Author Topic: Australian Investing Thread  (Read 2194897 times)

annsie

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Re: Australian Investing Thread
« Reply #5050 on: September 23, 2020, 03:54:49 AM »
Thanks everyone. Seems to be a pretty hazy subject to make informed decisions about. So if one has an emergency fund of a certain amount and no mortgage it seems that that it is a scaled decision as to which type you need/want. I feel like I need a tool similar to the Australian FIRE calculator to be able to decide?

middo

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Re: Australian Investing Thread
« Reply #5051 on: September 23, 2020, 06:56:59 AM »
So my daughter at 23 is about to start her first full time job, on 80+K per year. She has asked me for advice about investing, salary sacrifice and all things money.  My first thought is the 25K super max out, then what?

mjr

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Re: Australian Investing Thread
« Reply #5052 on: September 23, 2020, 02:42:58 PM »
She's young and just starting out. She'll need capital to get her start in life.  I wouldn't be advocating maxing out super to save $2600 a year in tax but lose access to the money for 40 years.

My advice to her would be to save as much as she can - she'll have plenty of need to spend money to set herself up in the next 5 years - too short a time horizon for any risky investments.

mspym

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Re: Australian Investing Thread
« Reply #5053 on: September 23, 2020, 03:04:20 PM »
So my daughter at 23 is about to start her first full time job, on 80+K per year. She has asked me for advice about investing, salary sacrifice and all things money.  My first thought is the 25K super max out, then what?
She's probably in the right spot for The Barefoot Investor approach.

marty998

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Re: Australian Investing Thread
« Reply #5054 on: September 25, 2020, 02:20:59 PM »
So my daughter at 23 is about to start her first full time job, on 80+K per year. She has asked me for advice about investing, salary sacrifice and all things money.  My first thought is the 25K super max out, then what?

I agree with mjr that she needs capital.

For better or worse, such is life. It’s gives options that are simply unavailable to those without it.

Having said that, I would still advise her maxing out her super up to $25k (to an industry fund, AusSuper, SunSuper, AwareSuper.... doesn’t really matter which to be honest, they all invest similarly) and if you have the means to do so, top up her wages with a cash gift to compensate as an incentive, that goes into a savings account for a property.

An early start with Super will make up for the years when she is not working due to children etc. It’s so important for women to have a decent level of super... the stats on older women in poverty are horrendous. Her future self will be grateful.
« Last Edit: September 25, 2020, 02:22:37 PM by marty998 »

dondon

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Re: Australian Investing Thread
« Reply #5055 on: September 28, 2020, 11:31:52 PM »
So my daughter at 23 is about to start her first full time job, on 80+K per year. She has asked me for advice about investing, salary sacrifice and all things money.  My first thought is the 25K super max out, then what?
Having said that, I would still advise her maxing out her super up to $25k (to an industry fund, AusSuper, SunSuper, AwareSuper.... doesn’t really matter which to be honest, they all invest similarly) and if you have the means to do so, top up her wages with a cash gift to compensate as an incentive, that goes into a savings account for a property.

Maxing out supper at early age should have disproportionally larger effect than anything else - assuming decent compounding over very long period of time

mspym

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Re: Australian Investing Thread
« Reply #5056 on: September 29, 2020, 01:13:20 AM »
So my daughter at 23 is about to start her first full time job, on 80+K per year. She has asked me for advice about investing, salary sacrifice and all things money.  My first thought is the 25K super max out, then what?
Having said that, I would still advise her maxing out her super up to $25k (to an industry fund, AusSuper, SunSuper, AwareSuper.... doesn’t really matter which to be honest, they all invest similarly) and if you have the means to do so, top up her wages with a cash gift to compensate as an incentive, that goes into a savings account for a property.

Maxing out supper at early age should have disproportionally larger effect than anything else - assuming decent compounding over very long period of time
I've been told off om here before for recommending maxing out Super at this age but yeah, this is one of those things that could really counteract the effect of any time off for children/slowly widening wage gap due to structural and unconscious bias.

Andy R

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Re: Australian Investing Thread
« Reply #5057 on: September 29, 2020, 04:59:45 AM »
I've been told off om here before for recommending maxing out Super at this age

Based on what?

MrThatsDifferent

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Re: Australian Investing Thread
« Reply #5058 on: September 29, 2020, 02:11:58 PM »
I’d agree that maxing our super at her age will be the best way forward. She probably wouldn’t even need to do much else than that. She can then learn to live off what’s left. Also, she’ll be be able to withdraw some for a home if she wants to. I second the Barefoot Investor boo, it’s a good one for young people. Also, if you get her to stick to paying off credit cards every month and avoiding after pay, she’ll be set.

middo

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Re: Australian Investing Thread
« Reply #5059 on: September 29, 2020, 02:51:39 PM »
I’d agree that maxing our super at her age will be the best way forward. She probably wouldn’t even need to do much else than that. She can then learn to live off what’s left. Also, she’ll be be able to withdraw some for a home if she wants to. I second the Barefoot Investor boo, it’s a good one for young people. Also, if you get her to stick to paying off credit cards every month and avoiding after pay, she’ll be set.

Thanks everyone for your advice.  She has always been good with money, only has a debit card, no debt and a bit of cash in the bank as a student, so is doing OK.

I will look into the super for home deposit scheme as it mat make locking up her money more palatable.

Murdoch

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Re: Australian Investing Thread
« Reply #5060 on: October 04, 2020, 08:05:50 PM »
Hi all,

Couldn't find it posted elsewhere, so please re-direct me if it this is already discussed.
I've just caught up on the changes to Vanguard in Australia.

The move to this new platform will incur a 0.2% AUM fee. This is on top of the fee from whatever fund you are invested in.
For the lower cost funds, this essentially doubles your management costs.
I've just been advised that I can still make Wholesale BPay purchases into funds I don't current have money within, but only until the 16th October.
After that to open any new fund it'll need to be through the new platform/software.

I don't think this is in keeping with Vanguards stated ethos of lowest cost investing.
Is anyone else a bit put out by this?

