Latest / She's On The Money / Ownership Structures of Investments Part A

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Ownership Structures of Investments Part A · She's On The Money

• 0:00
  Speaker 1: Hello.
• 0:01
  Speaker 2: My name's Santasha Nabananga Bamblet. I'm a proud Yr the
• 0:05
  Speaker 2: Order Kerney Whalbury and a waddery woman. And before we
• 0:08
  Speaker 2: get started on She's on the Money podcast, I would
• 0:11
  Speaker 2: like to acknowledge the traditional custodians of the land of
• 0:14
  Speaker 2: which this podcast is recorded on a wondery country, acknowledging
• 0:18
  Speaker 2: the elders, the ancestors and the next generation coming through
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  Speaker 2: as this podcast is about connecting, empowering, knowledge sharing and
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  Speaker 2: the storytelling of you to make a difference for today
• 0:31
  Speaker 2: and lasting impact for tomorrow.
• 0:33
  Speaker 1: Let's get into it.
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  Speaker 3: She's on the Money. She's on the Money. Hello, and
• 0:58
  Speaker 3: welcome to She's on the Money cast for millennials who
• 1:01
  Speaker 3: want financial freedom. My name is beck Syed and with
• 1:04
  Speaker 3: me today is Victoria Device. Hello, Hi, Victoria.
• 1:09
  Speaker 1: Are you excited for today's episode?
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  Speaker 3: Pretty?
• 1:14
  Speaker 1: You are not telling the truth that all I am.
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  Speaker 3: I feel like by the end of this, hopefully I'll
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  Speaker 3: know what any of this means.
• 1:20
  Speaker 1: You'll be like, why are we even talking about this?
• 1:23
  Speaker 1: It's important? I promise, is it?
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  Speaker 2: Yeah?
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  Speaker 1: It's so import Okay, I trust you. At the end
• 1:27
  Speaker 1: of the day, I'm not going to spoil what the
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  Speaker 1: topic is, because it's your job to do us. But like,
• 1:32
  Speaker 1: picking the right one means you'll make more money. Oh
• 1:36
  Speaker 1: and you like money spicy.
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  Speaker 3: Okay, well let me get straight into it. So basically
• 1:41
  Speaker 3: be today we are more investment focused, sexy. You will
• 1:44
  Speaker 3: be telling us about ownership structures of investments.
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  Speaker 1: Hot.
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  Speaker 3: Now, this is not an episode that you already need
• 1:50
  Speaker 3: to be an investor to listen to, right.
• 1:52
  Speaker 1: No, absolutely not. In fact, you are in the perfect
• 1:56
  Speaker 1: spot to listen to this, Okay, an investor already because
• 1:59
  Speaker 1: it can help you when you go to like kick
• 2:02
  Speaker 1: how am I going to invest for the first time?
• 2:04
  Speaker 1: Because one of the issues that you run into and like,
• 2:07
  Speaker 1: it's not to scare anybody who's already invested, Like you're fine,
• 2:10
  Speaker 1: I promise you are absolutely fine, and you're probably investing
• 2:12
  Speaker 1: in the right structure to begin with. This really comes
• 2:15
  Speaker 1: in if you have big investment amounts like inheritances or
• 2:20
  Speaker 1: you're talking about estate planning and stuff like that along
• 2:24
  Speaker 1: the long term and you just want to make the
• 2:26
  Speaker 1: right decision so that it benefits family members and the
• 2:29
  Speaker 1: future and potentially your tax rates. So it's good to
• 2:33
  Speaker 1: know beforehand. It's also good to know once you are
• 2:36
  Speaker 1: an investor, because you can always change your structure. And yeah,
• 2:39
  Speaker 1: it's just a very exciting topic to talk about. I
• 2:42
  Speaker 1: know you don't.
• 2:42
  Speaker 3: Care at all, but my.
• 2:45
  Speaker 1: Energy is enough for both of us one hundred percent.
• 2:48
  Speaker 3: And also, I will one day care about this stuff.
• 2:50
  Speaker 3: So I'm glad that we're learning about it.
• 2:52
  Speaker 1: But I really don't, and I'm happy to admit that
• 2:54
  Speaker 1: on the podcast that I co host.
• 2:56
  Speaker 3: Well, exactly right, just in case someone else is listening
• 3:00
  Speaker 3: needs the information, probably won't do anything with it. Right
• 3:03
  Speaker 3: now here with you. Also, I'm here with you, I
• 3:06
  Speaker 3: see you, I see you. So it's actually well timed
• 3:10
  Speaker 3: for those who are thinking of starting their investment journey.
• 3:13
  Speaker 1: Exactary, which is why I think it's important to know
• 3:16
  Speaker 1: all of this stuff before you purchase an asset, because
• 3:19
  Speaker 1: it's really important to consider, I guess, the most appropriate
• 3:22
  Speaker 1: investment structure to use. Obviously, getting it right at the
• 3:26
  Speaker 1: very beginning means that there's long term benefits. You don't
• 3:29
  Speaker 1: have the fuss of changing things. And as we all know,
• 3:33
  Speaker 1: if you own an investment today, and let's say it
• 3:35
  Speaker 1: does well, because that's the point of owning an investment,
• 3:38
  Speaker 1: right like you want it to do well over the
• 3:40
  Speaker 1: long term. If you get like ten fifteen years down
• 3:43
  Speaker 1: the track and then go, oh damn, I'm back, can
• 3:45
  Speaker 1: I wish I had a different investment structure. To change
• 3:49
  Speaker 1: things into a different structure is not as easy as
• 3:52
  Speaker 1: picking them up and just dropping them into another investment
• 3:55
  Speaker 1: vehicle or into a trust. You often have to sell
• 3:59
  Speaker 1: down all of those assets, which is going to trigger
• 4:02
  Speaker 1: what we call a CGT event, which is where capital
• 4:05
  Speaker 1: gains tax has to be paid. And that's not that sexy,
• 4:09
  Speaker 1: especially if you're like, well, actually, I was just trying
• 4:12
  Speaker 1: to protect my assets. So something that I have run
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  Speaker 1: into historically when I was a financial advisor is I
• 4:19
  Speaker 1: would meet people who had significant wealth and a different
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  Speaker 1: structure would work better for them. So they came to
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  Speaker 1: me and said, hey, VE like, you know, my other
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  Speaker 1: really rich friend at our really fancy dinner that we
• 4:31
  Speaker 1: went to was talking about a trust structure, and I
• 4:35
  Speaker 1: would really like one of those, because they told me
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  Speaker 1: all of these sexy tax benefits and I just can't
• 4:40
  Speaker 1: believe I haven't thought of it yet. And I'd be like, ah, great,
• 4:42
  Speaker 1: step this way, let's have a chat, and then I
• 4:45
  Speaker 1: do all of the maths and work out what capital
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  Speaker 1: gains tax might cost them and what it looks like
• 4:51
  Speaker 1: to change those structures, and it's just not financially feasible
• 4:54
  Speaker 1: for them because they've owned it for so long in
• 4:57
  Speaker 1: their own name and in a particular way that changing
• 5:01
  Speaker 1: it actually doesn't put them in a better or significantly
• 5:04
  Speaker 1: better off position. However, it would have been a better
• 5:07
  Speaker 1: position had they done it from the start. So it's
• 5:10
  Speaker 1: one of those things where it's better to just learn
• 5:13
  Speaker 1: before we actually get to the point where we're making
• 5:15
  Speaker 1: these decisions. And to be Really Morbid Morbid is my
• 5:19
  Speaker 1: favorite podcast, by the way, but to be Really Morbid
• 5:22
  Speaker 1: for a hot second, Over the next fifteen to twenty years,
• 5:26
  Speaker 1: we are going to see the biggest intergenerational wealth transfer
• 5:30
  Speaker 1: from boomers.
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  Speaker 3: Down to millennials.
• 5:33
  Speaker 1: And I don't think it's very nice to think about
• 5:36
  Speaker 1: because at the end of the day, we're talking about inheritances,
• 5:39
  Speaker 1: and you know what has to happen for inheritances to
• 5:41
  Speaker 1: be triggered, which is really sad. Yes, However, it means
• 5:45
  Speaker 1: that honestly, a lot of our community are going to
• 5:48
  Speaker 1: have to be making big decisions about lump sums of
• 5:50
  Speaker 1: money whether that is ten thousand dollars, whether it is
• 5:53
  Speaker 1: one hundred thousand dollars or a couple of million dollars.
• 5:56
  Speaker 1: This conversation is something where if you've already had it today,
• 6:00
  Speaker 1: you're like, all right, well shit, something bad has happened.
