Shaun Farrugia – Could a trust structure turbo charge your wealth creation? Episode 26

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

Case Studies as mentioned in this episode

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.

Links mentioned in this Episode

Optimised Accounting & Finance

Multi-Phase solution for Early Retirement

Leave a Reply

Your email address will not be published. Required fields are marked *