Author Topic: Investing advice of the "homeless"  (Read 5006 times)

Kaminoge

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Investing advice of the "homeless"
« on: May 22, 2014, 05:29:19 AM »
... and by homeless I mean "one with dodgy residence status". Fortunately I have a roof over my head.

Current situation is that most of my finances are tied up in property in Australia (where I'm a citizen but not a resident). I also have about $40,000 in a mutual fund there and about $30,000 in super. there's no tax advantage to me in having the super.

Since starting to hang out on MMM I'm realising that my current investment "strategy" could perhaps be improved. Not surprising since I've never put any thought into it at all. At first I thought I'd invest in Vanguard but it turns out they won't take money from a non-resident. I've emailed a stockbroker to see if they'll let me open an account but while waiting for their reply I started to think that perhaps getting more money tied up in Australia while claiming to be a non-resident is a bad idea.

So I'm wondering. Are there options for people who aren't really tied to a geographical location? I'm in Bulgaria right now but that's likely to be for a few years and then I'll be off to the next location. I don't really have a home base. Does anyone have any ideas or any thoughts on how the ATO might view me opening a stockbroker account in Australia (presuming I'm even allowed to) in light of my non-residence?

Alternatively should I just stick with what I'm doing? The mutual fund has worked out to give me an average of 8% returns over the last 15 years (calculated by comparing what I put in and when vs what interest rate I would have had to have gotten to end up with the same amount of money in a compounding interest account) so that doesn't seem completely horrible. The housing loans are at 5.2% interest so I could always just dump more money into them too.

It all seems so complicated. I like my life but there are times when it would be certainly simpler just to live in the one location.

SDREMNGR

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Re: Investing advice of the "homeless"
« Reply #1 on: May 22, 2014, 02:59:24 PM »
What is your nationality?  Most countries and governments need to classify you at a certain address for tax purposes.  In the U.S., you can establish residency in any state with a local address.  There are companies that run po boxes that help you establish residency.  Lots of people in the U.S. that travel by RVs across the country without a real "home" do this frequently.  They also pick a state that doesn't have any income tax to do this for obvious reasons. 

Depending on what your nationality is, I assume there may be a similar company in your country that can do this for you.  If not, perhaps you should start it up in your country!

nereo

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Re: Investing advice of the "homeless"
« Reply #2 on: May 22, 2014, 03:38:31 PM »
What is your nationality?  Most countries and governments need to classify you at a certain address for tax purposes.  In the U.S., you can establish residency in any state with a local address.  There are companies that run po boxes that help you establish residency.  Lots of people in the U.S. that travel by RVs across the country without a real "home" do this frequently.  They also pick a state that doesn't have any income tax to do this for obvious reasons. 

Depending on what your nationality is, I assume there may be a similar company in your country that can do this for you.  If not, perhaps you should start it up in your country!

She's Australian.  Which she mentioned twice in her post.

Quote
Current situation is that most of my finances are tied up in property in Australia (where I'm a citizen but not a resident).

SDREMNGR

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Re: Investing advice of the "homeless"
« Reply #3 on: May 22, 2014, 04:39:28 PM »
Ah.. Missed that 1 sentence.  I just thought she lived there part time.  Looking at Australian rules, it seems they demand that you live there.

"The primary test of tax residency is called the 'resides test'. If you reside in Australia, you are considered an Australian resident for tax purposes and do not need to apply any of the other residency tests.

If you do not satisfy the resides test, you will still be considered an Australian resident if you satisfy one of three statutory tests:

The domicile test: You are an Australian resident if your domicile (broadly, the place that is your permanent home) is in Australia, unless we are satisfied that your permanent place of abode is outside Australia.

The 183 day test: If you are actually present in Australia for more than half the income year, whether continuously or with breaks, you may be said to have a constructive residence in Australia, unless it can be established that your usual place of abode is outside Australia and you have no intention of taking up residence here.

The superannuation test: This test is design to ensure that Commonwealth government employees working at Australian posts overseas are treated as Australian residents."

It would probably depend on how mobile you are.  If you are just moving from one country to another every few months, I think you can make a pretty strong claim that your "legal residency" is still in Australia.  Are you earning money while travelling in these countries?  That may complicate things.  I believe most people who do the ATW travel usually keep their citizenship and residency in their origin country, even for many many years.
« Last Edit: May 22, 2014, 04:41:38 PM by SDREMNGR »

deborah

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Re: Investing advice of the "homeless"
« Reply #4 on: May 22, 2014, 05:00:41 PM »
As you have some assets in Australia, you will be paying Australian tax on those assets. If you have stock in Australia and receive franking credits, the Australian tax will decrease.

