Australian Investing Thread

[mjr]

I'm seeing this question discussed on other fora as well.

My comments there and here are "Given it's so hard to get large sums into super these days, why would you want to voluntary take some out" ?

I mean, it's at most $20k.  People want to move $20k out of a low-tax environment into a taxable account just to get access to $20k earlier ?

I'm 54, retired and still shovelling $25k p.a. into super and plan to until I'm 60 at least.

If your income is already permanently low such that you're better off tax-wise to move money out of super, then sure, but that's no early-retirement situation in which I'd want to be...

[bigchrisb]

I'm seeing this question discussed on other fora as well.

My comments there and here are "Given it's so hard to get large sums into super these days, why would you want to voluntary take some out" ?

I mean, it's at most $20k.  People want to move $20k out of a low-tax environment into a taxable account just to get access to $20k earlier ?

I'm 54, retired and still shovelling $25k p.a. into super and plan to until I'm 60 at least.

If your income is already permanently low such that you're better off tax-wise to move money out of super, then sure, but that's no early-retirement situation in which I'd want to be...

I'm in the same camp.  I'm younger (38), but am looking for all the ways I can get money IN to super, not out.  If I needed the liquidity to get through the short term, then I'd be looking strongly at it. 

The way I look at it, I expect my taxable income to be above the $37k tax band for the rest of my life.  Why would I move money from a 15%/0% environment to a 34.5% tax environment if I didn't need it?  The same logic would hold true (but less strongly) if I was looking at the $18k tax band.  Of course, the various tax offsets/credits may have minor impact, but for me won't change the outcome.

I am however enjoying the pain that the industry super funds are having for being too arrogant about liquidity.  I'm following the HostPlus drama unfold in particular, as they are likely to be one of the most impacted.  Will be interesting to see what the impact on buy/hold/accumulate members is in the long run.  Its one of those moments when the control of a SMSF comes to the fore!

[marty998]

I'm seeing this question discussed on other fora as well.

My comments there and here are "Given it's so hard to get large sums into super these days, why would you want to voluntary take some out" ?

I mean, it's at most $20k.  People want to move $20k out of a low-tax environment into a taxable account just to get access to $20k earlier ?

I'm 54, retired and still shovelling $25k p.a. into super and plan to until I'm 60 at least.

If your income is already permanently low such that you're better off tax-wise to move money out of super, then sure, but that's no early-retirement situation in which I'd want to be...

I'm in the same camp.  I'm younger (38), but am looking for all the ways I can get money IN to super, not out.  If I needed the liquidity to get through the short term, then I'd be looking strongly at it. 

The way I look at it, I expect my taxable income to be above the $37k tax band for the rest of my life.  Why would I move money from a 15%/0% environment to a 34.5% tax environment if I didn't need it?  The same logic would hold true (but less strongly) if I was looking at the $18k tax band.  Of course, the various tax offsets/credits may have minor impact, but for me won't change the outcome.

I am however enjoying the pain that the industry super funds are having for being too arrogant about liquidity.  I'm following the HostPlus drama unfold in particular, as they are likely to be one of the most impacted.  Will be interesting to see what the impact on buy/hold/accumulate members is in the long run.  Its one of those moments when the control of a SMSF comes to the fore!

It's really not going to have that much of an impact on the Industry Funds, even Hostplus. There's really not going to be much pain, if anything, getting rid of all the low balance members will actually help reduce admin costs and improve returns in the medium term.

The Industry funds have a huge amount of cash stockpiled (ask me how I know). Hostplus, per the front page of its website says they have $6 billion as of 1 April, and remember they still get the 9.5% in from the people who are still working.

If all 600,000 registered with the ATO to withdraw their Super withdrew the maximum and if all of them are with Hostplus, the fund will still be ok.

[Ozstache]

"Given it's so hard to get large sums into super these days, why would you want to voluntary take some out" ?

