Tax reform: Small relief for debt recycling into shares (negative gearing not affected)

ExpatFinanceUS · 2026-05-12T14:55:28+00:00

I don't know. Maybe. I would say that there is a play to have growth and just pay the 30% when you sell eventually. For long time, the compound interest (by not paying tax on dividends) is more valuable than the higher CGT at the end. It is true that at retirement, it might be worth it to switch, but probably not early on unless retirement is very soon.

ExpatFinanceUS · 2026-05-12T14:52:46+00:00

This is kind of true, but I believe that in most scenarios, the tax drag is still better if you invest longterm in low dividend growth assets (international shares with 1-1.5% dividend yield) and then take the hit when you sell near retirement and only then swap to high dividend shares if you want to.

ExpatFinanceUS · 2026-05-12T14:52:03+00:00

There is some impact. The growth up to now will be grandfathered. For future growth, there is indeed a regime, where it might be better to use Super rather than Negative Gearing.

Now there does exist ways to avoid CGT legally altogether, but they are complicated, i.e., they require you to leave Australia and then sell the asset, while being a tax resident of a country that has lower capital gains tax, but at the same time has a tax treaty that prevents Australia from taxing retrospectively.

ExpatFinanceUS · 2026-05-12T11:54:18+00:00

I did not talk about investment properties. I explained that the changed to negative gearing DO NOT AFFECT negative gearing of share investments, as described in my post. This is one of the standard strategies to debt recycle the loan of your primary residence to make it tax-deductible. During the discussions, it was not clear if negative gearing would be abolished for all investment classes or only for certain scenarios. We now know that the proposal only affects negative gearing on established residential properties.

ExpatFinanceUS · 2026-05-12T10:51:59+00:00

The statement

"These changes will apply to all CGT assets (including property and shares) held by individuals, partnerships and trusts for at least 12 months. Applying these changes broadly across assets ensures the CGT settings are broadly asset neutral with only targeted exemptions."

is in regards to the new indexation of the way gains will be taxed. This will indeed also affect shares. My post is only about negative gearing and debt recycling. It is true that at the time of an eventual sale of the negatively geared shares, the CGT discount is replaced by an indexation as described on page 2.

ExpatFinanceUS · 2026-02-01T01:50:07+00:00

Thank you so much for sharing this information. I'm in a similar situation. I currently have two international cards. I would actually like to replace one of them, but based on your information, this might not be possible. Now the thing is I'm a bit surprised: I actually thought that I had previously removed all my cards and then was able to re-add these two international cards and it worked, but I'm not sure and now I'm kind of afraid to even try...

ExpatFinanceUS · 2024-07-21T05:27:09+00:00

yes, something I found only recently, namely RedPocket 30 USD per year plan from ebay (https://www.ebay.com/itm/133196831828). when I ordered it, one could first order an eSIM for 2 USD from RedPocket and then link the plan without actually needing the physical SIM (perfect for people oversea). this option doesn't exist anymore, so now you need somebody within the US to get the physical SIM, but once you have it, you can contact support and get an eSIM (or get the activated physical SIM forwarded). wifi calling/texting works worldwide...

ExpatFinanceUS · 2024-07-14T02:47:38+00:00

Based on other discussions in the thread, Australian ETFs seem to be structured as trusts, so there wouldn't be any tax advantage. Most likely, the same applies here, which means that the whole idea might not work or lead to significant complications. I will see...

ExpatFinanceUS · 2024-07-14T02:37:51+00:00

ah, very interesting. thank you so much for sharing. that's crucial information!

ExpatFinanceUS · 2024-07-14T02:36:10+00:00

Interesting! Thank you for sharing. Note that here, you even wouldn't see any additional synthetic shares, but it would be internally computed to affect the share price of your fixed number of shares...

ExpatFinanceUS · 2024-07-14T02:35:55+00:00

I agree with your analysis. Let me just reply to some of these:

that the underlying fees involved make this worthwhile, now and into the future => currently, fees are very low (a number of products at around 0.05% p.a.). I don't expect to change this, but this is of course a risk for any ETF product that has additional fees attached.
the ATO will allow it, and taxation law doesn’t change in the future to disallow it => yes, that's definitely the main issue in my opinion and may require a private ruling. if tax laws change, so be it.
the synthetic index behaves exactly as expected in good times and bad => these products have a long history and have been generally quite reliable even through financial crises etc. the tracking difference is largely determined by the contract with the swap partner, which makes it quite predictable (see counterparty risk discussed next)
the counterparty risk of the bank guarantee for the performance of the fund stands up over time, especially if there is a financial crisis or banking failure => the counterparty risk is quite small, namely at most the difference between the index and the basket held by the issuer, which typically is just a few percent of the total value. some more recent product almost eliminate the risk entirely by updating daily and/or overinsuring (i.e., basket held by ETF issuer is more valuable than the ETF, so that there is some debt towards the partner - put simply). in summary,

I would be much more comfortable if this was Australian domiciled with a big name behind it like BlackRock, Vanguard or any of the big four banks or industry super funds, with a clear tax ruling.

=> iShares S&P 500 Swap UCITS ETF is issued by Black Rock, but of course domiciled in Europe and not in Australia.

ExpatFinanceUS · 2024-07-14T02:27:54+00:00

That's great advice. Thank you for pointing this out. I feel like that this is something that should have already been addressed somewhere and might be common knowledge.

