Australian Investing Thread

[flaky]

Thanks Andy, your site and replies across the various fora have been very helpful. I haven't been able to figure out what the best options are for drawing down from ETFs in the retirement. A lot of FIRE discussion amongst us young'uns understandably tends not to consider this phase, but given the whole idea is to enable 'RE' are there any resources that address these considerations directly for people who otherwise broadly follow a passive ETF investing approach? At a basic level it seems that paying a brokerage fee to cash out a whole number of each bond/ ETF required to roughly hit a certain payout amount is likely not optimal.

[Andy R]

Resources -
I only know the US resources such as earlyretirementnow.com, which is very in-depth.
SOR risk also important to read about.
Pfau is also worth reading.

Brokerage is absurdly cheap these days if you go with SelfWealth or OpenTrader, so I would think withdrawing every 1-2 months would cost you an extraordinarily small amount. Capital gains are also more efficient being taxed at 50% of the capital gain and can remain invested, earning money on the not-yet-paid tax until you actually need it.

This is opposed to dividends, where the amount paid out has not considered your personal circumstances.

The most important thing really is SOR risk (which you can search), and there is no known financial solution. It would be best if you built in some flexibility in case of multiple down years early on in your retirement via as many ways as possible such as these:
- working part-time or casual for the first few years.
- over funding your retirement nest egg by working an extra year or two.
- having discretionary expenses that you can cut from.
- vanguard's floor and ceiling rule for spending.
- having some secure income (although not sure the annuity market in Australia is sound or not).

I wish I had more information and links, but at this stage, I don't.

One thing I would say is that superannuation and the rules around retirement can be complex, so it may be worth seeking professional advice on possible strategies of which there are many. For instance, upsizing to get the pension, then downsizing later when you have begun to burn through some funds. There is a contribution strategy to reduce tax payable by your adult children from any remaining super you have. There are gifting rules with time frames of how long it can affect you getting the age pension. Lost more.

[Richmond 2020]

VAS dividend up to 77 cents a share. Tracking back nicely now the banks are paying out again.

[marty998]

Payment date 20 April.

I gather the lack of excitement and enthusiasm here about it is because everyone's pockets are groaning under the weight of massive gains on property at present.

[chevy1956]

Payment date 20 April.

I gather the lack of excitement and enthusiasm here about it is because everyone's pockets are groaning under the weight of massive gains on property at present.

We own our PPOR but never really think about how much it is worth. I always check our ETF & Super balances though. Market returns matter more to me at this point. I don't care too much about dividend payouts but they are nice. I'd love to have enough dividends being paid out to never sell my portfolio but I'm already retired so I doubt I'll get to that level.

[urbanista]

Anyone increasing their concessional contributions to 27,500 x 2 = 55,000 ? That's $1200pa tax cut for us. Sweet.

[Model96]

Anyone increasing their concessional contributions to 27,500 x 2 = 55,000 ? That's $1200pa tax cut for us. Sweet.

First thing we'll do after July 1 for sure!

[Richmond 2020]

Payment date 20 April.

I gather the lack of excitement and enthusiasm here about it is because everyone's pockets are groaning under the weight of massive gains on property at present.

I think you’re right. This thread has been dead lately.

I am still keenly watching dividend news as we rely on dividends, and cash generated from investment properties to top up my wife’s salary. I retired and became a stay at home dad recently and we use these income sources to help us bridge the gap until I can claim my defined benefit pension.

[marty998]

Anyone increasing their concessional contributions to 27,500 x 2 = 55,000 ? That's $1200pa tax cut for us. Sweet.

First thing we'll do after July 1 for sure!

I need to rework my salary sacrifice contributions.... maths is hard haha

[Murdoch]

Good to hear superannuation concessional contributions is rising next financial year.

More positive news out today with IMF predictions of further growth for Australia. Whether or not it comes true is another matter.

Australia seems to be slowing the amount of cash pumping into the economy, whilst the US continues to print cash and is hinting at another economic stimulus later this year. If the US dollar devalues in coming months or years, what effect (if any) would this have on the AUD and our own economy?

[mjr]

You mean other than the obvious impact of the AUD appreciating against the USD ?