Similarly, as I have an index fund that has US stock in it, I need to pay appropriate ammounts to the US tax system.

I expect that happens no matter where you invest.

Kaminoge

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Re: Investing advice of the "homeless"
« Reply #5 on: May 23, 2014, 01:22:09 AM »
It would probably depend on how mobile you are.  If you are just moving from one country to another every few months, I think you can make a pretty strong claim that your "legal residency" is still in Australia.  Are you earning money while travelling in these countries?  That may complicate things.  I believe most people who do the ATW travel usually keep their citizenship and residency in their origin country, even for many many years.

I'm definitely a non-resident and have been for years. Yes, I earn money overseas and I want to be a non-resident because otherwise the Australian government would take a cut of that.

I don't pay tax in Australia because I keep all my property negatively geared. If I started to earn money then I'd be paying tax. Due to being a non-resident I don't have the tax free threshold.

My problem isn't about the tax, it's about the fact that apparently they keep tightening things up and now it seems I can't invest at all. The stockbroker also said no to me opening an account as I'm not a resident.

AmericanEagle

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Re: Investing advice of the "homeless"
« Reply #6 on: May 23, 2014, 12:21:09 PM »
I'm an American who has lived abroad for more than half my adult life.  We could dedicate a whole forum to expat investing.  That said, there are some basic rules.

1) Broadly speaking, expats come in two stripes: those who just take off to somewhere they like, live cheap, and get low paying jobs like teaching english.  It can be a great experience, especially if you learn a language.  Some parlay their experience to startiing a business abroad (difficult).  Then there are expats like myself: those hired in their home country, sent overseas on an expat package which includes luxury housing, freight allowance, school allowance if you have kids, and pay differentials.  It's getting harder to get this type of job but they're still around.

2) Your goals should depend on which group you're in.  If your in teaching English, you probably aren't saving much if anything, but learning a foreign language could be invaluable.  Ditto for the experience you get surviving in another culture.

3) No matter how long you stay "out", you gotta have a home base.  Real estate back home is a great investment.  Buy a rental property, get a property manager in place and lease it out.  You get the income (hopefully enough to pay your mortgage) plus you get a place to hang your hat if/when you decide to return home.

4) Keep things like your driver's license, voter registration, etc. current.  A lot of expats don't do this then have to scramble when they decide to go back especially if they want to get a mortgage.  File a tax return, even if you owe no taxes -- this is a great way to prove residency somewhere (at least in the USA).
« Last Edit: May 23, 2014, 03:56:45 PM by AmericanEagle »

Kaminoge

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Re: Investing advice of the "homeless"
« Reply #7 on: May 23, 2014, 10:22:57 PM »
Eagle your number 3 is the problem. Australia is as much of a home base as I've got. And, as previously mentioned I do have quite a bit of real estate there. But that doesn't make me a resident. I still have a drivers license but my voter registration went years ago and I can't get it back. I do file a tax return (sort of) each year - well I file saying I don't need to file so at least I'm putting something in.

The problem isn't proving residency. I claimed residency for years. Then they changed the tax laws and I decided not to be a resident anymore. It's a very grey area and as far as I can understand largely depends on my intent. If I intend to go back one day I'm a resident if I don't then I'm not. Right now I have no intention of going back (and I've been out of the country over a third of my life) and so I feel it's totally reasonable for me to claim non-residency.

The problem isn't how to be a resident (I don't want to). it's how to invest as a non-resident. That's what I'm looking for tips on. As noted earlier both Vanguard and the stockbroker told me they won't deal with non-residents. Surely someone must...

AmericanEagle

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Re: Investing advice of the "homeless"
« Reply #8 on: May 25, 2014, 12:15:42 AM »
I guess I'm not versed enough in Australian residency law to understand your situation.    What exactly are the advantages of being a non-resident?  Why not go back and declare a residency in Australia and be done with it?  Personally I've always kept my residency in the U.S., no matter where I am overseas.

And since you're a resident of Bulgaria, could you invest through a broker there?

Kaminoge

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Re: Investing advice of the "homeless"
« Reply #9 on: May 25, 2014, 02:18:08 AM »
Well it's not just about the advantages. It's about actually trying to make sure I'm declaring the right thing.

But the big problem is that if I'm a resident I have to declare all foreign earned income and pay tax on it in Australia. Not an attractive proposition.

Possibly I could invest through a broker here but that all seems like hard work to me (I'd have to find an English speaking one for starters), it would complicate tax matters here (if you've ever experienced ex-communist paperwork you'd understand why I'm keen to avoid that) and the fact is that I'll only stay here for a few years and then I'll move on to the next adventure. At that point I won't want any ties to Bulgaria.

