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Living and investing in Australia.

Financial discussion for any financial queries for Expats
Avantegarde
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Living and investing in Australia.

#313058

Postby Avantegarde » May 28th, 2020, 2:33 pm

My sister (a Brit) lives in Sydney and, these days, is also an Australian citizen and taxpayer, with dual UK nationality. She wishes to invest in a worldwide tracker fund. I have done some research and discovered that the personal stockbroking industry there is much less sophisticated than in the UK. The websites of online brokers in Australia appear flimsy and opaque. Most tracker funds are in the form of ETFs, not OEICS; the range of tracker funds for Australian citizens is tiny compared to the range on offer in the UK; you actually cannot buy a genuine worldwide tracker fund in Australia! Not even from the likes of Vanguard, Fidelity or Blackrock! My question is this: does anyone here have any helpful experience of signing up for an online stockbroker/fund platform in Australia and, also, investing in international tracker funds while living there?

GrahamPlatt
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Re: Living and investing in Australia.

#313131

Postby GrahamPlatt » May 28th, 2020, 7:47 pm

Unfortunately I have nothing to offer, but have to say I was looking forward to responses here as I have a friend in a similar position to your sister. ...

Lootman
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Re: Living and investing in Australia.

#313133

Postby Lootman » May 28th, 2020, 7:54 pm

I can't help either, sorry. Except to say that I recall reading somewhere that Australia applies capital gains tax to unrealised gains annually, on a mark to market basis.

If that is true then it is miserable and an incentive for any Ozzie to invest in other jurisdictions.

fca2019
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Re: Living and investing in Australia.

#313219

Postby fca2019 » May 29th, 2020, 6:52 am

My friend moved to Australia for a few years. Over there they invest more in their occupational pensions called super or superannuation. Similar to our DC schemes auto enrolment, but higher compulsory contribution levels and encouraged to invest voluntary contributions on top. They can put this into stocks, funds and mixed investments. I believe cause of the high take up and popularity of this, personal investing much less popular there. Downside is will get taxed if drawdown in the uk, if stay there lump sum tax free (my understanding based on conversations with friend).

GrahamPlatt
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Re: Living and investing in Australia.

#313226

Postby GrahamPlatt » May 29th, 2020, 8:11 am

But that’s just the tax wrapper dealt with (like a SIPP). You’d still want access to the investments vehicles.

boris88
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Re: Living and investing in Australia.

#314479

Postby boris88 » June 2nd, 2020, 10:49 am

Vanguard and Blackrock (ishares) both have Australian websites and from a quick look it seems they have quite a large range of ETFs available for Australian investors. That does not address your question about brokers or platforms but these two sites do seem to offer information about how to purchase their products in Australia so maybe they can help?

Avantegarde
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Re: Living and investing in Australia.

#314848

Postby Avantegarde » June 3rd, 2020, 4:38 pm

boris88 wrote:Vanguard and Blackrock (ishares) both have Australian websites and from a quick look it seems they have quite a large range of ETFs available for Australian investors. That does not address your question about brokers or platforms but these two sites do seem to offer information about how to purchase their products in Australia so maybe they can help?


We have looked at these Australian websites. Neither offer exactly what she wants. She may invest in an Australian stock market tracker and an all-world ex-Australia one as well, to provide world-wide coverage. She is going to investigate the stock broking account from her bank (Westpac). Australian banks in general seem to offer stock broking accounts with modest dealing fees (approx. £12 per deal) and no annual fee unless her account is inactive for a year. Even then, her bank's annual inactivity fee is only about £35, so not too bad. I have advised her to look into the CGT regime for capital gains on shares. Intriguingly, Westpac says its stock broking account offers not only access to shares on the Australian Stock Exchange, but what it calls "full access" to shares on the UK, US and other international exchanges. I shall be interested to see what "full access" means, and at what cost. Could she, for instance, buy index trackers on the London Stock Exchange, or shares in UK investment trusts? We shall find out.

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Re: Living and investing in Australia.

#322620

Postby onslow » June 29th, 2020, 6:19 pm

Avantegarde wrote:
boris88 wrote:Vanguard and Blackrock (ishares) both have Australian websites and from a quick look it seems they have quite a large range of ETFs available for Australian investors. That does not address your question about brokers or platforms but these two sites do seem to offer information about how to purchase their products in Australia so maybe they can help?


We have looked at these Australian websites. Neither offer exactly what she wants. She may invest in an Australian stock market tracker and an all-world ex-Australia one as well, to provide world-wide coverage. She is going to investigate the stock broking account from her bank (Westpac). Australian banks in general seem to offer stock broking accounts with modest dealing fees (approx. £12 per deal) and no annual fee unless her account is inactive for a year. Even then, her bank's annual inactivity fee is only about £35, so not too bad. I have advised her to look into the CGT regime for capital gains on shares. Intriguingly, Westpac says its stock broking account offers not only access to shares on the Australian Stock Exchange, but what it calls "full access" to shares on the UK, US and other international exchanges. I shall be interested to see what "full access" means, and at what cost. Could she, for instance, buy index trackers on the London Stock Exchange, or shares in UK investment trusts? We shall find out.


If its listed on the LSE as a share, it'll be accessible by Westpac.

You're right though - the Australian market is not as well developed for private investors as the UK. A bit ironic, as Australia has mandated for years comuslory saving into what they call superannuation(ie pension savings). The rate has been at 12% now for years, so the country as a whole has a sizeable amount of pension/superannuation savings. The Austrtalian financial services industry - including fund management - still has some of the highest investor charges in the world, however that is more a function of how inefficent and uncompetitive things are in Australia.

