Warren Buffett’s $62bn secret of success

I was interested to read that Warren Buffett, one of the most famous, one the richest and one of the most successful investors in the world  has been able to defer $61.9 billion of corporate taxes. Warren Buffett

This figure — about eight years worth of taxes at Berkshire’s current rate — is a reminder that Mr Buffett understands how putting off the moment when taxes are due gives him more money today to invest elsewhere.

This is a savvy approach also used by smart property investors.

I’ll explain what I mean in a moment.

Of course it’s also a reminder that a savvy approach to taxes has always been a feature of Mr Buffett’s career.

The total of deferred taxes reported by Berkshire for the end of 2014 is more than five times the level of a decade ago.

So what has this got to do with property investment?

While the average investor in Australia tries to build the cash flow- on which they have to pay tax;  smart property investors focus on building  their asset based through capital growth – and this of course is tax-free. 

Capital growth is in fact really tax-deferred rather than tax free.

In other words you don’t  pay tax until you sell your property, but of course smart investors never sell their properties – just like Warren Buffett who’s favourite holding period is “for ever.”

Until Berkshire’s tax comes due, Mr Buffett is able to use the money for other investments with returns compounding over time — a situation he has described as an interest-free loan from the government.

Similarly property investors can borrow against the increased equity in their properties and use it as a deposit to buy their next investment


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Michael Yardney


Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media. Visit Metropole.com.au

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