Australian Investing Thread

[alsoknownasDean]

I filled out my tax return on myTax a month ago, but have been waiting for the pre-fill for VAS and VAP to become available before submitting it.

I've found a difference in the 2 amounts.  Specifically with "Other net foreign source income".

On my tax statements, 20E and 20M are the same.

On the pre-fill, 20M is different, specially by the amount of the foreign income tax offset, 20O.

The pre-fill makes more sense to me and as this is what Vanguard has reported to the ATO is what I will be submitting.  But where do Vanguard get off supplying tax statements that are different to what they tell the ATO ?

Anyone else notice this ?

I still haven't even received my tax statement for my VAS holdings (which I did sell during the year, but I did receive a distribution in the FY). No idea why I haven't received it yet.

Might have to contact Computershare and ask what's up.

[Chris AU]

I filled out my tax return on myTax a month ago, but have been waiting for the pre-fill for VAS and VAP to become available before submitting it.

I've found a difference in the 2 amounts.  Specifically with "Other net foreign source income".

On my tax statements, 20E and 20M are the same.

On the pre-fill, 20M is different, specially by the amount of the foreign income tax offset, 20O.

The pre-fill makes more sense to me and as this is what Vanguard has reported to the ATO is what I will be submitting.  But where do Vanguard get off supplying tax statements that are different to what they tell the ATO ?

Anyone else notice this ?

Yes, I had the same issues for VAS & VGS as mjr. Also 13C Franked Distributions were slightly different for VAS. Noted that previous year it was the same as the statements, so this year I changed it to be the same as the statements. No idea if this is correct...

[lush]

I filled out my tax return on myTax a month ago, but have been waiting for the pre-fill for VAS and VAP to become available before submitting it.

I've found a difference in the 2 amounts.  Specifically with "Other net foreign source income".

On my tax statements, 20E and 20M are the same.

On the pre-fill, 20M is different, specially by the amount of the foreign income tax offset, 20O.

The pre-fill makes more sense to me and as this is what Vanguard has reported to the ATO is what I will be submitting.  But where do Vanguard get off supplying tax statements that are different to what they tell the ATO ?

Anyone else notice this ?

I still haven't even received my tax statement for my VAS holdings (which I did sell during the year, but I did receive a distribution in the FY). No idea why I haven't received it yet.

Might have to contact Computershare and ask what's up.

Me too. Still waiting for Vanguard to submit statements to ATO..... Tick Tock.....

[361742]

Hey everyone. This will be my first post on this awesome thread (i've read almost all the posts - plenty of great info).

I'm currently 21 years old, and I have a fair bit of cash just sitting around in 3ish% savings accounts. Recently ING changed the interested and it's given me another reason to quit being lazy and properly invest my money.

I have around 280k, split up in the following:
205k high intresting savings
65k bitcoin (been pretty lucky with crypto, as I threw a bit of my income into them for a few months).
5k day traded altcoins
5k day traded shares

I'm planning to move most of my savings into index funds, split:
45% VAS
45% VGS
10% VGE

I'm on the fence around the cryptos. On one hand they have been great in terms of return, however i'm pretty damn sure it's a bubble so I would not be surprised if I lost most/all of it, but at my age i feel the risk might be worth it.

Would love to hear people's option of my index fund split & thoughts about crypto - anyone else have some?

[marty998]

Yay! VAS estimated distribution $1.11 per share!

Works out to be $2,100 for me, reinvested to be an additional 28 shares or so.

Hip Hip!

[FFA]

Hey everyone. This will be my first post on this awesome thread (i've read almost all the posts - plenty of great info).

I'm currently 21 years old, and I have a fair bit of cash just sitting around in 3ish% savings accounts. Recently ING changed the interested and it's given me another reason to quit being lazy and properly invest my money.

I have around 280k, split up in the following:
205k high intresting savings
65k bitcoin (been pretty lucky with crypto, as I threw a bit of my income into them for a few months).
5k day traded altcoins
5k day traded shares

I'm planning to move most of my savings into index funds, split:
45% VAS
45% VGS
10% VGE

I'm on the fence around the cryptos. On one hand they have been great in terms of return, however i'm pretty damn sure it's a bubble so I would not be surprised if I lost most/all of it, but at my age i feel the risk might be worth it.

Would love to hear people's option of my index fund split & thoughts about crypto - anyone else have some?

Split looks good to me. The main concern I have is on VAS due to concentration. I like to blend in some diversifiers, MVW and EX20 are my preferred (an example might be 30 VAS / 15 MVW instead of 45 VAS).

