Ep 407: The investors who obsess over tax often miss what matters more

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Tax is psychologically painful, but for investors, over-fixating on it is a genuine risk. The drive to minimise tax can lead to decisions far more costly than the tax itself, and this blog makes the case for keeping it in its proper place.

Using financial modelling across both property and shares, Stuart examines the real impact of capital gains tax on internal rates of return over 30 years. The findings are instructive: CGT changes have a surprisingly modest effect on outcomes. What actually drives returns is gearing and the asset's underlying performance. In fact, modelling a scenario where tax is eliminated produces a lower return, because the negative gearing deductions lost along the way are worth more than the CGT saved at the end.

The blog then works through the decisions that genuinely matter: ownership structure, funding structure, and asset selection. Whether to hold investments personally, through a family trust, or in a company, whether and how much to gear, and how proactively investments are managed, these variables shape the bulk of long-term outcomes before tax planning even enters the picture.

The closing hierarchy is clear: asset quality first, gearing second, structure third, tax optimisation last. By the time investors reach item four, most of the outcome is already determined.

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Important

This podcast provides general information about finance, tax and credit. It doesn't take into account your specific objectives, financial situation or needs, so you need to assess whether it's relevant to your circumstances before acting on it. If you're not sure, speak to a licensed, trustworthy professional.