White Papers

Tax effective investing

17/11/2009

Greg Cooper

Greg Cooper

CEO Schroders Australia / Global Head of Institutional

After tax investing has become one of the buzz topics for superannuation funds (and retail investors). However, much of the mainstream media debate has focussed on the after tax effects of an Australian equity portfolio from an Australian unit-trust holder’s perspective - a view that bears little, if any, resemblence to the situation from a typical Australian institutional investor’s (especially superannuation funds) perspective. In addition we have also seen the active promotion of "Emulation" strategies in Australian equities for the larger multi-manager funds, again largely under the premise of tax effectiveness. 

Tax effective investing is at its heart a relatively simple concept but one that is complicated by type and tax position of investor, vehicle used for investing, asset class and geography invested and method of tax lot accounting.  In this paper we look to explore what tax efficiency means and its impact on institutional investors. We also look to expand the debate on tax effectiveness beyond Australian equities and into international equities and fixed interest. In particular we suggest strategies that really do make a difference to tax and those that make little difference*.

*The usual caveats apply:  Schroders is not a qualified tax adviser and the points raised in this presentation are our own opinions and interpretations and do not constitute tax advice.  Readers should obtain their own independent expert opinions.

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Opinions, estimates and projections in this article constitute the current judgement of the author as of the date of this article. They do not necessarily reflect the opinions of Schroder Investment Management Australia Limited, ABN 22 000 443 274, AFS Licence 226473 ("Schroders") or any member of the Schroders Group and are subject to change without notice. In preparing this document, we have relied upon and assumed, without independent verification, the accuracy and completeness of all information available from public sources or which was otherwise reviewed by us. Schroders does not give any warranty as to the accuracy, reliability or completeness of information which is contained in this article. Except insofar as liability under any statute cannot be excluded, Schroders and its directors, employees, consultants or any company in the Schroders Group do not accept any liability (whether arising in contract, in tort or negligence or otherwise) for any error or omission in this article or for any resulting loss or damage (whether direct, indirect, consequential or otherwise) suffered by the recipient of this article or any other person. This document does not contain, and should not be relied on as containing any investment, accounting, legal or tax advice. Schroders may record and monitor telephone calls for security, training and compliance purposes.