ANZ

Increase investment returns

By adding borrowed money (also called leveraging or gearing) to your own funds you increase the amount you have invested and have the opportunity to increase your returns if your portfolio value increases.

Trading flexibility

A margin loan can enable you to take advantage of timely investment or market opportunities, including corporate actions and new listings, by providing quick access to additional funds. It can mean that you don’t have to quickly find spare cash from elsewhere to take up a market opportunity.

Plus with ready access to additional funds, you don’t have to sell existing investments to purchase additional equities. This can be particularly important if the investments have been made in the past 12 months and are not yet eligible for the 50% capital gains tax discount.

Portfolio diversification and risk reduction

Diversification reduces the volatility of your investments and can reduce market and investment risks.

A margin loan can enable you to diversify your portfolio by providing a larger pool of money to invest in a wider range of shares or investments. This is a proven method of reducing investment risk without sacrificing long-term performance.

A range of potential taxation benefits

Margin lending can be a powerful tool for managing tax.

• Interest on your margin loan is often tax deductible, provided those funds are used for income producing purposes.
• Tax deductions on interest payments can be brought forward by up to 12 months if you prepay interest (only available for fixed loans).
• You can take advantage of company, trust and third party security structures for tax planning.
• Companies often pay franked dividends, meaning that you benefit from tax already paid by the company.

Although tax benefits should not be the main reason for choosing a margin loan (or any other investment), the after tax return of your investment is a key consideration. Borrowing for investment purposes is often tax deductible against your gross income.

You should seek professional advice on how the taxation rules apply to your personal situation prior to implementing a gearing solution, particularly as tax laws are subject to change.

Repayment simplicity and flexibility

Generally, there is no set repayment schedule as long as you maintain the required level of equity in your account. Interest can be prepaid, paid monthly, or capitalised onto the margin loan, and many investors use their dividends to help offset interest expenses. Repayment of the amount owing is required when you close the account and may be required in part if your shares or managed funds do not provide enough security given the amount that you have borrowed.

More flexible than property

Traditionally, many Australians have used gearing in property to achieve their long term financial goals. With the rising cost of real estate, this investment option is becoming harder to achieve for many. More Australians are now turning to the share market to build their financial assets.

A margin loan can be a great way to fund investments in shares and managed funds and can help you achieve your financial goals:

• You don't need to own real estate to get a margin loan.
• Your loan can grow with your portfolio value. In fact, you can get started with less than $10,000 of your own money, shares or managed funds.
• Statements are clear and simple. They are fully integrated with your borrowings and track your investment value.
• Unlike some mortgages, fees on a margin loan are minimal. With the ANZ Margin Loan there is no application fee for individuals, no valuation fee, no mortgage registration fee, and no monthly fee (provided you maintain a loan balance averaging $20,000 or more per month).
• Investing in a margin loan can help monitor risk, as margin calls act as timely reminders to review your portfolio and your investment strategy.

Important information
Leveraging a portfolio is fast becoming a popular wealth creation strategy. However, you should be aware that while leveraging into investments increases the potential return on investments, it is important to recognise that it can also multiply the effects of falls in share market values. We therefore strongly advise you talk to your financial planner and/or stockbroker and ensure you understand the risks, the specific tax implications, as well as the legal and financial ramifications of a margin lending facility.

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