What are the basic types of return on an investment?

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The returns from the various asset classes are provided in the form of income and/or growth resulting from a change in the price of the investment. Some investments like cash will only provide income returns while the return from other investments may include a mix of income and capital growth.

Income returns can include interest from cash and bonds, rental income from property and dividends from shares. Managed fund may also pay realised capital gains as part of the income return.

This income is included in your tax return and is taxed at your marginal tax rate. If franking credits have been derived these will be passed onto you and can help to reduce tax payable.

If an investment is sold, this may create a capital gain or loss depending on whether the price of the security or unit price of managed funds has changed since investment. If a capital gain has been realised on units held for more than 12 months a 50% capital gains tax discount will apply unless the units were owned by a company.

Need advice? Contact Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide on (02) 9683 2869. www.macarthurwealth.com.au

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