APSEC Update

Now and then, I check investments I got out of to see if my thinking was correct. In early 2024, I got out of the Atlantic Pacific Australian Equity Fund or APSEC. Until this June they haven't done well: 

So, that was a good decision.

Changed My Mind on AIX but Not on Charter-Hall

Given how bullish everything is and Anthropic is supposed to imminently file for its IPO, I decided to make a small allocation to AIX in the SMSF. I am investing the distribution from the Regal Investment Fund in it. In hindsight, I should have tried to participate in the SpaceX IPO and flipped the shares after a few days. Yesterday, I thought again about investing in the Charter-Hall fund investing in the Sonic Healthcare lab. It is attractive to get an almost certain 7.5% yield with the potential for upside. And I like direct real estate (as opposed to listed real estate). But I really don't want to lock up my money for five years, when there are so many other opportunities. After all, I get 6.5% implicit interest on the money in our offset account with 100% liquidity and the possibility of putting into trades if and when they show up. 

Regular Charitable Giving

Increasingly, we support charities through monthly payments rather than one off contributions. This means that I don't need to wonder how much I already gave to a charity this year when I get another request to contribute. Once a charity is on our list I ignore requests for additional contributions... Instead, I just look at what they have done with the money. I would consider a new charity. Here are the charities we are currently supporting:

Save the Children: This was Moominmama's pick a long time ago, before we had children ourselves. It is our longest running charity. We are giving $40 a month.

Opportunity International Australia: This funds microfinance lenders in South and Southeast Asia. I like the idea of helping people to improve their life through investing in their own business. We are giving $17 a month.

WIRES: How could you say no to helping injured koalas? We give $30 a month to this charity.

Bush Heritage Australia: They fund habitat conservation in Australia. This is our most recently added charity. We are giving $30 a month to this.

RSL Queensland: This one is a bit different as we support it through Dream Home Art Union. As most of the contributions go to prizes, it's not tax-deductible. Someone was selling the tickets outside our local supermarket and I just thought I had this intuition that I had to buy. Anyway, it's fun thinking I might win something. A very asymmetric bet. The charitable component goes to support veterans in Queensland. Also $30 a month.

All in, it's about 1% of spending. In the longer term, I would like to give more money to charity but would want to be more purposeful about it.

It's Good I Got Out of WAM Capital When I Did!

A little while ago, I switched from WAM Capital to WAM Active. After I switched, WAM Active (WAA.AX) reported a bad result for July and the stock fell. I was annoyed I had switched too early. But actually it was a good move because since then WAM Capital (WAM.AX) has announced about a halving of the dividend going forward and the stock has collapsed. The dividend was unsustainable. The fund had increased it in a period of very good returns, and maintained it until now, despite lower returns, including a loss last year. Here is WAM Capital's chart:

And here is WAM Active's chart:

 

August 2026 Report

We "crushed it" this month. It was our biggest monthly investment return in dollar terms so far.  The previous best month was November 2024. Stockmarkets rose while commodities like gold and bitcoin skyrocketed as the US government tried to suppress long-term interest rates. Gold, in particular, eased back at the end of the month after Kevin Warsh made a "hawkish" speech at Jackson Hole. The Australian Dollar rose from USD 0.7024 to USD 0.7164. So, our Australian Dollar returns are lower than our USD returns. 

Here is the performance of our benchmarks (total returns including dividends):

US Dollar Indices

MSCI World Index (gross): 2.70%

S&P 500: 2.72%

HFRI Hedge Fund Index: 1.69%

Australian Dollar Benchmarks

ASX 200: 1.73%

Target Portfolio: 2.83%

Australian 60/40 benchmark: 0.72%

I marked up our Angellist investments based on the news from the general partner, though these gains may end up getting reassigned to another month. In Australian Dollar terms we gained 5.93% and in US Dollar terms 8.04%. As a result we outperformed all benchmarks. The SMSF returned 2.67%, beating Unisuper and PSS(AP) which gained 1.78% and 1.21%, respectively. Here is a report on the performance of investments by asset class:    

The asset class returns are in currency neutral terms and gross asset terms and do not include investment expenses such as margin interest, and so the total differs from the Australian Dollar returns on net assets mentioned above. This analysis shows that even without the private equity gains, which made the greatest contribution to returns, we did very well for the month, beating all benchmarks, as USD returns are around 2% higher than these currency neutral returns. This is our fifth positive month in a row now, since our worst loss ever in dollar terms in March.

