Investment strategy needed for self funded retiree wanting expat life

Discussion in 'Share Investing Strategies, Theories & Education' started by Sick_of_scams, 1st Sep, 2018.

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  1. skater

    skater Well-Known Member

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    I can't advise what product(s) would be suitable, or anything about taxes for ex-pats, but this comment strikes me as something to be looked at.

    If you have a PPOR that has rental income, what is the yield you are getting on it's current value? 5%?, 3%? If you sold the property, you may be able to get a similar, or higher return by investing into LIC's or EFTs, but the real benefit here is that there is NO land tax, NO maintenance, NO tenant issues, NO rates, etc, so that even if it sounds like the returns are similar, when you take all the expenses away that you have with property, you are better off overall.
     
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  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    But the difference is the leverage.
    If he sells the property and walks away with $50k cash, 6% yield on this would be $3000 per year. The cash flow on the property might be say $2000 per year, but if it is a $500,000 property and there is 2% growth that is $10,000 where as 2% growth on $50k of shares is just $1000.

    You can't eat growth, but you can sell the property later with concessional tax rates - potentially.
     
  3. skater

    skater Well-Known Member

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    I understand this, however I'm assuming that there's a very big chunk of equity in the property(s) which has enabled him to retire overseas. He needs a solution to get rid of the ongoing expense, which as an ex-pat, just seems to be ever increasing over time.
     
  4. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    The more equity the more this selling strategy would appeal I think.

    But from other posts, I don't think he has much equity.
     
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  5. Pier1

    Pier1 Well-Known Member

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    Ah I see, that lower threshold is a stinker.
    Workcover and insurance to deal with, what a delight.

    Does that mean you can’t earn any income at all though, without knowing what the TPD is, couldn’t you earn income other ways through a business or ecommerce
     
  6. Anthony Brew

    Anthony Brew Well-Known Member

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    My assumption from his posts was that he does not have leverage. If they had little equity, then all the rental income would go to service the loan and the cash flow would be negligible, and 25k left over that this person said they are currently getting is not negligible
     
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  7. hobartchic

    hobartchic Well-Known Member

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    Risk benefit analysis of retiring overseas for Australian's. May find this information useful, I think it's reasonably up to date:
    Retiring Overseas
     
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  8. Sick_of_scams

    Sick_of_scams Well-Known Member

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    'Total Permanent Disability' meaning unable to work in the occupation I was trained to do ever again and unlikely to work again. Nil background in business or ecommerce. I looked at working from home online business but have nil skills to apply. Loads of crap online courses from countless snake oil salespersons promising the world - when they are the only one's making money selling expensive courses! Looked at day trading but that is a really hard skill to get right and seems like 95% fail in that!
     
  9. Mike A

    Mike A Well-Known Member

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    Forget day trading. I know of one person in the Philippines that is a highly successful day trader. Night trader actually as he waits for the overseas markets to open. Earns over 1m usd per annum but he is a freak. He used to own the largest porn server in the world so not the most salubrious character.

    Ive never met another long term successful day trader.

    I have another friend who does trading for a hedge fund and they trade frequently but are not day traders. He said to me if someone tells you they consistently earn 25% per annum as a pure day trader over a 3 year period and can prove it ill pay them 5m usd per annum. Not one person has taken up the offer. Check him out. He posts a lot of strategies on facebook Sonic R Mastery Trading Course

    Ive heard all the tall stories. Ask to see their trading account history and its rubbish.
     
    Last edited: 2nd Sep, 2018
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  10. Mike A

    Mike A Well-Known Member

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    Have you.considered doing a TEFL course (i think that is what it is called). I knew some retired guys in their 60s teaching korean and chinese students english online. They were getting paid about 25 usd an hour. Worth looking into. Ill find out who they used.

    One was actually a young guy who was medically discharged from the US army with PTSD. And he loved it. Hours are all over the place but that wont be a problem for you.
     
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  11. Sick_of_scams

    Sick_of_scams Well-Known Member

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    Thanks Mike. Yes I actually did the course in 2005. Taught for a couple of years a decade ago part time in Vietnam. Thailand has woeful pay and conditions and not conducive to my medical condition. But if an online gig operating from a home base was possible it would be good. Thanks for the suggestion!!
     
  12. Anthony Brew

    Anthony Brew Well-Known Member

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    I knew a couple who came to Thailand, signed up with a company run by a westerner to teach English to thai's online. Told them all the visa's were taken care of. Not long after that someone dobbed the company in for not doing it legit. The couple were thrown out of Thailand. The whole process was very tough on them, including trusting the Thai lawyers recommended by the legal office, who demanded a huge bribe even though he was supposed to be working for them, which they had no money to pay for. Shortly after were thrown out of the country and banned for a few years, and of course will never return after that experience. So just a warning, if you go down this route, either teach people outside the country you are staying, or double check everything with immigration that the visa's are legit.
     
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  13. Sick_of_scams

    Sick_of_scams Well-Known Member

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    Thanks for the heads up advice. Yes I have heard of Thai Junta cracking down on illegal workers and no work visas. I think online TEFL teaching would be better serving overseas students outside the jurisdiction you were residing in. There is a huge community of digital nomad expats in Thailand - Chiang Mai I have read that operate various businesses online but are not targeted (yet) by authorities because of the difficulties in identifying them, most have businesses serving clients overseas and bank accounts in another country. They operate from their laptops and move about frequently as well.
     
  14. jaklap90

    jaklap90 Active Member

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    Hi @Sick_of_scams,

    How have you determined to be a non resident for tax purposes?

    My understanding of the income tax residency test is that, even if you spend less than 6 months as resident, but your domicile or permanent place of abode is in Australia, then you are a resident for tax purposes.

