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Old 06-27-2012, 11:12 AM   #21
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Well, in my original post I did say "can have", not "will have", negative tax consequences. You have suggested a case where not paying off the mortgage may have positive tax consequences.

I was thinking more in terms of already having the after-tax cash to pay off the mortgage (isn't this the case with most ER's?), and further thinking in terms of things like the amount of SS that is taxable (think tax torpedo) or the Medicare Part B premium, which are affected by one's AGI.
The OP is from Australia so while having a lower requirement for income without mortgage payments will also mean a lower tax bill for him we should not go off into too US centric tax, SS and medical discussions. I think he's looking for general advice.
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Old 06-27-2012, 11:41 AM   #22
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Old 06-27-2012, 12:20 PM   #23
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OP -

Once you have maxed out your tax sheltered options you just start up an account that is not tax sheltered. Not much you can do about that, but you can pull your money out whenever you want. Typically this would be a simple discount brokerage account with low fees, with mutual fund or ETF investments. Your taxable account and retirement accounts are all part of your portfolio, though you usually want to put any tax-inefficient investments into your tax sheltered accounts.

For the U.S. we pay "ordinary income taxes" of 0% to 35% on "ordinary income". We pay 15% on gains on most investments held over one year, excluding dividends. We pay 15% on many dividends but others count as ordinary income. Of course that will probably change next year. So, there is some tax advantage to stock investments, though inflation eats some of that. Australia may have something similar.