In terms of trackers - take a look at the following website. Good articles from an Australian expat now living in London, however he lists various Australian funds/trackers - mostly vanguard. Not sure the make up, however pretty sure he has/had an Australian market tracker. Somewhere he mentions his broker too.

https://www.aussiefirebug.com/net-worth/

I would have a look at Comsec in terms of Australian brokers, no inactivity fee and various funds

(why you would want to invest in a fund which tracks the Australian market is another topic! I certainly wouldnt unless you want exposure to banks and real estate - both of which are slowing, or mining - which is at the whim of China's mood this week - not much innovation going on there!)

(and I say that as an Australian!)

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Re: Living and investing in Australia.

#322678

Postby JohnW » June 29th, 2020, 11:02 pm

A couple of points:
'Compulsory savings' rate is 9.5%. Not likely to be 12% for at least another five years.
Just to fill out the picture, the Australian stock market has two real estate companies in the top 35, 13th and 30th by market capitalisation, 2.2% of the ASX 300 by value. The largest company is a biotech.
https://www.passiveinvestingaustralia.com/ might be a useful resources.

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Re: Living and investing in Australia.

#322704

Postby onslow » June 30th, 2020, 9:36 am

Good point JohnW - of course you are correct - for some reason I had 12 in my head given the (still ongoing!) discussions around rasing it to 12%

My comment re real estate was the Australian economy generally heavily exposed to property....particualary the banks which make up a large amount of the Australian indexes. You are likely aware of the recent royal commission into how underhand the banks were getting loans out to customers who plainly shouldnt have recevied them. Even the mortgage insurance companies in Australia are woefully under capitalised.

Pre Covid the Australian banks were battling headwinds into a slowing economy with extremely high debt. Eventually, the federal goverment/RBA buying their bad debts at par/small discount I think is very likely as the banks would be relucant to rasie equity at low levels given how many Australians (via their super) are invested in them. We will see.

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Re: Living and investing in Australia.

#322992

Postby PassiveInvestingAus » July 1st, 2020, 2:14 pm

My site was linked above and I came here after noticing that someone arrived at my site from here.

For a global index available in Australia in your taxable account (ie outside superannuation which is the retirement vehicle), there are 3 main options.


Option 1

VGS/VISM/VGE

VGS = MSCI developled LC+MC (ER 0.18)
VISM = MSCI developed SC (ER: 0.32)
VGE = emerging markets (ER: 0.48)

EM is currently 10% by market weighting.
If you want simplicity, you can leave out small caps and go with VGS/VGE 90/10.
If you wanted the whole global markets, it would be VGS/VISM/VGE 86.5/13.5/10 where VGS/VISM are split it into 85/15 (MSCI's own index ratio)

The advantage here is that these funds are all Australian domiciled (avoiding US estate issues) and the fund holds the assets directly.


Option 2

IWLD/VGE

IWLD = global developed all caps (a bit like VGS + VISM) (ER: 0.09)

90/10 makes an all world all caps combination.

IShares has their own emerging markets fund but it's even more expensive which is why I mentioned VGE instead of their own.

The advantage here is that it's quite a bit cheaper. Simpler also with one less fund.

The first downside is that they don't hold the individual company shares directly and simply wrap US domiciled index funds in an Australian fund. The upside is no US estate tax issues to the investor, but there is some tax drag to this but I have no idea how to calculate it.

The second downside is that the fund is a bit wonky. For the US part they use large caps and small caps and no mid caps. I guess they can approximate mid caps that way, just seems a bit weird to me to see it missing.

The third downside is that it is not popular and as a result there are wide spreads when buying and selling. This should theoretically improve as last year they lowered the ER significantly and AUM began to grow.

The second and third downside may disappear. BlackRock (the company that owns IShares) reduce the fees on this fund last year and have reportedly said that they plan to switch to full replication with AUM reaches 150-200M and until C19 happened it was on track to reach that within about the next 12 months (been growing fast since the fee reduction). Full replication means the fund holds the individual shares directly instead of holding US domiciled ETFs inside the fund. If that happened I can't see how this would not become the go-to fund for a world index but that is dependent on something that has not happened yet.


Option 3

VTS/VEU

I think currently it's around 60% VTS and the rest VEU but you can easily go and check.

These are literally the famed US funds VTI and VEU from the NYSE. They are simply cross listed on the ASX (Australian stock exchange).

The upside is that they are a ridiculously low cost. VTS is 0.03 and VEU 0.09

As a consequence of being US domiciled, you face US estate tax issues. Australian residents have a tax treaty up to 11.4M USD provided you send in the W8BEN form every 3 years. The problem is firstly if you are old and forget and die with the form being expired (and cost your heirs a fortune), or else if the US just changes the law and you have to sell and realise gains to switch.

I think that's pretty much it. Sorry for the long post.

In a nutshell

1. VGS/VISM/VGE (small caps optional) - most expensive but no domicile or tax leakage issues.
2. IWLD/VGE - cheaper but some tax leakage and wide spreads (both may improve in the future)
3. VTS/VEU - cheapest but US domiciled

Hope that helps.

JohnW
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Re: Living and investing in Australia.

#323153

Postby JohnW » July 2nd, 2020, 6:02 am

Not wishing to talk anyone out of iShares' IWLD which is cheaper than a comparable Vanguard fund, but iShares seem not to have been able to track their index as closely as Vanguard has (and mis-tracking on the losing side) so the cost advantage is more than wiped out over some short period. Perhaps that's the tax drag from using non-domiciled funds.


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