When it comes to investing, there are investment strategies you can utilise to minimise the amount of tax you pay.
Contribute more to super
Salary sacrifice contributions can help reduce the amount of tax you pay whilst building your retirement savings. The contribution to super is made before income tax is deducted from your wages. Whilst your money is in super, tax paid on fund earnings is usually much lower than other investment earnings outside of super.
Tax effective investing
Some investments are more tax effective than others. Growth investments such as shares and property often receive more favourable tax treatment. For example, capital gains tax and earnings tax on shares may be lower than the tax on fixed interest investments.
Investment loans
Borrowing money to invest (gearing) can also be a method of managing your tax obligations. If the cost of borrowing exceeds the income generated by the investment, you may be able to offset the loss against other taxable income. Prepaying loan interest in advance can also be a way to claim a tax deduction in the current financial year.
Selling assets
Timing the sale of assets can affect the amount of tax you pay. For example, selling shares more than 12 months after the original purchase date would incur capital gains tax at a lower rate. In some circumstances, a capital loss can be carried forward to a financial year when a capital gain applies - therefore incurring less tax on that gain.
The right advice
A Bridges financial planner can help assess your needs, explain suitable investments and develop appropriate strategies.
1. This is general advice only and does not take into account your objectives, financial situation and needs. Before acting on this advice, you should consult a financial planner.
2. Bridges Financial Services Pty Limited trading as Bridges Personal Investment Services (Bridges). Bridges holds an Australian Financial Services Licence No.240837 issued by the Australian Securities and Investments Commission (ASIC), is an ASX Participant and a Principal Member of the Financial Planning Association of Australia.
3. In referring Members to Bridges, Gateway Credit Union does not accept responsibility for any acts, omissions or advice of Bridges and its authorised representatives.
4. Gateway Credit Union may receive commissions from Bridges, for referring Members who invest through Bridges. See Gateway’s Financial Services Guide.