Tax free investments

[Guest Jaibee]

Are there any tax free savings schemes in Oz?

In the UK we have ISA's (individual savings accounts) which let us save up to a limit each year the interest/income is then paid tax free.

 

Looking at the ATO website I can't see anything similar but maybe I just don't know where to look.

[Guest ABCDiamond]

I'm pretty sure the short answer is NO.

 

However, if you have a mortgage, you can get a 100% offset account set up, and by keeping all your savings in that account, you do get the interest effectively tax free, and at a much higher rate.

 

eg:

Normal situation

You have a $100,000 mortage at 7% - You pay $7,000 in interest

You have $10,000 in savings, get 5% taxable interest, $500 gross, say $300 net.

NET $6,700 paid out

 

With Offset account

You have a $100,000 mortgage at 7% - You pay $7,000 in interest

You have $10,000 in savings offset againt the above at 7% = $700 reduction in interest paid

NET $6,300 paid out

 

Saving of $400, in combined extra interest and tax saving.

 

To get the same result in normal taxed interest situation, you would need about $23,000 in the savings account

 

(Tax based on 40%)

[Guest Jaibee]

Thanks ABC you really are the star of these forums. We won't have a mortgage so I guess that is bad news for us.

 

Maybe it is something for Peter Costello to think about (I'm sure he reads PomsinOz all the time!)

[calNgary 9,249]

Could anyone enlighten me on the pension front ,if our visa app is succesful my hubby will work full time and myself part-time around the kids,would we qualify for an aussie pension ? and if so after how long of working ,and finally ,(abc i hope your reading) do we sacrifce our english pensions on taking up residency in oz,thankyou very much in advance to anyone who has any answers

Cal x

[Guest ABCDiamond]

Could anyone enlighten me on the pension front ,if our visa app is succesful my hubby will work full time and myself part-time around the kids,would we qualify for an aussie pension ? and if so after how long of working ,and finally ,(abc i hope your reading) do we sacrifce our english pensions on taking up residency in oz,thankyou very much in advance to anyone who has any answers

Cal x

To compare the two countries pensions:

UK: You get a State pension paid for out of NI contributions, (remember that UK employer pays an extra 12.8% NI as well as the amount you pay). You will get this based on the number of years that you have paid UK NI contributions. "Men need 44 qualifying years by the age of 65 to get a full basic State Pension " eg: I have paid about 20 yrs UK NI, so I will get about 45% of the normal UK pension, when I reach 65, even though I am in Australia. Once it starts to be paid though, it will NOT increase in value each year, unless I am living in the UK. "The UK full basic State Pension for 2005/06 is £82.05 for a single person "

 

Any UK private pension you have, can also be collected later, although there are specific issues on this that came into effect 6/4/06.

 

Aus: Your employer pays 9% into a personal pension fund for you, and this is supposed to replace any State based pension.

However, as a safeguard for those without anything, there is also a State Pension, which is income and asset tested, but you do need 10 years residence for this. Current Government pension payments (nov 2005) are: $244.45 per week for a single person, plus various other benefits

 

More Super Info

[Adelady 10]

Are there any tax free savings schemes in Oz?

In the UK we have ISA's (individual savings accounts) which let us save up to a limit each year the interest/income is then paid tax free.

 

Looking at the ATO website I can't see anything similar but maybe I just don't know where to look.

 

Ressurecting an old post.... Is it still the case that Oz has no equivalent to the UK stocks and shares ISA?

[Marisawright 10,699]

Are there any tax free savings schemes in Oz?

In the UK we have ISA's (individual savings accounts) which let us save up to a limit each year the interest/income is then paid tax free.

 

 

Superannuation. I'm guessing that's why the government doesn't want other tax-free savings schemes to be created, because it's hard enough to get people to put aside money for their retirement already.

 

(Actually to be strictly correct, super isn't totally tax free but it lets you avoid a lot of tax).

[Adelady 10]

OK, no tax-free savings, thank you. I guess the benefit of an offset mortgage would depends largely on the amount of interest charged relative to other mortgage options available. These mortgages seemed popular in the uk 15-20 years ago, but you don't see them much any more.

[Parley 7,787]

There are Friendly Society Bonds which are tax free investments if kept for 10 years.

Every year you can contribute up to 125% of the previous year's contributions.

[le petit roi 36]

I've been recently looking into Investment Bonds. I think these sound similar to Parleycross suggestion. There are conditions you need to be aware of (such as the 125% rule) but put simply, you invest using post-tax dollars and have to hold onto them for 10 years before capital gains are fully tax-free. If you sell before then, they are subject to tax. I think the tax is on a sliding scale dependent on length of time held but you might want to check this first.

 

I'm not going to go into it any more than that because whether it is right for you is dependent on your circumstances. I'll leave it to you to raise with your own financial planner or to investigate yourself. However, it is another investment outside of Super which can be utilised to minimise tax. Be careful not to be seduced by claims of high historical gains and be aware of any high fees, charges and conditions. Not all are the same!

Edited April 2, 2015 by le petit roi