• 6:04
  Speaker 1: I'm going to have to go through this process. Didn't
• 6:06
  Speaker 1: V say something that Beck didn't care about? And actually
• 6:11
  Speaker 1: now it's really important. Yeah, So I think it's important
• 6:14
  Speaker 1: to have the conversation. And it's kind of interesting because
• 6:16
  Speaker 1: I'll try and drop in as many tip bits about
• 6:19
  Speaker 1: my ex wealthy clients to make it like a little
• 6:21
  Speaker 1: bit spicy.
• 6:22
  Speaker 3: Does that make it better? It actually kind of? Does
• 6:25
  Speaker 3: you know? I love a bit of juice? We do?
• 6:27
  Speaker 1: We do? So, I guess when it comes back to
• 6:29
  Speaker 1: investment structures in general, and investment structure refers to how
• 6:33
  Speaker 1: your investment is legally owned. And today we're going to
• 6:37
  Speaker 1: break down the different kinds of ownership models of investments.
• 6:40
  Speaker 1: So we're going to talk about individual ownership, partnerships, We're
• 6:43
  Speaker 1: going to talk about companies, trusts, what custodial ownership looks like,
• 6:47
  Speaker 1: how you own things through superannuation, and what that difference
• 6:51
  Speaker 1: is when you own something through superversus when you own
• 6:54
  Speaker 1: it individually. And what a hymn is, because I've had
• 6:56
  Speaker 1: a lot of questions about what a hinn is, but
• 6:59
  Speaker 1: we'll get they're.
• 7:00
  Speaker 3: Okay, Oh, I'm excited. So first, V what kind of
• 7:04
  Speaker 3: things should we consider to help us choose which investment
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  Speaker 3: structure is right for us? First things?
• 7:09
  Speaker 1: First to the first question you should be asking yourself
• 7:12
  Speaker 1: is Beck, if your investment is making money, who should
• 7:17
  Speaker 1: get that money? So? Is it going to be income
• 7:21
  Speaker 1: that is going to be for now or is it
• 7:23
  Speaker 1: income that is going to be for the future. Is
• 7:26
  Speaker 1: it income that in the future you want your children
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  Speaker 1: to have access to whether you have them now or
• 7:31
  Speaker 1: you're planning on having them in the future, or you
• 7:33
  Speaker 1: don't know, but you want.
• 7:34
  Speaker 3: That option to exist.
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  Speaker 1: Should you receive the capital, so should you be able
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  Speaker 1: to access the cash both now and near the future?
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  Speaker 1: Is there a need for investment assets to be protected
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  Speaker 1: from either future creditors or our partners.
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  Speaker 3: So I was privileged.
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  Speaker 1: Enough to work in the ultra high net wealth space,
• 7:54
  Speaker 1: so I often worked with people who were inheriting significant
• 7:58
  Speaker 1: sums of money. And we're quite young. So you might
• 8:02
  Speaker 1: come in Beck and be like Hey, this is literally
• 8:05
  Speaker 1: the worst thing in the entire world. Someone very close
• 8:08
  Speaker 1: to me has passed away yesterday. I'm inheriting you know,
• 8:12
  Speaker 1: a million dollars, And the conversations I need to have
• 8:16
  Speaker 1: with you aren't just oh great, Beck, have you thought
• 8:18
  Speaker 1: about a trust? It's more, Beck, do you have a partner?
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  Speaker 1: What does your partner do? How is your partner contributing financially?
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  Speaker 1: What does this money mean to you? Is this money
• 8:30
  Speaker 1: really really special to you? Usually it is because I
• 8:34
  Speaker 1: think a lot of people go, oh my gosh, they're
• 8:36
  Speaker 1: so lucky they got an inheritance. I guarantee you if
• 8:40
  Speaker 1: you sat down with any person that got an inheritance,
• 8:43
  Speaker 1: they would prefer to give that money back and have
• 8:45
  Speaker 1: the person back in their lives.
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  Speaker 3: It's not luck.
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  Speaker 1: It's an unfortunate outcome. Like, yes, it is a responsibility.
• 8:53
  Speaker 1: It is the best next thing. So like, if I
• 8:55
  Speaker 1: can't be there for my husband, Beck, yeah, I want
• 8:59
  Speaker 1: to make sure that he's final actually okay, And that's
• 9:01
  Speaker 1: me looking after him when I can't be around anymore.
• 9:03
  Speaker 1: And that's how we should see these things. It's not
• 9:06
  Speaker 1: lucky for you to get an inheritance. In fact, that
• 9:10
  Speaker 1: weight is very, very heavy, and there's often a lot
• 9:13
  Speaker 1: of therapy that goes along with the amount of money
• 9:16
  Speaker 1: that somebody inherits, because you know, let's just say you
• 9:19
  Speaker 1: inherit a couple of thousand dollars. You might go, yeah, okay,
• 9:22
  Speaker 1: no worries. But what happens if your estranged father passes away?
• 9:27
  Speaker 1: You have no idea. Someone comes and taps you on
• 9:31
  Speaker 1: the shoulder, Maybe a solicitor says, hey, beck, I don't
• 9:34
  Speaker 1: know if you know this, but this really unfortunate event
• 9:37
  Speaker 1: happened a month ago. You're just learning about this, but
• 9:40
  Speaker 1: you didn't realize he was super wealthy. There's so much
• 9:44
  Speaker 1: guilt associated with that because you're like, but I didn't
• 9:46
  Speaker 1: have anything to do with him. I don't know what
• 9:49
  Speaker 1: this money means. I feel very guilty for having it.
• 9:51
  Speaker 1: I don't know how to give this money the respect
• 9:54
  Speaker 1: it deserves. And I think that that's a bigger conversation.
• 9:57
  Speaker 1: So I'm going off topic and maybe we'll do a
• 9:59
  Speaker 1: whole episode on what it means to inherit money, because
• 10:03
  Speaker 1: I think there's this common misconception that it's luck.
• 10:06
  Speaker 3: Oh, you're so lucky to have had that.
• 10:08
  Speaker 1: Now be able to buy our first home, like, that's
• 10:10
  Speaker 1: not something everybody else gets. Sit down. Nobody wants their
• 10:14
  Speaker 1: inheritance and yes they might be ahead financially, but I
• 10:17
  Speaker 1: promise it's so much better to have that person in
• 10:21
  Speaker 1: your life. Yes, So we need to talk about I
• 10:23
  Speaker 1: guess am I protecting you against a partner. So you know,
• 10:27
  Speaker 1: if you break up with your partner in five or
• 10:29
  Speaker 1: six years, yeah, you might have built a life together.
• 10:31
  Speaker 1: But do they deserve half of your inheritance? Should they
• 10:33
  Speaker 1: walk away with what your you know, family member worked
• 10:37
  Speaker 1: so hard to have and wanted you to have. So
• 10:41
  Speaker 1: we need to make sure that we're either protected against
• 10:43
  Speaker 1: that or future creditors. We need to check if there
• 10:45
  Speaker 1: are any special family considerations. So say you get an inheritance, Beck,
• 10:51
  Speaker 1: but you also have a daughter and in a will
• 10:54
  Speaker 1: it was written Beck, you get the money, but XYZ
• 10:57
  Speaker 1: needs to be used for your daughter's educational whatever that means.
• 11:00
  Speaker 1: How do we allocate for that because if it was
• 11:03
  Speaker 1: in a trust and tied up, there might be issues
• 11:06
  Speaker 1: pulling it out to pay for that education, and we
• 11:08
  Speaker 1: need to make sure that that exists. We need to
• 11:11
  Speaker 1: understand what levels of flexibility is needed as far as
• 11:15
  Speaker 1: debt and leverage is concerned. If that's involved, what are
• 11:19
  Speaker 1: the tax implications of each structure? How does that work?
• 11:22
  Speaker 1: Because tax rates are going to look different if they're
• 11:25
  Speaker 1: your marginal tax rate versus the tax rate inside a trust.
• 11:29
  Speaker 1: But what does that mean when you pull it out?
• 11:31
  Speaker 1: And what other estate planning issues need to be addressed?
• 11:36
  Speaker 1: That heavy is a lot, it's a lot to think about,
• 11:41
  Speaker 1: but I also think it can be distilled down quite clearly,
• 11:45
  Speaker 1: and we should probably get into that because I feel
• 11:48
  Speaker 1: like I'm overwhelming everybody at this point in time.