Things that worked well this month:

• We had eight investments that gained more than AUD 10k: Angellist Investments (206k), Tribeca Global Resources (TGF.AX, 52k), Gold (50k), L1 Gold Fund (32k), Bitcoin (23k), Unisuper (15k), L1 Global Long-Short Fund (GLS,AX, 14k), and Pershing Square Holdings (PSH.L, 13k).

What really didn't work:

• We had two investments that lost AUD 10k or more: WAM Active (WAA.AX, 10k) and URF (10k).

Our distance from our new target allocation decreased. Our actual allocation currently looks like this:

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

Moominmama receives employer superannuation contributions every two weeks. There will still be capital calls from Aura Venture Fund II and III. I am receiving monthly pension payments from both Unisuper and our SMSF, totalling AUD 6,770 per month. I made the following moves:

• I invested a total of USD 5,500 in two startups on Angellist. One is a biotech and the other is a follow on investment in Chowdeck, the Nigeria-based delivery app.
• I bought 8,500 shares in the Monochrome bitcoin ETF (IBTC.AX). We now have 1.6 bitcoins worth. I also bought 2,000 more shares of ProCap Financial (BRR), which is mostly a bitcoin treasury company, and 500 shares of an Ethereum ETF (QETH.AX) or around 3.5 ETH.
• I sold c. 17k shares of Hearts and Minds (HM1.AX) to fund buying bitcoin.
• I sold 35k shares of WAM Alternative Assets (WMA.AX) mainly to reduce our margin debt. Next month, we will be participating in the L1 Gold Fund rights issue.
• I sold our remaining Berkshire Hathaway position. 
•  I bought another 1/4 million URF.AX shares.
• I bought another 2,500 ZIM shares. 
• Our Treasury Wine Estates (TWE.AX) position was called away and afterwards I wrote puts to try to get paid to buy a new position. 

Here are the income and spending accounts * for this month ($ is Australian Dollar):

Other income includes Moominmama's salary and net employer superannuation contributions but also the tax paid by the SMSF. Spending was quite low this month at AUD 8.5k even though this includes almost AUD 2k of depreciation recorded on our new car and we paid all the quarterly utility bills and body corporate fees (condo association). This number does not include our mortgage payments, which are regarded here as saving and investment costs and saving. We gained $410k investing. Retirement net contributions (Other income retirement) were negative as Moominmama's contributions were outweighed by SMSF taxes. The transfer out of retirement is my pensions. Tax credits were only implicit tax paid by our employer super funds. AS we report superannuation investment returns on an estimated pre-tax basis, the implicit tax needs to be deducted to get to the change in net worth.

Dissaving amounted to $7k, which is well within the 4% rule limit of AUD 23k.  

As a result of all this, net worth rose by AUD 399k to AUD 8.687 million.

* Results are shown separately for retirement and non-retirement accounts as well as housing, which nowadays doesn't have much activity. The grey shaded rows are additional notes. Total investment income is split into investment income before exchange rate moves and the contribution of exchange rates. Current other income is non-investment income including salaries and net income tax returns, while on the retirement side it includes employer superannuation contributions minus superannuation contribution tax and all SMSF tax payments to the ATO. Investment income is shown pre-tax. Tax credits include franking credits on Australian dividends etc. in non-retirement accounts and the SMSF and imputed tax on industry superannuation returns. These are taken away from investment income to get changes in actual net worth. Inheritances include gifts from relatives. Saving is from non-investment income, transfers, and inheritances not investment income.

