ETF LICs vs VAS - Taxation for non resident

If you are a non-resident of Australia you wouldn't pay australian tax on any income except taxable australian property, which might be some shares/units connected to Australia and real property in Australia.

 

have you already invested and will you invest more?

 

I have already invested, yes. And over the next 5-10 years I will be continually investing. What are your thoughts?

 

Its not a case of one way or the other. You could wait to purchase new investments when you are non-resident and keep existing ones as is perhaps.

If you do become a resident again you would get a cost base uplift for the new assets.

 

But in my understanding this is only the case if I was a non resident for the whole time I've held Australian shares? Which is not the case for me, as I would have been holding shares for almost 20 years as an Australian resident. Hence I will have to pay significant CGT. Unless I choose to defer CGT when CGT Event I1 occurs, which again in my understanding is seldom a good idea, because I would have no CGT discount for the whole time I was a non resident, no tax free threshold and non resident tax rates. Please correct me if I am wrong.

 

If you held Australian shares and became a non-residence then you would pay CGT on the sale of those shares. If you were a non resident and sold non-Australian shares they wouldn't be taxed here.

 

I understand, but 10 years of not investing will likely mean a huge opportunity cost.

Could you clarify the following please? Say I am an Australian resident for 20 years, then move overseas for 5 years and come back to Australia again where I sell shares in 10 years after returning to Australia. Would this mean:

1. For 30 years while I was an Australian resident - I get 50% cgt discount on the growth of portfolio occurred only during those 30 years,
2. For the 5 years I was overseas - I get no CGT discount on the growth of portfolio that occured during those 5 years.

 

But wouldn't this be the case regardless whether the shares I held as a non resident were Australian or international? That is, no CGT paid to Australia for Australian or international shares as long as I have been a non resident for the whole time I held them?

 

what 10 years?

 

Between now and when i move overseas.

 

Why wait?

 

You said:

"Its not a case of one way or the other. You could wait to purchase new investments when you are non-resident and keep existing ones as is perhaps."

Unless I misinterpreted?

 

It seemed like you are about to depart. There is no need to wait until you go, you could buy some foreign assets now in anticipation of leaving and hedge your tax bets later.

 

I was under the impression that the move was imminent. If you're looking at moving in 10 years, I would just buy LICs/VAS/VGS on the ASX for the next few years. (not advice)

 

My asset allocation is no where near where it should be, it's way too cash heavy, I'm in the process of re-allocating. There are various reasons for this: the sale last year of our former PPOR in Sydney, and having a plan to buy a new base in Sydney that couldn't be fulfilled due to being shut out of Australia, plus some potential property investments in EUR that haven't happened.

Current allocation is roughly 66% cash, 15% USD tech stock, 11% AUD super, 8% EUR property. I haven't included the EUR pension entitlements in this.
Currency exposure is 71%AUD, 14%EUR, 15%USD.

I'll be retiring in 1 - 2 years, so asset allocation is being optimized for this. Thinking has changed over the last 12 months - we won't be spending so much time in Australia in future so won't have so much in AUD. Aiming to get to 50% EUR 50% AUD in the next few years. Moving out of USD, there is too much exposure to one tech stock in particular, plus I don't want to leave behind any US inheritance tax obligation. AUD assets will be super plus a few old LICs, EUR will be a little property, global stock ETF, euro stock ETF. I'm being flexible so if there is a market dip or an appealing property comes up I'm ready to jump in.

 

What's the reason for buying properties for retirement? (over say, Ireland-domiciled ETFs)

 

Property is for family - i.e. buying a property for one of our children to live in (and pay rent of course).