What is investment?

Investment in Australia is the use of money to buy assets that are expected to grow in value or produce income over time. The four main asset classes for Australian investors are cash and fixed income (bank deposits, term deposits, government and corporate bonds), property (residential or commercial real estate, directly owned or through Real Estate Investment Trusts), shares (Australian and international equities), and alternatives such as infrastructure, private equity, and commodities.

Most Australians have substantial exposure to investment markets through their superannuation, which holds about 3.7 trillion dollars across default and choice fund options. Outside super, common investment vehicles include direct shares purchased through online brokers (CommSec, Stake, Sharesies, Pearler, Selfwealth), exchange-traded funds (ETFs) listed on the ASX, managed funds, listed investment companies, and investment properties. Self-managed superannuation funds (SMSFs) allow people to manage their own retirement savings with the support of an accountant and adviser.

Investment returns are taxed depending on the structure used. Direct shares and managed funds are taxed at the investor's marginal tax rate, with franking credits attached to dividends from Australian companies that have already paid 30 per cent corporate tax (so investors receive a tax credit equal to that already paid). Capital gains tax applies to assets held more than 12 months at half the marginal rate (the 50 per cent discount). Superannuation earnings are taxed at 15 per cent in accumulation phase and 0 per cent in retirement phase up to the transfer balance cap of about 1.9 million dollars.

Investment products are regulated by the Australian Securities and Investments Commission (ASIC), and financial advice is regulated under the Best Interests Duty introduced by the Future of Financial Advice (FOFA) reforms in 2013 and strengthened after the 2018 to 2019 Hayne Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. Free education resources are available at Money Smart (moneysmart.gov.au), the ASX (asx.com.au), and through the Investing for Beginners course at the Australian Investors Association.