Kuan Tian on Superannuation, Shares, Investments and Tax

The following links are to videos by Kuan Tian.

How to make money in the stock market consistently! Index fund investing explained for beginners.

In this video Kuan backs index funds. He gives examples of VAS for Australia stocks, IVV for US stocks and IOO for the largest international companies.

Ranking the 10 biggest super funds | BEST super fund for index investing? (2023)

What is the best Australian Shares ETF for 2023? (Comparing VAS, A200, IOZ and more!)

Recommends A200, VAS and IOZ.

The ATO is CRACKING DOWN on stock and ETF investors. Stay safe with these tax tips.

Wow, I had no idea how much more work was involved with ETFs when preparing a tax return.

Top 3 ASX stock brokers to invest in Australian shares

Hassle-Free Investing: How to build a 100% automated portfolio for Australians.

This Common Home Loan Mistake Could Cost You $100,000 in Extra Tax

Be careful with redraw facilities, compared to offset accounts, as it could come with a big tax bill if you later rent your house out.

The SMARTEST Ways to Invest $2,000 Right Now in Australia! (2K Sub Special)

Why transition to retirement (TTR) pension strategies are so lucrative | Superannuation in Australia

Ultimate Guide to REDUCING TAX with your superannuation

How to reduce your tax with a personal super contribution. EVERY AUSTRALIAN CAN DO THIS!

How anyone can legally pay NO TAX in Australia (requires planning)

Basically, you don't pay tax on income from your super when it's in pension phase

How wealthy Australians exploit investment properties to pay less tax.

The negative gearing and CGT loop hole.

Australia's simplest Portfolio (VAS + VGS) - What they're not telling you

Invest in Super first, then make sure you also have a diversified portfolio with defensive investments. VGS does not cover emerging markets either. A200 and IOZ both have lower fees than VAS. So, keep the majority of the portfolio in Super, the portion outside Super should be diversified across stocks, the stock component should include access to the fast growing emerging markets and VAS should probably be replaced by A200 because of the lower management fees.

Kansas vs California: a tale of tax

In Donnie, We’re Not In Kansas Anymore David Cay Johnston compares the impact of tax cuts in Kansas and tax rises in California on their respective economies.

Since the tax changes, the California economy has grown 1.7 times faster than the Kansas economy. Perhaps even more significant, California grew its share of the national economy from 13.8 % of the U.S. Gross Domestic Product to 14.2%. Kansas stayed flat at 0.8% of national GDP.

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Further west, in tax-raising California, jobs increased much faster. While jobs grew in Kansas by 3.8%, in California the lift was 11.8%.

KPGM arguing for a boost to education and infrastructure

In Coalition and Labor fighting the last war while a different battle looms Michael Pascoe argues that neither the ALP or the Liberal Party are really addressing the needs of Australia. He bases his argument on a KPMG report.

Meanwhile, the nation's future needs, the big economic issues the next government should be focusing on, are highlighted by a KPMG report that suggests there's a great deal more genuine political leadership should be doing instead of chanting that the other side is a tool of the unions/banks/dole bludgers/tax avoiders/socialists/neo-cons/whatevers.

The bottom line of KPMG's The Global Economy – Is This As Good As It Gets? paper is that our would-be leaders should be competing to offer the most credible boost to productivity-enhancing investment in infrastructure and education.

Personally, I think the ALP is much closer to KPMG's recommendations than the Coalition.

How the government spent our boom

In How the Budget was mugged (Treasury publishes the photo) Peter Davidson has a great graph, taken from a speech by the Treasury Secretary John Fraser, showing the impact of our unexpected revenue windfalls, spending decisions and tax cuts on the federal budget:

The following chart, included in his slides, shows how the windfall revenue gains from the boom between 2002 to 2008 (grey bars, circled by me) were spent (green, blue and red bars).

