Author Topic: Australian Investing Thread  (Read 723272 times)

misterhorsey

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Re: Australian Investing Thread
« Reply #3250 on: July 06, 2017, 07:51:56 PM »
Dividends in my vanguard managed funds were stupidly large this month.. on the order of 6% for my wholesale High Growth Lifestrategy. I guess it was from all the rebalancing they did, removing Australian property etc. Anyway gave me a nice boost to # of units with auto reinvestment even though the total value just dropped straight back to where it was the day afterwards.

On the downside they were significant enough to probably affect my taxes next year.

I'm in the same fund.  I think you may find that even though the statement is emailed to you on 1 July 2017, it actually covers the distribution in the previous financial year (up to 30 June 2016). So they won't affect your taxes next year, but will impact your taxes in the financial year just past.

This is my one complaint about vanguard wholesale fund, and retail too probably.  The distribution usually includes some capital gains, but they can't figure out the amount of CGT until 30 June (according to the vanguard rep I spoke to), meaning that if you have a range of investments it's impossible to strategically manage them.  For example, I have a few direct share investments that are showing a bit of a loss, and if I'm going to have capital gains from a fund it would be good to crystallise those losses, but until I know how much CGT I'm up for, you don't know how much to sell.

I appreciate this is bit of a niche concern for most people.

The simple solution is to sell everything and just put all the proceeds into funds. But unfortunately legacy investment choices can incur capital gains tax implications so it's not so easy to do this.

seranade

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Re: Australian Investing Thread
« Reply #3251 on: July 06, 2017, 09:00:07 PM »
Hey all,

Not sure if this is the right thread to ask:

I am an expat living in Australia and am looking for a low-fee online stock brokerage company. My goal is to:

- invest about $1000/month (or hold off, and invest quarterly lump-sums)
- be able to invest in international stocks (US, Canada, Europe, Asia etc)
- would like to convert to US dollars if needed (cheaply)
- have a decent user interface (I'm a newbie, so simple is good)
- mainly invest in index/etf funds
- the goal is to buy and hold with my investments (long term)

Any suggestions as to what brokerage is appreciated, and if anyone knows of the tax implications of having US money invested, I'd love to hear more about it.

A side note, I am with CommonWealth, and it looks like their fees are pretty high in comparison.

Also, not sure if it's beneficial to invest in my Super, since I am an expat, and don't know the implications of if I decide to stay/leave Australia.

Thanks.

nnls

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Re: Australian Investing Thread
« Reply #3252 on: July 06, 2017, 09:31:17 PM »
Hey all,

Not sure if this is the right thread to ask:

I am an expat living in Australia and am looking for a low-fee online stock brokerage company. My goal is to:

- invest about $1000/month (or hold off, and invest quarterly lump-sums)
- be able to invest in international stocks (US, Canada, Europe, Asia etc)
- would like to convert to US dollars if needed (cheaply)
- have a decent user interface (I'm a newbie, so simple is good)
- mainly invest in index/etf funds
- the goal is to buy and hold with my investments (long term)

Any suggestions as to what brokerage is appreciated, and if anyone knows of the tax implications of having US money invested, I'd love to hear more about it.

A side note, I am with CommonWealth, and it looks like their fees are pretty high in comparison.

Also, not sure if it's beneficial to invest in my Super, since I am an expat, and don't know the implications of if I decide to stay/leave Australia.

Thanks.

I am with CMC for brokerage, they are pretty cheap and easy to use. not too sure about, I use it to invest in vanguard index funds and haven't had any issues

For leaving Australia see here  Departing Australia superannuation payment

and here I’m leaving Australia: Can I access my super?

Quote
Temporary residents are treated differently under the super rules in terms of accessing super benefits early, although you need to check with the ATO how the rules specifically apply to your circumstances.

If an individual has held a temporary visa under the Migration Act 1958 (except for visas under subclasses 405 and 410), then such an individual is eligible to apply for a ‘Departing Australia Superannuation Payment’ (DASP) when leaving Australia.

In most cases, a superannuation fund must transfer the temporary resident’s super benefits to the ATO if the individual has not claimed the benefits within 6 months of departing Australia, or within 6 months of the expiry or cancellation of the visa, whichever event is later.

A temporary resident doesn’t have to claim his or her super benefits upon leaving the country or, at a later stage. It’s possible to leave the benefits in Australia until retirement, but if the super benefits are transferred to the ATO, the money is not invested on the individual’s behalf. What this means is that the super benefit does not receive investment earnings or pay insurance premiums.

Instead, since 1 July 2013, the super benefit receives a form of ‘interest’. The ‘interest’ will be paid at a rate equivalent to the rate of inflation – Consumer Price Index (CPI) on all superannuation accounts reclaimed from the ATO. I that super account had remained with the super fund, then you could have expected investment earnings (and sometimes investment losses) less fees.


lush

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Re: Australian Investing Thread
« Reply #3253 on: July 07, 2017, 09:22:42 PM »
Hi Everyone,  great thread! Here is my situation:

•   I earn $230k per year.  My partner earns about $80k
•   I own an Investment property with no loan owing (meaning loan still there but filled up the offset account to have zero interest payments)
•   Me and my partner have $116k in VAS & $965k Vanguard Balanced Fund
•   I pay about between $20 – 30K in additional tax due to Vanguard distributions & rent return.  Partner pays about another $10k in taxes.
•   Question: we are thinking of taking out a loan to invest more in VAS in order to offset the tax we are paying – what are people’s thoughts on that? We think it makes sense, however not really sure how much longer either one of us wants to continue to work for. My partner wants to work part-time, and depending on the day I am having at work most days so do I, ….so worried that by taking out a loan we might be making the wrong choice by getting into “debt”.

