Affluent Business Owner’s $3.1M Wealth Plan
Background: Meet Kathleen
Kathleen is the founder of a successful business in the health & fitness industry. As a devoted single parent to a young child, she has been faced with the intricate task of balancing her businesses financial well-being with her financial goals and obligations towards her child’s future.
Snapshot of Kathleen’s Financial Situation (Excluding Lifestyle Assets)
- Income: $210,000
- Super balance: $1,423,000
- Other financial assets: $3,932,000
- Business Value: $4,000,000
- Debt: $0
- Annual Expenses: $96,500
- Desired Retirement Income: $140,000 in today’s money
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Family Trust :$3.1M invested through a family trust allowed flexible, tax-efficient income distribution.
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Bucket Company:$370K invested via a bucket company capped tax at 30% v 47%.
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Super Contributions:Maximised concessional & non-concessional contributions to super for improved tax outcomes
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Tax:Concessional contributions to 18-year-old daughter’s super, capping tax at only 15%
Why Did She Seek Advice?
- Invest personal, trust, and company-held cash reserves more effectively.
- Build a diversified portfolio aligned with her risk tolerance and long-term goals.
- Create a long-term financial legacy for her child, including education and future housing support.
- Streamline the management of her personal and business finances.
- Retire comfortably with a desired income goal of $140,000 per year.
Strategies Implemented
Our first step with Kathleen was to gain a clear and holistic understanding of her financial situation, spanning her personal, business, and trust structures. Through collaborative conversations, we explored her financial goals, assessed her risk tolerance, and reviewed her current strategies.
Through our initial analysis, we confirmed that Kathleen was in a strong financial position, with a combined asset base of over $9 million and zero debt. However, a large portion of her wealth was held in cash across personal, trust, and business structures, leading to missed investment opportunities and tax inefficiencies.
Our goal was to design a well-rounded portfolio that not only meets her financial objectives but also ensure prudent risk management throughout her investment journey.
Investment Structuring & Tax Efficiency:
- Advised to speak with her Accountant about paying herself a $600,000 dividend from available funds in her business to another company structure she had. Since she had already used similar distributions before, expanding this strategy would allow her to access additional investment opportunities and improve her financial optimisation.
- Recommended investing $3.1 million from cash reserves across her company and family trust into a diversified, tax-effective investment portfolio tailored to her risk profile and liquidity needs.
Superannuation Advice:
- Maximising concessional super contributions each year until age 67, reducing tax by 22% on contributions.
- Making non-concessional contributions of $110,000 in 2023–24 and $330,000 in 2024–25 to grow her super in a tax effective environment
- Rolling over her super balance to an alternative fund through our Managed Discretionary Account (MDA) service, allowing her to benefit from lower fees, customised investment options, and the efficiencies of account linking
Cash Flow Management:
- For Kathleen’s working cash and secure cash savings, we presented a strategic solution by recommending the establishment of a Cash Management Account (CMA) for each entity.
- These CMAs will serve as centralised cash hubs, with high interest, allowing streamlined management of funds and enhancing overall financial efficiency.
- Ensured she maintained her desired liquidity by keeping a minimum of $100,000 in personal cash reserves to cover short-term needs and unexpected expenses.
Wealth Protection Advice:
- We conducted a thorough review of Kathleen’s insurance needs to ensure her wealth is protected against unforeseen events.
- Based on her strong financial position as an affluent business owner, we concluded that no additional insurance coverage is currently required.
- Even excluding the value of her business, Kathleen’s total assets exceed her lifestyle funding needs by over $2 million, providing a solid financial safety net.
- Her existing wealth offers sufficient protection to manage emergencies without the need for further insurance at this stage.
- Advised regular reviews to adjust her coverage as her circumstances evolve.
Estate Planning Advice:
- To establish a binding death benefit nomination on both her BT Panorama super and UK pension accounts.
- To engage with her solicitor to review and update her will, which had not been reviewed in over a decade.
- To establish an enduring power of attorney to safeguard her interests during times of incapacity.
Other Strategic Advice:
- Recommended making concessional contributions to her daughter’s superannuation, ensuring the funds are preserved until retirement, while also serving as a potential savings vehicle for her first home purchase.
- Recommended making concessional contributions to her daughter’s superannuation, ensuring the funds are preserved until retirement, while also serving as a potential savings vehicle for her first home purchase.
Outcome and Benefits
- Move $370,000 into a bucket company, capping tax at just 30% (compared to the top personal rate of 47%), while unlocking potential future franking credit refunds.
- Invest $3.1 million via a family trust, allowing for diversified investments and flexible income distribution to minimise tax.
- Maximise concessional super contributions until age 67, reducing tax by 22% on those contributions while significantly growing her retirement savings.
- Use trust distributions to fund super contributions for her 18-year-old daughter, taxed at only 15%.
Key Takeaway
Kathleen’s journey demonstrates the power of proactive, personalised financial planning, particularly for business owners juggling complex structures and family priorities. By transforming idle funds into strategic investments, optimising her tax position, and setting a foundation for her daughter’s future, she now enjoys greater clarity, control, and confidence.
Life is Full of Possibilities
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Important Note
Produced with our client’s permission. Names within this case study have been changed to protect the client’s right to privacy. The content of this case study has been based on a real-life client. Any information provided here is general advice only and does not consider your objectives, financial situation or needs. This information should not be taken as comprehensive and does not constitute legal or financial advice. You should seek legal, financial or other professional advice before relying on any content. Yield Financial Planning is not responsible to you or anyone else for any loss suffered in connection with the use of this information. Information is only current at the date initially published.
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