Structuring dilemma for a UK expat in Australia

Discussion in 'Share Investing Strategies, Theories & Education' started by JohnDoe12, 8th May, 2022.

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  1. JohnDoe12

    JohnDoe12 Member

    Joined:
    8th May, 2022
    Posts:
    5
    Location:
    Australia
    Hi all, I wonder whether I could get some feedback on investment structuring for my situation below. I spoke to a financial advisor but the conversation revolved more around the type of investments/portfolio they advised me to sign up for and so wasn't quite what I expected.

    I've also been reading posts on this forum (particularly Terry's tips) and I've been going through British expat posts on the bogleheads forum. I've jotted down some really useful information about which ETFs etc but I'm stuck on the structuring aspect.

    Background:

    Early 30s

    Country of residence:

    British expat living in Australia
    Permanent resident in Australia

    Future residency:

    Uncertain at present - Australia or UK
    Looking to apply for Australian Citizenship in about 3-4 years
    Will likely continue being resident in Australia for tax purposes for at least 3-4 years

    Income:

    47% tax bracket and likely to remain in this bracket
    No investment property at present but would probably consider this down the line (at least 1 in Australia - probably PPOR initially and then rent this out if I move back to the UK)

    Goals:

    Long term regular investment in ETFs with Worldwide exposure (assume minimal if any franking credits)
    Looking to invest around $50,000/year
    Looking to scale back work in 15 years and hopefully use part of my investment returns to fund this

    Issues:

    Tax on investment returns given my tax bracket
    Uncertainty about whether I will eventually move back to the UK or remain in Australia

    My thoughts:

    A discretionary trust with a bucket company as a beneficiary would help with tax efficiency whilst investing in the ETFs. I have no other beneficiaries that would benefit more than the company.

    I am unsure of the implications of subsequently getting money out of the bucket company if I move abroad to the UK and become non-resident in Australia.

    I am unsure of the status of the assets within the trust if I move out of the country.

    I am unsure about whether the trustee of the discretionary trust should be me or another company with me as director.

    If I invest in my own name without the above structure, then I am liable to paying the highest tax rate on any dividends for all the years I invest. However, if I move back to the UK then I believe I can defer the deemed disposal of my Australian EFT’s under a Capital Gains Tax (CGT) event and instead sell them if/when I become a UK resident and make use of the 12,000 GBP CGT tax free annual allowance and avoid double taxation due to the treaty between Australia and the UK. I would then probably repurchase the ETFs in the UK.

    I'm a bit stuck about the best way to structure my investments and I'm hesitant to start investing until I feel I've figured out answers to some of the questions above.

    Thanks for reading!
     
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    A company or trust could remain a tax resident while you won't in the future - it could be structured so that is the case. That could have advantages or disadvantages depending on the circumstances
     
  3. JohnDoe12

    JohnDoe12 Member

    Joined:
    8th May, 2022
    Posts:
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    Location:
    Australia
    Hi Terry, thanks for your response. That's useful to know.

    I'll speak with an accountant familiar with Australia and UK tax laws in order to get an idea of future tax implications if I were to move back to the UK. I'll endeavour to post what I find out here in case it helps someone in a similar position.

    Terry - generally speaking, are there any theoretical advantages of having a company be a trustee of a trust instead of an individual if that trust contains only shares as assets? The beneficiary being a bucket company. I guess the downsides are extra costs with having to do accounts for 2 companies.
     
  4. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

    Joined:
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    Posts:
    41,672
    Location:
    Australia wide
    Yes, one advantage would be if the individual becomes a non-resident the trust would be a non-resident trust, but a company could mean residency is maintained. But trustees can be easily changed down the track too
     
  5. JohnDoe12

    JohnDoe12 Member

    Joined:
    8th May, 2022
    Posts:
    5
    Location:
    Australia
    Thanks Terry, that's useful to know. I'll post back once I find out more about the tax implications if I become non-resident.