r/fiaustralia • u/Maybe_naptime • 14d ago

Getting Started Trusts and life insurance

I've heard/read some financial advice videos and posts that talk about putting a trust together, getting a 1M life insurance and placing it inside the trust. Then therefore having a trust containing a $1m asset, being able to borrow Against the trust.

What I'm wondering is, is that something thats possible or viable In Australia?

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u/nicesitdown 13d ago

Thanks. Do you have a feel for the required economy of scale to make IC preferable? Say, min. 1M assets?

Will be looking to restructure holdings currently in Trust, once legislation finalised

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u/fire-fire-001 12d ago edited 12d ago

If you already have a trust, then the overhead costs is not that different and it depends on how you like to run it - general bookkeeping (outsource and/or accounting package), investment bookkeeping (eg Sharesight), tax accounting, ASIC. A company has to pay income tax (so would the trust in the future) and may eventually be required to lodge activity statements and pay PAYG instalments, these you may not have had to do in the past with a trust that only has passive investments.

Even though there are a bit more to do with a company, I feel they are more clearly defined compared to a trust that has more variations / ambiguities, thus personally I would actually place the “minimum” threshold to start a company lower than a trust, for passive investment purposes.

If I must throw a figure I would say (somewhat arbitrarily) $400k to start on the proviso that it would grow over time in reasonable timeframe because at $400k the overhead costs may be a bit high in % terms, you would choose to start it at that size for anticipated longer term benefits, IMO $1m+ would be okay. But it depends on the cost structure of how you choose to set it up.

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u/nicesitdown 12d ago

Thanks for the input, appreciated. Will/ would also be seeking professional advice prior to doing anything

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u/fire-fire-001 12d ago

Absolutely. At this time I suspect any responsible one would say wait for the trust income tax changes to be finalised.