Cheers.

mjr

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Re: Australian Investing Thread
« Reply #3254 on: July 07, 2017, 10:05:49 PM »
If you buy more VAS, your interest costs of somewhere between 5 and 7% will be offset markedly by VAS's dividends of 4%, leaving you with a tax reduction of  0.5% - 1.5% of the loan amount on the top marginal rate.
Negatively gear shares if you think there's enough capital growth upside to warrant the risk of gearing, but I wouldn't be doing it "to reduce tax".

deborah

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Re: Australian Investing Thread
« Reply #3255 on: July 07, 2017, 11:28:46 PM »
Why? You could use your offset money to buy shares VAS, giving you a negatively geared investment property rather than negatively geared shares. But, as mjr says, you don't need to. Maybe you should just FIRE instead. Have you done your numbers?

misterhorsey

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Re: Australian Investing Thread
« Reply #3256 on: July 07, 2017, 11:31:58 PM »
I've thought about doing the same in the past. Motivated by tax 'benefits'.

I'd suggest doing a bit of modelling via spreadsheet to see how you'd feel about the outcome of your investment with the changes to key variables (interest rates, capital growth, dividends).

The margin loan calculators on the bank websites are skewed towards the glass overflowing.  I seem to recall one default % growth was set at 10% per annum!  Which doesn't really give you a realistic picture of how investments will perform over time.

My view was that the small % increase from gearing wasn't worth the stress of potential downside of margin calls - or prolonged underperformance.

I too was also thinking of quitting work for a bit (which I have).  Having a reliable source of cashflow would buffer the risks of the investment underperforming for a while.  So the idea of continuing working to service a margin loan? Not for me.

These are just a few of my considerations. Others on this forum seem to have some success with gearing. Your own risk appetite will guide you.


Itchyfeet

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Re: Australian Investing Thread
« Reply #3257 on: July 08, 2017, 03:03:01 AM »
Prob the best tax break is to max out super contributions. Have you done that?

deborah

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Re: Australian Investing Thread
« Reply #3258 on: July 08, 2017, 03:10:23 AM »
There are several ways to get a tax advantaged return on money. Buy a PPOR. Superannuation. Negative gearing. Spending money to save money.

From where I think you are on the journey, negative gearing appears not to be a useful tool for you. And you appear to have maxed out the others except the spending money to save money category. This can take many forms. I did a few things to my home that made it somewhat more energy efficient, and then had an energy assessment done, and spent money on the things that they pointed out. The result was 50% less utility bills. That meant that my retirement expenditure went down substantially. This did not include anything like PV panels. You can apply this thinking to other parts of your budget - list it in expense order, and see what you can come up with to reduce (or eliminate) each major ongoing expense permanently. You may find that such things give you the best return on investment.

chasingthegoodlife

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Re: Australian Investing Thread
« Reply #3259 on: July 08, 2017, 03:10:19 PM »
I love that advice Deborah - very interesting way of looking at things, especially if FIRE is looming.

LonerMatt

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Re: Australian Investing Thread
« Reply #3260 on: July 08, 2017, 04:04:07 PM »
How do you know how much of dividends is franked?

Asking for tax purposes.
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mjr

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Re: Australian Investing Thread
« Reply #3261 on: July 08, 2017, 04:07:15 PM »
You have to look at the fund/etf statement.  It's on there.  You can't reliably predict what any individual distribution will be (unless it's always zero!)

lush

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Re: Australian Investing Thread
« Reply #3262 on: July 08, 2017, 11:12:02 PM »
If you buy more VAS, your interest costs of somewhere between 5 and 7% will be offset markedly by VAS's dividends of 4%, leaving you with a tax reduction of  0.5% - 1.5% of the loan amount on the top marginal rate.
Negatively gear shares if you think there's enough capital growth upside to warrant the risk of gearing, but I wouldn't be doing it "to reduce tax".

Yes, think you are right. Probably not a good idea if we are only seeking to reduce tax, given the level of risk with it and uncertainty of how long we want to continue to work for. Thank you.

lush

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Re: Australian Investing Thread
« Reply #3263 on: July 08, 2017, 11:15:24 PM »
I've thought about doing the same in the past. Motivated by tax 'benefits'.

I'd suggest doing a bit of modelling via spreadsheet to see how you'd feel about the outcome of your investment with the changes to key variables (interest rates, capital growth, dividends).

The margin loan calculators on the bank websites are skewed towards the glass overflowing.  I seem to recall one default % growth was set at 10% per annum!  Which doesn't really give you a realistic picture of how investments will perform over time.

My view was that the small % increase from gearing wasn't worth the stress of potential downside of margin calls - or prolonged underperformance.

I too was also thinking of quitting work for a bit (which I have).  Having a reliable source of cashflow would buffer the risks of the investment underperforming for a while.  So the idea of continuing working to service a margin loan? Not for me.

These are just a few of my considerations. Others on this forum seem to have some success with gearing. Your own risk appetite will guide you.


We have discussed it and don't think gearing is for us. Thank you for responding, it sure does help to hear peoples thoughts and experiences.

lush

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Re: Australian Investing Thread
« Reply #3264 on: July 08, 2017, 11:29:11 PM »
There are several ways to get a tax advantaged return on money. Buy a PPOR. Superannuation. Negative gearing. Spending money to save money.

From where I think you are on the journey, negative gearing appears not to be a useful tool for you. And you appear to have maxed out the others except the spending money to save money category. This can take many forms. I did a few things to my home that made it somewhat more energy efficient, and then had an energy assessment done, and spent money on the things that they pointed out. The result was 50% less utility bills. That meant that my retirement expenditure went down substantially. This did not include anything like PV panels. You can apply this thinking to other parts of your budget - list it in expense order, and see what you can come up with to reduce (or eliminate) each major ongoing expense permanently. You may find that such things give you the best return on investment.

What great advise. Can you tell me where the biggest savings came from to get a 50% less utility bill? When looking at our expenses, there are only 2 other things that we could cut back on:  1) Our Health Insurance - NIB Top Cover Gold package - $320 per month for both us. I am a little hesitant on that front as I have mixed feelings about cutting it back. 2) Less Alcohol :) not that we drink much, about a glass each per night, and just the cheap Yulumba cask wine (LOL) so about $60-80 per month.

Another thing you mentioned was super, but not sure how that works with my tax bracket (45%), if I contribute say another $30k per year after tax, not sure how that helps reduce the tax I pay. Sorry very ignorant when it comes to super, I can't ever seem to get my head round its true benefits.

lush

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Re: Australian Investing Thread
« Reply #3265 on: July 08, 2017, 11:36:47 PM »
Prob the best tax break is to max out super contributions. Have you done that?

