Investments can help you make more money for yourself. However, the secret to achieving your investment goals lies within your taxes.
Generally, as you increase your wealth, gain assets, and build your investment portfolio, the higher your taxes will be. That’s why you need to know how to strategically plan your investments, asset classes, and investment vehicles.
Minimising tax is an important part of growing your own money. There are ways to go about successful investing and pay less tax throughout the process.
You can seek professional advice from a financial planner who can help you make smart financial decisions. For now, let’s dive into some helpful tips so you understand your investment options and can start investing with confidence.
Minimising Taxes Through Investment Strategies
As an investor, you need to have the right strategy to meet your investment goals and financial goals. Minimising taxes should be a part of your strategy. To do that, here are a few different asset classes you can consider using as part of your diversified portfolio.
1. Superannuation or Self Managed Superannuation Funds
Superannuation is your retirement nest egg. It’s meant to help you in the future. However, by investing in your super early, you can enjoy significant tax benefits.
Through superannuation, you can get the following benefits:
- The ability to reduce your taxes in the future
- Lower effective tax rate than what you get through other means
- The ability to grow your money faster through compound interest
- Peace of mind you are contributing toward your retirement savings
You can choose to make concessional contributions or non-concessional contributions to grow your super fund. If you hold a Self Managed Superannuation Fund (SMSF), there are also several investment options to help you minimise taxes.
2. Property
The popularity of property to invest money into is growing in Australia. While other investments can be seen as quite volatile, property tends to be a low-risk investment as property prices continue to rise exponentially.
You can also reduce capital gains tax on your property investments by investing through an SMSF.
Some investors choose to invest in a couple of different properties to diversify their portfolio.
Other investors choose to make the most of tax benefits and opt for a negative gearing strategy. This is when you borrow money for an income-producing investment (such as a rental property) where the investment is not producing as much income as the cost of the asset. The short-term losses can be beneficial to your tax bill in some situations.
A negative gearing strategy can become quite complex and may be risky.
Seek financial advice from an investment advisor who can help you with personal advice based on your current financial situation.
3. Investment Bonds
Investment bonds (also known as insurance bonds) can be another tax-effective investment. Investment bonds are taxed at the company rate (which can be lowered than marginal rates). They also become tax-free after 10 years.
Additionally – with this investment product – you are taxed internally (ie. within the bond) meaning you do not have to declare the earnings you make on your tax return.
Ready to Achieve Your Financial Goals? Get Started with Tax Planning from an Investment Advisor
As an investor, you need to be aware of your tax implications. The good news is that you can reduce your tax with a financial advisor who can provide investment advice.
Ultimately, tax minimisation may not be the most enjoyable or rewarding part of investing, but its importance cannot be underestimated.
Minimise Your Taxes Now with Strategic Investment Advice from Hyland Financial Planning
If you are ready to start your investing journey (whether using property, the stock market or any other different investments), chat with Hyland Financial Planning’s advice team.
Hyland Financial Planning can provide you with investment financial advice in North Sydney to minimise your taxes and help build your wealth. We are located in Sydney and Hornsby, NSW.