Best tax structure for investments

Hi all,

I'm in the upper tax bracket for personal income tax and I currently have a few shares that I'd like to liquidate (held <12 months), the profits of which will be taxed at 47%.
I realise there may not be much I can do at the moment in the way of reducing tax for my current shares, but if I were to continue investing (with the view to hold for short term gains) what would be the best way to minimise tax?

 

1. If you have a partner on a lower income you could buy shares in their name. Cheap and simple but not flexible.

2. A discretionary trust (if setup properly) would allow the income to be flexibly distributed to various people/entities to allow your tax position to be managed differently on a year by year basis.

Eg. Wife takes a year off work to have a baby - distribute all the income to her name. Both partners on high marginal tax rates, then distribute income to a corporate beneficiary (company) and hold it there until a better time to distribute to lower tax brackets.

All this comes at additional legal/accounting costs.

I’d suggest seeking proper advice for your situation if you were interested in this.

Regards,

Jason

 

Best ownership structure?

Consider either
a) a discretionary trust with a bucket company
or
b) a company owned by the trustee of a discretionary trust.

a) I would generally prefer where the investment is high, but b) can be good for smaller investments or if you want less administrative hassle.

Also consider the structure of the trust and the structure of the company and how they will be funded.
Seek specific legal advice.

in the meantime see
Legal Tip 151: Structuring the Ownership of Shares Legal Tip 151: Structuring the Ownership of Shares

and
Legal Tip 288: Structuring the Ownership of Shares in a Company Legal Tip 288: Structuring the Ownership of Shares in a Company

 

Thanks Jason & Terry!

Can the trust + bucket company be combined with property ownership?
What about a future small business?

 

it can, but you have many issues to consider. You wouldn't want the same trust to own both shares and property.
Legal Tip 269: 4 Reasons not to hold shares in the same Trust as Property Legal Tip 269: 4 Reasons not to hold shares in the same Trust as Property

 

Terry, are you taking on any new clients?

 

Yes