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Best tax structure for investor?

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jpldavis

jpldavis

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Hi,

I was wondering if anyone could advise me on the best tax structure for a 'long' investor?

I'm wondering whether I should invest under some form of company or as an individual.

Also, if the former, what type of structure is most appropriate?

If it has any bearing, I am in a high income tax bracket...

Many thanks

James
 
Re: Tax Structure for Investor

The most effective structure for tax residents of Australia is generally a discretionary trust with a company as trustee and a beneficiary of the trust. The trust retains CGT discount benefits so for long-term investing you can take advantage of the 50% reduction in assessable gains. For the trust, you can add as many beneficiaries as you like, including charities, other trusts, companies and individuals. Being discretionary, the trustee has complete determination on how to allocate distributions. Beneficiaries should be maximised when establishing the trust. Adding or deleting down the track may invoke tax consequences. Beneficiaries of a discretionary trust have no right to any of the earnings of the trust so you may have some in the list to whom you never make a distribution - but it's better to have a larger list of beneficiaries, some never used, than to need them down the track and have to add them which may be complicated and expensive.

Income (not capital gains) that would result in you paying top marginal rate, can instead be distributed to the company (trustee and/or beneficiary) which pays a rate of 30%. Both earnings and franking credits can remain within the company or be distributed out to you (or other shareholders) in years where your income might drop for some reason and reduce you to a marginal rate lower than 30%. You can also establish different share classes in the company to allocate different dividends.

Essentially, you can set up extremely flexible structures - all perfectly legal.

This is just a quick overview. Talk to an accountant about your particular situation and what would best suit your needs and objectives.
 
Thanks. I'd definitely want to talk to an accountant about that!

At what level of investing would this become important (ie. 20K in the market, 50K, 100K upwards?)
 
While the previous answer is a good one, it would depend on your assets and age.

IMO the best structure if over 55 is a super pension, as tax is very concessional, if over 60 = 0.

If nearing 50s(or any age), super is still 15% taxed

there are obviously costs in setting up and administering both SMSF and Dis Trust, U can work it out as a % of asset balance.

ATM reducing non-deductible mortgage would also appeal
 
Good call, awg.

I always forget about super because I'm still young and want access to all my money but super certainly has strong advantages in some cases. :)

jpldavis,

It will depend on your objectives. If you're only ever going to be dabbling with a few grand then forget it. If you want it to grow and grow, then it could be worth your while. In the early days it might cost an excessive amount to run (yearly tax returns for trust and company, annual company fee etc) proportionate to earnings but as you grow it will pay for itself by multiples.
 
being young i have private companies and have the clause in them that allows the companies to give me interest free loans, rather then drawing dividends.
 
Stormin_Norman said:
being young i have private companies and have the clause in them that allows the companies to give me interest free loans, rather then drawing dividends.
Click to expand...

How much did these cost to set-up Norman? That sounds like something i want to do eventually
 
$330 i think it is.

add slightly extra if u get the loan clause from a lawyer. i recommend just doing it via an online one.

all up under $500.
 
Prawn,

If you know what you're doing you can download the appropriate docs off ASIC and send them in with the incorporation fee which is a few hundred bucks.

If you basically know what you're doing but want a little help with the process this website will help you out for a fee. http://www.incorporator.com.au/
There are probably others that are cheaper. I've just found this one useful.

If you have no idea, see an accountant or solicitor who will happily charge for the process. :)
 
those structures worked better in the 'old' days...when individual's tax rates were higher, and company tax was higher

today you can earn 180,000 as an individual and pay tax at 31%, compared to a company at 30%..plus the filing fees and need for an accountant etc

companies dont have the benefit of capital gains tax concessions

some people set up companies without knowing the full picture....cause their friends did it....then find themselves stuck with annual fees and costs....

if you are on a high income...you can afford to pay for 'good advice' its not that expensive....any of the middle tier accounting firms...will give good affordable advice....
 
kincella said:
those structures worked better in the 'old' days...when individual's tax rates were higher, and company tax was higher

today you can earn 180,000 as an individual and pay tax at 31%, compared to a company at 30%..plus the filing fees and need for an accountant etc
Click to expand...

If that's all you want to earn, sure, stay as an individual.

companies dont have the benefit of capital gains tax concessions
Click to expand...

But trusts do.

some people set up companies without knowing the full picture....cause their friends did it....then find themselves stuck with annual fees and costs....
Click to expand...

Agreed. Very bad idea. People should pay for advice from a relevant professional before making decisions.
 
can anyone recommend a good, fair priced accountant who knows both taxation laws and also about australian's ownerships of overseas countries and repatriating dividends back to australia?

oh in brisbane would be extra good; unless theyre personally known and are happy to talk via email till i can travel down.
 
Stormin_Norman said:
can anyone recommend a good, fair priced accountant who knows both taxation laws and also about australian's ownerships of overseas countries and repatriating dividends back to australia?

oh in brisbane would be extra good; unless theyre personally known and are happy to talk via email till i can travel down.
Click to expand...

PriceWaterhouseCoopers

You should be able to afford them Norm;)

CanOz
 
Bentleys Bris are my accountants. In my experience they've been helpful, extremely informative and great at arranging tax - legally. I know how much they've saved me so far. :)

Initial consultation was free. What I learnt in that session was worth a mint. Have all your questions organised and ready to go and the initial session alone will probably be invaluable.
 
kincella said:
today you can earn 180,000 as an individual and pay tax at 31%, compared to a company at 30%..plus the filing fees and need for an accountant etc
Click to expand...

What sort of write-offs etc are you talking here though? Isnt the top tax bracket 45%? :confused:
 

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