Thursday, April 21, 2016

Entering the Top Tax Bracket

Only 3% of Australian taxpayers are in the top tax bracket, which starts at $180,000 a year and has a marginal tax rate currently of 49%. And now I'm one of them, I think. IPE just declared a 5.75 cents a share dividend payable next month. I have 100,000 shares and so the dividend is $5,750. And it is a totally unfranked dividend. After this, I'm currently estimating my taxable income for the year at $182k and I'm now expecting to pay $3,000 extra tax at tax time. That also means I'm going to have to pay quarterly tax from now on.

I guess this is a good problem to have, but it feels kind of absurd that I'm now in the top tax bracket. Of course, when I first moved to Australia I wasn't that far from it because it kicked in at $50,000 a year in those days (1996) and my salary was a little higher than that. After "voluntary" super contributions of 7% and some deductions I was out of the zone.

Moominmama's reaction was that I should generate some business expenses to pull my income down. I could buy a nice big computer screen for home use, which I couldn't charge to my employer. It will be half price now I'm in the top tax bracket. I'm already almost maxing out my pre-tax super contributions. But spending money on stuff just to reduce tax is silly.

Wednesday, April 20, 2016

Superannuation Reform Again?

Changes to superannuation are a perennial topic. If the government does this - lower the threshold for the 30% super contributions tax to $180k income per year and cut the concessional cap to $20k p.a. - I figure I will have to pay almost $7,000 a year more in tax. My taxable income this year looks like being just below $180k but the threshold for the super surcharge adds things like employer super contributions and investment losses to the taxable income amount. It would make most sense to cut the non-concessional cap, which is currently $180k per year, dramatically, as that is the way that wealthy people can get really large amounts of money into the super system, which will be taxed at a zero rate once they retire. But, of course, there is no immediate revenue to be gained by cutting the non-concessional cap. To simplify the system the government could just get rid of the concessional/non-concessional distinction, stop taxing earnings and then have a simple US Roth style system. Much too logical, of course. Actually, the optimal solution, assuming that super will be taxed in some way is to go for the US 401(k)/403(b) approach where there is no tax on contributions or earnings and regular tax on payouts. This gives the the money the best opportunity to increase in value... well under some economic assumptions anyway.

Sunday, April 03, 2016

March 2016 Report

Low spending didn't continue into this month... Moominmama (formerly Snork Maiden) is out and about and Moomintroll is in tow. We went to Ikea and spent more than $2,000. Before that, it was a low spending month. Even though everything seems to be cheap in Ikea, it somehow adds up into big numbers :) Costco is also like that and just across the road from Ikea. Yes, we went there too.

Here are our monthly accounts (in AUD):

So, spending was $6,355. The biggest single expenditure was $2,281 at Ikea. Doctors' fees totaled $1245, but we got a total refund from Medicare of $655. The latter is counted as income. Health insurance is $308 a month, BTW. The Australian health care system is a strange mix of public and private care and payments...

We earned $14.2k in salary and other current payments including those Medicare refunds. After taking into account the mortgage payment of $3,541, which shows up as a transfer to the housing account, we saved $4.3k on the current account. We made $3.6k of retirement contributions, and saved a net $1.4k in added housing equity. Net saving was, therefore, $9.3k across the board.

Stock markets rose strongly this month. The ASX 200 rose 4.73%, the MSCI World Index 7.48%, and the S&P 500 6.78%. The Australian Dollar rose from $US0.7152 to $US0.7676. We gained 2.46% in Australian Dollar terms and 9.96% in US Dollar terms. So we under-performed the  Australian market and outperformed international markets. The best performing investment (in total dollars not RoR) was the Colonial First State Geared Share Fund, which gained $25.8k, followed by Unisuper with $3.2k, and Medibank with $2.8k. I sold my Medibank holding during the month, but Moominmama is keeping hers. The worst performing investment was the Winton Global Alpha fund losing $3.2k. All asset classes apart from commodities gained this month with Australian and U.S. stocks leading the way.

As a result of all this, net worth rose $37k including housing equity ($US103k) to $1.470 million ($US1.128 million).