Updated Australian Wealth Distribution

Economists at ANU have used a simulation model and other data to update the Australian Bureau of Statistics household wealth distribution. The ABS haven't done a detailed survey since the pandemic. 

These figures are higher than recent estimates by the Grattan Institute. I believe these more. Due to data limitations they only estimate the threshold for the top 1% for all age groups together. I am guessing based on this that the top 2% is around $8.5 million. So, we are just on the borderline of the top 2% but a bit lower among households with a head between 60 and 64 years old.

I am surprised by the high estimate net worth to be in the top 5% of 25-29 year olds! 

Another Attempted Scam

Recently, someone used our CBA credit card in California. Now, I got a message from MyGov that someone has been trying to sign into my account. I just learned that you can check the account history on the site, and someone has been making multiple attempts to try different passwords with my email address. I have now upgraded my security (I wasn't using my email address anyway) to use the government run MyID. It is important to take a separate second step to turn off access via password.

I guess the scammer was hoping to claim a benefit from Centrelink? Or just get more information on me for identity theft? They can't have been wanting to pay tax for me! 😅

Novig Series B

Novig–one of our startup investments–raised a Series-B round at around a 5x markup on their previous price. It was already our most successful venture investment so far. Angellist have not updated the valuation yet. After the "carried interest" for the general partner who manages our investment, we might see a 4x markup on top of our current 9.5x markup. It would take our overall Angellist IRR to 24% and my own investments in syndicated startups (rather than through venture funds) to an IRR of 70%+. 

Of course, these are all "paper profits". But it's kind of crazy to think that this markup and expected markups in their rolling fund are on the scale of the redundancy package I got last year, which was just over AUD 1/4 million, or more than a year's expenses. Hopefully, the capital gains tax comes back to some more sensible number when these investments are eventually realised.

Role of the Target Portfolio

After yesterday's post, you might think I just randomly change the target portfolio to follow what I want to do. Here is evidence that it has an effect on our performance:

 

This graph shows our portfolio returns each month with the target portfolio return deducted. There is a phase change in 2012. After 2012, our returns hug the target portfolio much more closely. Also, after 2012 we started to make money. I think this has come partly from allocating across asset classes to match a defined allocation. The trend line on the graph rises–we underperformed the target before 2012 and outperformed after–but I'll agree that it doesn't look too convincing. So, we can't say for sure whether this was due to mostly being in a bull market for stocks since 2012 or more disciplined investing.

Changes to the Target Portfolio and Trading

I use a target portfolio as a performance benchmark and as a guide to where to invest. Now and then I make tweaks to bring it in line with what I want to do. I am increasing the allocation to futures and commodities and reducing the allocations to credit and real assets. Futures and commodities go from 5% to 10%, real assets from 12% to 10%, and credit from 10% to 7%. 

This is related to wanting to do more trading. I am having more and more trade ideas. I think, like Karsten Jeske, I won't be satisfied to just sit and watch my portfolio. I want to do something active to generate income. He sells S&P 500 options. My latest idea–which I haven't implemented yet–is related to that. But I am also doing lots of different things which are different to just buying funds (or startups) and waiting:

1. Gold: I buy gold when the price falls and sell when it rises. Part of my gold exposure is now in a December futures contract (50 ounces).

2. Australian Dollar: I have Australian Dollar Futures as a currency hedge. Some day I will get rid of that hedge.

3. Individual stocks: Currently, I have ZIM, Treasury Wine Estates (TWE.AX), and Regal Partners (RPL.AX). These are all valuation stories. 

4. Bitcoin: I am again accumulating bitcoin after selling out of it. 

5. URF: This is a listed fund on the Australian stock market invested in US residential property. It is in its final stages of winding down, but still trading below net asset value.

