David, high income professional and investor

David earns a considerable income from his salary as an investment banker, as well as over $500,000 in investment income.

The Challenge

All of David’s investments were held in a trust structure and he had no beneficiaries to distribute the investment income to, as his children are under 18 and his spouse is also in the highest marginal tax bracket. He approached Acceler Advisory with the goal of saving on tax and continuing to invest in a tax-effective structure.

How Acceler helped

With the goal of helping David save tax, we set up a company that will be a beneficiary of the trust (bucket company) so that any income distributed to the bucket company will be taxed at 30% instead of 46.5%. We also set up a new trust as the shareholder of the bucket company, allowing dividends to be paid to the new trust to distribute to David’s kids once they are over 18.

To maximise tax effectiveness for purchasing property, we established a Self- Managed Super Fund (SMSF). This allowed David to have greater control of his assets and investment decisions. By utilising the bucket company to loan money to the SMSF on commercial terms set by the ATO, David was able to pay interest to his company instead of the bank. We also utilised the SMSF for investing to allow David to take advantage of the 15% SMSF tax rate on investment earnings and the 10% tax rate on capital gains.

Overall, we were able to help David save 16.5% tax on investment income, equating to over $82,500 tax saved per year. We also achieved savings of over 30% tax on investment income (compared to earning this income in his personal name) by lending money to the SMSF and investing in property. David is now paying interest to his own company rather than the bank and is able to distribute investment income to his children by setting up a new trust for the bucket company.

David, high income professional and investor

The Challenge

How Acceler helped

What we achieved

Savings of over 30% tax on investment income

Ability to distribute investment income to his children

Pays interest to his company rather than a bank

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