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.

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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