Roads Toward More Efficient Tax-Related Investments


What every business owner wants to know before they decide to invest their money is how much they will have to pay to the tax authorities. Since entire investments can depend on the taxation process and regulation, it is important for every economy to have clear rules about taxes and investments. Many roads can be taken to ensure that your investment makes profits, but few of them are legal and approved by the taxation office.

Learn Your Marginal Rate

Before you even start thinking about making an investment, it is vital to know what marginal bracket you belong to. The first thing every investor should know is that every type of income, super profits, pension, capital gains and investments are taxable.

After that, it is important to know what group of marginal brackets your incomes should be placed in. They will determine how much tax you will have to pay for every extra cent you make through your investment. Here you can find out more about details on marginal brackets in Australia. So, if you are able to make the amount of the tax paid on your investment lower than your marginal rate, it will be a tax-efficient investment.

Roads Toward More Efficient Tax-Related Investments

Investing in Properties and Shares

If you decide to invest in properties, e.g. to rent them, or shares, you will be taxed in accordance with your marginal rate. For instance, if an Australia-based business pays a tax on certain profits, it will also have to pay dividends out of those profits. Those dividends are called franked dividends. By franking dividends, businesses receive a 30% franking credit. It means that a franked dividend worth $14 will have the same value as an unfranked dividend worth $20.

Moreover, when it comes to properties, here businesses usually have to pay a capital gain tax. Simply put, if you sell an investment, e.g. a property, at a price that is higher than you paid for it, the taxation office considers such a venture a capital gain and you are obliged to pay a tax on it.

Mind the Bonds

Well-off businesses often invest in investment bonds. Insurance companies and different financial organizations often offer such deals. They can be pretty tax-efficient over a longer period of time, as long as the investor follows the rules set in advance, advise Sydney’s reputed tax accountants.

The tax rate for all the profits that an investment bond brings your business is about 30%. Here a regular corporate tax rate is applied. The long-term part means that your business will pay no more taxes on your investment bonds if you do not make any withdrawals during the first 10-year period. This is why these investments will pay off for investors whose marginal tax rate exceeds 30%.

Roads Toward More Efficient Tax-Related Investments

Caution Comes First

Another chance for investors who want to make profits Down Under are tax schemes. Their main purpose is to enable investors to delay their tax payments. Also, such business moves can provide certain tax deductions if you invest in certain products and assets that are supposed to bring profits in the future.

However, keep your eyes wide open when it comes to tax schemes and be careful who you ask for advice on that matter. If you listen to wrong people, it might be treated as tax evasion by the taxation office.

To conclude, no investment will pay off if you pay all the taxes at once. This is why you have to devise a shrewd plan that follows the legal procedure, but also contains well-crafted steps for making profits. No matter what you do, do not fall for easy money transactions, especially if you are a rookie in this field. First stick to safe investments. As you budget keeps growing, you can start looking for alternatives.