In November 1991, House of Representatives Select Committee on Print Media inquiry, Australian media tycoon Kerry Packer famously remarked: “I am not evading tax in any way, shape or form. Now of course I am minimising my tax and if anybody in this country doesn’t minimise their tax, they want their heads read.”
More than 30 years later, those words are likely resonating with Australian investors as they assess the tax changes announced in this year’s Federal Budget and recently legislated by Parliament.
The changes reduce some of the tax advantages previously available through investment structures. Rather than revisiting the arguments for or against these reforms, Alman Partners believes investors should remain focused on what they can control.
For many investors, after-tax investment outcomes are now even more important. Tax efficiency begins with investment strategy. A portfolio designed with low turnover and managed with flexibility can help minimise unnecessary tax liabilities. When combined with a focus on investments with higher expected returns, this can improve the amount investors ultimately retain after tax.
Tax efficiency is also influenced by the degree of control an investor has over when tax is paid. Investment structures and strategies that provide flexibility around the timing of realised capital gains can be particularly valuable.
A portfolio managed with thoughtful trading discipline may be able to reduce realised capital gains and defer tax liabilities. While this does not remove the obligation to pay tax in the future, it gives investors greater control over when those taxes are incurred. Importantly, it also allows a larger portion of their capital to remain invested and continue compounding for longer.
While the rules around tax may change, the principles that underpin successful investing remain remarkably consistent. Investors cannot control government policy, but they can control the investment strategies they employ, the costs they incur and the extent to which taxes unnecessarily erode returns. At Alman Partners, we believe that a thoughtful, low-turnover and tax-aware investment approach remains one of the most reliable ways to improve long-term after-tax outcomes.
James Alexander (CFP® Professional, GradDipFP, MFinP, BBus [Fin, Mgt]) is an Authorised Representative of Alman Partners Pty Ltd, Australian Financial Services Licence No: 222107.
Performance data shown represents past performance or simulated performance. Past performance is no guarantee of future results and current performance may be higher or lower than the performance shown. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost.
Note: This material is provided for GENERAL INFORMATION ONLY. It has not been taken into account your personal objectives, situation or needs. The information is objectively ascertainable and is not intended to imply any recommendation or opinion about a financial product. This does not constitute financial product advice under the Corporations Act 2001 (Cth). It is recommended that you obtain financial product advice before making any decision on a financial product such as a decision to purchase or invest in a financial product. Please contact us if you would like to obtain financial product advice. While we believe the information in this article is accurate at the time of publication, we do not warrant its completeness or reliability. Information is subject to change without notice.