Two weeks ago, I asked what you wanted more of from this newsletter.
The most popular reply was: help me get smarter on super, tax, and retirement.
So let’s start talk about tax today.
This part of money is not very glamorous. It will never compete with headlines about crashes, hot stocks, or the next shiny ETF. But it matters.
Most people chase tiny deductions and ignore the big levers. The real tax wins usually come from these six things:
1.Max out the tax shelters before getting clever.
Across major systems, the pattern is the same: governments usually give you a wrapper with either upfront tax relief, tax-deferred growth, or tax-free growth. In the US, that includes traditional IRAs and 401(k)s for tax deferral, and Roth accounts for tax-free growth. In the UK, there are ISAs and pensions. In Australia, Superannuation. In Canada, RRSPs and TFSAs. Skipping those and investing only through taxable accounts is usually one of the dumbest avoidable mistakes.
If you want to invest outside the retirement system, it is also worth thinking carefully about the structure you use for your brokerage account. Depending on your situation and financial journey, that could be a personal account, a spouse’s account, a company, or a trust. Also, tax is only one part of that decision. Asset protection, cost efficiency, and future planning matter too.
2.Hold good assets longer and trade less.
A lot of countries tax capital gains when you realise them, not while they are simply sitting there, and some give better treatment to long-term holdings. In the US, long-term generally means more than one year, and qualified dividends can be taxed at lower capital gains rates. In Australia, individuals generally get a 50% CGT discount on assets held for at least 12 months. Unnecessary turnover creates avoidable tax drag.
3.Do not chase yield when retirement is decades away.
Interest, dividends, and capital gains are often taxed differently. Chasing yield blindly, when retirement is still decades away, can create a lot of unnecessary tax drag if growth could have compounded more efficiently instead. For many people, the better approach is to focus more on growth assets earlier, then gradually shift towards income-producing assets later if they want to preserve capital. Or simply withdraw from capital in retirement, when their tax rate may be lower or at least no higher than it was during their working years. Dividends are not free money, it’s actually irrelavant to investing - I didn’t say it - there is a Dividend Irrelevance Hypothesis paper published in 1960s about it.
4.Use the household, not just the individual.
A lot of people plan tax as if they are one person and waste family capacity. In the UK, assets transferred to a spouse or civil partner are generally treated on a no gain/no loss basis. In Canada, spousal RRSPs are explicitly allowed, and the CRA says they can help make retirement income more evenly split. Even where the exact rules differ, the principle is the same: use both partners’ shelters, thresholds, and legal transfer options before paying unnecessary tax.
5.Cross-border investors need to deal with double tax properly.
For cross-border investors, residency and citizenship rules matter. U.S. citizens and resident aliens are generally taxed on worldwide income even while living overseas, while Australia generally taxes worldwide income based on tax residency, not passport. Tax treaties, foreign tax credits, and the right filing structure can help you avoid paying more than you need to.
6.Record-keeping is a tax strategy.
Cost base matters. The IRS says basis is generally your purchase price plus purchase costs. The ATO notes that ETF and DRP transactions affect your cost base, and reinvested amounts still matter for tax and future CGT. Most investors do not document properly.
This is also why I care so much about tracking. ETF distributions, DRPs, cost base adjustments, capital gains, dividends, and franking credits get messy fast.
That’s why I like Navexa. It helps track the tax details, not just your portfolio value and returns, but supports things like cost base adjustments, CGT optimization, dividend and DRP tracking, franking credits, and ATO myTax export.
If you’re based in Australia and want to check it out, my affiliate link is here. You will get 25% off on any yearly plan.
Talk soon,
Irene