Murdoch

chevy1956

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Re: Australian Investing Thread
« Reply #5061 on: October 04, 2020, 08:24:53 PM »
Hey Murdoch - I didn't know about the new personal investor option. I just checked it out. It sounds exactly like what you state. It sounds to me like I'd be getting charged .3% management fees on my VAS ETF if I moved it under the Vanguard banner. If I just leave my etf's outside of the personal investor approach I retain a .1% fee.

I assume this just makes the ETF option a better option.

It doesn't sound like the best low fee option to me.

Murdoch

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Re: Australian Investing Thread
« Reply #5062 on: October 04, 2020, 08:34:47 PM »
Hi Chevy,

Agreed. I've previously been happy with the slightly raised management fee for ease of use.
They are now enforcing the $100k in any single Wholesale fund option, so you can't split your money across several.
Minimum investment goes up to $5k, so BPay of $100 aliquots is now gone. Many will need to save a lump sum now.
AUM goes up.

On the plus side, you aren't automatically transitioned across.
If you currently hold Wholesale funds the current arrangements continue.
I've only got the International Shares fund, so can thankfully just keep BPay'ing into that unless I'm forced over in the future.
I'll retain the current management fee of the fund only and won't incur the new platform fees as I'll just sit on the legacy system.

Bit of a bummer.
I have previously been a fan of the simplicity and low purchase options, which in my view made up for the very slightly higher management fee.
With both those now gone and the managed funds having a 0.2% premium, I would no longer advocate starting this option with them as I don't think it stacks up.

Disappointing.


Andy R

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Re: Australian Investing Thread
« Reply #5063 on: October 05, 2020, 01:54:19 AM »
One thing to note is that on the Vanguard FB group, someone mentioned that they spoke to a Vanguard representative on the phone who said the fee is likely to come down.

Nevertheless, I'd stick with ETFs. The main advantage of VPI over ETFs is that you can put in very small amounts, but you can't even set it up in an automated way.

For putting in very small amounts, have you had a look at OpenTrader? They offer $5 brokerage for up to $2,500. They are the retail arm of the wholesale broker (OpenMarkets) that SelfWealth, Riaz, and Six Park use, so I expect it to be ok, although they said their web interface is still being improved.

For set-and-forget (the main advantage of Vanguard's wholesale/retail funds while they were available), might be worth looking at a new brokerage under beta testing called Pearler. You can setup auto direct credit to auto take your money out periodically, and you can set your ETF allocation and have it auto purchase the most underweight to your allocation. So that is the closest thing to a real set and forget (and you get the tax efficiency of ETFs over managed funds). Although as I said, they are still under beta testing.

SpInvest

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Re: Australian Investing Thread
« Reply #5064 on: October 24, 2020, 10:47:52 PM »
[quote author=jk5954 link=topic=21335.msg2687689#msg2687689 date=1598266678

I bought them a copy of The Barefoot Investor thinking it might at least teach them a thing or 2 or point them in the right direction. Next thing I hear is that they have gone and seen a financial advisor who has advised them to start a SMSF and buy an investment property through it. Which they did.
[/quote]

I would hazard that that 'financial advisor' is not really a proper adviser - any advisor worth their salt wouldn't recommend this type of strategy!  ASIC would be all over them.

marty998

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Re: Australian Investing Thread
« Reply #5065 on: November 18, 2020, 03:10:36 AM »
Have we really talked about everything possible about Aussie investing?

A month without a post here!

Not even a broken ASX on Monday causing a stir!


deborah

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Re: Australian Investing Thread
« Reply #5066 on: November 18, 2020, 03:41:53 AM »
Don’t know about you, but I’m laying low and keeping with my current investments.

Murdoch

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Re: Australian Investing Thread
« Reply #5067 on: November 19, 2020, 04:24:12 AM »
I'm a QLD'r but the NSW proposal to switch stamp duty to land tax is interesting.
Harder for investors with many houses as presumably more holding costs now, but easier to trade housing as transactional costs go down.
Harder for new owner occupiers to afford their home as annual costs will go up, but easier to get into the market.
Seems both right and left wing news reports are applauding the change though, and if proves successful with voters may be adopted by other states.

Not overly interesting but Marty998 seems bored:)

marty998

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Re: Australian Investing Thread
« Reply #5068 on: November 19, 2020, 06:12:43 AM »
I’ve been very busy at work lately. Missed quite a few threads here.

Having just forked out a significant amount of duty this year I’ll be holding onto that property a very very long time now.

They should have should made a decision and brought it in now. The uncertainty over the next few months will quell the market quite dramatically.

deborah

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Re: Australian Investing Thread
« Reply #5069 on: November 19, 2020, 12:58:55 PM »
The ACT has been gradually moving to land tax from stamp duty since 2012, and there’s been no stamp duty on commercial property for a couple of years now. The total reform is supposed to take 20 years, so we’re not there yet.

Murdoch

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Re: Australian Investing Thread
« Reply #5070 on: November 19, 2020, 06:31:44 PM »
What's the effect in the ACT been Deborah? Has it mobilised housing stock, improved access to potential home owners?

Marty, I've also paid a lot in stamp duty on our property this year. Glad I won't also be paying an annual holding cost forever.
QLD will be slow to move in this direction I suspect though.

If you're a buy and hold property investor and could make deposit and stamp duty costs I suspect that stamp duty would be preferred over land tax. If you buy and flip housing though, getting rid of stamp duty very much in your interest.


deborah

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Re: Australian Investing Thread
« Reply #5071 on: November 19, 2020, 07:20:46 PM »
The gradual rate increases have caused a number of howls over the years - certain corners of the real estate market have decided that they’ve been targeted. Currently, both pensioners and first home buyers are exempt from stamp duty. They’ve changed when you actually pay stamp duty to after purchase rather than before.

