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Dividends, Retirement Accounts and Spending

April 2nd, 2007 at 11:01 am

A couple of dividend statements arrived today - $403.23 from Foster's Group and $324.08 from Australian Pipeline Trust. The Foster's dividend is fully franked (ie. carries a tax credit for the 30% company tax that has been paid), so on my tax return I'll declare both the dividend and the franking credit as income, but get a tax credit for the amount of the franking credit ($172.81). This basically means that I'll only have to pay additional personal income tax on this dividend if my marginal tax rate ends up higher than 30% (ie. in the 40% or 45% range). As I usually reduce my taxable income considerably via the tax deductible interest paid on my margin loans, I'll probably not have to pay any additional tax on this dividend. If my marginal tax rate was lower than 30% I'd get a tax refund for the excess franking credit.

The Pipeline Trust dividend was actually a combination of unfranked dividend of $185.76, a capital return of $69.66 which is not taxable (but which reduces the cost basis of the shares when they are eventually sold and capital gain is calculated), and a trust distribution of $69.66 which gets reported under a different tax item from dividends and has different tax treatment - I don't know exactly what, the details will be in the end of financial year taxation statement from the trust. Overall I prefer the simplicity of a straight dividend to trust distributions, even if they have favourable tax treatment!

I filled in an online application for a self-managed superannuation fund (SMSF) account with esuperfund.com. As its nearing the end of the 2007 tax year (30 June 2007), and a SMSF has to report each year to the tax office, eSuperFund has an offer of $0 annual fee (as well as the usual $0 establishment fee) for the 2007 fund paperwork. This is good, as it lets me get the fund established this financial year and have everything in place to transfer most of my existing superannuation account balance into the SMSF asap. I'll probably leave a small balance in my existing super fund with BT Employer Superannuation, just to keep my existing life and TPD insurance in place. I may even leave my employer 9% SGL contributions and salary sacrifice amounts going into the BT account as the 1% admin fee on these small amounts will not be material. I can always transfer additional amounts into the SMSF later on. My wife will probably transfer her entire balance and arrange for future contributions to go into the SMSF as she has a smaller balance and won't be doing any salary sacrifice while working part-time for the next few years (until DS2 starts school).

Finally, I didn't do much spending today - $39.64 for some grocery shopping, and $26.60 for petrol. I normally fill up the car on a Tuesday as that is generally the bottom of the weekly price cycle, but as there is often an early increase in petrol prices immediately before the Easter long weekend, I decided to fill up today instead.

Enough Wealth

2 Responses to “Dividends, Retirement Accounts and Spending”

  1. Buzzle Says:

    Mate, your SMSF sounds like a good idea - however what is your expected annual cost to maintain it ? eg cost of auditing , tax return .

  2. enoughwealth Says:

    I posted more details of the eSuperfund service in an earlier post. Basically their annual fee of $599 pa includes the cost of the required annual audit and tax return. To keep costs down you have to trade shares via an account setup with e*trade (so that they have electronic read-only access to your transaction data) and any mutual fund etc. purchases are lodged via them (they get the normal trailing commisions which help defray their costs, but they rebate the upfront entry fee). The only other fixed cost is the ATOs annual fee, which is going up next year to around $140 pa.

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