Moominmama's Taxes 2023-24

I also did Moominmama's taxes for this financial year. It only took me about 2 hours to do both as I am very organized :) You can find previous years' reports here. Here is a summary of her tax return for this year:

Her salary was up 4% this year. Gross income was down 9% mainly because we lost money on futures instead of winning, I think.

Total deductions rose by 19%, mainly because of increased interest costs and futures losses, which are included as other deductions. As a result, net income fell 38%.

Gross tax applies the tax bracket rates to taxable income. This was more than offset by franking credits. So, she gets the franking credits refunded as cash and has a negative tax rate. She also had to pay tax installments. As a result, she should get a large refund, estimated near $12k.

If we get refunds as big as predicted here they will almost be enough to pay private school fees for both children for 3/4 of the year! One term's fees is one of the monetary units I now think in :)

Moominpapa's Taxes 2023-24

I did our taxes earlier this year as Aura sent me a tax statement earlier than in previous years. Here is a summary of my taxes. You can find previous year's taxes here. To make things clearer, I reclassify a few items compared to the actual tax form (such as foreign source income deductions). Of course, everything is in Australian Dollars. 

Overall, gross income fell 6%, while deductions rose 5%, resulting in a fall in net income of 8%.

On the income side, Australian dividends, franked distributions from managed funds, and foreign source income were all down strongly. Tribeca Global Resources paid a much smaller dividend this year, some of my other share holdings were reduced slightly to make new investments, and I didn't get dividends from Fortescue (sold) or Pendal (acquired). I also reduced my holding of 3i (III.L) and so got reduced foreign source income.

My salary still dominates my income sources but again only increased by 3%. Net capital gain is zero due to carryover losses from last year. I am carrying forward $41k in capital losses to next year. Rising interest rates increased deductions, while charitable giving was up 33% after falling last year.

Gross tax is computed by applying the rates in the tax table to the net income. In Australia, you don't enter the tax due in your tax return, but I like to compute it so that I know how big or small my refund will likely be. Franking credits (from Australian dividends), foreign tax paid, and the Early Stage Venture Capital (ESVCLP) offset are all deducted from gross tax to arrive at the tax assessment. ESVCLP was up due to more capital calls from Aura.

Estimated assessed tax fell because of the reduced net income and larger offsets this year.

I estimate that I will pay 24% of net income in tax. Tax was withheld on my salary at an average rate of 32%. I already paid $7,996 in tax installments and so estimate that I should get a refund of $16,942! Let's see.

August 2024 Report

This was a relatively quiet month with little investment activity. I was busy working on my teaching. We spent AUD 6k less than last month though we spent around AUD 9k in travel expenses for a future trip. Flying a family of four internationally costs a lot.

In August, the Australian Dollar rose from USD 0.6531 to USD 0.6772, so US Dollar returns are a lot higher than Australian Dollar returns this month. Stock indices and other benchmarks performed as follows (total returns including dividends):

US Dollar Indices

MSCI World Index (gross): 1.64%

S&P 500: 2.43%

HFRI Hedge Fund Index: 1.26% (forecast)

Australian Dollar Indices

ASX 200: 0.67%

Target Portfolio: -0.49% (forecast)

Australian 60/40 benchmark: -0.01%

We lost 0.87% in Australian Dollar terms or gained 2.79% in US Dollar terms. So we beat all the US Dollar indices and underperformed all the Australian Dollar indices!

Here is a report on the performance of investments by asset class:

The asset class returns are in currency neutral terms as the rate of return on gross assets and so the total differs from the Australian Dollar returns on net assets mentioned above. Returns varied radically across asset classes. RoW stocks (mostly Defi Technologies) gained more than 13% and contributed the most to the overall return. Several asset classes lost money, with futures being the worst in terms of RoR and contribution to return.

Things that worked well this month:

• Defi Technologies (DEFI.NE) was the top performer, gaining AUD 54k. Australian Dollar futures contributed AUD 13k.
  

What really didn't work:

• Bitcoin lost AUD 39k. I discovered Defi Technologies due to my interest in bitcoin and Defi has so far more than offset my bitcoin losses. In total, I have lost AUD 47k on bitcoin and made AUD 143k on Defi Technologies. Pershing Square Holdings (PSH.L) was down again, losing AUD 11k. Chipotle was to blame this time, losing its CEO to Starbucks.
  

Here are the investment performance statistics for the last five years:

The top three lines give our performance in USD and AUD terms, while the last three lines give results for three indices. Our performance fell back this month compared to the ASX200 but, as we have much lower volatility, we have a higher Sharpe ratio of 0.82 vs. 0.53. But as we optimize for Australian Dollar performance, our USD statistics are much worse. We do beat the HFRI hedge fund index in terms of return, but at the expense of much higher volatility. We have a positive alpha relative to the ASX200 of 2.74% with a beta of only 0.46.

We moved away from our target allocation due to the gains in Defi Technology. We are most underweight cash and most overweight rest of the world stocks. Our actual allocation currently looks like this:

About 70% of our portfolio is in what are often considered to be alternative assets: real estate, art, hedge funds, private equity, gold, and futures. A lot of these are listed investments or investments with daily, monthly, or quarterly liquidity, so our portfolio is not as illiquid as you might think.

The SMSF did have a winning month:

Unisuper did a little better and PSS(AP) a little worse.

We receive employer superannuation contributions every two weeks. We contribute USD 10k each quarter to the Unpopular Ventures Rolling Fund and less frequently there will be capital calls from Aura Venture Fund II. I only made one additional move this month:

• I bought 5k shares of Regal Partners (RPL.AX) after what I thought was a great annual report. The market agreed for a few hours and then changed its mind...