I don’t really follow property here, and it’s difficult to tell. We’re a small market, very dependent on the ups and downs of Federal government public service numbers. During the time, we’ve had the “move public servants out of Canberra” National party push. As well, we had over 1000 Mr Fluffy houses demolished (a loose asbestos insulation scheme in the 1960s and 70s) since 2015. They’re being rebuilt, mainly as two houses on smaller blocks instead of the original single house, and the last of them will probably have been constructed next year. These thing would both have influenced the market significantly, especially when all the Mr Fluffy home owners moved out at about the same time before the demolitions.

We haven’t been outliers in the quarterly housing market statistics, so I guess it’s not really affected the market.

Richmond 2020

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Re: Australian Investing Thread
« Reply #5072 on: November 24, 2020, 01:44:03 PM »
Don’t know about you, but I’m laying low and keeping with my current investments.

I think that maybe most posters on this thread have now set their course and are happy with their asset allocations and investment strategies. Hence not a lot of people around these traps with questions.

It’s been one hell of a sharemarket rally through November. My share portfolio is up approximately $20k for the month to $205k.

I guess it will take a while for the dividends to bounce back though.
« Last Edit: November 28, 2020, 09:21:23 PM by Richmond 2020 »

Richmond 2020

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Re: Australian Investing Thread
« Reply #5073 on: November 24, 2020, 04:10:14 PM »
I guess my superannuation account has bounced back also. I only check that once a year though.

Alchemisst

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Re: Australian Investing Thread
« Reply #5074 on: December 03, 2020, 06:04:57 AM »
Who is everyone here with for super, and which option are they with? I'm with hostplus, international indexed and international hedged.

marty998

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Re: Australian Investing Thread
« Reply #5075 on: December 04, 2020, 06:08:42 PM »
Australian Super. I just have a basic 70/30 split right now between Australian shares and Fixed income.

No real difference in returns to the balanced option.

If the $A keeps rising on the back of another commodities boom I’ll rotate into some international stocks. Seems an easy long term win in that respect.

bigchrisb

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Re: Australian Investing Thread
« Reply #5076 on: December 05, 2020, 10:45:50 AM »
The gradual rate increases have caused a number of howls over the years - certain corners of the real estate market have decided that they’ve been targeted. Currently, both pensioners and first home buyers are exempt from stamp duty. They’ve changed when you actually pay stamp duty to after purchase rather than before.

I don’t really follow property here, and it’s difficult to tell. We’re a small market, very dependent on the ups and downs of Federal government public service numbers. During the time, we’ve had the “move public servants out of Canberra” National party push. As well, we had over 1000 Mr Fluffy houses demolished (a loose asbestos insulation scheme in the 1960s and 70s) since 2015. They’re being rebuilt, mainly as two houses on smaller blocks instead of the original single house, and the last of them will probably have been constructed next year. These thing would both have influenced the market significantly, especially when all the Mr Fluffy home owners moved out at about the same time before the demolitions.

We haven’t been outliers in the quarterly housing market statistics, so I guess it’s not really affected the market.
The devil is in the implementation. I'm a supporter of an annual housing tax, and oppose stamp duty in theory. But I've been hard hit by the implementation.

I bought my house in 2014 for $770k, and paid about $30k in stamp duty.
I'm now paying $11,300 a year in combined rates and land tax.  (It's rented out while I'm overseas). Rates and land tax in the first year i owned it were 
$6.5k

Stamp duty buying it today, if you paid $770k would be $23.4k. In reality, house prices have boomed, and as stamp duty is linked to sale cost, buying the same place now (approx $1.2m) would incur stamp duty of $50k.

So for someone in my situation the changes really do stink.

Alchemisst

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Re: Australian Investing Thread
« Reply #5077 on: December 23, 2020, 05:11:42 AM »
Does anyone know how to compare defined benefit super to a normal accumulation? I'm trying to work out whether its better to switch. From an estimate calculation I guessed that 100,000 in defined benefit would be worth about 9k per year at retirement. However if that 100k were transferred to a normal super account/ indexed at a estimate 7% return per year after inflation you would end up with 400k after 20 years and 800k after 30 years, using the 4% rule you would be able to withdraw 32k at retirement after 30 years. This makes the accumulation method seem much more beneficial. Am I missing anything here?

deborah

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Re: Australian Investing Thread
« Reply #5078 on: December 23, 2020, 08:55:07 AM »
A defined benefit pension counts as

16 x annual pension

towards your transfer balance cap. If you expect to be near your transfer balance cap, this may be a problem, especially if both of you have residual defined benefit pensions that, when added together may break the transfer balance cap after one of you dies.

Depending on the pension, it can be worth more or less. Is it indexed to inflation? Does it have a residual benefit - for instance, some public service DB pensions give 65% to your widow(er), whereas some give nothing, and some give a lump sum... The thing you need to look at is its value to you, which might be completely different.

Most pensions are pretty poor value to a FIREee, because they look at your income in your last years of work at the company and work out the pension amount from that. Anyone who leaves early is penalised, and many have a different (more generous) calculation if you reach retirement age.

On the other hand... Some of them assume that you retire at 55, and can give you an earlier retirement stream than most super. They can also be worth more if you’re retrenched. If they’re indexed to inflation or cost of living, they can provide a certain income, no matter what investments do. So if you’re not retiring particularly early, they can be really good value.

Model96

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Re: Australian Investing Thread
« Reply #5079 on: December 27, 2020, 10:16:42 PM »
Does anyone know how to compare defined benefit super to a normal accumulation? I'm trying to work out whether its better to switch. From an estimate calculation I guessed that 100,000 in defined benefit would be worth about 9k per year at retirement. However if that 100k were transferred to a normal super account/ indexed at a estimate 7% return per year after inflation you would end up with 400k after 20 years and 800k after 30 years, using the 4% rule you would be able to withdraw 32k at retirement after 30 years. This makes the accumulation method seem much more beneficial. Am I missing anything here?