No have not looked into this because super always confuses me. But will I need to look into what can be done on this front as a few people have mentioned this. Thanks for the push.

deborah

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Re: Australian Investing Thread
« Reply #3266 on: July 09, 2017, 12:09:50 AM »
Superannuation is a tax haven with assets that you cannot use until you reach your preservation age - probably 60. You can buy most investments inside super, including investment properties - although some investments are more easily bought if you have an SMSF rather than an commercial/industry super fund. Any income from investments within the super fund is taxed at 15% rather than your normal tax rate, and the income does not count toward your tax.

Once you have reached preservation age, and you decide to access your super (usually by retiring from work), you can put up to $1.6mill of your super into pension phase. In pension phase, income is untaxed, but you need to take out varying amounts each year, depending on your age - ranging from 4% at 60 to 13% when you are old and decrepit (I think it is 85 or 90). This is why having a super fund that only consists of an investment property is a really bad idea. If you have any assets above the $1.6mill in super, the income is still taxed at 15%, and you can take out lump sums from this.

When pre-tax money is added to super 15% tax is taken out (eg. salary sacrifice, employer contributions, your own contributions that you have deemed as pre-tax). If post-tax money is put in, no tax is taken out. The recent changes limit the amount that can be put in once you have reached the $1.6million cap. You are also limited to $25,000 per year pre-tax (including employer contributions) and $100,000 per year post-tax (you can occasionally put in more, but I'm keeping it simple) - this changed on 1st July.

deborah

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Re: Australian Investing Thread
« Reply #3267 on: July 09, 2017, 12:29:45 AM »
Nothing I did was particularly expensive. I topped up my insulation, replaced halogen lights with LEDs, bought canvas exterior blinds (they made a huge difference in the livability of rooms in summer), made properly insulated curtains and added pelmets, so the windows were totally sealed, made rain gardens (I no longer have any storm water drains) and got a couple of tanks, and use that water on the garden (when we have some), put shade cloth over the deck, so it isn't hot in summer, put bubblewrap in the skylights to improve their insulation, replaced some windows with double glazing (this was by far the most expensive thing - one wall was all glass, whereas all the other walls had insulation in them already), replaced the gas ducted heating with a couple of reverse cycle air conditioners (it was actually a fire hazard), replaced the fridge. But everyone will be different. You can probably get energy efficiency kits from the library - everywhere in Australia has kill-a-watts (measure the energy usage of your appliances), and some have full kits.

I don't believe you can't do other things as well. Do you have gym membership? Would some equipment be able to replace that?... A bit of lateral thinking can save a lot of money.

lush

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Re: Australian Investing Thread
« Reply #3268 on: July 09, 2017, 01:01:22 AM »

When pre-tax money is added to super 15% tax is taken out (eg. salary sacrifice, employer contributions, your own contributions that you have deemed as pre-tax). If post-tax money is put in, no tax is taken out. The recent changes limit the amount that can be put in once you have reached the $1.6million cap. You are also limited to $25,000 per year pre-tax (including employer contributions) and $100,000 per year post-tax (you can occasionally put in more, but I'm keeping it simple) - this changed on 1st July.

Thanks for the detailed explanation. So based on my income I max out on super and so therefore can't undertake salary sacrifice. I still don't really understand how by putting money in super post tax helps reduce the tax I pay each year. I understand that it doesn't get taxed going into my super, but I am not a big fan of super as I can't touch it for another 20 years and in that time rules can change many times over. I did a very quick bit of reading that suggests that if you pay more than 15% tax in the dollar on your personal income, then super may not be a tax-effective investment. Either I am as thick as 2 bricks (LOL - totally possible when it comes to me and super) or maybe I am on the right track and continue putting as much as I can into our Vanguard index funds (rather than super) to reach the magical figure of about 1.3 Mil in about 2 years. Then FIRE!!!  Crazy or not?

lush

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Re: Australian Investing Thread
« Reply #3269 on: July 09, 2017, 01:16:31 AM »

I don't believe you can't do other things as well. Do you have gym membership? Would some equipment be able to replace that?... A bit of lateral thinking can save a lot of money.

Thanks for giving me a better understanding of the savings you made with house / garden changes. Some of those things we have already done and have also undertook a cost benefit analysis of other things like rain water tanks and solar panels - so far it didn't look like a good cost saving measure for return on investment, but will give it another go as things do change.  We don't have gym memberships - walking keeps us fit enough. We have gone through all our expenditure for the last 10 years with a fine tooth comb and can only think of the health insurance being a cost we can reduce, but as stated earlier - just a bit concerned doing that - is that something you have looked into?

marty998

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Re: Australian Investing Thread
« Reply #3270 on: July 09, 2017, 01:54:55 AM »
lush - paying tax is generally a good thing. It means you are making money :)

Seriously though, with that level of assets you should consider looking at family trusts and company structures. Splitting the various income returns (dividends, capital gains etc) to different beneficiaries can save you tens of thousands in tax.

Get a good accountant and some good tax advice.


Freshwater

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Re: Australian Investing Thread
« Reply #3271 on: July 09, 2017, 02:48:10 AM »

I don't believe you can't do other things as well. Do you have gym membership? Would some equipment be able to replace that?... A bit of lateral thinking can save a lot of money.

Thanks for giving me a better understanding of the savings you made with house / garden changes. Some of those things we have already done and have also undertook a cost benefit analysis of other things like rain water tanks and solar panels - so far it didn't look like a good cost saving measure for return on investment, but will give it another go as things do change.  We don't have gym memberships - walking keeps us fit enough. We have gone through all our expenditure for the last 10 years with a fine tooth comb and can only think of the health insurance being a cost we can reduce, but as stated earlier - just a bit concerned doing that - is that something you have looked into?

You could do a case study (see case study thread section) if you want people to help find those savings.

