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On this episode of The nestegg Podcast, host Maja Garaca Djurdjevic and three experts discuss the latest in equities, property investing and super.

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Steve Waters, director of Right Property Group, chats about the latest in property, including the much-talked-about use of macro-prudential measures to cool the rapidly expanding market.

RMIT’s senior lecturer of finance, Dr Angel Zhong, talks about soaring ETFs, what they are and why young investors, in particular, are jumping onboard their latest surge. Dr Zhong also takes a closer look at BNPL platforms.

And lastly, tax and super guru Timothy Munro gives his thoughts on Prime Minister Scott Morrison’s choice to backtrack on any further SG changes and looks at the impending end of the low and middle income tax offset.

Have a question for our experts? Get in touch at [email protected] and you might get featured on the next episode.

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Why ETFs are ‘more tax efficient’ than other funds

By Killian Plastow

June 26 2017
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Invest

Why ETFs are ‘more tax efficient’ than other funds

By Killian Plastow
June 26 2017

Recent years have seen investors increasingly move into exchange-traded funds (ETFs) for a host of reasons, according to State Street Global Advisors, with one major advantage being the different way ETF tax is computed.

State Street Global Advisors, SSGA, State Street, Thomas Reif, ETF, Managed fund,

Why ETFs are ‘more tax efficient’ than other funds

By Killian Plastow

June 26 2017
Share

Thomas Reif, one of State Street Global Advisors portfolio managers, says investors stand to benefit from being aware of the ways in which their investments are taxed.

Mr Reif said ETFs are a “more tax efficient vehicle” than other traditional managed funds because an ETF unit-holder pays their own tax.

“That might sound like a bit of a surprise. Surely you pay your own tax on all investment schemes? Well, that’s not the case,” he said.

In traditional managed funds, the capital gains tax that needs to be paid when another investor chooses to redeem their units is paid for from the shared pool of capital invested in the fund, meaning those who do not redeem their units will indirectly pay taxes for those who do.

“If you buy an ETF at a certain price, let’s call it a dollar, and you sell it subsequently for $1.10, you pay tax on the ten cents of capital gains,” Mr Reif said.

“In mutual funds, or a traditional investment scheme, you may pay tax, but it depends on what other capital gains are earned by other investors.”

Additionally, ETFs that invest in Australian will benefit from the franking credits of their underlying shares, further adding to their tax advantages, Mr Reif said.

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