4 essential tax tips for first time investors
Written and accurate as at: Mar 14, 2025 Current Stats & Facts
When you’re just starting out investing you’d be forgiven for focusing solely on the returns you stand to make, but no investment strategy is complete unless it factors in tax. Below, we look at some tax-savvy strategies that can help you pocket more of your earnings.
Make use of the 50% CGT discount
When you sell an asset for more than you purchased it, the profit is typically subject to Capital Gains Tax (CGT). But if you hold the asset for at least 12 months you’ll be able to reduce your capital gain by 50%.
That means if you buy a bundle of shares for $1,000 and sell them a year later for $1,500, you’ll only have to pay tax on $250 (half of $500).
This is a good reminder of how timing the sale of shares can make all the difference. If you’ve adopted a ‘passive’ investment approach and are holding your shares for long stretches of time, you’ll probably be looking at less tax — and brokerage fees — than someone who’s buying and selling shares on a daily basis.
Use capital losses to offset capital gains
Capital losses can be used to offset any capital gains you’ve made, and the good news is these can be carried forward indefinitely. That means a capital loss that was incurred several years ago can be used to lower your CGT liability in the most recent financial year, assuming the capital loss has been reported in your tax return.
Just keep in mind that capital losses can only be used to offset capital gains and not other taxable income, such as your salary or interest on savings accounts.
Invest through super and claim a deduction
Super might not seem exciting — especially if retirement isn’t on your immediate horizon — but it’s worth remembering it’s one of the most tax-friendly investments you can make.
You can do this by salary sacrificing, in which you accept a smaller paycheck from your employer in exchange for a larger contribution to your super, or by making a contribution from your after-tax income. If you opt for the latter, you can then claim this as a tax deduction by submitting a Notice of Intent form to your super fund.
While investing through super might feel as though you’re locking away your money, this could be a good thing if you’re the type of investor who’s prone to making rash decisions as markets fluctuate.
Keep detailed records
You’re probably already keeping track of your investments, if only to see which ones are performing well and which aren’t. But having detailed records of things like brokerage fees and returns will also come in handy come tax time.
A big reason why is because shares are ‘fungible’, meaning that one share in a company is identical and interchangeable with all other shares in that company. This can be confusing if you’ve made multiple purchases of the same share at different price points over time.
Without detailed records, you won’t be able to work out your capital gain without identifying which ‘parcel’ of shares is being disposed of, how much it cost, and how long you’ve held it.
There are three common ways to identify the parcel of shares you're using to calculate your CGT:
- FIFO (first in, first out): selling the shares that were bought first, regardless of cost
- LIFO (last in, first out): selling the shares that were bought last, regardless of cost
- HIFO (highest in, first out): selling the most expensive shares, regardless of timing
Chasing high returns can be exciting, but the tax on your investments can quickly add up. If you’re still unsure about how to minimise tax when investing, a financial adviser can help devise a plan tailored to your goals and circumstances.