Do you have hospital cover or hospital plus extras? If you have extras, add up what you spent on the gap + the extras premiums and compare to what it would have cost without insurance. We are better off without extras, I think most people are unless you can find the right provider and pay no gap. I shopped around and found I could get save about $175ish a month if I left Bupa's top cover + extras and got top hospital cover elsewhere. More than enough to cover our physio and dental appointments.

You also need to look at the inclusions and think about whether you want the top hospital cover or if next best is ok. We do things that could lead to joint reconstructions, hence we have top cover as one of those done privately is $30k+. I haven't got round to changing yet...

We saved about a third on electricity usage after we had the place rewired (for safety) and LEDs put in. Bizarre.

deborah

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Re: Australian Investing Thread
« Reply #3272 on: July 09, 2017, 03:02:43 AM »

When pre-tax money is added to super 15% tax is taken out (eg. salary sacrifice, employer contributions, your own contributions that you have deemed as pre-tax). If post-tax money is put in, no tax is taken out. The recent changes limit the amount that can be put in once you have reached the $1.6million cap. You are also limited to $25,000 per year pre-tax (including employer contributions) and $100,000 per year post-tax (you can occasionally put in more, but I'm keeping it simple) - this changed on 1st July.

Thanks for the detailed explanation. So based on my income I max out on super and so therefore can't undertake salary sacrifice. I still don't really understand how by putting money in super post tax helps reduce the tax I pay each year. I understand that it doesn't get taxed going into my super, but I am not a big fan of super as I can't touch it for another 20 years and in that time rules can change many times over. I did a very quick bit of reading that suggests that if you pay more than 15% tax in the dollar on your personal income, then super may not be a tax-effective investment. Either I am as thick as 2 bricks (LOL - totally possible when it comes to me and super) or maybe I am on the right track and continue putting as much as I can into our Vanguard index funds (rather than super) to reach the magical figure of about 1.3 Mil in about 2 years. Then FIRE!!!  Crazy or not?
That bolded bit is totally wrong.  If you pay LESS it isn't much chop. If you pay MORE you're in clover! That's why, once you are FIRE (until you reach preservation age), it isn't much good.

Luckyvik

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Re: Australian Investing Thread
« Reply #3273 on: July 09, 2017, 03:39:54 AM »

When pre-tax money is added to super 15% tax is taken out (eg. salary sacrifice, employer contributions, your own contributions that you have deemed as pre-tax). If post-tax money is put in, no tax is taken out. The recent changes limit the amount that can be put in once you have reached the $1.6million cap. You are also limited to $25,000 per year pre-tax (including employer contributions) and $100,000 per year post-tax (you can occasionally put in more, but I'm keeping it simple) - this changed on 1st July.

Thanks for the detailed explanation. So based on my income I max out on super and so therefore can't undertake salary sacrifice. I still don't really understand how by putting money in super post tax helps reduce the tax I pay each year. I understand that it doesn't get taxed going into my super, but I am not a big fan of super as I can't touch it for another 20 years and in that time rules can change many times over. I did a very quick bit of reading that suggests that if you pay more than 15% tax in the dollar on your personal income, then super may not be a tax-effective investment. Either I am as thick as 2 bricks (LOL - totally possible when it comes to me and super) or maybe I am on the right track and continue putting as much as I can into our Vanguard index funds (rather than super) to reach the magical figure of about 1.3 Mil in about 2 years. Then FIRE!!!  Crazy or not?
That bolded bit is totally wrong.  If you pay LESS it isn't much chop. If you pay MORE you're in clover! That's why, once you are FIRE (until you reach preservation age), it isn't much good.
What about your partner, could they salary sacrifice?

Also for clarification any post-tax money you put into super does not get taxed in Super as you have already paid tax on it. The difference is that any earnings of investments in Super get taxed at 15% while outside of super they get taxed at your marginal tax rate. Also you can't access Super till you're 60. Personally I don't put any post-tax money in Super as I want to access that money at FI before 60.


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Itchyfeet

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Re: Australian Investing Thread
« Reply #3274 on: July 09, 2017, 11:08:16 AM »
Your hubby should max out his pre-tax super contributions at $25K and not the $8K SGL.

I hear what people are saying about super being locked away, but as Lush has a high marginal tax rate, and already a good stash outside super there could be merit in putting some more into super post-tax.

All those years between now and preservation age only being taxed 15% on returns and the not paying any tax post retirement has to warrant some consideration.

frozzie

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Re: Australian Investing Thread
« Reply #3275 on: July 09, 2017, 06:17:21 PM »
So, more than a year ago (all the way back to page 37) I was toying with the idea of selling my unit and renting somewhere else.
At the time I got a mild face punch (thanks !) and reconsidered ... move forward to now and things have changed sligthly :
- Rents are somewhat cheaper (<$800pw)
- Wife has a stable part time job paying for the rent
- I've got a new job paying a bit more
- Increased savings (groceries etc...), replace the 15 year old 550Kwh fridge by a bigger 310Kwh
- The expected selling value for my unit went from my conservative +30% to an estimated +60%, then 70%, then 75% in a matter of months ... so we sold at +87%!

Renting is not ideal but found a nice house and I'm glad I'm out of the sydney market with that level of crazyness

Now for the stash, I'm considering 60% fund(s)/40% conservative (saving accounts, bond, gold).
What's the general wisdom around asset allocation those days, is 40% too high while not being retired yet? FIRECalc is showing I could while wife wants to keep working for a bit longer but with 2 kids still in primary, I'll probably wait another 3-5 years, maybe 7
Would you put everything in one fund (I'm thinking VGS) or splitting (VGS/VEU ?)

I'm also considering buying a rental in country NSW/QLD (Orange NSW, Roma QLD or something alike) for a lowish $200k potentially earning a $200-$300 rent but considering my lack of experience on this, I'm not so sure it's wise now ?



steveo

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Re: Australian Investing Thread
« Reply #3276 on: July 09, 2017, 06:56:13 PM »
frozzie - asset allocation is a tough one because there are so many opinions but you have to come up with what works for you. Then super has to be considered.

I think the portfolio that makes the most sense is the simplest one as well which to me is international stocks and home currency domiciled bonds based upon your risk profile. In your situation I would use VGS and VAF. There is a guy who recommends this as well but I forget his name.

