My wife and I recently opened an account (joint names) with the Vanguard wholesale funds. Our tax brackets are 32.5c for my wife and 45c (47?) for me.
Tax wise, would it make much of a difference to create a family trust and transfer our Vanguard fund to the trust? We have two children (7/10) so would that mean the trust could pay them up to a tax free threshold?
Do you need the income from investment now? If not, I'd invest through a trust, stream what you can to the kids (not much at their ages but will increase as they get older / support them through uni), and stream the balance to a company beneficiary. Better to be compounding at 27.5% than 49% / 34.5%, and have the flexibility to change how you distribute income later without CGT.
This is the approach I've taken, and its been beneficial for me. I'd say the main criteria are:
- Having a reasonable nut to invest, so there are some tax savings to offset the running costs. Maybe $250k was the break-even point for me.
- Being on a high personal tax rate
- Not needing the money now, and having a reasonable duration to gain from the tax spread
- A bonus if you expect to have differing income patterns. For example, last few years I was the high income earner compared to my wife. We are heading overseas for her work soon, and this will invert. With a trust, we can choose the lower tax beneficiary. With investing in individual names, changing it would be a CGT event.