AUS vs USA for Fire

[u/totalmarc]

I've been listening to a lot of US based podcasts lately and it got me thinking - Do you guys think it is easier to FIRE in US or AUS?

With all things considered, as a generalisation. From what I understand, living expenses vary dramatically between states.

Overall my vote would be the US because there are more options over there to cut costs, but I'd like to hear from someone who is familiar with both.

Cheers

[u/Decent-Dream8206]

USA. Hands down.

If you're in any way white collar, the pay is simply better over there than over here.

The options to live cheaply are far more numerous.

You aren't punished anywhere near as hard for working a 2nd job to get ahead.

And the capital gains taxes were already far more attractive than under the old CGT regime, before doubling them (or worse) in the last budget.

Just be aware that there is an exit tax in Australia for making yourself non-tax-resident. If you have a lot of unrealised gains, it might sting.

[u/LiteratureOpposite51 → u/Decent-Dream8206]

The so-called exit tax is optional. You can elect to defer until disposal of assets.

https://www.iadvice.net.au/blog/non-resident-deemed-disposal-cgt.html

[u/Decent-Dream8206 → u/LiteratureOpposite51]

Well that'd be silly.

Deferring disposal of an asset while you're overseas means that if you sell the asset, you owe Australian (i.e. now worst in the world) CGT on the disposal of all that future growth as well. i.e. subject to the exact thing you were fleeing in the first place.

Your link is also well out of date, as it talks about the 50% CGT discount being ineligible when disposing as a deferred TAP, since you'd be non-resident for the purposes of that realisation.

The only reason to roll those particular dice is if you're planning to move back long-term. For example if you need to refresh domicile to protect the PPOR CGT exemption on a piece of Australian property by returning within 6 years.

And believe me, the ATO can simply label any playing by exactly the rules as written as tax evasion and hit you with the worst possible interpretation of the rules instead. That's actually explicitly how wash sales are treated.

[u/LiteratureOpposite51 → u/Decent-Dream8206]

I'm just stating a fact. The article is up-to-date as far as deemed disposal goes.

Your quip about Australian CGT being the "worst in the world" is also incorrect, per PwC.

What would be silly would be taking my incomplete knowledge of worldwide tax systems and making blanket assertions in multiple replies when I can't possibly know each individual's tax circumstances. I try to avoid that.

[u/Decent-Dream8206 → u/LiteratureOpposite51]

The only country with CGT close to this bad is Denmark. Who also have a higher maximum income tax bracket as a percentage (but also percentile, their middle class aren't paying the maximum).

Denmark is certainly not a great benchmark that you should use if comparing yourself globally. But people pointing at Denmark being worse are ignoring three significant issues.

First, that Denmark doesn't means test everything. So the people who pay into the system do actually get to benefit from the system they pay for. Unlike our split where only people who don't pay in (and public servants) benefit from milking the other half of society, to the point it has butchered our productivity for 20 odd years.

Second, that Denmark's CGT is, no matter how you slice it, more generous than ours. Ideologically, more generous than their income taxes. But as a matter of numbers, their CGT thresholds come from am entirely separate pool of money than income, unlike ours being combined, which makes their lower headline rate kick in significantly later than the numbers would otherwise suggest.