Which investment structure is best to build wealth?

Financial Advice

01-04-2025

Which investment structure is best to build wealth?

Choosing the right investment vehicle is a crucial step in building long-term wealth. With various options available, understanding the unique features and benefits of each can help you make informed decisions to achieve your financial goals. 

Investment strategies can produce vastly different outcomes depending on the structure in which they are implemented. For instance, a share portfolio held personally could attract capital gains tax of up to 47% if assets are sold within 12 months. In contrast, holding the same portfolio within a superannuation environment during the pension phase could result in a 0% tax liability. 

Whether you're saving for retirement, growing your investment portfolio, or planning for future generations, selecting the right structure is essential to optimise tax efficiency and maximise long-term growth. 

  • Personally owned investments are often the most straightforward and accessible option, particularly for those just starting their investment journey. Holding assets in your own name allows for full control and flexibility, making this structure ideal for short to medium-term financial goals. However, this simplicity comes with trade-offs. All income, including dividends, interest, and capital gains, is taxed at your individual marginal tax rate, which could be as high as 47%. While assets held for more than 12 months may be eligible for a 50% capital gains tax discount, this structure does not offer the same level of tax efficiency or asset protection as superannuation or trusts.
    For those with significant personal income or those focused on intergenerational wealth planning, alternative structures may be more suitable in the long-term. 
  • Superannuation remains one of the most effective vehicles for long-term wealth creation, particularly when saving for retirement.
    Contributions made to super can be taxed at concessional rates, making it an attractive option for individuals looking to grow their savings efficiently. Additionally, earnings within a super fund are taxed at a lower rate compared to personal income, and withdrawals after retirement are often tax-free. However, there are limitations regarding contribution caps and access restrictions until preservation age.
  • Family trusts, or discretionary trusts, offer a flexible way to distribute income among family members while optimising tax obligations. These trusts can be an effective tool for asset protection and estate planning, as they allow income to be allocated to beneficiaries who may be taxed at lower marginal rates. However, trusts do not receive the same concessional tax treatment as superannuation and require ongoing management and compliance with legal requirements.
  • Investment companies can provide a structured and tax-efficient way to grow wealth, especially for individuals, families or business with large assets to invest.
    Profits retained within an investment company are taxed at the corporate rate, which may be lower than an individual's marginal tax rate. Access to profits is typically through dividend payments, which may come with franking credits to help offset personal tax liabilities depending on the shareholder’s marginal rate. Unlike trusts, companies do not allow income splitting, however, they offer greater flexibility in reinvesting profits for future growth. Another important consideration is the capital gains tax treatment, as companies are not eligible for certain concessions that are available to other investment structures. 

How do I make the right choice?

The best investment structure for you depends on your individual circumstances. Everyone's situation is unique, with factors such as financial goals, time horizon, tax considerations, and more playing a key role in determining the right approach.

Investments held personally are simple and offer more control, ideal for short and medium-term objectives. While Superannuation may be ideal for long-term goals, offering concessional tax rates and potentially tax-free income in retirement.

For asset protection and more flexibility, a family trust can be useful for distributing income among beneficiaries and managing tax efficiently. On the other hand, an investment company may be appropriate for those with substantial assets, allowing profits to be reinvested and taxed at the corporate rate.

A Partner in your financial journey

Navigating the various options for wealth creation can be complex. Our team at Partners Wealth Group is here to help you choose the most suitable investment vehicle based on your unique circumstances and goals.

Contact us to schedule a consultation and start building a secure financial future.

 

This information is general in nature and is provided by Partners Wealth Group. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information.