Chris AU, yes I noticed the same on VAS pre-fill and also adjusted in line with the statement. Regarding, 20E/20M I enter the same amount in both there.

[mjr]

I got on to Computershare yesterday and had them kick off an investigation as to why the difference.  The CSR reckoned that the statement was the source of truth, which is good to know, but as they're telling the ATO something different I'll let them work out what the story is before submitting it.

[bigchrisb]

Its September 30, when tougher fee reporting rules come in to place for super funds.  These rule changes improve fee transparency by forcing funds to include the costs of  transacting and managing unlisted assets.  Who's going to re-check what they are paying in fees for their super fund?

[cakie]

Hey everyone. This will be my first post on this awesome thread (i've read almost all the posts - plenty of great info).

I'm currently 21 years old, and I have a fair bit of cash just sitting around in 3ish% savings accounts. Recently ING changed the interested and it's given me another reason to quit being lazy and properly invest my money.

I have around 280k, split up in the following:
205k high intresting savings
65k bitcoin (been pretty lucky with crypto, as I threw a bit of my income into them for a few months).
5k day traded altcoins
5k day traded shares

I'm planning to move most of my savings into index funds, split:
45% VAS
45% VGS
10% VGE

I'm on the fence around the cryptos. On one hand they have been great in terms of return, however i'm pretty damn sure it's a bubble so I would not be surprised if I lost most/all of it, but at my age i feel the risk might be worth it.

Would love to hear people's option of my index fund split & thoughts about crypto - anyone else have some?

I think you've got the right idea. With crypto, treat it like any other risky commodity. I would work out what % you are comfortable holding eg 5%, 10% and stick with that. I would personally focus on buy and hold purchases, not day trading...

When I have some extra cash I will buy (and use) a little bit of crypto, but just bought a house, nothing spare atm


Also, +1 on splitting VAS with others like MVW

[lush]

Yay! VAS estimated distribution $1.11 per share!

Works out to be $2,100 for me, reinvested to be an additional 28 shares or so.

Hip Hip!

Hi Marty, can you advise where you get this information from? I am an investor in the VAS Wholesale fund. I have tried looking around the Vanguard site, but no luck. Thanks.

[marty998]

Yay! VAS estimated distribution $1.11 per share!

Works out to be $2,100 for me, reinvested to be an additional 28 shares or so.

Hip Hip!

Hi Marty, can you advise where you get this information from? I am an investor in the VAS Wholesale fund. I have tried looking around the Vanguard site, but no luck. Thanks.

This is the ASX announcement for the ETF. They'll put out a revised distribution notice on Tuesday (the estimate is always revised, materially in some cases).

Not sure about the managed fund, you'll just have to wait.

[lush]

Yay! VAS estimated distribution $1.11 per share!

Works out to be $2,100 for me, reinvested to be an additional 28 shares or so.

Hip Hip!

Hi Marty, can you advise where you get this information from? I am an investor in the VAS Wholesale fund. I have tried looking around the Vanguard site, but no luck. Thanks.

This is the ASX announcement for the ETF. They'll put out a revised distribution notice on Tuesday (the estimate is always revised, materially in some cases).

Not sure about the managed fund, you'll just have to wait.

Thanks Marty.

[BattlaP]

Cryptos are one of the few things in this world where I draw a personal moral line. There’s surely hypocrisy there in me holding index funds full of arms and oil companies, but the amount of power consumed by the way in which cryptos currently function (particularly bitcoin) is totally disgusting. Not only that but, like it or not, their primary use is currently for criminals of all the worst sort. My last addendum is the totally childish attitude of the people who ‘hodl’ them, with the rollercoaster memes and the rubbing losses in people’s faces and the complete obliviousness to any possibility of reasoned discussion and the glee with which they anticipate the ‘inevitable’ crash of fiat.

There’s money to be made in the volatility there but the hook/line/sinker way that people swallow the concepts make it wide open for scam artists and I think there’s a lot of that around this year because of bitcoin’s rise in perceived value.

I’m not going to make any predictions about their future, but in their current state I find them offensive and a little bit ridiculous. Sorry to opinionate this financial forum but these things shouldn’t be glossed over.

[FFA]

I got on to Computershare yesterday and had them kick off an investigation as to why the difference.  The CSR reckoned that the statement was the source of truth, which is good to know, but as they're telling the ATO something different I'll let them work out what the story is before submitting it.

Yes that's my understanding the statement is what matters ultimately and pre-fills should be checked. There can be errors and managed fund data seems to be an area where it happens most often.

