The income earned by investments in superannuation are taxed at 15%. Compare this to your marginal tax rate. You can also add extra funds to super via salary sacrifice – this will reduce the amount of income tax payable. However, you generally cannot access these funds until you retire after your “preservation age”.
If one or both partners of a couple work and you invest outside of super, it is usually more tax effective to have the investments owned by the person who earns the lowest salary/income (unless you are using a gearing strategy).
When investing in shares and the company makes a profit, the company will often pay tax on their profits before distributing the after-tax profits to shareholders/investors whether you hold the shares directly in your name or via a managed fund. In order to avoid paying tax twice, a statement is issued with the amount of tax already paid, called an “imputation credit”. You would then include this in your tax return.
For those who have significant assets, a family trust can be used to distribute income among the beneficiaries (e.g. family members) in the most tax-effective way and may also be used to protect your assets from predators and as an estate planning tool.
Family Trust structures are particularly useful for people who have a business or who work in a profession where litigation is a real risk such as medical professionals, company directors, etc.
This is a complicated area of financial planning and requires a multi-disciplinary approach with input from a financial advisor, tax accountant and solicitor.