Tax Effective Investment
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When it comes to managing your wealth, structure is everything. There are multiple structures your accumulated savings can be held in, such as super trust, unit trust, discretionary trust, individually (in your own name) and other trust structures. Each structure has a different set of taxation rules and accumulation rules. Sometimes holding your savings in your own name or partner’s name and investing may not be the best tax beneficial way to manage your wealth.
For high marginal tax rate individuals saving and investing inside super and growth bonds can provide substantial tax benefits; savings on tax means you keep more of the money your money earns. These structures also provide a high level of wealth protection. If your employment is riskier than others, there is a substantial secondary benefit in your savings. You are not at risk if you face legal proceedings.
Gearing can be another way to tax effectively invest. What is gearing? It is using borrowed money to invest in growth assets. Many people would associate gearing with property investment however, gearing can be used to invest in shares. You can either borrow against the investment or you can use the equity in your home if you own one. Gearing allows you to bring forward future savings with the anticipation that the assets you are investing in will be worth more over time than the interest cost of borrowing money. This type of investing is risk because you are borrowing money to invest in a growth asset which is risky. This can be a beneficially way to increase your wealth long term, and the interest cost of the borrowings are tax-deductible.
When it comes to managing your wealth, structure is everything.
