Professional Advice on SMSF

Hi All,

First up a big thx to @Nodrog for his continued education on the Thornhill style approach.

After 6 months into a long term buy and hold globally diversified direct share approach, I've come to realize it is far too time consuming and 'fancy' for the end result i'm looking for. Which is to.. and i'm going to go all New Age Buddhist on you here.. ascend past the superficial focus on wealth and allow my capital to return to me my most valuable commodity... time.

So with that said, I'm obviously not chasing financial advice. I'm quite happy riding the industrials index using FF as an income booster. However once you hit around $35k PA income stream, your income tax effectively nullifies your Franking Credits, in comparison to not paying any income tax at all, which can done by moving your residence to a country that does not tax on worldwide income. This is obviously a major life change, getting up and leaving an amazing country, but for a grid skipping digital nomad with an innate sense of wanderlust for all things foreign and exotic, I see a very real and rewarding challenge through internationalizing myself and this has been my plan for some time.

As it just so happens, if I push 70% of my capital into LICs I will be on about $36k PA, however my plan is to remain an AU resident for at least a few years, whilst taking an extended holiday abroad to see where the road takes me. The remaining 30% capital I would like to keep in a revolving term deposit or near cash position. I foresee the cash being spend within 3 years on a PPOR abroad, with only 3 years living expenses remaining in cash.

My remaining wealth is about $150k super, I've rolled it into LegalSuper, due to their lower fees and numerous direct investment options. However after reading Michael Holmes Super Smart Money, I'm not 100% happy using retail funds. My problem exists wherein I cannot go ex-resident with an active SMSF, the 2 year temporary absence rule is not a permanent solution. However, this is where my knowledge wanes, the tax on a SMSF that does not comply with AU residency rules goes from 15% to 49%, however considering I won't be contributing, perhaps it won't matter. In this case I will look closer at Esuperfund and the likes.

As I attempt to internationalize myself my mum is in the throws of re-nationalizing. She has a complex situation that involves repatriating Canadian capital, selling down over priced Melbourne property and downsizing. She has received international CGT advice from PKF accountants in Melbourne, however I'm leaning towards shortlisting personal wealth managers that are qualified to offer a one stop shop in; SMSF, retirement planning, international taxation minimization, ownership structuring, etc

My thinking at this stage is to shortlist both personal wealth managers and public accountancy firms with experience in the above, after DD move forward with professional advice. My question to those hear that are already in retirement with a happy cash flow funding their lifestyle is;

Can you recommend any such professionals in Melbourne?
What qualifications would you prefer to see (ie, CFP, SSA, etc)?
Would you expect to find such a one stop shop or would you prefer independent advice?
Is living off LIC's through a SMSF, other structure or even just owing the assets under your personal name for a 70 year old retiree the type of matter would justify ongoing professional advice?

thx for reading!

 

@MikeLivingTheDream might wish to comment.

I found living overseas and having structures / investments here along with currency issues problematic. Then there’s the issue of Health Cover etc.

Good advice definately required.

 

Plan ahead

It is pretty easy to keep a SMSF resident by having an attorney appointed to become a director of the company.

Similar with shares outside of super. If you are a non-resident and getting dividends then the franking credits will be lost. If there was a trust with bucket company set up the company could receive dividends and later pay them to you when you become a resident again. Perhaps not good if you need the dividends to live on.

 

Thx Terry there's obviously a few options available. One I may consider is combining mine with my mums, as there may be a loophole in there somewhere, but probably more effort than its worth.

@Nodrog, yes FX volatility is the elephant in the room. My understanding is currency volatility has gone down significantly in the low interest rate environment, 10 years and running. I've read 10% swings are now the global average. Online FX brokers now offer competitive rates and with a running 12 month pool of foreign cash available, I could then look at the 12 month averages and only convert when above the average.

Currency pairs I'm looking at I'm seeing 10-16% swings across 12 months, keep in mind though my lifestyle expenses will be roughly one third of those in Ozzy, so if I can achieve a 12 months average FX trade price, my buying power is ultimately 3x what it would be if i spent the AUD here.

In a worst case scenario (for the current market conditions) let's say I'm forced to buy at the bottom of a 16% downside swing. My 16% loss in buying power still represents an 84% boost into an economy that offers a 300% cheaper lifestyle, 300x0.84=252, In this scenario I'm still 252% in front for total purchasing power

Unfortunately there's no way around FX if your investing in advanced economies and living in developing ones. Health Cover I need to look at closer, it will likely cost more OS but at some point I will hit an inflection point where going ex-resident will be financially beneficial, whether that's 5 years or 10 years of div growth, only time will tell.

 

Not so much at this time but at one point I really fancied retiring overseas and was an avid reader of a blog called nomadapitalist on importance of second residency etc.

For those of you with European ancestry , dust that EU passport. Many of the South American and Caribbean countries welcome retirees with open arms and preferential tax treatment. Asian countries are also a good bet and closer to home.

 

I hadn't thought of Caribbean countries, NC has some great blogs, there's no shortage of them around I think I've read them all. I've just turned 35 so Philippines residency program is open to me and Malaysia seems like a perfect fit, on paper anyways, I won't visit until later this year. Portugal and Mexico offer similar opportunities.

@JohnPropChat why the change of heart?

 

Mostly because the fate of countries seems to be changing every 10 years so If I spend the time and effort in sorting out second residency right away then it may be worthless exercise when the time comes. I do look at options once a year or two.

Malaysia second home program is not all that is cracked up to be. Unless you plan to really live in a village most of city-like places have high costs of living, still less than here but the idea of leaving home and setting up shop in a foreign country is to live like a king not just "comfortable living".

Portugal is a good choice but their investment program is fraught with delays and bureaucracy.

Panama has the "Friendly nations visa". Don't know if Malta is still doing this but if you have 1 million or so euro coins to spare then you can go straight to residency. Uruguay is a popular destination for Germans.

 

Can you expand on this? Inflation, social welfare, housing prices, employment opportunities?

I'm building a list and setting myself up for 1-2 years of travel, such that I can execute DD with the ultimate goal of setting up a bolt hole residency and landed property with a concrete home, ideally all services off the grid. At this stage I'm only looking at macro factors such as;

residency programs, capital requirements & restrictions
Secular government, population density, air quality
close to amenities such as large retail grocer, private hospital, etc

You can over-plan too though, I'm just wanting to put some back end structure around my wondering travels. Monthly rentals in most parts of the world are representative of long term living costs, so a month here or there living like the locals will give me a good idea of my base line. Once I find a place that ticks all the boxes, rent for 6-12 months whilst looking for land. Once I own land and have decided on design and specs for the build I'll know how much my comfort level will cost.

Yes KL, BKK etc same cost as living in Melbourne, not sure about you but I can't stand city living. And major ex-pat communities like Penang I expect to be over priced. MM2H needs 70k AUD and minimum property prices are about 300k AUD. But wherever someone has made a rule someone else has found a way to bend it. One thing I've found is you can't know for sure until your on the ground networking, putting in the hard yards, and lets admit it, for 80c a beer and $4 meals it's not that hard.

How far along the residency progress did you go?

 

The factors I were referring to are:
1. Economic Stability - in poorer nations this tends to change over time when this is lacking crime and corruption goes through the roof
2. Residency requirements. Once you acquire second residency some countries don't have any residency requirements but many do - only way to get around them is to stay long enough to gain citizenship. Residency rights can be lost as fast as they can be acquired. No point in planning so much when things can change so abruptly and I am not making the move today.

As for me - lots and lots of research, talked to a few people who actually did it and decided it's not time for me yet. YMMV.