Friday, 27 November 2015

Employer Health Benefits

One nice aspect of working for an 'international' company that has its HQ in the US is that their standard 'benefits' package for staff includes medical coverage (which is essential in the US, but not so much here in Australia due to universal public health coverage via Medicare). Now that the 'integration' phase has been completed, we are moving to new employment contracts from 1 Jan, and our new opt-in 'Health Plan' becomes available from 1 Jan also.

The Health Plan is a quite generous scheme offering 'top' private hospital insurance as well as a suite of 'extras' cover (such as dental, optical, physio etc.) with most basic options available from 1 Jan and some of the others (such as physio) having a 12 month 'waiting period' unless you are transferring in from another existing health plan.

The company will be fully funding the standard cost of the plan (at lesast for those within the 'base tier' of taxable income -- under $90,000pa for singles or $180,000pa for families, and in cases where there is no 'Lifetime Health Cover loading'). Unfortunately, while we are likely to be well within the 'base tier' in terms of family income (as DW only works 3 days per week), we haven't had any health insurance since 2008, so we currently have a LHC loading of 10%. That will mean our 'out of pocket' premium is estimated to be around $26 per month, which is still excellent value  -- even just by going for routine annual checkups at the dentist we should get back more in benefits than the 'out of pocket' premium cost. Of course our employer will be footing most of the premium (I guess around $200+ per month), so if we had to pay full cost for private health insurance we would probably still continue to rely on Medicare and the public hospital system.

One side benefit of having private health cover under this company plan is that our LHC loading will stay at 10% while we have private hospital insurance, and after ten years the LHC loading will revert to 0%. That could be a major benefit in the long term if we decide to continue with private health insurance after we retire (when we are more likely to need 'elective' surgery such as knee or hip replacements, dentures or hearing aids...). Of course that assumes we stay employed for the next ten years -- one downside of the completion of the 'integration' process is that we have all got new employment contracts that include a clause whereby we can have our employment terminated for 'any reason' with only 4 weeks notice. I suspect if that happens I'd be lodging an 'unfair dismissal' claim though, and might end up with the equivalent of a redundancy payment. It would still not be very nice to find myself unemployed and over 55 though...

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Wednesday, 25 November 2015

Employer Superannuation benefits

The takeover of the company I work for has finally concluded the 'integration' phase -- some people have left, some people have been transferred overseas, and some people have transferred in from the US 'head office' to our office in Australia, either permanently, or for a short period to help us 'locals' transition to new systems, processes and policies that are the new standard. The final stage was to dump all our old job titles and get new ones selected from the standard set, and to switch our superannuation from the old Employer Fund to a new preferred Fund.

DW and I currently have our super in a SMSF, so we won't be 'rolling over' our current balance into the new Employer Fund, however I will nominate the new fund to receive our contributions from 1 Jan as the new fund has very low management fees (only 0.2% after a hefty rebate by our company) and has default amounts of Life/TPD insurance and Salary Continuance (Income Protection) insurance provided with the premiums rebated by the company.

Overall the new Employer Fund will provide around $150,000 worth of life/TPD insurance and 21 months of 75% salary continuance insurance (paid for up to two years after 90 days waiting period in cases of temporary disablement eg. a heart attack/stroke/accident etc.). Looking at some quotes from an online insurance broker, these two covers would otherwise cost me around $2,000 per annum in premiums, so it is definitely worthwhile to nominate to join this new Employer Fund for our ongoing superannuation contributions (SGL and salary sacrifice).

Ideally I'd like to have the 9.5% SGL contributions paid into this new fund, and keep my salary sacrifice contributions paid into our SMSF, but unfortunately we aren't allowed to have our employer superannuation contributions paid into two difference funds. However, I can always do an ad hoc 'rollover' into our SMSF if I want to (I'll have to check if there are any exit or rollover fees in the new fund).

