u/Fun_Chip6177

With the new tax changes to capital gains, there has been the thought that dividends may be worthwhile to avoid some of the minimum 30% tax when selling off high growth ETFs.

I've played around in a spreadsheet to model a number of scenarios with different assumptions. The TL;DR is that for nearly every situation accumulating high growth ETFs dramatically outperform high yield ETFs from avoiding tax drag. This is true even when giving high yield ETFs

Unfortunately because there's so many variables there's no way to simply graph it, the variables I've playead with include:

High growth ETF %
High yield ETF % annual growth
High yield ETF % distribution payout
Strategy allocation %
Starting capital

Fixed variables/assumptions

Retirement at 40
68K after tax income required
No other income other than shares
Assumes that each drawdown will have 50% of the value as taxable profit
Any excess dividends above the 68K to be reinvested
Dividends/distributions 100% franked

Some interesting notes/data points:

There are many combinations where high growth will outperform even when the high yield total gain per year is lower than the high growth total growth per year. Even with really generous assumptions for high yield, it would still draw down faster.
No set of assumptions using historical data was favourable for high yield ETFs.
High growth has a much starting lower point where money will continue to grow rather than decline
High yield only comes out ahead if you assume its growth will be close to the growth of high growth, with a nice dividend on top.
The amount of tax saved is small relative to the gains lost in nearly every scenario.

In addition to the above, there is the opportunity cost of buying high yield ETFs to begin with.

Buying the high yields ETFs early means you will suffer from tax drag
Rebalancing your portfolio as your reach your retirement age also has additional tax drag when you sell off

Modelling high growth ETFs vs high yield ETFs for early retirement