Increasing Wealth
Property
Property is one of the best ways to create wealth. It's important though, that if you are serious about property investing, you take a closer look at why. Here are some tips that might help you...
Property Investments can provide:
- A good return on your income
- The potential for capital gains
- Greater investor security
- Potential tax advantages
Investment property and tax:
- Correctly structured investments can assist in reducing your tax
- When you sell your investment property, you may be liable for capital gains tax, or other taxes, so it's important to seek upfront advice on the right way to own the property
- Land tax and depreciation are also important factors to consider
Investing in property see a financial adviser who will:
- Analyse your budget to make sure you can afford to invest
- Decide which type of investment property best suits your needs
- Discuss the benefits of positive and negative gearing
- Ensure you have enough money for the deposit and up front costs such as stamp duty, legal costs, valuation and other fees
- Arrange a loan and structure that suits your needs and your finances
Shares
Shares comprise a large proportion of many investors' portfolios. Research reveals that, over the long term, shares deliver a higher return than any other asset class, including property.
There are five compelling reasons for investing in the share market:
- Capital growth
- Dividends
- Ease of buying and selling
- Diversifying your investment
- Receiving shareholder discounts or entitlements
Think about whether you are interested in investing in shares. If you are thinking about investing in shares directly, work through a financial advisor as:
- They will be able to help assess whether investing in a particular company is worthwhile
- They can also provide advice on the right asset allocation, an important consideration for retirement planning and superannuation
Alternatively, you can invest in shares through a managed investment fund, wrap account or master trust:
- This allows you to diversity your portfolio across a range of different companies, industries, countries, regions and even across different investment styles
Shares become even more attractive when tax benefits are taken into account, as they can be used for generating tax effective income, largely as a result of dividend imputation. Dividends are paid out of company profits - but not until after company tax has been taken out (at the rate of 30%).
So when it comes to assessing your taxable income, the government gives you a credit (up to 30%) for the tax that's been paid on any shares you own directly. Shares held for more than 12 months may qualify for a 50% discount on any capital gains tax payable. But, as usual, seek the advice of tax experts and other advisors.
If you are looking to get involved with shares, you should speak to a financial advisor who will help you assess your investment goals, and the level of risk you are comfortable with.
Superannuation
Superannuation is a tax efficient way of creating wealth for your retirement. No matter how old you are, it's important to start planning for your retirement now - to ensure that you can afford the lifestyle you want when you retire.
Superannuation as an investment:
The important difference between superannuation and other forms of investment is that tax concessions are available. Superannuation investment earnings are taxed at a lower rate than on an equivalent investment in either shares or cash.
How superannuation works:
A superannuation fund accumulates small amounts, saved regularly by each of its members, into a large pool of money. The money is then invested in a broad range of investments such as shares, property, government bonds and cash deposits.
The government's objective with superannuation is to ensure that individuals save for their retirement; so it's important to pay attention to your superannuation and to ensure that your retirement money works for you.
On retirement, your superannuation payout can be paid to you either as a lump sum or as a monthly pension.
Superannuation is compulsory, so why speak to a financial advisor?
- The legislation that governs superannuation is very complex and changes regularly. A financial advisor can help you better understand your superannuation responsibilities.
- Speaking to a financial advisor about your superannuation might assist you in minimising your tax bill.
- A greater knowledge of the superannuation choices available to you now will help in maximising your choices in retirement.
Recent 'member's choice' superannuation changes gives employees the right to choose their own superannuation fund rather than their employer doing it for them. As with all investments, selecting the appropriate superannuation fund is not a decision to be rushed. It requires a great deal of due diligence and understanding. Take the time to determine what you are trying to achieve, educate yourself as to your choices, and seek the support of a licensed financial advisor. There are also a number of other tax concessions that you may be eligible for that you don't know about.
Managed Funds
a managed fund, your money is pooled with that of many other investors, so you can take advantage of substantial investment opportunities. You can choose from International shares, Australian shares, fixed interest investments, cash, property or a combination of these.
The advantages of investing in a managed fund:
- With a small investment, you can spread your risk across a range of investments through a single fund
- Your investments are managed by professional fund managers
- Fund managers look after the administration, day-to-day responsibilities of the investments and reinvest your income to increase your returns
- You don't need to research particular companies or assets, or have the specialist knowledge to analyse and understand it, as you would with buying shares directly
- You can use regular savings plans to build up your investment over time, including the re-investment of income earned from the fund assets