Basically much of the boom was spent on personal income tax cuts and public support for people who didn't need it (via mechanisms such as superannuation tax breaks and the Seniors Supplement).

A brief history of tax

Peter Davidson has prepared a brief history of tax:

A brief history of tax: Part 1 Income tax, the great leveller
A brief history of tax, Part 2: Clash of the titans
A brief history of tax (Part 3): the trojan horse

Hockey gets it wrong on tax, again

Greg Jericho in Joe Hockey either doesn't understand how tax works or he is deliberately misleading the public finds that Treasurer Hockey's claim that people in Australia pay half their income in tax utterly wrong.

In 2011-12, the richest 10% – those who earn over $110,000 a year – paid on average around 32% in tax. This includes the top 1% who earn on averaged $611,000 a year. But even that minute segment of the population paid just 39.5% of their total income in tax – well below Hockey’s “nearly half” amount.

By contrast the middle income earners in the fifth and sixth deciles paid just 14% and 17% of their income in tax.

In 2011-12, the median taxable income of taxpayers was around $49,700. People earning that amount paid on average 15.6% of their income in tax.

Rather than meaning they had to work “July, August, September, October, November, December” for the government, it meant they had to work just 57 days. Or from 1 July to 26 August in the financial year.

How Disney avoids paying tax in Australia

In How Disney has McDucked its tax, left Australia holding pumpkin Neil Chenoweth explains how Disney, through complex offshore transactions, has avoided paying their fair share of tax in Australia.

Use Luxembourg if you want to reduce your corporate tax bill

In How a European duchy makes tax bills disappear Leslie Wayne, Kelly Carr, Marina Walker Guevara, Mar Cabra and Michael Hudson explain how many companies use secret agreements with the Luxembourg Government to avoid paying tax in other countries.

Pepsi, IKEA, FedEx and 340 other international companies have secured secret deals from Luxembourg, allowing many of them to slash their global tax bills while maintaining little presence in the tiny central European duchy, leaked documents show.

These companies appear to have channelled hundreds of billions of dollars through Luxembourg and saved billions of dollars in taxes, according to a review of nearly 28,000 pages of confidential documents conducted by the International Consortium of Investigative Journalists and a team of more than 80 journalists from 26 countries.

Big companies can book big tax savings by creating complicated accounting and legal structures that move profits to low-tax Luxembourg from higher-tax countries where they have their headquarters or do lots of business. In some instances, the leaked records indicate, companies have enjoyed effective tax rates of less than 1 per cent on the profits they've shuffled into Luxembourg.

The leaked documents reviewed by ICIJ journalists include hundreds of private tax rulings – sometimes known as "comfort letters" – that Luxembourg provides to corporations seeking favourable tax treatment.

The European Union and Luxembourg have been fighting for months over Luxembourg's reluctance to turn over information about its tax rulings to the EU, which is investigating whether the country's tax deals with Amazon and Fiat Finance violate European law. Luxembourg officials have supplied some information to the EU but have refused, EU officials say, to provide a larger set of documents relating to its tax rulings.

More about how IKEA avoid's paying tax

Neil Chenoweth explains some of the techniques IKEA uses to avoid paying it's fair share of tax in Why IKEA’s profits are mostly tax free.

WA Liberals shouldn't be complaining about GST revenue

Larry Graham writes that the WA Liberals' GST problems all their own work.

Yet another article on IKEA not paying tax

In IKEA pays a low amount of tax Michael West looks at another implication of IKEA not paying taxes, the advantage they have over their competitors who do:

"I am occasionally reminded by the ATO that tax is a competition issue, and that a late-submitted BAS is unfair to competitors. But my competitors as a furniture maker include the likes of IKEA, who I understand is a charity registered in the Netherlands that pays no tax whatsoever in Australia. How is this fair, and how are we to encourage home grown entrepreneurs?" Email from a reader, Dave.

Dave makes a solid point. It is not just individuals who suffer from the failure of government to police big tax avoiders. It is local businesses too, small and large, forced to compete on the same playing field as their multinational rivals. The latter enjoy an advantage of scale and far lower funding costs and pay negligible tax.

Saul Eslake on tax reform

Prior to the 2011 Tax Summit Saul Eslake made an interesting speech on tax reform. The transcript is online at Australia's Tax Reform Challenge. While I don't necessarily agree with everything he says, he has some very compelling arguments. He may even have changed my mind on negative gearing. Well worth a read.

Most Americans favour a carbon tax if revenue neutral or the proceeds spent on renewables

A recent survey Public Views on a Carbon Tax Depend on the Proposed Use of Revenue found that the majority of Americans, both Democrats and Republicans, are in favour of a carbon tax if the revenue raised is returned to tax payers or spent on renewable energy.

Quoting the key findings of the study:

1. Most Americans oppose a carbon tax when the use of tax revenue is left unspecified. Overall support for such a tax is 34% in the latest NSEE survey. Attaching a specific cost to the carbon tax reduces overall support to 29%.
2. A revenue-neutral carbon tax, in which all tax revenue would be returned to the public as a rebate check, receives 56% support. The largest gains in support come from Republicans.
3. A carbon tax with revenues used to fund research and development for renewable energy programs receives 60% support, the highest among tax options that we presented. Majorities of Democrats, Republicans, and Independents each express support for this tax.
4. Most respondents oppose a carbon tax with revenues used to reduce the federal budget deficit. Overall support for such a tax is 38% with a majority of Democrats, Republicans, and Independents each expressing opposition to this tax.
5. When asked which use of revenue they prefer if a carbon tax were enacted, pluralities of Democrats, Republicans, and Independents each prefer renewable energy over tax rebate checks or deficit reduction.

Numbers of people subject to the top marginal tax rate - 1982/3 vs 2012/3

Another graph tweeted by Matt Cowgill:

The top tax rate doesn't kick in until you earn about 2.5 times male ave earnings; the # who face it has fallen a lot

Comparing the marginal tax rate on top incomes vs average incomes

Another tweet from Matt Cowgill comparing the marginal tax rate on top incomes vs average incomes:

Marginal tax rate on top income earners is nearly 15 ppts lower than it was in 1982-83; MTR for average earner=higher

Note, MTAWE = Male Total Average Weekly Earnings

Federal Government receipts as a proportion of GDP

Matt Cowgill tweeted the following graph of Federal Government receipts as a proportion of GDP:

How many charities are there in Australia?

Sarah Dingle in Why put the charity watchdog to sleep? writes that there may be more than 60,000 charities and not-for profit organisations registered by the ATO in Australia. The problem is no one knows how many are still operating.

Glencore and (no) tax

In Glencore tax bill on $15b income: zip, zilch, zero Michael West reports on an analysis of Glencoe's accounts and the methods it uses to ensure it doesn't pay tax in Australia.

Australia's largest coalminer, Glencore, paid almost zero tax over the past three years, despite income of $15 billion, as it radically reduced its tax exposure by taking large, unnecessarily expensive loans from its associates overseas.

At up to 9 per cent, the interest rates on these $3.4 billion in loans were double what the company would have had to pay had it simply borrowed the money from the bank.

As it was claiming tax breaks in Australia on these inflated interest payments, the secretive Swiss-based multinational actually increased its lending to other related parties interest free. This may include its executives. Nobody from Glencore, which used to be called Xstrata, was available for comment despite repeated requests.

The aggressive tax avoidance tactics of Glencore Coal International Australia Pty Ltd have been identified in an independent analysis of the company's accounts for Fairfax Media by an expert in multinational financing.

Along with the blatant irregularities in its borrowing and lending, the study also found a hefty increase in Glencore's coal sales to related companies (up from 27 per cent to 46 per cent of total sales, with no explanation), indicative of transfer pricing - also known as profit-shifting - and an activity that appears to breach Section IVA of the Income Tax Assessment Act - the part that deals with schemes designed to comply technically with the law but whose ''dominant purpose'' is really to avoid tax.

