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Old 06-29-2012, 10:40 AM   #41
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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)...
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Old 06-29-2012, 02:42 PM   #42
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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.
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Old 07-03-2012, 10:43 AM   #43
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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.
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Old 07-03-2012, 10:49 AM   #44
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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!
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Old 07-04-2012, 01:27 AM   #45
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Originally Posted by 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. !
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.
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Old 07-04-2012, 02:57 AM   #46
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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.
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Old 07-04-2012, 06:31 AM   #47
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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.
Good advice. I totally agree. Avoid get rich quick schemes. Just save as much as you can in non registered accounts.
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Old 07-04-2012, 09:38 AM   #48
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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 ____ ?
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Old 07-04-2012, 09:40 AM   #49
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"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

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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.
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Old 07-04-2012, 04:22 PM   #50
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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.
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Old 07-04-2012, 07:10 PM   #51
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I live in Australia and our super annuation scheme doesn't allow for withdrawals until 60+ currently. This doesn't work so well for early retirement..........
Not quite! You can draw on superannuation assets from age 55, but will pay tax on it at your marginal rate. However, as a self-funded retiree you will get a 15% tax rebate, which reduces the tax liability considerably. In concert with the recently introduced tripling of the tax-free threshold to ~$AU18k, this means the tax 'hit' is actually quite reasonable. After age 60, superannuation income-streams are tax-free.

Yes, Oz is a higher taxing country, but then there are many social offsets, such as the medicare system, that 'account' for those taxes. Infrastructure costs are also far greater in OZ than, say, the US, because we have a country roughly the same size as continental US or China [or Canada], with a population of less than 25m, so paying for the highways/roads, electricity-grids and such is proportionally far greater for us because of the distances/area covered.

I think it'd be worth be seeing an aussie tax-specialist accountant to try and legally minimise obligations, but don't try chasing minimisation schemes as a goal in itself, it'll only end in tears

Cheers - Mick

[retired aged 56 on a superannuation drawdown + taxed military pension]
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Old 07-04-2012, 07:49 PM   #52
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Thanks Mick, Finding a good accountant is not easy! I have a financial advisor who specializes with doctors. He is supposed to be providing me with some info regarding investments the banks supposedly only offer to doctors. Of course I am suspicious! The problem is that if you have a high salary at 46.5% it becomes really difficult to save quickly. Every retirement scenario I go over results in a minimum of 10 years of work despite using 250-300k salary as a base. It seems hard to believe that even on a high salary you can't really organize an early retirement. I don't even think I can maintain the 250k-300 for 10 years unless the trend with my health improves. If I used negative gearing to build up a real estate portfolio, ER could be possible within 6 years. If the real estate market was down this strategy would work but I think it is a bubble waiting to burst currently so all bets are off. The only thing that I am considering is buying property in a country without overvalued real estate. That way, I can still get the negative gearing tax advantage here but build up an asset base that will appreciate over time as opposed buying in a market ready to burst. The only problem is that with this strategy, I would need to get a mortgage in a country in which I have no credit rating.
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Old 07-05-2012, 08:20 PM   #53
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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.
Not to put too fine a point on it, the above statement, while generally true, is not always true (thanks to the overcomplicated US tax code), called phaseouts. Now I am not a tax attorney but its been my experience that 3% of your AGI is excluded from deductions. It gets more complicated as your income increases, due to nasty things like AMT addbacks. Personally I don't have a mortgage, don't take any mortgage deductions and don't believe in the govt subsidizing peoples homes, but that's beside the point.
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Old 07-05-2012, 09:03 PM   #54
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Yep, it looks like 6.8% on mortgages here. When a 2 bedroom apt costs 450k it makes little sense. I am not sure how the interest is counted for tax purposes. Australia doesn't allow you to write off the expenses of a university education on your taxes. Not even the interest. They have loans scheme called HECs. Essentially it was in my best interests to pay down my student debt ASAP since my loans were in Canada and accumulating interest. I paid most of it off whereas people in NA tend to take their time. I hate negative gearing because it has meant that the lower end of the housing market is especially overvalued and that's where I would be looking to start now. Of course I will probably take advantage of it once my salary increases.
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Old 07-05-2012, 11:35 PM   #55
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I think you are being totally unrealistic if you think you could become FIRE'd within 6 years given your current assets. The risks you would have to take would be crazy. Have you come up with an amount you would need in retirement to live on?