I also don't follow my own advice. I have 50% Aussie (split between shares that I own and VAS and possibly something else in the future dependent on price). I don't recommend owning individual shares however I've been given shares for free as part of my income for working at a big bank. I then have 25% VGS and 25% VAF. If I choose to work an extra year or two I'd split my assets 1/3 each.

All of that is outside of Super. In Super I just choose the riskiest profile.

The problem with being conservative is that in my opinion the biggest risk to a long retirement is poor returns and being hammered by inflation. Bonds/cash won't help with this problem. At the same time you need enough or some other way (going back to work/spending less) to handle a down period which could be 2-5 years.

frozzie

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Re: Australian Investing Thread
« Reply #3277 on: July 09, 2017, 07:15:17 PM »
Thanks Steveo,

Similar case with my individual shares being from employment plans (less than $10k in total)
I do have 3 individual shares I bought for a grand total of $4k (pre-mustach days) and not planning to add to those.

I really like the idea of International stocks and local bonds. I might still but a bit in an online saving account like ING for an emergency/ready to invest stash but VGS+VAF sounds like a good and simple approach.
I had started my allocation on the "100 minus your age in stocks" rule but considering I'm not quite retiring 70/30 might be just fine for the next few years.
« Last Edit: July 09, 2017, 07:18:51 PM by frozzie »

GT

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Re: Australian Investing Thread
« Reply #3278 on: July 09, 2017, 08:59:06 PM »
For low income earners that make super contributions that get the government match, when does the government match go into the Super account?  At the time of the earners addition, or after tax time?

Trying to work out whether it is best to hold onto cash for 11 months (earning interest) and deposit it into super in June to get the match from the government after Tax time in July.

Dunno why I was thinking of it, but I might actually not earn much this financial year due to planned #daddydaycare, so it may affect me.

Rowellen

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Re: Australian Investing Thread
« Reply #3279 on: July 09, 2017, 09:01:25 PM »
GT After tax time.

GT

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Re: Australian Investing Thread
« Reply #3280 on: July 09, 2017, 09:05:59 PM »
GT After tax time.

Thanks.  So no good dropping some in until June then.  Cool.  Never know, I may decide to go back to work and get a job between now and June next year that earns above $51K thus would miss out on the match.

steveo

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Re: Australian Investing Thread
« Reply #3281 on: July 10, 2017, 12:28:38 AM »
Thanks Steveo,

Similar case with my individual shares being from employment plans (less than $10k in total)
I do have 3 individual shares I bought for a grand total of $4k (pre-mustach days) and not planning to add to those.

I really like the idea of International stocks and local bonds. I might still but a bit in an online saving account like ING for an emergency/ready to invest stash but VGS+VAF sounds like a good and simple approach.
I had started my allocation on the "100 minus your age in stocks" rule but considering I'm not quite retiring 70/30 might be just fine for the next few years.

https://www.youtube.com/watch?v=_chiIIxMGl0

This is the guy who articulated this to me and it makes sense.  I think having some money in a cash account is also fine. I think this comes down to your risk profile though. I can take a risk but I want to have some money available if the markets crash so that at worst I don't have to withdraw from a decent amount from my equity portfolio. Ideally I'd like to be able to rebalance my accounts.

I'm a fan of a rising equity portfolio over the course of your retirement but that to me is based on having good returns.

seranade

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Re: Australian Investing Thread
« Reply #3282 on: July 10, 2017, 01:51:29 AM »
Hey all,

Not sure if this is the right thread to ask:

I am an expat living in Australia and am looking for a low-fee online stock brokerage company. My goal is to:

- invest about $1000/month (or hold off, and invest quarterly lump-sums)
- be able to invest in international stocks (US, Canada, Europe, Asia etc)
- would like to convert to US dollars if needed (cheaply)
- have a decent user interface (I'm a newbie, so simple is good)
- mainly invest in index/etf funds
- the goal is to buy and hold with my investments (long term)

Any suggestions as to what brokerage is appreciated, and if anyone knows of the tax implications of having US money invested, I'd love to hear more about it.

A side note, I am with CommonWealth, and it looks like their fees are pretty high in comparison.

Also, not sure if it's beneficial to invest in my Super, since I am an expat, and don't know the implications of if I decide to stay/leave Australia.

Thanks.

I am with CMC for brokerage, they are pretty cheap and easy to use. not too sure about, I use it to invest in vanguard index funds and haven't had any issues

For leaving Australia see here  Departing Australia superannuation payment

and here I’m leaving Australia: Can I access my super?

Quote
Temporary residents are treated differently under the super rules in terms of accessing super benefits early, although you need to check with the ATO how the rules specifically apply to your circumstances.

If an individual has held a temporary visa under the Migration Act 1958 (except for visas under subclasses 405 and 410), then such an individual is eligible to apply for a ‘Departing Australia Superannuation Payment’ (DASP) when leaving Australia.

In most cases, a superannuation fund must transfer the temporary resident’s super benefits to the ATO if the individual has not claimed the benefits within 6 months of departing Australia, or within 6 months of the expiry or cancellation of the visa, whichever event is later.

A temporary resident doesn’t have to claim his or her super benefits upon leaving the country or, at a later stage. It’s possible to leave the benefits in Australia until retirement, but if the super benefits are transferred to the ATO, the money is not invested on the individual’s behalf. What this means is that the super benefit does not receive investment earnings or pay insurance premiums.

Instead, since 1 July 2013, the super benefit receives a form of ‘interest’. The ‘interest’ will be paid at a rate equivalent to the rate of inflation – Consumer Price Index (CPI) on all superannuation accounts reclaimed from the ATO. I that super account had remained with the super fund, then you could have expected investment earnings (and sometimes investment losses) less fees.

CMC is only Australian stocks. I'm looking for a low fee brokerage that will trade internationally with low cost per trade fees and exchange rates. Looks like NAB might be the best one out of the big banks ...