Defined Benefit Super, whether a pension type or lump sum type, is vastly superior to any accumulation fund because it is guaranteed payment based on your final salary and years of service.
 I have never met a happy person that switched from a defined benefit fund to an accumulation fund!
IMO Keep paying into your defined benefit Super, if that Super doesn,t allow 'extra' contributions then there is nothing stopping you putting more into another fund.

marty998

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Re: Australian Investing Thread
« Reply #5080 on: December 29, 2020, 03:05:21 PM »
Does anyone know how to compare defined benefit super to a normal accumulation? I'm trying to work out whether its better to switch. From an estimate calculation I guessed that 100,000 in defined benefit would be worth about 9k per year at retirement. However if that 100k were transferred to a normal super account/ indexed at a estimate 7% return per year after inflation you would end up with 400k after 20 years and 800k after 30 years, using the 4% rule you would be able to withdraw 32k at retirement after 30 years. This makes the accumulation method seem much more beneficial. Am I missing anything here?

Defined Benefit Super, whether a pension type or lump sum type, is vastly superior to any accumulation fund because it is guaranteed payment based on your final salary and years of service.
 I have never met a happy person that switched from a defined benefit fund to an accumulation fund!
IMO Keep paying into your defined benefit Super, if that Super doesn,t allow 'extra' contributions then there is nothing stopping you putting more into another fund.

I have a family member that switched out of a DB fund (forcibly, there was no choice to stay in it once retirement was reached). Her fund has grown much faster % wise in retirement even whilst drawing a pension than it ever did in accumulation mode (and she was sal sacrificing into it to top it up).

She stayed in the fund for 27 years being constantly told that it was "the best thing". But looking back, she probably would have done better with an accumulation fund that had uncapped investment growth potential.

Model96

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Re: Australian Investing Thread
« Reply #5081 on: December 30, 2020, 01:30:30 AM »
It's not difficult to calculate the difference with hindsight. In my case I was roughly twice as well off when I exited the defined benefit fund after 17 years, both by my calculations and by comparing with a couple of mates who had been in accumulation funds for the same time on similar salaries.
Not to mention, if defined benefit funds yielded less to us the consumer then we would all still be given the opportunity to join them!

lazycow

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Re: Australian Investing Thread
« Reply #5082 on: December 30, 2020, 04:17:44 AM »
Not sure this is the right thread to post this question, and I am very hesitant to ask this but I can't find any info on the forum related to it.

My son has just turned 18 and he wants to start investing (yay!)

He has just over $1000 saved and wants to put it into ETFs (Vanguard?) and I have no idea how to go about it. He'd like to add to it on a semi-regular basis as he has a part-time job while he finishes school next year.

 I have looked online for help but I think I just need someone to literally talk me through it as if I was 5 years old. Or at least point me to a site/page that has an idiot-proof step=by-step guide. He banks with the Commonwealth Bank, if that helps. I don't quite understand what sort of fee/payment he will need to make up front and frankly, am the most put off by making that decision for him.

Once I set him up, I want to invest some of my savings, but as he has by far the lesser amount, I think it is less intimidating for me to start small!

marty998

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Re: Australian Investing Thread
« Reply #5083 on: December 30, 2020, 01:41:49 PM »
The Reddit AusFinance sub is filled with teenagers trying to start with $1000. The general consensus is to go with SelfWealth for the cheap brokerage, but even at $9.50 a trade that is still going to be a relatively high 1% cost.

I usually suggest $4-$5000 is the minimum to start with, any less and it’s not really worth the trouble of admin and tax and and CGT record keeping.

I went through the set up for my young cousins earlier in the year, but they had $30k each and it’s their “old-lady-never-ever-sell” money, so it’s slightly different circumstances.*

Commsec will charge $10 for trades under $1000 if you open an account and pay for trades using a Commonwealth Direct Investment Account (CDIA). accounts can be opened online pretty easily if you are an existing CBA customer.

Application link here:

https://www.commsec.com.au/accounts/share-trading.html

Your son will need all the usual personal details, plus you need to provide a tax file number. Apply for an “Individual” account, not a joint, company, trust etc

Upon completing the application, your son will get:

- A new CDIA bank account (you’ll see it in NetBank)
- An 8 digit Commsec client number - I forget if they advise you it immediately, or if you get an email, or you might be able to jump from NetBank to Commsec and view your profile details.
- Write down the password you set up too.
- In the mail, the ASX CHESS will send confirmation of your son’s Holder Identification Number (HIN). This starts with X and has 11 digits. This is a really important number which identifies your son as the owner of any share purchased on the ASX.
- For my cousins I got them to buy Vanguards Australian Shares Fund (code VAS). It is a fund that contains the top 300 listed companies in Australia, weighted by value.

Goes without saying your CDIA needs to be funded with sufficient cash to pay for the shares - cash is swept to pay for shares two business days after purchase (and paid to you two days after selling).

Once purchased, the share registry Computershare will send a letter asking you to set up a few details. Not every company uses Computershare, but Vanguard does.

You can set up a login/account with Computershare and advise or change

-Bank details to pay distributions and dividends into
-Whether you want to reinvest dividends
-Advise your TFN so that tax is not deducted from dividends
- View distributions and annual tax statements

Computershare is a bitch of a website to navigate. You don’t have to pay to access your distribution statements, but they try and force you on to a page where they want you to pay for it. You just need to navigate around it.

Hope this helps! Happy investing!

*I told my cousins Afterpay (@$8) was shit because it was losing $100 million a year and is practically insolvent without ongoing capital raising.

That was a bad call. But we did buy VAS at $70 a pop so it’s been a good start for them nonetheless.
« Last Edit: December 30, 2020, 01:46:34 PM by marty998 »

lazycow

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Re: Australian Investing Thread
« Reply #5084 on: December 30, 2020, 06:23:31 PM »
The Reddit AusFinance sub is filled with teenagers trying to start with $1000. The general consensus is to go with SelfWealth for the cheap brokerage, but even at $9.50 a trade that is still going to be a relatively high 1% cost.

I usually suggest $4-$5000 is the minimum to start with, any less and it’s not really worth the trouble of admin and tax and and CGT record keeping.