One reason is if you wanted to transfer some super from one partner who has hit the transfer balance cap to the other who has not. A tax free withdrawal then a tax deductible contribution, plus more overall pensionable super for a couple sounds like a win to me.

[bigchrisb]

I'm in the same camp.  I'm younger (38), but am looking for all the ways I can get money IN to super, not out.  If I needed the liquidity to get through the short term, then I'd be looking strongly at it. 

The way I look at it, I expect my taxable income to be above the $37k tax band for the rest of my life.  Why would I move money from a 15%/0% environment to a 34.5% tax environment if I didn't need it?  The same logic would hold true (but less strongly) if I was looking at the $18k tax band.  Of course, the various tax offsets/credits may have minor impact, but for me won't change the outcome.

I am however enjoying the pain that the industry super funds are having for being too arrogant about liquidity.  I'm following the HostPlus drama unfold in particular, as they are likely to be one of the most impacted.  Will be interesting to see what the impact on buy/hold/accumulate members is in the long run.  Its one of those moments when the control of a SMSF comes to the fore!

It's really not going to have that much of an impact on the Industry Funds, even Hostplus. There's really not going to be much pain, if anything, getting rid of all the low balance members will actually help reduce admin costs and improve returns in the medium term.

The Industry funds have a huge amount of cash stockpiled (ask me how I know). Hostplus, per the front page of its website says they have $6 billion as of 1 April, and remember they still get the 9.5% in from the people who are still working.

If all 600,000 registered with the ATO to withdraw their Super withdrew the maximum and if all of them are with Hostplus, the fund will still be ok.

Yes, and as per their 2019 annual statement, they had 2bn.  So, when asset prices have been totally smashed, they have not only increased the percentage allocation to cash, but total cash balances too.  That's exactly the opposite action than I want for my super.  If I were a long term holder of assets in this fund, who will effectively pay for it by reduced returns, I'd be very frustrated.

[mjr]

One reason is if you wanted to transfer some super from one partner who has hit the transfer balance cap to the other who has not. A tax free withdrawal then a tax deductible contribution, plus more overall pensionable super for a couple sounds like a win to me.

I did ask for a reason and yep, this is one, but I don't know that I'd be OK with a person who has accumulated $1.6m in super using a mechanism designed to help people desperate for money to wangle a tax deduction and skirt a contribution cap.

Of course, I know that no one is asking me if I'm ok with it :-)

[marty998]

I'm in the same camp.  I'm younger (38), but am looking for all the ways I can get money IN to super, not out.  If I needed the liquidity to get through the short term, then I'd be looking strongly at it. 

The way I look at it, I expect my taxable income to be above the $37k tax band for the rest of my life.  Why would I move money from a 15%/0% environment to a 34.5% tax environment if I didn't need it?  The same logic would hold true (but less strongly) if I was looking at the $18k tax band.  Of course, the various tax offsets/credits may have minor impact, but for me won't change the outcome.

I am however enjoying the pain that the industry super funds are having for being too arrogant about liquidity.  I'm following the HostPlus drama unfold in particular, as they are likely to be one of the most impacted.  Will be interesting to see what the impact on buy/hold/accumulate members is in the long run.  Its one of those moments when the control of a SMSF comes to the fore!

It's really not going to have that much of an impact on the Industry Funds, even Hostplus. There's really not going to be much pain, if anything, getting rid of all the low balance members will actually help reduce admin costs and improve returns in the medium term.

The Industry funds have a huge amount of cash stockpiled (ask me how I know). Hostplus, per the front page of its website says they have $6 billion as of 1 April, and remember they still get the 9.5% in from the people who are still working.

If all 600,000 registered with the ATO to withdraw their Super withdrew the maximum and if all of them are with Hostplus, the fund will still be ok.

Yes, and as per their 2019 annual statement, they had 2bn.  So, when asset prices have been totally smashed, they have not only increased the percentage allocation to cash, but total cash balances too.  That's exactly the opposite action than I want for my super.  If I were a long term holder of assets in this fund, who will effectively pay for it by reduced returns, I'd be very frustrated.

