Your Investment Structure

[johndeyell]

I like finding out about how other people do things. This time I am interested in how you structure your investments - i.e. personally holding, through a company, through a trust or perhaps a company owned by a trust, a partnership....

Also, why did you decide to go with such a structure?

Bit of a think-tank.

-JD.

[CJ]

Mine are all long term hold and are in a trust. Rational being wealth accumulation in the trust, spending in personal name.

[johndeyell]

Mine are all long term hold and are in a trust. Rational being wealth accumulation in the trust, spending in personal name.

Solid logic :)

[lissica]

Mines in a holding company held by the family trust

[fungus pudding]

Mines in a holding company held by the family trust


There's no advantage in having a trust for me that I can see, so I just own mine in my own name. All long term.

[loofa]

Long term investment all in family trust structure to allow distribution of the income.
All short term, hedges and derivatives held personally as trading entities. Pay the tax (if any) and claim the losses.

[lissica]

Long term investment all in family trust structure to allow distribution of the income.
All short term, hedges and derivatives held personally as trading entities. Pay the tax (if any) and claim the losses.

I found it quite tedious when you had multiple shares held by a trust.

Every time you sell/buy you have to do minutes etc. So I think having an investment holding company (owned by the trust) works quite well for me. Aside from shares, we also have a rental property owned by the company.

Also, I might be wrong, but I think trusts are taxed at 33% whereas companies at 30%

[OldRider]

lissica:
I suggest you make some further checks, my advice is for company decisions to be minuted just the same as for a trust, though I guess imdividual ownership and beneficiary circumstances can make things different.

An investment holding company owned by the trust seems to be the stucture in vogue at the moment

[loofa]

I found it quite tedious when you had multiple shares held by a trust.

Every time you sell/buy you have to do minutes etc. So I think having an investment holding company (owned by the trust) works quite well for me. Aside from shares, we also have a rental property owned by the company.

Also, I might be wrong, but I think trusts are taxed at 33% whereas companies at 30%
Right. But we have only bought four shares in six years and about nine transactions. We never buy less than $20k per transaction.
On the other hand the same period saw many time that number in the trading accounts.
Dividends are milked to individuals so the trust has nil income.

[johndeyell]

An investment holding company owned by the trust seems to be the stucture in vogue at the moment

Well it makes the most sense, as you can keep the profits at the company level and if there is any tax payable it's at 30% while still retaining the protection of the Trust structure. Therefore, if you're marginal tax rate is 30 or above you're saving or atleast breaking even. Of course, if it's lower - dividends are paid to the trust, then distributed to the beneficiaries to take advantage of the 12.5 or 21% marginal rate. Imputation credits flow right through as well.

[shasta]

lissica:
I suggest you make some further checks, my advice is for company decisions to be minuted just the same as for a trust, though I guess imdividual ownership and beneficiary circumstances can make things different.

An investment holding company owned by the trust seems to be the stucture in vogue at the moment

Yup & as the politicians use this very structure with there own personal affairs, hell will freeze over before ANY Govt even tries to change the rules.

Have done alot of tax "friendly" structures in my time, & sometimes the most effective are the more simple approaches!

[voltage]

shasta so what do you recommend as the best simple approach. Thanks

[shasta]

shasta so what do you recommend as the best simple approach. Thanks

That's hard to answer because it all depends on the person's situation, timeframes, amounts involved, etc etc

To be honest the simple thing is to stay trading as an individual until such time as the tax payable is large enough to warrant investigating a more tax friendly structure (& the time, cost & effort that it involves).

In the past i've used 3 companies, with a holding company owing all the shares in a "trading" company & "investment" company, where i owned all the shares in the holding company. ;)

Basically a cash "merry-go round" if you will, but now i've unravelled all that, & am out of the market at present.

If you have more specific questions PM me.

[johndeyell]

Shasta, do you mind me asking what your qualifications or experience are in this area? Cheers.

[shasta]

Shasta, do you mind me asking what your qualifications or experience are in this area? Cheers.

Um, i'm an accountant who spent the first 8 odd years of my professional life at Coopers & Lybrand/PwC.

The 6 years i've been in the Nations Capital, i've worked (briefly) for a 2nd tier CA firm, a private electrical/energy company, & done contract work for a large charitable organiation, & a very large crown entity.

At the moment i'm doing nought, but nursing a knee injury :D

In the past i've done a fair bit of work with Trusts & Company structures for wealthy clients, ring fencing liabilties, tax friendly structures etc

But then again, i haven't followed the normal beanie path, i'm a bit different ;)

I'm trying to move away from accounting, the sharemarket interests me more these days

[zacman]

Trusts and companies are often a good way to waste money on lawyers and accountants.

It depends on what your asset size is and what your investing or trading style is.

If you are primarily an investor then even with $1m in shares the dividends may not be $50,000. That is not big enough to split with various "tax saving" devices.

Sure there may be some capital gain ... but thats tax free.

You need to have a few millon invested befor it becomes cost effective.

Sure, you can have asset growth that is easier to pass to beneficaries ... but that is counted by loss of control issues (independant trustees should not just rubberstamp your decisions).

If your a trader ... and good at it ... your income return may be better, but the picture is similar.

If your into derivatives, margin lending or the like, then yes your risk is quite different, but you should only be doing that if you really know what your doing.

zacman

[johndeyell]

Um, i'm an accountant who spent the first 8 odd years of my professional life at Coopers & Lybrand/PwC.

The 6 years i've been in the Nations Capital, i've worked (briefly) for a 2nd tier CA firm, a private electrical/energy company, & done contract work for a large charitable organiation, & a very large crown entity.

At the moment i'm doing nought, but nursing a knee injury :D

In the past i've done a fair bit of work with Trusts & Company structures for wealthy clients, ring fencing liabilties, tax friendly structures etc

But then again, i haven't followed the normal beanie path, i'm a bit different ;)

I'm trying to move away from accounting, the sharemarket interests me more these days

That's very cool. I'm a student at UC doing a BCom in Taxation & Accounting and this is the kind of area that I like, tax implications and business/investment structure, trusts - charitable and private, that kind of thing.

[shasta]

That's very cool. I'm a student at UC doing a BCom in Taxation & Accounting and this is the kind of area that I like, tax implications and business/investment structure, trusts - charitable and private, that kind of thing.

I did a bit of everything during my time there, just kept putting my hand up & never allowed myself to be pidgeon holed in one area.

Accounting is just a base for what i really want to do ;)

It just happened that Trust/Group Company structures was the area i enjoyed the most.

BTW - i started my BBS extramurally (at Massey) back in 1995 whilst working fulltime :cool: