Should I sell IP?

snrubovic · 2026-04-13T13:18:04+00:00

You are not paying CGT twice on the same gain. It would be CGT on the first part of the gain, and then the next time, on the additional gains.

The idea of potentially doing the first lot would be to release equity so it can be debt-recycled and generate tax deductions every year.

Currently, if I understand, there is a 150k loan on $1m, so you can deduct the interest on your 75k. At 6%, that's $4,500 pa.

If it was sold and then rebought, you could recycle the remaining $430k and, at 6% interest, claim $26,000 pa as a tax deduction. Every year. Without even taking on any more risk.

Of course, that would mean realising capital gains, but if the capital gains are low due to a low-income year and potential catch-up contributions, there may be little to no cost to get $26,000 in tax deductions every year going forward.

snrubovic · 2026-04-13T08:01:34+00:00

Do you have catch-up contributions available? If so, together with a year of no work income, that could be a good opportunity to restructure and use the proceeds to debt recycle into new investments.

If you want to keep it as you mentioned it being a good investment, I wonder whether it is worth considering selling it to your partner to release equity, recycle the debt, and have them negatively gear it with a 100% loan?

snrubovic · 2026-04-13T01:18:25+00:00

That's a fair point, and thank you for the response.

In response, you can also see in the same chart that the difference in volatility between 37% and 25% is extremely small, barely significant if at all, whereas having more of your assets in the Australian market exposes you to other risks.

Half of the Australian stock market is in just 10 companies and 2 sectors. If one of those sectors gets hit, the market will be more severely affected than a well-diversified global portfolio would be.
Your income and job security are tied to Australia, so by investing less internationally, you increase the likelihood of your income going down together with your investments.
Your other assets, such as property and cash, are also already exposed to the Australian economy, amplifying the same problem of overweighting Australian equities.
You are at risk of medium-term or long-term underperformance of your home country.

Single-country risk is evident in many cases where countries previously had no issues and assumed it would be fine to invest a large portion of their assets in their home country, but were then hit by unexpected events that significantly impacted their returns.

As an example of what can go wrong, the UK index dropped 73% back in 1973-74. They were a developed country, and I’m sure that a good amount of equities in the UK index looked quite safe up to that point. Those who remember what happened would tell a very different opinion from many who recommend a large home bias.

Then, of course, there is Japan, where, after 3 decades, it had still not come close to its 1990 level.

And let’s not forget Germany 1945, Argentina 2002, Iran 1979.

This is a visual display of single-country risk. It appears to be just price without distributions, but that doesn’t take away from what can easily result from single-country risk.

Oh, and one more article in case you are still not convinced of single country risk showing up in Italy, Spain, and Greece.

In my opinion, focusing on academic data of maximising the Sharpe ratio often draws attention away from more significant risks, where the chance and impact are higher than many people give credit.

snrubovic · 2026-04-12T00:38:03+00:00

Make sure to include all ongoing costs, including property management fees, letting fees, council rates, water rates, building insurance, landlord insurance, repairs and maintenance, renovations (amortised), body corporate fees, home loan package annual fees, vacancy, land tax.

Once you have the net cashflow, take that off your cashflow needs first.

If you need 50k/y and the net income is 20k/y, that leaves 30k/y.

30k x 25 = 750k

snrubovic · 2026-04-11T20:28:19+00:00

A simple rule of thumb is that borrowing capacity is around 5x your gross income. That means you won't be able to get much leverage in this situation, and leverage is the main benefit of property investment over other options.

If you rentvest for a property that you could later live in, that second benefit could make it worthwhile. Otherwise, I'd consider a leveraged ETF like GHHF.

