As each client retains the direct beneficial ownership of their holdings, dividends and franking credits accrue directly to each portfolio and existing holdings can be transferred into their Infinitas portfolio without triggering tax events. Investment management, sell decisions, withdrawals and transitions are made with consideration to the clients’ total tax consequences and status.
Unlike investing in a managed fund, any taxation consequences resulting from a portfolio transaction are quarantined to the individual investor. In a managed fund, there may be embedded capital gains within the unit price that an investor “buys into” when investing in a fund. In addition, the manager may be forced to sell stocks to meet other investors’ redemption requests, resulting in taxation consequences for remaining investors, through no action of their own.
From this perspective, IMAs are the most tax-effective vehicles, as the portfolio manager takes into account the individual investor’s tax position on individual stock and the overall portfolio, and may seek to time the sale of stock in order to minimise the investor’s tax liability.