[361742]

Split looks good to me. The main concern I have is on VAS due to concentration. I like to blend in some diversifiers, MVW and EX20 are my preferred (an example might be 30 VAS / 15 MVW instead of 45 VAS).

Chris AU, yes I noticed the same on VAS pre-fill and also adjusted in line with the statement. Regarding, 20E/20M I enter the same amount in both there.

My main reason for the high % on VAS was that there are tax credits on the dividends, and that managing dividends from overseas stocks is a bit of hassle. I'll look into the other funds, thanks for the info!

I think you've got the right idea. With crypto, treat it like any other risky commodity. I would work out what % you are comfortable holding eg 5%, 10% and stick with that. I would personally focus on buy and hold purchases, not day trading...

When I have some extra cash I will buy (and use) a little bit of crypto, but just bought a house, nothing spare atm


Also, +1 on splitting VAS with others like MVW

Yea, that's my main decision at the moment, how much BTC to hold. I just hold BTC, don't trade it (longer term investment), but I enjoy messing around with trading altcoins and have made decent profit (which is probably from the market going up as a whole vs me being a good trader). I don't intend to purchase any more crypto.

Cryptos are one of the few things in this world where I draw a personal moral line. There’s surely hypocrisy there in me holding index funds full of arms and oil companies, but the amount of power consumed by the way in which cryptos currently function (particularly bitcoin) is totally disgusting. Not only that but, like it or not, their primary use is currently for criminals of all the worst sort. My last addendum is the totally childish attitude of the people who ‘hodl’ them, with the rollercoaster memes and the rubbing losses in people’s faces and the complete obliviousness to any possibility of reasoned discussion and the glee with which they anticipate the ‘inevitable’ crash of fiat.

There’s money to be made in the volatility there but the hook/line/sinker way that people swallow the concepts make it wide open for scam artists and I think there’s a lot of that around this year because of bitcoin’s rise in perceived value.

I’m not going to make any predictions about their future, but in their current state I find them offensive and a little bit ridiculous. Sorry to opinionate this financial forum but these things shouldn’t be glossed over.

I do agree with some of your points, the crypto community is pretty immature as whole but I'll be honest ,I don't really look into the ethics of my investments. My understanding was that a lot of the power is renewable (since bitcoin is mostly mined where power is cheap, i.e. near hydro plants etc) but it's still a massive waste.

I disagree with your thoughts on the primary use, whileit certainly used to be the case. I think the current primary 'use' is definitely as an investment which has caused the massive rises in prices (which I don't think are sustainable). It can't keep going up forever, and the prices vs utility of BTC right now is through the roof. People promote it as a replacement for money, but no where accepts it, there are too many limitations (plus the fact it takes 10-30 mins for a TX even with high fee of $1-5). 

[bigchrisb]

Yay! VAS estimated distribution $1.11 per share!

Works out to be $2,100 for me, reinvested to be an additional 28 shares or so.

Hip Hip!

Updated distribution announcement today, revised down to $1.0088.  I don't understand how Vanguard Australia get this so wrong so consistently.  It's not like there is anything that has paid in the last three days that wasn't announced and ex-div for a long time.

[Notch]

Yay! VAS estimated distribution $1.11 per share!

Works out to be $2,100 for me, reinvested to be an additional 28 shares or so.

Hip Hip!

Updated distribution announcement today, revised down to $1.0088.  I don't understand how Vanguard Australia get this so wrong so consistently.  It's not like there is anything that has paid in the last three days that wasn't announced and ex-div for a long time.

The first announcement was on 9:14 AM on September 29th.  My understanding is that people buy ("create") units up until close of business on the last trading day.  Any extra units bought dilute the already accumulated dividends the trust is passing on.

[bigchrisb]

The first announcement was on 9:14 AM on September 29th.  My understanding is that people buy ("create") units up until close of business on the last trading day.  Any extra units bought dilute the already accumulated dividends the trust is passing on.

I wonder how much drag this causes for "passive" buy and hold investors?  If its 10% of distributions (as was the case for this distribution), then its close to 50 basis points pre-tax.  I wonder if this is being exacerbated by more people practicing dividend stripping?  I wonder how to get a good answer on it - my experience is that calling Vanguard tends to get the same responses that they have already written as text.  Perhaps this makes a stronger argument for closed end funds?

Doesn't seem to be such an issue in the US cross listed funds.  An artifact of our franking system, or is it just because the sheer size of the US funds is so big that traders can't really move the needle?

