Invest in tax-effective ways


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”.

Lower income earner

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).

Franking Credits

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.

Family Trust

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.

Sofie Korac is an Authorised Representative (No. 400164) of Prudentia Financial Planning Pty Ltd, AFSL 544118 and a member of the Association of Financial Advisers.

Financial Advice Sydney and the North Shore Office based in Gordon NSW

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