Monday, August 16, 2010

Differences between the USA and Australia (financial of course)

I’m no expert on tax matters or anything, so this is just how I view it. Since I have never lived in nor had much to do with the American tax system or financial system, I am only going by what I have read around the place, so take everything here with a grain of salt. I have been asked a few times about the differences. I think in Australia we get a bit of an idea of how things are done in the USA courtesy of shows like Oprah and books written by Dave Ramsey, Suze Orman etc... Most financial advice books are American, so we get a little bit of information that way. So I will try my best to explain what I think simply, so others can get a bit of an idea.


Property taxes/loans/payments etc... everything to do with real estate are dealt with very differently in both countries. In Australia if the property you own is the one you live in you are not entitled to tax exemptions. If it is an investment you can claim pretty much anything under the sun (that is an exaggeration, but interest, land tax/rates, repairs/improvements, travel to inspect the property etc... can all be claimed in various ways).



That is one of the reasons people in Australia like to pay down our home so fast. It is just costing you money, you get no tax benefits. In USA, correct me if I am wrong, you do get tax benefits/tax breaks with your own home?



With superannuation/IRA’s/retirement fund whatever you want to call it things are set up different, but there are similarities. In Aus there are tax advantages to depositing into your retirement. It does reduce your taxable income. You can choose any super fund you like and that is the one your employer will pay into. All employers have to pay 9% minimum of what you are worth into your retirement fund. So if you get $50,000 a year, the employer has to pay $4,500 a year into that account on top of your wage.



I am not a fan of super. I prefer to keep my money and invest it myself rather than having it locked away until I am 65. That’s right, any money put in there is not accessible until retirement age. Under very extenuating circumstances it can be received, but it’s rare and hard. Then there’s the fees paid to have the fund etc... I don’t like them, but they are great for anyone who has no other plan.



As for pensions and things, in Australia we supposedly have one of the best welfare systems in the world. That said, it can still be very hard to live on. It’s pretty lenient and we get more than most countries for all different situations. If you want more info this link will take you to our welfare site and you can see what you can get for various situations. It is a great safety net for those who need it, but there are many who take advantage of this system. Bear in mind, if you do happen to play around with figures, many parts of Aus are very expensive to live in.


Of course there are cheaper areas and I am not saying USA is cheap. Just every American I have ever personally known has said how much more expensive Australia is. And yes, I have known and do know a lot of Americans and they all tell me I should move to the USA.


FICO scores, we don’t have them. We do have credit ratings/history which can determine whether you can get a loan/how much you can borrow etc... The first thing looked at is your income and how long you have been with your employer. I don’t know much about FICO scores, so I am not going to comment much on that.


I have read a lot about people walking away from their mortgages in the USA. You can’t do that here. You will get a big black mark against your name, the loan for the house will follow you until it is repaid either by the bank repossessing the house and selling it or by you declaring bankruptcy. This is not advisable. Bankruptcy will leave you unable to get any sort of credit for 7 years. Some banks will deal with you, but going bankrupt is a black hole you want to avoid if at all possible.


I know I haven’t explained everything technically or anything. I am not experienced in this area, merely trying to bumble my way through to sort of answer some reader questions. If you’d like more info on the Australian tax department you can go to their site here.


Hope I have helped a little. Remember it is not hard and fast financial advice, just my take on things.

Oh, and to my American friends, it's not me who needs convincing to move to the USA, it's my husband!

3 comments :

  1. I should share this with one of my friends who is contemplating a move to Australia. Thanks for the info!

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  2. I'm glad it kinda made sense. Australia is awesome and she would love it. Depending on where she is thinking of moving there's more job prospects here than USA and we are not in a recession.

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  3. Delighted to see your terrific blog. Thanks for following me. It's my pleasure to follow you as well.

    Maureen
    http://maureenmakesit.com

    ReplyDelete

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