Tax-aware investing is an investment methodology that aims to legally minimise tax liability to maximise overall after-tax returns. For Australian investors preparing for the 2025-26 financial year and beyond, getting this right could mean the difference between paying unnecessary tax and keeping substantially more of your investment returns.
Quick Answer: Where to Hold What in 2026
Tax-aware investing in Australia focuses on net-of-tax performance rather than just gross returns. The core principle is asset location: matching each asset class to the structure that delivers the highest after-tax return, not just the highest pre-tax return. Structure determines the tax rates on income, whether the 50% capital gains tax discount applies, how franking credits are utilised, and whether distributions can be directed to lower-rate beneficiaries.
The 2026-27 Federal Budget introduces massive visual shifts to the Australian wealth landscape. Here is your cheat sheet for asset location in 2026:
Australian shares and equity ETFs with franked dividends:
Prioritise super pension fund (0% tax, full franking refund)
Then family trust with low-rate beneficiaries
Then super accumulation (15% tax, credits often reduce to 0%)
International shares and global ETFs:
Prioritise super (especially for long-term growth)
Family trusts for 50% CGT discount on sale
Fixed income and term deposits:
Prioritise super (15% accumulation, 0% pension)
Then bucket company (25%) over high personal marginal rates
Positively geared investment property:
Usually family trust for income splitting and 50% CGT discount
Negatively geared investment property:
Usually personal name to offset salary income (noting 2027 changes)
General information only. This article is for Australian investors in the lead-up to 30 June 2026. It is not personal tax, financial or legal advice. Seek professional advice from a licensed financial adviser and registered tax agent before acting.
Asset Location vs Asset Allocation in Australia
Most Australians understand asset allocation—the percentage split across asset classes like 60% shares, 20% property, and 20% fixed income. Far fewer apply an asset location framework to improve after-tax returns.
Asset location is the decision of which investment to hold in which structure, as distinct from asset allocation, and can significantly impact after-tax returns in Australia. Two investors with the same allocation can have vastly different outcomes depending on whether their fixed income sits in super or personal names, and whether Australian shares are in a trust or company.
The core tax principles for 2026 planning are straightforward:
Put high-taxed ordinary income (interest, rent) into low tax environments (super, bucket company)
Put high-growth, CGT-discountable assets into structures that receive the 50% discount (individuals, family trusts)
Use pension phase super for tax free income where caps allow
Asset location should be reviewed before major asset sales, before 30 June each financial year, and whenever legislation changes—particularly given upcoming reforms from 1 July 2027.
How Tax Works Across Key Structures in 2025–26
Understanding how capital gains, interest, rent, and dividends are taxed in each structure is essential before assigning assets. The tax treatment of investments can vary significantly based on the structure in which they are held, affecting after-tax returns for investors.
Structure | Interest/Unfranked Dividends | Franked Dividends | CGT (<12 months) | CGT (>12 months) | Losses |
|---|---|---|---|---|---|
Personal name | Up to 47% | Marginal rate less 30% credit | Up to 47% | 50% discount (max 23.5%) | Can offset other income |
Super (accumulation) | 15% | 15% less credits (often 0%) | 15% | 10% effective | Quarantined |
Super (pension) | 0% | 0% + full credit refund | 0% | 0% | N/A |
Family trust | Beneficiary rate | Beneficiary rate less credit | Beneficiary rate | 50% discount to beneficiary | Trapped in trust |
Bucket company | 25-30% | Company rate less credit | 25-30% | No discount | Carried forward |
Investment bond | Up to 30% internal | 30% internal | 30% internal | No personal event after 10 years | Internal |
For eligible retirees, the Seniors and Pensioners Tax Offset (SAPTO) can make personal taxable income effectively tax free up to around $32,000 for singles or $58,000 for couples in 2026. This structural tax mapping forms the foundation of any asset location framework.
Australian Shares and ETFs: Franking Credits and Structure Choice
Australian shares and equity ETFs are central to many investment portfolios because of franked dividends and capital growth potential. Your 2026 tax planning depends heavily on where these assets sit.
When an Australian company pays a fully franked dividend, it attaches a tax credit equal to the 30% corporate tax already paid on that profit. Investors include the grossed-up amount in assessable income and claim the franking credit as an offset. Utilizing fully franked dividends can help offset tax burdens for high income earners, reducing their effective marginal tax rate from 47% to approximately 17% on that income.
A super fund in pension phase (0% tax rate) receives the full 30% franking credit as a cash refund, effectively boosting the dividend yield significantly. This makes pension phase super the optimal home for income-focused Australian equity portfolios.
To claim a franking credit, shares must be held ‘at risk’ for at least 45 days during the period beginning 45 days before the ex-dividend date and ending 45 days after it, excluding the days of purchase and sale. ETFs generally manage this internally, but check your annual tax statement.
