Transcription
Hello everyone. Today, let's have a look, um, whether it's possible to convert $10,000 per year to more than half a million in 20 years' time, right?
So, just a quick declaration. Um, the information provided in this session is for general information only. So, before you make any decisions, please make sure you contact a professional person. And also, we're not financial planners or solicitors, and will not provide any financial product advice or legal advice or any other special advice that's only covered by unregistered financial planners or solicitors.
All right. So, uh, we have prepared this little chart to compare when you are having your money invested in different structures or different locations, okay? So, the first one is what if you are put in a normal bank account and just earn, um, like a small interest, um, so we have added 3% here, all right? Of course, it's not ideal because it's not going to feed the current inflation rate, um, so that means your money will reduce in value compared to inflation.
Uh, and then, uh, personal investment is when you are, um, having the ownership as under your own name. So that means, um, you're actually paying a marginal no tax rate on the investment income, yeah? When you earn employment income or any other income, basically your investment income will be added on the very top, and you pay the marginal tax rate.
The third choice is on the super fund. So, super fund is paying 15% income tax. And then, uh, the last for us is tax rate structure, okay? So, tax-free structure is actually will be the secret for us to be able to achieve more than half a million, okay?
Then, let's have a look. How can we invest, um, and then, uh, pay 0% tax on our investment income? All right? So, how to make, uh, your investment income tax-free? So, one is, uh, potentially you can put in a company structure and then achieve the franking credit refund of our, uh, dividend payout or TR structure distribution to tax-free family members, okay? We did prepare one session that's on our YouTube channel already, um, that's, um, uh, with the title as "Can You Pay 0% Tax on Business or Investment Income?" You can go back and refresh what we have mentioned in that, uh, little session. But, uh, as a quick recap, yeah, we'll have, we have a quick look a bit later.
And then, of course, um, we could also, um, add our investment to, uh, combined structure. Yeah, I, I'll show you one example later in this session. And then, uh, last but not the least, super income above age 65, if it's invested under the super, um, environment, okay? Provided if your, um, actually is under the transfer balance card at the moment is $1.9 million. So, once you transfer the money out to p face pension account, any investment there is going to be tax-free, okay?
So, that's have a quick look. So, if it's under the trust structure, okay, if you have enough beneficiaries, enough family members who doesn't have any other taxable income, and then you distribute income to them. Let's say, if you have $50k total business or invest, uh, investment profit, you give them $10,000 each, but that's going to be below their tax pay threshold, and of course, there'll be no tax payments, okay? That's using trust structure by itself.
Okay, if you're using company structure by itself, you need to involve long-term tax planning. That means, um, say the first year, uh, the company profit will be $50k, and then you slowly get the money out, okay? Declare a dividend, and then provided if the gross of, um, dividend you declare is going to be below the individual's tax rate threshold, and then what the company tax paid before will come back as a refund, yeah? Is, uh, called franking credit refund, okay, in tax terms. And then, uh, with time, okay, you can actually get all the tax paid on the company structure refunded in individual taxpayers' hands, all right? That's using company structure.
So, a combination of both. Let's say, for an example, if you have kept all your investments under a trust structure. In trust structure, of course, there are pros and cons, yeah? We have introduced, um, the pros and cons in different structures in different sessions before. So, basically, uh, uh, the, the most ideal situation will be you are receiving a cash profit under the trust because when you have a loss, it's going to be trapped in there because trust P distribute loss, okay? So, if you have a good profit for the investment, okay, you can, um, that's probably the most ideal situation. You have the investment in the TR structure, and you can actually pick and choose different beneficiaries to, uh, distribute the profit, okay? Uh, you could have individual beneficiaries, or you could have a corporate beneficiary. We have another name for it is called bucket company. Bucket company, I guess, if you look at the name, um, you can use it to save water, okay? Save it for the future, all right?
So, let's say if you distribute, uh, profit to the corporate beneficiary, then you can also choose a later year or choose, uh, beneficiary, or if your shareholder is actually a trust structure, you could choose, uh, shareholder, or if a shareholder, the shareholder is a Family Trust situation, you can choose a beneficiary of that Family Trust to receive a dividend, okay? Provided if in that year, that individual taxpayer doesn't have any other taxable income, then you could receive refund on the company tax that's paid before, okay?
So, it can happen that, um, let's say, for example, if in a year you don't have an individual taxpayer, um, that's going to absorb the income that's going to be below the corporate tax rate, okay? When is a corporate beneficiary, the tax rate is 30%. What if in a year, the individual beneficiaries have to pay 47% tax, okay? Then it's not ideal to distribute more profit to them then, because you don't want to leave any profit inside the trust because if you do, then it's automatically taxed at 47%. So, you don't want to leave any profit within the trust, you have to distribute. Then you can actually distribute all the profit to the corporate beneficiary and then pay the 30% Cate tax. But later on, you can choose a year to get the money out, get the through the dividend declaration, yeah, to a shareholder or a trust beneficiary if a shareholder is actually a trust, all right?
Okay, so that's, um, everything we wanted to cover today. And a brief introduction about myself. You can pause the video to have a quick look, all right? And our contact details here. So, if you have any questions, let us know. Um, it's highly recommended before you start any investment, talk to us first. There must be a better structure to keep your investments, okay? So that you can save your tax for the future to build your future wealth for the family group, all right? Thank you very much. We'll talk to you next time.