[Murdoch]

Yes.
If the US experienced serious inflation, and the Aus gov isn’t pouring excess AUD into the economy we’d probably see AUD go up against USD. At least in theory. Has this happened historically? The high AUD valuation to USD around 2010 wasn’t due to inflation so much was it?
What effect would high US inflation it have on our economy and market though?

[Juan Ponce de León]

Personally i think AUD v USD has in the past been a commodity trade and will be going forward.  The 2010 AU$ valuation was due to the resources boom after the GFC.  We generally follow the US lead when it comes to printing money and inflation.  I think if they keep printing, we'll think of a reason to print too.

[turboslob]

Were dividends extra special recently?

I hold VDHG (paid quarterly) and got >3% dividends for the quarter, and usually it's the EOFY which is the big one. Did I miss something?

[lush]

Yeah significant distributions also for the Vanguard Balanced Fund (managed fund) - anyone know why?

[mjr]

Holy Dooley, how about that share market >

[Richmond 2020]

Were dividends extra special recently?

I hold VDHG (paid quarterly) and got >3% dividends for the quarter, and usually it's the EOFY which is the big one. Did I miss something?

I’m not sure but maybe partly due to the relaxation of the temporary regulations that were imposed on the banks forcing them to slash dividends when COVID broke out.

[LonerMatt]

What to do about housing? What the fuck will happen?

Hello everyone: reluctant investor, non-savvy, median wage earning ignoramus here. Looking for some advice and speculation from you all.

What I'm curious about is what the hell is going on with property prices. Obviously I know they are rising, obviously I know most of the COVID predictions were wrong and obviously I know negative gearing means investment $$$ in property. What I don't know is should I accept our reality of low interest rates and high prices and just buy a place to live or should I keep taking advantage of stagnant rental prices and not worry too much.

I was reading yesterday that the median house price in Melbourne is now $1,000,000 which is, you know, quite a lot of money. My partner and I have the same cyclical conversation where we think we'd like to buy a place, we look at what's available that suits our wants/needs then the price is so high that we just get depressed. On the other hand we're getting a bit more dew eyed about having our own space, we usually rent cheaper places, even though each place where we've lived has been super nice there have always been some flaws that kept the price quite reasonable.

We've got to a point where we have about a $400k deposit but our appetite for debt is not high, neither of us likes the idea of taking about a $800,000 loan or something, so we've tentatively set a $500-$600k hard stop on any mortgage. This now gets us into 'median' price range. Additionally, we really don't want to do a 'property ladder' thing again, our appetite for debt and buying/selling is really low - that may be a dumb choice but it's where we stand for now (ofc if we bought somewhere and then, 5-10 years later realised it wasn't workable we'd sell and move, but I digress).

I think our ideal would be a 3 bedroom smaller place 7-10km from the CBD with something of a garden, we're not especially picky about a lot of things other than appetite for debt and the desire to not be constantly doing property flips.

I guess this is a long rambley explanation to wonder out loud: should we just keep saving and waiting until it's a buyer's market? Or should we move at a time that suits us regardless of the insane pricing?

[GT]

Option two, move when it suits you.

[LonerMatt]

Not sure it ever will unless NG gets the flick and prices drop.

[middo]

If you are planning on holding the home for a number of years then any short term fall in value won't really matter.  The cost of the loan compared to rent, and the opportunity cost of investing in housing are issues, but you still need to live somewhere.  I would suggest like any investment, trying to time the market is a bit of a mugs game for the average home buyer. Buy something you think will work for 10+ years and live there.

[Model96]

What to do about housing? What the fuck will happen?

Hello everyone: reluctant investor, non-savvy, median wage earning ignoramus here. Looking for some advice and speculation from you all.

What I'm curious about is what the hell is going on with property prices. Obviously I know they are rising, obviously I know most of the COVID predictions were wrong and obviously I know negative gearing means investment $$$ in property. What I don't know is should I accept our reality of low interest rates and high prices and just buy a place to live or should I keep taking advantage of stagnant rental prices and not worry too much.

I was reading yesterday that the median house price in Melbourne is now $1,000,000 which is, you know, quite a lot of money. My partner and I have the same cyclical conversation where we think we'd like to buy a place, we look at what's available that suits our wants/needs then the price is so high that we just get depressed. On the other hand we're getting a bit more dew eyed about having our own space, we usually rent cheaper places, even though each place where we've lived has been super nice there have always been some flaws that kept the price quite reasonable.

