Inflation

[TimeISmoney]

Nice mix. I had 100% Australian shares in my super in the past but changed it to 30% in recent years. I understand wanting to support local companies. The PE is lower so sounds appealing to buy Aus shares for cheap. But the companies here are really quite stagnant. A lot of bloated banks who have a monopoly here but are absolutely non-competitive internationally. Miners who don't seem they'll be liquid in a few years. A lot of scammy small random companies.

One Australian company that I actually liked is Atlassian. Global. High growth. Innovative. Here I was thinking it was dual-listed on the ASX but nope, NASDAQ only!

How do you go with paying taxes on international shares?

I wouldn't mind owning some large global stocks.

 

[over9k]

How do you go with paying taxes on international shares?

I wouldn't mind owning some large global stocks.

W-8 form

 

[joeno]

W-8 form

I'm with Interactive Brokers. I'm not sure this is required? Believe you sign it when you sign up.

 

[over9k]

I'm with Interactive Brokers. I'm not sure this is required? Believe you sign it when you sign up.

30% tax if you don't

 

[Value Collector]

Nice mix. I had 100% Australian shares in my super in the past but changed it to 30% in recent years. I understand wanting to support local companies. The PE is lower so sounds appealing to buy Aus shares for cheap. But the companies here are really quite stagnant. A lot of bloated banks who have a monopoly here but are absolutely non-competitive internationally. Miners who don't seem they'll be liquid in a few years. A lot of scammy small random companies.

One Australian company that I actually liked is Atlassian. Global. High growth. Innovative. Here I was thinking it was dual-listed on the ASX but nope, NASDAQ only!

Franked dividends are another nice part of Aussie shares, especially in low tax environments like super.

 

[Value Collector]

How do you go with paying taxes on international shares?

I wouldn't mind owning some large global stocks.

In super it’s all felt with for you.

On your own tax return you just list the dividends and any capital gains, its a good idea when you buy the international shares to write on your buy contract how much the purchase was in Australian dollars, and then when you sell how much you received in Australian dollars, it’s easier that way.

The USA government normally deducts a 15% tax out of the dividends before you receive then, but you get a credit for that against the the tax you would have to pay here.

 

[Value Collector]

How do you go with paying taxes on international shares?

I wouldn't mind owning some large global stocks.

The other option is just buy into VGS on the Aussie stock market, it is a good way of getting international exposure, and all the dividends and capital gains are automatically in Australian dollars.

VGS owns the a broad cross section of the North American, European and some Asia markets.

So you get an interest in all the big names overseas, as well as many companies you never heard of producing everything from pharmaceuticals to Bricks About 1300 companies in total.

 

[joeno]

30% tax if you don't

I checked. Paying 15% withholding on IBKR for US shares since I joined.

In super it’s all felt with for you.

On your own tax return you just list the dividends and any capital gains, its a good idea when you buy the international shares to write on your buy contract how much the purchase was in Australian dollars, and then when you sell how much you received in Australian dollars, it’s easier that way.

The USA government normally deducts a 15% tax out of the dividends before you receive then, but you get a credit for that against the the tax you would have to pay here.

Any action required for funds in super? I only do the tax return for Aus shares that I own in my personal account

 

[sptrawler]

How do you go with paying taxes on international shares?

I wouldn't mind owning some large global stocks.

If you use an accountant, check with them, I know the accountant that does my SMSF books for me doesn't want to deal with them.

 

[Value Collector]

I checked. Paying 15% withholding on IBKR for US shares since I joined.



Any action required for funds in super? I only do the tax return for Aus shares that I own in my personal account

In regular super fund all the tax is taken care of for you by the fund, if it’s a self managed fund you have to arrange for all the accounting to be done and correct.

 

[greggles]

Is it any wonder investors are increasingly looking to alternative currencies when even the mighty US$ has lost 45% of its purchasing power since 2000. Since 2020 the US$ devaluation has accelerated and I can't see things improving any time soon.

 

[Value Collector]

Is it any wonder investors are increasingly looking to alternative currencies when even the mighty US$ has lost 45% of its purchasing power since 2000. Since 2020 the US$ devaluation has accelerated and I can't see things improving any time soon.

View attachment 172901

Investors should really be looking to real assets not currencies. In my opinion If you are planning on holding cash or cash equivalents for more than 3-5 years you are probably doing something wrong.

 

[greggles]

Investors should really be looking to real assets not currencies. In my opinion If you are planning on holding cash or cash equivalents for more than 3-5 years you are probably doing something wrong.

Real assets are physical assets that have an intrinsic worth due to their substance and properties. Real assets include precious metals, commodities, real estate, land, equipment, and natural resources. They are appropriate for inclusion in most diversified portfolios because of their relatively low correlation with financial assets, such as stocks and bonds.

I agree with you, but I was mainly thinking about Bitcoin and precious metals when I mentioned alternative currencies. I'm not so crazy about Bitcoin (although I am now not as critical as I have been in the past) but have a very strong belief in the long term investment value of gold and silver, but we've been down that road already.

I am getting the feeling that 2024 is going to be a memorable year for precious metals, so perhaps we can revisit that conversation after 2024 has played out. Maybe I'm wrong, but we shall see.

 

[over9k]

Only took 18 months but we got there eventually.

 

[over9k]

I checked. Paying 15% withholding on IBKR for US shares since I joined.



Any action required for funds in super? I only do the tax return for Aus shares that I own in my personal account

Do you have an SMSF? This is a fairly esoteric accountant/tax lawyer question.

