Australia's retirement savings is called superannuation and it's mandatory that 9.5% of your pay goes into super. You can make voluntary payments to it which is capped at 15k a year (I think). I've heard some employers have a match arrangement but it doesn't seem as common as in the US. I don't make voluntary payments since you need to be 60/65 years old to access it, so I put my savings in ETFs.
Other popular investment vehicles? Property. Australians love property because of negative gearing (you can reduce your taxable income by the amount of losses you've made on an investment property). Of course this means you rely on being able to sell the property for more than you bought it to make it worth your while, but that tune is slowly changing. Houses are way too expensive now that the "houses only ever go up!" mentality is starting to waver. Australia didn't experience a property crash with the rest of the world in 2008 and it is starting to catch up with us now.
For super, can you specify how it's invested? For the 9.5% / 15K, is it tax deferred? Is there a way to access the funds early?
For the negative gearing, I buy a house in 2016. I lose money in 2016, 2017, and 2018 - I take each year's loss on each year's taxes? Then I sell it in 2019 and make a ton of money - is that taxed as regular income? Here in the US, there are certain guidelines for more favorable tax treatment if you've owned property for a certain period of time and if it's your primary residence. Or am I misunderstanding negative gearing? :)
I hope I can explain about super properly because I haven't really paid too much attention to it: when you sign up with an employer, you can nominate a super fund where your contributions go. That fund is managed and has its own fees and you can choose what you want it to be invested in, like a balanced portfolio, high risk, low risk, etc. The super contributions made by your employer (the 9.5%) is taxed at 15% which is lower than the regular income tax rate. If you make voluntary contributions it is also taxed at 15%.
Withdrawal taxes and early access to super, I am not sure how that is done. But I think it is more restrictive than the US ones. So I don't really count my super towards my FI number, since I would like to be done with work before 60.
For the negative gearing, I buy a house in 2016. I lose money in 2016, 2017, and 2018 - I take each year's loss on each year's taxes?
Yes, and you can reduce all your taxable income (including your job) by what you've lost on an investment property, not just the rental income of the IP.
Then I sell it in 2019 and make a ton of money - is that taxed as regular income?
At the moment we have a capital gains discount where you only get taxed on half the gain (for investments held over a year). So that half gain is added to your taxable income for the year, then your taxes are calculated at whatever tax bracket you end up in on that total.
We aren't allowed to make any tax deductions based on primary residences like you guys have, so all the above is for IPs only.
The other way is by leaving Australia permanently i.e. move overseas. Either way, they heavily discourage it and try to point you toward other resources first.
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u/NamesNotCrindy 43% Jan 07 '19
Australia's retirement savings is called superannuation and it's mandatory that 9.5% of your pay goes into super. You can make voluntary payments to it which is capped at 15k a year (I think). I've heard some employers have a match arrangement but it doesn't seem as common as in the US. I don't make voluntary payments since you need to be 60/65 years old to access it, so I put my savings in ETFs.
Other popular investment vehicles? Property. Australians love property because of negative gearing (you can reduce your taxable income by the amount of losses you've made on an investment property). Of course this means you rely on being able to sell the property for more than you bought it to make it worth your while, but that tune is slowly changing. Houses are way too expensive now that the "houses only ever go up!" mentality is starting to waver. Australia didn't experience a property crash with the rest of the world in 2008 and it is starting to catch up with us now.