Proxy Investments in Australia: 2025 Guide & Trends

Proxy investments are emerging as one of the most dynamic tools for Australian investors in 2025. Whether you’re seeking global market exposure, diversifying your portfolio, or navigating tax and regulatory changes, understanding proxies is more essential than ever. With the Australian Securities and Investments Commission (ASIC) tightening compliance and international markets shifting, the role of proxy vehicles is front and centre for savvy investors.

What Are Proxy Investments, and Why Are They Booming?

A proxy investment is an indirect way to gain exposure to an asset, sector, or market without holding the underlying asset directly. Common proxies include exchange-traded funds (ETFs), listed investment companies (LICs), managed funds, and even derivatives like contracts for difference (CFDs). The appeal? Proxies offer access to otherwise hard-to-reach markets, lower transaction costs, and potential tax efficiencies.

• Access to global equities: Australian investors can use US-listed ETFs as a proxy for exposure to the S&P 500 or tech giants, avoiding the complexities of direct international share ownership.
• Sectors and thematics: Thematic ETFs and LICs tracking green energy, AI, or emerging markets have surged in popularity, especially as Australia’s domestic market remains concentrated in financials and resources.
• Alternative assets: Real estate investment trusts (REITs) and infrastructure funds serve as proxies for property and infrastructure exposure, without the need to directly own physical assets.

According to the ASX 2025 Investor Study, over 30% of new retail investors are using ETFs and other proxy vehicles as their primary entry point into the market—a sharp jump from just 18% in 2022.

2025 Regulatory & Tax Updates: What Investors Must Watch

This year, Australian regulators have responded to the explosive growth in proxy investments with new disclosure and transparency rules. ASIC’s updated Regulatory Guide 107 requires ETF issuers to provide more detailed reporting on underlying holdings, fees, and risk exposures. Meanwhile, the ATO has clarified its tax treatment of synthetic proxies, such as CFDs and swap-based ETFs, to ensure capital gains and losses are reported in line with the actual economic exposure, not just nominal transactions.

Key 2025 policy changes include:

• Enhanced product disclosure: ETF and managed fund providers must now disclose their top 10 holdings monthly and report liquidity metrics quarterly.
• Tax treatment of derivatives: ATO guidance has closed loopholes around the use of derivatives as proxies, particularly for high-frequency traders and SMSFs.
• Foreign withholding tax alignment: Australians using offshore proxies (e.g., US-domiciled ETFs) now face clearer rules on how withholding tax credits can be claimed, simplifying end-of-year tax returns.

For investors, these changes mean more transparency but also a greater need to scrutinise the fine print—especially regarding costs, tracking errors, and tax consequences.

Smart Proxy Strategies for Australian Investors in 2025

Proxies can be powerful tools, but they’re not without pitfalls. Here’s how to harness their benefits while managing risks:

• Know your underlying exposure: Not all proxies track their benchmarks equally. For example, an ASX-listed ETF tracking the NASDAQ may use currency hedging or synthetic replication, which can affect returns.
• Watch for tracking error and hidden fees: Even low-cost ETFs can have tracking errors or hidden costs, especially in thinly traded or niche markets. Review the provider’s disclosures and compare performance to the index.
• Consider liquidity and exit strategies: Some proxies, like LICs or unlisted managed funds, can trade at a discount to net asset value or have restrictions on redemptions. For short-term needs, stick with highly liquid vehicles.
• Tax planning matters: Synthetic proxies may generate unexpected tax liabilities. Consult current ATO guidance on capital gains, foreign income, and reporting obligations for 2025.

Example: An investor seeking exposure to global infrastructure could choose between an ASX-listed global infrastructure ETF, an unlisted managed fund, or a hybrid LIC. Each comes with different costs, liquidity, and tax considerations. In 2025, ETFs are generally favoured for transparency and liquidity, but managed funds may offer more active management and risk controls.

Conclusion: Proxy Investments Are Here to Stay—But Choose Wisely

The rise of proxy investments is reshaping how Australians access global markets, diversify portfolios, and manage risk. As regulation evolves and product innovation accelerates in 2025, investors must do their homework—scrutinising disclosures, understanding tax changes, and matching proxy vehicles to their financial goals. Used wisely, proxies can be a gateway to smarter, more flexible investing.