Even on a salary of $300k before tax, over 6 years that is only $1.8 mil. Taking out taxes and living expenses what would be your target to be FIRE'd.

Another suggestion, why not contact some of the banks and see what they offer for customers like yourself. I know that ANZ has advisors that are only open to high net worth individuals and they offer investment opportunities to select groups of customers.

The other option would be buy an investment property that you negatively gear now with the intention that you would move into down the track. Alternatively buy some choice real estate and get a room mate. However it would have to be location, location, location. I see you are in Brisbane, what about an area like Bulimba? Would be big bucks but doubt you would do your dough there.

Whatever you do, don't go chasing crazy returns. I don't believe that property prices are going anywhere in Oz at the moment, despite the media constantly talking it up. Take a good 12 months to get your head around what you want to do. I think your primary focus has to be to identify your goal and then do the rounds with various advisors and ask how they would get you there.
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Old 07-05-2012, 11:59 PM   #56
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I have a financial advisor who specializes with doctors.
I'll bet he does... like Willie Sutton specialized in banking...
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Old 07-06-2012, 03:03 AM   #57
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I'll bet he does... like Willie Sutton specialized in banking...
Yeah, I don't really trust financial advisors in general. I am not taking any risks at this point. The advisor has stated not to buy real estate in Melbourne and to be relatively careful as well.

My scenario is not a full retirement in 6 years. That was the absolute worst case scenario if my health takes a turn for the worst. I am anticipating working full time for 6 years, creating some wealth and then working part time for another 10-15 years without touching the original amount. So I am not really a typical ER but partial ER.
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Old 07-06-2012, 05:52 AM   #58
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Don't let tax considerations drive your investment stategy. Doctors often do this and save 50% of their 100% losses.
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Old 07-06-2012, 02:50 PM   #59
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You know Popeye I am not sure what you are after. YOu have been given plenty of guidance and suggestions but I'm not seeing much action on your part. No good complaining about tax rates etc. because they are not changeable. You primary goal should be to come up with some kind of life plan and make your financials work to achieve those goals.

You state continually how much you distrust financial advisors, well in that case get off the pot and educate yourself so you do not need to use one. You seem to have very little knowledge of the Australian system at all. You state your tax rate is 46% with a salary of 250k, in fact if you run that salary thru the ATO tax calculator your actual effective tax rate is 36%.

The obvious first step for you has to be superannuation to save some tax. If I were you I would come up with some kind of life plan as follows:

Ages 40-46 (6 years) - fulltime employment, salary $250k, disposable salary after tax $160k.

Investment goals for this period:

- maximise superannuation to be available at age 60
- purchase a residence that you feel you could live in for the next 20 years. I would do fortnightly mortgage payments, put all the extra cash into the mortgage offset account and it would be done in 20 years.
- open an account with Commsec and transfer X amount of dollars every month and over time build up a portfolio of blue chip shares that offer franking credits. Remember you buy shares in Australia for dividend/franking credits as capital growth is a lot smaller than in the US market.

Age 47-57 - Reduce income due to PT work - $s expected less tax

Age 60
- Housing paid off
- Access to superannuation
- Dividend stream from shares

Agree with Danmar that basing an investment decision on tax minimisation is not the way to go. You only get a tax deduction if you made a loss.
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Old 07-07-2012, 07:47 AM   #60
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No need to be insulting. You suggest to take action and then suggest to educate myself. I think educating myself before taking action is what makes most sense! I am going through the ASX courses and taking on board all the advice given here. The tax minimization questions are all related to the uncertainty with my health. I wanted to have a retirement fund built up in the fastest manner possible so that I could relax a bit on this. My condition is something that would cause disability insurance to be sky high (and unlikely to pay out) if they would even insure me, thus the urgency in the plan. I will look into real estate likely next year since I am looking at a change of city/state for work. Already doing super. Not planning to rush into any decisions.
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