[FFA]

The first announcement was on 9:14 AM on September 29th.  My understanding is that people buy ("create") units up until close of business on the last trading day.  Any extra units bought dilute the already accumulated dividends the trust is passing on.

I wonder how much drag this causes for "passive" buy and hold investors?  If its 10% of distributions (as was the case for this distribution), then its close to 50 basis points pre-tax.  I wonder if this is being exacerbated by more people practicing dividend stripping?  I wonder how to get a good answer on it - my experience is that calling Vanguard tends to get the same responses that they have already written as text.  Perhaps this makes a stronger argument for closed end funds?

Doesn't seem to be such an issue in the US cross listed funds.  An artifact of our franking system, or is it just because the sheer size of the US funds is so big that traders can't really move the needle?

I've noticed HVST parking in VAS to strip the div in the past. Not sure if they were doing it this time though, but it must've been tempting since it was a big quarter.

There's no free lunches so while these short-termers pinch some of the distribution, they are paying for it too (as in it was already in the NAV price paid in late Sep). And less distribution also means less fall in NAV on the ex date. So for long-term investors, any loss of distribution is offset by a capital gain (or higher price). However that doesn't take into account the franking credits.

[marty998]

Yay! VAS estimated distribution $1.11 per share!

Works out to be $2,100 for me, reinvested to be an additional 28 shares or so.

Hip Hip!

Updated distribution announcement today, revised down to $1.0088.  I don't understand how Vanguard Australia get this so wrong so consistently.  It's not like there is anything that has paid in the last three days that wasn't announced and ex-div for a long time.

The first announcement was on 9:14 AM on September 29th.  My understanding is that people buy ("create") units up until close of business on the last trading day.  Any extra units bought dilute the already accumulated dividends the trust is passing on.

The fund is too big to grow 10% in a day. Several hundred million would have to go in, and the number of completed trades suggests nowhere near that amount is bought and sold daily.

I don't have an answer, to be out by the margins they are every quarter suggests something is broken internally in Vanguard.

Doesn't inspire confidence, but since I still get paid a decent yield and the fund carries on I don't think about it too much.

Perhaps I should worry.

[FFA]

no harm keeping an eye on tracking error every now and then. if the ETF's total return is in line with the benchmark less fees.

[lush]

Hi All,

Can anyone tell me what they think of the returns for the wholesale managed funds for VAS & Balanced  - were good this quarter? I can never tell from my distributions if they are good. So new to this world of distributions and working it all out. Thanks!

[misterhorsey]

It does depend on what you mean by 'good'. It is relative.

Firstly, it's interesting to track quarterly returns but it's not terribly useful. Investments like these are best left to do their thing and looked at over long periods of time. Then you get a meaningful view of their performance.

But in terms of evaluating whether performance is 'good', well consider that:
- VAS should track the S&P 200, so the quarterly instalment should align with the performance of that basket of shares. 
- The Balanced Managed Fund quarterly instalment should align with the performance of the individual funds that comprise the Balanced fund. 

So determining whether performance is 'good' is whether or not they accurately track the index (re: VAS) or in the case of the Balanced Managed Fund, whether the performance accurately tracks the individual indexes that each of the individual funds is based on (good luck trying to figure that out quickly!). One hopes that they do what they say they do.  I think this is the most important way of evaluating performance.

Another way of evaluating whether performance is good this quarter is by comparing the performance with other asset classes: individual shares, other managed funds, property, alpacas, etc etc.  You can do this - but why bother. It will just make you feel temporarily bad or smug. And that won't last.

I'm not sure that this is entirely helpful, but I'll mention it in the interests of provoking someone else with a better brain than mine to provide a bettered more learn'd answer!

[lush]

It does depend on what you mean by 'good'. It is relative.

Firstly, it's interesting to track quarterly returns but it's not terribly useful. Investments like these are best left to do their thing and looked at over long periods of time. Then you get a meaningful view of their performance.

But in terms of evaluating whether performance is 'good', well consider that:
- VAS should track the S&P 200, so the quarterly instalment should align with the performance of that basket of shares. 
- The Balanced Managed Fund quarterly instalment should align with the performance of the individual funds that comprise the Balanced fund. 

So determining whether performance is 'good' is whether or not they accurately track the index (re: VAS) or in the case of the Balanced Managed Fund, whether the performance accurately tracks the individual indexes that each of the individual funds is based on (good luck trying to figure that out quickly!). One hopes that they do what they say they do.  I think this is the most important way of evaluating performance.

