Invest More Into The Market Or Pay Down Your Mortgage
Every Australian homeowner has likely faced this dilemma: should spare cash go towards the mortgage, or into the market?
With interest rates higher and proposed capital gains tax reform on the table, the question has become more timely. Proposed CGT changes could also affect the after-tax return from investing. From 1 July 2027, the government proposes to replace the current 50% CGT discount with one based on inflation, and bring in a minimum 30% tax on real capital gains. The impact will vary most depending on the type of investment you hold. Australian equities, for example, tend to deliver more of their return through dividends and franking credits than pure capital growth, which can mean a lower tax bill under the new indexation rules. Other factors like your income, holding period and inflation will then determine your final position. It’s also worth noting that for some investors, the most tax-friendly option sits outside this debate altogether. Concessional super contributions are generally taxed at 15%, which is usually lower than a person’s marginal tax rate. Over the long run that can add up, provided you’re comfortable with the trade-off of locking your money away until you can access your super.
