The aim of this article is to document ideas on, and explain how to firstly build, secondly protect & grow, and thirdly intergenerationally transfer wealth in Australia in a tax-efficient, simple, robust way.
Build It
The most important and basic fact in this whole process is this: someone in the intergenerational chain has to start it. If no one in the family group ever starts it, it will never happen.
The steps in Australia to start the building process under current policy settings are fairly simple to identify, but harder to implement because they require self-discipline, a very long-term focus, and the correct temperament.
Get educated & get a professional job with high barriers to entry (the higher the better) – move to build your own incorporated practice ASAP. Team up with competent business partners (preferably fellow shareholders in your incorporated practice) who you respect & who are in some way better than you. Team up with a life partner who:
- is honest & acts with integrity in all circumstances. Generally, follow God’s rule book for life.
- is spiritually compatible with you. Christianity (living a Christ-centred life) is the best way.
- is physically fit & compatible with you
- is better than you somehow
- comes from a stable family
- has solid earnings prospects
- has a good work ethic
Buy a main residence & set up a mortgage offset account. Set up (or join an existing family group) SMSF & start buying VAS & big banks through the SMSF, fully dividend/distribution reinvest. Have 2 or more kids – preferably more, as children are true wealth.
Don’t get divorced (easier said than done). Pay off the house. When respective member account balances inside the SMSF hit $AU 2M each, duplicate (or “mirror”) the portfolio outside of super individually & grow it indefinitely. This structure is both simple and infinitely scalable. Add your kids into the SMSF as members ASAP and smooth unrealised market valuation increments over into their account to avoid the $3M indexed threshold.
Understand It
Knowing when you’re winning is very important. A lot of mistakes are made in life by even very smart people who think they’re winning when they’re losing – and vice versa.
The summarised financial life plan for continuing Australian tax residents set out in Step 1 “Build It” above is simple, but not easy.
Life happens & gets in the way of our best-laid plans. But good plans guarantee ultimate success while allowing for the possibility of early success. Even notwithstanding the inevitable bumps in the road, continually chipping away towards the ultimate goal in a consistent manner should yield satisfactory outcomes over time.
Explain It To Children
Ensure they understand that they are only passing through something much bigger than themselves, & that they see their place in the chain. Importantly, they should be made to understand that their individual link in the chain is in the razor-thin beam of shining light for only a very short period and that they don’t have much time to strengthen their link. Urgency (even desperation) to contribute to the balance sheet should be engendered from very young.
Ensure Low-Cost Structures Exist To Receive & Manage Income & Inheritance
Wealth is structural, not operational. What this means is that regardless of how good you are at whatever work you end up doing, and how much you get paid (or make) at your job/occupation/profession/practice, if you don’t have robust and scalable structures in place to receive and manage the income in a tax-efficient way, you will likely underperform.
On-time and accurate tax accounting and corporate management of those structures is also critical. In some cases, particularly where lifestyle inflation is allowed to take hold, you may never harness the power of compounding because you fail to start investing in your early years, or at all.
Ensure Those Structures Are Understood By Others (Not Just the Kids)
It’s ideal to have a child who has a passion for and chooses to go into tax accounting. If God does not bless you with such a child, then it’s imperative from very early on that a competent family group wealth-focused tax accountant is engaged to assist with managing and maintaining the group structure and attending to all income tax lodgement and compliance obligations for all members and entities of the family group.
Efficient administration and on-time tax & corporate compliance lodgements cannot be stressed enough. The risk and stress that failing to comply brings is among the most serious risks to any corporate or family group.
Minimise Administration Costs
Fond of doctors, little health; fond of lawyers, little wealth. The aim with administration costs is to see them within the perspective of the broader family group’s consolidated balance sheet. It is important not to treat compliance as an expense, but rather an investment in the longevity and general health of your group.
Find a tax accountant, solicitor and a banker or broker who you are happy with and invest both time and money into the relationship to ensure you stay on track throughout the generational chain.
Minimise Holding Costs
Read books written by John Bogle. The best 2 to start with are Enough & The Clash of the Cultures. Bogle dedicated his amazingly long life to efficient investment philosophy and practice. His conclusion is that in the investment universe, low-cost, robust investment structures which track a broad-based market win by a large margin over time – particularly after holding costs are considered.
Dumb money becomes smart by acknowledging its limitations, and in this Dunning-Kruger spirit, for a whole host of reasons, the haystack should generally be preferred over individual needles within it.
Stay Focused on Delivering Value for Your Stakeholders
Making money for others around you is important. Your staff, family, company, employer, customers, clients – you should strive to be as useful as possible to your market.
Be Careful With “Charity”
We believe you should not be fooled into “giving back” for the sake of feeling virtuous only. As I write this, the scourge of victim mentality and wokeness is destroying modern first-world western cultures and countries all over the planet.
Unfortunately, the start of this recent folly is saviour-complex people trying to ‘save’ everyone else from themselves or trying to ‘save’ the “minorities” / “oppressed” / “vulnerable” / anyone or anything perceived as having got a “raw deal” in life.
Overt charity, including open doors immigration policies, is virtue signalling at its worst, and if charity helped fix or solve anything, it wouldn’t still be the struggling wasteland it is today. The Bible tells us that we should give privately, not in public, and that strong border walls and protecting your city/homeland is a Godly pursuit. It would not have survived and flourished for thousands of years if it were not wise and truthful.
Bringing the Intergenerational Strategy Together
The intergenerational game is long, and most people never play it properly. Structures, discipline, temperament and a clear understanding of your place in the chain matter far more than luck or intelligence. If the family group stays focused, thinks generationally, avoids unnecessary complexity and remains committed to orderly administration, the outcome becomes almost inevitable. Wealth built slowly, protected carefully and transferred intentionally will outlast any single individual. Stay humble, stay disciplined, and keep strengthening the link that has been entrusted to you.