Is it possible to resolve how they increased the cash holdings by $4bn? A lot of it could be the 9.5% + franking credit refunds.

If you're in the balanced option you might feel some drag on future returns, but if you've chosen 100% equities then you're not going to notice any change long term.

[mjr]

Nice work Eucalyptus!

As for bargains, I see that the travel sector is getting hammered.  Flybe collapsed in the UK.  The one I'm watching at the moment is VAHHA, a listed note/bond from Virgin Australia.  Its been smashed in the last couple of weeks, and is trading at 75c in the dollar. 

It has a fixed face yield of 8% and lasts for 5 years (Nov 2024).  What that means is that you are buying $140 in future cash flows for $75.  A bargain, provided Virgin Australia does not go bust in the next 4 years an 8 months.

Given that they were already in some financial strife prior to the virus problems emerging in China , I don't see it as risk free by any means.  But I am watching it, and am tempted to start to accumulate it over the next while.  I see it as a similar mis-pricing, akin to the SVWPA pricing a few years ago - I did very well out of that (although SVW is much more diversified as a business than Virgin).

bigchrisb - did you end up buying some ?  I had a look when you mentioned it, but knew immediately that it was too risky for me.

[bigchrisb]

No, I watched it, and had an unfilled order at one point, but didn't buy. Possibly lucky - suspect they will see some form of haircut.

[potm]

The biggest issue with the industry funds is them not writing down the unlisted assets sufficiently/overvaluing them to begin with. It benefits members who cash out to the detriment of remaining members, not too dissimilar to a ponzi scheme. Host plus have applied to redeem $1.5 bil in an unlisted fund. At least they are selling unlisted assets to meet redemptions instead of deferring the problem for later. Will be interesting to see how the sale goes.

I hope if there is a massive blowup one day that my investments in the all listed share options with sunsuper aren’t impacted. I’m hoping they are not able to take a little from one area to prop up another.

[Andy R]

I wouldn't call it a ponzi scheme.

But yes it's a problem, as Neil Woodford and investors found out last year.

I once mentioned this elsewhere to be met with "but this is super and you won't get lots of outflows because people are only allowed to access it a bit at a time".

Sounded reasonable. Still a no from me back then. Illiquid assets are often less correlated simply due to not being able to price them rather than actually falling in value less. If you have a product that nobody is buying and nobody is selling because they have taken it off the market to avoid selling at a loss, the value is no longer the last comparable price. Not only that, unlisted products are not under the scrutiny of ASIC. They also tend to have high fees. Alternatives sound good in theory, but in practice you better know what you are buying, and for 99% of people they won't know anything about it, and in that case it's just safer to not use it in my opinion. I'm thrilled that indexing is an easily available option.

[bigchrisb]

I wouldn't call it a ponzi scheme.

If the definition of a ponzi scheme is paying some investors from the new contributions of others, then yes, that's whats being proposed.   Super is much more opaque than it should be  - which means no-one really knows what the outcomes are going to be.  Hence my interest in watching this space. 

I'm also thrilled that indexing is now widely available and cheap.  That's where the bulk of my money is going these days. 

[mymatenate]

But what about for the mustachian?  What if they take $10-20k out of their super (let's assume they've chosen the index option inside super) and re-invest it in the index outside super?  Pay

It's really hard to get money into super, I can't imagine that anyone who's fair dinkum about retiring early would care about $20k taken out of super and reinvested in taxable accounts.

I'm still wondering whether it might be a reasonable idea.

We are already retired, and so our tax bill is very low on our largely passive income.

We're doing more of an Early Retirement Extreme style FIRE, so our net worth is a little on the lower side, and $20k ($40k for the both of us) represents a not-completely-insignificant contribution to our stash.

The preservation age (the age at which you can first access your super) has recently been upped from 55 to 60. Will they up it again in the next ~25 years? The higher it goes, the greater the likelihood that you might drop dead soon after finally being able to access it, and having little time to enjoy it.

