WEBVTT - Is becoming a Sophisticated Investor in your best interest? 0:00:10.000 --> 0:00:12.920 Hello, and welcome to The Australian's Money Puzzle podcast. I'm 0:00:12.960 --> 0:00:15.960 James Kirkby. Welcome aboard everybody. Would you like to be 0:00:16.040 --> 0:00:20.239 a sophisticated investor? It sounds good, doesn't it, And you'd 0:00:20.280 --> 0:00:25.200 get access to special investments that the everyday investor can access. 0:00:26.200 --> 0:00:28.800 And I mean I would think if you're an aspirational investor, 0:00:28.800 --> 0:00:31.600 of which I imagine most of our listeners are, you 0:00:31.640 --> 0:00:33.400 think you'd want to sign up for that and have 0:00:33.440 --> 0:00:37.720 that certificate. But I have to tell you sophisticated investor 0:00:38.120 --> 0:00:42.239 is as a status is currently under vigorous debate. Let 0:00:42.280 --> 0:00:46.479 me tell you across the market, inside the regulation sphere, 0:00:46.880 --> 0:00:50.879 and someone who's right across it and also across Division 0:00:51.560 --> 0:00:53.880 two nine to six the new super tax, which we'll 0:00:53.880 --> 0:00:56.280 talk about also in the show, is Peter Burgess. He's 0:00:56.280 --> 0:01:00.080 the CEO at the Self Managed Super Fund Association. And 0:01:00.120 --> 0:01:00.720 how are you, Peter? 0:01:01.520 --> 0:01:03.440 I'm good, Thank you, James, thank you for having me 0:01:03.480 --> 0:01:03.880 on the show. 0:01:04.560 --> 0:01:06.520 Lovely to have you on the show, and I'm amazed 0:01:06.600 --> 0:01:09.920 that it's actually your debut considering how often we talk, 0:01:10.040 --> 0:01:13.720 but great to have you on. Now, Sophisticated Investors. Here's 0:01:13.760 --> 0:01:17.800 the thing so when I tell people about this, it's 0:01:17.920 --> 0:01:24.720 only natural that they immediately want to join this club 0:01:24.800 --> 0:01:28.520 that they hadn't heard of. Right, so people understand there 0:01:28.560 --> 0:01:33.039 is a status, a legal status called sophisticated investor, and 0:01:33.240 --> 0:01:36.760 if it was introduced a long time ago, and the 0:01:36.840 --> 0:01:40.479 idea was it was for exotic investments basically that were 0:01:40.720 --> 0:01:45.120 risk quite risky and couldn't come under conventional consumer protection 0:01:45.600 --> 0:01:48.480 and people were allowed access out if they signed a certificate. 0:01:49.480 --> 0:01:52.040 That was how it worked. The issue these days is, 0:01:52.120 --> 0:01:54.680 I won't say every time Dick and Harry has one, 0:01:55.160 --> 0:01:57.960 but an awful lot of people are entitled to them. 0:01:58.000 --> 0:01:59.800 Could you explain what it is? And first of all, 0:02:00.080 --> 0:02:02.400 it's become yes. 0:02:02.200 --> 0:02:03.840 Now I think it, James, and you're right, this has 0:02:03.880 --> 0:02:06.640 been here for over two decades now. There was a 0:02:06.800 --> 0:02:09.200 change is made to the legislation back in two thousand 0:02:09.240 --> 0:02:13.240 and one to distinguish between what they call a retail 0:02:13.360 --> 0:02:17.959 investor and a wholesale investor. So the legislation makes that distinction. 0:02:18.560 --> 0:02:22.000 If you meet the criteria to be treated as a 0:02:22.040 --> 0:02:26.079 wholesale investor, it means that you have access to certain 0:02:26.120 --> 0:02:29.480 types of investments that may not be available to retail investors, 0:02:29.919 --> 0:02:32.200 and some of these investments, as you point out, could 0:02:32.240 --> 0:02:35.240 be higher risk type investments, but they also offer the 0:02:35.240 --> 0:02:40.840 opportunity for achieving larger returns. Now, in order to meet 0:02:40.880 --> 0:02:44.320 that criteria of being a wholesale investor, there are certain tests, 0:02:44.320 --> 0:02:46.040 and you only have to meet one of these tests 0:02:46.080 --> 0:02:48.359 in order to be classified as a whole stal investor. 