Since our SMSF will no longer be receiving employer contributions after Jan 1 I'll cancel the monthly transfer of $5,000 from our SMSF bank account into our Vanguard HighGrowth Index Fund investment, and leave the remaining cash balance to provide for future SMSF tax and annual fee payments. There should also be sufficient cash available to fund the first 'pension' payout once we switch our SMSF into 'transition to retirement pension' (TRP or TRAP) mode once we hit the preservation age (57 for DW and myself). As we intend to 'recontribute' the pension amounts as an undeducted (nonconcessional) personal contribution every six months there only needs to be around 2% of the SMSF balance available in the bank account to avoid having to liquidate any of our Vanguard investment to fund the TRP payments.

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Tuesday, 3 November 2015

Net Worth: October 2015

The CFC ('chinese financial crisis') seems to have fizzled out, with global markets apparently deciding that the sky isn't falling (again) after all. The GFC was 'the big one', then the EFC had less impact, with the PIGS not collapsing after all, and now the imminent 'CFC' appears to morphed into just a transition to a more sustainable rate of economic growth. Ah well, I'm sure they'll be another 'crisis' soon enough.

Overall the market recovery during October and the continued rise in the 'estimated valuation' for our home pushed my net worth back above A$1.8m, which is new 'all time high' -- although if you adjust for inflation and debit the value of the hobby farm/weekender I 'inherited' last year I still have a way to go before I'm as well off as I was in late 2007.

My geared stock portfolio gained $32,650 but is still well below the levels of 2007, or even where it had recovered to in 2010 before the end of the 'mining boom'. My retirement account was boosted by the share market gains and also by one monthly employer contribution being deposited during the month. Our estimated house price gained $36,794. Overall my net worth improved $102,586 during the month, which recovered the losses suffered in the previous two months. I make no predictions as to where my net worth might be at the end of this year or next...

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Thursday, 1 October 2015

Net Worth: September 2015

A rather poor monthly performance with the stock market dip at the end of the month capping off a period of weakness. My geared stock portfolio lost $20,141 (-16.05%), and the market weakness also adversely affected my retirement savings, with my SMSF account balance dropping $8,286 (-1.19%) despite two months worth of Employer Contributions (including my hefty amount of salary sacrifice) being deposited during September.

Sydney real estate has also come off the boil, with a relatively small monthly gain being reported in most available sales price data. The data previously used to estimate our house valuation (six months average sales price for our postcode) is no longer available, and the switch to a difference source of monthly average sales price resulted in a 'paper' loss of $3,757 (-0.58%). The local council has delayed the release of planning report regarding housing densities in our suburb until at least April 2016, with any 'rezoning' happening after that. So we aren't likely to make any windfall profit from selling our home to a developer until at least 2017. In the meantime I'll continue to use the conservative valuation based on house sales across the entire suburb.

The $336,000 valuation used for my rural 25-acre 'hobby farm' property is still based on the valuation at the time I 'inherited' the property, plus subsequent capital improvement expenses. A rough current price estimate (based on movement in the house sale prices in the nearest country town) suggests it might currently be worth around $440,000 in the current market.

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Tuesday, 29 September 2015

The Bell at the Top of the Stock Market

Amongst the many old adages relating to the stock market is the one saying "no one rings a bell at the top of the market". And like many such adages it is basically incorrect. The "bell" one should listen out for is when the market is out of line with its fundamental essence - the economy.

As a case study, I've pulled about 35 years of quarterly GDP index data for the Australian economy, normalised for 2010=1.00 (source: source: ) and calculated quarterly average 'All Ordinaries Index' (XAO) values from the adjusted daily close data (source: ). I've then simply divided the quarterly average XAO index by the GDP index to get a simple measure of the valuation of the stock market compared to the national economy.

(nb. The unconventional x-axis is simply due to the way I had uploaded the data into my spreadsheet, resulting in the x-axis starting with the most recent quarterly data.)

From this simple plot one can clearly see the two 'once in a lifetime' instances of 'irrational exuberance' (aka 'the madness of crowds') that occurred in 1987 and again in 2007. If one had got out of the market during the two quarters prior to each 'crash' where this overvaluation became apparent from this sort of simple plot, one would have done very well. (In my case I hadn't started investing in stocks back in 1987 -- I was just doing 'paper trades' as part of a Business Economics course at university, and in 2007 I decided to 'insure' my geared stock portfolio using Index Put Options rather than liquidate my stock investments and crystalize a capital gains tax liability, and then failed to 'roll over' my put options.