I went through the set up for my young cousins earlier in the year, but they had $30k each and it’s their “old-lady-never-ever-sell” money, so it’s slightly different circumstances.*

Commsec will charge $10 for trades under $1000 if you open an account and pay for trades using a Commonwealth Direct Investment Account (CDIA). accounts can be opened online pretty easily if you are an existing CBA customer.

Application link here:

https://www.commsec.com.au/accounts/share-trading.html

Your son will need all the usual personal details, plus you need to provide a tax file number. Apply for an “Individual” account, not a joint, company, trust etc

Upon completing the application, your son will get:

- A new CDIA bank account (you’ll see it in NetBank)
- An 8 digit Commsec client number - I forget if they advise you it immediately, or if you get an email, or you might be able to jump from NetBank to Commsec and view your profile details.
- Write down the password you set up too.
- In the mail, the ASX CHESS will send confirmation of your son’s Holder Identification Number (HIN). This starts with X and has 11 digits. This is a really important number which identifies your son as the owner of any share purchased on the ASX.
- For my cousins I got them to buy Vanguards Australian Shares Fund (code VAS). It is a fund that contains the top 300 listed companies in Australia, weighted by value.

Goes without saying your CDIA needs to be funded with sufficient cash to pay for the shares - cash is swept to pay for shares two business days after purchase (and paid to you two days after selling).

Once purchased, the share registry Computershare will send a letter asking you to set up a few details. Not every company uses Computershare, but Vanguard does.

You can set up a login/account with Computershare and advise or change

-Bank details to pay distributions and dividends into
-Whether you want to reinvest dividends
-Advise your TFN so that tax is not deducted from dividends
- View distributions and annual tax statements

Computershare is a bitch of a website to navigate. You don’t have to pay to access your distribution statements, but they try and force you on to a page where they want you to pay for it. You just need to navigate around it.

Hope this helps! Happy investing!

*I told my cousins Afterpay (@$8) was shit because it was losing $100 million a year and is practically insolvent without ongoing capital raising.

That was a bad call. But we did buy VAS at $70 a pop so it’s been a good start for them nonetheless.

Brilliant! Thank you so much @marty998. That is exactly the info I have been looking for. I will get him to trawl the Reddit subs as well. It is scary starting out (as are most things!) but my husband and I are almost FI (a combination of luck, frugality, downsizing property, small inheritance) and we didn't go the investment route, so this is all completely new to us.

Alchemisst

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Re: Australian Investing Thread
« Reply #5085 on: January 03, 2021, 07:21:14 PM »
It's not difficult to calculate the difference with hindsight. In my case I was roughly twice as well off when I exited the defined benefit fund after 17 years, both by my calculations and by comparing with a couple of mates who had been in accumulation funds for the same time on similar salaries.
Not to mention, if defined benefit funds yielded less to us the consumer then we would all still be given the opportunity to join them!

Not too sure what you mean, are you still in the defined benefit fund/ getting pension from it? From my calculations 20+ years is when accumulation funds start to catch up/ overtake once compounding takes effect e.g if you had 100k that would be 200k, 400k and then 800k after 10, 20, 30 years compounded at 7%

Model96

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Re: Australian Investing Thread
« Reply #5086 on: January 04, 2021, 07:32:15 AM »
It's not difficult to calculate the difference with hindsight. In my case I was roughly twice as well off when I exited the defined benefit fund after 17 years, both by my calculations and by comparing with a couple of mates who had been in accumulation funds for the same time on similar salaries.
Not to mention, if defined benefit funds yielded less to us the consumer then we would all still be given the opportunity to join them!

Not too sure what you mean, are you still in the defined benefit fund/ getting pension from it? From my calculations 20+ years is when accumulation funds start to catch up/ overtake once compounding takes effect e.g if you had 100k that would be 200k, 400k and then 800k after 10, 20, 30 years compounded at 7%

No, I'm no longer in the defined beneflit fund. But the only way I could match defined benefit performance performance was to go smsf with a particular type of investment. Can't comment on accumulation fund compounding rates, but I can tell you in reality they don't catch up even after 30 years.

Alchemisst

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Re: Australian Investing Thread
« Reply #5087 on: January 05, 2021, 06:19:14 AM »
It's not difficult to calculate the difference with hindsight. In my case I was roughly twice as well off when I exited the defined benefit fund after 17 years, both by my calculations and by comparing with a couple of mates who had been in accumulation funds for the same time on similar salaries.
Not to mention, if defined benefit funds yielded less to us the consumer then we would all still be given the opportunity to join them!

Not too sure what you mean, are you still in the defined benefit fund/ getting pension from it? From my calculations 20+ years is when accumulation funds start to catch up/ overtake once compounding takes effect e.g if you had 100k that would be 200k, 400k and then 800k after 10, 20, 30 years compounded at 7%

No, I'm no longer in the defined beneflit fund. But the only way I could match defined benefit performance performance was to go smsf with a particular type of investment. Can't comment on accumulation fund compounding rates, but I can tell you in reality they don't catch up even after 30 years.

Some superfunds funds such as sunsuper and hostplus have pretty flexible options allowing you to put all your super into indexing basically. The historical returns for indexes are what I quoted.

Model96

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Re: Australian Investing Thread
« Reply #5088 on: January 05, 2021, 04:31:04 PM »
It's not difficult to calculate the difference with hindsight. In my case I was roughly twice as well off when I exited the defined benefit fund after 17 years, both by my calculations and by comparing with a couple of mates who had been in accumulation funds for the same time on similar salaries.
Not to mention, if defined benefit funds yielded less to us the consumer then we would all still be given the opportunity to join them!

Not too sure what you mean, are you still in the defined benefit fund/ getting pension from it? From my calculations 20+ years is when accumulation funds start to catch up/ overtake once compounding takes effect e.g if you had 100k that would be 200k, 400k and then 800k after 10, 20, 30 years compounded at 7%

No, I'm no longer in the defined beneflit fund. But the only way I could match defined benefit performance performance was to go smsf with a particular type of investment. Can't comment on accumulation fund compounding rates, but I can tell you in reality they don't catch up even after 30 years.