0:02:48.480 --> 0:02:52.440 So there's a test around your net wealth. You need 0:02:52.480 --> 0:02:55.160 to have at least two point five million dollars in 0:02:55.480 --> 0:02:57.680 net assets. That's one of the tests. One of the 0:02:57.720 --> 0:03:00.760 other tests or income, if you have received two hundred 0:03:00.760 --> 0:03:02.679 and fifty thousand dollars or more in income over the 0:03:02.720 --> 0:03:05.800 two previous years, will then you satisfy the test. And 0:03:05.840 --> 0:03:08.560 the last one is where your investing amounts in excess 0:03:08.600 --> 0:03:11.320 of five hundred thousand dollars in one go into the product, 0:03:11.760 --> 0:03:13.200 then you meet that test. So you only have to 0:03:13.200 --> 0:03:14.960 meet one of those in order to be able to 0:03:14.960 --> 0:03:16.919 be classified as a wholesale investor. 0:03:17.200 --> 0:03:19.600 An accountant to assigned a certificate and you have that 0:03:19.680 --> 0:03:23.079 classification and then the product seller as such can deal 0:03:23.120 --> 0:03:23.360 with you. 0:03:24.320 --> 0:03:26.520 That's right, So you need to be signed off a 0:03:26.520 --> 0:03:28.040 recognized accountant. 0:03:28.520 --> 0:03:31.560 And nothing to do with your and we might come 0:03:31.639 --> 0:03:34.360 back to this, but nothing whatsoever to do with your 0:03:34.720 --> 0:03:41.200 experience or competence. You could be a very bad investor, 0:03:41.640 --> 0:03:44.480 but if you have the money, you qualify as sophisticated. 0:03:44.640 --> 0:03:46.600 But you might not be sophisticated per se. 0:03:47.520 --> 0:03:50.600 That's right. It's based on those income and assets tests. 0:03:50.640 --> 0:03:53.680 As I see, there is another test called the sophisticated 0:03:53.720 --> 0:03:57.320 investor test. Now that's where the licensee, like a financial 0:03:57.320 --> 0:04:00.640 planning licensee, makes a judgment call based on the experience 0:04:00.680 --> 0:04:03.760 of the investor that they are sophisticated and that they 0:04:03.840 --> 0:04:06.920 need to ensure that the investor is aware of that, 0:04:06.960 --> 0:04:09.800 and the investor has acknowledged that they are being treated 0:04:09.840 --> 0:04:12.920 as a sophisticated investor. So that's an additional test in 0:04:12.960 --> 0:04:15.840 there as well. So there are a number of tests 0:04:15.880 --> 0:04:19.440 that apply. Of course, all the controversy, I guess, all 0:04:19.520 --> 0:04:22.599 the debate around these tests have been that they haven't 0:04:22.800 --> 0:04:25.680 changed since they were first introduced back in two thousand 0:04:25.720 --> 0:04:28.840 and one. So those thresholds that I talked about, the 0:04:28.880 --> 0:04:30.839 two and a half million dollars in net wealth and 0:04:30.880 --> 0:04:33.960 the two hundred and fifty thousand dollars income over the 0:04:34.000 --> 0:04:36.839 last two years, those thresholds have not changed in over 0:04:36.920 --> 0:04:38.200 twenty years, so that was. 0:04:38.200 --> 0:04:40.000 A lot of money and two or one right, So 0:04:40.120 --> 0:04:42.880 basically there was I don't know, let's pick a number, 0:04:43.000 --> 0:04:46.320 fifty thousand people who could qualify then and there was 0:04:46.400 --> 0:04:49.120 a lot of money. These days, well, I was just 0:04:49.160 --> 0:04:53.279 reading about how construction workers are earning two fifty, mine 0:04:53.279 --> 0:04:56.120 workers are earning two fifty and they're good salaries, but 0:04:56.160 --> 0:05:00.600 they're actually not spectacular compared to see investment banking or whatever. Similarly, 0:05:00.600 --> 0:05:02.000 two and a half million was a lot of money. 