Total Return in 2025: How to Measure True Investment Performance

Total return has become the investment buzzword of 2025—and for good reason. In a world of volatile markets, shifting interest rates, and new tax policies, Australians need a smarter way to measure real investment success. Relying on share price alone is old news. If you want to see how your money is truly working for you, total return is the key metric to watch.

What Is Total Return and Why Does It Matter?

Total return measures the full picture of your investment performance. Unlike price return, which only looks at how much an asset’s price has changed, total return includes all income generated—like dividends, interest payments, and capital gains—plus any changes in value.

• Capital gains: The increase (or decrease) in the value of your original investment.

• Income: Dividends from shares, interest from bonds, or rental income from property.

• Reinvested earnings: Returns from reinvesting your dividends or interest, compounding your gains.

For example, if you held an ASX-listed ETF that grew 7% in price last year and paid 3% in dividends, your total return would be 10%. Factor in dividend reinvestment and your overall gains could be even higher, thanks to compounding.

2025 Policy Updates Affecting Total Return

This year, several regulatory and tax updates have made total return analysis even more critical for Aussie investors:

• Dividend Imputation Credits: The ATO’s 2025 update confirmed that franking credits remain fully refundable for most Australians, making dividend-paying shares more attractive in after-tax total return terms.

• Superannuation Changes: The government’s new super contribution caps and changes to tax on earnings above $3 million mean SMSF investors should track total return after-tax, not just pre-tax growth.

• Interest Rate Environment: With the RBA pausing rate hikes after two years of tightening, fixed income investments like bonds are offering higher yields—boosting the income component of total return.

Staying on top of these changes is essential if you want to maximise the real-world outcome from your investments.

How to Use Total Return to Compare Investments

Comparing investments on price alone is like judging a footy game by the first quarter score. Here’s how to use total return for a fair, apples-to-apples comparison:

• Always look at total return, not just price charts. Ask your broker or fund provider for total return data, which includes dividends and other income reinvested.

• Factor in fees and taxes. Two funds might have the same pre-tax return, but if one charges higher fees or you’re taxed differently, your after-tax total return could be very different.

• Reinvest your income. Reinvesting dividends or distributions can supercharge your long-term returns due to compounding.

For example, the ASX 200 index returned about 8% per annum in the decade to 2024 based on price alone, but over 10% per annum when dividends were reinvested. That’s a huge difference in wealth over time!

Real-World Examples: Shares, ETFs, and Property

Sydney Property: Many property investors focus on price growth, but total return also includes rental income. In 2024, Sydney’s average property price grew just 2%, but rental yields averaged 3.5%, making the total return over 5.5% before costs.

Australian Shares: The Commonwealth Bank paid a fully franked dividend yield of around 4% in 2024. Add capital growth and franking credits, and the total return for many investors exceeded 10%.

ETFs: Consider an ETF like Vanguard Australian Shares (VAS). Its total return in 2024 was 12.4%—but only 8.7% was from price growth. The rest came from dividends, demonstrating the importance of considering all sources of return.

Key Takeaways for Australian Investors in 2025

• Total return is the most accurate way to measure investment performance.

• Policy changes, especially in tax and superannuation, make tracking after-tax total return essential.

• Always factor in income, compounding, fees, and taxes when comparing investments.

• Ask for total return figures from your financial provider—don’t just rely on headline numbers.