Tax treatment of EFTs vs Shares

Discussion in 'Sharemarket Investing Platforms, Tools & Services' started by pjjjj, 6th Mar, 2020.

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  1. pjjjj

    pjjjj Member

    Joined:
    6th Mar, 2020
    Posts:
    6
    Location:
    Perth
    Hi all

    I am seriously struggling to find an answer to the following question and I'm hoping the collective wisdom on here can help! I've read up all the fact sheets on Vanguard, all the FAQs, everything on the ATO, but I still can't figure out how my return on VAS will be taxed.

    Context - i am trying to decide whether to invest a significant sum of money into shares or an EFT equivalent (e.g. VAS). My strategy is long term buy and hold, and i'll be reinvesting each year. I am trying to optimise my after tax annual yield. As I'm sure most people here are aware, the difference in even a 1% net return over 20+ years is absolutely massive. It is far simpler to purchase a single share (VAS) rather than purchase 20+ other shares to get a similar exposure, however I want to make sure I'm not hurting myself tax-wise to do so.

    So my question is as follows:

    The 10 year annual return according to the VAS fact sheet is 4.64% distribution and 4.18% growth (8.82% EFT total). Is it possible to figure out how the distribution and how the growth would be taxed, even if only approximately?

    If we were looking at a normal share, the distribution would simply be a dividend, and it would be taxed at your marginal rate (assuming no franking credits). The growth would be taxed only at sale, and at 50% if you've held the shares for over a year. However I can't figure out how the 4.64% and 4.18% would be taxed if I purchased the VAS EFT.

    I've read all about AMIT and AMMA and it still doesn't really make it clear as to how much of the ~8% per annum growth you'll actually retain.

    Can anybody help?

    Thanks in advance!
     
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

    Joined:
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    30,862
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    Australia wide
    VAS consists of different components, some franked, some unfranked, some interest depending on the underlying share mix held so the tax aspects will vary a bit from year to year.