Tax Havens?

[nun]

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.

 

[kumquat]

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.

 

[dr_popeye]

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!

 

[target2019]

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.

 

[dr_popeye]

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.

 

[DangerMouse]

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.

 

[DangerMouse]

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/supe...ctsheets/Factsheet Accessing your super.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.

 

[DangerMouse]

ASX online courses - Australian Securities Exchange - ASX

I would start with the basics available online.

 

[DangerMouse]

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.

 

[dr_popeye]

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....

 

[nun]

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.

 

[MichaelB]

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.

 

[rescueme]

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?

 

[DangerMouse]

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.

 

[DangerMouse]

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.

 

[rescueme]

Not to get "political", but when DW/me were down under a couple of years ago, the health system (defined by our guide) was a bit "wanting", as far as the basic system (e.g. beds in the hallway) vs. a private room for those that could pay for a supplemental plan.

That's much different than say the "Canada System" which does not allow supplemental insurance, and in some cases drives those near the border to cross over (and pay) for USA doctors, if they did not want to go "on the list" for months - or longer.

I guess the question does come up - regardless of health coverage under a national system, of retirement income. In this case, the "super annuitunt" vs. the SS system we have in the States.

My simple observation (as one who has w*rked and traveled in many, many countries) that there is no "best" system - both in health, and retirement income.

BTW, I did w*rk for, and in Sweden - which is shown as an example (in a lot of cases) as the "perfect system".

As for me? I could not survive (with my goals) in that system. Rather than give an advantage to those that strived, they tried to reduce (through excessive - IMHO - taxation) a level where "most are equal".

Sorry, I have higher goals.

I guess we (as humans) will never agree to what is "best", for all (but again, that's just what human is being all about)...

 

[DangerMouse]

All you can decide is what is best for you. If you get free medical coverage from an employer in the US that will likely be the best system for you. However, for the millions who have to pay out of pocket or go bankrupt due to medical costs, they would be grateful for a bed in the hall.

Not sure where you experienced the bed in the hallway as none of my family or friends have ever encountered such a thing, not to say that I have not heard of reports of it happening. You can take out private health insurance in Australia which will run you somewhere between $200-$300 a month. However, often private patients will end up seeing the same Dr and being in the same room as a patient on the medicare system.

I think it is easy when you are a have to be happy with the status quo. Personally I am happier with a system that is a bit more caring and sharing. I would much rather pay taxes to fund a medical system for all than to fund a war in some far off country.

 

[dr_popeye]

I've worked in about 12 different hospitals. The media in Aus loves to sensationalize stories from emergency. They will put people on the air that are complaining about waiting for over 6 hours. They leave out the part that they are Category 5 (ie. should go to a GP) and have no medical issue requiring an emergency room. Patients do get ramped occasionally when the numbers are particularly busy and if other emergencies are on bypass. However, the news truly exaggerates things. For the most part the care looks better than the Canadian system to me. My stepfather had lymphoma and a doctor there said you would practically need a member of parliament to sign off on a PET scan. Here they are almost routine. But, Aus probably lacks in the super specialties and cutting edge stuff that occurs in the US. However for >90% of patients that is irrelevant.

 

[dr_popeye]

The thing with Australia is that the taxes are quite high. Everyone that makes over 100k seems to invest in housing and heavily utilize negative gearing to offset taxes. The problem is that now the house prices are over valued as a result. Many people think it is due for an adjustment since normal individuals can't afford homes. It will take something like China not buying as much from the mines to set off the recession/housing re adjustment but I get the feeling this could happen soon. My big question with early retirement is that the 6% returns on investment is not high enough. Right now I earn less than 100k and have less than 100k in assets. If make over 300k pretty much half goes to taxes. Outside negative gearing, salary sacrificing and super annuation, there are not many options for reducing taxes. Please fill me in if someone knows!

 

[Meadbh]

The thing with Australia is that the taxes are quite high. Everyone that makes over 100k seems to invest in housing and heavily utilize negative gearing to offset taxes. The problem is that now the house prices are over valued as a result. Many people think it is due for an adjustment since normal individuals can't afford homes. !

That is what happened (more or less) in Ireland, where property prices have fallen over 50% since 2007. And of course in the US. Many experts are expecting a similar correction in the overheated Canadian markets, namely Toronto and Vancouver. A simple rule of thumb is that when you think there's a bubble, you are probably correct.

With respect to your ~50% income taxes, have you discussed this with a tax professional? As a medical practitioner, are you entitled to incorporate? (pardon me if I have asked this previously). I am an incorporated MD and paid ~15% in corporate taxes last year, and 12% on personal income. In Canada.

 

[dr_popeye]

Incorporating here is not the same unfortunately. up to 80k is over %38 and over 180 is 45%. If incorporated it is not a huge advantage unless i actually run a practice or have eployees. right now i am a resident in a competetive program but i was doing rural locums as a sole trader previously. there seemed to be few ways outside negative gearing to lower the taxes.

 

[Danmar]

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.

Good advice. I totally agree. Avoid get rich quick schemes. Just save as much as you can in non registered accounts.

 

[Independent]

The thing with Australia is that the taxes are quite high. Everyone that makes over 100k seems to invest in housing and heavily utilize negative gearing to offset taxes. The problem is that now the house prices are over valued as a result. Many people think it is due for an adjustment since normal individuals can't afford homes. It will take something like China not buying as much from the mines to set off the recession/housing re adjustment but I get the feeling this could happen soon. My big question with early retirement is that the 6% returns on investment is not high enough. Right now I earn less than 100k and have less than 100k in assets. If make over 300k pretty much half goes to taxes. Outside negative gearing, salary sacrificing and super annuation, there are not many options for reducing taxes. Please fill me in if someone knows!

"negative gearing" is Australian for ____ ?

 

[MichaelB]

"negative gearing" is Australian for ____ ?

I assume he means negative real interest rates.

Edit: I'm wrong. From wikipedia, it is taking tax losses from real estate investing. Negative gearing - Wikipedia, the free encyclopedia

Negative gearing is a form of financial leverage where an investor borrows money to buy an asset, but the income generated by that asset does not cover the interest on the loan. The investor must fund the shortfall until the asset is sold, at which point a profit is made if the capital gain on the asset exceeds the accumulated loss.
The tax treatment of interest expenses and future gain affects the investor's final return. Tax rules vary from country to country. Losses from negative-geared property investments are currently tax-deductible in Canada, Australia, and New Zealand, which are all countries in the Commonwealth of Nations.

 

[dr_popeye]

Yep, MichaelB has it. It is interesting that all of those commonwealth countries mentioned currently have overvalued housing markets. From what I can see, the value of negative gearing works if the houses are going to go up in value. But if the housing market is due for a burst then it seems to me like it is a risky method. You may be saving on tax but then loose on actual asset value. Which makes me wonder what other methods can be used to lower taxes and use that money to build assets. At my current salary it doesn't matter but in a few years it will. Hopefully by then the market will have adjusted itself to realistic prices.