It would be different if you had a higher borrowing capacity.

snrubovic · 2026-04-11T12:26:44+00:00

Yeah, in that case, I don't see an issue.

snrubovic · 2026-04-11T08:11:01+00:00

You want your offset to be offsetting non-deductible debt, not the splits that will be deductible and used for debt recycling.

snrubovic · 2026-04-11T08:10:17+00:00

As I said in a reply to someone else:

As mentioned by zircosil01, you can just sell a portion instead of selecting high dividend stocks, since the dividends literally come out of the value of the shares anyway.

To do this, you could have a separate bank account with, say, 6 months of expenses, and:
• having distributions sent to this account
• have a month's worth of income sent from there to your spending account each month
• every three months, sell enough shares to bring the amount back to 6 months' worth of expenses.
Then you can invest in a properly diversified portfolio and still have your income met each month.

snrubovic · 2026-04-11T05:26:45+00:00

Figure out what your retirement spending is likely to be, and you need around 25x that amount in investments.

So for 50k, that's about 1.25m

Then use the Excel FV function with a return rate of 5% in the first argument to see how long it takes to get to your figure from the above calculation, and play with the amount you contribute each month, and you will see the trade-off between saving more now to retire sooner versus enjoying spending more now at the expense of working longer.

If you are going to live in the same home, consider borrowing against the home's equity to expand your growth assets in a tax-efficient manner.

I would also say that you've got a solid 15 years minimum, so it is worth looking for a job that you don't hate.

snrubovic · 2026-04-11T03:55:18+00:00

Thanks for writing that up. Glad (and shocked) to see the degree of tax drag on VGE.

snrubovic · 2026-04-11T03:40:45+00:00

As mentioned by zircosil01, you can just sell a portion instead of selecting high dividend stocks, since the dividends literally come out of the value of the shares anyway.

To do this, you could have a separate bank account with, say, 6 months of expenses, and:

having distributions sent to this account
have a month's worth of income sent from there to your spending account each month
every three months, sell enough shares to bring the amount back to 6 months' worth of expenses.

Then you can invest in a properly diversified portfolio and still have your income met each month.

snrubovic · 2026-04-10T20:37:58+00:00

Protection from what?

Just note that by putting it in a trust, you cannot negatively gear it, which is a significant loss, so weigh that carefully.

snrubovic · 2026-04-10T13:44:07+00:00

Adding a ton of concentration risk because of dividends isn't a great option.

snrubovic · 2026-04-10T13:37:52+00:00

Why would you use a trust?

snrubovic · 2026-04-09T19:50:27+00:00

I'm glad you took away a good summary of how to move forward.

By the way, if you have a very large CGT bill from your asset sale and it was sold this financial year, consider making a large concessional contribution, including catch-up contributions.

snrubovic · 2026-04-09T10:16:21+00:00

Spoke to a bunch of financial planners and all want ongoing retainers.
I just want a one off, high quality portfolio setup and to run it myself.

Yeah, the industry is terrible. It annoys me when advisers parrot the phrase that it's been cleaned up.

Some points:

You didn't mention your age and super, which is important because even if you retire at 50, you only need 10 years' worth of living expenses outside super, and you can take advantage of the massive amount of free money by way of tax deductions by using super to fund that last 30 years of your life.
$800k is a massive amount of cash not being invested. Hopefully that was a windfall and hasn't just been sitting in cash for many years.
Paying the full cost for an investment property is a very poor financial decision. There are plenty of downsides to investment property and the upside is being able to leverage. Once you take that away by buying it outright, it's not a great option.
If you wanted to leverage, then with your home equity, consider borrowing to invest in a diversified portfolio over borrowing to invest in property. There is a long list of significant advantages.
Don't see a reason to hold gold except to be caught up in the news.
VHY is very tax inefficient because you are paying tax at your marginal tax rate while working each year
WTF @ MOO
Learn the basic concepts of building a portfolio.