Glencore Xstrata and tax avoidance

Michael West in Gushing Glencore converts tax flow into tiny trickle notes how Glencore Xstrata manages to pay virtually no company income tax in Australia on its revenue:

Lo and behold, Glencore had booked cash of almost $15 billion from coal mining in Australia in the past three years and had effectively paid zero tax. They make roughly $5 billion a year from copper, zinc and nickel too, but we'll stick with coal today as it would take another two weeks to dig out the rest of the accounts.

Anyway, the boys from Zug - the Swiss tax haven from which Glencore sprang - did actually pay some tax. They managed to ''leak'', as they say in the trade, just $507 million in income tax, on cash receipts of $30 billion. That's roughly 1.7 per cent leakage in seven years.

Tax is levied on profits, or course, not on sales. Cash is more relevant though, since multinationals engage in the practice of transfer pricing; that is, siphoning profits out of this country, where the corporate tax rate is 30 per cent, into more tax-amenable jurisdictions.

Here they were, drowning in cash - the biggest coal boom in history was in full swing - but what does Glencore do? It borrows billions from its parent and other associates overseas and pays them interest on these loans of $1.4 billion. That's flair for you. Get the money out, and saunter off with a tax deduction on your interest payments to boot.

And that is just profit shifting via a few loans. Of Glencore's $4.3 billion in sales last year, some $1.97 billion worth were made to related parties.

The immense wealth held in tax havens

Heather Stewart in Wealth doesn't trickle down – it just floods offshore, research reveals looks at a report about the vast wealth hidden away in tax havens.

Using the BIS's measure of "offshore deposits" – cash held outside the depositor's home country – and scaling it up according to the proportion of their portfolio large investors usually hold in cash, he estimates that between $21tn (£13tn) and $32tn (£20tn) in financial assets has been hidden from the world's tax authorities.

"These estimates reveal a staggering failure," says John Christensen of the Tax Justice Network. "Inequality is much, much worse than official statistics show, but politicians are still relying on trickle-down to transfer wealth to poorer people.

"This new data shows the exact opposite has happened: for three decades extraordinary wealth has been cascading into the offshore accounts of a tiny number of super-rich."

In total, 10 million individuals around the world hold assets offshore, according to Henry's analysis; but almost half of the minimum estimate of $21tn – $9.8tn – is owned by just 92,000 people. And that does not include the non-financial assets – art, yachts, mansions in Kensington – that many of the world's movers and shakers like to use as homes for their immense riches.

It seems this hurts poorer countries in particular. In many cases wealth hidden offshore exceeds the value of the debt such a country might have.

He corroborates his findings by using national accounts to assemble estimates of the cumulative capital flight from more than 130 low- to middle-income countries over almost 40 years, and the returns their wealthy owners are likely to have made from them.

In many cases, , the total worth of these assets far exceeds the value of the overseas debts of the countries they came from.

The struggles of the authorities in Egypt to recover the vast sums hidden abroad by Hosni Mubarak, his family and other cronies during his many years in power have provided a striking recent example of the fact that kleptocratic rulers can use their time to amass immense fortunes while many of their citizens are trapped in poverty.

The world's poorest countries, particularly in sub-Saharan Africa, have fought long and hard in recent years to receive debt forgiveness from the international community; but this research suggests that in many cases, if they had been able to draw their richest citizens into the tax net, they could have avoided being dragged into indebtedness in the first place. Oil-rich Nigeria has seen more than $300bn spirited away since 1970, for example, while Ivory Coast has lost $141bn.

Assuming that super-rich investors earn a relatively modest 3% a year on their $21tn, taxing that vast wall of money at 30% would generate a very useful $189bn a year – more than rich economies spend on aid to the rest of the world.