By Mark Churchmichael, Head of Tax and Compliance

Managing wealth efficiently isn’t only about choosing the right investments – it’s about owning them in the right structure. For high-net-worth Australians, the difference between holding assets personally at a 47% marginal tax rate versus using a company, trust, SMSF or testamentary trust can be significant. Below is a practical guide to the key structures, how they work, and real numbers showing the tax savings they can deliver.

1. Family Trusts: Flexible, Tax-Efficient Wealth Management

A discretionary (family) trust is one of the most widely used structures for high-net-worth (HNW) families. It allows income to be streamed to beneficiaries in a way that minimises tax and protects assets.

Why HNW individuals use them

• Income splitting across family members
• Ability to stream different classes of income (e.g., capital gains, dividends)
• Asset protection from creditors
• Ability to distribute to lower-taxed adult children where the funds are used to help support them or pay for their expense
• Excellent for investment portfolios, property, and operating businesses (through a corporate beneficiary)

Real-World Example: Trust vs Personal Name

Scenario: Sarah holds a $1 million share portfolio generating $60,000/year in franked dividends.

If held personally (47% rate): Tax ≈ $15,600 after franking credits Sarah keeps $44,400.

If held via a family trust: Income split to two adult children on low incomes Tax ≈ $2,242 each, total $4,484 Family keeps $55,516.

Annual tax saved: $11,116 (> $110k over 10 years)

2. Companies: Low Tax Rates and Growth Compounding

Companies offer a flat 25% tax rate for base rate entities or up to 30% for non-business entities and this can be significantly lower than the personal top marginal rate.

Why HNW individuals use companies

• Lower tax on retained profits
• Excellent for business operations and reinvestment
• Clear separation between business and personal assets assisting with asset protection
• Ability to pay franked dividends later
• Works well alongside family trusts in a group structure

Real-World Example: Company vs Sole Trader

Scenario: Alex’s consulting business generates $400,000 profit.

As a sole trader: Tax ≈ $131,000 Alex keeps $269,000.

Through a company (25% tax): Company tax = $100,000 $300,000 retained for growth

Tax saved upfront: $31,000 per year If reinvested, this compounding advantage can far exceed the tax saving itself.

3. SMSFs: Tax-Smart Retirement Investing with Long-Term Payoffs

Self-Managed Super Funds allow high-net-worth individuals to control their retirement wealth while accessing concessional tax rates.

Why SMSFs are valuable

• 15% tax on investment income during accumulation
• 0% tax in pension phase (subject to TBC rules)
• Access to unique strategies such as buying a business property
• Leverage through limited recourse borrowing arrangements (LRBAs)

Real-World Example: SMSF Owning Commercial Property

Scenario: A couple buys a $900,000 commercial property generating $60,000 rent.

Personally (47% tax): Tax ≈ $28,200 Net income: $31,800.

In an SMSF (15% tax): Tax = $9,000 Net income: $51,000.

Tax saved: $19,200 per year

In pension phase: Tax drops to 0% on both rental income and capital gains.

For long-term investors, the difference is extraordinary.

4. Testamentary Trusts: The Most Powerful Structure Most Families Overlook

A testamentary trust is created through a Will and can provide adult tax rates to minor beneficiaries- a significant advantage over direct inheritances.

Why they matter

• Income to minors is taxed as if they were adults
• Substantial tax savings for young beneficiaries
• Long-term protection against divorce, bankruptcy, and family disputes
• Excellent for generational wealth planning

Real-World Example: Child Inherits Investment Portfolio

Scenario: A 15-year-old inherits $1 million generating $50,000 income.

If received directly: Minor’s tax = $22,250.

Through a testamentary trust: Minor taxed as an adult Tax ≈ $4,500.

Tax saved annually: $17,750 Over 10 years: $177,500+

For high-net-worth families, this structure is essential.

5. Multi-Entity Strategy: Company + Trust + SMSF Working Together

High-net-worth families often combine multiple structures to achieve even stronger results.

Why this works well

• Company allows low-tax accumulation
• Trust streams income efficiently
• SMSF grows wealth at concessional rates
• Risk is compartmentalised across entities
• Strong asset protection outcomes

Real-World Example: Multi-Entity Savings

Family group generates:

• Business profit: $500,000
• Investment income: $80,000

Without structuring (47% rate): Tax ≈ $272,960.

With company + family trust: Company tax (25%): $125,000 Trust tax distributed to adult kids: $4,484 Total tax = $129,484

Annual tax saved: $143,476

This is exactly why high-net-worth families rarely hold significant assets in their own names.

Final Thoughts: Structure Is Strategy

The right structure does more than reduce tax – it supports succession planning, protects wealth, reduces risk, and creates a more resilient financial foundation. High-net-worth individuals and families who rely solely on personal ownership often miss out on meaningful long-term advantages.

If you’re managing significant assets or planning generational wealth, it’s worth reviewing your structures now. Small changes today can drive substantial savings over the next decade and beyond.

Did you find these insights valuable? Follow Stewart & Smith Advisory for more expert guidance on navigating the complexities of business finance.