Saturday, August 17, 2013

More International Investing Red Tape

It used to be that one advantage of being an Australia based investor was that you could invest in any investment product anywhere in the world and as long as you paid your taxes the government didn't mind. Of course, the taxes are relatively high compared to living in Hong Kong or Singapore but low compared to Western Europe. By contrast, US investors are heavily restricted unless they have a high net worth and become "accredited investors". But it seems the red tape is increasing (not surprising under a Labor government). I have had an account with Interactive Brokers since I lived in the US. This includes margin lending and I currently am borrowing money from them. Their interest rates are much lower than those you can get with retail brokers here in Australia. But, I just got a message from them that Australia modified the Corporations Act in 2010 so that margin lenders to Australian clients all need some licence. IB was told at the time that they didn't need to get the licence modification but now they do. Therefore, until they get the licence approved I won't be able to make any new investments on margin. Of course, I can close positions and I could add enough money to the account to pay off the loan and then continue to make new investments. No problem with trading futures as IB isn't lending money on futures trades. I haven't done any futures trades for several years. They gave us the option of closing our account at this point. Of course, I affirmed to keep my account open.

Thursday, August 15, 2013

Ten Years of Tax Credits

The chart shows our annual total of investment tax credits over the last ten years. These consist of credits attached to dividends for corporation tax paid by Australian companies known as "franking credits" and tax withheld on dividends in some countries. The US withholds tax on foreign investors, the UK does not. This doesn't include the atx credits in our superannuation (retirement) funds.

Because of investment expenses we end up with excess credits beyond the tax due on the dividends. We can use these to reduce our tax bill on a one to one basis. But with a $A60k joint annual tax bill we would need 20 times our current liquid assets to wipe out our tax bill. That's something like 10 million dollars. So this strategy is only making a somewhat marginal impact at the moment. Tax credits have not yet exceeded the pre-GFC high, despite liquid assets being 45% higher now. Liquid assets are all non-retirement investments before deducting debt.

Sunday, August 11, 2013

Vote Compass

The ABC have a website called Vote Compass that is meant to help in deciding who to vote for in our upcoming federal election here in Australia. I came out as a little socially liberal and right of centre economically and closest to the Liberal National Party. This wasn't a surprise at all. But it was still fun to do the survey. Snork Maiden was about as socially liberal as me but left of centre. Both of us are in the space between the Labor and Liberal parties.

I just saw that Enoughwealth has also done the survey. He came out as more socially conservative and right wing than the Liberal National Party.

Friday, August 02, 2013

Health Insurance, Part 2

So the consultant I met last week didn't send me any quotes... When I phoned the company she hadn't entered any of my details into their system either. So, I talked to a couple of consultants who were willing to give me actual quotes. The hospital cover plan we are looking at would cost $253.39 per month for the two of us including the lifetime health care cover and the 10% tax rebate and a $500 excess on hospital admission (only paid once per year per person if you need to go to hospital more than once). That's $3040 per year. My estimate of the Medicare surcharge is $3,100. So, it is about a breakeven in terms of upfront fees, as I expected. It turns out that my understanding of the lifetime health cover fee was wrong. If you don't join a private health scheme within a certain time of returning to Australia or immigrating and becoming eligible for Medicare then you pay the full loading. Your time out of Australia doesn't count. So our average loading would be about 20%.

I'm now thinking about the "extras" package, which covers stuff like dental and optical. The cheapest package adds $508 a year in costs, but none of their preferred optical providers are in our state and the benefits you can get on dental are also low outside of Victoria and South Australia which seems to be their major base. So, I don't think that extra package makes sense. Snork Maiden tends to use these services when she visits China.

This is our corporate health insurance deal. Probably, I should look at another quote before deciding on it.

P.S. 12:24pm

I just discovered this great government website that lets you compare alternative policies.

Thursday, August 01, 2013

Moominvalley July 2013 Report

Half of this month we spent travelling. Given that, spending is fairly modest. The Australian Dollar continued to fall, boosting returns in Australian Dollar terms and reducing them in US Dollar terms. This month's accounts in US Dollars, as usual:

Income was very high as this was a three pay month and we also got some refunds for the travel expenditure. The difference between "Expenditure" and "Core Expenditure" is due to business-related travel spending. Core expenditure gives a better idea of how much we are really spending while the total expenditure is needed to actually make the numbers add up. As a refresh, there are quite a few anomalies in the way I report our accounts. Other income, which is salary and other non-investment income (current income), as well as retirement contributions, is reported after tax and also include the proceeds to net tax refunds. Investment income (both current and retirement) is reported pre-tax including tax credits (Australian "franking credits" and foreign tax paid). We don't actually receive these credits - they reduce our tax bill at the end of the year - so I need to deduct them from the reported investment return to get the actual change in net worth each month. This is because net worth only reflects the actual money in our accounts at the end of each month. If we went to an accrual based system I could also add the value of my capital gains loss tax asset - worth $35k or so - but that would be a big complication for little or no gain. So, I stick with this system which works well for me. I only really care about what we get after tax and what we have now, but I want to see investment returns on a pre-tax basis to compare them with the market indices.

The Australian Dollar fell sharply this month resulting in investment returns in US Dollar terms of 2.33% but in Australian Dollar terms of 4.73%. This again lagged the market. The MSCI gained 4.82% (USD terms) and the S&P 500 5.09%.

Net worth rose in US Dollars by $34k to $861k. In Australian Dollar terms it rose by $A59k to $A961k. This has really been a stratospheric rise since mid 2011:
Non-retirement profits in AUD terms also finally got above zero again. Profits on retirement accounts are well above the pre-GFC high: