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What is the best structure for investment
The best structure is one that is fit for
purpose to each client personal circumstances and requirement. There is no one
size fits all structure.
These are 7 key considerations I look at when putting a structure for a client:
- Life is full of risks and liabilities and we
might run into legal disputes with others and expose your assets to third party
claims. Therefore, you might consider having your investment properties in an
entity difficult to make claims against.
- Taxation: Tax should never be
the sole reason for choosing a structure, however this does not mean that you
don’t consider tax efficiencies. If you have multiple investment income, you
might consider choosing a structure that can carry all these investments and
help you offset investments losses with investments gains.
- Number and type of parties
involved: Structuring for a family group is completely different from
structuring for business partners or other non-individual legal entities.
Different parties introduce commercial restrictions and rules that narrow down
- Investment income usage: How
the investment income will be used and accessed is another driver in the
structuring decision. Is it for retirement? Or is it for funding daily and
routine expenses? Some structures like SMSF are purely for providing for
retirement. If you plan to have easy access to this investment income, probably
SMSF is not the right one for you.
- Succession planning: No one
lives forever! Any structure you put in place has to take into consideration
your present and future situation.
- Your exit strategy: Once you
exit and sell an investment property, high chances are that you would get
capital gain out of it. If you know you are selling in the future, you need to
consider structures that are eligible for capital gain tax concessions.
- Costs & complexities: I
have seen incredibly complex structures for investments, related and unrelated
The higher the complexity of the structure, the higher the cost and the maintenance requirements. Golden rule here: “Keep it simple!” and make sure the benefit you are getting out of it exceeds its cost.
Is it possible to find a structure that
covers 100% all these considerations? It is possible depending on each investor
individual situation and requirements.
If covering all these considerations in one
structure is not a possibility for you, I recommend choosing top 3
considerations for you and get a structure that covers all 3.
Let me know your thoughts around these