Question 1. Reporting season has seen some great results from some of our Aussie tech stocks but it’s difficult for smaller retail investors to follow them all and have a sensible exposure. Is there any “Aussie tech” ETF or LIC that we can access to add into our portfolios?
Answer: Unfortunately, there is no ETF that tracks Australian technology stocks. It is a small sector with only a handful of companies with any meaningful market capitalisation.
BetaShares has ETFs that track Asian technology companies (ASIA), cyber-security (HACK), robotics and AI (RBTZ), and the broader NASDAQ 100 (NDQ).
Question 2. With respect to the franking credit concern, do you see any problem in having shares with unfranked dividends in my SMSF? I’ve had GOZ, CQE for some time and recently bought CMW. Fair growth and dividends. Yes, I’ve got banks, health, Telco and utilities.
Answer: Absolutely not. Franking is only a component of the return, so provided the other securities meet your needs around expected income/capital return, they should be fine in a diversified portfolio.
Question 3. I am 35. What probability do you place on a future government increasing the preservation/retirement age (by the time I get there)? I can’t help but feel that probability is “high”. I don’t want to work forever and have $180,000 in an industry super fund and my employer contributes 17% on my $106,000 p.a. salary. I have been salary sacrificing for the past few years but with the current political climate I have lost all faith and can’t help but think that a future government will change the rules. It seems those (few of us) that take action early and plan to be financially independent are the ones to get punished through rule changes because they are easy political targets. I’m thinking it may be safer to pay more tax now and build wealth outside of super. What do you think?
Answer: Very high, almost inevitable re an increase to the preservation age. Generally, I think young adults should build wealth outside super. Step 1 is to own your own home. Step 2 (if you are paying a high rate of tax) is probably to buy an investment property and/or invest in shares. Step 3 is then to invest in super. If you are saving for your first home, I would be putting any surplus cashflow through the First Home Super Saver Scheme. (see https://www.ato.gov.au/individuals/super/super-housing-measures/first-home-super-saver-scheme/ .
Question 4: The Labor policy to deny refunds of surplus franking credits has received significant publicity but self-funded retirees with pension accounts may still need franking credits because of another of Labor’s super policy announcements. Labor intends limiting the tax free earnings on assets supporting income streams to $75,000 per annum. Therefore franking credits will be required to offset tax liabilities on earnings in excess of $75,000, won’t they?
Answer: Possibly. This is one of the dumber ALP policies (I think it has been around for more than 4 years). I don’t expect it will ever see the light of day because:
- Administratively, it could be a nightmare. Does it include only realised earnings, or realised and unrealised earnings? Is it net of deductions and tax offsets? What happens if you have multiple super accounts – which account is taxed?
- The $1.6m cap on how much can be transferred into the pension phase effectively achieves much the same outcome. It depends on your assumption about investment returns.
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