Tuesday, December 28, 2010

Tax Efficient Investments

Tax efficient investments are products or structures that provide either shelter from tax, a reduced or preferential tax rate, or even tax credits/rebates for contributions to or income and capital gains from an investment. Examples of tax efficient investments include the 401(k) and IRA schemes in the US, ISAs in the UK, and KiwiSaver in New Zealand. Often governments will provide tax incentives for people to save for their own retirement due to the burden that government provision of superannuation income puts on government finances and thus the tax payers. Tax efficient investments may also include investments that are structured in a particular way to minimize tax liability or to exploit loopholes. In this sense it is important to get quality advice from a qualified tax practitioner and financial planner, it may cost money to get the advice but the extra returns and avoidance of penalties if you get it wrong will likely outweigh the costs.

Synonyms: Preferential tax treatment, Tax minimisation, Tax efficient

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