Moominmama's Taxes 2016-17 Edition

I've filed Moominmama's tax return for this tax year. The tax year runs from 1st July to 30th June in Australia. The figures ignore employer and employee contributions to superannuation (retirement account) which amount to a lot of extra income. Everything is in Australian Dollars of course.

Her salary is down because she went on maternity leave and the average tax rate also falls as a result. Investment income is up though.

Here are the reports on Snork Maiden's taxes for all previous years:

2015-16
2014-15
2013-14
2012-13
2012-13
2011-12
2010-11
2009-10
2008-9
2007-8

Moominpapa's Taxes 2016-17 Edition

I have now completed my tax return. Looks like I should get a $2,870 refund. This huge increase in refund compared to last year is mainly due to the 16% increase in tax witholding by my employer relative to only an 11% increase in tax owed. My taxable income is up by 8%. But my tax is up 11%. This is because the increase in income is taxed at the maximum marginal rate, which is 49%. Gross cash income is before tax income ignoring franking and other tax credits and adding in net undiscounted capital gains (not deleting losses from previous years). It was up 16%.

I again checked what information the government knows about my tax affairs as revealed by the prefilled information on my tax return. They are still missing as much information as last year.  I filed Moominmama's return online for the second time, using the prefilled numbers plus deductions.

Previous years' reports:

2015-16
2014-15
2013-14
2012-13
2011-12
2010-11
2009-10
2008-9
2007-8

Interactive Brokers Australia

Interactive Brokers have set up a subsidiary in Australia and are requiring all clients resident in Australia to move their account to the new broker. The only declared difference is that they won't hold cash in currencies apart from AUD and USD. A few years ago they told Australian clients that they couldn't borrow on margin any more. Maybe that was fixed in the meantime. In any case, the website indicates that you can borrow on margin. Formally, it doesn't change the obligation to pay US estate tax on US assets. These start at an estate of only USD60k for non-US citizens. But it would probably make it easier to avoid. I still have a US retirement account, which is a bit over the USD 60k limit and a US mutual fund worth USD 14k. I also have a bank account, but that isn't included in the estate tax liable assets. It seems though that the US-Australia estate tax treaty means that my estate wouldn't be required to pay US estate taxes.*

* This wasn't the case for my mother who lives in a country that doesn't have an estate tax treaty with the US.

Pay Offer

My employer announced the pay deal for the next 5 years. For the average academic it will be a 9.1% increase (less for me), which is less than inflation was over the last 5 years :( For the average non-academic it will be 10.6%, which matches inflation. It's the same deal for both groups but some years will have absolute pay increases and some proportional pay increases, so the more you are paid the less you will get. Also, the after tax gain will be even less, because additional pay is all taxed at your marginal rate of tax. Seems the union has agreed to this. A minority of employees belong to the union. In theory you can appoint your own representative if you don't belong to the union... but that doesn't really happen, I assume. When I went to check the local union branch's Twitter thread to see whether they had anything to say about the deal, it is all about same sex marriage and other political campaigns that they spend union fees on. Nothing on the deal the employer announced. No, I won't be joining the union...

10 Years in Australia

Today is the 10th anniversary of us arriving together in Australia. A lot has happened but in another way not much has happened. We live in the same city, though we moved suburb. Moominmama is still in the same job that we came here for her to start. But now we have a child. When we first came here, I was planning on quitting academia. That didn't work out, and I returned to academia and am now a full professor and also have had some heavy admin roles.

When we came here we had a net worth of about $A1/2 million and a relatively low income - Moominmama's (then Snork Maiden) salary and what I could make from trading. Now we are approaching $A2 million net worth and typically spend twice what she was earning then every month.