Another way of evaluating whether performance is good this quarter is by comparing the performance with other asset classes: individual shares, other managed funds, property, alpacas, etc etc.  You can do this - but why bother. It will just make you feel temporarily bad or smug. And that won't last.

I'm not sure that this is entirely helpful, but I'll mention it in the interests of provoking someone else with a better brain than mine to provide a bettered more learn'd answer!

So much sensible logic!!! Yes it is helpful.  I know I should just stick to my long term plan and just “forget” how the funds are going. However it’s really hard not to “track” to get a feeling if things are  growing or moving forward. But as you have suggested this will only bring upon short term depression or highs. Think I will try to breathe a bit and let time do its thing. Cheers.

[MrThatsDifferent]

Curious to see what you think, especially BigChris: this article suggests that a SMSF focused on Australian shares with franking credits and $1 million invested will generate $70k to live off for life, without touching the principal: https://www.superguide.com.au/smsfs/can-1-million-can-last-longer-than-you

Thoughts?

[Rowellen]

Interesting article. I have many clients who do this. Some are now in their 80s and are drawing down capital. Their balances didn't start over 1m though. Also many spend much more than 70k. I have no idea how but some spend over 250k a year then wonder why their capital is dropping lol. I wonder if "Mark" realises he doesn't have to pull the money out of his SMSF. He could just commute the excess to accumulation. It would mean an actuarial certificate would be required and also a reduction in the tax refund.

[MrThatsDifferent]

Interesting article. I have many clients who do this. Some are now in their 80s and are drawing down capital. Their balances didn't start over 1m though. Also many spend much more than 70k. I have no idea how but some spend over 250k a year then wonder why their capital is dropping lol. I wonder if "Mark" realises he doesn't have to pull the money out of his SMSF. He could just commute the excess to accumulation. It would mean an actuarial certificate would be required and also a reduction in the tax refund.

He argues this can only be done in a SMSF. I have my super in AusSuper and a Vanguard account, can I achieve the same in those vehicles?

[superannuationfreak]

Curious to see what you think, especially BigChris: this article suggests that a SMSF focused on Australian shares with franking credits and $1 million invested will generate $70k to live off for life, without touching the principal: https://www.superguide.com.au/smsfs/can-1-million-can-last-longer-than-you

Thoughts?

I'll take this one from two perspectives.

Firstly, the rational investor perspective.  Dividends are not a magic pudding, when they're paid out the price (on average) falls by the dividend amount.  Dividend cuts during persistent downturns are also not uncommon.  The benefits are largely psychological and at a withdrawal rate that high (let's say 5% + franking credits) there's meaningful sequence of returns risk in a large downturn consistent with historical downturns (i.e. if you keep spending at that rate during a protracted downturn your money will not outlast your expected lifespan).

From a behavioural perspective, however, if you have (or almost enough and are willing and able to be flexible enough in your spending) then your biggest risks are behavioural.  Any reasonable plan (including, off the top of my head say, 50-100% stocks) which is consistently followed will be fine in most states of the world.  So if you take psychological comfort from just spending dividends, because that's what you've always done/planned, to the extent that you're able to stick to that plan, you'll likely be better off than if you tried more rational total return investing but were unable to stick to it (e.g. going to cash 'at the bottom').  There's definitely still sequence of returns risk, there's large risks from only being in one country's equities but the behavioural benefits may outweigh those for some individuals.

Even for those investors, taking that approach to extremes is even more risky, i.e. focusing on the very highest dividend stocks or dividend 'harvesting'.  E.g. in a year where the ETF HVST has distributed almost 15% in dividends to a 0% tax rate investor after franking credits the total returns (after fees, including dividends and franking credits) have been below -3% where the return of the ASX200 has been over +9% (before franking credits, but involving only modest fees).  Be too dividend focused and your capital will erode without you needing to spend it.

https://www.betashares.com.au/fund/australian-dividend-harvester-fund/#performance
https://www.blackrock.com/au/individual/products/251852/ishares-core-s-and-p-asx-200-etf

[MrThatsDifferent]

So, are you saying that the SMSF path isn’t necessary? He’s able to get 7% of his stash yearly, without disturbing the principal. I’d like to do the same.  Apologies, I’m quite slow with all of this. A SMSF seems to be a bit complex, I’d be happy to leave everything in Aus Super, Vanguard and a HISA.

[mjr]

I don't understand Mark's article at all.  He seems to be saying that if you're in a "commercial" super fund, then the only way to get money out of the fund for pension payments is by selling units.  That's not my understanding, plenty of managed funds pay distributions which provide income without selling units.