Perhaps taking into account the risk that we may not be lucky enough to live into our nineties or even eighties, and/or the risk of some sort of financial system meltdown (hyper-inflation? monetary system collapse? etc) within the next 25-35+ years, it might be better to get your hands on at least some of that money now...?

[happy]

@mymatenate Your scenario and the questions you raise are an example of one situation of why it might make sense to utilise this opportunity.  Thats why there is no on- size-fits-all answer to questions about how much to put into super. One just has  to understand the principles and parameters and figure it out for oneself.

I am 61 and retired, but still trying to get as much into super as I can (by gradually shifting some assets around), whilst withdrawing the minimum amount. So taking 20k out makes no sense to me at all. Totally different scenario to bigchrisb, but taking it out makes no sense for either of our situations.

[mymatenate]

Thanks Happy, I appreciate the reply

[travelbug]

NAB trading halt and the reduction of the dividend payout is a bit of a blip. I have been watching these to buy more, but 30c per share dividend is much lower that expected, even if the price is pretty good buying.
Have  been buying VAS though.

[DrowsyBee]

NAB trading halt and the reduction of the dividend payout is a bit of a blip. I have been watching these to buy more, but 30c per share dividend is much lower that expected, even if the price is pretty good buying.
Have  been buying VAS though.

On the subject of NAB, I can't fathom how their profit was down 51% because of COVID-19. The effects of it came in late-February thru March? What am I missing here?

[Little Aussie Battler]

NAB trading halt and the reduction of the dividend payout is a bit of a blip. I have been watching these to buy more, but 30c per share dividend is much lower that expected, even if the price is pretty good buying.
Have  been buying VAS though.

On the subject of NAB, I can't fathom how their profit was down 51% because of COVID-19. The effects of it came in late-February thru March? What am I missing here?

I think that top-line revenue was relatively flat (perhaps down a little), which would be in line with your comments around the timing of C-19 impacts.

The drop in NPAT would be the result of taking a big collective provision against future credit losses, plus whatever else McEwan managed to push through to tank the result - usually by bringing forward costs like amortisation in order to make the subsequent recovery (and hence his performance) look better.  Standard behaviour for a new CEO.

[DrowsyBee]

Yep that makes a bit more sense then. And yes I was thinking about top-line revenue - it will no doubt drop but will take a while.

[marty998]

Accounting standards for asset impairments (basically for loan defaults for Banks) changed quite substantially a couple of years back.

The relevant accounting standard is IFRS9, specifically regarding Expected Credit Losses (ECL).

Previously, the accountants would look at the loan book a point in time and assess which loans were bad and which ones were likely to go from arrears to default. This meant that "bad earnings news" would only be taken well after the event, which we saw in the GFC meant a lack of trust between banks. No one knew which loan books were good and which were bad.

The ECL provisions of the standard* require banks to assess continuously what is the probability of default over the life of the loan (not just now). This means the collective provisions of the banks are much higher than they used to be, and are likely to be much higher than required. When times return to normal, you might find some of the provisions reverse (assuming things don't get worse from here).

The banks also like to play around with software amortisation costs. They do take a hit now so that future earnings look a lot better.

* On transition to the new standard a couple of years ago in 2018, each of the banks took about a $1billion charge to opening retained earnings, so the value of the provision for bad debts could be increased to what it needed to be under the new rules. You will find it in the fine print of the 2018 annual reports under "changes to accounting standards", and also as a line item in the Statement of Changes in Equity.

That extra billion dollar hit did not go into the profit results, so also did not impact anyone's bonus calculations.

Accounting generates some interesting outcomes sometimes.

[DrowsyBee]

I hear that. I’ve been dealing with interesting effects of accounting standards in my own world with AASB 16 - Leases.

[marty998]

I despise with a vengeance the leasing standard.

