Understanding tax

Investors need to consider the tax implications for the investments they hold, however, it isn't wise to base any investment decision on tax effectiveness alone.

Understanding how investments are taxed and what strategies might be suitable for your situation is an important part of making informed investment decisions and keeping on the right side of the Australian Taxation Office (ATO).

How is investment income taxed?

Investment income explained

If you own any investments you usually receive some sort of income from those investments. Investors have to declare investment income each year whether they receive it physically or not.

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Investment income

Find out from the ATO about the investment income you must declare.

Investment income deductions

You can claim a deduction for expenses incurred in earning investment income.  Find out more from the ATO about Interest, dividend and rental property investment income deductions.

Capital gains tax

If you sell an asset, such as property or shares, you may make a capital gain or a capital loss. Check with ATO for how capital gains and losses affect the tax you pay.

Strategies to reduce tax

Tax planning strategies

There are many ways to legally minimise the tax you pay and your accountant is best placed to provide this advice.

Tax planning

You have the right to arrange your financial affairs and investment to keep your tax to a minimum. This is often referred to as tax planning.

 Learn more about the ATO's view on legitimate tax planning as well as tax avoidance schemes.

Donating shares: ShareGift Australia

Learn more about donating shares to ShareGift Australia;  the only service of its kind in Australia that converts share parcels to cash and aggregates the proceeds to distribute to charity. 

Make tax work for you

Consider the tax implications of any investments. While lower tax can help your wealth grow faster, you should never base an investment decision on tax benefits alone. Moneysmart provides some guidance about what makes some investments more tax-effective than others and includes a video from Paul Clitheroe on tax avoidance schemes.