Investment Structures: Supporting Your Clients’ Long-Term Wealth

When it comes to building long-term wealth, selecting the right investments is only part of the equation; the structure used to hold those investments is equally crucial.

As financial planners, we can work together to help your clients optimise their financial frameworks.

Through thoughtful planning, we can maximize tax savings and protect their wealth, enabling them to retain more of their earnings and effectively achieve their financial goals.

Customising Investment Structures

Every family’s financial situation is unique and selecting the appropriate investment structure involves multiple factors.

By assessing these variables, your clients can benefit from a tailored investment portfolio that balances growth, security, and their specific financial objectives.

Key Considerations:

    • Asset Protection: Safeguard your clients’ wealth from creditors.
    • Tax Benefits: Optimise savings based on income and goals.
    • Cost Management: Evaluate expenses such as land tax for property investments.

“To grow wealth in the most tax-efficient way, the structure in which your clients hold their investments is critical.”
– Michelle Griffiths, Partner at TAG Financial Services

 


Using Company and Family Trust Structures

Instead of holding investments personally, your clients might consider establishing a company to own their investments, with a Family Trust holding the company’s shares. This approach offers two significant benefits:

1. Lower Capital Gains Tax
Company profits are taxed at a flat 30%, significantly lower than personal tax rates, which can reach 47%.  While individuals can benefit from a 50% capital gains tax discount on assets held longer than 12 months, companies do not receive this benefit. However, the overall tax efficiency can still be advantageous.

2. Franking Credits
These can help reduce personal tax liability and avoid double taxation by allowing clients to offset taxes already paid by the company.

How It Works:

1. Investment Company
The company holds the investments, while the Family Trust owns the company shares.

2. Profit Distribution
When the company profits and pays tax, it can declare dividends to the Family Trust, which can then distribute them to the most tax-efficient family members.

3. Tax Reduction Strategies
Utilising superannuation contributions and deductions can further reduce tax liabilities on dividends, potentially leading to refunds on taxes already paid by the company.

Leveraging Loans for Investment

Investment loans can offer tax-deductible interest, depending on the loan’s purpose.

By reviewing your client’s ability to explore leveraging their home equity for investments, as interest on that portion can also be tax-deductible, financial advisers can unlock significant potential for wealth accumulation.

This strategy not only enhances the client’s investment capacity but also creates a more tax-efficient structure for managing debt.

Any Questions?

If you have any further questions don’t hesitate to reach out to us! Email us at super@tagfinancial.com.au or give us a call on 03 9886 0800.

 



TAG Financial Services Partner Michelle Griffiths, features on Dollars and Making Sense Podcast: Retiring Early & Family Trusts

Michelle Griffiths, TAG Financial Services Partner – Investment Advisory & Wealth, was interviewed on the Dollars and Making Sense podcast, discussing options around early retirement, best tax structures, investment company structures, and family trusts.

Watch the podcast now: Dollars and Making Sense – Retiring Early & Family Trusts – YouTube

 


Disclaimer: The information contained is general in nature. Professional advice should be sought before acting on any aspect on this page. Financial planning services provided by TAG Financial Advisors Pty Ltd (ABN 77 154 205 017 AFSL 415632), a wholly owned subsidiary of TAG Financial Services Pty Ltd (ABN 67 075 374 686). Copyright 2024. Please do not reproduce without the expressed written consent of the author.