    For example, this is the definition of residence in the legal decision of ZKBN and Commissioner of Taxation [2013] AATA 604.

    Once a person has established a home in a particular place....a person does not necessarily cease to be resident there because he or she is physically absent. The test is whether the person has retained a continuity of association with the place.... together with an intention to return to that place and an attitude that the place remains “home”.

    Further from that decision...
    1. An “Australian resident” means a person who is a resident of Australia for the purposes of the ITAA 1936. A “resident of Australia” is defined in s 6(1) of the ITAA 1936 to mean:
    (a) a person, other than a company, who resides in Australia and includes a person:

    (i) whose domicile is in Australia, unless the Commissioner is satisfied that the person's permanent place of abode is outside Australia;

    (ii) who has actually been in Australia, continuously or intermittently, during more than onehalf of the year of income, unless the Commissioner is satisfied that the person’s usual place of abode is outside Australia and that the person does not intend to take up residence in Australia.

    ....

    Those bases for determining residence are expressed as alternatives.[4] Accordingly, if any one of them is met, residence is established. The Commissioner submitted that whether a person “resides in Australia” discloses the “ordinary concepts test”; that the reference above in paragraph (i) of the ITAA 1936 constitutes the “domicile test”; and that the remaining tests have no application in this matter. The Commissioner’s contention is that, on the ordinary concepts test and on the domicile test, the applicant was an Australian resident in each of the relevant tax years.

    NOT ADVICE, JUST THE RESULT OF A QUICK GOOGLE SEARCH.
     
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  15. jaklap90

    jaklap90 Active Member

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    I have been looking into this as I am planning to FIRE in a few years and early retire mainly in the Philippines but also travel a fair bit to other countries. I am planning to come to and fro Australia, probably once a year or so, but I doubt I would be spending the full 183 days.

    As previously mentioned, losing tax residency would mean missing out on franking credits, tax free threshold, increased land tax, and medicare.

    From what I read, residency appears to be almost left to the individual choice of whether you have intention to migrate permanently to a different country or not. Example from the ATO website Examples of residents and foreign residents

    Emily - teaching in Japan
    Facts
    Emily leaves Australia to work in Japan as a teacher of English.

    She has a one-year contract, after which she plans to tour China and other parts of Asia before returning to Australia to resume work here.

    During her time in Japan, she lives with a family who treat her as one of their own.

    She rents out her property in Australia during her absence.

    Emily is single. Her parents live interstate, and her brother has moved to France.

    Outcome: why is Emily considered an Australian resident?
    Even though Emily is residing in Japan, under the domicile test:

    • her domicile is in Australia (a resident who has always lived in Australia will generally retain a domicile here when they are absent overseas, unless they choose to permanently migrate to another country)
    • her permanent place of abode remains in Australia.

    This is not advice, please correct me if I'm misunderstanding something.
     
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  16. Mike A

    Mike A Well-Known Member

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    found it.. her name is Julie. her email is; [email protected]

    while having a degree is 'preferred', without is fine.

    Thats his response.
     
  17. Mike A

    Mike A Well-Known Member

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    found it.. her name is Julie. her email is; [email protected]

    while having a degree is 'preferred', without is fine.

    Thats his response.
     
  18. Mike A

    Mike A Well-Known Member

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    Thats not correct. Changing domicile is but one test.
    I lived in the philippines and changed my domicile to there. I have a quota immigrant visa. When i left australia i planned to live there forever but alas circumstances change sometimes.

    Unless you get either that or a SSRV visa ATO will argue you havent emigrated. You cant emigrate on a tourist visa.

    Then need to look at permanent place of abode being in the philippines.

    If you are australian tax resident and then in the philippines more than 180 days you will be a resident alien not enagaged in trade or business there. Now you are dual resident.

    In your case they might try and even argue you are non resident of australia !!! Dont think ive seen a case on that yet.
     
    Last edited: 3rd Sep, 2018
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  19. jaklap90

    jaklap90 Active Member

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    Thanks for your response.

    Yes, I understand that domicile is only one of the tests that can be applied. However you only need to "pass" one test to be classified as resident. For our purposes, that case study is entirely copied from the ATO website.

    As I am married to a Filipina, I can avail of the balikbayan visa program which allows a 1 year free stay provided I enter the country with my spouse. So, from my understanding that would not constitute a permanent change of abode and I would therefore remain an Australian tax resident, which is the result I am trying to achieve.

    What I am trying to understand is whether @Sick_of_scams would not be better off trying to be classified as a resident for tax purposes rather than switching his investment strategy in order to reduce land tax liabilities.
     
    Last edited: 3rd Sep, 2018
  20. Sick_of_scams

    Sick_of_scams Well-Known Member

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    Thanks for the info regarding non-resident test. There are several factors as you have revealed to test for non-residency. For me at this time my best option is to try to remain as a resident as long as possible until I make the necessary transitions eventually in my life to convert to a full time expat.

    I believe I still/and was satisfy/ing the criteria as a resident for tax purposes - after completing the online ATO residency test calculator. But if it is disputed by ATO then one needs to lodge a review.

    I know there are three tests to consider: The Resides test - based on Domicile status, the 183 day test, the Superannuation test.
    There is ample case law on the topic. Unfortunately it is a very grey area still.
    The trap for some is to come back to Australia after spending a stint overseas and unaware that even though they may have returned from overseas, that the ATO may determine them still as a non-resident.

    If you were to then sell a property at that time you may well unwittingly be selling it as a non-resident and paying CGT at the foreign resident rate. You would clearly need to confirm with the ATO at that point you had re-established yourself as a resident again. So many tax traps it's like a minefield.
     
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