5 wealth preservation strategies for high-net-worth Australians

If you have a high net worth, you’ve worked hard to get where you are. You want to not only protect what you’ve built but also ensure it’s passed onto your family intact.

As a financial planner in the Southern Highlands, Poole Advisory has years of experience helping high-net-worth individuals improve and protect their financial position. This article will give you some effective strategies you can use to safeguard your wealth from risk.

 1. Look at ways to reduce your tax bill

According to the latest available data from the OECD, Australia has the second-highest personal tax rate as a share of total taxes. This means, as a high-income earner, tax strategies are critical to protect your net worth. Careful planning can protect your income and ensure more of it ends up in your bank account, instead of going to the government.

Maximise your deductions

The simplest way to reduce your payable tax is through deductions. This includes deductions for:

• Investment property expenses, such as depreciation, mortgage interest and property management fees
• Work-related expenses including travel expenses and depreciation on equipment
• Contributions to retirement accounts such as superannuation
• Income protection insurance premiums
• Donations to registered political parties or independent candidates
• Cost of managing tax affairs, including preparation of tax returns and financial advice fees.

   

Pay close attention to your capital gains

Capital gains tax (CGT) is an important consideration when managing investments. It is the tax levied on the profits generated from the sale of assets such as shares, property, or businesses.

You pay capital gains tax in the same financial year you sell an asset. Timing the sale of an asset can optimise tax outcomes, by considering your overall income for the year and any available capital losses that can be used to offset gains. Additionally, you can reduce your capital gains tax by 50% if you hold the asset for longer than 12 months.

Utilise your superannuation

Your superannuation provides a powerful outlet for tax planning. For example, you can sacrifice some of your salary and have it paid directly into your super account instead.

These contributions are taxed within your super fund, usually at a rate of 15% (although if your income is above $250,000 you may also be subject to a Division 293 tax as well). Either way, the amount of tax you pay could be lower than your marginal tax rate. This enables you to reduce your tax bill and grow your retirement nest egg at the same time.

2. Diversify your investments

If you keep all your eggs in one basket, you expose your wealth to a high level of unnecessary risk. That’s why it’s a fantastic idea to diversify your investments across a range of different asset classes. These could include:

• Shares. Shares offer liquidity, potential for capital gains, and the opportunity to receive dividends. You can further diversify and protect against risk by purchasing shares in different companies and industries.
• Investment properties. Property is a popular asset for high-net-worth individuals. It is safe, has a strong history of capital growth, and provides favourable tax advantages such as negative gearing and depreciation.
• Bonds. Bonds typically offer lower returns than shares or property, but they also pose less risk, making them a useful hedge against market volatility.
• Cash. Keeping cash reserves in a high-interest savings account can provide both liquidity and stability. It can help you pounce on new investment opportunities that arise, and handle any unexpected expenses.

3.  Leverage trusts and keep an up-to-date Will

A trust can be a useful tool for protecting your wealth. Establishing a family trust, for instance, can offer significant benefits such as asset protection, tax efficiency, and flexibility in wealth distribution.

By structuring assets within a trust, you can safeguard them from potential risks and legal challenges, while also providing for your family’s financial security. This is particularly beneficial if your profession leaves you at risk of frequent lawsuits, such as a doctor or surgeon.

Your Will is also an important tool to protect your wealth and ensure its smooth transition to future generations. It dictates how your wealth will be distributed after you die, ensuring that your assets are passed on according to your wishes.

Without a Will, your assets may be subject to NSW intestacy laws, and the process can be complex and time-consuming for your loved ones. Regularly reviewing your Will so it remains aligned with your wishes can avoid complications for your family and ensure they’re taken care of after you are gone.

4. Buy insurance

Insurance provides protection against unexpected risks that could jeopardise your financial security. As a high-net-worth individual, you may want to consider:

• High-value home and contents Insurance. Bowral and the Southern Highlands have some of the most beautiful properties in the country. So it’s likely that your home is one of, if not the, most valuable assets you own. Insurance protects it and your valuable possessions from risks such as fire or theft.
• Business insurance. If you’re a business owner, insurance can protect your company’s assets, covering things like property damage, liability claims, and interruptions to your operations. It can keep your business protected against risk and ensure it remains strong in the long term.
• Income protection insurance. As a high-income earner, you stand to lose more than the average Australian should you fall seriously ill or become disabled. Income protection insurance can provide continued income in the event of illness or disability, helping to maintain your financial stability and afford any lifestyle expenses that may occur as a result.
• Life insurance. Life insurance ensures your family will be taken care of, should anything unforeseen happen. It can provide financial security for beneficiaries and cover expenses such as estate taxes and debts, ensuring a smooth transfer of your assets to your loved ones.

   

5.  Seek expert advice from a financial planner

While most high-net-worth Australians can benefit from the above strategies, it’s important to remember your situation is unique. A financial planner can provide personalised advice tailored to your specific financial goals, risk tolerance, and lifestyle aspirations. This can minimise any risks and ensure you protect and grow your wealth over the long term.

A financial planner can help you to:

• Plan and grow your nest egg for retirement
• Make smart investment decisions based on your goals and appetite for risk
• Safeguard your income and assets using appropriate insurance
• Plan your estate so you can pass on your wealth to your family.

   

If you’d like to discuss wealth preservation strategies with an award-winning adviser in the Southern Highlands, Poole Advisory can help. Take a look at our financial advice services or get in touch for a free introduction meeting today.

Compliance Disclaimer:

This information contains general advice only, that is, advice which does not take into account your needs, objectives, or financial situation. You need to consider the appropriateness of that general advice in light of your personal circumstances before acting on the advice. You should obtain and consider the Product Disclosure Statement for any product discussed before making a decision to acquire that product. You should obtain financial or credit advice that addresses your specific needs and situation before making investment or borrowing decisions. Taxation information is based on our interpretation of the relevant laws as at 1 July 2018. While every care has been taken in the preparation of this information, Prosperitas Partners Pty Ltd does not guarantee the accuracy or completeness of the information. The case studies are hypothetical, for illustration purposes only and are not based on actual returns

Poole Advisory Pty Ltd ABN 15 642 040 604 is a Corporate Authorised Representative (No. 001282603) of Prosperitas Partners Pty Ltd ABN 30 662 654 453 AFSL 544 917