We've got to a point where we have about a $400k deposit but our appetite for debt is not high, neither of us likes the idea of taking about a $800,000 loan or something, so we've tentatively set a $500-$600k hard stop on any mortgage. This now gets us into 'median' price range. Additionally, we really don't want to do a 'property ladder' thing again, our appetite for debt and buying/selling is really low - that may be a dumb choice but it's where we stand for now (ofc if we bought somewhere and then, 5-10 years later realised it wasn't workable we'd sell and move, but I digress).

I think our ideal would be a 3 bedroom smaller place 7-10km from the CBD with something of a garden, we're not especially picky about a lot of things other than appetite for debt and the desire to not be constantly doing property flips.

I guess this is a long rambley explanation to wonder out loud: should we just keep saving and waiting until it's a buyer's market? Or should we move at a time that suits us regardless of the insane pricing?

Houses in my area in Sydney have been appreciating over $2000 a week for over a decade, and more than $1000 for half a century. Demand for housing will always be high during good times and bad due to immigration, and as we see now expats returning have raised demand even during a pandemic.
If you live in Australia, buy a home as soon as you can, it's the best start to investing you can possibly give yourself.

[chevy1956]

If you are planning on holding the home for a number of years then any short term fall in value won't really matter.  The cost of the loan compared to rent, and the opportunity cost of investing in housing are issues, but you still need to live somewhere.  I would suggest like any investment, trying to time the market is a bit of a mugs game for the average home buyer. Buy something you think will work for 10+ years and live there.

Houses in my area in Sydney have been appreciating over $2000 a week for over a decade, and more than $1000 for half a century. Demand for housing will always be high during good times and bad due to immigration, and as we see now expats returning have raised demand even during a pandemic.
If you live in Australia, buy a home as soon as you can, it's the best start to investing you can possibly give yourself.

Just quoting these two for truth. We bought our house about 11 years ago now. I was extremely concerned about the cost as it was too high and it had to come down. I don't intend to move for a while yet.

[deborah]

It depends on where you live. I have a relative in Perth who bought some years ago (ten?) at the height of the housing prices there. The house went down in price for a number of years, and, only now, is it anywhere near what it was bought for (in $ terms, not accounting for inflation). The same happens in many rural towns with only a couple of major employers. If the employer stops, housing prices in the town fall off a cliff. Geelong was badly hit when Ford closed, and mining towns seem to be in a perpetual boom and bust.

[LonerMatt]

To clarify:

1. We're planning on buying for the next 5-10 years, minimum
2. Inner Melbourne so definitely subject to fluctuations but hopefully not as boom-bust as rural towns or newly minted suburbs

[Fresh Bread]

Didn't your gf want to move for work though? Or am I misremembering/ did she change her mind?

Sounds like you should just buy in. Everyone has a story, but we bought in Sydney in hot markets twice and were fearful but after a plateau the prices took off again. The house has doubled in value in almost 10yrs but the apartment has not. We no longer own the apartment.

We used a buyer's agent to get the house, I'd strongly recommend that in a hot market, it cost $10k for a 1.2m house and we wouldn't have got it otherwise (inside knowledge, relationship with the selling agent etc etc). 

[LonerMatt]

We'd like to move overseas for a stint but not sure when that will be feasible, but we'd like to settle back in Melbourne long term. It's a bit of a hard one, I tend to make a decision and go for it, she tends to like to umm and ahh a bit more, especially with future day dreaming.

[Fresh Bread]

Well if it's just for a year or two you can rent it out while you're away. I did that with my UK house then moved here permanently. It actually wasn't hard to sell it remotely.

[mjr]

Or you could consider buying your first house as a median wage earner a bit further out than 7-10km from the Melbourne CBD where the prices are probably less insane ?

Also, you might lay off negative gearing (which by the way, I don't use and never have), it's not the problem.