From that point on, the argument collapses back to safe withdrawal rates allowing a sum to last 30 years.

[Luckyvik]

The article regarding Mark was from 2011, back then it wasn't as common to have 'direct investment' options where you can hold shares through a commercial super fund such as ING directly.


Sent from my iPhone using Tapatalk

[mjr]

You don't need to hold direct shares in a fund,  distributions from a fund are equivalent to dividends for this discussion.  So the question is did funds pay distributions waaay  back in 2011 (they did).

[MrThatsDifferent]

You don't need to hold direct shares in a fund,  distributions from a fund are equivalent to dividends for this discussion.  So the question is did funds pay distributions waaay  back in 2011 (they did).

Dumb questions, are distributions the same as gains?

[MrThatsDifferent]

The article regarding Mark was from 2011, back then it wasn't as common to have 'direct investment' options where you can hold shares through a commercial super fund such as ING directly.


Sent from my iPhone using Tapatalk

The original article was written in 2011, but the revisited it in 2017 and checked in with Mark to see if he still thinks the same. He responds to questions in the comments.

[Fresh Bread]

Apologise if this is obvious, I have a stinking cold... Does anyone know what shares "Mark" owns? How is he getting 5% dividends? I'm sticking with Vanguard anyway, just curious.

I can't see it but did he mention whether he's held his capital value as hoped? Or has his high dividend stock not had the growth as superannuation freak has discussed? 

[mjr]

Dumb questions, are distributions the same as gains?

See superfreak's post from yesterday.  Distributions and capital gains together form the total return from a managed fund investment.  Distributions are paid out in cash and don't require you to explicitly sell units.  The bulk of distributions from managed funds come from the dividends from shares held in the fund (depending on the asset allocation of the fund, of course).

[MrThatsDifferent]

Dumb questions, are distributions the same as gains?

See superfreak's post from yesterday.  Distributions and capital gains together form the total return from a managed fund investment.  Distributions are paid out in cash and don't require you to explicitly sell units.  The bulk of distributions from managed funds come from the dividends from shares held in the fund (depending on the asset allocation of the fund, of course).

Thanks. Yeah, just reread this: With this strategy, Mark stated that his SMSF portfolio generates about 15% total return, comprised of 7% income and about 8% average growth.

[MrThatsDifferent]

So, if I retire and pull out $18k of distributions, then that would be tax free right?  What if I pulled out $35k and contributed $17k of that to my super? How would that help my taxes if my distributions from a non-super Vanguard account was my only income and I’m under 60yo?

[superannuationfreak]

So, are you saying that the SMSF path isn’t necessary? He’s able to get 7% of his stash yearly, without disturbing the principal. I’d like to do the same.  Apologies, I’m quite slow with all of this. A SMSF seems to be a bit complex, I’d be happy to leave everything in Aus Super, Vanguard and a HISA.

Sorry if I was a bit hypothetical, I took it as more of a hypothetical question.  That high a withdrawal rate is risky.  Just because Mark hasn't experienced the risk doesn't mean there isn't risk (even with the GFC markets have recovered strongly, much better than historical worst case scenarios, earnings and dividends even more so).  I would not recommend it, even if you had the 100% conviction in the strategy that Mark has (and your questions suggest you don't - if you were close to 100% shares while no longer earning an income from employment, next time your shares drop 20-30% would that really have zero effect on your behaviour?)

Could you do something like this in AustralianSuper?  It would either be as much work as an SMSF (picking stocks using Member Direct) or you'd lose some of the psychological benefits (you'd be redeeming units which have had dividends reinvested, although mathematics says at 0% tax there's basically no difference between reinvesting the dividends and then redeeming units vs taking dividends).

Also, on returns, if Mark has kept up 8% growth and 7% dividends after franking credits over 10 years including the GFC then he's a brilliant investor.  HostPlus (picking an example, not suggesting any indication of future performance) has had one of the strongest long-term track records in Australian Shares and had a compound rate of 6% p.a. over the 10 years to June 2017.  That included franking credits but was taxed (at 10-15% super rates) and had fees.  Even adding on an extra 2% p.a. to account for that, if you can consistently invest at 15% p.a. when professionals are earning 8% p.a. then maybe a 7% withdrawal rate isn't so crazy.  I can't do that and I would guess, if measured properly, neither can Mark.

[mjr]

So, if I retire and pull out $18k of distributions, then that would be tax free right?  What if I pulled out $35k and contributed $17k of that to my super? How would that help my taxes if my distributions from a non-super Vanguard account was my only income and I’m under 60yo?

