Investing in an ETF for someone not tied to any particular country

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Olmec
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Joined: Thu Dec 26, 2019 6:38 pm

Investing in an ETF for someone not tied to any particular country

Post by Olmec » Thu Dec 26, 2019 6:45 pm

I'm an Australian about to move to Canada for an unknown number of years. I'm 28 and I have about 60k in savings, but my career has only really just taken off (I've been working for a Canadian company remotely for about 5 months, and moving to work in-house). My job (video games) is likely to see me moving to a number of different countries in my lifetime. Because I'll likely be moving a lot, property doesn't seem like it'll be a good investment any time soon, and so I'm looking at ETFs.

My plan is to take 5-8k with me to Canada, invest about 20k in an ETF, and leave the rest in a High-Interest Account in Australia for now.

If I'm not living in Australia then there doesn't seem to be much incentive to invest in an Australian ETF, so I'm currently looking at investing most of my money through vanguard into the s&p500 (and maybe diversifying a bit internationally).

I've also heard that ETFs can be very complicated taxation-wise, which is a concern for me because I doubt I'll be able to get any assistance if I'm going to be taxed as an Australian citizen for this financial year. Because of this I'm considering waiting until the start of the next financial year in Canada before I start investing.

Does this sound like a sound plan? Are there more effective places I could put my money? Would be better to hold off until next financial year when I might be filling a Canadian tax return?

Apologies if any of this is very basic or misinformed

Valuethinker
Posts: 39273
Joined: Fri May 11, 2007 11:07 am

Re: Investing in an ETF for someone not tied to any particular country

Post by Valuethinker » Fri Dec 27, 2019 9:36 am

Olmec wrote:
Thu Dec 26, 2019 6:45 pm
I'm an Australian about to move to Canada for an unknown number of years. I'm 28 and I have about 60k in savings, but my career has only really just taken off (I've been working for a Canadian company remotely for about 5 months, and moving to work in-house). My job (video games) is likely to see me moving to a number of different countries in my lifetime. Because I'll likely be moving a lot, property doesn't seem like it'll be a good investment any time soon, and so I'm looking at ETFs.

My plan is to take 5-8k with me to Canada, invest about 20k in an ETF, and leave the rest in a High-Interest Account in Australia for now.

If I'm not living in Australia then there doesn't seem to be much incentive to invest in an Australian ETF, so I'm currently looking at investing most of my money through vanguard into the s&p500 (and maybe diversifying a bit internationally).

I've also heard that ETFs can be very complicated taxation-wise, which is a concern for me because I doubt I'll be able to get any assistance if I'm going to be taxed as an Australian citizen for this financial year. Because of this I'm considering waiting until the start of the next financial year in Canada before I start investing.

Does this sound like a sound plan? Are there more effective places I could put my money? Would be better to hold off until next financial year when I might be filling a Canadian tax return?

Apologies if any of this is very basic or misinformed
Filing for tax on investments in 2 countries is a nightmare so I would try to avoid.

Do say no Canadian investments until you are Resident in Canada for tax purposes and not resident in Australia.

Then you have to figure out how CRA ,(tax authority), treats your Australian investments.

It's often the case that Super or RRSPs as we call them ie pensions are recognised by tax treaty and therefore tick along without problems.

Other investments if you have any capital gains then you might be well advised to sell them before you are resident in Canada for tax purposes, to establish a new higher cost basis.

Once in Canada you should have an RRSP and hopefully the employer will match contributions. Canadian mutual funds tend to have far higher expense ratios than American ones so if you can buy ETFs this is a good thing.

RRSP is the main retirement vehicle. If you leave Canada and fin a subsequent tax authority does not recognize them (eg California) then you can cash them in and pay a 25% (?) flat tax on withdrawals.

Make sure you put enough in to get any employer maximum contribution. If there is one. More than that even though you are not at maximum annual limit I think there is a concern if you ever move country again. I would use my TFSA limit first *after* employer match.

Outside RRSP there is TFSA ? On acronym? Which allows post tax savings to earn returns tax free. You should use your annual limit there but realise if you leave the country you probably just close them out.

There is a Csnadian financial web forum and it is linked to from these boards and you should ask the same questions there. They may be aware of your unique situation. Also I have not lived in Canada for 25 years and things change and I may have missed something very important.

Btw you will be issued a Canadian Social Insurance number for Canada Pension Plan or Quebec pension Plan and you want to keep track of that and make sure they are aware of your address for the next 30+ years. That state pension is inflation indexed and the few thousand dollars of eligibility you will earn now is a comforting sum when you get to age ?67? I think. And I believe your future widow is also eligible for part of it?

Valuethinker
Posts: 39273
Joined: Fri May 11, 2007 11:07 am

Re: Investing in an ETF for someone not tied to any particular country

Post by Valuethinker » Fri Dec 27, 2019 9:41 am

I missed the part about moving countries.

The problem is the tax domicile of the ETF matters.

So US listed ETFs are fine for Csnadian or American taxes.

In the UK only some American ETFs are ok but in any case EU brokers can no longer sell them to you.

Holding say a European domiciled etf for US taxpayers (which includes all US citizens globally( is a disaster due to something called PFIC rules from the American IRS.

You may wind up selling your investments and starting afresh each time you change countries.

Topic Author
Olmec
Posts: 2
Joined: Thu Dec 26, 2019 6:38 pm

Re: Investing in an ETF for someone not tied to any particular country

Post by Olmec » Sun Jan 12, 2020 7:34 pm

Apologies for the late reply, but thanks very much, that's all incredibly helpful.

I'm not sure if it would completely defeat the point of investing if I had to sell all of my ETFs every time I moved to a new country, I'll have to look into it.

It seems like my employer does not match contributions to a RRSP, which makes putting money there much less appealing. Putting money into a TFSA is a start, but I think I'm going to need something better to do with my money in the long term.

I'm going to ask work some questions, and then probably repost this in the Canadian subforum when I have more information.

Thanks again!

Valuethinker
Posts: 39273
Joined: Fri May 11, 2007 11:07 am

Re: Investing in an ETF for someone not tied to any particular country

Post by Valuethinker » Mon Jan 13, 2020 3:04 am

Olmec wrote:
Sun Jan 12, 2020 7:34 pm
Apologies for the late reply, but thanks very much, that's all incredibly helpful.

I'm not sure if it would completely defeat the point of investing if I had to sell all of my ETFs every time I moved to a new country, I'll have to look into it.

It seems like my employer does not match contributions to a RRSP, which makes putting money there much less appealing. Putting money into a TFSA is a start, but I think I'm going to need something better to do with my money in the long term.

I'm going to ask work some questions, and then probably repost this in the Canadian subforum when I have more information.

Thanks again!
Conceptually if you have to sell investments and reinvest it is the same as holding the investments.

Except vis a vis capital gains realisation.

So it is not like starting from scratch. You can still own the same assets.

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asset_chaos
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Re: Investing in an ETF for someone not tied to any particular country

Post by asset_chaos » Tue Jan 14, 2020 5:02 pm

Here we've got an Australian moving to Canada. In another thread we've got a Canadian moving to Australia. Both are asking the same question about investing via the investment choices available in another country when you don't know the duration of your stay. What they really need is to invest on behalf of each other where they're going; kind of like the original purpose of interest rate swaps. There's gotta be a fintech idea in there somewhere.-)
Regards, | | Guy

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