JamesSyd

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Re: Australian Investing Thread
« Reply #3283 on: July 10, 2017, 02:19:27 AM »
Hey all,

Not sure if this is the right thread to ask:

I am an expat living in Australia and am looking for a low-fee online stock brokerage company. My goal is to:

- invest about $1000/month (or hold off, and invest quarterly lump-sums)
- be able to invest in international stocks (US, Canada, Europe, Asia etc)
- would like to convert to US dollars if needed (cheaply)
- have a decent user interface (I'm a newbie, so simple is good)
- mainly invest in index/etf funds
- the goal is to buy and hold with my investments (long term)

Any suggestions as to what brokerage is appreciated, and if anyone knows of the tax implications of having US money invested, I'd love to hear more about it.

A side note, I am with CommonWealth, and it looks like their fees are pretty high in comparison.

Also, not sure if it's beneficial to invest in my Super, since I am an expat, and don't know the implications of if I decide to stay/leave Australia.

Thanks.

I am with CMC for brokerage, they are pretty cheap and easy to use. not too sure about, I use it to invest in vanguard index funds and haven't had any issues

For leaving Australia see here  Departing Australia superannuation payment

and here I’m leaving Australia: Can I access my super?

Quote
Temporary residents are treated differently under the super rules in terms of accessing super benefits early, although you need to check with the ATO how the rules specifically apply to your circumstances.

If an individual has held a temporary visa under the Migration Act 1958 (except for visas under subclasses 405 and 410), then such an individual is eligible to apply for a ‘Departing Australia Superannuation Payment’ (DASP) when leaving Australia.

In most cases, a superannuation fund must transfer the temporary resident’s super benefits to the ATO if the individual has not claimed the benefits within 6 months of departing Australia, or within 6 months of the expiry or cancellation of the visa, whichever event is later.

A temporary resident doesn’t have to claim his or her super benefits upon leaving the country or, at a later stage. It’s possible to leave the benefits in Australia until retirement, but if the super benefits are transferred to the ATO, the money is not invested on the individual’s behalf. What this means is that the super benefit does not receive investment earnings or pay insurance premiums.

Instead, since 1 July 2013, the super benefit receives a form of ‘interest’. The ‘interest’ will be paid at a rate equivalent to the rate of inflation – Consumer Price Index (CPI) on all superannuation accounts reclaimed from the ATO. I that super account had remained with the super fund, then you could have expected investment earnings (and sometimes investment losses) less fees.

CMC is only Australian stocks. I'm looking for a low fee brokerage that will trade internationally with low cost per trade fees and exchange rates. Looks like NAB might be the best one out of the big banks ...
Interactive Brokers

Sent from my SM-G925I using Tapatalk


frozzie

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Re: Australian Investing Thread
« Reply #3284 on: July 10, 2017, 03:24:02 AM »
I've recently transferred my ETF from CMC to IG : https://www.ig.com/au/
International trades and $8 brokerage ($10 for US) was just too tempting

superannuationfreak

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Re: Australian Investing Thread
« Reply #3285 on: July 10, 2017, 05:53:11 AM »
If I traded frequently then Interactive Brokers would be cheap.  I try not to trade often.

IG markets I really can't understand what protections we'd have if something happened to them.  There's no mention of SIPC (US Insurance) or CHESS sponsorship on their site.

I currently use optionsxpress.com.au for US trades, now down to 5USD.  They're part of Schwab.  No Australian trades though.

seranade

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Re: Australian Investing Thread
« Reply #3286 on: July 11, 2017, 12:42:28 AM »
I've recently transferred my ETF from CMC to IG : https://www.ig.com/au/
International trades and $8 brokerage ($10 for US) was just too tempting

I'll have to check out their fees and structure.

If I traded frequently then Interactive Brokers would be cheap.  I try not to trade often.

IG markets I really can't understand what protections we'd have if something happened to them.  There's no mention of SIPC (US Insurance) or CHESS sponsorship on their site.

I currently use optionsxpress.com.au for US trades, now down to 5USD.  They're part of Schwab.  No Australian trades though.

I was looking at IB, but I'm just a beginner, and their platform feels too complex ... I'm not sure if $1000/month of trades would be worth it with IB, or if I should hold off and do a lump sum, I'm obviously new at this, and recognize that all the banks charge an arm and a leg, and would rather find something cheap and reliable to use.

As for Optionsxpress, I'll take a look at them. I am okay with US and International stocks instead of Aus. Do they also convert money to US? Or do you use an external provider, and transfer money over?

Sorry for all the questions. Thanks for all your help!

lush

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Re: Australian Investing Thread
« Reply #3287 on: July 11, 2017, 02:21:59 PM »
Superannuation is a tax haven with assets that you cannot use until you reach your preservation age - probably 60.

Thanks for the super overview - our biggest challenge is that we can't touch super until we are 60, so that's about 15 years away. In that time we hope to FIRE ( in the next 2 years) so really need to put all our cash outside super if we want to meet that goal.


lush

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Re: Australian Investing Thread
« Reply #3288 on: July 11, 2017, 02:28:06 PM »
@MisterHorsey and others that mentioned that you have been impacted by the CGT from Vanguard funds.

I also have don't like the unexpected CGT that comes post FY end. I was thinking that moving forward rather than keep topping up the Vanguard funds (VAS / Balanced) that I might consider ARGO or some other LIC as I don'd believe they pass on the CGT and set up your returns especially for retirement. Is this something you have considered?

lush

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Re: Australian Investing Thread
« Reply #3289 on: July 11, 2017, 02:34:54 PM »
@Luckyvik link - agree with your comments about not toping up super. For us we want to FIRE soon, so we need all our funds to go into our funds for distribution returns.

lush

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Re: Australian Investing Thread
« Reply #3290 on: July 11, 2017, 02:37:00 PM »

I don't believe you can't do other things as well. Do you have gym membership? Would some equipment be able to replace that?... A bit of lateral thinking can save a lot of money.

Thanks for giving me a better understanding of the savings you made with house / garden changes. Some of those things we have already done and have also undertook a cost benefit analysis of other things like rain water tanks and solar panels - so far it didn't look like a good cost saving measure for return on investment, but will give it another go as things do change.  We don't have gym memberships - walking keeps us fit enough. We have gone through all our expenditure for the last 10 years with a fine tooth comb and can only think of the health insurance being a cost we can reduce, but as stated earlier - just a bit concerned doing that - is that something you have looked into?