• 11:50
  Speaker 3: If this is all very confusing, see a financial advisor
• 11:53
  Speaker 3: one hundred percent, pause your podcast and re listen to
• 11:57
  Speaker 3: that all. But if you are up to scratch and
• 12:00
  Speaker 3: you know exactly what we're talking about, then let's jump
• 12:03
  Speaker 3: straight into the different types of investment structures.
• 12:06
  Speaker 1: All right, First things first, individual ownership or direct ownership,
• 12:11
  Speaker 1: so most common and it's actually the simplest investment vehicle.
• 12:16
  Speaker 1: Is basically a person holding an investment in their own name.
• 12:18
  Speaker 1: You went on the shares e's site, you signed up,
• 12:21
  Speaker 1: you put all of your personal information. You now own
• 12:24
  Speaker 1: those shares directly, that is in your personal name, either
• 12:29
  Speaker 1: singly or jointly. You might have signed up with a
• 12:31
  Speaker 1: partner and that is split investments in an individual name.
• 12:35
  Speaker 1: I've written a list of things can be Are you ready?
• 12:39
  Speaker 1: Easy to set up and manage, as income and capital
• 12:41
  Speaker 1: gains are included in your individual tax return. Simple. They're
• 12:46
  Speaker 1: easier to administer as there is much less paperwork in
• 12:50
  Speaker 1: comparison to any other structure. They are more cost effective
• 12:53
  Speaker 1: as there's no additional expenses to set them up and
• 12:56
  Speaker 1: run them. They're more tax effective, especially if the investment
• 13:00
  Speaker 1: that you own is negatively gared or one of the
• 13:02
  Speaker 1: individuals that owns it is a low income earner. So
• 13:06
  Speaker 1: there are cons. So obviously I've done like a pros
• 13:08
  Speaker 1: and cons list because that's very victoriata mine of me.
• 13:11
  Speaker 1: Of course.
• 13:11
  Speaker 3: The cons, Yeah, you're ready, I'm ready.
• 13:13
  Speaker 1: So the assets held by an individual, they offer no
• 13:17
  Speaker 1: flexibility with the distribution of the income. So if you
• 13:20
  Speaker 1: own that asset, the money has to come to you.
• 13:23
  Speaker 1: You can't just send it to somebody else for tax
• 13:26
  Speaker 1: purposes or even distribution purposes. You personally have to pay
• 13:30
  Speaker 1: tax on it.
• 13:31
  Speaker 3: Okay.
• 13:32
  Speaker 1: Individuals in high risk occupations, they could be sued and
• 13:36
  Speaker 1: their assets exposed to risk from creditors. Okay, that's not
• 13:43
  Speaker 1: that sexy means like, hypothetically, if you were to sue
• 13:48
  Speaker 1: me back, Yeah, I'm worth nothing. So weird, it's really
• 13:54
  Speaker 1: can it?
• 13:54
  Speaker 3: I was actually planning on it.
• 13:56
  Speaker 1: Yeah, I thought you might. I'm worth nothing. I have
• 13:58
  Speaker 1: a trust. We'll get to that and why I have
• 14:01
  Speaker 1: a trust, and I'm happy to talk about, you know,
• 14:03
  Speaker 1: the structure that works for me that you know, if
• 14:05
  Speaker 1: something really bad happened with Sheese on the money, I
• 14:08
  Speaker 1: don't want the property that I own or the shares
• 14:11
  Speaker 1: that Steve and I have worked so hard to invest
• 14:13
  Speaker 1: in being on the table for somebody to take from us,
• 14:17
  Speaker 1: which would significantly impact my lifestyle and the life that
• 14:21
  Speaker 1: we've created. I wanted to separate it out and go
• 14:25
  Speaker 1: all right, well, if something happens with the business, I
• 14:27
  Speaker 1: would want the business to be liable, Like, you can
• 14:29
  Speaker 1: take the business's income, you can take all of those
• 14:32
  Speaker 1: things if you came for me personally. Pretty sure.
• 14:35
  Speaker 3: I own a dog, I'll take the dog. I don't
• 14:38
  Speaker 3: even own a car, beck technically, so I'm now following.
• 14:43
  Speaker 1: I don't even own any that's all.
• 14:46
  Speaker 2: Yeah.
• 14:47
  Speaker 1: Do you own a TV?
• 14:48
  Speaker 3: I'll take a TV? Yeah, I think I have a TV,
• 14:51
  Speaker 3: maybe some flower in your pantry. I'll take a pantry, yeah, easily. Okay,
• 14:57
  Speaker 3: Well I'm still going to come for you. Okay.
• 14:58
  Speaker 1: Sorry, sorry, I still love me. And then the other
• 15:02
  Speaker 1: negative is negatively geared assets that are held by an
• 15:05
  Speaker 1: individual will actually eventually become positively gared, resulting in increased
• 15:09
  Speaker 1: tax liability over time. That's a con and I've written
• 15:13
  Speaker 1: it down as a con. But essentially, if you make money,
• 15:16
  Speaker 1: you have to pay tax, is what that one is saying.
• 15:18
  Speaker 1: Oh okay, So like, if you're gonna make money on
• 15:20
  Speaker 1: your investment, you're gonna have to pay tax, and it's
• 15:22
  Speaker 1: gonna have to be at your marginal tax rate. Like
• 15:25
  Speaker 1: you can't get out of it, okay. And I'm not
• 15:27
  Speaker 1: saying that you can get out of it with other things,
• 15:29
  Speaker 1: but you know, obviously, the whole purpose of having a
• 15:32
  Speaker 1: negatively gid asset is for one day. It's you start
• 15:35
  Speaker 1: producing income. Sure you'll have to pay tax on that income.
• 15:39
  Speaker 1: And some people don't think about it into the future.
• 15:41
  Speaker 3: Enough. I got you, I got you, I got you. Okay,
• 15:44
  Speaker 3: So I guess my next question is what is a partnership?
• 15:47
  Speaker 1: All right? So a partnership is also a relatively simple
• 15:52
  Speaker 1: structure when it comes down to it, and the cost
• 15:54
  Speaker 1: of it is fairly low when it comes to just
• 15:57
  Speaker 1: setting up a structure like this. A partnership, as a
• 16:00
  Speaker 1: pose to holding an investment in joint names, is actually
• 16:03
  Speaker 1: a separate entity for tax purposes and requires its own
• 16:07
  Speaker 1: tax file number and complete tax return, So that's another
• 16:10
  Speaker 1: cost a partnership. It does not pay tax, but it
• 16:15
  Speaker 1: has to distribute all of the income it makes to
• 16:17
  Speaker 1: the partners according to the partnership agreement, so offers limited
• 16:22
  Speaker 1: distribution flexibility. So what that means is it's a separate entity.
• 16:26
  Speaker 1: It does its tax, but come tax time, let's say
• 16:30
  Speaker 1: it made one hundred dollars and you're declaring one hundred dollars.
• 16:33
  Speaker 1: That one hundred dollars cannot stay in that partnership for
• 16:36
  Speaker 1: the next financial year. It has to be taken out.
• 16:38
  Speaker 1: And if Beck, you and I established a partnership together
• 16:41
  Speaker 1: and it was a fifty to fifty split, it means
• 16:44
  Speaker 1: that legally fifty dollars has to go to you and
• 16:48
  Speaker 1: fifty dollars has to go to me because the partnership
• 16:50
  Speaker 1: can't hold it. I see, it's not a place you
• 16:53
  Speaker 1: can store money.
• 16:54
  Speaker 3: Oh I see okay, but you said something about not
• 16:57
  Speaker 3: being taxed. Does that mean if you both made fifty
• 17:00
  Speaker 3: dollars each, you would be tax Yeah, so it would
• 17:04
  Speaker 3: become income for you and it would be taxed at
• 17:06
  Speaker 3: your marginal tax rate.
• 17:07
  Speaker 1: However, that entity has to do its own tax return
• 17:10
  Speaker 1: and operates as an individual entity. So a partnership does
• 17:15
  Speaker 1: not pay tax. But as I said, it has to
• 17:18
  Speaker 1: distribute the income to the individual partners according to the
• 17:21
  Speaker 1: partnership agreement, and then you would pay tax on that
• 17:25
  Speaker 1: income that comes in at your marginal.
• 17:27
  Speaker 3: Tax Oh okay, I got to you. I got you righte.
• 17:31
  Speaker 1: So something to be mindful of there is that there
• 17:34
  Speaker 1: is no risk protection in a partnership, as the assets
• 17:37
  Speaker 1: of either partner may be subject to claim by creditors
• 17:41
  Speaker 1: as all partners are jointly liable, and this means that
• 17:44
  Speaker 1: one partner could become personally liable for all the debts
• 17:47
  Speaker 1: of the entire partnership are then I put together the
• 17:52
  Speaker 1: pros and cons on this one. There wasn't a separate
• 17:54
  Speaker 1: pros and then cons list. It was like a here's
• 17:56
  Speaker 1: all the information you need about it, because I have
• 17:58
  Speaker 1: ADHD and can't stick to a specific for that.
