Is there a range of strategies that can be used to lower tax rates on investment portfolios?
A. Investors can effectively elect the tax rate they pay on their investments. The simplest way to illustrate the possibilities for enhancing investment returns by reducing taxes is to consider the difference between investing inside or outside the superannuation fund. Superannuation funds are taxed at the concessional rate of 15 per cent. Compare this to the marginal tax rate of 48.5 per cent for individuals and the 30 percent corporate tax rate. There are also deductions available for contributions to super, and we are all familiar with the additional tax impost of the superannuation surcharge. Q. How does the dividend imputation system work inside Super Funds? A. Imputation is, and always has been, a legitimate tool for super funds to reduce their effective tax rate. All shareholders who receive franked dividends receive some tax benefit from them. Individuals, trusts and partnerships effectively reduce the tax payable on those dividends by suing the franking credits to offset that