[Murdoch]

Almost my entire adult life the property market has looked overpriced and ready for a regression to the mean (I'm late 30's).
If you want a place to live that is your own, and you'll commit to it long term then just dive in I reckon.
If you hate debt, then get a fixed low interest rate for the first few years and dedicate all your efforts and extra hustle into getting it down to comfortable levels. This may not be the best financial decision on maths, but if they psychology plays into your personal approach then it may be a good approach.
Good luck:)

[Andy R]

Well if it's just for a year or two you can rent it out while you're away. I did that with my UK house then moved here permanently. It actually wasn't hard to sell it remotely.

From 2020, if an Australian citizen sells as a non-resident, they lose the CGT-free status - for the entire time they lived in it while it was in Australia before they left.

[MrThatsDifferent]

Well if it's just for a year or two you can rent it out while you're away. I did that with my UK house then moved here permanently. It actually wasn't hard to sell it remotely.

From 2020, if an Australian citizen sells as a non-resident, they lose the CGT-free status - for the entire time they lived in it while it was in Australia before they left.

But if you move back you’re not a non-resident anymore, correct?

[LonerMatt]

Or you could consider buying your first house as a median wage earner a bit further out than 7-10km from the Melbourne CBD where the prices are probably less insane ?

Also, you might lay off negative gearing (which by the way, I don't use and never have), it's not the problem.

1. Not going to fly with the Mrs, I don't think ownership is enough of a lure to see her 10km out. Usually she's pretty flexible but on location she knows what she wants and it's priority #1 for her.

2. It's certainly a problem

Almost my entire adult life the property market has looked overpriced and ready for a regression to the mean (I'm late 30's).
If you want a place to live that is your own, and you'll commit to it long term then just dive in I reckon.
If you hate debt, then get a fixed low interest rate for the first few years and dedicate all your efforts and extra hustle into getting it down to comfortable levels. This may not be the best financial decision on maths, but if they psychology plays into your personal approach then it may be a good approach.
Good luck:)

Thanks - the psychology does matter a lot for sure.

[mjr]

Negative gearing is a simple foundation of taxation law that you can deduct expenses that are used to generate income from your taxable income.  Pretty simple.

People against negative property are usually advocating for an exception to this foundation principle just for existing real estate - usually with arguments that it is "unfair" and "costing the taxpayer".

Inner-city Melbourne lefties who couldn't possibly buy their first house 10km out are typical examples.

[chasingthegoodlife]

If you’re reasonably confident you want to be in Melbourne long term and that your relationship will be long term then in your shoes I would start looking around for the right thing to buy.

I think there will always be a strong demand for single family homes in inner Melbourne (one of Australia’s biggest urban centres, not dependent on any one industry). High rise apartments or housing estates on the fringe are riskier perhaps, but with what you want to buy I don’t think you’ll see a sharp drop and trying to time a slight dip might waste a lot of your time for no result.

What suburbs are you thinking about? With your criteria I’m guessing maybe western around Sunshine or northern around Coburg/Fawkner? Have lived in and love both of those areas myself. Don’t know where you live now but it’s worth spending a bit of time investigating the suburbs you’re interested in and thinking about what you value.

Oh and get clear on your joint appetite for renovation. If you plan to rent it out for a period in the near future to work overseas, you want something in good repair.

[LonerMatt]

Thanks for the advice, some responses!

1. Surburbs: Footscray/West Footscray (not as far as Sunshine as the increased commute for both us would be quite bad), Brunswick West/East, Coburg, Ascot Vale/Flemington, Northcote/Thornbury. Obviously we're not going to pay for the nicest places in those suburbs (outside our budget of ~$1m), but there are a dozen places we've seen online that fit the bill (though may go for over the estimate at auction ofc). We're looking at 2-3 bedrooms, a bit of a front or back yard, 15 minutes from some form of PT and bike friendly.

2. We've discussed renovation and we don't want to buy a 'fixer upper' as a primary place to live in, my partner travels for work 150-200 days of the year so coming home to a whole place being renovated isn't something that we'd like to do for now (though in the future who knows), a room or two needing an update, or cosmetic changes are fine, as is maintenance, just not a bombshell where it's really just the land value (for example, one spot I saw on a browse yesterday clearly hadn't been lived in for 5-10+ years).

