These tax cuts will mean that come the new financial year, everyone who earns income above the tax-free threshold of $18,200 per annum will have fewer dollars taken away by the taxman every paycheque.

Chances are that most people won't really notice these tax changes. After all, we tend not to miss what we don't have. But we also tend to adjust to what we do have fairly easily. But I'm going to be making an effort to redirect the extra dollars I'll be getting from these tax cuts into investments in ASX shares.

I think investing in ASX shares is the most effective way for Australians to build additional wealth and retire earlier and more comfortably than they would by relying on their salaries, savings and superannuation.

But ASX shares build wealth most effectively when we properly harness the power of compound interest.

Compounding works more effectively the more time and money we give it. As such, I try and invest every spare dollar that I can, as soon as I can, into buying more ASX shares.

So, with the financial boost of a tax cut coming our way, I'm looking forward to ramping up my investing firepower.

Investing my tax cuts in ASX shares

The exact ASX shares I will buy with my tax cut money all depends on what the markets are doing at the time.

Ideally, I'd love to add to some of my favourite portfolio positions. These include Wesfarmers Ltd (ASX: WES) and Washington H. Soul Pattinson and Co Ltd (ASX: SOL). As well as the VanEck Morningstar Wide Moat ETF (ASX: MOAT) and MFF Capital Investments Ltd (ASX: MFF).

However, as of today, most of these investments are trading pretty close to all-time highs. If this continues, I might decide that the risk-reward balance isn't attractive enough to justify additional investments using my tax-cut money in the next few months.

As such, I might turn to some new positions. As I outlined yesterday, these could include Infratil Ltd (ASX: IFT), or the Regal Investment Fund (ASX: RF1). Or perhaps the high-flying L1 Long Short Fund Ltd (ASX: LSF).

If I don't like where those investments are priced at, I would probably deploy my new tax-cut cash into simple index funds like the Vanguard Australian Shares Index ETF (ASX: VAS). I think these investments are a great choice when all else fails the valuation test.

All in all, I expect any additional dollars I get from the tax cuts after 1 July to end up in the share market. In my view, this is the best choice for anyone wishing to build wealth as effectively as possible.

The post How I plan to invest my tax cuts appeared first on The Motley Fool Australia.

However, that might change very soon. Two investments on the ASX have caught my eye in recent weeks, and there's a good chance that my next ASX buy will be one of them.

The 2 ASX shares that I might buy next

Infratil Ltd (ASX: IFT)

Infratil is a rather unusual ASX share. It is a New Zealand-based conglomerate similar to Washington H. Soul Pattinson and Co Ltd (ASX: SOL) in that it owns a vast portfolio of underlying assets that it manages on behalf of its shareholders. In Infratil's case, these are mostly private investments in the renewable energy, infrastructure and healthcare spaces.

Infratil has been around for a very long time (120 years). Over this period, it has consistently brought it home for shareholders, targeting a total return rate of 11-15% per annum.

It has also delivered on this, with the company reporting that investors have enjoyed a total return (assuming dividends are reinvested) of 21.4% per annum over the 10 years to 29 February 2024.

This track record, combined with Infratil's defensive yet diverse portfolio of investments, indicates a high level of quality to me. As such, I can see myself adding this company to my ASX share portfolio in the near future.

Regal Investment Fund (ASX: RF1)

The Regal Investment Fund is a listed investment trust (LIT) on the ASX. It's a fairly complicated setup comprising stakes in a number of other investments provided by its owner, Regal Partners Ltd (ASX: RPL).

These investments mostly consist of 'alternative assets', including water entitlements, a long-short strategy, private credit and resources royalties.

This LIT is designed to deliver meaningful, risk-adjusted returns with limited correlations to the broader share market. It has notched up some impressive performance wins since listing in 2019, achieving an average of 27.2% per annum over the four years to 30 April and 19.3% per annum since inception.

I like this investment from a diversification view and appreciate its rather stunning past returns. Whilst this LIT doesn't come cheap (charging 1.5% per annum in fees as well as a performance levy on returns above the cash rate), it's still on my watchlist right now.

If the Regal Investment Fund can keep up its impressive performance track record, it might find itself in my ASX share portfolio.

The post Here are the 2 ASX shares I might buy next appeared first on The Motley Fool Australia.

The relationship between the dividends per share that a company pays and the price that a company's shares trade at produces the metric we know as the dividend yield.

Most ASX shares offer investors dividends yields of between 3 and 6%. But some go higher than that. In fact, the ASX houses many shares that currently have a trailing yield of above 10%. Here are a dozen such shares:

So are these ASX dividend shares all screaming buys? Can investors really expect to get at least 10 cents on every dollar invested back every year by investing in these companies?

When is a 10% yielding ASX divided share a trap?

Well, not so fast. As a rule, income investors should be very careful when dealing with an ASX dividend share offering a yield of 10% or higher. As we went through earlier, the dividend yield is a function of a company's share price, as well as its raw dividends per share. Thus, if the market is pricing a dividend share with a high yield, it is usually for a reason.

Looking at this list, we can see it is dominated by ASX energy shares. Terracom, Yancoal, Whitehaven, and New Hope are all ASX coal miners, and Woodside is an oil share. These companies' earnings (and thus dividends) are notoriously cyclical and depend almost entirely on the coal and oil prices at the time.

