The Money Mustache Community
Around the World => Australia Discussion => Topic started by: HomewardBound on May 05, 2019, 08:04:07 AM
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I’ve been reading and contributing to these forums for a number of years now but with my life about to take on a big exciting change I’ve decided to also have an online reset to give me a fresh start.
Let me give the back story first:
- I left Australia in the late 90’s for a holiday which turned into twenty years living abroad. I’ve travelled the world with my work and am currently living in the UK.
- Happily married to Mrs Homeward Bound with no children.
- Up until 11 years ago financially I lived day to day like the vast majority.
- In late 2007 I hit a cross roads requiring some decisions and after much soul searching I decided on a plan that involved increasing earnings, living far more intentionally to decrease spending and taking responsibility for my own financial situation which I thought would give me rapid early retirement options. Today it’s obviously well known as FIRE. That plan sort of worked as today we have:
-- $1.4M in readily accessible investments in my name.
-- $1.1M in a UK pension (the UK equivalent of Australian Super) in my name.
-- $800k in readily accessible investments in Mrs Homeward Bound’s name.
Before I go on I do intend to take some professional accountancy advice but I find it always helpful to know a little about what I’m walking into so I can ask the right questions and make sure the advice seems sound (unknown unknowns are always a concern)
So what’s the plan:
- We intend to FIRE and as part of that will move home to Australia.
- We intend to build a modest home with eco/low’ish running cost credentials but not as aggressive as being off-grid – think the basics like decent insulation, double glazing, good orientation, oversized PV panels for grid feed in, rain water harvesting... Research so far suggests that will cost us about $550k including the land leaving us with net worth between us of about $2.75M. Now with low’ish home running costs, a second hand small car and a largely vegan diet I think our fixed costs will be something like $16k per annum which is a ‘safe’ withdrawal rate of about 0.6% per annum. In comparison here in the UK we’ve tracked our spending for many years and ignoring rent (as we’ll own in Aus) and work costs our annual spending currently runs to about $13k per annum. So that leaves plenty of discretionary spending in the good economic times so I think financially we might just about have won the game given the lifestyle we want to lead.
- As when I left Australia I had not much more than debt on a home and we now have a reasonable amount of assets I’m going to be able to take advantage of the Australia tax law nuance which essentially allows us to “When you become an Australian resident (other than a temporary resident), you're taken to have acquired certain assets at the time you became a resident for their market value at that time.”
- So that tax nuance essentially allows us to completely reset our investments and greatly simplify our financial positions (both the investment products and the countries where the accounts are held). With that in mind...
- I will leave my pension in the UK. I can’t access it for another 8 years and I can’t move it as a QROPS transfer to Aus is now pretty much impossible as I understand it. When I finally can access it will be treated as overseas earnings from a tax perspective. If the pension performs too well from here I’m also at risk of reaching the UK pension lifetime allowance which will result in draconian UK ‘tax’ penalties so I’m going to position this as the insurance policy side of our portfolio so it will hold the majority of our bonds and gold.
- We will move all of our readily accessible investments to Australia and split them approximately 50:50. In the spirit of simplicity (and low expenses) we’re going to have a 3 fund portfolio – VAS, VTS and VEU.
- We’ll also keep 3 years of fixed spending in cash which we’ll use to help when dividends fall during the next ‘big one’. Otherwise post the home build we’ll be fully invested.
- Once everything is in place it will essentially be a 73% equity (equities, REIT’s, gold) : 27% bond (government/corporate bonds, cash)
- In normal times the accessible investments will spin off more dividends than we’ll spend so we’ll spend all of my dividends and only part of Mrs Homeward Bound’s. The remaining dividends she will reinvest meaning with time our readily accessible investments should skew in her favour. The aim is to ensure our marginal tax rates are the same once my pension comes on line.
So that’s the high level plan. I hope the collective might be able to help with a couple of questions:
- Firstly, can anybody spot any errors or obvious flaws in the plan?
- Would a Trust structure of some description help? I’m thinking that provided we keep things split roughly 50:50 it wouldn’t but I know nothing about Australian Trusts. Without a Trust I think the trick will be managing the switch on of my pension in 8 years or so.
- Minimising expenses is something I’m passionate about. I currently have a legacy CommSec Account and if I’m understanding their fee structure correctly to invest with them we’re going to be up for something like $2,000 in trading costs which seems excessive. Some of the blogs are now talking about a stockbroker called SelfWealth which is fixed $9.50 per trade which if we went with them would cost us closer to $60 to get fully invested. Is anybody using them and would they recommend them? Any other reliable low cost options?
Thanks if you’ve made it this far.
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Good to read about another Australian dealing with the complexities of returning to Australia.
I have been overseas more than 30 years but I am intending to return to Australia later in 2019.
Most of my investments are already in Australia, including a large amount in an Australian superannuation account.
It promises to be an interesting and complex time over the next year.
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Good luck with the move Lukim. It's interesting you were able to keep building your investments in Australia. Working for UK employers Super building was never an option but even away from that I found that as soon as I became a non-resident the opportunity to invest in Australia dried up.
Our aim is to be in Australia by Christmas 2019 but we'll see how we get on. Decision has only recently been made and there's a lot to do between then and now. We've probably also made it more difficult for ourselves than we had to as we honestly didn't know if we would ever be back but as we've aged life priorities have changed. I'd also add that Maslow was right.
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If you’ve lived overseas for 20 years, you may want to dip your toe in the water first. Australia may have changed in ways that are important to you, and you may have changed too. I’ve known a number of migrants who were never happy in Australia, but when they went back home, they no longer felt ‘home’ there either. It’s very sad, but it happens. Also, you may want to travel around a bit before deciding on anywhere in particular. You may find that some places - even some suburbs in the same city - are more the home you want than others.
I guess you want to be near family, but there is always a variety of places near to another.
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Very good point deborah. It's funny but in our time overseas, while having a great time, we have never felt like putting down permanent roots (is that what people call 'home'...). That then causes it's own problems as we've for example never bought a home in that 20 years which then prevents formation of a place to call 'home'. It then becomes a self fulfilling prophecy. How do we give Australia a chance to become home without self sabotaging ourselves then becomes the question.
Not for a second do we think we are returning to a land of unicorns and we are yet to settle on an exact area. What's important now though is Security/Safety (does owning your home and a fixed costs FIRE withdrawal rate at today's valuations of 0.6% give that?), access to aged parents before it's too late and the opportunity to rekindle strong friendships that have lasted the time but which have of course weakened with distance.
I know the move will however damage my esteem needs as I won't be able to work in my field of expertise from Australia. Positively I also don't think I'd want to as over the years it has more and more gone from being meaningful work to a job. Something I foresaw way back in 2007 and which drove me to FIRE in the first place. That will also mean I'll need to replace some of my sense of purpose as my work (job?) has filled part of that as well. So while I'll win in some areas I'll have to rebuild some others. I guess life is never perfect but FIRE will give me plenty of opportunity to find what I enjoy as a paycheck doesn't have to be attached to it.