This is a snapshot of our net worth ($A) at the beginning of September 2007 and 2017:

It wasn't smooth upward sailing from 2007 to 2017. The financial crisis arrived soon and our net worth plummeted. It hit a minimum of $A284k in February 2009, though that was one month I didn't post a monthly account on this blog. Over the ten years retirement accounts grew much more than stocks in non-retirement accounts. This has been due to much better returns on retirement accounts, largely because of the huge negative effect of the financial crisis, and partly due to diversion of savings to buying a house and then stacking up money in our offset account. We saved more money in non-retirement accounts than in retirement contributions over the ten years. These are the sources of the change in net worth over the period:

Current profit is on non-retirement accounts and is pre-tax. Net tax is reflected in income and hence current savings. Of course, a big chunk of housing equity was once current savings, which we then contributed as a downpayment and since then we have been making mortgage principle payments. Only $37k is attributed to gain in house value.

Ron Brierley and IPE

 

Ron Brierly is a famous New Zealand investor, now based in Australia. He is chairman of MVT. This company is Gabriel Radzyminski and is supposedly a listed investment company, but one that has a habit of taking over other small companies. At Sandon Capital he also has an activist approach to investing.

They had a stake in IPE of less than 5%, but two days ago took their stake up to near 20% when they purchased a large block of shares from Wilson Asset Management. I infer that was who sold from the list of major shareholders in the IPE annual report. I did have 150,000 shares in IPE. Yesterday I bought another 250,000. Either MVT is planning a takeover of IPE, or they think that the remaining private equity assets are worth more than their carrying value. Given that the shares are trading at net asset value of 0.105 cents, they must think the latter either way. On the other hand, though Wilson Asset Management must have not seen additional value. Or perhaps a $2 million shareholding is no longer worth their attention when they are managing $2 billion and could find a willing buyer at NAV. The shares have fallen in value as the company has returned capital and dividends in a winding down strategy.

Anyway, I now own 0.3% of the company, which is a bit scary :)

August 2017 Report

It was a relatively quiet month financially. Here are our monthly accounts (in AUD):

"Current other income" was $14k which includes almost $2k of childcare subsidy from the government that we get paid quarterly and salaries (after tax). Spending (not counting mortgage) was a little higher than last month moderate at $6.7k. The electricity, water, and gas bills that totalled about $1,100 (we pay these quarterly here in Australia) partly explains the increase. After deducting the mortgage payment of $4.0k (which includes implicit interest saving due to our offset account - the actual mortgage payment was about $792 less than this), we saved $3.4k on the current account and added $2.0k in added housing equity. Retirement contributions were $2.8k. Net saving was, therefore, $8.3k across the board.

The Australian Dollar fell slightly from USD 0.7981 to USD 0.7922. The ASX 200 gained by 0.71%, the MSCI World Index gained 0.43%, and the S&P 500 0.31%. All these are total returns including dividends. We gained 1.13% in Australian Dollar terms and 0.38% in US Dollar terms. So, we outperformed the Australian market and the S&P500 index. The best performer in dollar terms was the Unisuper superannuation fund, gaining $3.5k. Clime Capital was the worst perfomer but only lost $0.6k. Australian small cap stocks were the best performing asset class in percentage terms. All other asset classes gained.

As a result of all this, net worth rose AUD 25k to $1.889 million (new high) or rose USD 8k to USD 1.496 million (also a new high).

Property Taxes

Our "rates" or property taxes are up 30% from last year! Presumably this is partly because of the shift in this state from stamp duty on buying a house (we paid $A 27,000 when we bought this house) to land taxes over time. Only the value of the land is taxed here in Australia, not the structure on it. For "townhouses" like ours - our house is actually a separate house - that are part of a body corporate (condo association) the land is valued as a share of the overall value of the land in the development. Our land share is only valued at $A168k, when a similar individual block in this suburb would be about $400k. So, this means our property tax is much lower than if we didn't live in a development like this. It's still $1,970 per year.

I just noticed that taxes on commercial property are outrageously high. The value in excess of $A600k is taxed at almost 5%. So you would pay about $A40k a year on land valued at $1 million.