Some superfunds funds such as sunsuper and hostplus have pretty flexible options allowing you to put all your super into indexing basically. The historical returns for indexes are what I quoted.

I'm sure they do, and whether they are better than a defined benefit fund is a moot point anyway......they are simply not offered as an option.
There is a good reason why they aren't offered, because they are a guaranteed good result for the consumer. Accumulation funds are a guaranteed return to the provider. I've been lucky enough to actually witness the difference in results for consumers over more than a couple of decades, not just through projections...

z3170501

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Re: Australian Investing Thread
« Reply #5089 on: January 14, 2021, 03:29:29 PM »
Hi - first post here after long-time lurking. Hoping for thoughts on a couple of questions. But first a bit of background.

Our situation is a husband and wife with two children under 10. We have stable jobs ($150k and $60k). Own home outright, no other debt. No significant other assets outside of super. One of our super is defined benefits which will pay a reliable income stream in retirement. The other has around $160K (low-cost industry fund).

We propose to implement salary sacrifice from the lower income spouse to boost concessional contributions to $25k.

With remaining spare income, we have decided to invest in a simple ETF portfolio (having read Barefoot, MMM, Firebug, etc). The purpose of this investment is not to fund retirement (our super will do that adequately). The purpose is to build up in investment portfolio indefinitely (to leave to children, etc).

Unlike many, we are not motivated to retire early.


Questions:

- In terms of portfolio mix, what are people’s rationale for holding different classes of underlying asset (e.g., how are people deciding what ratio of domestic share : US share : other international share : bond, etc). I have read the Barefoot Idiot Grandson suggestion, and also commentary of it on Reddit and elsewhere.

- What are people’s thoughts on using a discretionary trust for investing (hassle vs benefits). I understand the potential tax benefits. But the major benefits don’t accrue until the taxable income of the lowest earner exceeds $180k (or there are newly minted adults who can take advantage of the tax-free threshold). Otherwise, the benefit is the difference between 32.5% and 37% - not nothing, but also not startling on small amounts of income. You also lose the benefit of successive CGT-free transfer of assets upon death (let’s say 45 years, per succession), vs presumably triggering CGT consequences upon termination after a trust vests (80 years).

Thoughts?

Andy R

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Re: Australian Investing Thread
« Reply #5090 on: January 14, 2021, 07:33:56 PM »
We propose to implement salary sacrifice from the lower income spouse to boost concessional contributions to $25k.

Are you already maxing out the higher income earners concessional contributions (cc)? If not, look into doing that and using contributions splitting where you increase the higher-income spouse's ccs, then make a transfer to the lower-income earner. This would be useful because marginal rates for a 150k salary are 37% and can therefore get 22 of that 37% back in tax deductions. In contrast, particularly below 45k on the lower-income earner side, the marginal tax rate is only 19%.

You can transfer up to 85% of the concessional contributions to lower-income earner (it counts to the lower-income earners non-cc cap).

Also note that there is a "bring forward' rule with cc introduced a couple of years ago, so if the higher income earner has unused cc amounts from the 2018-19 year onwards, they can be used.

- In terms of portfolio mix, what are people’s rationale for holding different classes of underlying asset (e.g., how are people deciding what ratio of domestic share : US share : other international share : bond, etc). I have read the Barefoot Idiot Grandson suggestion, and also commentary of it on Reddit and elsewhere.

I prefer low-cost indexing because I can't predict what will happen in the future.
I prefer something starting with a global weighted index.
I don't mind a bit of Aus shares, but there is a lot of concentration risk with almost half of the index made up of 10 companies and 2 sectors, limiting the amount of risk I can tolerate. The idiot grandson portfolio has 70%, which has more risk than I would consider sensible. Take a look at how many other individual countries have had very rough patches.
Also while VTS/VEU have lower expense ratios, there is tax drag which results in a cost being fairly similar to Australian domiciled funds minus the pain in the US-domiciled issues with VTS/VEU.

z3170501

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Re: Australian Investing Thread
« Reply #5091 on: January 14, 2021, 08:37:02 PM »

Are you already maxing out the higher income earners concessional contributions (cc)?


Thanks for the detailed reply!! I may need to look into this. The higher-income superannuation is defined benefits, so there are no actual concessional contributions, only notional. I will need to look at what the notional amount is currently determined to be.

Quote

If not, look into doing that and using contributions splitting where you increase the higher-income spouse's ccs, then make a transfer to the lower-income earner.


Quote

You can transfer up to 85% of the concessional contributions to lower-income earner (it counts to the lower-income earners non-cc cap).


Where do you make the transfer from? From the excess concessional contributions or just from the higher income spouse’s superannuation account or direct spouse contributions? Higher income spouse does have a largely redundant accumulation account with minimal funds in (around $8k) it that could be used if either of the former.

Is it desirable to make non-concessional contributions within the super environment, as opposed to direct investment outside of super? I thought the major benefit was within the concessional contribution limits?

Quote

Also note that there is a "bring forward' rule with cc introduced a couple of years ago, so if the higher income earner has unused cc amounts from the 2018-19 year onwards, they can be used.


I assume this is also true of the lower income spouse. That is, might as well bring forward any concessional cap shortfall from the last two years as well (that is, let’s say, an additional $40k of concessional contributions that could be made).

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I prefer low-cost indexing because I can't predict what will happen in the future.

This is exactly what we’re thinking. And also because we are lazy!

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I prefer something starting with a global weighted index.
I don't mind a bit of Aus shares, but there is a lot of concentration risk with almost half of the index made up of 10 companies and 2 sectors, limiting the amount of risk I can tolerate. The idiot grandson portfolio has 70%, which has more risk than I would consider sensible.

This is what I need to understand more. Making decisions based on the different attributes of the ETFs. (E.g., how does one appropriately make the decision of ratio between VAS, VTS and VEU - just to pick an example of an equity only portfolio)

Quote
Take a look at how many other individual countries have had very rough patches.

I take it you are suggesting quite a few!

