We all know that choosing the perfect investment and getting the timing right are both critical. What people often overlook, however, is selecting the right investment ownership model.
How you own your investment – and with whom – is a decision you’ll want to nail from the outset.
That’s because the asset ownership structure you select can dictate the tax you pay, access to finance, estate planning, control of your investment, costs associated with maintaining it, and the risks you face.
Today we’re going to take a quick look at your options when it comes to asset and investment ownership.
Personal ownership – sole or joint
Sole ownership is the complete ownership of an asset by one individual. This is perhaps the simplest and least costly form of asset ownership.
You’re entirely responsible for the asset, which means you carry full liability for all debts, finances and taxes.
Joint ownership involves two or more individuals owning a share of the asset.
Depending on your situation there may be tax benefits or tax discounts associated with joint ownership. For example, joint ownership of a property by a husband and wife may qualify for a tax benefit. You may also receive a 50% discount on Capital Gains Tax (CGT).
One of the main disadvantages of personal asset ownership is that it offers little protection for your investment if you become bankrupt or are sued.
A trust is an investment structure that obliges a person, or group of people (trustees) to hold assets for the benefit of others.
Trust ownership can offer additional asset protection, allow for profit sharing and tax benefits, including a 50% discount on CGT. It can also help with estate planning and reduce the costs associated with transferring asset ownership.
Trusts, however, can be costly and complicated to establish and are also associated with more reporting and administrative responsibilities than personal ownership. Depending on the trust structure you select, it can also be more complicated to secure an investment loan.
A company can own a stake, or the entirety, of an asset.
Again, company ownership can help protect assets from personal losses and liabilities. It can also deliver tax benefits because any income and capital gains is taxed at the company tax rate of 30% (which may be significantly less than your personal marginal tax rate).
On the other hand, companies miss out on the 50% discount on CGT that is possible through personal or trust ownership.
Your control over the asset – including when you buy and sell – may also be diluted via a company structure.
Investing through a superannuation structure can deliver significant tax benefits as any income earned via super can be taxed at as little as 15%. CGT from investments via super may be discounted by a third.
Investing through your super is also an estate planning strategy that many people consider.
That said, there are complex rules around super contribution caps, tax treatment and borrowing arrangements when investing via super. The location, type and liquidity of your investment may also be restricted.
Get in touch
Understanding which ownership option is the best fit for you and your asset can be complex. As you can see, it’s not straightforward – there’s a lot of considerations and no two situations will be the same.
So if you want to get it right from day dot, get in touch. We can help put you in touch with professionals who can offer you reliable legal and financial advice.
If you would like assistance getting your accounts under control as we approach the end of financial year, call us today on 1300 79 80 38.
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At Assure Wealth we specialise in helping busy, successful families structure their finances to achieve greater wealth and financial peace of mind.
Disclaimer: The information provided on this website has been provided as general advice only. We have not considered your financial circumstances, needs or objectives and you should seek the assistance of your Walker Lane Pty Ltd Adviser before you make any decision regarding any products mentioned in this communication. Whilst all care has been taken in the preparation of this material, no warranty is given in respect of the information provided and accordingly neither Walker Lane nor its related entities, employees or agents shall be liable on any ground whatsoever with respect to decisions or actions taken as a result of you acting upon such information.
Assure Wealth Pty Ltd ABN 31 965 466 780 Corporate Authorised Representative no. 1244817, Patrick Casey Sub-Authorised Representative no. 1244748 of Walker Lane Pty Ltd ABN 70 626 199 826, an AFSL holder No 509305.