No law says retirement savings have to be held in a special government approved retirement account. Some just aren't as tax advantaged.
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Old 06-27-2012, 01:55 PM   #24
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Hmm, ok. I will look into that. Are you sure this also works in Australia? (the 50% discount?) My financial planner was trying to talk me into a product that involves a 10k investment but gets a loan for 50k worth of stock investment. I am only really starting to look into these things now. The Aussie gov scares me. They are talking about raising the retirement age to 70 within the next 10 years and I suspect that they will do something similar with the super annuation funds since they recently took the max down from 50k to 25k per year. I think the last thing they want is to encourage early retirement!
I did a quick check of Aus. tax laws, that's what I read, obviously you need to check it out. Your FP sounds more like a broker (ie salesmen who is trying to sell you something with high commissions), find one who doesn't make $ from what they sell you, but will charge you a flat fee to sit down with you review your situation, or try to find some good books by Aussie authors on financial planning (most are US centric), although the basic concepts remain the same. All the govts around the world have been making promises they can't keep...it's not a Aussie only problem.
Sounds like you are new to all this, try to read as much as you can and educate yourself, including Aus. tax laws.
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Old 06-27-2012, 04:43 PM   #25
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Yes I am new to this. I came to Australia for medical school. I racked up 200k in educational debt which I have mostly paid off. Now I am realizing that my health condition is likely going to limit the number of years I can work. My money is mostly in an account earning 5% currently. But I still have to accumulate wealth. I am trying to figure out how to do that part of it in the most efficient manner but it seems like there are many policies in place to make that difficult! When I said investing in a foreign country I should have said Canada, where real estate is much cheaper than Aus. (And I have citizenship there). I did just read a thread about how a re-adjustment is forthcoming on Canadian home prices as well though... I do need to research more about Aussie tax law and which investments make the most sense. It is great to get opinions and ideas here as well.
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Old 06-27-2012, 05:03 PM   #26
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If you want to spend all your time doing and researching taxes buying foreign property is a good way to require it. Seriously, you are looking for a quick fix and that's not the way to do it. I think I remember another post of yours and your disposable income is impressive so you have no need to come up with complex schemes involving leverage or foreign investments. Keep your money in Australia and follow a simple approach to investing. The greatest return is the dollar you don't spend.
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Old 06-27-2012, 06:22 PM   #27
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When I said investing in a foreign country I should have said Canada, where real estate is much cheaper than Aus. (And I have citizenship there). I did just read a thread about how a re-adjustment is forthcoming on Canadian home prices as well though...
It probably depends on where you live (and want to live) in Oz and where in Canada you are comparing it to. If you are thinking of retiring in Canada, you'll need a boatload substanial sum of money to buy in Toronto or Vancouver. I suspect Sydney, Melbourne and the Gold Coast are similar (if not, I'd be buying Gold Coast IIWY). In Canada, if you are willing to live in East Podunk, Sk. (or Easy Bumf*ck Nl, or many other out of the way places) you can buy a house very cheap. I imagine there are lots of similar places in Oz. Canadian home prices may have a re-adjustment, but it will be far larger/smaller depending on where you want to go. If Canada has a downward drop, the 7-digit prices in Tronna and the Left Coast may fall significantly, but EP/EB can't fall very far from their current 5 digit prices.
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Old 06-27-2012, 06:26 PM   #28
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If you want to spend all your time doing and researching taxes buying foreign property is a good way to require it. Seriously, you are looking for a quick fix and that's not the way to do it. I think I remember another post of yours and your disposable income is impressive so you have no need to come up with complex schemes involving leverage or foreign investments. Keep your money in Australia and follow a simple approach to investing. The greatest return is the dollar you don't spend.
Yep the search for quick fix has been due to health issues. the salary i quoted before was based on exiting specialty training and doing rural and remote locum work. Now that i realize the time will be stretched out beyond 8 years i have to abandon that plan. (full time locum work is very isolating) my current job is 100k and i have 3 more years at that pay level if i make it through this specialty. Afterwards i will do well $wise providing my health allows for it. if l follow simple principles that means not much will change!
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Old 06-27-2012, 06:51 PM   #29
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dr_popeye,
If you find an AUS-specific retirement or investing board, please publish it here. My son lives there now, so a US citizen in Sydney, working for a global company. I need to get much smarter about the topics you mention.
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Old 06-28-2012, 09:20 AM   #30
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dr_popeye,
If you find an AUS-specific retirement or investing board, please publish it here. My son lives there now, so a US citizen in Sydney, working for a global company. I need to get much smarter about the topics you mention.
InvestEd :: Wealth Education for Australian Investors Just found this one. Not tons of recent posts though. They are discussing a Kaplan course in some threads. I find that interesting since they are a US company right? They do review courses for MCATs etc.
http://forums.whirlpool.net.au/archive/878483# This is a thread on whirlpool about superannuation links. Whirlpool is a great site for looking into phone and internet providers in Aus. It has quite a big following but not much of a finance section. Somersoft Property Investment Forums - Powered by vBulletin For real estate. One thing I have realized is that I could be earning a few % more on my current money by simply utilizing term deposits. I will also increase my super annuation deduction to 12.5%. I plan to sell my car and get something cheaper. I barely drive it these days anyways.
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Old 06-28-2012, 09:48 PM   #31
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Ok I'll share what I know that may apply to your situation. My husband and I are both Australian.

1. Forget about getting an Australian pension. In Australia pensions are means tested, to get the full pension you would only be able to have approx. $350k of assets and it totally phases out by time you get to $800k approx.

2. I wouldn't get too excited about putting your money into an overseas tax haven. I have an accounting degree from Australia but do not specialise in tax so do not assume that what I am saying is correct. One thing I do remember from my tax accounting studies was a proviso that if your actions to move offshore are perceived to be purely for tax avoidance they can come after you.

3. Everyone here is giving advice on whether or not to pay off a mortgage. However, you need to remember that most peeps on this site are US based with 3% mortgage rates that they can deduct from tax. Mortgage on principal property is not deductible in Australia and interest rates are probably 6-7% on mortgages.

4. What the financial advisor is probably advising you to do, which seems to be standard in Australia, is they want you to negatively gear a share portfolio as the interest payable is tax deductible. The idea would be you invest in high yielding blue chip shares that give tax imputation credits.

5. You either need to educate yourself or get an accountant/FA you can trust. By educating yourself I suggest you do some of the ASX courses.
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Old 06-28-2012, 09:56 PM   #32
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Should add that maximising your super is always a good idea. However, once again you need to get some guidance as to what amount you are targeting to achieve to ensure there will be no tax payable if you have an enormous amount.

http://www.australiansuper.com/super...r%20super.ashx

Term Deposits - You should be able to achieve 5%+ on a 5 year TD without any issue. Use the following website to get started.

