If you’re still a frequent visitor of this site, you might have noticed that last year was a very quiet year for me financially. I probably executed a total of 5 trades on my account; most of them buys and wrote two posts for this site. Most of my efforts went into not failing final year of medicine, even so I failed my psychiatry short cases and had to repeat it. Thankfully I passed it the second time and I’m a registered doctor working in Canberra now!
With a new career come new responsibilities, obviously. One of the big ones is tax. My situation tax situation is quite interesting this year. Australia’s financial year ends in the middle of the year, so 30th June. I started working in January that means my taxable income for this financial year is only half of my year’s salary (which is not a lot). On top of that, being a doctor working in a public hospital, we get other benefits like fringe benefit tax and other salary packaging goodies. If I put all of them together and cleverly and legally deduct tax deductable items I’ll be paying very very very little tax for this next 6 months, which is nice but is also a very rare opportunity, unless I stop working for 6 months in the future. Starting next financial year I’ll suddenly be taxed a lot because I would have been working the full financial year.
Taking all of that into consideration, I have decided to liquidate my (very small) share portfolio. This is how the trades look like.
As a result of making this decision, capital gain from the shares are 18.72% which is not bad considering the ASX S&P 200 returned about 7.5% in the last 3 years. I certainly got lucky with Flight Centre. I’m not sure how much I gained from dividens because I lost track :P so we’ll exclude that for now. Only half of the capital gains will be taxed because I’ve held them for more than a year and from the taxable half, my tax rate will be around the 15% mark this financial year. If I sold it after 30th June, my tax will be more than 30%, saving 15% there.
Besides the tax savings, this decision has given me the opportunity to “reset” my investment portfolio. Now because my portfolio is small and if I want to save for a home loan deposit, I cannot afford to lose my capital. I’ll focus on saving a portion of my salary, capital preservation and low risk investments like Index Traded Funds, term deposits and high interest online banking accounts (Combank’s goal saver account pays 4.6% if you increase your balance by 200 every month at the moment). Maybe allocating a small small amount of my capital to more risky small caps – one that really interests me at the moment is Greencross LTD.
Good or bad, the decision was made and executed. I thought it was an allright decision and hopefully wouldn’t regret it in the future. What do you think? Had I done something foolish? Would you have made the same decision if you were in my situation? Do leave a comment or send me an email, I’m always happy to hear different opinions.