July 2017 Report

Here are our monthly accounts (in AUD):

"Current other income" was very high at $26k due to a lot of money coming in from a consulting project. Spending (not counting mortgage), on the other hand was moderate at $5.6k. After deducting the mortgage payment of $3.9k (which includes implicit interest saving due to our offset account - the actual mortgage payment was about $690 less than this), we saved $16.5k on the current account and added $3.5k in added housing equity. Retirement contributions were lower than recently at $2.9k. I have stopped my voluntary retirement contributions due to the reduction in the concessional contribution cap from 1 July. Moominmama's employer also cut their contributions to her account since the beginning of the new financial year. Even though she has been working part time since the beginning of the calendar year they made contributions at the full time rate up till now. Housing equity increased by $2k. Net saving was, therefore, $21.3k across the board.

The Australian Dollar continued to rise from USD 0.7681 to USD 0.7981. The ASX 200 fell by 0.01%, the MSCI World Index gained 2.83%, and the S&P 500 2.06%. We gained 0.34% in Australian Dollar terms and 1.88% in US Dollar terms. So, we outperformed the Australian and  underperformed the international markets. The best performer in dollar terms was Platinum Capital, gaining $4.0k across our various different holdings. The worst performer was the Unisuper superannuation fund, losing $2.9k. Hedge funds was the best performing asset class in percentage terms thanks to Platinum Capital, followed by private equity. All other asset classes gained apart from large cap Australian stocks which lost 0.04%.

As a result of all this, net worth rose AUD 27k to $1.864 million (new high) or rose USD 76k to USD 1.488 million (also a new high).

June 2017 Report

This month we spent a lot of money. We went on vacation to Singapore - our first trip overseas with little Moomin. Since last year there are now direct flights between our city and there - one of two international destinations now available on direct flights. I think next time we will go to the other country where the weather is much more to my liking, at least in the summer. The trip ended up costing a lot more than expected...

This month's accounts are very preliminary as they include estimates of franking (tax) credits on managed funds ($3.9k) that we won't actually know till the end of July. Here are our monthly accounts (in AUD):

"Current other income", which is mainly salaries, was a bit higher than usual at $14.8k. Spending (not counting mortgage) was very high at $10.9k. After deducting the mortgage payment of $5.5k (which includes implicit interest saving due to our offset account - the actual mortgage payment was about $698 less than this) - there were three mortgage payments this month rather than the usual two - we dissaved $1.5k on the current account and added $3.5k in added housing equity. Retirement contributions were quite high at $5.1k as I got three retirement contributions this month. Net saving was, therefore, $7.1k across the board.

From next month I will stop my voluntary retirement contributions of $100 a week due to the reduction in the concessional contribution cap from $35k a year to $25k a year. My employer contributions will actually exceed the cap. As is usual in the public sector they are much higher than the 9.5% compulsory contributions. The excess will just be taxed at my marginal rate like a non-concessional contribution. I might still add some non-concessional contributions to superannuation in a few years time but don't feel like locking up more money than necessary when there is no immediate tax advantage and the rules on taxation in the retirement phase, could change at any time...

The Australian Dollar rose from USD 0.7437 to USD 0.7681. The ASX 200 rose by 0.17%, the MSCI World Index gained 0.50%, and the S&P 500 0.62%. We gained 0.38% in Australian Dollar terms and 3.68% in US Dollar terms. So, unusually we outperformed both the Australian and  international markets. The best performer in dollar terms was CFS Geared Share Fund up $5.6k. Next best was Platinum Capital, gaining $3.0k across our various different holdings. The worst performer was PSSAP superannuation fund, losing $0.8k. Small cap Australian stocks was the best performing asset class in percentage terms, followed by hedge funds. All other asset classes gained apart from commodities and real estate.

As a result of all this, net worth rose AUD 9k to $1.839 million (new high) or rose USD 51k to USD 1.413 million (also a new high).

30th June is the end of the Australian financial year. Over the last 12 months we had a rate of return of 13.7% in AUD terms (17.5% in USD terms). The ASX200 gained 14.1%, while the MSCI gained 19.4% in USD terms. Net worth increased AUD 262k and we are still on track to get close to the optimistic projection for 2017. Of course, anything could happen in the next 6 months!