You could do a case study (see case study thread section) if you want people to help find those savings.

Do you have hospital cover or hospital plus extras? If you have extras, add up what you spent on the gap + the extras premiums and compare to what it would have cost without insurance. We are better off without extras, I think most people are unless you can find the right provider and pay no gap. I shopped around and found I could get save about $175ish a month if I left Bupa's top cover + extras and got top hospital cover elsewhere. More than enough to cover our physio and dental appointments.

You also need to look at the inclusions and think about whether you want the top hospital cover or if next best is ok. We do things that could lead to joint reconstructions, hence we have top cover as one of those done privately is $30k+. I haven't got round to changing yet...

We saved about a third on electricity usage after we had the place rewired (for safety) and LEDs put in. Bizarre.

Thanks for this information. Never thought about the case study...will look into it.Yes and reviewing health insurance inclusions etc to calculate if worth the additional "extras".

lush

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Re: Australian Investing Thread
« Reply #3291 on: July 11, 2017, 02:38:24 PM »
lush - paying tax is generally a good thing. It means you are making money :)

Seriously though, with that level of assets you should consider looking at family trusts and company structures. Splitting the various income returns (dividends, capital gains etc) to different beneficiaries can save you tens of thousands in tax.

Get a good accountant and some good tax advice.

thanks marty - good accounts are hard to find :) Thanks for the info!

chasingthegoodlife

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Re: Australian Investing Thread
« Reply #3292 on: July 11, 2017, 02:53:42 PM »
Lush, I'm wondering what your current inside super/outside super asset split is and if you have decided on a target split?

If you have 15 years before preservation age, and perhaps 30 afterwards, you would need at least a third of your asserts outside super and then two thirds within. Depending on your assett allocation you'd probably want more outside super so you had  flexibility in what you sold if you needed to draw down when a particular fund or assett class was performing poorly. Also, your spending needs might not be even accross the lifespan - many people spend less in their 80s as their health limits the desire for travel etc.

But if your current split is more like 80% outside 20% inside, maybe think a bit more about how much of this you are likely to need before your preservation age?

I agreed with marty's advice above - with your lever of income and assetts you would probably benefit from professional advice on how to structure your assetts.

Now I'm curious how everyone else has worked out their inside/outside super balance? 

ozbeach

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Re: Australian Investing Thread
« Reply #3293 on: July 11, 2017, 03:06:53 PM »
Now I'm curious how everyone else has worked out their inside/outside super balance?

70% in super, 30% outside - but that will only have to fund about five years till I reach 60.
Late to FI; but better late than never!

marty998

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Re: Australian Investing Thread
« Reply #3294 on: July 11, 2017, 03:48:14 PM »
Now I'm curious how everyone else has worked out their inside/outside super balance?

70% in super, 30% outside - but that will only have to fund about five years till I reach 60.

Hard to determine with investment property debt. I have about $250k of net investment assets (property and shares) outside super, and $130k within. Guess that is roughly a 65/35 split.

Early days. Lots of time to grow it.

Itchyfeet

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Re: Australian Investing Thread
« Reply #3295 on: July 12, 2017, 10:59:10 AM »
At FIRE We'll be about:
 - 25% paid off home
 - 25% super
 - 50% investments outside super

Will add to super post FIRE from any random surplus income we collect along the way.

We need a big chunk outside super as I'll be waiting 14 years to access super and DW 19 years.
« Last Edit: July 12, 2017, 11:58:48 PM by Itchyfeet »

lush

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Re: Australian Investing Thread
« Reply #3296 on: July 12, 2017, 02:20:14 PM »
Roughly 80% outside of super and 20% inside super.

misterhorsey

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Re: Australian Investing Thread
« Reply #3297 on: July 12, 2017, 08:37:41 PM »
@MisterHorsey and others that mentioned that you have been impacted by the CGT from Vanguard funds.

I also have don't like the unexpected CGT that comes post FY end. I was thinking that moving forward rather than keep topping up the Vanguard funds (VAS / Balanced) that I might consider ARGO or some other LIC as I don'd believe they pass on the CGT and set up your returns especially for retirement. Is this something you have considered?

Following on from this, for anyone who is interested...

TL;DR - capital gains included in fund distributions isn't the whole story.


I got my EOFY tax statement and it informs me that I my share of Capital Gains amounts to $14k, discounted down to $7k - this is from a fund worth almost 300k.

So approximately 2.3% of the total value of the fund has been distributed as capital gains. 

'Luckily' I've crystallised losses of around $3.5k from other share boo boos, so that leaves $3.5k as a CGT tax liability.

I wasn't on the top marginal rate but on 37%, so about $1.3k will go to the tax person to pay for roads, infrastructure, detention centres, hospitals, politician salaries, submarines, pensions/welfare - so good stuff and the bad stuff, depending on your political views.

So it's not that bad.

One thing to consider is that I'm not terribly good at buying, selling or rebalancing.  In the past I've bought shares that have gone up by 200%, only to watch them deflate right back down so that they are in the red.  A prudent calculating dispassionate investor would have sold out part of these positions to crystallise gains, but also perhaps left some in the market.  I do still have legacy direct share holdings These days I do take money off the table if a share has reached 100%, or 200%.  Basically I recoup my initial investment (the shares pay me back) and I leave the rest in the market.

What the fund does is take care of rebalancing for you.  Rebalancing is theoretically the most optimal way to ensure consistently high average returns.  With rebalancing comes the crystalisation of capital gains and losses.

My ETFs don't distribute capital gains. But nor are they ever rebalanced by me.  I've set them intending to forget them. This isn't optimal. 

So having looked at the bigger picture, while I'm not happy about not knowing in advance how much CG I will receive before the EOFY, I'm starting to appreciate that its one of the costs of the fund that is part of optimising overall performance.  The other piece of the puzzle is that the fund increased by around 13% or more over the year (it's hard to calculate exactly due to quarterly distributions) so this is quite a decent year.

