The 2026 federal budget is changing the focus of advice

Produced in partnership with Generation Life.

The biggest value add of professional financial advisers is not asset allocation, manager selection or portfolio management. It’s in understanding a client’s financial situation, needs and goals, and putting a plan in place that will see them achieve their objectives.

A critical, but often taken for granted step in this process, is assessing the suitability of different tax and investment structures, and advising on the structure(s) that can best meet a client’s needs and address their challenges throughout life.

“Investment structures” refers to the legal entities that own investments, such as individuals, trusts, companies, superannuation funds and investment bonds. Each structure carries different tax advantages and disadvantages, and varying degrees of control, flexibility and transparency.

Often, because clients have complex lives and are planning for different events concurrently, such as children going to private schools, retirement and legacy plans, they require variable investment structures.

Selecting structures can often end up involving less concerns about how to optimise investment performance and more about optimising tax, flexibility and asset protection for the purposes of efficiently building, storing and passing on a client’s long-term wealth.

That said, the right structures can enable advised clients to tap into alternative sources of return or, what some refer to as, strategic structuring alpha. These are essential tools for accumulation, decumulation and estate planning.

In May, the value and importance of advice in asset structuring was reinforced on budget night, when Treasurer, Jim Chalmers, announced the winding back of capital gains tax (CGT) and negative gearing concessions.

The 2026 federal budget highlights the fragile nature of tax reforms and how vulnerable Australians are to policy risks that can very likely change the tax treatment of their long-held assets and trusts, as governments seek to fund public expenditure.

While superannuation was carved out of this year’s Budget reforms, the Government has repeatedly demonstrated its willingness to tinker with the rules affecting investments in and out of super, this can be said to strengthen the case for structural diversification and create opportunities for advisers to demonstrate their value.

Adding value through structural diversification

Diversification is hardly an innovative risk management strategy. It has been around for centuries, although the mathematical model was only formally introduced by economist Harry Markowitz in his 1952 paper, Portfolio selection.

Increasingly, the way advisers think about diversification is extending beyond the focus of Markowitz’s Modern Portfolio Theory, which centres on spreading investments across asset classes that display little to no correlation in order to lower portfolio volatility and improve long-term returns. Within asset classes, diversification can be achieved by spreading investments across securities, sectors, geographies and managers.

But diversification can be enhanced even further by spreading investments across structures too.

The appropriate structure and combination of structures can give clients certainty by providing flexible access to funds, shielding assets from certain legal liabilities and locking in tax efficiencies for different investment pools.

It can also provide a high degree of legislative certainty, for example, in the case of investment bonds, which are tax-paid investments with the tax paid on earnings capped at 30 per cent. The structure benefits from a life company’s ability to increase deductibility of its assessable income using tax optimisation strategies in its revenue account tax environment. After ten years of investment that has not been reset, withdrawals become tax-free in the hands of the investor and there are no restrictions on when clients can access their funds.

For advisers, the ability to add value by advising on appropriate asset structuring has enduring relevance and is largely within their control. It is not dependant on external forces like markets, interest rates or manager skills. Advisers can also add significant value by using their knowledge and experience to recommend the right investment provider.

In the same way that they select fund managers, life insurers and platform providers that they trust, choosing the right partner is crucial for ensuring alignment and accountability of client outcomes. The right partner will know the tax rate of underlying investors, their time horizon and financial planning objectives. They will have a framework and settings that facilitate decision-making to maximise after-tax and after-fees outcomes for individual clients. Reporting these outcomes in terms of what clients will keep after all tax is paid is critical to ensure alignment and accountability of your partner.

This is an edited extract from the Professional Planner Investment Innovation Guide. Click here to read the full article.

John Laver is head of investments at Generation Life.