• 18:01
  Speaker 3: Okay, well I told you and you've got the information absolutely.
• 18:05
  Speaker 1: Okay, I'm hearing you. I'm hearing you.
• 18:07
  Speaker 3: Actually, I just want to ask what is the point
• 18:10
  Speaker 3: of a partnership. I mean, I guess you can't give
• 18:12
  Speaker 3: any advice, but what I'm hearing is.
• 18:15
  Speaker 1: I would just go an individual It's so that it's
• 18:18
  Speaker 1: not owned in your individual name, and it can be
• 18:21
  Speaker 1: you know, constructive to distribute income. Obviously, there's a partnership agreement,
• 18:26
  Speaker 1: so you might both jointly own it, but I might
• 18:29
  Speaker 1: have in my agreement. Okay, well, you know, let's pretend
• 18:33
  Speaker 1: I'm a lower income earner than you. Maybe we have
• 18:35
  Speaker 1: an agreement that it's fifty to fifty owned, but we
• 18:38
  Speaker 1: distribute a lot more of the income to me because
• 18:41
  Speaker 1: I'm on a lower tax bracket. We declare it under
• 18:44
  Speaker 1: my tax bracket. But you and I were married, we're
• 18:47
  Speaker 1: in love. That money actually goes into our pooled account.
• 18:50
  Speaker 1: Let's just say I stay at home and I look
• 18:51
  Speaker 1: after all of our pets that we have together. You know,
• 18:54
  Speaker 1: I don't have any other income. That can mean that
• 18:57
  Speaker 1: there are some tax benefits because we've distributed the income
• 19:01
  Speaker 1: that is from that partnership, but one hundred percent of
• 19:04
  Speaker 1: the income had to be distributed. So we might have
• 19:07
  Speaker 1: chosen to distribute it all to me this year, but
• 19:09
  Speaker 1: you're still the owner.
• 19:10
  Speaker 3: Beck Oh, I see okay, So.
• 19:13
  Speaker 1: It doesn't have to be fifty to fifty. Well, it
• 19:15
  Speaker 1: doesn't have to be, but should be based on the
• 19:17
  Speaker 1: partnership agreement and how all of that works. I sat
• 19:20
  Speaker 1: something that you would sit down with your accountant and
• 19:22
  Speaker 1: talk through. And one of the reasons might be because you
• 19:25
  Speaker 1: don't want a complex structure. You don't need a trust
• 19:28
  Speaker 1: to be set up, because trusts can be expensive to
• 19:31
  Speaker 1: maintain and also to do all of the audits on them.
• 19:34
  Speaker 1: We'll get to that. But you might just want to
• 19:36
  Speaker 1: be able to, you know, send some more money to
• 19:37
  Speaker 1: me while I'm staying at home and looking after all
• 19:39
  Speaker 1: the pets. Sure, and then you know, when we're both
• 19:42
  Speaker 1: back in the workforce full time, we.
• 19:43
  Speaker 3: Just split at fifty to fifty. Gotcha, clever and legal?
• 19:47
  Speaker 3: I like that. Now, what about companies?
• 19:51
  Speaker 2: All right?
• 19:51
  Speaker 1: So companies are most often used as a structure for
• 19:54
  Speaker 1: business rather than for investments. But you can choose to
• 19:58
  Speaker 1: hold investments in a com there are a couple of benefits.
• 20:02
  Speaker 1: Let me go through this. We're back to the pros
• 20:03
  Speaker 1: cons list. So the tax rate on profits in a
• 20:07
  Speaker 1: company is twenty eight point five percent or thirty percent,
• 20:11
  Speaker 1: depending on the size of your company. So if you're
• 20:15
  Speaker 1: on a high taxable income, so let's say you have
• 20:17
  Speaker 1: the highest marginal tax rate in Australia because you big dog,
• 20:20
  Speaker 1: you baller, so you're paying forty eight point five percent
• 20:24
  Speaker 1: personal tax. A company rate might actually be more effective
• 20:28
  Speaker 1: because you get twenty eight and a half or thirty
• 20:31
  Speaker 1: percent tax instead of the forty eight point five. There
• 20:34
  Speaker 1: is also protection for the shareholders if the business fails
• 20:38
  Speaker 1: or is sued for some reason. There are obviously cons
• 20:42
  Speaker 1: so the disadvantage of this, particularly when it comes to investments.
• 20:46
  Speaker 1: We're not talking about owning a company structure when it
• 20:49
  Speaker 1: comes to business here, but losses can only be offset
• 20:52
  Speaker 1: against future income with the company, and a company is
• 20:55
  Speaker 1: not able to obtain the benefit of any capital gains
• 20:59
  Speaker 1: discount on the sale of investments.
• 21:01
  Speaker 3: I gotta be honest, I don't know if I got
• 21:03
  Speaker 3: any of that. Are you able to?
• 21:05
  Speaker 1: Yeah? Translate, So losses can only be offset against future income.
• 21:10
  Speaker 1: So if we made a loss on an investment this year,
• 21:13
  Speaker 1: and it was in your personal name back and again
• 21:15
  Speaker 1: I'm not an accountant, so talk to your accountant about
• 21:18
  Speaker 1: what this means for you personally. However, you could offset
• 21:22
  Speaker 1: it against your income from this year. So say you
• 21:24
  Speaker 1: earned fifty thousand dollars from your full time job and
• 21:28
  Speaker 1: then you had fifteen thousand dollars worth of shares, but
• 21:31
  Speaker 1: they made a loss. If you're doing your personal tax
• 21:35
  Speaker 1: return this year, that loss can be declared an offset
• 21:38
  Speaker 1: against your fifty thousand dollars worth of income this year
• 21:41
  Speaker 1: and lower your tax. So that's kind of sexy. It's
• 21:43
  Speaker 1: kind of one of the benefits. However, you cannot do
• 21:46
  Speaker 1: that in a company. It means that you can only
• 21:49
  Speaker 1: do what's called carrying forward a loss. So we put
• 21:52
  Speaker 1: the loss down on paper and say, oh, well, Victoria's
• 21:55
  Speaker 1: assets lost, you know, let's say ten thousand dollars last year,
• 21:58
  Speaker 1: so I can next use that ten thousand dollars. It's
• 22:02
  Speaker 1: kind of like an IOU sure, I can use that
• 22:05
  Speaker 1: loss to offset tax in the next year, but I
• 22:07
  Speaker 1: can't use it in the same year that it happened,
• 22:10
  Speaker 1: which over the long term shouldn't matter too much. But
• 22:14
  Speaker 1: at the end of the day, like a lot of
• 22:16
  Speaker 1: people just want to offset it, pay as less taxes
• 22:19
  Speaker 1: possible every single year. Right, The cost to set up
• 22:22
  Speaker 1: a company is arguably very high, I need to say,
• 22:25
  Speaker 1: can be really high, but I've never seen it be cheap.
• 22:27
  Speaker 1: And there is a legal requirement for a separate set
• 22:30
  Speaker 1: of accounts and a tax return each year, as well
• 22:34
  Speaker 1: as ongoing ASSEIC registration fees. So a lot of people
• 22:37
  Speaker 1: think that a trust is set and forget it's not.
• 22:39
  Speaker 1: You don't just set it up and then wham bam,
• 22:41
  Speaker 1: thank you, ma'am. I have a trust. We've spoken about
• 22:44
  Speaker 1: this before. I pay accounting fees on that trust every
• 22:48
  Speaker 1: single year, and I'm telling you right now they are
• 22:50
  Speaker 1: not the two hundred dollars that you pay for your
• 22:52
  Speaker 1: individual tax return at the accountant. Oh okay, like I'm
• 22:55
  Speaker 1: paying I think around fifteen hundred to two thousand dollars
• 22:58
  Speaker 1: a year for that trust to do all of the
• 23:01
  Speaker 1: accounting on it, which for me makes sense. And I've
• 23:04
  Speaker 1: done all the maths, and as you guys know, I
• 23:06
  Speaker 1: happen to know what I'm talking about. When it comes
• 23:08
  Speaker 1: to this.
• 23:08
  Speaker 3: Type of stuff.
