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The value of advice- When the stars aligned for the Bank of Mum and Dad

Steve Thaxter- Senior Partner and Principal Adviser, Sovereign Wealth Partners

There was cause for quiet celebration in one of our clients’ household a few weeks back. A private investment they’d made had paid off handsomely. The investment itself we take no credit for – it was solely the client who had committed to the risk and put in the hard yards.

But at Sovereign we were celebrating too, because in collaboration with the client and their accountant, the decision had been made at the outset to hold the investment in a family trust.

This allowed the stars to align in multiple ways:

  • The proceeds of the investment sale could be efficiently shared with the family, saving considerable tax, rather than being taxed at the top marginal rate of a single person;

  • Over $100,000 was able to be made in tax deductible superannuation contributions by various family members, saving even more tax by tapping into the new “carry over” super contribution rules;

  • Part of those super contributions will be eligible for early withdrawal by the adult children when buying their first home.

Whilst a family trust is not suited to all investors, it can be the ideal vehicle for certain family investment projects and be the day-to-day work-horse of “The Bank of Mum and Dad”.

Other common ownership structures The Bank of Mum and Dad might also use include self-managed superannuation funds (SMSFs), investment companies, joint investments and partnerships. Each comes with pros, cons and varying annual running costs.

So if you’re aiming for the perfect ten with your wealth set up, look carefully at how you’ve structured your investments, especially before embarking upon a new venture. Talk to us, it may only need a quick discussion but the potential to improve the outcome in the years ahead might be quite profound.

Disclosure Statement: This communication has been approved and issued by Sovereign Wealth Partners Pty Ltd ABN 18 607 071 367 Corporate Authorised Representative (No. 001233909) of Sovereign Capital Pty Ltd ABN 44 164 127 833, AFSL 456235.

General Advice Warning: Any advice included in this article and associated links is general in nature and does not take into account your objectives, financial situation or needs. If a product we recommend has a Product Disclosure Statement (PDS), you should read it before making a decision. Past performance is not a reliable indicator of future performance. We do not endorse any information from research providers that we provide to you, unless we specifically say so.


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