How to Invest Long Term in ETFs

amorphous2111 on 24/03/2025 - 10:53

Hellow fellow OZBs,

I hope to set up an ETF investment with Vanguard for a long-term and in an effortless way, likely in the 10+ years. I have a few questions I appreciate your help.

  1. Does Vanguard keep track of all the buying and selling for a long time? I am looking for putting regular money in for the next 20 years, then regularly selling down the portfolio to fund retirement, in small parcels over years to minimise the CGT.

  2. If we choose the dividend reinvestment scheme, Vanguard would still send the dividend payment information to the ATO, and we pay tax on the year using the franking credits or from our income?

  3. Any other concerns?

Thank you,

Financial Exchange Traded Fund

Comments

  • Gdsamp on 24/03/2025 - 10:55
    +2

    Superannuation….

    • McMaferMur on 24/03/2025 - 11:22

      i think the above is correct. super first then vanguard etc
      or maybe both?

      • amorphous2111 on 24/03/2025 - 11:36
        +1

        Thank you. Yes I agree super would be the first option, but we have reached the contribution threshold.

        • Duckie2hh on 24/03/2025 - 11:43
          +9

          humblebrag :p

        • dtc on 24/03/2025 - 12:00

          both concessional and non concessional? So $150k per year per person?

          of course, you may still want to invest for the period before you can access super

          • amorphous2111 on 24/03/2025 - 14:20
            +1

            @dtc: No, only concessional I should have been more clear. Super doesn't always invest alot in ETFs, and the fee is less competitive. We want some flexibility as well so don't want to put all the money into super via non-concessional contribution.

            • sumyungguy on 24/03/2025 - 16:50
              -4

              @amorphous2111: So you have plenty of cash to spare, are focusing on saving for your retirement yet want flexibility, dislike that super funds don't invest in ETFs, don't trust Vanguard to competently manage your account, have no idea about taxation inside super so would be happy to pay your fair share of CGT. Just go and see a financial planner and stop spitballing on OzB.

            • dtc on 24/03/2025 - 19:37

              @amorphous2111: You can easily find super funds that allow investment in diversified index passive funds for fees that are lower than buying on the ASX.

              However obviously you lose the flexibility

              • amorphous2111 on 24/03/2025 - 20:44
                +1

                @dtc: I am with Unisuper and their fee is about 0.7% in average. VAS or VGS averaged 0.12% and we can sell some in case we need the money.

            • brad1-8tsi on 25/03/2025 - 20:35

              @amorphous2111: You don't need ETFs within Suiper. Just setup 10% Australian Shares & 90% International. Job done.

              If you do buy ETFs then keep your own records as online records with share registries can be lost if the registry changes (been there, done that) and don't do DRP until you have a significant portfolio.

              Non-Concessional contributions to Superannuation are still beneficial from a retirement taxation perspective once you are over 60 (on current rules). It's an immediate double-dip 30% uplift plus the benefits regarding inheritance taxation if you have no spouse on death and your children are no longer "dependents".

              Q2: yes, they send the info to MyGov. Serious;y, DRP sux big ones.

  • scalebearer on 24/03/2025 - 11:42
    +1

    If we choose the dividend reinvestment scheme, Vanguard would still send the dividend payment information to the ATO, and we pay tax on the year using the franking credits or from our income?

    You can reduce this by making sure to choose the most aggressive option that is marketed towards building wealth rather than ones for shorter term consistent income.
    E.g. ETFs with more bonds will pay more dividends than ETFs with more shares in smaller companies that will be reinvesting most of the dividends into more growth before they start paying out more as large companies (assuming they succeed at whatever they do).

    Some of them also pay dividends less often as well.

    https://www.betashares.com.au/fund/diversified-all-growth-ge…

    Here's an example where dividends are paid twice a year instead of 4 times.

  • soan papdi on 24/03/2025 - 11:47

    If we choose the dividend reinvestment scheme, Vanguard would still send the dividend payment information to the ATO, and we pay tax on the year using the franking credits or from our income?