Somehow I have to explain that rental occupancy costs are not "rent expense" anymore but are now in depreciation and interest expense lines, and that we have a building on our balance sheet that we do not own. I yhen also have to explain the deferred tax impacts of these fictitious make believe P&L items.

And accountants wonder why the profession is not trustworthy...

[DrowsyBee]

You are speaking my language mate. All just new things for accountants to keep themselves employed year after year!

Tl;dr become an accountant or a lawyer, you’ll always have a job.

[Alchemisst]

What bonds do you guys have? I currently have VAF and a little VCF, thinking maybe I should diversify and get some global bonds instead of just VAF?

[Andy R]

What bonds do you guys have? I currently have VAF and a little VCF, thinking maybe I should diversify and get some global bonds instead of just VAF?

Depends on your strategy.

If you're using bonds to lower volatility and for preservation of capital and you get your returns from your equity, then government bonds make the most sense to avoid credit risk, and in that case I doubt the Australian government (or the government of pretty much any developed country) is going to default, and I'm not convinced you need to diversify internationally.

If you use a very low portion of growth assets (eg an irrational fear of stocks might be one reason, can't think of other reasons) and you need to boost your returns, then some corporate bonds would be the choice, and in that case you really want to diversify to lower idiosyncratic risk and going international makes sense.

Since you decided on using 2 funds with one of them a corporate bond fund, why not just remove the corporate bonds from VAF and go with VGB?

[Murdoch]

Hi all,
In The Australian Vanguard funds, I assume CPU for the quarterly dividends means 'Cents Per Unit'?
I'm changing from the Growth Index to a heavier Shares fund and trying to work out how much dividends payments will change.
Other places I read suggest CPU may be a percentage of the individual shares price rather than a flat 'cents per unit' number.
I couldn't find an answer on the website.
Can anyone clarify please?
Cheers
Murdoch

[mjr]

You have it correct.  CPU means cents per unit, it's not a percentage.

"As at 31 March 2020, the gross distribution of 2.7025 cents per unit comprised 2.0039 of net (cash)
distribution plus 0.6986 by way of franking credits and foreign tax credits."

[deborah]

As many businesses are foreshadowing lower dividends, dividend payments will certainly be changing anyway due to our current economic climate.

[Murdoch]

Cheers MJR and Deborah.

[MrThatsDifferent]

Hi, I’ve asked a question on the main board to get a wide perspective, but I’d love to get your thoughts on something I’m trying to work through: will next year be the best time to buy a property in Sydney? And if so, should I pause my investing to save cash to grab the opportunity?

Here’s my thinking on why next year should be the best window:
—Because of COVID, there will be lots of stock on the market
—there will be lots of people who won’t be cashed up to buy next year
—they’re predicting a 10-20% drop in house prices
—seems like they’re going to abolish stamp duty

My hope and thinking is that places that are $850-950k now come down to $750-850k, which would give me my desired 2 bed/2bath with car within 20 min walking to the CBD (a boy can dream).

Do you all see this as well? If there was a time to jump in, Will that be then?

Would love your thoughts @marty998  and @bigchrisb @deborah

[marty998]

I just bought in Southern Sydney and have a property settling in 10 days time.

Admittedly I exchanged contracts at the end of January just before SHTF but I'm still ok with the decision. Vendors are renting it back from me until mid September @ $800 a week, which basically means I'm positively geared.

I don't think I'll have any issues renting it for that amount or more afterwards. Plenty of families will be interested in a 4 bed unit in a nice complex located 5-10 minutes from a train station, major hospital, selective school, shopping centre and the beach.

Having just dropped $37,752 in stamp duty I'll be annoyed if I start getting charged land tax but what can you do? The rules change all the time. You've got to expect that and be willing to adapt. If you bitch and moan and complain like a a lot of people do then all you're left with is nothing but a head-ful of anger and no portfolio because you refuse to take action.

$40 grand is small change when you're playing a long game and eventually have an investment portfolio that goes up and down by that amount every day.

