Investment companies a better alternative to family trusts
Investment companies present an alternative for family trusts, when it comes to planning alongside superannuation for high net worth clients, according to HLB Mann Judd.
Michael Hutton, HLB Mann Judd partner, said investment companies could be used to house and invest family wealth.
“One of the things we’re talking to our wealthier clients about is using it as an alternative structure in addition to superannuation,” Hutton said.
“The benefit there is you’re not limited by contribution limits, a family can loan money into the company and then have that company invest money from them and earn income on those investments.
“It’s taxed at the company rate of 30%, rather than perhaps the top marginal tax rate if they were to invest that money in their own name.
“That’s not as good as superannuation, which is why it should be part of the strategy and perhaps the major part of the strategy.”
For that reason, Hutton said investment companies had come into play more often with discussions with wealthier clients.
“Where they’re not able to draw enough from their super because they didn’t build it up enough, they can draw down on the investment portfolio and effectively they’re drawing down on a loan account so there’s no tax payable,” Hutton said.
“They can pay dividends out of that to themselves as these would come out as franked dividends.
“It doesn’t have to declare a dividend each year, it doesn’t have to pay out profits, which is different to a family trust, so were finding that to be a flexible way to go.
“It’s also perpetual and can continue on past the death of the shareholders, whereas a super fund cannot.”
AUTHOR
Chris Dastoor
Recommended for you
The Financial Services and Credit Panel has made a written order to a relevant provider after it gave advice regarding non-concessional contributions.
With wealth management M&A appetite only growing stronger, Business Health has outlined the major considerations for buyers and sellers to prevent unintended misalignment between the parties.
Industry body SIAA has said the falling number of financial advisers in Australia is a key issue impacting the attractiveness and investor participation of both public and private markets.
As advisers risk losing two-thirds of FUA during the $3.5 trillion wealth transfer, two co-founders underscore why fostering trust with the next generation is vital to retaining intergenerational wealth.
