Managed Funds Navra fund - is it a tax effective fund

Actually - given that NavraInvest are professional share traders, their capital gains are actually treated as income ... it is this income that is distributed at the end of each quarter. There may be small amounts of capital gain included in the distributions (and I haven't yet worked out exactly what circumstances cause that to happen !)

I'm not sure I follow you here ? If one is on a 30% tax bracket, then you pay less tax then someone who is on a 47% tax bracket, so your returns are better ?

Depending on your circumstances, the funds can be considered tax inefficient given that they distribute income, which must be declared in your tax returns each year, regardless of whether you reinvest those distributions or not. Hence, someone on a 47% tax bracket will only get to keep 51.5% (after tax and medicare levy) of their distributions. However, if efficiently structured, this can be reduced or minimised to become a non-issue.

Personally, I hold my units through my family trust, which also holds my highly geared property portfolio. The losses I incur from the property cannot be distributed or used to offset any other personal income I have, so that's not very tax effective, but the income from the Navra funds is used to offset those costs, and any extra is then distributed to the lowest income earner in the family (another benefit of discretionary trusts). As a result, the taxable nature of the distributions does not concern me at all.

What's more - there's another benefit that many people don't realise.

With a normal fund that relies on captial growth (perhaps with a little bit of income distributed), when you sell, you pay capital gains tax on the growth you've achieved - and if held personally or through a trust you also get the 50% CGT discount.

With the Navra funds, given the primary source of profit is from income which is distributed each month (causing the value of the fund to drop), the actual capital growth of your investment in the fund (regardless of whether you reinvest or not), is significantly less than what you would see from a growth fund. This means that you pay significantly less CGT when you sell.

So, while the Navra funds might be less tax efficient up-front for some people, there is a not-so-obvious benefit of lower CGT when you sell as well. I'm not saying this makes the Navra funds better for everyone in every situation from a tax point of view, but it does even the score a little.

If you own your Navra funds in your personal name and you are in the top tax bracket, you're going to be losing nearly half your profits from the fund every year. I would suggest that some good structuring advice is in order to help you get the most from your investments.