Investment model and retirement buckets

Hi BigAl, I don't understand why you would hold income generating assets in the company and not the trust? If in the trust the income could be distributed to the company anyway.

Hope the hotshot accounting firm advised you on s100A and reimbursement agreements? If there are 2 trusts they probably did.

 

@Terry_w The reason its set up that way is the income that the company receives is as a shareholder in a business I operate. So it might as well be left there and invested in it. Being that I already hold this company for that purpose I have also listed it as a beneficiary of the trust. There are other reasons that a company was set up as a shareholder in the business I operate.
I would hope for the money they charged that they took into consideration s100A and reimbursement agreements. I am personally not familiar with those rules so just did some reading. Being that the two trusts are pretty much identical with regards to individual beneficiaries I don't believe there is any issue there.
Though just briefly reading up on the s100A stuff, it seems the rule is about trusts not being used to distribute income to the lowest taxed family members. I thought that was one of the key purposes of having a family trust? Am I missing something here?

 

The ATO have implied that s100A can be applied to situations where Trust A distributed to Company A where the shareholder of Company A is also Trust A. This is a circular situation and could result in the income being taxed at the top marginal tax rate.

To avoid this it is best to have Trust B as the shareholder of Company A, so there is a '3rd' party in as shareholder....

 

Thank you @Terry_w . That makes sense. Yes I recall that discussion with the accountants who advised on this set up hence why we now have two family trusts to avoid the circular situation.
You know your stuff @Terry_w . I'm impressed. Will have to come to you in the future for any structuring / re structuring advice. I see you have remote as your location. Do you have a base somewhere or work with clients online / phone hook up?

 

I have given up the office and try to live a peripatetic lifestyle so give most advice via phone or skype. But I plan to go to Melb and Sydney cities several times per year.

 

Nice. That makes sense. Not much benefit to paying rent for an office these days. That's why the fancy accounting firms charge so handsomely for there advice I guess. Need to pay the rent on those flashy Sydney CBD offices they sit in.

 

Old thread but the cascading 1,2,3,4 is a nice simple way to approach things, particularly if you or partner are happy to keep working through to preservation age / 60

 

I’d swap 2 and 3 during the accumulation phase as super can compound in a low tax environment.

Then in retirement, if bucket 1 is full, lump sum withdrawal from accumulation into personal account to ensure the 60k tax free personal income

 

In accumulation mode there would be no distinction between 1&3 so the aim could be to maximise NCC up to the TSB as quickly as possible to allow further CC to continue to be made (which I don't think are constrained by the TSB), let compounding do its thing as well as take advantage of any other mechanisms to make further contributions that aren't constrained by the TSB (small business CGT exemption prior to 55 and then downsizer from 60 maybe?). Just spitballing

 

That is exactly our strategy. Mrs Hockey Monkey has reached the TSB so can only do CC going forward. We now live off her salary and max both CC and NCC on my account to get to the 2nd TSB ASAP so both can continue compounding.

Something to strive for Australia’s biggest SMSF is worth $544m

Downsizer allows another $300k per person and isn’t limited to TSB or NCC.

Super is awesome. Have resisted the SMSF temptation so far.

 

Good strategy @Hockey Monkey!

How close are you to your preservation age and are you planning for early retirement?

 

Nice one. I suppose that's where a market 'crash' prior to completion of accumulation could be "welcome" in that it could pull some member balances back under the TSB limits on NCCs and allow further contributions before active accumulation phase winds down. Another take on 'sequence of return risk/opportunity'

 

We were in this exact situation with Mrs Hockey Monkey. Her 30 June 2020 balance had dropped a little below the TSB allowing us to do one last drop of NCC into her account.

 

Mrs Hockey Monkey is older, only 4 years from preservation age. So although I’m further off, locking up money in my super is less of an issue as we will have access to hers.

I want to keep open the option of us retiring at the same time although no specific plans at this stage. We both enjoy our work.

 

Your post and the article this this thread prompted me to review our plan, we current do #1 (maxed out super 1) and #2( via trust) because we wanted to stop work early. Now the plan change a bit and I still have a long way to go (over 10 years) until I can access mine. So I need to model whether to continue with 2 or put more after tax into my super (super 2) taking into consideration tax saved vs fees in super and accessibility).

 

I also have over 10 years until I can access mine, but spoilt by the flexibility of Mrs Hockey Monkey having access sooner

 

I just did a couple of rough caculations on this and was surprised how quickly you can reach the TSB (including indexing of TSB, NCC, & CC limits) if you maximise efforts towards NCC (as well as CC of course which you'd be mad not to). As an example, by my caculations, if a member has ~$500K TSB at June 30 2021, it would only take 6 years with modest assumptions (7.8% after tax return, 1.5% indexing). I hadn't previously considered NCC contributions in any of my planning and had only ever modelled maximising CC through to conclusion of accumulation phase. I guess this is why 'contribution strategies' is often quoted with reference to FPs.

 

We are similar, super 1 can be accessed next year if necessary, but we are both working so no plan as yet.

 

Bring forward arrangements can also shorten this by a further 2 years.

 

ChrisP73 thanks for resurrecting this post. I had completely forgotten the article. Bringing it up now has allowed me time to reflect and review my super strategy and implement changes to my own circumstances. This resulted in me

• reducing my f/n pension to conserve my funds already in super;
• increasing my salary sacrifice contributions from my p/t job
• selling lesser performing shares to increase my funds within super

There is such a lot of investment information. How does everyone keep it all together.