• 23:09
  Speaker 1: You look ald and go that's so expensive. But also
• 23:12
  Speaker 1: for me, it's like an insurance policy as well. It's
• 23:14
  Speaker 1: a layer of protection that you're paying for. It's a
• 23:16
  Speaker 1: layer of you know, making sure that all of my
• 23:19
  Speaker 1: assets are sitting over in a trust. You can change
• 23:21
  Speaker 1: the names on people in companies and trusts in the future,
• 23:25
  Speaker 1: so like I could be like, oh, Beck, I'm now
• 23:27
  Speaker 1: adopting you as my child. I'm going to add you
• 23:29
  Speaker 1: to my trust, so in the future I can distribute
• 23:32
  Speaker 1: income to you. So that's kind of sexy. Obviously we're
• 23:34
  Speaker 1: still talking about companies. I just get really excited. But also,
• 23:38
  Speaker 1: a company can distribute profit by paying a dividend, but
• 23:42
  Speaker 1: that has to be in accordance with the shareholder registry.
• 23:45
  Speaker 1: So a dividend is when I pay out a certain amount,
• 23:49
  Speaker 1: but I don't have to go and pay double tax
• 23:51
  Speaker 1: on it. But there are rules and regulations about that.
• 23:54
  Speaker 3: Okav. I feel like that is so far a lot
• 23:57
  Speaker 3: to take in. Let's have a little break. On the
• 23:58
  Speaker 3: flip side, we're going to be talking about it. Trusts.
• 24:00
  Speaker 3: Oh my gosh, I cannot wait.
• 24:07
  Speaker 1: So I feel like trusts are a really popular investment structure,
• 24:11
  Speaker 1: but they are often very misunderstood. And there's a fair
• 24:16
  Speaker 1: bit to get your head around when it comes to
• 24:18
  Speaker 1: a trust. Right. So a trust is formed by executing
• 24:21
  Speaker 1: a deed which documents the establishment of a trust. So
• 24:25
  Speaker 1: go down to your accountant, you explain that you want
• 24:27
  Speaker 1: to trust. You know, your accountant could provide some advice
• 24:29
  Speaker 1: on this. A financial advisor could talk you through this
• 24:32
  Speaker 1: as well. We did a lot of it. They'll talk
• 24:34
  Speaker 1: to you about the pros and cons, what it actually
• 24:36
  Speaker 1: means for you, and then you'll say, no worries. I
• 24:39
  Speaker 1: cannot tell you how many pages there is to sign
• 24:42
  Speaker 1: when you set up a trust. It's insane, by really,
• 24:45
  Speaker 1: it's honestly insane. Like I remember when I used to
• 24:49
  Speaker 1: do it. So I did it for me. Great, no worries,
• 24:51
  Speaker 1: man them, Thank you, ma'am. Sign here six hundred billion times,
• 24:54
  Speaker 1: like get a cup of coffee, do it over coffee.
• 24:56
  Speaker 1: But I used to have to set them up for clients. Oh,
• 24:59
  Speaker 1: and it was a bane of my existence printing all
• 25:02
  Speaker 1: of the documentation because it has to be printed because
• 25:05
  Speaker 1: it has to be in hard copy, right, And then
• 25:07
  Speaker 1: I go through with all of my sign here stickers,
• 25:10
  Speaker 1: and I'd use nearly a whole damn box of them,
• 25:12
  Speaker 1: and then I'd be like, hey, if you could just
• 25:15
  Speaker 1: come in, Like, I know we've been doing this financial
• 25:17
  Speaker 1: advice process back and it's been so easy. This is
• 25:21
  Speaker 1: gonna be the worst meeting that we do. I'm so sorry.
• 25:24
  Speaker 3: Come in.
• 25:25
  Speaker 1: We have to sign your trust documents and you go,
• 25:27
  Speaker 1: what are you talking about? That can't be that bad?
• 25:29
  Speaker 1: And then I like give you this slab it's like
• 25:32
  Speaker 1: half a rim of paper, and I turn it around
• 25:35
  Speaker 1: and be like, do you want to coffee your tea?
• 25:36
  Speaker 1: Like I've put the stickers everywhere. You need to sign here,
• 25:39
  Speaker 1: your partner needs to sign here, I need to sign here,
• 25:41
  Speaker 1: and witness this like takes ages. Oh my god, Like
• 25:46
  Speaker 1: the amount of times I would sit down with clients
• 25:48
  Speaker 1: and they would be like you.
• 25:49
  Speaker 3: Weren't joking, were you?
• 25:50
  Speaker 1: And I'm like, I'm sorry, I'm so sorry. But at
• 25:54
  Speaker 1: the end of the day, like it's important to set
• 25:56
  Speaker 1: it up sure, and that makes sure that everything is
• 25:59
  Speaker 1: well and good.
• 26:00
  Speaker 3: Can I just ask, have you ever had a situation
• 26:02
  Speaker 3: where someone like signs something in the wrong spot and
• 26:04
  Speaker 3: then you've had stuff yeah all over again. Do you
• 26:06
  Speaker 3: know how hard it is?
• 26:07
  Speaker 1: And then you have to go back to your computer
• 26:09
  Speaker 1: and be like, okay, well what page was that? Oh
• 26:11
  Speaker 1: it was Marketer's page eighty six, but on the PDF
• 26:14
  Speaker 1: it's page eighty seven. Hold on, let me check, all right,
• 26:16
  Speaker 1: let me just print page eighty seven and then it
• 26:18
  Speaker 1: prints a page eighty six and then you have to
• 26:20
  Speaker 1: like reprint the page and slip it back in because
• 26:23
  Speaker 1: you can't just wipe it out. Like anyway, that's a
• 26:26
  Speaker 1: nice happen all the time, or people being like, oh,
• 26:29
  Speaker 1: can't you just sign it for me? And I'd be
• 26:32
  Speaker 1: like no, Like I literally cannot forge your signature. I
• 26:37
  Speaker 1: know that you trust me, but I'm never going to
• 26:39
  Speaker 1: do that. Like, oh, well, could you just like coffee
• 26:41
  Speaker 1: and paste it?
• 26:42
  Speaker 3: No, I can't.
• 26:44
  Speaker 1: I'm so sorry, Like this is the one thing, the
• 26:47
  Speaker 1: one thing I have to get you to do pen
• 26:49
  Speaker 1: and paper. It was like bribery and corruption sometimes yeah,
• 26:53
  Speaker 1: because people will be like, I don't want to do it,
• 26:54
  Speaker 1: and I'd be like, I get that, but I'm also
• 26:57
  Speaker 1: just trying to help you.
• 26:58
  Speaker 3: Yeah, that's what they want exactly how to do it?
• 27:01
  Speaker 1: So a trustee of a trust it might be a
• 27:04
  Speaker 1: person or a number of people or a company. Okay,
• 27:08
  Speaker 1: So what happens is you set up this trust, right
• 27:10
  Speaker 1: and it's this little floating entity and it exists on
• 27:14
  Speaker 1: its own, it owns itself. But then I might be
• 27:17
  Speaker 1: nominated as what's called a beneficiary. Sure, so I've got
• 27:21
  Speaker 1: you know, I'm not going to tell you the name
• 27:22
  Speaker 1: of my trust because it's top secret's super squirrel. But
• 27:25
  Speaker 1: the cool thing about trust is actually you can pick
• 27:27
  Speaker 1: any name at cool Like you could be real sassy
• 27:30
  Speaker 1: about it. Like I had clients name trusts like some
• 27:33
  Speaker 1: of the dumbest things in the entire world. One of
• 27:36
  Speaker 1: my clients was like money for the Crypto, and like,
• 27:40
  Speaker 1: obviously that was a joke because they were very conservative.
• 27:43
  Speaker 1: But you know, you can pick any name in the
• 27:45
  Speaker 1: entire world, and clients used to have fun with it.
• 27:47
  Speaker 1: That's the only fun part about setting a trust up.
• 27:50
  Speaker 1: But let's say we've got the Victoria Divine Trust. Sure,
• 27:54
  Speaker 1: I don't own that trust, but I'm nominated as a
• 27:57
  Speaker 1: beneficiary on that trust. Right now, I'm not needed as
• 28:00
  Speaker 1: one hundred percent beneficiary, which means any profit that that
• 28:04
  Speaker 1: trust makes can be distributed to me right now, any profit,
• 28:09
  Speaker 1: any money that that trust makes, or like, you know,
• 28:12
  Speaker 1: I've got this trust, and then I go and invest money.