    RTFM https://www.vanguard.com.au/personal/support/tax-hub

  • netjock on 24/03/2025 - 11:57
    -1

    Does Vanguard keep track of all the buying and selling for a long time? I am looking for putting regular money in for the next 20 years, then regularly selling down the portfolio to fund retirement, in small parcels over years to minimise the CGT

    Keep your buy records. Because most businesses only need to keep documents for 7 years. Some might do it for longer. I don't get how you minimise CGT. You get 50% discount after 12 months.

    If we choose the dividend reinvestment scheme, Vanguard would still send the dividend payment information to the ATO, and we pay tax on the year using the franking credits or from our income?

    Auto populate might do it for you but you'll still need to check it is there. If not take your annual tax report from Vanguard and plug the numbers in yourself

    • vorsprung on 24/03/2025 - 13:32
      +2

      I don't get how you minimise CGT.

      Since CGT is paid at your marginal tax rate, wouldn't spreading the CG over a number of years reduce overall tax paid?

      Say you had $91,000 in capital gains to realise, and you have no other income.

      If you sold chunks each year to split it over 5 years, realising $18,200 in capital gains each year, you'd pay $0 tax.
      If you instead sold the lot in one year and realised $91,000 in capital gains, you'd pay $18,088 in tax less the discount if you held for more than 12 months e.g. 50%.

      I could be wrong. Not financial advice etc.

      • netjock on 24/03/2025 - 19:22

        CGT rules are clear.

        If you want to minimise personal income tax that is a whole different matter and many things come into play not just the CGT discount of 50%

        Last week I was playing with a case where you would end up paying $54k in tax on a $2m capital gain.

        • vorsprung on 24/03/2025 - 20:22

          I think it’s just semantics.

          Perhaps OP could have said that they’re looking to reduce their income tax liability by selling down their ETFs (and realising smaller capital gains) over many years.

          I believe I understood the outcome OP was looking for.

    • amorphous2111 on 24/03/2025 - 13:53

      Thanks, Vanguard asks for the TFN so I think they will autofill with the ATO.

      I think spreading the CGT over the years would reduce the CGT bill a bit. Share is flexible in the sense that you don't have to sell everything at once and got a big CGT bill on top of your income and thus pay high rate tax.

  • dtc on 24/03/2025 - 12:01
    +2

    are you investing direct with Vanguard or through ETFs on the ASX?

    • amorphous2111 on 24/03/2025 - 14:01
      +1

      I am thinking of doing it directly with Vanguard. I have selfwealth account but they charge fee for buying and selling… I want to do the ETF regularly so Vanguard direct could be cheaper.

      • skid on 24/03/2025 - 14:14
        +1

        we pay tax on the year using the franking credits or from our income

        You'll pay tax using your income as usual.

  • SBOB on 24/03/2025 - 18:17

    Does Vanguard keep track of all the buying and selling for a long time? I am looking for putting regular money in for the next 20 years, then regularly selling down the portfolio to fund retirement, in small parcels over years to minimise the CGT.

    Vanguard will not calculate your yearly AMIT cost base adjustments.
    You should be keeping records, and then each year based on the supplied funds reporting, calculate (or at least document/record) the AMIT adjustment so you can apply it to your cost base come selling time.

  • nahkk on 25/03/2025 - 07:35

    DSSP with AFI

  • Some Guy on 25/03/2025 - 13:52
    +1

    Set up a SMSF and purchase ETF through it. Selling will be tax free.

    • McMaferMur on 25/03/2025 - 17:05

      and how much the cost to setup smsf ? what is most people recommend (super balance) to start considering smsf ?
      can we combine mr and mrs and sis in law super into one smsf ?

    • SBOB on 25/03/2025 - 17:51

      Don't need an SMSF complexity for that though.
      Australian Super members direct, Hostplus choice plus etc provide that option
      Lower complexity option than smsf

  • racer1234 on 25/03/2025 - 19:16

    Have a look at vanguard personal imvestor as another option to there etf offerings. It might be closer to what you want and no etf buy sell fees.

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