It's the down side to this lifestyle. The world isn't set up for people who don't want to conform to a national identity.

Oh well, maybe I'll come across some more international option for investing. Otherwise I'll just be thankful that I can keep dumping money into what I already had set up.

swisstash

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Re: Investing advice of the "homeless"
« Reply #10 on: May 25, 2014, 03:08:21 AM »
The world isn't set up for people who don't want to conform to a national identity.

There are a lot of people living the Perpetual Traveler lifestyle. There must be a lot of wisdom floating around the internet on that topic by now. I'm not sure whether to find it exactly, though.

One option is to talk to banks that are used to having international customers: HSBC, Credit Suisse, etc. You could for example open an account here in Switzerland and keep that throughout your travels. They are flexible about your nationality, residency, and how you make your tax declarations. There are some rules but they may suit you well.

Kaminoge

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Re: Investing advice of the "homeless"
« Reply #11 on: May 25, 2014, 03:47:42 AM »
Thanks for the suggestions swisstash. I guess many of the people who do float around are like Eagle and keep a home base somewhere. But yes, I thought someone else on here might have some suggestions for me.

Hmmmm maybe I should look into Swiss banks and see what they offer in terms on investments. I'll do a little googling. Part of the problem is that I suspect a lot of people who are looking into investing outside their country of residency are rich and doing it for tax reasons. I'm not quite on that scale!

bluecollarmusician

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Re: Investing advice of the "homeless"
« Reply #12 on: May 25, 2014, 06:59:07 AM »
My wife is English, I am American, and we both worked on cruise ships for years- we were paid in dollars, and had similar questions and concerns about saving investing.    Australian tax law has many similarities to English tax law- so I may have some suggestions-
take it FWIW....

What we did was open a bank account (in dollars) through the Isle of Man.  There are various places like this- the so called "tax havens" - but the real benefit to us was that they allowed you hold your account in pretty much any currency you wanted to.  I don't know if this would benefit you or not, but if you move around a lot, it might be easier to hold your account in say Euro's/Dollars, etc.  That was with HSBC, but there are numerous other large banks that have an offshore option.

Through investment advisors at HSBC we were able to invest in Royal Skandia which was basically a vehicle which allowed you to invest in other funds- there were American Funds, worldwide funds, etc.   The big drawback to this was cost- essentially the fees are out of site-  they were effectively "funds of funds"- so you were paying expense ratios on two levels instead of one.  The big advantage for me was that I never had to bring the money back home (which was silly, as in the end I realized this was not an advantage- I declared all my income each year and got the tax advantage of the foreign earned income exclusion)  for my wife the big advantage was being able to save in dollars rather than having to change it all to pounds.  And while we were holding it in that account we did not pay taxes on our gains... again, because the money was in a tax haven, and was Foreign earned for both of us.  But it was very complicated to set up- due to scrutiny on the channel islands there were many hoops we had to jump through to show that we were legit and not using drug money or evading taxes or anything like that.  It is a possibility- but I do believe that they have become even more restrictive in allowing people to do this- but in the absence of other options this may be a good one.

It is a little complicated- and be very wary of tax advisors selling bad advice that they get paid very well on.  There are numerous options available and don't take the first thing they offer you.

I would also say that Investing in Australia might not be bad.  As long as you don't live in Australia, your foreign income should be relatively safe.  Investing from Australia may cause you to incur tax liability- but eventually you will run into that just about anywhere. 


Sorry- wish I could say there is a simple answer- but in your situation it IS a little complicated and most people do not understand the intricate nature of tax law.  I know it is daunting but the best thing is to take the time to learn yourself.  If you have any questions, I can only respond to our specific issue.

Kaminoge

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Re: Investing advice of the "homeless"
« Reply #13 on: May 25, 2014, 07:38:57 AM »
Thanks a lot for the thoughts. It gives me a bit more to think about. I probably would be interested in anything with high fees. Unless it's less than what I'm paying on the mutual fund I already have in Australia (set up many many years ago when I was a resident) then it's not such an attractive proposition.

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As long as you don't live in Australia, your foreign income should be relatively safe.

As long as I stay a non-resident it is. The problem is that as long as I stay a non-resident no broker will allow me to open an account with them it would seem. Right now I'm basically shipping all of my money back to Australia and putting it against my mortgages. It's not a problem because I don't need to explain where I got it from since I'm not a resident.

Working on cruises must have been an interesting lifestyle.