Ownership structure to use for investments

Wondering if I could get some advice on how I should be structuring my investments (ie should I hold them as individual/joint names or in a individual or company trust). Am married with young children. I am the top tax-bracket full time income earner, wife is off work for next two years with low income. Not really in a high-risk profession so asset protection not a major issue. Would like to invest in shares and property (positive and negatively geared). What ownership structure would you use?

 

There is no simple one word answer to a question such as this. Start by reading all of my legal tips and tax tips concerning structure and then see a lawyer for specific advice.

 

Issues that may affect it :
- Incomes of likely owner/s next year and thereafter
- Might there by a capital gain ?
- What about if its a revenue / CGT loss ?
- What sort of income ? eg dividends, property rent etc
- Investing in shares for income or growth ?
- Negative gearing ?
- Salary sacrifice and other strategies ?
- Do you want to involve super ? (Often overlooked)
- Could your wife make deductible super contributions ?
- Might your wife return to workforce - Likely earnings ?
- Finance issues ? Where are funds coming from?
- Where is investment ?
- Do you have kids and what ages ?
- Where are you residing ?
- Do you / someone else seek control ?
- What issues may be affected if you / someone else dies ?
- Your occupations and risk
- Your risk to creditors (ie you operate a business or are a Director)
- What may happen if we divorce ? (Your lawyer will set you straight on that one. Contrary to many views a trust wont be any use)

and many more issues. Its a massive array of issues and there is no definitive guide. Invariable many legal issues will arise and possible that estate planning and other issues are paramount. Sometimes structure / ownership can pose a spouse concern and involvement of both in process ensures clarity. ie wife will then understand why its all in her name or not in her name. Legal advice would likely cover family law impacts. ie Just because its a trust doesn't protect it from courts.

 

Terry and Paul have more than covered why you should seek professional advice but generally...

You'd want the negatively geared stuff in your name where it's going to provide the greatest deduction.

You'd want the positively geared stuff in the wife's name for now while her income is nil but given that she may return to work you probably want to achieve that via a trust. Generally you don't want capital gains assets in a company due to the CGT Discount not being available.

But all of that is particularly general and you absolutely should be seeking professional advice because even the above is purely the tax side of it with no consideration of asset protection, estate planning or any other legal matters.

I'd probably start with your accountant and see if he thinks it's worthwhile involving a lawyer as well to ensure desired results.

 

Why not a unit trust ? A ungeared UT may actually give neg gearing benefit now to high income earner and use a strategy to swing equity to super over time. Maybe even benefits in the refinancing principle over time too.

Example of dangers of just focussing on marginal tax rates. A Disc Trust may end up with major land tax concerns in some states. A unit trust may also be a stamp duty issue in QLD.

 

When working out ownership structure for a future property the first question that needs to be answered is 'what state will the property be located in?'. The second question will depend on the answer to the first and may be along the lines of 'what do family members already own in that state and how is that structured?'.

 

Thanks. Looks like it can get quite complicated and I will seek professional advice.

Getting through them now. They are very helpful. Thanks for posting.

NSW, but I am in no hurry .

 

example of reason for that question = In NSW a disc trust can be problematic for land tax. Every $ of land value is taxed and there is no threshold. V's say personal ownership it can add up to $6K a year (every year) to land tax costs v's other forms of ownership.