Episode 18: Tax Efficiency and Maximising Investment Returns
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Episode 18: Tax Efficiency and Maximising Investment Returns
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About this listen
When it comes to investment success and the accumulation of real wealth, be it investment-grade real estate or another asset class, compounding is the golden ticket; where you charge interest on your interest or make a profit on your profit. Compounding enables exponential financial growth as profits or interest accrues on the initial principal amount and the accumulated interest or profits from previous periods.
The primary prohibitor to financial compounding in the investment space is tax. Tax is payable when a gain or profit is realised via a liquidity event- usually the sale of an asset. In Australia, this can mean, in some cases, a diminished actual after-tax result of almost half of your profit, having a detrimental effect on compounding ability.