6. Trading funds around NAV: I am prepared to trade almost anything that significantly deviates from net asset value. This includes paintings on Masterworks, properties on Assetora, and all the closed end listed funds I am invested in. 

I like doing it, but also feel like I should be doing something to earn a living 😀 with our high level of spending relative to most retirees.

Charter Hall Direct Life Sciences Fund

I got an email today about this new fund. It is an investment in a building hosting a Sonic Health Care lab.

At first glance, it sounds attractive. They are advertising a 13% projected rate of return. Before performance fees. Performance fees would only knock 0.5% off that, so still sounds attractive. But actually, the 13% target is based on the capitalization rate declining from 5.25% to 4.75%. 5.25% is already a lot below current office cap rates. If that change in cap rate doesn't happen, they expect a 9.4% IRR. Of course, if the cap rate rises, the return will be less than 9.4%. They project that the distribution rate will be 7.5% per year. Only half of that will come from net income. The rest will come from increasing the loan against the property as rent rises (it rises at CPI with a cap of 3.5% p.a.) and distributing some of the unrealised capital gains in that way. They do seem to have a very low interest rate on the mortgage. Don't know how. This is tax deferred income, but means most of the expected returns on this investment are capital gains, which will be subject to a 30% minimum tax rate going forward. The fund is locked up for 5 years, after which, if they decide to stay invested, some liquidity might be available. The tenant has a 20 year lease.

After all these considerations, this looks a lot less attractive to me. To lock money up I need to think there might be an above market gain. Like 13%. I am pretty doubtful of that outcome here. The minimum investment is $100k. So, I will probably pass on this one. 

Someone Used Our CBA Credit Card in California

 

They used it at a Rite Aid in the Sacramento suburbs and at a gas station in Tracy, CA. Commonwealth Bank queried the transactions and now I have cancelled the card. Definitely, only use a credit card for online transactions. If this was a debit card, the charges wouldn't be reversed as they are immediately deducted from the account. But really the banks need to make the whole payments thing more secure as this seems to be a more and more frequent occurrence. 

Probably, there is nothing stopping us from using credit cards for everything? Currently, we each have an account at HSBC with a debit card we use for most day to day spending. These accounts have little money in them. But HSBC is closing its retail banking in Australia.

Yes, that's the actual gas station they used it at in the picture. 

July 2026 Report

The Australian Dollar rose from USD 0.6909 to USD 0.7024. So, our Australian Dollar returns are a lot lower than USD returns. World stockmarkets were flat, while the Australian market rose.

Here is the performance of our benchmarks (total returns including dividends):

US Dollar Indices

MSCI World Index (gross): 0.10%

S&P 500: -0.06%

HFRI Hedge Fund Index (forecast): 0.08%

Australian Dollar Benchmarks

ASX 200: 2.26%

Target Portfolio (forecast, depends on HFRI): -0.11%

Australian 60/40 benchmark: -0.23%

In Australian Dollar terms we gained 0.60% and in US Dollar terms 2.28%. We outperformed all benchmarks apart from the ASX200. The target portfolio has more or less flatlined since September last year as the Australian Dollar rose and more recently gold fell:

I've been through a bit of excess volatility, peaking in January. Until this month the ASX200 has also been going sideways:

You'll notice that even the S&P 500 doesn't look as spectacular in the last couple of years when converted to Australian Dollars! The SMSF returned -0.36%, beating UnisupeR, which lost 0.59%. But PSS(AP) was up 0.63%. Here is a report on the performance of investments by asset class:

The asset class returns are in currency neutral terms and gross asset terms and do not include investment expenses such as margin interest, and so the total differs from the Australian Dollar returns on net assets mentioned above. This month was the reverse of last month: private equity and futures led the way. Rest of world stocks had the worst rate of return and hedge funds detracted the most.

Things that worked well this month:

• 3i (III.L) and Australian Dollar futures gained AUD 10k or more, with the former gaining AUD 33k and the latter 10k.

