Best Way to Setup an Investment So I Can Give Away Earnings?

Laelix on 06/08/2023 - 13:07

Hi all

I have an amount of money >$10k that I want to invest in such a way that earnings are paid out (not reinvested) and I can then give them away to either charities or people I know who are in need. I'm not much of an investor and I don't want to be hand-picking shares, mucking around with crypto etc.

What's the most efficient setup to achieve this? In particular:

  • Are there managed investment product types that I want to avoid because of transaction fees etc.?
  • Is there a better/worse way to do this from a tax perspective?

Thanks

Financial Investment

Comments

  • soan papdi on 06/08/2023 - 13:13

    Use index funds: https://passiveinvestingaustralia.com/index-funds/
    Specifically ones which have low fees.

  • Muzeeb on 06/08/2023 - 13:24
    +3

    I'm not an accountant but I'm pretty sure it would be easier just to pay tax on the earnings and claim the donations in your return.

    Billionaire philanthropists probably have different setups but they also engage expensive accounting firms.

    Another option is to become a 7th day Adventist. I'm sure they will happily take your money and invest in for the good of the community and pay zero tax.

  • freefall101 on 06/08/2023 - 13:51
    +2

    Earn income, claim franking credits and deduct donations. There is no way to structure just handing cash to people you think who need it from a tax perspective, it will never be deductible (for good reason).

    Unless >$10k means you have $500k then there's nothing to structure. You'll earn $1,000 a year and get a $1,000 deduction for your donation. If you try setup a trust/charity/whatever setup you'll be paying a grand a year anyway.

    • aelix on 06/08/2023 - 14:39

      Makes sense, I didn't expect there to be much by way of tax strategy. Also interested in investment product types, I expect the first comment suggesting index funds with low fees is the best bet.

  • pjetson on 06/08/2023 - 13:51
    +2

    If the money is invested in your name, you will have to pay tax on the earnings at your marginal rate. It doesn't matter if you give it away, you still need to pay the tax on the earnings.

    However, if you donate money to a deductible gift recipient (basically a registered charity), you can claim that donation on your tax return.

    • jv on 06/08/2023 - 20:39
      -3

      If the money is invested in your name, you will have to pay tax on the earnings at your marginal rate.

      Depends where you reside.

  • bobbified on 06/08/2023 - 16:09
    +1

    If you setup an account with a principal amount and keep giving away all the earnings, the 'value' of that amount is going to become less and less each year with inflation. And in turn, the value of the interest will become less and less over time as well. So it would probably be good to reinvest the amount that is equal to the index and give away/donate anything above the index rate.

    • aelix on 06/08/2023 - 19:05

      That's a good point. I'm thinking I will keep adding to the account out of my own savings at a modest rate anyway, but I can also do some reinvestment of earnings to help it keep building 'value'.

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