Sunday, February 19, 2017

How divorce provides disincentives for investment

In Australia, there's a very real imbalance with regards to how finances are dealt with when it comes to divorce and, specifically, child support.

Put simply, the rules are set to cover 95% of the applicable population, with the other 5% expected just to suck it up.

Consider Case A - Unfair to men:

A couple get divorced and they have one child together.  The husband, let's call him Harry, has to pay $300 a week in child support, which is based on the fact that his ex-wife, who we'll call Debbie, earns a decent wage.

Harry's ex-wife Debbie then re-marries and has another child to her new husband and decides to cut back on work or quit altogether.

Child Support Australia then re-calculates Harry's child support payments and INCREASES them to account for the fact that Debbie is no longer earning.

The outcome: Harry must pay MORE money to support his child because of the lifestyle decision his ex-wife made in a new relationship.  What's worse for Harry is that there currently exist no safeguards in place to ensure that the money that he's paying to his ex-wife for child support is even spent on his own child.


Now consider Case B - Unfair to women:

The same couple get divorced, only this time Harry remarries and has a child with his new wife.

Since Child Support Australia calculates amount payable as a portion of your income, the amount Harry is required to pay in child support to his ex-wife is REDUCED because he's now got two children and the total amount he can reasonably be expected to pay is now divided by two.

The outcome: the ex-wife, who may have been relying on that weekly payment to put food on the table and the lights on, is now going to come up short.


Now consider Case C - Disincentive to invest:

Same couple gets divorced, man decides that he's going to buy an investment property, which is negatively geared to the tune of $10k a year.  Since Child Support Australia doesn't allow deductions for negative gearing, the net loss of roughly $200 per week must come out of what money Harry has left after paying child support.

Fast forward 10 years, Harry is still paying child support, only the property is now positively geared and making $200 per week.  Since this income is now considered in calculating child support payments, his payments to his ex-wife go up proportionally, despite him taking the hit for the first 10 years.

Fast forward another 2 years, Harry decides to sell the house and walks away with $200k in capital gains, which is first taxed by the ATO for capital gains tax, then taken apart by Child Support Australia as being profit.

The outcome: any man paying child support is going to pay for an investment property out of what he has left after paying taxes and child support, but once that investment turns a profit in either selling for Capital Gains or in increase in rent, he has his child support adjusted.

The alternative would be to allow deductions of child support due to negative gearing, however this would negatively affect women as some men would load themselves up with multiple properties in the interests of avoiding paying child support.


Conclusion:

As stated above, the laws are in place to cover 95% of the population, however as I've shown above in Case C, the current system is a massive disincentive for people paying child support (usually men) to invest in property since they get no concessions in payments early in the investment in the loss-making portion, and get stung at either the profit making, be it positive cash flow or capital gains.

Give that child support can last 18 - 21 years, that's a big chunk of what would otherwise be prime capital building years.

I guess the only suggestions I can make are:

  1. If planning to purchase property, opt for long-term holdings rather than flipping houses profit method.  Making $100k in two years may look good on paper as a side project, but won't look as good when your ex-wife gets a hefty chunk of money from the investment without lifting a finger.
  2. If you already hold properties and would like to sell, hold off on selling until child support payments have stopped.  Simply waiting a couple of years could save you thousands.
  3. Consider investing in lower cost, lower time investments like shares, bonds and ETFs.  You're going to have to pay money to support your child one way or another, but property investment carries a lot more unpaid time cost and capital improvement cost that can only be deducted from your post-child support money.  Simply paying that money as a percentage of dividend yield is a far simpler in the short term.

Please don't take the above post to mean that I'm advocating to minimise support of your children.  I am only pointing out that the whole system is designed for the 95% and that the 5% ends up in circumstances that cost tens of thousands of dollars and are a massive disincentive to bother in the first place.

One of the common complaints I read from ex-husbands is that their respective ex-wives have no accountability for the money: "I pay $500 a week and my wife doesn't work, wears Prada, smokes and drinks".  Perhaps things would be better if there was a mechanism whereby the wives were required to account for the money a bit, but knowing how the media loves to just shoot down any suggestion that women be held accountable for anything is "sexist" and could be open to abuse by former spouses (men) whilst simultaneously defending the decision to allow the current laws brought in under the Gillard government making false accusations against men in divorce cases legal, the chances of any changes in this space are minimal.

It really is one law for men and one law for women.

Tuesday, February 14, 2017

Strange 'extortion' attempt

So here's the story of a poor woman who sent some photos of herself to a guy she was chatting with on the internet whose girlfriend found out and tried to get her fired.