What really didn't work:

• Tribeca Global Resources (TGF.AX) lost AUD 26k.

Our distance from our target allocation increased very slightly. Our actual allocation currently looks like this:

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

Moominmama receives employer superannuation contributions every two weeks. There will still be capital calls from Aura Venture Fund II and III. I am receiving monthly pension payments from both Unisuper and our SMSF, which going forward will total AUD 6,750 per month. I was very busy investing this month, making the following moves:

• I invested a total of USD 6,000 in four new startups on Angellist. They cover the defence, biotech, education, and real estate sectors.
• I bought a total of 7,500 shares in the Monochrome Bitcoin ETF (IBT.AX). That amounts to 0.75 bitcoins. I also bought 5,000 shares of ProCap Financial (BRR), which is mostly a bitcoin treasury company.
• I sold 5,000 shares of Cadence Opportunities (CDO.AX), 11k shares of Hearts and Minds (HM1.AX), and 2,500 shares of Treasury Wine Estates (TWE.AX)–the money to buy bitcoin has to come from somewhere.
• I bought another 5,000 shares of Regal Partners (RPL.AX). Still don't understand why this seems so undervalued.
• I bought another 500 shares of the Alerian MLP ETF (AMLP).
• I sold 6,000 shares of the gold ETF PMGOLD.AX as part of the "restructure" as well as buying 30k shares of the L1 Gold Fund (LGF.AX) and opening a gold futures position in the SMSF and closing the AUD futures position in the SMSF. We still have AUD futures in our personal IBKR accounts.
• I bought 1.25m shares of the US Residential Fund (URF.AX) using the margin freed up by the restructure.
• I sold all our position (110k shares) in WAM Capital (WAM.AX) and replaced it with WAM Active (WAA.AX, 150k shares).
• Finally, I started selling covered calls on our Treasury Wines position (TWE.AX). 

Here are the income and spending accounts * for this month ($ is Australian Dollar):

Other income includes Moominmama's salary and net employer superannuation contributions but also the tax paid by the SMSF. Spending was high this month–AUD 29k, the third highest ever in nominal terms–due to paying school fees, a big dollop of depreciation recorded on our old and new cars, and the stamp duty and insurance on buying the new car. I opted to again insure our car rather than just insure against damaging other cars.  This number does not include our mortgage payments, which are regarded here as saving and investment costs and saving. Dissaving amounted to $23k, which is at the 4% rule limit of AUD 23k. We gained $41k investing. There was only $645 this month in tax credits and implicit tax on our employer super, which are included in pretax investment returns but have to be deducted to get to the change in net worth. But there was a big transfer to superannuation as I carried out the "restructure". Net of my pension payments it was around AUD 90k. As a result of all this, net worth rose by AUD 17k to AUD 8.261 million.

* Results are shown separately for retirement and non-retirement accounts as well as housing, which nowadays doesn't have much activity. The grey shaded rows are additional notes. Total investment income is split into investment income before exchange rate moves and the contribution of exchange rates. Current other income is non-investment income including salaries and net income tax returns, while on the retirement side it includes employer superannuation contributions minus superannuation contribution tax and all SMSF tax payments to the ATO. Investment income is shown pre-tax. Tax credits include franking credits on Australian dividends etc. in non-retirement accounts and the SMSF and imputed tax on industry superannuation returns. These are taken away from investment income to get changes in actual net worth. Inheritances include gifts from relatives. Saving is from non-investment income, transfers, and inheritances not investment income.

Got Out of Berkshire Hathaway Again!

I bought 200 shares of Berkshire Hathaway B just after Warren Buffett announced that he would retire as CEO. This was around the time of the "Tariff Tantrum". My thesis was that the stock would rise as Greg Abel deployed the huge cash pile. He has made some moves, but the stock has gone sideways. In the meantime, I sold half the position and today the rest of it. I have better ideas for the money, namely ZIM. At least I think it is a better idea.