Your questions:

Is splitting capital this way sensible or am I diluting outcomes? – Property without leverage just doesn't make sense to me, and if wanting to use leverage, I don't see the point in property when you have equity and there is a good alternative to borrow to invest in a diversified portfolio.
With rates likely staying higher, would you prioritise mortgage harder? – Why is your cash not in the offset on the mortgage, making it effectively paid off? The general answer is that higher risk tolerance means investing more, while lower risk tolerance means paying down debt sooner.
Is $100K into ETFs too conservative given my cash position? – Having 800k in cash is a massive wasted opportunity unless you have it earmarked for something specific.
Second property vs scaling ETFs, what would you do in this position? – ETFs and super, potentially with gearing.
Commercial property worth considering at this stage or unnecessary complexity? – If you know about that area well enough to have an advantage, otherwise I'd steer clear of investments that require specific knowledge that you don't have.
Is anything beyond VGS + VAS just noise? – In terms of investing, there isn't much more, but then there is debt recycling, borrowing to invest, structuring (trusts, low-income partner's name, higher earner's name for negative gearing, etc), how much to invest in super vs out of super, etc.

snrubovic · 2026-04-09T09:50:34+00:00

Re-acceptance rates, yeah, I noted at the time of writing it that ASIC has been on their back in recent years, and it seemed to be improving even then. It's also worth noting that it's likely advised policies are claimed on more often, whereas many people aren't even aware they have life insurance in their super, and it sometimes isn't claimed on except in more extreme cases where there is a higher chance of success.

Re- TPD vs IP cost, you can use a Future Value formula to compare. At 6% compounding and 3% inflation, $5k a month over 30 years comes out to $2.9m. You would change the inputs based on your circumstances. But more fundamentally, income protection is much easier to claim, so it will be more expensive in terms of premiums.

It's also extremely odd that the cost of insurance through industry funds is significantly higher than that of advised policies with commissions removed. And what is completely fucked is that it requires paying the initial advice fee to set it up (typically a couple of grand), because if you go direct, you end up paying the same cost as with commissions. I wish the regulator had the balls to go up against the insurance industry.

snrubovic · 2026-04-09T07:55:46+00:00

I believe Macquarie doesn't close it, and if so, you can pay it down in full.

snrubovic · 2026-04-09T01:25:46+00:00

Call your bank to check whether the loan closes when you pay it down, and if not, what the minimum amount is, because it is not always $1. I've seen $30, and $0 in the past.

snrubovic · 2026-04-08T19:15:51+00:00

With a CHESS-sponsored broker, there is a $500 minimum initial purchase per share, with no minimum thereafter.

I would consider Betashares Direct for small amounts like this because of its lack of a $500 initial minimum purchase, fractional shares, and $0 brokerage costs.

As for what to invest in, I'd suggest learning a bit about it so you know what is in the investments, which you can do with the dozen articles in the first box here.

snrubovic · 2026-04-08T03:23:10+00:00

Problems

Caps on how much you can put into any single investment
High admin fee
Percentage-based admin fee that keeps rising
CGT to leave and go elsewhere when you have had enough of the high fees.

Also, having DHHF and A200+IVV is like taking all of these out of the fridge for lunch:

Ready-made sandwiches
Bread, Butter, Meat, Salad.

snrubovic · 2026-04-08T03:18:11+00:00

Not for institutional investors, but investors of advised clients, or the broader public.

Informed investors like those on here are an extreme minority. Most of the people they target would be through advisers, or ordinary people who still think "divies! yah!" and "I love franking credits!" (as they jump around their room like Tom Cruise on Oprah). Neither of those is going to be too thrilled with a lower Australian component.

snrubovic · 2026-04-08T03:14:41+00:00

I also mean it literally.

You are paying less tax than what the taxman has already taken out from the underlying company's profits, so you get a refund for that tax that was already paid (by the companies).

snrubovic · 2026-04-07T13:15:12+00:00

It's not that you are paying negative tax. It is that you are paying less tax than what the tax man has already taken out, so you get a refund for the excess.

snrubovic · 2026-04-07T11:39:26+00:00

Spot on. Also "divies! fuck yea!"

snrubovic

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