Over our lives we've lived in: Newport/Williamstown, Carlton, Parkville, Brunswick and Ascot Vale, so we're sticking to places we know well, that are close to family and friends and don't blow our commute out to really unpleasant levels. If we can't afford the sort of place we want in the sort of places where our lives are good then that's fine, renting is far from a bad deal :)

[marty998]

How much do you pay in rent @LonerMatt ? I spent a similar amount on my latest purchase ($340k deposit, $600k loan)

Loan repayments are $2399 a month (rate is 2.59%).

The interest component is barely $1300 a month... I can’t believe I’m getting $800 a week rent for it.

Who said property has to be negatively geared lol.

I vote for owning rather than renting (landlord shooting himself on the foot here telling renters to buy)

[LonerMatt]

Each month I pay $970 in rent. If I read the websites I've looked at correctly, if we got a $600k loan, with current interest rates that would be about $2-2.5k repayments per month, which is not much more than our combined rent ($1850).

[timn]

Afternoon all,

Been following this forum for a while, and after some advice.

After reading about the debate between ETFs and index funds, I started initially with Vanguard's retail high growth fund, and am now part of it's wholesale high growth fund over the last few years. Of particular concern to me then, was that I would be influenced by watching prices and holding off on buying, so instead the fund allowed me to set up a 'set and forget' regular small amount to bpay over, and avoid having to look at prices if I were to purchase ETFs myself.

However it seems I've become a bit more resilient than I initially thought, and would like now to consider a mixture of VAS/VEU/VTS (mainly for a bit more control and tax efficiency - please correct me if I'm wrong though).

Would you advise selling off the growth fund units and moving to them to above combination, or just holding onto them as they are without adding anything further to the fund?

Cheers

[marty998]

Depends on how much you have in there, what your tax position is, whether you'd be better off putting the money in super if you are nearing retirement age, how much your spouse earns, and why you are investing at all.

Standard advice is just to "open SelfWeath account, buy VDHG/VTS/VEU/VAS" but its soooooo much more complicated than that.

If you are going to sell and you have are up substantially because of the gains this year, do it after 1 July so you delay the CGT bill for another year.

[turboslob]

G'day. Hoping to understand dividends a little better.

I own a small amount of a share (APN Property Group) which paid out a dividend of more than 80% of its share value. What are potential causes of such a spike?

Just trying to understand what the potential causes may be for such a dividend (100% franked too).

Thanks, Slob.

[Juan Ponce de León]

G'day. Hoping to understand dividends a little better.

I own a small amount of a share (APN Property Group) which paid out a dividend of more than 80% of its share value. What are potential causes of such a spike?

Just trying to understand what the potential causes may be for such a dividend (100% franked too).

Thanks, Slob.

From a quick look at the announcements APN has been taken over by Dexus Property Group and will cease quotation on the ASX.  Basically you got paid out I think.

[turboslob]

From a quick look at the announcements APN has been taken over by Dexus Property Group and will cease quotation on the ASX.  Basically you got paid out I think.
[/quote]

Thanks - that makes sense.

[lush]

Does anyone that owns a Vanguard wholesale fund claim the management fees for tax purposes? I have never done it, and thought surely I should - but can't see it on my distribution statements. Thanks.

[mjr]

https://community.ato.gov.au/t5/TaxTime/Deduction-for-managed-trust-quot-indirect-fees-quot/td-p/9127

[mspym]

https://community.ato.gov.au/t5/TaxTime/Deduction-for-managed-trust-quot-indirect-fees-quot/td-p/9127

Thank you! I had no idea this community exists and you may have just saved me another 2 days of attempting to translate the ATO jargon into something I understand.

[lush]

https://community.ato.gov.au/t5/TaxTime/Deduction-for-managed-trust-quot-indirect-fees-quot/td-p/9127

Thank you! I had no idea this community exists and you may have just saved me another 2 days of attempting to translate the ATO jargon into something I understand.

Ditto - thanks so much mjr!

[mjr]

Check out those VAS dividends!  $1.41

[Richmond 2020]

Check out those VAS dividends!  $1.41

Yeah noice. Was expecting an increase but that’s huge.

[Vinkyb]

Hi everyone- was just wondering if anyone has a recommendation for a good accountant in Canberra? I need some investment structuring advice- so slightly more complicated than just completing a tax return. Appreciate any referrals!