Comparison: Fully Franked Australian Shares (held >12 months)
Structure | Effective Tax on Dividends | CGT Treatment |
|---|---|---|
High-income individual (47%) | 17% | 23.5% |
Low-income/SAPTO retiree | 0% (with refund) | 0-8% |
Super accumulation | 0% (credits offset 15%) | 10% |
Super pension | 0% + 30% cash refund | 0% |
Family trust (low-rate beneficiary) | 0-16% | ~8% |
Bucket company | ~0% (credits offset 25%) | 25-30% full gain |
Global Shares and International ETFs: Capital Growth, Not Credits
Global shares and international ETFs pay unfranked dividends and may have withholding tax deducted at source. The primary tax perspective for these assets is capital gains rather than dividend income.
The 50% capital gains tax discount for individuals and family trusts makes these structures attractive for international equities held over 12 months. Super in pension phase still provides 0% CGT, making it one of the most tax efficient homes for long-term international growth assets.
Typical 15% withholding tax on US and UK dividends can be claimed as a foreign income tax offset in personal and trust tax returns. However, in super pension fund generates no tax liability, so this offset is wasted—the 15% withholding becomes a real drag.
2026 Location Guidance:
High-growth international equity ETFs are ideal in super accumulation and pension accounts
For retirees relying on international dividend income, consider family trust or personal name (within tax free thresholds) to reclaim foreign tax offsets
Avoid global growth ETFs in bucket companies due to no CGT discount
Investment Property: Where Should It Sit in 2026?
Investment properties generate two income streams: net rental income, which is taxed at ordinary rates, and capital gains, which may be eligible for a 50% discount if held for more than 12 months.
For investment properties, the choice between holding in a personal name or a trust depends on whether the property is positively or negatively geared, affecting both ongoing income tax treatment and eventual capital gains tax treatment.
Structural trade-offs:
Structure | Rental Income Tax | CGT After 12 Months | Negative Gearing |
|---|---|---|---|
Personal name | Up to 47% | 50% discount | Can offset salary |
Family trust | Beneficiary rates | 50% discount | Losses trapped |
Super (SMSF) | 15%/0% | 10%/0% | Cannot offset personal income |
Bucket company | 25-30% | No discount | Cannot offset personal income |
Negative gearing can be used in individual names to deduct losses against high personal income. However, losses from property investments in established homes purchased after the May 2026 Budget can no longer offset losses against wage income but can be carried forward. Negative gearing is limited strictly to residential new builds starting from 1 July 2027.
Superannuation funds are excluded from the negative gearing restrictions and continue to receive their concessional one-third CGT discount. For positively geared residential property, a family trust may deliver better outcomes through income splitting and the 50% CGT discount.
Note that CGT and stamp duty costs make shifting property between structures expensive—the initial asset location decision is critical.
Fixed Income, Term Deposits, and Cash: Shelter the Ordinary Income
Fixed income and term deposits pay interest that is fully taxable as ordinary income with no CGT discount or franking credits. This makes them the least tax efficient asset class for high income earners.
Superannuation is the most tax-effective structure, with a maximum 15% tax on earnings and 10% on capital gains for assets held over 12 months. In accumulation mode, superannuation earnings are generally taxed at 15%, with further concessions for capital gains on assets held for longer than 12 months. Superannuation in pension mode is tax-free for both income and capital gains, meaning members pay no tax on pension received.
Example: $200,000 Fixed Income at 5% ($10,000/year)
Personal name at 47%: Tax $4,700
Super accumulation at 15%: Tax $1,500
Pension phase: Tax $0
Over 10 years with compounding, the difference exceeds $40,000 in additional wealth purely from structural placement. Fill up super with fixed income before placing these assets in personal names.
For retirees reliant on age pension, shifting interest-bearing assets between structures can influence deemed income and government benefits entitlements under the income and assets tests.
An Asset Location Framework for 2026: Which Assets in Which Structure?
Different investment structures, such as family trusts, companies, and investment bonds, can help distribute income among family members in lower tax brackets or retain earnings at a lower company tax rate, thus optimizing tax outcomes.
Personal Name
Best for: Emergency funds, offset accounts, negatively geared property (pre-2027), income under tax free thresholds
Avoid for: High-yield fixed income for high-income earners (up to 47% highest marginal tax rate)
Superannuation (Accumulation)
Best for: Fixed income, international equities, long-term balanced portfolios
Avoid for: Capital needed before preservation age
Superannuation (Pension)
Best for: Income-focused Australian shares (maximising franking refunds), defensive fixed income, growth portfolios targeting 0% CGT
Note: Superannuation balances in pension phase count under assets tests
Family Trust / Discretionary Trust
Best for: Australian equity ETFs where franked dividends and capital gains can be streamed to low-rate beneficiaries; positively geared property
Note: A family trust must distribute income in the same year it is earned, but it cannot distribute losses, which can complicate tax management
Family trusts are eligible for a 50% capital gains tax discount after holding an asset for over 12 months, making them advantageous for long-term investments
Important: Discretionary trusts will face a minimum tax rate of 30% starting 1 July 2028
Bucket Company
Best for: Receiving overflow trust distributions at 25-30%, conservative income assets
Avoid for: Long-term high-growth assets (no 50% CGT discount)
Investment Bonds
Best for: 10+ year savings, education funding, retirement overflow above contribution caps
Avoid for: High-franking strategies (credits lost internally), short timeframes
The standard 50% CGT discount for individuals and trusts will be replaced with an inflation-indexed cost-base model combined with a minimum 30% tax rate starting 1 July 2027.
