Tax on investments
Tax goes hand in hand with investing. It’s a complex area but an understanding of the fundamentals can ensure you avoid any mistakes at tax time. However, the best way of doing this is to seek inpendent professional tax advice.
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What taxes on investments do I pay?
Generally you pay tax on investment income as well as if you make a gain on the disposal of your investment. The amount of tax you pay will also depend on your other income and your marginal tax rate. There are different tax implications for super.
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What is a Capital Gain?
A capital gain is the profit you make from the sale of an investment asset. You could also have a capital gain distributed to you as part of a managed fund distribution. A net capital gain will form part of your taxable income. A net capital gain is the total of your capital gains for a year reduced by your capital losses.
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What is the benefit of imputation credits?
If you are eligible for dividends from an investment in shares in a company, those dividends may include imputation credits. These credits can reduce your overall tax bill.
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How is gearing tax effective?
Investment gearing, sometimes called borrowing to invest, may offer some tax benefits. If your interest costs exceed your investment income, generally you can deduct the interest costs from your total taxable income. Particular attention should be given to the fact whether the loan is used to finance the investment and whether the investment is expected to derive assessable income.
The taxation position described is a general statement and should only be used as a guide. It does not constitute tax advice and is based on current tax laws and our interpretation. Your individual situation may differ and we strongly recommend you seek independent professional tax advice.
Did you know?
Understanding investment fees gives you a real advantage when looking to invest. A small difference of even 1% over a long time frame can make a big difference to your real returns.
Investing money for the first time can be daunting. Whilst it’s important to seek professional advice before investing, it’s also good to understand the investment basics.