• 28:15
  Speaker 1: The trust owns it, so I've used the trust as
• 28:18
  Speaker 1: the person buying the investments. So when I go to
• 28:22
  Speaker 1: fill out a new form back to buy an investment,
• 28:24
  Speaker 1: say I'm going to go buy a new share in
• 28:26
  Speaker 1: A and Z. I don't buy that personally, my trust
• 28:29
  Speaker 1: purchases that. But then if that makes any money, I
• 28:33
  Speaker 1: can distribute it from my trust to me. However, I
• 28:36
  Speaker 1: could also leave the money just sitting in that trust,
• 28:38
  Speaker 1: but it could be me as the beneficiary, or the
• 28:41
  Speaker 1: trust actually could be owned by a company, so you
• 28:45
  Speaker 1: might have a company as well. So let's say I
• 28:47
  Speaker 1: set up a investment trust, but actually the beneficiary is
• 28:52
  Speaker 1: cheese on the money. It's not me. It could be
• 28:54
  Speaker 1: a company, and then I could be the owner of
• 28:57
  Speaker 1: the company. So you can set it up and be
• 29:00
  Speaker 1: I won't say sneaky, because it's not seeky. It's all
• 29:02
  Speaker 1: above board. It's all legal. But there's just lots of
• 29:04
  Speaker 1: different structures usually in existence for asset protection to make
• 29:08
  Speaker 1: sure that you're okay. But the more money you're dealing with,
• 29:12
  Speaker 1: the more risk you're carrying, and the more important it
• 29:15
  Speaker 1: is to make sure that you have the right structure
• 29:17
  Speaker 1: because at the end of the day. Like a house
• 29:19
  Speaker 1: of cards, the bigger the house of cards, the more
• 29:22
  Speaker 1: it's going to crumble if one of the bottom cards
• 29:24
  Speaker 1: gets knocked out. So the trustee, as allowed by what's
• 29:29
  Speaker 1: called the trust deed, which is a very big document
• 29:32
  Speaker 1: that you have to sign when you set up a trust,
• 29:34
  Speaker 1: determines to which beneficiaries and in what proportion the income
• 29:39
  Speaker 1: or assets of the trust are distributed. So I would
• 29:43
  Speaker 1: have my trust right, so all set up, when bam,
• 29:46
  Speaker 1: thank you man, we know who owns it. Then we've
• 29:48
  Speaker 1: got the trust deed. And the trust deed is essentially
• 29:51
  Speaker 1: a set of instructions as to how that income and
• 29:54
  Speaker 1: how that trust money gets distributed. So if the trust
• 29:57
  Speaker 1: has made a net profit, actually a good question right here.
• 30:00
  Speaker 1: Do you know the difference between net profit and gross profit?
• 30:03
  Speaker 3: I believe and I always get these too confused. But
• 30:05
  Speaker 3: gross is before tax. Net is after tax. Yes, that
• 30:09
  Speaker 3: is perfect. Do you know how I remember it?
• 30:11
  Speaker 1: No, gross is gross because it's disgusting to look at
• 30:14
  Speaker 1: what you could have taken home gotcha and you didn't.
• 30:17
  Speaker 1: And net is what you actually scooped up and all
• 30:19
  Speaker 1: the water fell out and.
• 30:20
  Speaker 3: You just got the fish that is really clever.
• 30:23
  Speaker 2: Yeah.
• 30:24
  Speaker 1: Yeah, so that's the difference between gross and net profit.
• 30:26
  Speaker 1: But yeah, gross profit. I believe it's gross because when
• 30:30
  Speaker 1: you look at it, it's what you could have taken
• 30:31
  Speaker 1: home but you didn't, Yes, and you had to take tax.
• 30:34
  Speaker 3: Makes feel sickly.
• 30:34
  Speaker 1: Yeah, you're not going to forget now. But franking credits
• 30:38
  Speaker 1: can also be distributed to the beneficiaries. That's so sexy, Beck,
• 30:43
  Speaker 1: what's that mean? That means? My favorite part is like
• 30:49
  Speaker 1: you're like, yes, a franking credit. I love this for us,
• 30:52
  Speaker 1: And I'm like, like, what's a franking credit? And You're like,
• 30:55
  Speaker 1: I have no idea, but it sounds so sexy.
• 30:58
  Speaker 3: Sounds very exciting.
• 31:00
  Speaker 1: I trust you.
• 31:00
  Speaker 3: I trust that it's exciting.
• 31:01
  Speaker 1: You are not wrong. So franking credit. You bought a
• 31:04
  Speaker 1: share in Ainz and it made some money, right. Ain
• 31:07
  Speaker 1: Z's a massive company, so they paid tax already on
• 31:10
  Speaker 1: their profit, usually at thirty percent because they are a
• 31:13
  Speaker 1: big organization. So what happens is when that money goes
• 31:18
  Speaker 1: to you and you get your profit. There's like a
• 31:21
  Speaker 1: little tag. I just like to see it as a tag.
• 31:23
  Speaker 1: It's not an actual tag. It's called a franking credit,
• 31:25
  Speaker 1: but it's like a little tag that gets added to
• 31:27
  Speaker 1: the profit that you took home. And you take that
• 31:30
  Speaker 1: tag and you go, hey, here's my receipt from an
• 31:33
  Speaker 1: Z tax man. It says that ain Z already paid
• 31:36
  Speaker 1: tax to thirty percent, and it means that you only
• 31:40
  Speaker 1: get taxed the difference between that thirty percent and your
• 31:43
  Speaker 1: marginal tax rate, instead of being taxed an additional thirty percent.
• 31:47
  Speaker 1: So this happens in zupranuation. So this is not something
• 31:51
  Speaker 1: that you usually get to like take heaps of advantage of.
• 31:55
  Speaker 1: They're most powerful inside supranuation. And I say this because
• 32:00
  Speaker 1: inside supranuation this usually means that you get a bit
• 32:04
  Speaker 1: of a refund because the super environment taxes your money
• 32:08
  Speaker 1: back at fifteen percent. Okay, a franking credit is thirty
• 32:12
  Speaker 1: percent usually, right, what's the difference there an additional fifteen percent?
• 32:17
  Speaker 2: Ye?
• 32:18
  Speaker 1: So usually a sexy franking credit inside supbranuation means a
• 32:22
  Speaker 1: fifteen percent refund.
• 32:24
  Speaker 3: Oh okay, kind of hot.
• 32:26
  Speaker 2: Yeah.
• 32:27
  Speaker 1: So like think of a franking credit as a little
• 32:29
  Speaker 1: tag that comes along with your profit to say tax
• 32:32
  Speaker 1: was already paid on this, and because we're a really
• 32:34
  Speaker 1: big company, we're disclosing that and you get this little
• 32:36
  Speaker 1: sexy franking credit that hopefully helps you make more money.
• 32:39
  Speaker 3: I love that. I've always wondered what a franking credit was,
• 32:42
  Speaker 3: to be honest, it always makes me think of like
• 32:45
  Speaker 3: casino chips, and I don't really know why.
• 32:47
  Speaker 1: Yeah, Like like see it as a little chip that
• 32:48
  Speaker 1: you get given to say. It's like an IOU certificate,
• 32:51
  Speaker 1: but go on there that says io you like you
• 32:54
  Speaker 1: don't have to worry about the tax, but I trust
• 32:57
  Speaker 1: it can't distribute its losses. So like if it made
• 33:01
  Speaker 1: a negative return, like let's say the markets were off
• 33:04
  Speaker 1: and your portfolio actually made like negative ten percent, sucked,
• 33:09
  Speaker 1: but like it's off, you can't take that negative ten
• 33:13
  Speaker 1: percent give it to a beneficiary and have them claim
• 33:16
  Speaker 1: that on their tax to get a tax refund. It's
• 33:19
  Speaker 1: not how it works. It's owned by the trust. Sure,
• 33:22
  Speaker 1: losses inside trusts can be carried forward though, to offset
• 33:26
  Speaker 1: against future income.
• 33:27
  Speaker 3: So that's kind of helpful. Like the company, you might
• 33:30
  Speaker 3: have lost.
• 33:30
  Speaker 1: Money this year, beck, but actually next year, if you
• 33:33
  Speaker 1: make money, don't worry, because we've got that little credit
• 33:36
  Speaker 1: up our slaves to say, last year we lost ten percent,
• 33:39
  Speaker 1: so this year if we make twelve percent, we're going
• 33:42
  Speaker 1: to like add that ten percent and then you just
• 33:44
  Speaker 1: look after the two percent, So it kind of becomes
• 33:47
  Speaker 1: sexy in that way. But again, that's why long term
• 33:50
  Speaker 1: investment is so important. You can't just look at things
• 33:53
  Speaker 1: over one year, and you shouldn't be too disappointed if
• 33:56
  Speaker 1: in one year, Beck your portfolio makes less money. It's
• 34:00
  Speaker 1: not the end of the world. Because investments, and I've
• 34:03
  Speaker 1: said this a million times on the podcast, like, if
• 34:05
  Speaker 1: you're going to invest in shares, please don't look at
• 34:08
  Speaker 1: it over one or two or even three or even
• 34:10
  Speaker 1: five years. A minimum of seven to ten years is
• 34:13
  Speaker 1: what you need to be looking at to see if
• 34:16
  Speaker 1: you're making a profit, if it's a good share portfolio.
