Take tax into account for investment planning

When judging performance, investors often look at the wrong number, since many published comparisons of investment performance do not take into account tax. For example, money invested in a cash trust earning interest at 5.3 per cent a year would produce a net return of 2.73 per cent for anyone on the top marginal tax rate. Our tax system divides investment earnings into two streams. Income earnings are taxed at full marginal tax rates. But the profit on the sale of the shares or property gets concessional treatment for the gain in capital value. So the form in which investment earnings come to you makes a major difference to how much you get to keep in your pocket.

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