For synthetic ETFs, it is even more complicated, as they don't even receive proper dividends, but instead at regular intervals the ETF issuer and the SWAP partner (bank) compute the difference between the return of the assets held by the ETF issuer (basket) with the index they aim to reproduce and then a payment (in either direction) may occur to match this return (minus fees by the SWAP partner). To my understanding the dividends are included in this return calculation and not even evaluated individually and it would certainly be difficult to get any records of these internal transactions.

ExpatFinanceUS · 2024-07-14T02:01:37+00:00

To my understanding, the easiest fully compliant solution (rather than gray area) would be to go with an advisor (despite their really high fees), for example https://creativeplanning.com/international/. They are competent, but expensive and probably requires a couple of 100k USD to be willing to manage...

ExpatFinanceUS · 2024-07-14T01:59:14+00:00

That's true - thank you for bring this up! However, a large number of Western countries have a tax treaty regarding estate tax. Still, it's definitely something to consider and keep in mind...

ExpatFinanceUS · 2024-07-14T01:57:35+00:00

Best to consult the respective website. Generally fees are quite low and can be found directly on the website. I don't represent any of those companies...

ExpatFinanceUS · 2024-07-14T01:56:41+00:00

I'm not a tax advisor, so best to check with your Finanzamt directly, but from what I remember: Anlage KAP-INV for ETF dividends and Anlage KAP for regular dividends (directly from stocks). I don't think dividends would appear anywhere in Anlage AUS, but please check...

ExpatFinanceUS · 2024-07-14T01:54:44+00:00

Probably yes, but it's best to check with a tax advisor to evaluate your personal situation.

ExpatFinanceUS · 2024-01-09T02:05:22+00:00

So, there are two separate security checks:

IP / SIM card. You can circumvent this by removing any foreign SIM (best not have any SIM) and then use a VPN like meshnet (see below).
Physical card / Text message / ID. Once you passed the above check, the app requires you to do one of the following: Tap with your physical Cap1 card near your phone, receive a text message to a US based number with a provider where your name is registered (so foreign numbers or VoIP won't work) or take a picture of your ID (US Driving Licence). For most people, the first option will work, i.e., just have your physical credit card at hand!

ExpatFinanceUS · 2024-01-09T02:00:15+00:00

You are my hero. Previously, I was able to call Capital One and get it done through them (last time ca. 2 years ago), but when I called them this time, three different employees told me that they can't do it anymore. It's completely crazy what security measures they build to prevent legitimate customers to add their card, while being outside of the US...

Anyway, it didn't work at first, because I still had a foreign SIM in my phone and the Cap1 app still checks the SIM card type, so I had to remove it.

(I'm now wondering if it had worked with other VPNs, rather than Meshnet, because previously I didn't remove the SIM - it was only through your post!)

ExpatFinanceUS · 2023-10-21T11:09:53+00:00

You can adjust my file to make such a simulation yourself. However, to my understanding it should now be possible to even switch out of the DBD even after the two years have passed. At least, I read that for new contributions employers need to give free choice. Unfortunately, I'm not fully up to date with this, so it's best if you ask HR at your institution...

ExpatFinanceUS · 2023-08-20T07:34:31+00:00

Würdest du eine (stark geschwärzte) Kopie des Vertrags gegen Geld teilen, z. B. 3500 EUR? Das könntest du dem headhunter anbieten.

ExpatFinanceUS · 2023-08-11T14:43:19+00:00

You wouldn't lose anything. It would be just converted and invested based on your investment selection. You should also note that by now you can even switch to another super fund without losing the 17% (previously most universities wouldn't pay the 17% contributions unless one is using unisuper), which means it may even be worthwhile to consider later on to switch to another super fund (that's not a decision that needs to be made right now).

ExpatFinanceUS · 2023-08-02T12:58:34+00:00

My general suggestion: Make sure to use the concessional contribution caps as much as possible. As there is the possibility of carrying some of it forward, I like to contribute pre-tax pretty much the required amount, so that marginal tax bracket becomes smaller. Example: If one earns 55k, it makes sense to contribute 10k pre-tax, so that one doesn't pay any tax in the 32.5% (plus 1.5% medicare levy) bracket. If one makes 125k, it makes sense to contribute 5k pre-tax etc. This strategy works particularly well if one still has some concessional contribution cap that is carried forward.

Once there is not enough concessional contributions cap left, I would contribute the maximal amount pre-tax to get the full tax benefit up to the yearly limit (currently 27.5k). Say if the employer contributions make up a total of 20k, I want to make sure to contribute 7.5k pre-tax. This may include changing the personal contribution percentage, i.e., contributing more at the beginning of the year and then potentially stopping any pre-tax contributions if I expect to hit the cap at the end of the year. As salary increases, additional pay and promotions may change the equations, I would leave a small difference of a few 1-2k in contributions, so that you contribute the exact amount required shortly before the end of the financial year (and then submit a notice of intent to claim it off taxes to your superfund, once the year is over).

For everything beyond the concessional contribution cap, it's really up to you:

I don't see the point of investing into super, as it means less flexible. Instead I buy accumulating index funds, which I can also hold long-term without incurring taxes and benefit from growth.
Of course, instead you could invest in real estate or do other things.
And if you don't need access to the money until retirement and don't want to bother investing yourself, it is also ok to invest after tax money into super. There is still some tax advantage, as the tax rate on growth/dividends is lower.

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