I guess I am just not patient enough to be a Berkshire shareholder. I have been in an out of the stock many times. Overall, my IRR is 7.4% and AUD 21k in profit, though this recent period lost AUD 4k.

The Financial Reality of Being a (Moderately) Wealthy Retiree in Australia

Unless you are quite wealthy, not well organised or under 60, you shouldn't be paying any income tax in this phase of life. The following breakdown is based on my expected income and tax figures for the 2026-27 tax year.*

First, since transferring the maximum allowed into an "account based pension", I should get a tax-free pension of $81k per year. This is the minimum allowed distribution to maintain the tax-free status of my pension account. For my employer superannuation, that is as simple as just setting up a payment of $2,750 each month from the account. For our self-managed super fund (SMSF), I have to make sure I have enough cash in our Macquarie Cash Management Account to pay the $4,000 a month pension. Currently, I have around one year's worth of cash there. The SMSF will still be paying tax on Moominmama's account, my small remaining accumulation account, and concessional contributions. More on that later.

Then I expect to earn to around $100k net outside super, which would put me in the 32% tax bracket. This includes quite a lot of capital gains that I plan to take this year before the new CGT regime comes into effect. To reduce my tax liability, I will make the maximum allowed concessional superannuation contribution. I call this a no-brainer contribution, as being retired, I could take it out again the next year. The contribution will reduce my taxable income by $32,500.**

The contribution is taxed at 15% in the SMSF. But as that is less than 32%, it is a win, and that is not income tax. 

On the remaining $67k, there might be about $13.5k in tax payable. But I expect to have around $20k in franking credits and early stage venture capital offsets. These more than wipe out my tax liability, resulting in a tax refund of $6.5k adding to my income. So, I will have negative income tax. I have then $165k in disposable income, which almost covers our expected expenses of about $180k. The remainder will be covered from Moominmama's earnings.***

In order to pay income tax, you would probably need to be at least in the 37% marginal tax bracket–more than $135k of income outside superannuation. This is assuming you have a supply of franking credits and do a little borrowing etc. to generate deductions.

If you are a retired couple, you can double all these figures for a household income. 

* In Australia, the tax year runs from 1 July to 30 June. All numbers are Australian Dollars.

** You can make concessional contributions up to age 67 without a work test. But after age 65 the minimum required pension jumps to 5% of the account value. So, you might want to reduce capital gains realisations.

*** I won't exactly spend the capital gain, as the proceeds of those transactions will largely be reinvested. First of all, the part of the proceeds that is the original investment doesn't enter income, and only 50% of the gain is recorded as income under the current rules. But I could spend the $165k and only need $15k from Moominmama. 

Cancelling Moominmama's Insurance

I cancelled life and disability insurance on Moominmama's superannuation account. Here in Australia there are number of different types of insurance that are tied to your retirement account (health insurance isn't one of them!).

Her job will end in either 1 week (fast track) or 8 weeks (slow track). By law, superannuation funds cancel all insurance if there haven't been any contributions for 16 months. I did not know this till now. The insurance is costing us more than $200 per month. I don't see the point in continuing to pay. Not being a big fan of insurance in general, I probably should have cancelled ages ago.

I think she should take the fast track–quit in one week's time and get a bigger redundancy payout–rather than the slow track, which means working another 7 weeks and getting a smaller payout, but earning salary, superannuation contributions, and leave entitlements during that time. The fast track pays about $1,500 more and you get the interest on getting the redundancy payment earlier. But for unclear reasons she is leaning towards the slow track, even though she essentially has no work to do. I told her she can do this if she wants as $2,500 is not that much money 😂. She did this analysis using Gemini, which produced about the same result as I calculated and argued it said the slow track was better. But that was ignoring tax, which is higher on the slow track. Gemini did include the tax on a separate line and then on the final line gave the net result.