Age Pension, Deeming, and Asset Location in Retirement
For Australians approaching age pension age, tax aware investing overlaps with social security planning. Where assets held sit affects both your tax bill and age pension outcomes.
Key 2025-26 considerations:
Principal residence is exempt from the assets test
Super in accumulation for those under age pension age is not counted in tests
Pension-phase super is subject to deeming rules
Investments in personal names, discretionary trusts, and companies are generally counted
The Transfer Balance Cap (TBC) limits the amount that can move from accumulation to pension phase, currently set at $1.9 million and expected to increase to approximately $2.1 million from 1 July 2026.
Example: 68-year-old couple with $500,000
Option | Tax Position | Age Pension Impact |
|---|---|---|
$500k in bank accounts at 4.5% | $22,500 income taxed at marginal rates | Fully deemed, may reduce pension |
$300k super pension + $200k bank | 0% tax on super portion | Same deeming applies to both |
Restructured with family trust | Potential income splitting | Assets still counted |
Careful modelling is essential before significant changes. Manage income and cash flow to optimise both your tax position and government benefits.
Putting It Together: A 2026 Multi-Structure Case Study
Consider a couple in their late 50s with combined income of $420,000, superannuation balances of $700,000 each, a family trust with $600,000 in ETFs, an $850,000 investment property held personally, $200,000 cash, and a bucket company with $150,000 retained earnings.
Issues identified:
Trust distributions all flowing to high-tax-rate spouses
Cash earning 4-5% taxed at 47%
Investment property expensive to move due to CGT and stamp duty
Super overweight Australian shares
Recommended structural changes:
Distribute income to adult family members on lower tax rates and direct surplus to bucket company at 25%
Make non concessional contributions to super before 30 June 2026, within contribution caps
Adjust super asset allocation to hold more fixed income and international equities
Consider transition-to-retirement once work tests are met
Family trusts are used to distribute income among multiple family members, allowing for tax obligations to be managed more effectively, especially by redistributing income to lower-income earners.
Estimated outcome: Annual after-tax improvement of approximately $14,000-$18,000 without changing overall risk profile—purely through better asset location. Your investment returns compound faster when you reduce tax drag.
How Money Path Can Help with Tax-Aware Investing
Money Path focuses on evidence-based, tax aware investing for Australian households and professionals. Our approach integrates financial advice, tax planning, and retirement strategy to maximise your after-tax returns.
Our tax aware investment review includes:
Full structural review of personal accounts, superannuation, family trusts, companies, and investment bonds
Asset location framework tailored to your age, income, goals, and risk tolerance
Scenario modelling using current and proposed tax rules (including changes from 1 July 2027)
Coordination with your accountant and tax agent for lump sum decisions, tax return timing, and compliance
We help with superannuation strategy including contribution planning before 30 June each financial year, pension phase structuring, and advice on when to use a family trust or bucket company for asset protection and long-term wealth building.
Book a tax aware investment review before 30 June 2026. A short initial consultation can quickly identify if asset location is costing you money. Contact Money Path to discuss your situation.
FAQs: Tax-Aware Investing and Asset Location in Australia
What is the difference between asset location and asset allocation? Asset allocation is the mix of asset classes in your portfolio. Asset location is deciding which structure holds each asset. Both need coordination for best after-tax returns—the same ETF in different structures can produce very different net outcomes.
Is it always better to put everything into superannuation? Super is highly tax efficient but has contribution caps, access limits until preservation age, and potential new tax for balances over $3 million. Super cannot be your only structure.
How does the 50% CGT discount work across structures? Individuals and trusts receive the 50% discount on assets held over 12 months. Super applies a one-third discount in accumulation. Companies and investment bonds do not pass the discount to investors.
What is a bucket company? A private company used to receive distributions from a discretionary family trust at a capped 25-30% rate. Best for surplus investment income and fixed income holdings, not high-growth assets.
When should I consider an investment bond? Investment bonds suit investors expecting high marginal rate for at least 10 years who value simple administration and tax-free access after the 10-year period.
How does investing in my own name versus super affect Age Pension? Super for those under age pension age may be exempt from tests. Personal investments are counted. Deeming applies to financial assets regardless of structure.
Can I move assets between structures? Yes, but CGT, stamp duty, and other tax consequences apply. Seek professional advice before moving property or large share portfolios.
When should I review my asset location? Before major events (retirement, sale of business, downsizing) and annually before 30 June. Given Tranche 2 reforms will significantly impact compliance requirements for Australian businesses and professional practices, staying current with legislative changes is essential.
These answers reflect laws and proposals as at early 2026. Confirm details with your adviser and tax specialist.