The only difficulty with trying to take advantage of this clear signal is that when the market moves above the trend line it can do so for a considerable period, and by a substantial percentage, so while this plot will show when the market has moved into dangerous territory it can still be difficult to 'pull the trigger' and liquidate ones portfolio (or buy Put options) when the market appears to be in a strong up-trend. One strategy might be to sell off a fraction of the portfolio as soon as the market is clearly well above trend, and then sell off an additional fraction every month or two while the market continues to set new highs. Waiting for the market to peak and establish a clear down-trend is often impossible to implement due to the speed at which a market 'crash' can occur.

While it may be tempting to also try and time Index Fund purchases by waiting for the price to drop below the trend line, the market tends to dip below trend more frequently, but with less severity, than the relatively rare instances when the market moves substantially above the trend line. For that reason it is probably sufficient to simply dollar-cost-average into the market (from example via an automatic savings plan being setup to buy a fixed dollar amount of Index Fund units each month) as long as the market is around or below the trend line. If the market drops considerably below the trend line due to global events that may only have a transitory impact it might be an opportunity to make an additional 'lump sum' investment utilizing any 'spare' cash reserves, or by deciding to increase gearing (however, if one already employs gearing, there is often little scope to borrow more when the market suffers a large drop -- one is more likely to be concerned about the possibility of a margin call).

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Monday, 7 September 2015

Coaching costs bite

I booked coaching classes in Advanced English, '3 unit' Mathematics, Physics and Chemistry for DS1 next school term (10 weeks of 7-hours/week coaching cost around $800). Although he doesn't start these HSC 'Preliminary' subjects until Year 11 at the start of next year, the plan is that having some advanced exposure to the core syllabus content might help him do his best in these subjects at school next year. We'll see how it pans out. I'd previously bought him a set of Excel study guides for his HSC Preliminary subject selection, but he had hardly glanced at them this term (too busy doing school 'homework' at the last minute to ever actually 'study' - except the night before a class test), so leaving planning and execution of a study schedule to him seems a forlorn hope. Perhaps having scheduled weekend 'coaching' classes and set 'homework' will be more effective.

DS2 has actually been enjoying attending 'Year 4' coaching classes this year (he is in Year 3 at school), and he recently sat for a 'scholarship' exam run by North Shore coaching and did well enough to qualify for a 1/4 scholarship (fee rebate). Unfortunately that was only for entry and attendance in the Year 4 'Young Achiever' coaching classes next year, and when I went to enroll him last weekend I learned that very little of the 'High Achiever' course content differs from what he has already done this year in the Year 4 'Fastrain Extended' program. So instead I've enrolled him in the Year 5 'Fastrain Extended' course for next year, and he will have to sit another 'entry exam' to see if he switch into the Year 5 'High Achiever' course. After I complained a bit about not being told that the Year 4 'Young Achiever' course content would be almost identical to what he has already been doing this year (and hence a total waste of his time and my money), they at least agreed to waive the normal $30 exam fee. I've enrolled DS2 for the next four terms, as there is a small (10%) discount applied for multi-term enrollments of three of more terms. The cost for the four terms was around $2200! Still, I suppose it is a lot cheaper than private school fees, and will be money well spent if he gains entry into OC and then Selective High School. of course one can never be sure if the money spent on coaching has actually 'added value', or if the students might have done just as well without attending any coaching classes. I managed to get into 'OC' when I was in Primary School, but in those days there wasn't the 'coaching industry' that exists today. In some ways coaching is a bit of an 'arms race' - parents whose kids might struggle to get into OC or Selective HS send them to coaching to get the extra few marks that might get them in, which in turn means that parents of 'bright' kids are worried that their kids might 'miss out' of the chance to attend if they don't go to coaching also...