Selling Covered Calls

I realised I could sell covered calls on my Treasury Wine Estates position. I haven't sold options in decades, I think. I sold 150 Aug 2026 5.50 calls (There are 100 shares per contract). This strike is 10% above the current price. I would be very happy if the position gained another 10% in three weeks. I think it is pretty unlikely though, so can pick up 2.5 cents per share (minus commissions). It's mainly just for fun, but if I did this consistently, it would provide a decent annual yield. I always like the idea of selling options–getting the opportunity to create securities out of nothing, seems like magic!

Switching from WAM Capital to WAM Active

I first invested in WAM Capital (WAM.AX) in April 2025 during the "Tariff Tantrum". This has mainly been an investment in our SMSF. But the portfolio performance over the last year has been disappointing, with a 10.5% portfolio loss before fees etc. This vastly underperformed the market. All the WAM small cap funds apart from WAM Active (WAA.AX), had a similar performance. 

WAM Active was up 75% and up an average of 26% in each of the previous two years. It is managed mainly by Shaun Weick, while the overall small cap strategy is overseen by Oscar Oberg. The fund takes a more active trading stance. It had a 10x portfolio turnover in FY 26 and they participated in 87 capital raises! Three years ago, its strategy was separated from the other small cap funds.

So,  I have sold my WAM position of 110k shares and bought 150k shares of WAM Active. Overall, we made AUD 19k on WAM Capital with an IRR of 9.9%. So, we still made money despite the poor performance of the underlying portfolio. But I think we can do better.

Spending 2025-26

Each year, I report on income and spending for the Australian financial year, which runs from 1 July to 30 June. This makes it easy to do a break down of gross income including taxes that's comparable to many you'll see online, though all our numbers are in Australian Dollars. Here is last year's report. I define a few things differently here than I usually do to make the numbers more comparable with other people's versions.*

At the top level we can break down total gross income (as reported in our tax returns plus employer superannuation contributions that are paid on top of nominal salary) into the following categories of spending (click on the image to read more easily):

The gross income for this year (bottom line) is just an estimate. It is based on the gross income we expect to report in our tax returns (before investment expenses etc.) plus employer superannuation contributions. Gross income is forecast to rise by 23% this year because of the redundancy package. It should fall again in 2026-27 despite a second redundancy payout.

Tax includes local property tax as well as income tax (projected) and tax on superannuation contributions. Tax is projected to rise by 26%! Investing costs include margin interest. These fell for the second year running. Mortgage interest is included in spending, while mortgage principal payments are considered as saving. Spending also includes the insurance premia paid through our superannuation. Current saving is then what is left over. This is much bigger than saving out of salaries because gross income includes investment returns reported in our tax returns. Spending fell for the second year running, by 0.7% and has been flat for the last four years. Mortgage principal saving rose again, because we are keeping more money in our offset account, reducing mortgage interest payments. Other saving rose 129% because of the redundancy. Graphically, it looks like this:

We break down spending into quite detailed categories. Some of these are then aggregated up into broader categories as shown here:

Our biggest spending category, if we don't count tax, is childcare and education, which increased by 12% this year. As mentioned above, the income and tax numbers are all estimates. Commentary on each category follows:

Employer superannuation contributions: These include employer contributions (we don't do any salary sacrifice contributions) but not concessional contributions we paid to the SMSF this year. They are down due to the redundancy and will fall dramatically in 2026-27.

Superannuation contributions tax: The 15% tax on concessional superannuation contributions including tax on our concessional contributions to the SMSF. It is up 24% this year, even though employer contributions fell, because the government increased the maximum concessional contribution to $32,500, and because I expect to pay a lot of Division 293 tax because of the redundancy payment pushing me further above $250k of income.

Franking credits: Income reported on our tax returns includes franking credits (tax paid by companies we invest in). We need to deduct this money which we don't receive as cash but is included in gross income. Foreign tax paid is the same story. If we get franking credits refunded that will reduce the income tax line.