Not sure what you mean by "pull out".  Your managed fund will give you an amount of distributions which will depend on how much you have invested.  You don't choose how much to "pull out" as distributions.  You can only choose how many units to sell if you want to "pull out" funds and such funds will be subject to capital gains tax.

If you receive $18k in distributions or capital gains, then that's under the tax-free threshold and you'll pay no tax if that's your only income.

If you pulled out $35k and contributed $17k to super, then that $17k will incur 15% tax as opposed to the 19% tax (plus Medicare levy) that you'd incur if you didn't seek the personal contribution tax deduction.

[MrThatsDifferent]

So, if I retire and pull out $18k of distributions, then that would be tax free right?  What if I pulled out $35k and contributed $17k of that to my super? How would that help my taxes if my distributions from a non-super Vanguard account was my only income and I’m under 60yo?

Not sure what you mean by "pull out".  Your managed fund will give you an amount of distributions which will depend on how much you have invested.  You don't choose how much to "pull out" as distributions.  You can only choose how many units to sell if you want to "pull out" funds and such funds will be subject to capital gains tax.

If you receive $18k in distributions or capital gains, then that's under the tax-free threshold and you'll pay no tax if that's your only income.

If you pulled out $35k and contributed $17k to super, then that $17k will incur 15% tax as opposed to the 19% tax (plus Medicare levy) that you'd incur if you didn't seek the personal contribution tax deduction.

Thanks MJR.  If you get a lower tax rate, why wouldn’t an early retiree cash out the extra $25k and put in super, seems like you get a 4% tax benefit. It seems like if I can shift money from Vanguard into the super from 50-60, that money will be tax free at 60. I’m trying to figure out how to access the most money while paying the least in taxes, legally of course. I’m thinking I should have a fair chunk of cash reserves that I can add to the $18k distributions.  So much to figure out!

[BattlaP]

Has anyone found out from Vanguard when their auto-fill info for the managed funds will get submitted? I want to do my tax return and it's still not reporting anything from them automatically. Annoyance.

[marty998]

Has anyone found out from Vanguard when their auto-fill info for the managed funds will get submitted? I want to do my tax return and it's still not reporting anything from them automatically. Annoyance.

Has anyone found out from Vanguard when their auto-fill info for the managed funds will get submitted? I want to do my tax return and it's still not reporting anything from them automatically. Annoyance.

You don't have to wait (seem to recall having this conversation before :) apologies if I'm giving the same answer)

[Fresh Bread]

I'm getting to the nitty gritty of how we actually draw income in retirement since it might happen next year. I've always just assumed a 3.5% WR because I've only ever really looked at total growth and thought that was reasonable, but today I've been thinking further about Mark and his dividends.

Maybe if we move more towards a 50/50 Aussie/International split (we are currently 40/60) then I could switch our retirement 'withdrawal rate' income to being actual fund distributions and go from an assumption of 3.5% to 4% or maybe even 5% including franking credits.

Do these sums make sense: Vanguard fund income over the last 10 yrs was roughly 5% Aussie / 3% International. So if I have my funds invested 50/50, the income would average at 4%. But then I need to add franking credits: 5% + 2% = 7% so would my income average at 5% of total investment? 

We have other sources of income so are ok with fluctuations in the fund distributions. If the fund income drops away we'd still have plenty, just maybe cut back travel or whatever.

[mjr]

Has anyone found out from Vanguard when their auto-fill info for the managed funds will get submitted? I want to do my tax return and it's still not reporting anything from them automatically. Annoyance.

Mine appeared weeks ago.  With an error in the pre-fill as well which is still not resolved.  Just use your tax statement.

[marty998]

I'm getting to the nitty gritty of how we actually draw income in retirement since it might happen next year. I've always just assumed a 3.5% WR because I've only ever really looked at total growth and thought that was reasonable, but today I've been thinking further about Mark and his dividends.

Maybe if we move more towards a 50/50 Aussie/International split (we are currently 40/60) then I could switch our retirement 'withdrawal rate' income to being actual fund distributions and go from an assumption of 3.5% to 4% or maybe even 5% including franking credits.

Do these sums make sense: Vanguard fund income over the last 10 yrs was roughly 5% Aussie / 3% International. So if I have my funds invested 50/50, the income would average at 4%. But then I need to add franking credits: 5% + 2% = 7% so would my income average at 5% of total investment? 

We have other sources of income so are ok with fluctuations in the fund distributions. If the fund income drops away we'd still have plenty, just maybe cut back travel or whatever.

