Question: How can returning Australians (and expats moving to Australia) make MASSIVE tax savings by using offshore investment bonds and investment-linked life policy wrappers? Answer: Set it up while you’re an expat working abroad, and keep it running at least ten years (even if you go back home) for maximum tax benefits. (Note: this article is relevant to expatriate Australians working in Singapore and other overseas locations, as well as other nationalities who may be moving to Australia in the future.) Click to download a copy of this information in PDF format. Background - Repeal of Foreign Investment Fund legislation For several years the Australian Tax Office (ATO) had very defined, and perhaps harsh, rules for how foreign insurance bonds were treated in respect of capital gains for tax residents in Australia. In effect, these tax wrappers were treated in a ‘look through’ manner and holders were liable for tax on actual gains made or at a deemed rate set by the authorities
Has your adviser given you a factsheet on a recommended fund, and you need to understand what the terms mean? If so, read on … The fund factsheet is an essential document for the private investor. Unfortunately, the information contained in a factsheet - and the way it is presented - is not controlled in the same way as it is in a fund prospectus (a prospectus is a legal document). In essence a factsheet is marketing literature. Only a tiny fraction of investors ever read the formal prospectus for a fund, that’s why it’s especially important to be able to read a fund factsheet correctly, and if necessary to read between the lines. Key Contents Of A Factsheet Most fund factsheets will contain some or all of the following: Fund Name Many funds are commonly referred to by a short or abbreviated version of the full fund name. Hence it’s important to make use of the identifying codes (see below). Fund Management Company & Domicile The fund management company is structured and reg
Source: Warren Buffett, the most successful investor in the world in the Berkshire Hathaway Chairman’s Letter 1997 I’m saving for the long term - should I be worried if share prices fall? “A short quiz: If you plan to eat hamburgers throughout your life and are not a cattle producer, should you wish for higher or lower prices for beef? Likewise, if you are going to buy a car from time to time but are not an auto manufacturer, should you prefer higher or lower car prices? These questions, of course, answer themselves. “But now for the final exam: If you expect to be a net saver during the next five years, should you hope for a higher or lower stock market during that period? “Many investors get this one wrong. Even though they are going to be net buyers of stocks for many years to come, they are elated when stock prices rise and depressed when they fall. In effect, they rejoice because prices have risen for the ‘hamburgers’ they will soon be buying. “This reaction makes no sense. Only
How Regular Savings Create Gains From A Falling Market Dollar Cost Averaging is a strategy in which an investor places a fixed dollar amount (or indeed any other currency) into a given investment such as a unit trust, on a regular basis. The investment generally takes place each and every month regardless of what is occurring in the financial markets. As a result, when the price of a given investment rises, the investor will be able to purchase fewer units. When the price declines, the investor will be able to purchase more units. Millions of investors around the world employ a dollar cost averaging strategy because it offers the following benefits: It’s an attractive option for investors who want to contribute to their investment portfolios on a regular basis. It eliminates the issue of ‘market timing.’ As a result, an investor’s returns will be determined more by the overall trend in a given fund as opposed to the investor’s specific entry price. In addition, it helps investors reduc
Please note. This article is a summary, for general information only. It is not tax advice. Whether you pay UK tax depends on your residence. Non-UK residents will pay tax on their UK income, but not on their foreign income. So, if you live outside the UK, what counts is whether HMRC considers you to be non-residents for tax purposes. The Basics - UK Statutory Residence Test (SRT) A few years ago the UK introduced the Statutory Residence Test . You’re automatically UK resident if either : you spent 183 or more days in the UK in the tax year, or your only home was in the UK - you must have owned, rented or lived in it for at least 91 days in total - and you spent at least 30 days there in the tax year You’re automatically non-resident if either : you spent fewer than 16 days in the UK (or 46 days if you haven’t been classed as UK resident for the 3 previous tax years), or you work abroad full-time (averaging at least 35 hours a week) and spent fewer than 91 days in the UK, of which no
I live outside the UK - should I make voluntary National Insurance contributions? The decision on whether to make voluntary NI contributions depends on your own specific circumstances. National Insurance contributions for British expats? First a quick reminder. National Insurance (NI) contributions go principally to fund the National Health Service (NHS), the state pension, unemployment benefits, and sickness and disability allowances. Anyone employed in the UK will have an NI number, and make NI contributions via PAYE (pay-as-you-earn) deduction from salary. These are known Class 1 NI contributions (NICs). If you’re self-employed in the UK, you pay Class 2 NICs at a flat weekly rate, and annually Class 4 NICs based on taxable profits. If you are working abroad for up to two years and for a UK-based employer, you will likely be required to continue paying Class 1 NICs. Alternatively, you can choose to pay voluntary contributions, Class 2 or Class 3. Depending on your circumstances, vo
Introduction To some degree, currency risk is embedded in the portfolios of every international investor. So it’s surprising that such an important topic is often ignored, mismanaged, or misunderstood from both outside and inside the financial planning industry. Given that global currency movements are prominent in the headlines right now, it seems like good timing to have a quick review of currency risk, and safety-check that the currency exposure of our personal investment portfolio is in line with our objectives. What Is Currency Risk and Where Does It Come From? Most people who live and work internationally have experienced first-hand the impact of positive or negative currency movements; this is currency risk (also called exchange rate risk). Maybe you’re sending money home each month to pay your mortgage, and payments are easier than before because you get paid in a stronger currency. Or maybe your child wants to attend university in a country whose currency has appreciated again
Would you like to maximise the tax planning benefits of being a British expat abroad? Read on for a summary of some key reliefs and allowances available from the HMRC tax man… (Note: this article is relevant to British expatriates working in Singapore and other overseas locations, as well as other nationalities who may be moving to UK in the future.) Click to download this information in PDF format. Summary of Tax Benefits of an Offshore Investment Plan Under HMRC tax rules for ‘ foreign ’ investment bonds and investment-linked life policies have additional tax planning benefits compared with their domestic equivalents. The purpose of this article is to briefly highlight the most important. The content is not intended to be specific tax advice of any kind, and rules can change at any time. Everyone’s tax situation is unique and you should consult a qualified tax accountant regarding your own circumstances. 5% withdrawal allowance Time apportionment reduction Top slicing relief
Emotion and psychology play a critical role in the strategy of private investors. Unfortunately, this is almost always a bad thing. When prices go through the roof, so many of us feel euphoric and want to invest more at exactly the wrong time. When prices collapse, we feel miserable (and for some that ‘pit in the stomach’ is a physical reaction) and may feel like walking away from the market, never to return. Figure: Investor Emotion Given that each of us implicitly understands the single most important rule of investing - Buy Low, Sell High - how can it be that the vast majority of the investing public behave in such an irrational way? And, what can we do about it, as individual investors? Lessons From Behavioural Finance Behavioural Finance is the field of study that overlaps psychology with conventional financial theory, to help provide explanations for why investors behave illogically so much of the time. Over recent years behavioural finance has given us some useful insights ab