The Million-Dollar Structure Mistake – Protecting Assets & Minimising Tax

Many Australian businesses start simple: sole trader, get to work, build success.

But here’s what happens next: you get busy, profits grow, and changing your structure feels like tomorrow’s problem. Until you realise you’re paying maximum tax rates and your personal assets are completely exposed to business risks.

The same trap catches successful investors, too. Building wealth in their own name, watching unnecessary tax eat into returns, with no protection if something goes wrong.

The fix? A properly designed structure that protects what you’ve built and optimises what you keep.

The Foundation Every Wealth-Building Family Needs

Whether you own a business or not, every Australian family building wealth needs the same structural foundation. Think of it as your financial command centre.

Your Family Trust: The Cornerstone

This isn’t just for the wealthy. A properly structured family trust becomes your wealth headquarters, capable of:

• Owning your investment properties and share portfolios
• Holding shares in your business (but never operating the business directly)
• Distributing income amongst family members for maximum tax efficiency
• Providing bulletproof asset protection from business risks

The Corporate Beneficiary: Your Overflow Valve

Alongside your family trust sits what we call a “bucket company.” This corporate beneficiary catches any excess income you can’t distribute to family members. Currently taxed at 30%, it serves as your safety net for income that would otherwise be subject to higher personal tax rates.

Together, these structures work whether you’re building wealth through investments, business ownership, or both.

At PrimeAdvisory, we believe every successful Australian family should aim for the same three-pillar foundation:

Own your home outright (in personal names for CGT exemption), maximise superannuation (up to $2.0 million per spouse), and hold all other investments through your family trust structure.

This foundation scales as your wealth grows, maintaining the same core principles at every level.

What Changes When You Own a Business

Here’s where most families get it catastrophically wrong: they mix business risk with their family investments.

The Golden Rule: One Business, One Entity

Each business activity needs its own separate structure. No exceptions.

Why? Risk isolation.

If you run a café and a consulting business from the same entity, problems in the café can threaten the consulting business. A supplier dispute, employee claim, or customer injury in one business shouldn’t destroy the other.

Property developers understand this instinctively. Each development is a separate entity. One troubled project can’t sink the entire operation.

The Smart Setup That Protects Everything

When you own a business, your structure becomes a layered system:

• Your family trust owns your investments AND shares in your businesses
• Each business operates from its own dedicated company or trust
• Business profits flow up to the family trust as dividends
• The trust distributes income tax effectively amongst family members
• Excess income flows to your corporate beneficiary at 30%

This separation means that business risks are quarantined, while your family wealth remains protected.

Red Flags: When Your Structure Is Costing You

Red Flag One: You Own Company Shares Personally

If your name is on the share register of your business, you’ve eliminated every tax and asset protection benefit available. Zero flexibility for income distribution. Zero protection if things go wrong.

We see this constantly: business partners where one has their shares owned by a family trust and the other owns shares personally. The difference in outcomes is staggering.

Red Flag Two: Successful Sole Trader Syndrome

Making more than $200,000 profit as a sole trader? You’re in the danger zone. Every day you delay restructuring, the costs grow and the bird flies further from the cage.

Once you’re employing people, signing supplier agreements, and generating serious profit, sole trading becomes financially reckless.

Red Flag Three: Multiple Businesses, One Entity

Running two businesses from one structure exposes each business to the other’s risks. It’s like putting all your eggs in one very breakable basket.

The Restructuring Reality Check

“But Christian,” clients often tell us, “restructuring sounds expensive.”

It can be. Moving a successful business from the wrong structure to a proper structure might incur significant capital gains tax and occasionally stamp duty.

We run a break-even analysis for every client. Our rule: if you can’t recoup restructuring costs within three years, we recommend staying put. But if the numbers work, delaying becomes the expensive option.

Here’s a sample calculation: if a restructure costs $200,000 but saves you $100,000 annually in tax, it pays for itself in two years. Over the next 20 years, you’re ahead by $1.8 million. Not every restructure costs $200,000; some may cost as little as $20,000-$30,000.

The Income Splitting Advantage

This is where proper structures really deliver.

Sole Trader Reality: All profit lands in your personal tax return. No flexibility. Ever. You’ll pay maximum tax rates on every dollar above $190,000.

Structured Approach:

• Distribute income to your spouse (potentially in a different tax bracket)
• Utilise lower tax thresholds across eligible family members
• Push excess into your corporate beneficiary at 30%
• Create flexibility you can deploy when circumstances change

You might not need this flexibility every year. But having it available when your situation changes is invaluable.

The Bigger Picture: Protecting What Matters

Beyond tax efficiency, proper structuring protects what you’ve worked years to build.

When we structure families correctly, we separate business activities from personal investments. Your property portfolio, share investments, and family assets remain quarantined from business risks.

This isn’t about complex tax avoidance schemes. It’s about making smart, legal structural decisions that protect your family’s financial future while maximising what’s possible with your money.

Getting Your Structure Right

Every family’s situation is different, but the principles remain constant:

• Separate business risk from family investments
• Create tax distribution flexibility
• Protect assets from unnecessary exposure
• Plan for the long term, not just next year

The structural decisions you make today will impact your family’s wealth for decades. Getting them right from the start, or knowing when to change them, can be the difference between paying hundreds of thousands in unnecessary tax or protecting and growing your wealth efficiently.

At PrimeAdvisory, we specialise in helping Australian families navigate these structural decisions. We understand that behind every structure is a family working hard to build something meaningful.

We get you sorted. Then comfortable. Then thriving.

Ready to review your business structure? Drop us a line for a confidential discussion about whether your current setup is working as hard as you are.

This article provides general information only and should not be considered personal financial advice. Consider your specific circumstances and consult with qualified advisers before making structural changes to your business or investments.