Your franking credit refund will depend on your tax rate, which will depend on your total income distributions.

E.g. if you derive $20,000 distributions from international shares, and $30,000 from domestic shares, then your income is $50k + the franking credits. Puts you well into the 34.5% marginal tax rate, which means you don't get a franking refund (you owe 4.5% on the Aus income).

Hard to know for sure without your full income details (you don't have to post that obviously if you don't want to).

[Fresh Bread]

Yes of course, cheers Marty. Since there's two of us I think I'll fall into the 19% bracket, hubby may not retire so will be very high. I'll do a spreadsheet - now we've sold an IP and moved to shares we of course have different deductions and what not and I haven't worked it all out. I haven't even done my tax yet for 16/17 and there's all the sale stuff to work out for 17/18 :(

Hey, we did sign the contract in July in the end (I think it was you that pointed out the benefit of the delay?) I've put the amount for the potential CGT bill in a 2.85% esaver so that's a nice little bonus I didn't expect.

[lush]

Has anyone found out from Vanguard when their auto-fill info for the managed funds will get submitted? I want to do my tax return and it's still not reporting anything from them automatically. Annoyance.

I called them and they said they have moved it to the end of Oct! So dosen't leave much time to to meet the ATO deadline.

For those of you wondering why I am waiting, when I plugged in the numbers on mytax, I have a threshold of CGT affect and try as I might I am in a loop of hell that won't seem to fix itself. So I have decided to wait to see if the pre-fill might fix the problem. I don't have the time to talk to the ATO about this right now.

[MrThatsDifferent]

I'm getting to the nitty gritty of how we actually draw income in retirement since it might happen next year. I've always just assumed a 3.5% WR because I've only ever really looked at total growth and thought that was reasonable, but today I've been thinking further about Mark and his dividends.

Maybe if we move more towards a 50/50 Aussie/International split (we are currently 40/60) then I could switch our retirement 'withdrawal rate' income to being actual fund distributions and go from an assumption of 3.5% to 4% or maybe even 5% including franking credits.

Do these sums make sense: Vanguard fund income over the last 10 yrs was roughly 5% Aussie / 3% International. So if I have my funds invested 50/50, the income would average at 4%. But then I need to add franking credits: 5% + 2% = 7% so would my income average at 5% of total investment? 

We have other sources of income so are ok with fluctuations in the fund distributions. If the fund income drops away we'd still have plenty, just maybe cut back travel or whatever.

Your franking credit refund will depend on your tax rate, which will depend on your total income distributions.

E.g. if you derive $20,000 distributions from international shares, and $30,000 from domestic shares, then your income is $50k + the franking credits. Puts you well into the 34.5% marginal tax rate, which means you don't get a franking refund (you owe 4.5% on the Aus income).

Hard to know for sure without your full income details (you don't have to post that obviously if you don't want to).

What then, if anything, can we do to lower taxes? Invest those distributions into super?

[marty998]

I'm getting to the nitty gritty of how we actually draw income in retirement since it might happen next year. I've always just assumed a 3.5% WR because I've only ever really looked at total growth and thought that was reasonable, but today I've been thinking further about Mark and his dividends.

Maybe if we move more towards a 50/50 Aussie/International split (we are currently 40/60) then I could switch our retirement 'withdrawal rate' income to being actual fund distributions and go from an assumption of 3.5% to 4% or maybe even 5% including franking credits.

Do these sums make sense: Vanguard fund income over the last 10 yrs was roughly 5% Aussie / 3% International. So if I have my funds invested 50/50, the income would average at 4%. But then I need to add franking credits: 5% + 2% = 7% so would my income average at 5% of total investment? 

We have other sources of income so are ok with fluctuations in the fund distributions. If the fund income drops away we'd still have plenty, just maybe cut back travel or whatever.

Your franking credit refund will depend on your tax rate, which will depend on your total income distributions.

E.g. if you derive $20,000 distributions from international shares, and $30,000 from domestic shares, then your income is $50k + the franking credits. Puts you well into the 34.5% marginal tax rate, which means you don't get a franking refund (you owe 4.5% on the Aus income).

Hard to know for sure without your full income details (you don't have to post that obviously if you don't want to).

What then, if anything, can we do to lower taxes? Invest those distributions into super?

Split income as much as you can - via companies, trusts, or just generally holding equal balances.

The cheeky answer is that if you really want to pay less tax then you can simply earn less.

Seriously though... I can't imagine you are that unhappy about paying 4.5% tax are you?