• 34:20
  Speaker 1: In saying that, I've also said before obviously, if you're
• 34:23
  Speaker 1: making negative ten percent in a bull market where the
• 34:28
  Speaker 1: market is just aggressively going up, all your mates they're
• 34:31
  Speaker 1: making like thirteen fourteen percent on their share portfolios. Beck.
• 34:34
  Speaker 1: If in that circumstance you're making negative ten percent, we
• 34:37
  Speaker 1: really need to talk about it, God, because there's probably
• 34:39
  Speaker 1: something going on with what your portfolio is returning. And
• 34:43
  Speaker 1: your portfolio as much as it shouldn't be identical, because
• 34:46
  Speaker 1: you've probably selected a different array of asset classes. Your
• 34:50
  Speaker 1: portfolio should be relatively reflective of the market. So like
• 34:53
  Speaker 1: when we went through COVID, everyone was absolutely terrified because
• 34:57
  Speaker 1: their portfolios were off, but my friend and the entire
• 35:01
  Speaker 1: economy was off, so it made sense that your share
• 35:04
  Speaker 1: portfolio was reflective of that. Yeah, and that's okay. You
• 35:07
  Speaker 1: can't beat the market. I wish you could. Can't be
• 35:11
  Speaker 1: by market at the end of the day. I think
• 35:13
  Speaker 1: that's a good you know, a little bit of a
• 35:15
  Speaker 1: sense check, Like if you're worried about your own portfolio.
• 35:18
  Speaker 1: I was recording my audio book the other day back
• 35:20
  Speaker 1: and like I said it, and I just couldn't stop
• 35:22
  Speaker 1: laughing at myself. I was like, when in doubt, zoom out,
• 35:25
  Speaker 1: but like it's true, Like when in doubt, look at
• 35:27
  Speaker 1: the bigger picture. Yes, Like don't just look at your
• 35:29
  Speaker 1: portfolio because that could make you feel terrible. Zoom out
• 35:32
  Speaker 1: and be like, oh wow, Like actually everybody's portfolios are
• 35:35
  Speaker 1: performing like this at the moment. It must be something
• 35:38
  Speaker 1: in the economy, it must be something bigger than me.
• 35:40
  Speaker 1: But yes, we need to be looking long term.
• 35:42
  Speaker 3: It's really solid advice.
• 35:44
  Speaker 1: Fee Okay, I'm not done though, okay, because we just
• 35:47
  Speaker 1: talked about how sexy trusts are.
• 35:49
  Speaker 3: Yes, but there are three types of different trusts.
• 35:52
  Speaker 1: Oh good, strap in, sit down, babies, are you ready?
• 35:56
  Speaker 1: So the first is a discretionary trust. Sure, So the
• 35:59
  Speaker 1: trust of a discretionary trust are able to distribute income
• 36:03
  Speaker 1: and capital gains to beneficiaries in whatever way they wish, okay,
• 36:08
  Speaker 1: typically the most tax effective way. The assets of the
• 36:11
  Speaker 1: trust are also protected in the event of litigation, so
• 36:14
  Speaker 1: legal action against beneficiaries because there is no single individual
• 36:18
  Speaker 1: that owns any asset oh changed by the trust, baby,
• 36:22
  Speaker 1: which is why I was saying before.
• 36:24
  Speaker 3: I'm well not Oh my god.
• 36:26
  Speaker 1: Creditors of an individual can't access any assets held by
• 36:30
  Speaker 1: a trust. Creditors also your ex boyfriend oh my god,
• 36:35
  Speaker 1: girlfriend yeah, or ex human that you used to have
• 36:38
  Speaker 1: a relationship with that is now salty that wants your staff. Well,
• 36:41
  Speaker 1: it's a trust, babe, and it was pre existing before
• 36:44
  Speaker 1: our relationship. Important to note that it was pre existing
• 36:47
  Speaker 1: before your relationship, because if an asset was established while
• 36:50
  Speaker 1: you were in a relationship, it's up for debate. So
• 36:53
  Speaker 1: if you're single right now and you've been thinking about
• 36:55
  Speaker 1: a trust, how so of the time my friend.
• 36:57
  Speaker 3: Yes, very clever. So creditors of.
• 36:59
  Speaker 1: An individual can't access any asset held by a trust,
• 37:02
  Speaker 1: and beneficiaries who receive capital gains can claim the fifty
• 37:06
  Speaker 1: percent capital gains discount where the asset has been held
• 37:10
  Speaker 1: for more than twelve months.
• 37:11
  Speaker 3: Okay, I think that makes sense.
• 37:13
  Speaker 1: Next is a unit trust? Okay, strap in, this one's
• 37:17
  Speaker 1: very exciting. A unit trust is one where the assets
• 37:21
  Speaker 1: are held and administered by the trustee of the trust
• 37:25
  Speaker 1: for the holders of units in the unit trust.
• 37:28
  Speaker 3: This means that unit.
• 37:30
  Speaker 1: Trusts predetermine the unit holders entitlements, which may be for income, capital,
• 37:36
  Speaker 1: or both, so this is less flexible. Unit trusts are
• 37:42
  Speaker 1: often used where unrelated parties run a business together and
• 37:45
  Speaker 1: for managed funds, where investors hold units in a trust.
• 37:49
  Speaker 1: They have limited application for most personal investments. So would
• 37:53
  Speaker 1: you like me to tell you where I use a
• 37:56
  Speaker 1: unit trust in my life? Yes?
• 37:57
  Speaker 3: Please?
• 37:58
  Speaker 1: Okay. So I have what's called discretionary trust for my
• 38:01
  Speaker 1: personal assets. Okay, because I'd love to be able to
• 38:03
  Speaker 1: in the future say, oh my gosh, Beck, I'm having kids.
• 38:06
  Speaker 1: This is the most exciting time in my life. I'm
• 38:09
  Speaker 1: going to add my kids to my trust. So that
• 38:11
  Speaker 1: if something happens to me, it goes to raight to them.
• 38:13
  Speaker 1: You know, once they turn eighteen, beck I can start
• 38:15
  Speaker 1: distributing income to them and getting some tax.
• 38:18
  Speaker 3: Benefits, which is really nice. Have to wait eighteen years
• 38:20
  Speaker 3: for that.
• 38:21
  Speaker 1: Sure, do you know why you don't distribute income or
• 38:24
  Speaker 1: most people in their right minds do not distribute income
• 38:28
  Speaker 1: to children under the age of eighteen.
• 38:30
  Speaker 3: Because they are irresponsible.
• 38:32
  Speaker 1: No, it's actually not that. It's because after kids earn
• 38:36
  Speaker 1: four hundred and sixteen dollars or get distributed more than
• 38:40
  Speaker 1: four hundred and sixteen dollars, they have to pay sixty
• 38:43
  Speaker 1: six percent tax. What sixty six percent that's higher than
• 38:47
  Speaker 1: the highest marginal tax rate for adults in Australia, which
• 38:50
  Speaker 1: is thirty eight and a half percent. That is so
• 38:52
  Speaker 1: ridiculous to stop reach people from using their kids as
• 38:55
  Speaker 1: tax vehicles.
• 38:56
  Speaker 3: Oh what if there's like a seventeen year old who
• 38:59
  Speaker 3: literally has to leave home because they.
• 39:01
  Speaker 1: They're going to have to deal with it. And like
• 39:02
  Speaker 1: I mean, there's always going to be brutal with the
• 39:04
  Speaker 1: government and with regulation, there's always going to be outliers
• 39:07
  Speaker 1: and reasons why it might be really good to be
• 39:09
  Speaker 1: able to do that. But at the end of the day,
• 39:11
  Speaker 1: that was institutionalized because really rich people were being like,
• 39:16
  Speaker 1: oh great, I can distribute up to like forty eight
• 39:19
  Speaker 1: thousand dollars to my kid on the lowest marginal tax rate,
• 39:23
  Speaker 1: and then they were getting money out of their trusts
• 39:25
  Speaker 1: at the lowest marginal tax rate and only paying really
• 39:29
  Speaker 1: really low amounts instead of the forty eight and a
• 39:31
  Speaker 1: half percent that they should have been paying because they
• 39:34
  Speaker 1: were using their kids, they were dropping in index account
• 39:37
  Speaker 1: and then transferring it back to the parents.