At a minimum coaching should help improve exam technique and reduce exam nerves/stress in the actual selection exams, and provide some help in any subject areas that need improvement. Whether it does any good in areas where a child is already performing well is much less certain. And there is a view held by some academics that the nature of coaching classes might make them counter-productive for more gifted pupils (who might find the 'workbooks' favoured by coaching school to be repetitive and boring). As with most things it is up to the parent to decide whether or not coaching may/will be beneficial and if the expense is justified.

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Wednesday, 2 September 2015

Net Worth: August 2015

A negative month for my net worth, with global share markets taking a battering as the reality of the slow-down in the Chinese economy hit their stock market and then the rest of the world followed suit. This devalued my geared stock portfolio and retired savings considerably, although the overall impact was slightly mitigated by the continued rise in the estimated valuation of our Sydney real estate. The local council is still deciding on the rezoning of the area surrounding the new hospital site (which includes our home), so for the moment I'm continuing to use an estimated valuation based on the average sales data for the entire suburb.

The overall monthly decline in my net worth was -$57,738. Not a particularly cheerful amount considering it is about the same as my annual after-tax 'tax home' pay! So far 2015 has seen very little change in my net worth, although the monthly fluctuations have been 'interesting' to say the least.

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Monday, 31 August 2015

Academic Competitions for School kids

There are quite a few academic competitions (national or state) available each year. Some of the ones DS1 and DS2 have entered (and I can recommend) are:


DS2 has now finished the round of ICAS tests for this year, an annual routine we commenced many years ago when DS1 was in Year 3. The ICAS (International Competitions and Assessments for Schools) tests are run by Educational Assessment Australia (EAA), an educational non-profit group of the University of New South Wales (UNSW) that specialises in large-scale assessment programs in Australia and more than twenty countries internationally. ICAS tests cost a small fee and are available for Digital Technologies, Science, Writing, Spelling, English, and Mathematics.

Most schools (I think) offer some ICAS tests - in our local Primary school they used to offer the whole suite of ICAS tests to interested pupils, but recently have reduced it to only English and Mathematics. I suspect this is due to low participation rates (only around 8/40 pupils in DS1s class did the ICAS tests this year) due to lack of interest (especially amongst those that don't expect to do well in such tests), having to attend the test before school, and the cost.

Fortunately the coaching school DS1 attends on Saturday morning is also able to offer ICAS tests in those subjects where it is not available at the pupil's normal school - so DS1 was able to do the remaining ICAS tests not available from his local public school.


Not really a competition, and not available to a student each year, the National Assessment Progam - Literacy and Numeracy, aka 'Naplan', is a compulsory test administered by the Department of Education every year, but only sat by pupils every second year (when they are in years 3,5,7,9). It is designed to allow the government to see how effective public education is in teaching 'the basics' of literacy and numeracy (English and mathematics) to the 'minimum standard' expected per the curriculum. The results are reported in 'bands' (1-6) for each year, in a similar way that 'bands' are used for assessing student performance in the HSC. Detailed results (showing student responses to individual questions, the correct response, and what % of the student cohort got the correct answer) are also provided, which can be a helpful guide if your child is having greater difficulty with one particular subject or one area within a subject. However, it is a fairly blunt tool at the top end, with DS1 and DS2 getting mostly band 6+ (the little triangular pointer which says 'somewhere above band 6...').

Young Scientist Competition:

This is an annual competition run by the Science Teacher's Association of NSW (STANSW) for students from years K-12 (there are separate categories for K-2, 3-6, 7-9. and 10-12). Entries can be in the category of 'Scientific Investigations', 'Models and Inventions', or in both categories. There is plenty of online help for parents and teachers at and as entry is free it is nice way to introduce kids to the 'scientific method' and writing a 'lab report' without having to worry if the entry is 'competitive'. Every entry gets a certificate ('participation', 'commendation',' high achievement' or 'excellence' depending on the score) so all student efforts get rewarded. There are small cash prizes for the top entries in primary school categories, and some more substantial cash prizes (and trophy for the winner) in the senior school entries. Some winning entries also go on to the National Science and Engineering Awards and might be selected to proceed on to the International Science and Engineering Fair...