Firstly, I note how the whole article mentions extortion, yet by all accounts the jilted girlfriend only tried to threaten her off her man and sent photos to her boss to try to get the woman fired.  I saw no mention of "give me $20k or else".

Secondly, it's not until the sixth paragraph that we find out the online abuse (or 'extortion') came from the guy's fiancee, NOT the guy himself.  In the article's defense, it was written in chronological order, so taking six paragraphs to get to that little detail is somewhat forgivable.

Thirdly, the woman worked in retail, so getting fired from a job in retail because some random stranger wasn't likely to happen, but even if it did it would hardly 'ruin her life'.

True to form, there's only a handful of paragraphs where the gender of the abusive person is mentioned, whereas had the offender been male every other paragraph would have started with "The man then..."

Remember, the media lies by omission and will play down or leave out details they don't want featured.  Had it been a man doing those nasty things the headline would have been "Man sends images of woman to her boss".

Media reports on poor Middle Easterners arrested, leaves police's side last

So the media has reported about a couple of Middle Eastern men who have been arrested and charged following a scuffle with police.

As usual, the media tells the whole side of the 'poor misunderstood' Middle Eastern guy's story first, even interviewing him, before then showing the other side of the story.

Most police don't just start dragging people to the ground for no reason.

That area is known for its high Lebanese population and, interestingly enough, a person I was speaking to the other day who is also from Lebanon was telling me, when I asked had they gotten to know the Lebanese community, that the people they saw from Lebanon who now live in Melbourne were not typical of Lebanese and were, for lack of proper translation, the 'bogans' of Lebanon and not middle class or upper class.

I've met a few Lebanese people who were very nice, but the males in the area mentioned above tend to have a big chip on their shoulder, do whatever they want when they want and don't respect other people in their neighbourhood.

I'm aware that we get people like that from all backgrounds and it's the noisy ones who get the most attention, but this is more than that.  The Lebanese gentleman who lived next door to me was quiet, however he'd invite his extended family over on occasion (any night of the week!) and there'd be arguments, swearing and yelling until all hours of the morning.  It's possible that the quiet ones were trying to calm down the rest of their friends and family by association, but all we saw and heard was large groups hanging out the front of their house until all hours of the morning and even throwing stuff (like eggs) at my house.

Coming back to the original article, it's not hard a hard concept to understand: don't abuse people who have the authority to arrest you for that abuse!

Wednesday, February 8, 2017

Potential Islamic terrorists charged, Yahoo and Nine quiet

So a couple of aspiring Bonnie and Clyde youngsters looking to go on a rampage against "the kaffir" have been charged and face possible life in prison.

Funny how this doesn't make the headlines of Yahoo or Nine.  I guess this doesn't fit with the "all Muslims are peaceful" narrative.

How to potentially reduce your tax while paying your family

Want to know how to potentially reduce your tax whilst giving money to your family and get more money than you started with?  Just follow what the CEO of Australia Post did.

Notice that he negotiated a $2 million taxable payment into a $2.8 million, a 40% increase, 'donation' to the Islamic Museum of Australia that his brother runs, which presumably pays his brother a salary, though it's not really a donation if it's technically a payment.

I think I'll look at setting up an organisation that will be run by my wife and will negotiate $50k of my salary into a $70k donation to the organisation, which will ultimately pay her a salary.

It must be legal, because Ahmed Fahour was allowed to do it!

Oh wait, the donation came from a Muslim and was paid to a Islamic organisation, so I won't be holding my breath that it'll be audited or investigated in any way, since our media and law enforcement doesn't want to appear to be 'racist'.

On second thoughts, I'm not prepared to convert to Islam just to save a bit on tax.

Tuesday, February 7, 2017

Musings on the public vs private school debate

This is a copy and paste of a comment I left on an article about public vs private schools at the Monthly:

Living in a large country town that is crowded out by private (mostly Catholic) schools that apparently poach top performing students from public schools, leaving the public schools with 'the leftovers', I'm caught between a rock and a hard place.