Specifically on your questions

- there is currently a shortage of stock as sellers hold off, and banks extend repayment holidays - people are not being forced to sell right now.
- there are alway investors cashed up to buy - like me :)
- It depends where. Some areas might go down, some areas might go up.
- Abolishing stamp duty might allow people to spend more, and push prices up.

[MrThatsDifferent]

Thanks @marty998.  Do you think it’s better to save the cash now in HISA for the next year, or invest and take it out next year if I want to buy something?

[marty998]

I'd be hesitant to invest a house deposit in shares if you need it as early as next year.

Cash is probably the best place for it to be frank.

[MrThatsDifferent]

Thanks @marty998

[happy]

Agree, save in cash for the deposit.

When repayment holidays end and if levels of unemployment remain high as might be expected then the Sydney market may cool, say somewhere between September and end of 2020 and if the economy really goes as badly as many fear in 2021 it could go even lower.

If I were buying in Sydney, I'd be following and researching prices in my preferred suburbs from now on. Once we get open houses again go to as many as you can be bothered with. I would also keep an eye on auction clearance rates, and know how many properties were usually on the market in my preferred postcode.

Keep watching the market and the economy and you should get a feel of the trends. Be ready.  Have an idea of the price point you are willing to jump in...its the same as the stock market, pretty hard to predict the bottom.

That being said the Sydney market continues to surprise me with its ability to rise. I do think though, if its ever going to drop substantially the next 6-12 months look like it could be it.

[MrThatsDifferent]

Thanks @happy.  Good advice and I’ll stick with that plan then. I’m scared of auctions though. Hopefully, if it gets there I’ll be able to do a private sale.

[bigchrisb]

Hi, I’ve asked a question on the main board to get a wide perspective, but I’d love to get your thoughts on something I’m trying to work through: will next year be the best time to buy a property in Sydney? And if so, should I pause my investing to save cash to grab the opportunity?

Do you all see this as well? If there was a time to jump in, Will that be then?

I wouldn't trust me on predicting the residential property market - I've thought it was irrationally over-valued since the mid 2000s.  If I keep calling a bust, I'll eventually be right!

Instead, what have I been doing:
- I begrudgingly bought a house in 2014 (Canberra) wanting to own a place to live in.  I did everything I could to optimise the price and purchasing process, but at the end of the day I bought the house that I wanted to live in.  The way it turned out, I ended up lucky, and its appreciated about 40% since.
- When I bought, the house represented 32% of my total assets (I had a lot of leverage/debt, particularly after the house buy!).  I used the opportunity to debt-recycle fairly quickly, using the home loan to refinance margin loan debt (lower rates and lower chance of the debt being called.
- Since buying I have ended up married and started a family.  The house is currently rented out while I'm overseas, but my wife and I are debating about upgrading houses when we return.  We don't expect a lot of impact from COVID on this, as we are in Canberra (public sector jobs fairly secure), and we currently own two places (one house, one apartment), and selling both would be in the ballpark of the kind of places we want to buy.

Don't get your hopes up on stamp duty having a big impact.  Canberra started the stamp duty/rates phase over shortly after I bought.  I paid just under $30k in stamp duty in 2014.  The same price house would be $23k now.  So a stamp duty saving of $7k one off.
Over the same time, my rates have increased from $2300 to $4300 ($2k increase) and my land tax (currently rented out) from $4200 to $6700 ($2.5k increase).   So, the increase in annual costs has been $4500.  i.e. the reduction in stamp duty in my situation is equivalent to 1.5 years of the additional taxes.  I don't intend to sell my house every 18 months, so for me, the change stinks.  As an economist, I support it - its efficient and hard to avoid.  Much better than transaction taxes or company taxes.

As to your situation, if it were me I'd not get too worked up about the timing - if the right place for you comes up, and you want to buy it to live in, do so.  I'd educate myself about the markets I'm interested in - focus on figuring out what kind of place you actually want.  In terms of the savings, if you genuinely expect to spend it in the next couple of years, it doesn't belong in shares. 



