When looking to buy investments. There are three main ways to house these investments. They are having them in your personal name/joint names with another person, in a company or in a Trust with or without a bucket company attached. Each of these options have different positives/negatives that may impact what structure is the best way for you to invest moving forward.
1. Personal name
Advantages – Simple, inexpensive, have access to the CGT Discount upon sale of investments, possibility of negative gearing against other income that you are earning
Disadvantages – Cannot split income, Will need to top up dividend income from the franking credit from corporate tax rate of 30% to Personal Income tax of 47%. Meaning you will need to cover the 17% on dividends received from the company when taking cash out.
Advantages – Top up tax of only 4 percent required compared to the 21% if owned in your own name. (however, will need to pay the 21% to be able to spend the money in own name).
Disadvantages – No access to CGT discount, unable to split income unless company owned by a trust.
Attached or not attached to a bucket company – Ability to split income, Ability to access the 50% discount, Most efficient for tax planning
Disadvantages – Higher initial set up costs and annual compliance costs will be more expensive.
There are more pros and cons to each of these options depending upon what type of investment you are looking to make and your personal circumstance
If you need any more advice or are seeking additional information, please do not hesitate to contact us at Turners.