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
Compared to four years ago when the divide between boutique and large licensees were largely equal, adviser movements have seen this trend shift in light of new licensees commencing.
As ongoing market uncertainty sees advisers look beyond traditional equity exposure, Fidante has found adviser interest in small caps and emerging markets for portfolio returns has almost doubled since April.
CoreData has shared the top areas of demand for cryptocurrency advice but finds investors are seeking advisers who actively invest in the asset themselves.
With regulators ‘raising the bar’ on retirement planning, Lonsec Research and Ratings has urged advisers to place greater focus on sequencing and longevity risk as they navigate clients through the shifting landscape.
