Tax Effective Investment Management

Tax effective investment management can produce significant increases in real returns. 

Although the benefit of tax effective investment strategies will vary depending on the individual investor and their overall tax situation, academic studies estimate that investment management using a tax effective investment approach adds 2% per annum to real returns.

Even for those in a low or tax exempt environment, adopting a tax effective investment strategy has considerable benefits due to Australia's imputation system and the ability to enhance returns through franking credits.

Our approach to after tax investment management incorporates a variety of elements to help create tax effective investment portfolios, these include:

• Minimising transactions that result in the creation of tax events
• Adopting a long term investment approach to avoid realising capital gains
• Considering the implications of franking credits for investors who may benefit
• Offsetting capital gains and losses where possible (within the portfolio and against external assets)
• Considering the tax implications of corporate actions

Pooled investment vehicles such as managed funds have a distinct disadvantage in producing tax effective investment returns as they pool investors with different tax status and strategies together. This makes tax effective investment management impossible because adopting a tax strategy across all investors can create tax advantages for some whilst disadvantaging others due to differences in tax situations.

To overcome this problem, we utilise an individually managed account (IMA) structure, where each investor has a segregated portfolio managed to suit their individual tax status.