JonathanGiles
12-11-2014, 01:05 PM
Hi all,
I've been trying to understand what the best option for me and my family is now that we are getting to a point where we are mortgage free and able to start investing to grow our savings.
In my mind, the best options seem to be either investing in US ETFs (e.g. the Vanguard VTI index) via my E*Trade account, or investing locally in a smartshares ETF. The primary difference is the fees (0.05% vs 0.75%) and the added complication of FIF for the US ETFs.
I'm by no means an accountant (or even overly knowledgeable about taxes), but I've been trying to mock up a spreadsheet that compares both approaches (which I am happy to share if people are interested or want to give feedback - it's pretty primitive though).
The one thing I do not fully understand (and it is embarrassing to admit) is that I don't know how to take my calculated FIF income value (with FDR or CV) and calculate the amount of tax I would need to pay to the taxman. Is it simply taking 33% (given my income pushes me into the highest income bracket) of the FIF income, or am I misunderstanding?
In my mocked up data I can see I would have a FIF income of $6,250 (FDR) or $10,000 (CV) with a starting investment of $125,000 and an 8% gain over the year. Given this, am I correct to assume tax payable is approximately $2,000 or $3,300?
In my spreadsheet, it seems to me that the 0.75% fee of smartshares is less than the tax I would owe under FIF. What I don't account for is any taxes on my smartshares - I'm simply taking the 0.75% fee off annually. Should I take 33% off of the earnings each year to more fairly calculate smartshares (my intention would be to have dividends reinvested into smartshares, so there would be no cash gains)?
Would it be fair to say peoples uneasiness with FIF is that you're paying out the tax when the gains are only on paper, versus smartshares where you're paying a higher fee but then only taxes on realised gains?
Overall, any insights and thoughts would be much appreciated!
Thanks!
I've been trying to understand what the best option for me and my family is now that we are getting to a point where we are mortgage free and able to start investing to grow our savings.
In my mind, the best options seem to be either investing in US ETFs (e.g. the Vanguard VTI index) via my E*Trade account, or investing locally in a smartshares ETF. The primary difference is the fees (0.05% vs 0.75%) and the added complication of FIF for the US ETFs.
I'm by no means an accountant (or even overly knowledgeable about taxes), but I've been trying to mock up a spreadsheet that compares both approaches (which I am happy to share if people are interested or want to give feedback - it's pretty primitive though).
The one thing I do not fully understand (and it is embarrassing to admit) is that I don't know how to take my calculated FIF income value (with FDR or CV) and calculate the amount of tax I would need to pay to the taxman. Is it simply taking 33% (given my income pushes me into the highest income bracket) of the FIF income, or am I misunderstanding?
In my mocked up data I can see I would have a FIF income of $6,250 (FDR) or $10,000 (CV) with a starting investment of $125,000 and an 8% gain over the year. Given this, am I correct to assume tax payable is approximately $2,000 or $3,300?
In my spreadsheet, it seems to me that the 0.75% fee of smartshares is less than the tax I would owe under FIF. What I don't account for is any taxes on my smartshares - I'm simply taking the 0.75% fee off annually. Should I take 33% off of the earnings each year to more fairly calculate smartshares (my intention would be to have dividends reinvested into smartshares, so there would be no cash gains)?
Would it be fair to say peoples uneasiness with FIF is that you're paying out the tax when the gains are only on paper, versus smartshares where you're paying a higher fee but then only taxes on realised gains?
Overall, any insights and thoughts would be much appreciated!
Thanks!