Logical Thinking Challenge (LTC):

This is a free online adaptive multiple choice test (24 questions in 30 minutes) run during one 24-hour period each year (12/13 September this year) for students in Years 3-8. It is developed by the University of Melbourne and achieving an excellent result 'wins' free entry into the Creative Problem Solving (CPS) written competition run by North Shore Coaching the following month. North Shore Coaching also donates $100 to every school that has more than 30 students participate in the LTC. See for details and online registration.

Creative Problem Solving (CPS) National Competition:

Run by North Shore Coaching College, this competition costs $20 (refunded/exempt for those that do well in the LTC), this written test is set and marked by the University of Melbourne. Entries close on 6 October and the test is on 17 October. Trophies, Certificates and Prizes are awarded in each Age Group (A-F).

AMT Competitions:

The Australian Mathematics Trust (AMT - see runs both 'open' and 'invitational' competitions in the areas of mathematics and informatics. These competitions have to be entered via school registration. The annual 'open' competitions are:

Computational and Algorithmic Thinking (CAT) - for students in years 5-12. Held in March.

Australian Mathematics Competition (AMC) - for students in years 3-12. Held in May.

Australian Informatics Olympiad (IAO) - for students in years 7-12 with programming ability. Held in September.

Australian Statistics Competition (ASC) - for students in years 7-12. Project based, due in September.


UNSW Computing Department runs an annual programming competition (ProgComp) for High School teams around Australia. The main round is held in schools (19 June this year), and the best dozen or so teams get invited to compete at the Grand Final held at UNSW on 5 Sep this year. Teams comprise of up to three students. The competition involves solving as many as possible of around five set problems in two hours, using any programming language that will take input from keyboard or text file and produce output as a text file. The program code and text file submissions are manually reviewed to check that output has not been 'typed' rather than generated by a running program. The manual marking allows some marks to be awarded for partial solutions.  Textbooks and manuals can be consulted, but no outside help is allowed.

DS1 has entered this for the past couple of years (using Python) and enjoys getting a better score each year, but as a 'team' of only one student, his entries aren't competitive. He might have more luck organising a real 'team' next year when some of the other students are studying Software Design and Development in Year 11...  unless you make it to the 'Grand Final' there are no prizes, but you do get a certificate, and your name on the past results page:

Chess Competitions:

There are school-team based 'round robin' competitions run by the NSWJCL (NSW Junior Chess League) during terms 2 and 3. There is also a one-day interschool chess competition held at the end of term 3. Aside from that, the NSWJCL also runs one-day, and two-day chess competitions during each school holiday. The entry fees are modest ($15 for a one-day competition involving 7x30 min games), but you also have to pay the small annual fee to join the NSWJCL (for which you will get the magazine each term that includes some Chess puzzles, articles about winners of NSWJCL competitions, and the printed chess ratings listing). DS1 and DS2 play school chess, but don't take it very seriously, so they only attend one (or two) of the one-day chess competitions during school holidays if they have nothing else organised.

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Thursday, 27 August 2015

HSC Subject selection

DS1 has just gone through the process of selecting which subjects he will do in years 11-12 for his Higher School Certificate (HSC).

He was already enrolled in Preliminary SDD (Software Design & Development) this year (via distance education through HSCOnline) as an 'accelerate' student, so will be doing his HSC exams for that subject while he in in Year 11. Although computer programming is one of his favourite subjects (he started the Year 9 ITC course while he was in Year 8, but couldn't do it last year as it was no longer offered by HSCOnline), it doesn't 'scale' very well (so, unless he gets in the top 1% in that subject it is unlikely to be included in the 'best 10 units' used to calculate his ATAR for university entry). So it is probably a good idea to get in done while he is in Year 11 next year so he can concentrate on the more demanding (and better scaling) HSC subjects like Ext 2 Math while he is in Year 12. He is also doing a lot of other extracurricular computing activities this year (he completed the UNSW Computing 1 course( 'HS1917') earlier this year, and will be doing his week of 'work experience' at NICTA in term 4), so once his SDD final exam is completed early in term 4 next year he can have a 'gap year' from computing studies while he concentrates on his other HSC subjects.