Quote
Also while VTS/VEU have lower expense ratios, there is tax drag which results in a cost being fairly similar to Australian domiciled funds minus the pain in the US-domiciled issues with VTS/VEU.

So, in the alternative to those two funds, something like IVV for VTS - but not aware of anything similar and Aussie domiciled for VEU?

Andy R

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Re: Australian Investing Thread
« Reply #5092 on: January 14, 2021, 09:08:32 PM »
Thanks for the detailed reply!! I may need to look into this. The higher-income superannuation is defined benefits, so there are no actual concessional contributions, only notional. I will need to look at what the notional amount is currently determined to be.

Ah right. Defined benefit works differently and I don't have much understanding how they work with the caps and contribution splitting. My apologies.

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Where do you make the transfer from? From the excess concessional contributions or just from the higher income spouse’s superannuation account or direct spouse contributions? Higher income spouse does have a largely redundant accumulation account with minimal funds in (around $8k) it that could be used if either of the former.

Is it desirable to make non-concessional contributions within the super environment, as opposed to direct investment outside of super? I thought the major benefit was within the concessional contribution limits?

It is transferred from the higher income spouses fund to the lower income spouses fund, but it has to be done in the following financial year for the previous financial year.

Yes, concessional contributions have a much bigger financial benefit, but with contribution splitting, if the higher earner has unused concessional contributions available, they can contribute and get the tax deduction, and then transfer to the spouse, so you get the tax deduction from the higher income earner. It is just counted additionally as a non-cc for the receiving spouse going towards their 100k/yr cap.

As above, I'm not sure how this plays in with defined benefit super.

Quote
I assume this is also true of the lower income spouse. That is, might as well bring forward any concessional cap shortfall from the last two years as well (that is, let’s say, an additional $40k of concessional contributions that could be made).

Yep, but once you bring down enough for the lower income spouse to be at 45k taxable income, any further and you are only saving 4%. Better than nothing, but not much.

Quote
So, in the alternative to those two funds, something like IVV for VTS - but not aware of anything similar and Aussie domiciled for VEU?

I would just stick with:
• VGS (global large/mid caps)
• VGE (emerging markets).
• Optionally VISM (global small caps).
• Optionally Australian shares (VAS).

Emerging markets is about 10% by global weight.
If you use VISM, then the MSCI split between VGS and VISM is 85:15.
So for the global part, if going by cap weighting, either:
• VGS/VGE 90/10
• VGS/VISM/VGE 76.5/8.5/10

If you wanted, say, 20% Australian equities, that would be
• VAS/VGS/VGE 20/72/8 (I'd round to 20/70/10)
• VAS/VGS/VISM/VGE 20/61.2/10.8/8 (I'd round to 20/60/10/10)

They are all Australian domiciled.
The cost is similar to VTS/VEU after taking into account tax-drag.
Easier at accounting time than VTS/VEU.
No risk of forgetting to send in your W8BEN form and having the US take 40% of your assets from your heirs.

Andy R

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Re: Australian Investing Thread
« Reply #5093 on: January 14, 2021, 09:12:36 PM »
Also, if you are talking about succession planning, it may be worth consulting someone on the pros and cons of setting up a company/trust combination and investing in there for tax benefits.

deborah

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Re: Australian Investing Thread
« Reply #5094 on: January 14, 2021, 09:27:35 PM »
As far as I know anyone can contribute to more than one superannuation fund. When I was in a defined benefit fund, I contributed to it plus another fund to max out my super contributions. Initially, I had problems because there were only certain funds that my workplace would allow me to contribute to, and HR needed a letter from a financial planner to confirm that it was OK for me to contribute more of my own money to super, but after a fair bit of tooing and froing, it happened.

z3170501

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Re: Australian Investing Thread
« Reply #5095 on: January 15, 2021, 01:48:02 AM »
Yes, concessional contributions have a much bigger financial benefit, but with contribution splitting, if the higher earner has unused concessional contributions available, they can contribute and get the tax deduction, and then transfer to the spouse, so you get the tax deduction from the higher income earner. It is just counted additionally as a non-cc for the receiving spouse going towards their 100k/yr cap.

As above, I'm not sure how this plays in with defined benefit super.

Ok, got it! There is room in the higher income concessional contribution cap, by reason of how the defined benefits fund works. Therefore, if the ‘split’ contribution is treated as a non-concessional contribution in the spouse’s fund (it seems to be treated as a rollover), it is not further taxed. This is good, because there is no particular interest in building another super fund for the higher income spouse (the defined benefit fund will deliver an acceptable income stream). So the higher income earner’s concessional contribution ‘shortfall’ is otherwise wasted (each year). Rather than a sum being taxed at 32.5% or 37%, it could be taxed at 15% (together with the earnings thereon). So, if the concessional contribution shortfall in the higher income earner is, say, $12,000 - the tax will be, roughly, $1,800 rather than $3,900 or more (a saving of at least $2,100).

What seems unbelievable is that, if correct, it also leaves the lower income earner’s concessional contribution cap unaffected (I can’t understand the policy for that).

Based on the above, there is a question of whether $2,100 (plus the tax benefit of earnings thereon) is a good price to pay for not being able to access the $12,000 (plus earnings thereon) for 20 years. I presume, given that it is difficult to see how the $12,000 could otherwise ‘earn‘ 17.5% in the first year, it leans heavily towards being a fair price to pay!

I am also not sure how this would play into the $1.6m transfer balance cap - which i know almost nothing about!!

Quote
I would just stick with:
• VGS (global large/mid caps)
• VGE (emerging markets).
• Optionally VISM (global small caps).
• Optionally Australian shares (VAS).

Emerging markets is about 10% by global weight.
If you use VISM, then the MSCI split between VGS and VISM is 85:15.
So for the global part, if going by cap weighting, either:
• VGS/VGE 90/10
• VGS/VISM/VGE 76.5/8.5/10

If you wanted, say, 20% Australian equities, that would be
• VAS/VGS/VGE 20/72/8 (I'd round to 20/70/10)
• VAS/VGS/VISM/VGE 20/61.2/10.8/8 (I'd round to 20/60/10/10)

They are all Australian domiciled.
The cost is similar to VTS/VEU after taking into account tax-drag.
Easier at accounting time than VTS/VEU.
No risk of forgetting to send in your W8BEN form and having the US take 40% of your assets from your heirs.