I myself went to what was (and still is) a very good public school (I think we got lucky with where we were living at the right time) whereas both of my parents went to private schools and opted for a lifestyle decision not to send me to a private school, mostly based on the good reputation of the local public school.
I'm in the opposite situation as where I'm living with my family is in an area that has pretty terrible public schools (primary and secondary) for the simple reason that the private schools poach the good students and then parents (like me) decide not to send our beloved children to what is a 'failing school', statistically speaking, in favour of one of the more expensive private schools, which in my area consist of moderately priced Catholic schools (a bit hard to get in if your children aren't baptised) or the exorbitantly over-priced non-Catholic schools.
It almost becomes a self fulfilling prophecy because nothing succeeds like success, so parents climb over and sometimes go into debt to send their children to one of the nearby private schools instead of risking their children's education.
My brother and his family are living in the catchment area of a much better performing public school, but oddly enough, should they decide to send their children to the nearby private school, the fees are very reasonable at about $2k per student per year, as opposed to the 'moderately' priced $5k per student per year I'm looking at.
So, I've got the choices of:
1. Move into the catchment area of a good school - $$$
2. Get my children Baptized so they can attend - deceptive, but I have seen MANY couples do this
3. Put them into the public system and hope they get poached - not helping the public school
4. Put them into the public system and put full support behind it, even going so far as to resist any possible effort for my children to be poached.
It's a hard decision to make and I'll never really know if I've done the right thing (unless all of my children become CEO's or Prime Minister) as I'll always wonder if whatever decision I made could have held them back.
Sorry for the long post, but I'll finish with this one piece of information that the original poster may not have been aware: one of the reasons behind my parents, who were both privately schooled, not sending me to private school was that a study had been completed by Melbourne University on the outcomes of students who went public vs private. The outcome was that if a family could easily afford the money, then the slightly improved outcomes were worth the money. If, however, the parents had to scrimp, work two jobs or struggle to put them through, then it wasn't.
Whether this was because of any pressure or resentment from the parents (ie "I'm paying a fortune for you to attend that school, you should be top of the class") or whether it is because the children from wealthy families bully the 'poorer' students (apparently the children work out very quickly whose family isn't wealthy), the conclusion from the study was that the overall outcomes of children has more to do with the home life of the children than what school they went to.
If parents are always out working (to pay for school fees) then of course the children are at a greater risk of falling into bad crowds.
As a guy once pointed out to me when talking about discussing sending his two girls to private school: "for the amount of money my ex-wife is asking me to pay for our daughters' education, I'd rather buy each of them a rental property that I have to put the same amount towards every year and be able to give them each a rental property when they graduate".
I'm not sure which way that guy went, but often times we like to console ourselves that we 'did our best' when raising our children, and all too often the yard stick we measure how much we put into raising our children is measured by how much we spent on their education instead of by how much time we spent with them.
I know many doctors and lawyers who went to public schools and I know quite a few people who went to private schools only to drop out of university or who never went to university.

END OF COMMENT:
Further to the above comment, when I look across the people my age who I know went to private schools, not that many of them completed university (some had trouble going from a system that held their hand right through to a self-driven model), so I imagine a few people would be a little annoyed if you'd spent $50k on your child's education for them to end up as a waiter/waitress.

Conversely, I know quite a few people who went public school, who work as real estate agents, supermarkets and as mechanics and who are very happy with their lives, not that the private school people aren't happy, and perhaps they could have done more, but their parents are at least not disappointed in the lost opportunity cost.

I think giving any children I have a (partially paid off) house each in a market that will arguably be very much harder to buy into in 20 years time will provide a much bigger advantage than a $50k education that they may choose to take or leave.  The house will probably be worth more than the education would have cost and it would be theirs to do as they wish, removing the need for them to spend the first 5 to 10 years of their working lives scraping together a deposit on a small starter home.

Media and mother of slain girl slams Trump

So the media is at it again bagging out Trump, this time doing exactly what they're accusing Trump of doing: using an emotional event to make a political point.

The final sentence is an attack on the writer of the list, stating that it was obviously hastily put together as it had even misspelled the word "attacker", yet the same media that attacks Trump's cabinet's spelling can't even edit a simple sentence:


I think what they MEANT was "Allahu akbar" - an Arabic phrase meaning "God is great" - during the attack.  If the media can pick on the US government for spelling errors, which isn't one of their core points - then I can pick the media up on their bad editing, which IS one of their core points.

So, a Muslim man can do whatever he wants whilst yelling the war cry of a Jihad soldier and it's not considered a terrorist attack.  When is it a terrorist attack?  How many people have to die in an attack by a man yelling "Allahu akbar" before it's deemed a terrorist attack?  More than two?  Because one death is too many to me.

As usual, the media is only too happy to give coverage to stories like this, but far less likely to give stories like the Angel mums, mothers who have lost their children to the criminal activities of illegal immigrants.  Or to the pro-life march that took place in Washington.

Of course, that's not the narrative the media wants to spread.

Which is why public trust in the media is at the lowest point in history and they're showing no sign of doing anything different to try to turn that around.

We are very rapidly heading towards a post-media world, where no one trusts anything that comes out of the media unless it confirms what they know to be fact.

Well done media, you've only go yourself to be blamed.