• 39:39
  Speaker 3: That's brutal, and I mean, I don't really know the
• 39:41
  Speaker 3: ins and outs of it all. But for kids who
• 39:43
  Speaker 3: literally need to work because they can't afford it's different
• 39:46
  Speaker 3: if they're earning their own income. Okay, if they're earning
• 39:50
  Speaker 3: their own.
• 39:50
  Speaker 1: Income, so it's not the same if you are, you know,
• 39:53
  Speaker 1: fourteen years and nine months and have your first job. Yeah,
• 39:55
  Speaker 1: that's a difference, I understood. Okay, very different story because
• 39:58
  Speaker 1: you're working for that income, which is very important to clarify. Sure,
• 40:02
  Speaker 1: if I was distributing money from a trust, gotcha, the
• 40:04
  Speaker 1: tax read is very very high, which I think is
• 40:06
  Speaker 1: very important to recognize because that's also why a lot
• 40:10
  Speaker 1: of people don't purchase shares in their children's names, right.
• 40:15
  Speaker 1: That's why often parents, if they're investing for their children,
• 40:19
  Speaker 1: will make the decision to purchase shares and just have
• 40:22
  Speaker 1: them in their name and transfer them to their kids'
• 40:24
  Speaker 1: names when they turn eighteen.
• 40:26
  Speaker 3: Gotcha because of tax?
• 40:27
  Speaker 1: Because of tax exactly pesky so discretionary trusts. That's what
• 40:32
  Speaker 1: I have personally. Beck. However, you guys know, I own
• 40:35
  Speaker 1: Zella Money obviously the world's greatest mortgage broken company, but
• 40:39
  Speaker 1: I own that fifty to fifty with Kate brandsgrowth. And
• 40:42
  Speaker 1: I adore Kate. She is one of my best friends.
• 40:45
  Speaker 1: She is literally the nicest human I have ever met.
• 40:48
  Speaker 1: I don't know anyone I like more than Kate. Sorry,
• 40:51
  Speaker 1: better at me, you know what, You're great too. But
• 40:53
  Speaker 1: at the end of the day, like I like Kate
• 40:55
  Speaker 1: so much that I went into business with her K's
• 40:58
  Speaker 1: But Kate and I have a U unit trust, and
• 41:01
  Speaker 1: we have a unit trust because we wanted to make
• 41:04
  Speaker 1: sure that when we were in our right minds and
• 41:06
  Speaker 1: so in love and so excited to start this business venture,
• 41:10
  Speaker 1: we were like, we definitely get fifty to fifty each.
• 41:13
  Speaker 1: These are the entitlements. This is what's happening. Whereas if
• 41:16
  Speaker 1: we had a discretionary trust that could have been flexible,
• 41:19
  Speaker 1: like no, no, no, no, this isn't flexible. I own half
• 41:22
  Speaker 1: the units, Kate owns half the units. What we get
• 41:25
  Speaker 1: in terms of income or capital or both is pre
• 41:28
  Speaker 1: determined and set. And that's why we have a unit
• 41:31
  Speaker 1: trust instead of a discretionary trust, because we're in business.
• 41:35
  Speaker 3: Like business sometimes doesn't.
• 41:37
  Speaker 1: Go so well, but I want to make sure that
• 41:39
  Speaker 1: we're both protected and we both have assets that are
• 41:45
  Speaker 1: definitely allocated so that it's not about, oh, Beck, can
• 41:47
  Speaker 1: I have more this month than you had? No? No, no,
• 41:49
  Speaker 1: like it's set, it's pre determined. So obviously that's why
• 41:53
  Speaker 1: they have limited application for most personal investments because you
• 41:56
  Speaker 1: don't get that flexibility. You would have to sell some
• 42:00
  Speaker 1: units in that trust for somebody to come in. But
• 42:05
  Speaker 1: my units in my trust are actually owned by my
• 42:07
  Speaker 1: discretionary trust.
• 42:08
  Speaker 3: Back, Okay, I think that's all slowly.
• 42:13
  Speaker 1: Sinking, slowly syncing in. So that's more for a company structure.
• 42:17
  Speaker 1: I know that some people have used it for personal
• 42:20
  Speaker 1: but like seldom ever, yeah, seldom, Ember, Okay. The next
• 42:23
  Speaker 1: is a hybrid. So as you can probably guess, the
• 42:27
  Speaker 1: hybrid is a mix of both. Hybrid discretionary trusts can
• 42:30
  Speaker 1: be hybrid discretionary or hybrid unit trusts. So discretionary are
• 42:35
  Speaker 1: obviously the most common, but they take the best features
• 42:38
  Speaker 1: of both discretionary and unit trusts and mix them together
• 42:41
  Speaker 1: in the one entity to create a powerful and flexible
• 42:44
  Speaker 1: tax planning solution. Not as common. Requires a lot more
• 42:48
  Speaker 1: documentation because you don't just go to your accountant and
• 42:53
  Speaker 1: have them organize a standard unit trust trusteed, so.
• 42:58
  Speaker 3: It's much more expensive.
• 43:00
  Speaker 1: You might go, oh, V, I really like the idea
• 43:02
  Speaker 1: of discretionary trust and the flexibility, but I also really
• 43:04
  Speaker 1: like the set nature of unit trusts and how units
• 43:08
  Speaker 1: are issued. And these are conversations to have with your accountant.
• 43:12
  Speaker 1: And to be honest, most people in cheese on the
• 43:14
  Speaker 1: money aren't going to care one way or another about this.
• 43:17
  Speaker 1: But you might care about a discretionary trust if you're
• 43:20
  Speaker 1: not in business.
• 43:22
  Speaker 3: Okay, I don't know about you. V. I am overwhelmed.
• 43:24
  Speaker 1: I'm exhausted.
• 43:25
  Speaker 3: So, because it's turned into quite a chunky episode, let's
• 43:29
  Speaker 3: make part two.
• 43:30
  Speaker 1: We are definitely going to make a part two because
• 43:33
  Speaker 1: there's honestly, so much to talk about that I was
• 43:35
  Speaker 1: meant to talk about in this episode but then didn't.
• 43:37
  Speaker 1: So we're meant to talk about this structure of superannuation.
• 43:40
  Speaker 1: We're meant to talk about HIN, which is a whoder
• 43:43
  Speaker 1: identification number, and I promised up the front, but this
• 43:45
  Speaker 1: is just blown out. So I'm going to cut it
• 43:47
  Speaker 1: here and we're going to do a part two, which
• 43:48
  Speaker 1: is very exciting. We're going to talk about chess sponsorship,
• 43:51
  Speaker 1: which is a question that I get a lot all
• 43:53
  Speaker 1: the time about when you're purchasing a share does it
• 43:56
  Speaker 1: need to have.
• 43:57
  Speaker 3: Chess sponsorship or not?
• 43:58
  Speaker 1: And spoiler, it's not as important as you think it is.
• 44:01
  Speaker 1: And we're going to just talk about I guess the
• 44:02
  Speaker 1: ownership structures inside shares so you can be a little
• 44:06
  Speaker 1: bit more comfortable with that. So this was more how
• 44:09
  Speaker 1: do you individually own the share and then how do
• 44:12
  Speaker 1: you purchase the share on the share market and own that?
• 44:15
  Speaker 1: Does that make sense?
• 44:16
  Speaker 3: That makes sense? I think it makes sense.
• 44:17
  Speaker 1: I've been really excited to talk about trusts with you today.
• 44:20
  Speaker 1: In fact, I really just wanted to break out.
• 44:22
  Speaker 4: A whiteboard and like draw it up and be like,
• 44:24
  Speaker 4: so this is the structure. This is how a discretionary
• 44:27
  Speaker 4: trust can work with a unit trust and a company
• 44:29
  Speaker 4: and these all click together, and this is what it
• 44:31
  Speaker 4: looks like.
• 44:32
  Speaker 3: And maybe I'll do that one day on like a
• 44:34
  Speaker 3: TikTok or something. You're allowed. I'm really excited.
• 44:36
  Speaker 1: No one else will care, but that's all right, all right,
• 44:38
  Speaker 1: let's go and we'll see you guys on Friday.
• 44:41
  Speaker 3: Bye guys.
• 44:48
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• 44:50
  Speaker 1: nature and does not consider your individual circumstances. She's on
• 44:54
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• 44:58
  Speaker 1: be relied upon to make an investment or financial decision.
• 45:01
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