 

[marty998]

Over the same time, my rates have increased from $2300 to $4300 ($2k increase) and my land tax (currently rented out) from $4200 to $6700 ($2.5k increase).   So, the increase in annual costs has been $4500.  i.e. the reduction in stamp duty in my situation is equivalent to 1.5 years of the additional taxes.  I don't intend to sell my house every 18 months, so for me, the change stinks.  As an economist, I support it - its efficient and hard to avoid.  Much better than transaction taxes or company taxes.

If they implemented the land tax on all properties, not just investment and commercial, then it wouldn't have to be so high...

[MrThatsDifferent]

Thanks for sharing that @bigchrisb!

[bigchrisb]

I see ME Bank is the first to freeze mortgage re-draws.
https://www.abc.net.au/news/2020-05-04/westpac-will-not-take-cash-from-home-loan-accounts/12213408
Also a good AFR writeup, but its behind a paywall, so I haven't linked it.

A timely reminder that there is cash and there is "cash".  I wouldn't be surprised to see more of this happening, particularly from second tier lenders.

People haven't lost money, as its been applied to the principal.  But they have lost access to it, which hurts.  If your emergency fund, or your dry powder was being kept in a redraw with ME, you have just been screwed. 

I took action a while ago and made sure that my investable cash was in genuine offset accounts (as opposed to redraw accounts).  And for good measure, I've got 12 months spend in real bank accounts, spread over a couple of different banks.  In the past, I was happy for this to sit in my offset account, but  but now I'm prepared to give up a couple of percent interest for better security of access to my emergency fund.

Hope none of you have been adversely impacted by this. 

[marty998]

I see ME Bank is the first to freeze mortgage re-draws.
https://www.abc.net.au/news/2020-05-04/westpac-will-not-take-cash-from-home-loan-accounts/12213408
Also a good AFR writeup, but its behind a paywall, so I haven't linked it.

A timely reminder that there is cash and there is "cash".  I wouldn't be surprised to see more of this happening, particularly from second tier lenders.

People haven't lost money, as its been applied to the principal.  But they have lost access to it, which hurts.  If your emergency fund, or your dry powder was being kept in a redraw with ME, you have just been screwed. 

I took action a while ago and made sure that my investable cash was in genuine offset accounts (as opposed to redraw accounts).  And for good measure, I've got 12 months spend in real bank accounts, spread over a couple of different banks.  In the past, I was happy for this to sit in my offset account, but  but now I'm prepared to give up a couple of percent interest for better security of access to my emergency fund.

Hope none of you have been adversely impacted by this.

My understanding of this was that they've swept redraws into the mortgage to the extent of how far ahead of the normal mortgage payoff you were.

For example, if you were 29 years into a 30 year loan, and you have $300,000 in re-draw, they've now stopped you from re-borrowing $300,000 (because then your repayments would be over $25,000 a month, and that would be irresponsible).

Call it a bug in the legacy IT systems that the available re-draw didn't reduce in line with the normal pay-off schedule. Commbank fixed it 2 years ago (to similar outcry of "bad bank stealing people's money").

It wasn't true then and it isn't true now.

[DrowsyBee]

Has anyone used mFund to purchase shares in unlisted funds? Is it as easy as it looks or am I missing something?

[Andy R]

Just because something is easy to purchase doesn't make it a good idea.

[DrowsyBee]

Great and valued contribution that didn't even attempt to answer my query. Thanks.

[bigchrisb]

Anyone else looking at the NAB share purchase plan?  I have some NAB shares with  a capital loss.  I've sold them at about 20% over the SPP price, and booked the capital loss.  Will apply for the full $30k of spp shares.

To get my holding back, I need to be allocated $12k under the spp, so can handle a scaleback to 40%.  I'll buy the balance back on market after any scaleback is announced.

Will be interesting to see where it lands.  Anyone have any view on the ATOs treatment of share purchase plans under the wash sale rules for capital losses?

