Aussie FIRE Maths

Financial Independence (FI). The phrase conjures images of overflowing bank accounts, early retirement on a tropical beach, and a life free from the shackles of the 9-to-5 grind. While accumulating wealth is undeniably a part of the equation, the true essence of FI transcends mere monetary gains. It's a profound shift in perspective, a journey towards reclaiming control, and ultimately, a quest for a more fulfilling life. Many embark on the FI path driven by a desire to escape the perceived drudgery of work. They yearn for the freedom to dictate their time, to pursue passions, and to live life on their own terms. However, focusing solely on the financial metrics risks overlooking the core values that make FI truly transformative. FI is About Autonomy : It's about having the ability to make choices aligned with your values, free from the constraints of financial necessity. It's the power to say "no" to a job you dislike or "yes" to a passion project that ...

A pivotal point in my financial understanding was the moment I found TerryW . He freely shared over 100 tax tips, and the concept of structuring. I now view debt differently. I see it as a as a single bubble. Collectively I have to repay it all. Collectively I have a limit the banks will lend me. Collectively I have a personal ceiling I should not exceed. The security of the debt doesn't change this. The tax purpose of the debt doesn't change this.  It's also important to see that debt doesn't change the returns of any asset you buy with it. Buying shares with debt or cash doesn't change how much they grow or not. Example 1: Investment Property Imagine you have a $1M PPOR paid off, and want to buy a $500K IP.  Borrow $500K from PPOR, buy IP no debt against IP Borrow $500K against IP, secure against PPOR to avoid deposit. In both cases we have the same amount of debt. The difference is which property the debt is secured against. Tax wise if done correctly there is no...

TerryW has done an amazing job sharing many tax tips.  Terryw’s Tax Tips And there is one that stands out above all others as a general principal that is useful to follow where possible,  Tax Tip 9: Don’t use Cash in Offset account to Invest , or as I like to say Don't Invest Cash* *Until the PPOR is paid off. This rule is a tax minimisation strategy and should be used where possible. But not to the extent that you delay investing. The idea is very simple, have tax deductible debt where possible over non-tax deductible debt.\ Related Debt Recycling and the Offset Fallacy

  What scenarios are there that I am out of work for 5 years due to injury and I can get income protection but I cannot claim on TPD? There are scenarios where you might be unable to work for more than 5 years due to injury or illness and qualify for income protection insurance but  not  meet the criteria for a Total and Permanent Disability (TPD) claim. This is because income protection and TPD insurance have different definitions and requirements for payouts. Here are some examples: 1.  You Are Not Permanently Disabled Scenario : You suffer a severe injury (e.g., a back injury or complex fracture) that prevents you from working for more than 5 years, but there is a possibility of recovery or improvement in the future. Why TPD Won’t Pay : TPD requires that you are  unlikely ever  to return to work in any occupation you are suited for by education, training, or experience. If there’s a chance you could recover and work again, even after 5 years, you won’t q...

In this lineup let's see the difference in FHSSS and HISA. FHSSS $10K put into FHSS ends up as $8,500. Lets assume 4% deeming rate, so you can withdraw =$8,500 x 104% = $8,840. Now you withdraw with MTR 32%: = 8,840 x (100% - 32% + 30%) = $8,663.2 MTR 39%: = 8,840 x (100% - 39% + 30%) = $8,044.4 MTR 47%: = 8,840 x (100% - 47% + 30%) = $7,337.2 HISA $10K income into HISA. Lets assume 5.5% return. MTR 32%: = 10,000 x (100 - 32%) x (100% + 5.5% x (100% - 32%)) = $7,054 MTR 39%: = 10,000 x (100 - 39%) x (100% + 5.5% x (100% - 39%)) = $6,304 MTR 47%: = 10,000 x (100 - 47%) x (100% + 5.5% x (100% - 47%)) = $5,454 FHSS Relative Improvement Relative to HISA So how much better if FHSS after just 1 year? MTR 32%: = (8,663.2 - 7054) / 7054 = 22.8% MTR 39%: = (8,044.4 - 6304) / 6304 = 27.6% MTR 47%: = (7,337.2 - 5454) / 5454 = 34.5% ANZ FHSS Calculator This calculator compares over 4-7 years which is an improvement over my above calculation. I believe it also includes the impact of the withdr...

If you don't have an PPOR Offset, you might be tempted to use your IP Offset.  But as an IP offset is against an IP and not a PPOR, the interest saved is indirectly taxed. So the benefit is minimal. In addition to this, the IP offset often locks the 'saved' interest into the mortgage where it is unable to be extracted for a future PPOR purchase. And as the full 6% saved is locked in, the additional tax comes from your savings, and so this approach certainly speeds up paying off the IP at the expense of your savings and future PPOR. Lets assume you want to put $10k into either option. 5.5% HISA, 6.3% IP Mortgage. HISA - MTR 32% = $10,000 x (5.5% x (100% - 32%)) = $374 - MTR 39% = $10,000 x (5.5% x (100% - 39%)) = $335.5 - MTR 47% = $10,000 x (5.5% x (100% - 47%)) = $291.5 IP Offset - MTR 32% = $10,000 x (6.3% x (100% - 32%)) = $428.4 - MTR 39% = $10,000 x (6.3% x (100% - 39%)) = $384.3 - MTR 47% = $10,000 x (6.3% x (100% - 47%)) = $333.9 Cashflow Now the catch is the IP offs...