Betashares' take on the CGT change + examples
Amidst the wailing here, one of the few actionable suggestions is whether to shift from growth towards income producing assets. Betashares has its take and an example.
>As a rule of thumb, for an investor on a marginal tax rate above 30%, the two methods produce the same tax outcome when the nominal capital gain is roughly double the cumulative inflation on the original cost base. Above that threshold, the new regime is worse; below it, the new regime is more favourable. For investors on a marginal tax rate below 30%, the 30% minimum tax floor means the new rules will generally produce a materially worse outcome.
Stating the obvious, but most of us know that growth assets are most negatively affected by the change. Yet,
>In our scenario analysis above, the shift to indexation reduces the after-tax outcome for Investment 1 by $1,844 (from 7.39% p.a. to 6.83% p.a.). Yet Investment 1 still finishes $2,595 ahead of the income-oriented Investment 2 on an after-tax basis. While this tax change will generally have a negative impact for accumulators who prioritise growth over income, it is not a reason to dump growth assets. Tax should never be the only consideration when building an investment portfolio, and the long-term return premium from growth assets remains the strongest contributor to outcomes for accumulators.
>The new regime narrows the after-tax advantage of growth assets within our scenarios, but it does not eliminate it. For investors on marginal tax rates below 47%, the drag is also less pronounced.
>For wealth accumulators with a long time horizon, growth assets are still likely to be the best asset class
tldr; Don't do anything drastic, continue to DHHF and chill. My other life advice is that you can only react to what you can control, so I don't need replies to this to be like the other 100 threads where you put in your 2c about the changes.