This piece of information is very much appreciated. I will look into each of those funds, and make sure i understand them properly and what you have told me.

Also, if you are talking about succession planning, it may be worth consulting someone on the pros and cons of setting up a company/trust combination and investing in there for tax benefits.

Yes, this is probably true. I have concerns about a bucket company arrangement. They seem particularly on the nose with the ATO at the moment.

As far as I know anyone can contribute to more than one superannuation fund. When I was in a defined benefit fund, I contributed to it plus another fund to max out my super contributions. Initially, I had problems because there were only certain funds that my workplace would allow me to contribute to, and HR needed a letter from a financial planner to confirm that it was OK for me to contribute more of my own money to super, but after a fair bit of tooing and froing, it happened.

Absolutely. In fact, now the employer doesn’t even need to be involved. Anyone can make personal contributions and claim a deduction (same outcome as salary sacrificing, almost).

Andy R

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Re: Australian Investing Thread
« Reply #5096 on: January 15, 2021, 07:45:47 AM »
What seems unbelievable is that, if correct, it also leaves the lower income earner’s concessional contribution cap unaffected (I can’t understand the policy for that).

It has already taken up the higher earners concessional contribution, so it makes sense not to take up the spouses.

Based on the above, there is a question of whether $2,100 (plus the tax benefit of earnings thereon) is a good price to pay for not being able to access the $12,000 (plus earnings thereon) for 20 years. I presume, given that it is difficult to see how the $12,000 could otherwise ‘earn‘ 17.5% in the first year, it leans heavily towards being a fair price to pay!

It's the same question about whether to contribute to super or not - it's a question of massive tax deductions vs losing the flexibility of having access to it before preservation age.

Quote from: z3170501 link=topic=21335.msg2774187#msg2774187
I am also not sure how this would play into the $1.6m transfer balance cap - which i know almost nothing about!!

The transfer balance cap, currently 1.6m per person, is the max that you can move from an accumulation account (taxed at 15%) to a pension account (tax-free) when you reach preservation age. Any remaining must remain in an accumulation account being taxed at 15%. If the higher income person is likely to exceed the transfer balance amount, it is useful to move some to the spouse with the lower balance so that the combined amount that can be moved into an account-based pension in retirement is maximised.

Another way to move funds to the lower account balance spouse is when you reach preservation age and take out 300k and contribute it to the spouse with less super as a non-concessional contribution during the period they are still able to contribute to super, but you also might want to reserve this 300k for use as a "re-contribution strategy", which you can search for but basically is a way to reduce the tax payable by your non-dependants when you die (which includes adult children), so it may be worth taking advantage of contribution splitting in the meantime.

z3170501

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Re: Australian Investing Thread
« Reply #5097 on: January 15, 2021, 04:50:36 PM »
This guidance is awesome. Thank you!!

It has already taken up the higher earners concessional contribution, so it makes sense not to take up the spouses.

Yes, but it effectively could double the tax deduction / salary sacrifice (same thing) available to the family group. In effect, it is the same as streaming income to a lower rate family member. Who am I to complain!

Quote
It's the same question about whether to contribute to super or not - it's a question of massive tax deductions vs losing the flexibility of having access to it before preservation age.

Yes, indeed. We had figured that, with maxed our concessional contributions to the lower income spouse, and the defined benefits fund, that both would near the $1.6m transfer balance cap - and that we would invest any remaining funds outside of super. But based on this discussion, restricted access aside, it is hard to see how the rate of return of any identical external investment could beat the effect of the lower tax rate inside superannuation.

The only succession benefits that immediately come to mind are the lower CGT discount for a super fund (33% vs 50%) and the CGT rollover for deceased estates. Re: the latter, if a deceased held EFTs directly, they would rollover to a beneficiary without giving rise to a capital gain. However, I’d be highly surprised if an industry fund would do an in-specie distribution to a dependent, and the would potentially be tax payable on some part of that distribution.

Quote
The transfer balance cap, currently 1.6m per person, is the max that you can move from an accumulation account (taxed at 15%) to a pension account (tax-free) when you reach preservation age. Any remaining must remain in an accumulation account being taxed at 15%. If the higher income person is likely to exceed the transfer balance amount, it is useful to move some to the spouse with the lower balance so that the combined amount that can be moved into an account-based pension in retirement is maximised.

Another way to move funds to the lower account balance spouse is when you reach preservation age and take out 300k and contribute it to the spouse with less super as a non-concessional contribution during the period they are still able to contribute to super, but you also might want to reserve this 300k for use as a "re-contribution strategy", which you can search for but basically is a way to reduce the tax payable by your non-dependants when you die (which includes adult children), so it may be worth taking advantage of contribution splitting in the meantime.

I’ll keep both of these things in mind. Particularly the first. Re: the latter, given the rate of change with superannuation, I’d be very surprised if there weren’t significant changes before our retirement (20 years away).

I think it would also be worth better understanding how superannuation benefits interact with a potential testamentary trust. Even with recent law change, they are still one of the last major tax minimisation structures - distributions of excepted trust income to minors (taxed as if they were adults).

mjr

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Re: Australian Investing Thread
« Reply #5098 on: January 16, 2021, 02:45:06 AM »
Tax drag is associated only with VEU.  Put the money all into VTS and get the 0.03% MER.  Europe is a socialist basket-case anyway, you won't catch me putting money into their economy.  The US is more than enough for global exposure.

Juan Ponce de León

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Re: Australian Investing Thread
« Reply #5099 on: January 16, 2021, 03:24:42 AM »
Tax drag is associated only with VEU.  Put the money all into VTS and get the 0.03% MER.  Europe is a socialist basket-case anyway, you won't catch me putting money into their economy.  The US is more than enough for global exposure.

It's true, europoors ruin everything.