Recently, high energy prices have turbocharged these companies' profitability. But investors know that energy pricing booms don't last forever, and neither do the dividends that are funded by them. So that's probably why these companies are seemingly offering such large dividend yields right now.

It's not just ASX energy shares either

The other ASX dividend shares listed here also have their own problems. Magellan is a fund manager that has dramatically fallen from grace over the past few years. I would wager that it would be hard to find any serious investor who expects this company to pay out the same $1.16 in dividends per share over the next year as it did the last.

As such, you should always take an ASX dividend share offering a yield of 10% or higher as nothing more than an invitation to dig a little deeper.

It is entirely possible to find a 10%-er that will indeed prove to be a solid and reliable income stock to invest in. But more often than not, these types of income shares turn out to be dreaded dividend traps — luring investors in with a seemingly high yield, only to cut it down the road.

So choose your high-yielding dividends wisely. This is a dangerous field to be digging in for income.

The post 12 ASX dividend shares with yields over 10%. Are they too good to be true? appeared first on The Motley Fool Australia.

An ASX dividend share offering a 10% or greater yield on one's cash is a compelling proposition. We only found out this week that Australia's annual inflation rate is running at 6.9%. This technically means that if a dividend yield is under that threshold, the payments alone are not keeping your returns above breakeven.

So a 10% yielder is looking pretty good on that basis.

But finding high-yield ASX dividend shares is a bit of a risky business. There are plenty out there, to be sure. But if an ASX dividend share is offering a trailing yield above 10%, it's a sign that an investor might have to be wary. A company's trailing dividend yield reflects the past, not the future.

And if the share market lets a share trade with a trailing yield of more than 10%, it can often mean that many investors aren't expecting the dividends to continue at that level.

Otherwise, there would be more buyers, pushing the yield lower. So, always take a high dividend yield with a grain of salt.

But we digress. Here are 10 ASX dividend shares offering a dividend yield above 10% right now. The data comes from S&P Global Market Intelligence.

10 ASX shares with dividend yields over 10% today

Smartgroup Corporation Ltd (ASX: SIQ)

Smartgroup has paid out 66 cents per share in dividends over the past 12 months. That includes the March special dividend of 30 cents per share. This gives Smartgroup a trailing dividend yield of 12.6% right now.

Tabcorp Holdings Limited (ASX: TAH)

Gaming services provider Tabcorp has doled out payments worth a collective 13 cents per share this year. That gives Tabcorp a trailing yield of 12.42% at current pricing. But keep in mind that Tabcorp spun out Lottery Corporation Ltd (ASX: TLC) earlier this year, so this could affect Tabcorp's future dividend levels.

Yancoal Australia Ltd (ASX: YAL)

ASX coal share Yancoal is next up. This coal company has rained cash on its shareholders this year. It has doled out $1.03 in ordinary dividends per share, as well as a special dividend of 20.4 cents, for a total of $1.23 in dividends per share for 2022. That translates to a trailing dividend yield of 17.56% for just the ordinary dividends, and a whopping 21%, including the special dividend.

Magellan Financial Group Ltd (ASX: MFG)

ASX fund manager Magellan is another high-yielding share right now. This company has rolled out a total of $1.79 in dividends per share this year. At Magellan's current share price, that is worth a trailing yield of 18.34%

Latitude Group Holdings Ltd (ASX: LFS)

Financial services company Latitude is another relative newcomer to the ASX, having only listed in April last year. But it has certainly hit the ground running when it comes to dividend payments. Latitude has funded a total of 15.7 cents per share in dividends in 29022. That gives the ASX financial share a trailing yield of 11.89% right now.

Fortescue Metals Group Limited (ASX: FMG)

Fortescue is one of the ASX's more well-known dividend payers these days. And over 2022, Fortescue did not disappoint in this regard. Investors have enjoyed a total of $2.07 in dividend payments per share this year. That gives Fortescue a trailing yield of 10.51% today.

Base Resources Ltd (ASX: BSE)

Mineral sands producer Base Resources is next. This company has given investors two dividends worth 3 cents per share each over 2022. On today's share price of 21 cents, that equates to a trailing yield of a whopping 28.57%

SPDR S&P/ASX 200 Resources ETF (ASX: OZR)

This exchange-traded fund (ETF) has had a top year when it comes to distribution payouts. This fund, as its name implies, holds a basket of ASX resources shares. So you can understand why it has been able to make its investors very happy in this regard. Investors have enjoyed payments worth a total of $2.08 per unit this year. That gives this ETF a trailing yield of 14.54% on today's pricing

Regal Investment Fund (ASX: RF1)

Listed investment trust Regal is another dividend share with an enviable yield. Investors have enjoyed distributions worth 39.56 cents per unit over the past 12 months. That gives the Regal Investment Fund a trailing distribution yield of 12.21%.

SPDR MSCI Australia Select High Dividend Yield ETF (ASX: SYI)

Our final share to check out today is another ETF. As its name implies, this fund from SPDR focuses on holding a basket of high-yield dividend shares. It pays distributions quarterly, which, over the past 12 months, totals $4.29 per unit. On the current unit price of $27.95, that gives this ETF a trailing yield of 15.35%.

The post 10 ASX dividend shares paying more than 10% yield right now appeared first on The Motley Fool Australia.