Tax on a global shares portfolio in NZ compared to Australia

[firsthandsemiuniversalist]

Does anyone have any analysis on how FIRE'ing or investing in global shares compares in NZ and Australia? Here is some simple modelling in the below scenario, but wondering if anyone has a excel spreadsheet or other analysis?

- Assuming average long-term stock return rates, 7% real market gain, of which 2% is from dividend yield and 5% from capital gain, over twenty five years, and using tax rates representative of investors with middle-high incomes:

Modelling the taxation of NZ shares vs other countries in Python:

capital_gain, dividend, years = 0.05, 0.02, 25

def f(capital_gains_tax_rate, dividend_tax_rate):
  terminal_value = pow(1 + capital_gain
                       + (1 - dividend_tax_rate) * dividend,
                       years)
  return (1 - capital_gains_tax_rate) * terminal_value

print("AE", f(0, 0))         # No tax
print("NZ", f(0, 0.7))       # 0% CGT, effective 70% dividend tax (Assuming in PIE fund, 1.4% flat annual asset tax computed over 2% dividends)
print("Aus", f(0.165, 0.30))  # 16.5% CGT, 30% dividend tax (on a 32.50% marginal tax rate)

The results are pretty similar for NZ and Aus after 25 years:

AE 5.427432640122897
NZ 3.904792450119232
Aus 3.9375599083499244

As the time period increases NZ becomes more and more inefficient (pitfalls of a TTE tax system) but this is also not factoring in a potential lower PIR in retirement (not sure how much impact that would have).

Also not 100% sure the Aus tax is correct, as I assumed 50% CGT discount on the 32.50% marginal tax rate, with 30% dividends tax).

Would be great to see if any other people have their own analysis of this.

(This was inspired/stolen from a Bogleheads forum comment on this topic)

 

[newhistoricalprotestant]

@firsthandsemiuniversalist I thought we have FIF? So anything outside AU/NZ will lose 5% every year (need to liquidate 5% to pay tax), then any new investment will just bring up the cost of FIF.

 

[thestarside]

@newhistoricalprotestant Hold on.
Isn't it a tax on the 5%, rather than being 5% itself?

I.e. you are taxed 0.28 x 0.05 (=1.4%) of the portfolio value?

 

[newhistoricalprotestant]

@thestarside Yes sorry my mistake. Should be 5% taxable. So assuming the worst, it is 1.95% tax.

 

[tcdchameleon]

@thestarside Yes the return is assumed to be a max of 5%

 

[eppieterse225]

@thestarside Correct. 5% is the derived income. That is then taxed at your PIR.

 

[johnbiggs]

@firsthandsemiuniversalist The effects of inflation being different in each country means that even with the same stocks and same tax rate you could have different taxes