Income tax: Hits a record this year again because of the redundancy.

Life and disability insurance: Only a 3% decrease despite the redundancy, because Moominmama's insurance skyrocketed. More people are claiming disability post-pandemic.

Health: Includes health insurance and direct spending. Up 13%. Spending peaked with the birth of our second child.

Housing: Includes mortgage interest, maintenance, and body corporate fees (condo association). It is down this year because we parked more cash in our offset account reducing the mortgage interest we need to pay.

Transport: About 60% is spending on our car and 40% is my spending on Uber, e-scooters, buses etc. It is down 8%. This will likely rise in 2026-27 when we include stamp duty and depreciation on the new car and a big write down in July on the old car, which we only got $500 for as a trade-in.

Utilities: This includes water, gas, electricity, telephone, internet, and online storage etc. Up 13%. Electricity rose 36%, water and sewage 16%, phone and internet 6%, and gas–the smallest expenditure in this group–fell 33%.

Subscriptions: Includes all payments for online electronic services that aren't basic infrastructure. Continues to flatline.

Supermarkets: Includes convenience stores, liquor stores etc as well as supermarkets. It has been constant for the last five years.

Restaurants: This was low in 2017-18 because we spent a lot of cash at restaurants and during the pandemic for obvious reasons. It has now levelled out. Actually, we spent quite a bit on restaurants while travelling in China and Vietnam that either came out of Chinese accounts that aren't included here or in cash.

Cash spending: This is up strongly this year due to spending in cash in China and Vietnam. Generally, Western credit cards can't be used in China.

Department stores: All other stores selling goods that aren't supermarkets. Fell 45%.

Mail order: This has come down over the last five years and halved this year compared to last. We now get mail order direct from China, which is paid for from China and doesn't enter these accounts.

Childcare and education: We are paying for private school for both children now, plus music classes, swimming classes... It was up 12%, after the school raised fees by 23% for 2026.

Travel: This includes flights, hotels etc. It was very high in 2017-18 when we went to Europe and Japan. In 2020-21 it was down to zero due to the pandemic and having a small child. It was up only 1% this year. We travelled to China and Vietnam.

Charity: Up 12%.

Professional: Up 292%. We got various things done while we could either still deduct them against salary income or get reimbursed by our employers. This included two computers and a lifetime membership of a professional association.

Other: This is mostly other services. It includes everything from haircuts to tourist attractions, movie theatres, and clothing and watch repairs. Up 26%.

This year's reduced spending was mainly driven by reduced mortgage interest and mail order costs, while the professional category and education were the main increasing categories. Professional will be much lower in 2026-27, while childcare and education and transport will probably be the biggest increasing factors. I predict a 3% increase to $179k.

* Income here is taxable income before deductions plus employer superannuation contributions, whereas I normally included unrealised gains in income and deduct margin interest etc. and I normally report salary post tax. Savings here are out of gross taxable income rather than just out of non-investment income normally. Mortgage interest is counted as spending here rather than an investment cost. 

 

Moominmama Redundancy

I don't think I have mentioned that Moominmama is being made redundant. This is a compulsory process. 150 people are being cut from her division. Currently, we are in the notional internal redeployment period, but all the opportunities they send her are not relevant to her skills. So, it looks like she will reach the end of the track at the end of this month. After that, their process has a fast track and slow track. You can quit within a week, or stay another 8 weeks. The fast track pays a bit extra money and we get to use the redundancy package of around $100k faster. So, I am encouraging her to take the fast track. Work in her position is project based and she hasn't been assigned to any project, so I don't see a reason to stay on the slow track, which might make sense for someone who is handing over to other people.

She is 51 years old, so unlike me, she is not retiring. We'll see what she wants to do. We should be able to handle it financially. At our current rate of spending, our required annual dis-saving rate rises to about 2.3% from below 2%.