“Any income you receive from an investment may be added to your taxable income, and taxed at your marginal tax rate,” said Dunn.

‘Be savvy about tax’ is part of Wealth Know-How’s continuing financial educational video series. Hosted by Dunn, the video looks at what tax implications investors need to take into account.

“First of all in Australia, any income you receive from an investment may be added to your income, and taxed at

Benjamin Franklin was right: “In this world nothing can be said to be certain, except death and taxes.” That’s certainly true in investment, where any investment has tax implications. First of all in Australia, any income you receive from an investment may be added to your income, and taxed at your marginal tax rate, which is the rate of tax that applies to the income range into which your taxable income falls. Australia currently has four marginal tax rates, or five if you count nil as the tax rate on for low incomes below the tax threshold.

“So if you have interest from cash or bonds, dividends from shares, or rental income from a property, that is added to your assessable income and will be taxed at your marginal tax rate.”

“There is so much added value to being informed about tax implications because some assets are known as tax-effective, and you can pay less tax than you would have paid on another investment with the same return and risk.

“The best example of tax-effectiveness is the effect of fully franked dividends on shares, where shareholders get a personal tax credit linked to the dividend based on the tax already paid by the company, and they can use these ‘franking credits’ to reduce their tax liability.

This has a particularly powerful effect in superannuation where tax rates are significantly lower than corporate tax rates. The property equivalent of franking credits – although they are not as effective – are the tax deductions you get for the depreciation, expenses relating to financing, maintenance and repair, and occupancy of an investment property.

Another example is the capital gains tax – CGT – which can be lessened by holding the asset in question for more than 12 months, in which case a CGT discount is applied which may halve your marginal rate of tax for this capital gains, Or in super, the discount is one-third.

“While franking credits and property deductions help you pay less tax – and thus can help your savings grow faster – you should never base an investment decision on the tax benefits alone,” says Dunn.

Wealth Know How videos provides financial education to help people manage their wealth through its network of online educational videos.  Videos are also available to professional advisors for education and engagement.

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