Australian investors are increasingly investing in ASX shares, whilst more are selling their investment properties, new tax data shows.
The data covers the 2023 financial year.
It shows that 3,045,331 Australians received franked dividend income in FY23, up 10.8% from FY22.
This is the highest number since FY10, according to the data.
The average franked dividend income in FY23 was $10,537 per person, which is lower than the $12,178 per person recorded in FY22.
The data also shows that 3,018,598 Australians received franking credits in FY23, up 10.35% on FY22.
Those franking credits were worth an average of $4,217 per person, down from an average of $4,904 per person in FY22.
Franking credits are one of the unique joys of ASX shares investing, and can be used to offset other taxable income.
If the value of your franking credits exceeds your tax liability, you can receive a cash refund.
This is a common scenario for retirees because the taxable component of their incomes is typically low.
The data shows 1,315,654 Aussies received unfranked dividends in FY23, up 10.1% from FY22.
This increase reflects growing investment in US shares, with FY23 the first year of a three-year bull run for the S&P 500 Index (SP: .INX).
Investors received an average of $1,285 in unfranked dividend income in FY23 compared to $1,309 per person in FY22.
Investors lift ASX shares investments and sell property
The increased number of investors receiving dividend income contrasts with a reduction in the number of people owning rental properties.
In FY23, 2,261,080 people had an interest in an investment property and received rental income, compared to 2,268,161 investors in FY22.
This means 7,081 landlords (net) sold their investment properties (or a stake in a property) during the financial year.
This is likely due to the fastest rise in interest rates ever encouraging some landlords to offload their investment properties in FY23.
The Reserve Bank of Australia raised interest rates 10 times in FY23, and some of those increases were 50 basis-point rises.
Surprise: Property delivers positively geared returns for the majority
Interestingly, the data shows that FY23 was the third year in a row in which the majority of property investors were positively or neutrally geared.
This means more investors earned rental income that was higher than their expenses, including their investment loan repayments.
Among the 2,261,080 Australians with an interest in a rental property, 51% reported net positive or neutral rental income.
This is surprising given the long history of negative gearing in this country.
According to the tax data, the majority of property investors were negatively geared each year between FY00 and FY20.
The trend flipped in FY21 when interest rates were at emergency lows due to the pandemic.
McGrath CEO John McGrath says more positive gearing is a new trend in real estate investment.
McGrath said the trend held in FY23, despite rapidly rising interest rates, for several reasons.
He said (courtesy The Real Estate Conversation):
The biggest one is a huge surge in weekly rents that began in FY21 and continued into FY22 and FY23.
Cotality data shows annual rental growth of about 7% in FY21, 9% in FY22, and another 9% in FY23.
Additional rental income would have certainly offset the impact of rising interest rates in FY23.
McGrath also said that since the pandemic, more investors have bought cheaper properties with higher rental yields in regional areas and the smaller capital cities.
Shares vs. property in FY25
Earlier this month, we analysed the numbers to work out which investment asset class delivered the best capital growth in FY25.
We compared the capital growth of ASX 200 shares to Australia's metro and regional property markets.
