WELCOME STRUCTURES FOR INVESTMENTS CAMBEL SHARPE & CO Pty Ltd BUSINESS & TAX ADVISORS

1. WELCOME STRUCTURES FOR INVESTMENTS CAMBEL SHARPE & CO Pty LtdBUSINESS & TAX ADVISORS

2. Investment Structures • There is no ‘one size fits all’. • It depends on the wants and needs of the Investor. • Tax should not be the dominant reason for choosing a particular structure.

3. ASSETS • Different classes of Assets including: • Cash • Fixed Interest • Property • Australian & International Shares

4. Investment Structures • Some common Investment Structures include: • Individual • Partnership • Company • Trust (Discretionary, Hybrid, Fixed) • Superannuation Fund

5. Factors for Consideration • Factors to consider when choosing an Investment Structure: • How easy is it to set up, maintain and understand. • Risk profile. • Stamp Duty costs. • Will the structure provide protection from militant children or estranged spouses. • Treatment of the assets in the event of divorce.

6. Factors for Consideration – cont’d • Will the structure provide easy entry for new partners. • Future plans – retirement, going in to business. • Taxation considerations including: • Tax Rates of various entities. • Negative Gearing. • Availability of income.

7. Structure: Individual / Partnership • Advantages: • Simplicity. • Negative Gearing in high income earner’s name. • Income splitting with Partnership. • Capital Gains Tax concessions. • Disadvantages: • Inflexible. • Cost to re-structure if circumstance change i.e. Stamp Duty, Capital Gains Tax. • Limited Asset Protection – Partners and Individuals are jointly and separately liable to each other.

8. Example – Individual Capital Gains Dividend Rent Interest Individual assessed at marginal Tax Rates. Negative Gearing in individual names. Individual’s Assets exposed to Creditors or litigation.

9. Example – Partnership Capital Gains Dividend Rent Interest Profit / Loss / Capital Gain split in accordance with agreement. Partners are jointly and severally liable and Assets exposed to Creditors or litigation.

10. Tip: • It may not be appropriate to acquire assets in your own name due to Asset Protection if: • You carry on a business as a Sole Trader. • You are a Director of a company. • Only have a single Director company with one spouse Director, the other spouse holding the assets.

11. Structure: Company • Advantages: • Limited Liability – although Director can be personally liable. • Corporate Tax Rate of 30%. • Imputation credits can be passed to shareholders. • Disadvantages: • Cost of compliance – maintenance. • Directors’ potential liability. • Losses cannot be distributed to Shareholders. • Capital Gains – are not concessionally taxed.

12. Example – Company Capital Gains Rent Dividend Interest Single Director To limit exposure to Creditor or litigation. Company – 30% Tax Rate Wages or Franked Dividends taxed at marginal Tax Rates. No Capital Gains discounts. Shareholder Shareholder

13. Structure: Discretionary Trust • Advantages: • Limited Liability with a Corporate Trustee. • Asset Protection – Assets are sheltered within the trust. • Flexible tax planning with the ability to distribute income and Capital Gains to family and other entities. • Disadvantages: • No Land Tax threshold for Land Tax. • Potential changes in Legislation. • Losses are ‘trapped’ in a Discretionary Trust. • If holding shares in the Discretionary Trust, you must pass the 45 day Holding Period rule.

14. Example – Discretionary Trust Interest Rent Dividend Capital Gains DISCRETIONARY TRUST Discretionary Distribution of Income and Capital Gain. CORPORATE TRUSTEE Family members marginal rates & Capital Gains Discount Company – 30% Tax Rate

15. Structure: Fixed or Unit Trust • Advantages: • Limited liability with a corporate trustee. • Asset Protection – assets are sheltered within the trust. • Ability to issue different classes of units to different people dependant on the financial situation. • Benefits / income can be passed to beneficiaries without change in ownership of the investments. • Disadvantages: • Potential changes in legislation. • Cost of maintenance.

16. Example – Basic Fixed or Unit Trust Interest Rent Dividend Capital Gains CORPORATE TRUSTEE FIXED / UNIT TRUST Income Income Units Units (Beware of Land Rich Entities subject to Stamp Duty.) Transfer of Units not subject to Stamp Duty.

17. Example – Unit Trust Asset Protection & Negative Gearing Rent Capital Gains CORPORATE TRUSTEE UNIT TRUST Capital Gain Rent Bank Capital Units Income Units Borrowings Transfer of Units not subject to Stamp Duty. (Except Land Rich Entities.) Negative Gearing

18. Asset Protection / Estate Planning • Tips: • Put in place a number of layers. • Ensure risk is reduced by seeking expert advice. • Have adequate insurance cover. • Own little or no assets. • Proper Asset Protection is about being pro-active rather than reactive. • Divesting Assets at the point of a problem is likely to be costly and ineffective against a Trustee in Bankruptcy.

19. Asset Protection / Estate Planning – cont’d • Generally a Trustee in Bankruptcy will not be able to access Assets that a Bankrupt transferred to a relative, company or trust many years before the Bankruptcy or were never owned by the Bankrupt. • Family Law Courts apply a different set of rules to Bankruptcy court so it is irrelevant to which name the property is in.

20. CAMBEL SHARPE & Co Pty LtdBUSINESS & TAX ADVISORS • THANK YOU FOR VISITING US