So ultimately, while the capital gains and the CGT payable on these distributions isn't great, I think it's important to look at the bigger picture and appreciate that they are a cost to optimising a diversified portfolio.

This is a cost that could be avoided/ managed by investors taking a more hands on approach.  But I don't think it's an arbitrary drag on your investment.

Happy to hear any other opinions on this of course.  I'm no expert.

The other take away from this is that if I know that I'm going to cop a capital gain each year, in the thousands, it gives me an incentive to consider taking a punt on a few speculative shares.

ASL hit a low around 8c not that long ago, and is last trading at $1.70. (I bought in at $1 a while ago, before I was seduced by indexes, and saw my $1 go all the way down and back again.) If you knew you were going to be liable for CGT on a capital gain of $2000, why not pick a few unloved speculative small cap stocks, put $500 on a selection of 4, stick it in the bottom draw for a year.  If they fall over then if you crystallise that loss you can offset your gain. If they don't fall over you can reinvest your winnings into your indexes, rinse and repeat.

The tax regime is somewhat underwriting your speculative investment.

Just an idea for those who are into indexes, but like me, don't mind a wee bit of market timing on occasion.

Thoughts?

dbm

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Re: Australian Investing Thread
« Reply #3298 on: July 12, 2017, 10:02:28 PM »
Dividends in my vanguard managed funds were stupidly large this month.. on the order of 6% for my wholesale High Growth Lifestrategy. I guess it was from all the rebalancing they did, removing Australian property etc. Anyway gave me a nice boost to # of units with auto reinvestment even though the total value just dropped straight back to where it was the day afterwards.

On the downside they were significant enough to probably affect my taxes next year.

I'm in the same fund.  I think you may find that even though the statement is emailed to you on 1 July 2017, it actually covers the distribution in the previous financial year (up to 30 June 2016). So they won't affect your taxes next year, but will impact your taxes in the financial year just past.

This is my one complaint about vanguard wholesale fund, and retail too probably.  The distribution usually includes some capital gains, but they can't figure out the amount of CGT until 30 June (according to the vanguard rep I spoke to), meaning that if you have a range of investments it's impossible to strategically manage them.  For example, I have a few direct share investments that are showing a bit of a loss, and if I'm going to have capital gains from a fund it would be good to crystallise those losses, but until I know how much CGT I'm up for, you don't know how much to sell.

I appreciate this is bit of a niche concern for most people.

The simple solution is to sell everything and just put all the proceeds into funds. But unfortunately legacy investment choices can incur capital gains tax implications so it's not so easy to do this.

For the Vanguard wholesale managed funds I do believe they advised you a few days before the end of the year, it was posted on the Forms and Notices on the 27/06/2017.  Not much notice, but still 3 days to balance off your books.

Additionally, for each payment they do advise of the fund payment amount, so the correct non-resident WHT is withheld.  Just not sure where they publish this. 

Someone else mentioned LIC's, they will probably have as much CGT as a single sector MF/ETF, but as they are not a look through entity it is all done through their company tax return, they pay tax on it at 30% and then pay it to the holder as franked dividend.  LIC's do have special treatment that they can pass on a tax offset for any gains that were held for more than 12 months, as companies are not eligible to discount any capital gains, but you as an Individual or SMSF can.  A disadvantage is that you can't sell another asset to offset the realised gain that occurred inside a LIC like you can with an ETF. 

misterhorsey

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Re: Australian Investing Thread
« Reply #3299 on: July 12, 2017, 11:12:33 PM »
Dividends in my vanguard managed funds were stupidly large this month.. on the order of 6% for my wholesale High Growth Lifestrategy. I guess it was from all the rebalancing they did, removing Australian property etc. Anyway gave me a nice boost to # of units with auto reinvestment even though the total value just dropped straight back to where it was the day afterwards.

On the downside they were significant enough to probably affect my taxes next year.

I'm in the same fund.  I think you may find that even though the statement is emailed to you on 1 July 2017, it actually covers the distribution in the previous financial year (up to 30 June 2016). So they won't affect your taxes next year, but will impact your taxes in the financial year just past.

This is my one complaint about vanguard wholesale fund, and retail too probably.  The distribution usually includes some capital gains, but they can't figure out the amount of CGT until 30 June (according to the vanguard rep I spoke to), meaning that if you have a range of investments it's impossible to strategically manage them.  For example, I have a few direct share investments that are showing a bit of a loss, and if I'm going to have capital gains from a fund it would be good to crystallise those losses, but until I know how much CGT I'm up for, you don't know how much to sell.

I appreciate this is bit of a niche concern for most people.

The simple solution is to sell everything and just put all the proceeds into funds. But unfortunately legacy investment choices can incur capital gains tax implications so it's not so easy to do this.

For the Vanguard wholesale managed funds I do believe they advised you a few days before the end of the year, it was posted on the Forms and Notices on the 27/06/2017.  Not much notice, but still 3 days to balance off your books.

Additionally, for each payment they do advise of the fund payment amount, so the correct non-resident WHT is withheld.  Just not sure where they publish this. 

Someone else mentioned LIC's, they will probably have as much CGT as a single sector MF/ETF, but as they are not a look through entity it is all done through their company tax return, they pay tax on it at 30% and then pay it to the holder as franked dividend.  LIC's do have special treatment that they can pass on a tax offset for any gains that were held for more than 12 months, as companies are not eligible to discount any capital gains, but you as an Individual or SMSF can.  A disadvantage is that you can't sell another asset to offset the realised gain that occurred inside a LIC like you can with an ETF.

Thanks for the tip! Yes you're right. They include a notice in the Forms and Notices section. That would have been handy to have known.  3 days is ample time for a bit of quick selling!

I don't actually recall receiving any email alerting me to this. And it's a also bit disappointing that the Vanguard person I spoke to on the phone didn't alert me to this when I specifically asked them if there was any advance warning of Capital Gains included in any wholesale funds.  He advised that they only do the calculation on the 30th of June. But this even rough guestimate would be handy.

But I'll be in a better position next year. MMM forum hive mind to the rescue!