Episode 26
Shaun Farrugia - Could a trust structure turbo charge your wealth creation? Episode 26
January 2, 201827m 31s
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Show Notes
Following on from Episode 23 on Multi-Phase solutions for Retirement we are joined today by Shaun Farrugia from Optimised Accounting & Finance to talk all things Trusts.
Check out our free download Multi-Phase solution for Early Retirement
In this episode we cover:- The dummies guide to what exactly a Trust is
- How it can work as a funnel and the tax flexibility that it allows
- The two types of people that generally use Trust structures
- What are franking credits
- Three case studies of how Shaun clients are using Trust for tax flexibility
Scenario 1: Couple approaching retirement / early retirement. (Dramatically reduce tax)
- Distribute investment / business income to a 'bucket company'
- Allows for tax to be paid at the company tax rate - accrues as franking credits
- Funds pile up and are invested within the company
- Upon 'retirement' dividends can be streamed out with franking credits attached
- Draw down $13,000 each financial year to remain below the tax free threshold with a tax refund of $5,572 - effectively a zero tax rate
- Draw down $26,000 each financial year and receive a refund of around $6,800 back - 11% tax rate.
Scenario 2: Young Couple - DINKS / Side Business (flexibility)
- Couple both working full time on incomes > $90,000
- Have a side business and investments
- Currently there isn't much of a tax benefit however couple is looking at having kids in the medium term
- Wife will take a year off work, and then in the 2nd year the husband will take a year working part-time
- Trust allows the couple to distribute the income from the side business and investments to whichever member of the couple has the lowest income at the time.
Scenario 3: High Income Earner with a property
- Client is on the highest tax bracket
- Purchased a rental property at the coast
- Client is looking for a tax-break whilst being able to achieve capital growth
- Wife is entrepreneurial and keen to run an AirBNB
- Client is time poor and not interested in having a bar of it
- Property is leased at proper market level rates to a family trust setup by the wife
- Client receives rent as normal
- Wife runs business
- Kicker is adult son in Uni - profit from the Air BNB is effectively tax free.