ASX Shares — How to Buy and Invest in Australian Shares

The Australian Securities Exchange (ASX) is one of the world’s top 15 stock exchanges by market capitalisation, hosting over 2,000 listed companies. For Australian investors, direct share investing on the ASX offers access to companies across resources, financials, healthcare, technology, and real estate — with the added advantage of franking credits on dividends, a tax feature unique to the Australian system.

How the ASX Works

The ASX operates as an electronic order-matching market. When you place a buy order and a seller places a matching sell order, the trade executes and settles in two business days (T+2 settlement). Trading hours are 10:10am to 4:00pm AEST on business days (with a pre-open auction from 7:00am and a closing auction at 4:12pm).

The ASX 200 — the index of the 200 largest companies by market capitalisation — is the most widely tracked benchmark. It is dominated by financials (particularly the Big Four banks) and resources (BHP, Rio Tinto, Fortescue). Together, these two sectors represent around 50% of the ASX 200 by weight, which means the Australian market is significantly less diversified than global benchmarks like the MSCI World.

How to Buy Shares in Australia

To buy shares on the ASX you need a brokerage account with a licensed broker. Major options include:

• Full-service brokers: CommSec (CBA), NAB Trade — higher fees, more features and support
• Online discount brokers: SelfWealth, Superhero, Pearler — lower fees (flat fee of $5–$9.50 per trade), suitable for self-directed investors
• International platforms: Stake — offers both ASX and US market access

Brokerage fees vary from $5 flat (Superhero, SelfWealth) to $19.95+ for trades under $10,000 at traditional brokers. For small regular investments, lower brokerage matters significantly to net returns.

Understanding Dividends and Franking Credits

Dividends are payments made to shareholders from company profits. In Australia, dividends may carry franking credits — a tax credit representing the company tax (30% or 25% for small companies) already paid on those profits. This prevents double taxation: shareholders receive the franked dividend plus a credit for the company tax already paid.

For investors with marginal tax rates below 30%, franking credits can produce a tax refund. For those in higher tax brackets, the credits reduce (but don’t eliminate) the additional tax owed on dividend income. This makes fully-franked dividends from ASX-listed companies particularly attractive for retirees and lower-income investors.

Australia’s Big Four banks (CommBank, ANZ, Westpac, NAB) have historically paid high fully-franked dividends, making them popular income stocks. Mining companies like BHP also pay substantial dividends but with more cyclical variability.

Analysing ASX Companies

Key metrics for evaluating ASX shares include:

• Price-to-Earnings (P/E) ratio: share price divided by earnings per share — a common measure of relative valuation
• Dividend yield: annual dividend per share divided by share price — a measure of income return
• Earnings per share (EPS): company profit divided by shares on issue — indicates profitability per unit of ownership
• Debt-to-equity ratio: total liabilities divided by shareholder equity — a measure of financial leverage and risk

The ASX’s own platform (asx.com.au) provides basic company data. Annual reports, half-year results, and ASX announcements are the primary sources of financial information for listed companies.

Risks of Direct Share Investing

Individual shares are subject to both company-specific risk (poor management, competitive disruption, regulatory change) and market-wide risk (recessions, interest rate changes, global events). The ASX 200 has historically recovered from all major downturns, but individual companies can and do go to zero.

For most investors, a diversified approach — either through a broad ETF or a portfolio of at least 15–20 stocks across sectors — is more appropriate than concentrating in a small number of individual shares.

Frequently Asked Questions

How do I start investing in ASX shares? Open a brokerage account with a licensed broker (CommSec, SelfWealth, Superhero, Pearler, or similar), fund the account via bank transfer, and place a buy order for the shares you want. You will need a Tax File Number (TFN) and to complete identity verification. Most accounts can be opened online in under 30 minutes.

What is the minimum amount to invest in ASX shares? ASX shares are traded in parcels, but there is no regulatory minimum investment amount. Most brokers require a minimum order of $500 for new positions. Brokerage fees of $5–$19.95 per trade mean small investments are proportionally costly — $5 brokerage on a $200 trade is 2.5%.

What are franking credits on ASX dividends? Franking credits represent the corporate tax (30% or 25%) already paid by the company on its profits. When the company pays a fully-franked dividend, it passes these credits to shareholders. Shareholders include the gross dividend (cash + credit) in their taxable income and receive a tax offset for the credit, which may result in a refund.

Do I pay tax on ASX share profits in Australia? Yes. Capital gains from selling shares are included in assessable income. If you held the shares for more than 12 months, the 50% CGT discount applies — only half the gain is taxable. Dividends are also assessable income (with franking credits as an offset). You must report all investment income in your annual tax return.

This section provides general financial information. It does not constitute financial advice. For advice tailored to your situation, speak with a licensed financial adviser via the ASIC financial advisers register.