Start here: https://www.ato.gov.au/individuals-...-offsets/claiming-a-foreign-income-tax-offset

Then here: https://www.ato.gov.au/forms-and-in...ge=2#When_a_foreign_income_tax_offset_applies

Then here: https://www.ato.gov.au/forms-and-in...ur_offset_limit#Calculating_your_offset_limit

Remember that U.S tax rates are different for what they call pension funds which is what australia calls superannuation. You need to apply/use the pension funds rate there and the superannuation funds rate here. I know the super tax rate is 15% but don't know the U.S pension funds rate off the top of my head. I'm sure a quick google search will find it.

The way a FITO works is that your foreign income and capital gains are taxed overseas and then a credit is available on the Australian tax return for the Australian-dollar value of that tax paid.

So using numbers I've pulled out of nowhere, if you made 100k and paid 7k (7%) U.S federal taxes on it, your taxable income in your super would be 15k aud but you have 7k of paid-to-the-americans tax credits, so you pay the U.S government 7k and the australian government 8k. You don't get double-taxed by paying 15% of 93k.

I don't know what the U.S pension fund tax rate is though, you have to use their pension fund rate, not the normal income tax rate. I've just used 7% to demonstrate the example, you'd need to go and find it and run the sums.

Same as if it's regular income and you use the regular income tax rate - if you paid 14% to them for 100k of U.S income and 100k of income worked out to add 25k of australian regular income tax to your tax bill (remember it's 100k of U.S earned income that you need to add to your australian earned income) then you owe/have paid the yanks 14k and australian government another 11k.

So if you made 150k in aus and 100k in usa then you don't pay taxes on 100k of american income and 150k of aus income, you calculate taxes on 100k american income, 250k of aus income and then subtract the american taxes off the australian ones and pay the aus government the difference. You work out the taxes on 100k of U.S income (let's say 14k), 250k of aus income, let's say it's 50k, then then take the 14k off the 50k and you've paid 14k to the yanks and 36k to aus.

Remember that you must convert it into AUD to run the sums.



So there you all go, there's a crash course in tax credits

 

[Value Collector]

I agree with you, but I was mainly thinking about Bitcoin and precious metals when I mentioned alternative currencies. I'm not so crazy about Bitcoin (although I am now not as critical as I have been in the past) but have a very strong belief in the long term investment value of gold and silver, but we've been down that road already.

I am getting the feeling that 2024 is going to be a memorable year for precious metals, so perhaps we can revisit that conversation after 2024 has played out. Maybe I'm wrong, but we shall see.

Gold can provide some inflation hedge, but you are much better owning some other assets like property that provide the exact same style of inflation hedge, while also producing income, which you can either live off or compound.

Bitcoin will eventually prove to be both a terrible inflation hedge and a terrible investment.

any asset can perform well in any year, so speculating on either gold or Bitcoin could do well in the short term, but over the long term neither will be able to out perform good income producing assets.

 

[mullokintyre]

Gold can provide some inflation hedge, but you are much better owning some other assets like property that provide the exact same style of inflation hedge, while also producing income, which you can either live off or compound.

Bitcoin will eventually prove to be both a terrible inflation hedge and a terrible investment.

any asset can perform well in any year, so speculating on either gold or Bitcoin could do well in the short term, but over the long term neither will be able to out perform good income producing assets.

You missed out on one vital component.
Liquidty.
Have a miilion invested in a property versus a million invested in Gold silver or bitcoins.
To get some funds, reduce risk, or balance your investment portfolio, you can sell a small portion of your gold or BTC.
You have to try and sell the whole property, perhaps isn a smaller market.
And it will take weeks or months to complete the sale and get the cash.
Mick

 

[Value Collector]

You missed out on one vital component.
Liquidty.
Have a miilion invested in a property versus a million invested in Gold silver or bitcoins.
To get some funds, reduce risk, or balance your investment portfolio, you can sell a small portion of your gold or BTC.
You have to try and sell the whole property, perhaps isn a smaller market.
And it will take weeks or months to complete the sale and get the cash.
Mick

A $1 million of property in a reit like CLW, currently throws of about $70,000 per year in income, that provides a decent amount of liquidity, without having to sell your asset base, and you can always sell some shares if you want, easier and less fees than selling gold.

thats one of the big problems with both gold and bitcoin, the only way to extract funds out of it is to sell it off, it doesn’t produce any value it’s self that it can supply to you, if you own 500 ounces of gold, and you want to retire, you have to start selling an ounce every week to live and in 10 years you have nothing, but with some shares or property it will provide you income without depleting your pile.

 

[qldfrog]

You missed out on one vital component.
Liquidty.
Have a miilion invested in a property versus a million invested in Gold silver or bitcoins.
To get some funds, reduce risk, or balance your investment portfolio, you can sell a small portion of your gold or BTC.
You have to try and sell the whole property, perhaps isn a smaller market.
And it will take weeks or months to complete the sale and get the cash.
Mick

Or 11 month so far, and potentially years if your property is an income producing farm.

 

[Value Collector]

Or 11 month so far, and potentially years if your property is an income producing farm.

gold will take 11 months to sell too, if you price it above market.

But I was thinking more like reits holding a diverse range of income producing property, like CLW. Not direct property.

That can be sold quicker than physical gold, but also as I said because it throws off about 7% income, it’s not really required to sell, but if you retired with $1 Million of gold or about 500 ounces, you have to sell 1 or 2 ounces a week and burn though your capital base because it generates zero income.