Proposed Tax Reform changes affect how trusts are taxed but income splitting should still be effective. Trust income can be split to make the best use of each beneficiary's tax free limits or can be distributed to beneficiaries who are on lower marginal tax rates. Use 'tax-friendly' investments Examples include Australian equity investments, annuities and allocated pensions. These investments contain tax advantages which assist in minimising the amount of tax you pay. In addition to their taxation benefits, good quality shares can provide income in retirement for investors, with the added potential of capital growth on the investment.
Allocated pensions provide a flexible retirement income using superannuation benefits.
If allocated pensions are purchased between 1 April and 30 June, no income payment is required in the financial year, so the funds can accumulate longer in a tax efficient environment. Annuities, in particular CPI indexed annuities, can provide you with a regular and growing income in retirement. This can be comforting to investors who are retiring or are retired, as their income is not at the mercy of downward movements in interest rates, unlike people who have their savings in fixed interest investments. The reverse may also be true in periods when interest rates move upwards. In contrast with the major changes announced in the areas of taxation, superannuation and social security in previous years, this year's Budget introduced relatively few new proposals for investors.