Paying taxes is an important legal requirement. But by investing tax efficiently, we can aim to make the most of the available tax allowances and incentives. These include:-

  • maximising franking credits on dividends received
  • gearing into an equity portfolio
  • timing capital gains to suit your personal needs
  • choosing the appropriate investment structure so that the tax is most efficiently applied, including family trusts and superannuation funds
  • commencing a pension at the right time to maximise the tax advantages available
  • getting the most out of your tax-free threshold and seniors concessional tax allowances
  • consideration of salary sacrifice and advantages that can arise to high tax payers
  • maximising government co-contributions to superannuation
  • using portfolio administration systems to reduce costs and tax compliance on your investment portfolio
  • using the first homeowners saving schemes inside superannuation
  • using testamentary trusts as part of a well-planned estate planning strategy

Active and Passive Fund Managers

The alternative to an active fund manager is a passive fund manager (also called an index fund manager). A passive fund manager is characterised by one that lets investments follow an index or a basket of selected stocks intending to have certain attributes.

The majority of managed funds are not taxed in the hands of the fund manager, the process generally is income and capital gains are distributed to the investor and the investor, particularly in the Australian market, is responsible to report all taxable items on their own tax returns.

Index funds trade very little, so their realized capital gains are very low. Actively managed funds trade more (sometimes, much more), so their realized gains are higher.

But most shareholders eventually sell their investments—and when they do, they have to pay taxes on the embedded capital gains. Because index funds don’t trade much, embedded gains tend to build to much higher levels over time. By contrast, the capital gains that actively managed funds distribute reduce the capital-gains taxes paid upon the eventual liquidation of the investment almost one for one.

A passive fund manager will follow an index and therefore would not be considered to be trading their positions regularly unless new companies enter the index or companies leave the index. The other reason for trading is to reflect changes in market capitalisation of companies and to release capital from investors liquidating their positions.

One of the expected behaviour s of an active fund manager is that they are seeking growth and therefore profit and inherently this creates capital gains. The realisation of gains enables distributions to investors, therefore the fund manager will be realising taxable gains on a regular basis and passing it on to investors.


  • Members of Chartered Accountants ANZ and Financial Advisors
  • 30+ years in financial services, commercial and public practice
  • Licensed for Taxation, Audit and Authorised to provide Financial Advice
  • Authorised to provide Personal Financial Advice with appropriate taxation advice and guidance
  • Extensive experience with large and small business, family trusts, partnerships, SMSF’s, deceased estates and business restructuring
  • Specialise in self-managed super funds and provide accounting & tax, financial advice and audit services
  • Asset Management and Investment Advice
  • Personal Risk Insurance

  • Deposit Products
  • Managed Investments including Unit Trusts, Investment Bonds, Direct Shares, Property Trusts, Growth Funds, Balanced Funds, Indexed Funds and Cash Management Accounts
  • Share Market Investments
  • Tax Effective Investments
  • Superannuation, including Allocated Pensions, Rollovers, Personal Superannuation, Company Superannuation and Self Managed Superannuation Funds
  • Retirement Planning including aged care and estate planning
  • Life Insurance Products, including Annuities, Term Insurance, Income Protection, Trauma and Total and Permanent Disability Insurance
  • Investment Bonds
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North Financial Planning for tax-effective investment strategies

Paying taxes is an important legal requirement but by investing tax efficiently you can aim to make the most of your available tax allowances and incentives. Speak to us how.
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