[sirdeets]

After being rejected from Westpac for a margin loan late march, went to NAB Equity Builder and have to report its been great so far. The interest rate even dropped down to 3.9% from 4.05% when I applied.

[middo]

I see ME Bank is the first to freeze mortgage re-draws.
https://www.abc.net.au/news/2020-05-04/westpac-will-not-take-cash-from-home-loan-accounts/12213408
Also a good AFR writeup, but its behind a paywall, so I haven't linked it.

A timely reminder that there is cash and there is "cash".  I wouldn't be surprised to see more of this happening, particularly from second tier lenders.

People haven't lost money, as its been applied to the principal.  But they have lost access to it, which hurts.  If your emergency fund, or your dry powder was being kept in a redraw with ME, you have just been screwed. 

I took action a while ago and made sure that my investable cash was in genuine offset accounts (as opposed to redraw accounts).  And for good measure, I've got 12 months spend in real bank accounts, spread over a couple of different banks.  In the past, I was happy for this to sit in my offset account, but  but now I'm prepared to give up a couple of percent interest for better security of access to my emergency fund.

Hope none of you have been adversely impacted by this.

My understanding of this was that they've swept redraws into the mortgage to the extent of how far ahead of the normal mortgage payoff you were.

For example, if you were 29 years into a 30 year loan, and you have $300,000 in re-draw, they've now stopped you from re-borrowing $300,000 (because then your repayments would be over $25,000 a month, and that would be irresponsible).

Call it a bug in the legacy IT systems that the available re-draw didn't reduce in line with the normal pay-off schedule. Commbank fixed it 2 years ago (to similar outcry of "bad bank stealing people's money").

It wasn't true then and it isn't true now.

There is a report in The Age that ME Bank has reversed this decision.

[MrThatsDifferent]

I see ME Bank is the first to freeze mortgage re-draws.
https://www.abc.net.au/news/2020-05-04/westpac-will-not-take-cash-from-home-loan-accounts/12213408
Also a good AFR writeup, but its behind a paywall, so I haven't linked it.

A timely reminder that there is cash and there is "cash".  I wouldn't be surprised to see more of this happening, particularly from second tier lenders.

People haven't lost money, as its been applied to the principal.  But they have lost access to it, which hurts.  If your emergency fund, or your dry powder was being kept in a redraw with ME, you have just been screwed. 

I took action a while ago and made sure that my investable cash was in genuine offset accounts (as opposed to redraw accounts).  And for good measure, I've got 12 months spend in real bank accounts, spread over a couple of different banks.  In the past, I was happy for this to sit in my offset account, but  but now I'm prepared to give up a couple of percent interest for better security of access to my emergency fund.

Hope none of you have been adversely impacted by this.

My understanding of this was that they've swept redraws into the mortgage to the extent of how far ahead of the normal mortgage payoff you were.

For example, if you were 29 years into a 30 year loan, and you have $300,000 in re-draw, they've now stopped you from re-borrowing $300,000 (because then your repayments would be over $25,000 a month, and that would be irresponsible).

Call it a bug in the legacy IT systems that the available re-draw didn't reduce in line with the normal pay-off schedule. Commbank fixed it 2 years ago (to similar outcry of "bad bank stealing people's money").

It wasn't true then and it isn't true now.

There is a report in The Age that ME Bank has reversed this decision.

What a betrayal of trust, I’ll never use them.

[Wadiman]

Hi all - haven’t been round these parts for a while! 

Wondering if anyone has read and digested this: https://www.amazon.com.au/Living-Off-Your-Money-Retirement/dp/0997403403

I’m about two years out from FIREing and am starting to think about the mechanics of withdrawing living expenses - he makes some very interesting points and outlines strategies worth looking into (in my view).  I haven’t purchased the book yet but plan to do so.

Bestest

[mrmoonymartian]

Living off your money - anyone can do it with these simple steps:
1. Write book about living off your money
2. Sell book for $60 per paperback and $86 per hardback on amazon
3. Profit!