Term Deposit Comparisons - SMH

Real estate, agree it is outrageously inflated at the moment. I wouldn't buy in Oz, overpriced rubbish. Don't forget if you do buy there is stamp duty on the way in and commission if you sell on the way out.
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Old 06-28-2012, 09:59 PM   #33
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ASX online courses - Australian Securities Exchange - ASX

I would start with the basics available online.
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Old 06-28-2012, 10:01 PM   #34
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Tax havens and tax administration

ATO website guidance on Tax Havens. It is probably worth you having a poke around the ATO website as it is written so all users can comprehend what they are saying.
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Old 06-29-2012, 08:41 AM   #35
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Tax havens and tax administration

ATO website guidance on Tax Havens. It is probably worth you having a poke around the ATO website as it is written so all users can comprehend what they are saying.
Thanks for the advice. i already looked at the ato site. I came to the conclusion they are not worth it already. possibly buying real estate in place where rental returns are good makes sense. For now i think i will need to focus my energy on the career for the time being and use Lbym principles. I started the asx lesslns though. definitely need more knowledge....
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Old 06-29-2012, 08:48 AM   #36
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Thanks for the advice. i already looked at the ato site. I came to the conclusion they are not worth it already. possibly buying real estate in place where rental returns are good makes sense. For now i think i will need to focus my energy on the career for the time being and use Lbym principles. I started the asx lesslns though. definitely need more knowledge....
I think you are making good decisions. A few people can use exotic mechanisms to produce good returns, but they come with risk many will also run into trouble with them. The surest way to success is to save your dollars, LBYM and invest conservatively.
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Old 06-29-2012, 08:51 AM   #37
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I think you are making good decisions. A few people can use exotic mechanisms to produce good returns, but they come with risk many will also run into trouble with them. The surest way to success is to save your dollars, LBYM and invest conservatively.
+1 Nicely said.
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Old 06-29-2012, 09:42 AM   #38
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Forget about getting an Australian pension. In Australia pensions are means tested, to get the full pension you would only be able to have approx. $350k of assets and it totally phases out by time you get to $800k approx.
Is that $800k AUS each, or combined?
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Old 06-29-2012, 10:28 AM   #39
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Assets test for Age Pension

Actually for non homeowners for full pension for a couple it is combined assets of $400K. Once you reach $825k combined you get nada. Pension in Oz is totally different to that in the US. Everyone is entitled to the same regardless of contributions.

Payment rates for Age Pension

Also beyond pension there are other payments that peeps can qualify such as rental assistance. Medicare is provided by the Government, as a pensioner many Drs will bulk bill the patient so no gap payment. Prescriptions are only a $5 co pay for a pensioner and once they have spent $500 in a year they get them all free. I am a bit hazy on these numbers as I am only basing it on what I know from what my mother got and she died 18 months ago so things do change.
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Old 06-29-2012, 10:36 AM   #40
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Payments for Older Australians

Other payments the aged qualify for.

We are currently in the process of relocating from the US to Oz because we have analysed and believe it is a better system for us to live under. It immediately takes away the outrageous health care premium. Use the calculator below to see what other first world countries charge for private health insurance if you want it. Add in when you need help there is government help provided. If you are aged and stay in your home you get so many hours a week for a carer at government expense. Once you get a certain age and need help with cleaning you can go thru the govt and get a cleaner at $5 an hour for so many hours a week. My MIL died recently, over the past 3 years she probably spent 30 months out of 36 in hospital. No real cost to her, no messy insurance claims to deal with.

Health Insurance - Health Cover - Health Fund - Bupa

You also have to take the pension payment into context with superannuation which is the equivalent of the US 401k. It is obligatory that employers contribute 9% to the employees account. That includes contract/temp workers. Every employee gets to nominate their own super fund, the employer can not force you into the fund of their choosing. They have also regulated what the funds can charge in the way of fees, intended to protect smaller accounts. Often these funds will only be charging fee of around a $1 a week.
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