Tax-effective investing

Investing is using your money to try to make more money or gain assets. . Understanding how tax works in relation to your investment means you don't pay more tax than you need to. Australian residents are taxed on their worldwide income, so whether you have investments in Australia or overseas there are tax aspects to obtaining, owning and disposing of them.

Profits or returns you make on your investments usually become part of your income for tax purposes.

You can plan your investments so they are tax-effective and you don't pay more tax than you need to. Tax planning might mean reducing your taxable income by negatively gearing an investment property or through salary sacrifice arrangement, or increasing your claimable deductions by donating to a charity.

You can claim deductions for some expenses that are directly related to earning income from your investment for example, interest on money you borrow to buy shares. Be wary of opportunities to hide your investment income or artificially inflate your deductions.

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Last modified: 25 Jun 2015QC 33636