to benefit me. Robert is interested in ‘passive income’ because it is taxed differently. So what I need to look at is the basic Australian tax structures and start form there.

1 comment:

  1. This is good information!

    It's great to know that passive income it surpasses most of the income generating systems including JOBs regardless of the way tax is applied.

    ReplyDelete