For his 'real' HSC subjects he is doing English Advanced (no choice about that as 2 units of English has to be included in the HSC and in the 10 units used for ATAR calculation, and everyone at his selective High School does English Advanced rather than Standard) and English Ext 1 (although it's not his best subject, so he may drop English Ext 1 in Year 12 -- although it 'scales' well there isn't any point if he isn't at least in the 'top half' of the class). He might also have to drop Ext 1 English to make room for his other subjects and Ext 2 Maths in his school timetable.

He is also doing Maths and Math Ext 1 in Year 11, and intends adding Math Ext 2 in Year 12 (if his results are good enough). Math Ext 2 'scales' extremely well, so if he has the ability it can be quite time-effective compared to some other subjects that can take an inordinate amount of time (especially those that involve a 'major work' project).

His other subjects are Chemistry, Physics, Economics and Business Studies. He is quite interested in both science and finance/economics so those subject choices should suit him quite well. These subjects also happen to 'scale' quite well (if you achieve a decent result) as they are popular with the more able students. Given that most of the students attending selective high schools have been drawn from the 'top 2%' of students in the state (based on the entry tests done at the end of primary school), he should do fairly well in his HSC mark and ATAR ranking as long as he is in the 'top half' in each subject at his school. Ideally he should be aiming for the top quarter in each class, and possible try for 'first place' in some of his better subjects (he came first in Commerce last year, so he might do quite well in Economics and Business Studies).

Overall, his HSC preliminary subjects (year 11) at school for next year are:
English Advanced + Ext 1 (ie. 3 units)
Mathematics + Ext 1 (ie. 3 units)
Business Studies (2 units)
Chemistry (2 units)
Economics (2 units)
Physics (2 units)
and HSC Software Design and Development  (2 units) taken via distance education.

This is a total of 16 units, which is quite a heavy workload! Fortunately aside from Judo he doesn't have any time consuming extracurricular activities, as he is no longer studying piano.

In his HSC (year 12) at school he will probably be taking some combination of:
English Advanced (+ Ext 1 ?)
Mathematics + Ext 1 (+ Ext 2 ?)
Business Studies

However, as the school rules (and timetabling restrictions) only allow enrollment in 14 units or less for Year 12, he may have to drop a subject if he continues with English Ext 1 and also wants to do Maths Ext 2. He'll be making that decision around this time next year.

Although DS1 will be very busy, I don't think he'll be under too much pressure, as he has no interest in studying either medicine or law at university, and so he should easily get a sufficient ATAR to enrol in whatever science, engineering, computing or economics course he finally decides upon (he is still thinking about what he wants to 'do' at university). It will be interesting to see if he ends up doing well enough to qualify for a university scholarship though...

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Buying straw hats in Winter

The stock market was down nicely on Monday and early Tuesday, so I decided to take the opportunity to 'top up' my holdings in IHD (iShares S&P ASX High Dividend ETF) and RDV (Russell High Dividend Australian Shares ETF), buying about $6,000 worth of each using my Comsec margin loan account.

I didn't get around to placing my order until mid-afternoon, by which time prices were already recovering. As I intend to hold onto my geared share portfolios for at least 10-15 years until I retire (and probably longer, although I'll probably pay off any remaining margin loan amounts when I retire as the tax benefits of negative gearing will be negligble if the current 'tax free' status of superannuation pension income remains in place) it makes sense to add to my stock portfolio when 'the market' panics and shares are 'on sale'.

Of course the downside of such market volatility is that my superannuation balance has gone down by about $35,000 over the past couple of months. But as I'll still be in 'accumulation phase' for the next 10-15 years it pays to remain sanguine about such market volatility. I was tempted to move the $40,000 cash we have sitting in our SMSF into our Vanguard High Growth Index Fund investment, but decided to stick with out current $5,000 per month transfers to 'dollar cost average' the ongoing investments.

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