0:05:02.040 --> 0:05:05.000 Then it's just the price of two houses now in 0:05:05.080 --> 0:05:09.599 Sydney and Melbourne and so Peter, the issue is then, 0:05:10.320 --> 0:05:11.880 I think it was the A and you came out 0:05:11.880 --> 0:05:14.760 and said there's three million people will qualify or as 0:05:14.800 --> 0:05:17.960 we stand today, and that proportion is going to go 0:05:18.480 --> 0:05:21.799 through the roof in the future. The point I'm making 0:05:21.920 --> 0:05:24.560 is so it's not so much an exclusive club and anymore. 0:05:25.120 --> 0:05:28.719 The other thing, obviously is that it's strictly on dollars. Now, 0:05:28.800 --> 0:05:30.680 what are the criticisms? And I want to put this 0:05:30.720 --> 0:05:33.160 on for our listeners. Just by the way, folks, I 0:05:33.200 --> 0:05:35.640 do not want to you not to consider being a 0:05:35.680 --> 0:05:40.040 FA sophisticated investor absolutely, why not. You should go for 0:05:40.080 --> 0:05:42.320 everything you can, but I think we should make it 0:05:42.360 --> 0:05:45.560 clear that what is the price of it, Peter in 0:05:45.640 --> 0:05:49.039 terms of consumer protection, which isn't always mentioned in the 0:05:49.120 --> 0:05:49.760 coverage of this. 0:05:50.720 --> 0:05:54.120 Yeah, that's right. Certainly it gives you access to board 0:05:54.160 --> 0:05:57.120 a round's investment options. But the downside is that you 0:05:57.680 --> 0:06:01.080 don't have the same level of protection consumer protection that 0:06:01.160 --> 0:06:04.960 you would have if you're being treated as a retail investor. So, 0:06:05.279 --> 0:06:08.599 for example, the financial advisor that may be giving advice 0:06:08.640 --> 0:06:11.440 about the product is not bound by the requirement to 0:06:11.480 --> 0:06:13.840 act in your best interest when giving that advice. They 0:06:13.839 --> 0:06:16.080 don't need to issue you with what we call a 0:06:16.120 --> 0:06:19.680 statement of advice or a product disclosure statement, So there's 0:06:20.000 --> 0:06:23.560 much more relaxed disclosure rules around these things if you're 0:06:23.560 --> 0:06:26.240 treated as a wholesale investor. But also you don't have 0:06:26.360 --> 0:06:29.760 access to the complaints body so aftern we call it 0:06:29.800 --> 0:06:32.719 the use join Financial Complaints Authority. And also you don't 0:06:32.760 --> 0:06:35.719 have access to the advisor's internal dispute mechanism as well, 0:06:35.800 --> 0:06:38.680 So if you're not happy with the advice you received, 0:06:39.040 --> 0:06:41.520 then you don't have the ability to go to those 0:06:41.560 --> 0:06:45.159 complaint bodies like you would if you were a retail investor, 0:06:45.200 --> 0:06:46.200 and it's really important. 0:06:46.279 --> 0:06:48.560 If your investment gets wiped up, you're on your own. 0:06:48.760 --> 0:06:50.880 You're on your own. You're saying the document, you've presented 0:06:50.920 --> 0:06:55.680 yourself as a sophisticator's investor, and so that's it. That's 0:06:55.720 --> 0:06:57.080 the kind of price of it, is it. 0:06:57.960 --> 0:07:00.240 That's right, you don't have access to it is a 0:07:00.279 --> 0:07:02.760 compensation like you would have if you were all. 0:07:02.640 --> 0:07:05.839 Potentially it's a bit scary that the financial advisor doesn't 0:07:05.880 --> 0:07:08.600 have to act in your best interest. That's scary because 0:07:08.640 --> 0:07:10.760 of what I'm leading to is I know because I 0:07:10.840 --> 0:07:14.280 cover financial advice very thoroughly, and we publish a survey 0:07:14.280 --> 0:07:16.320 of course every year the top one hundred and fifty 0:07:16.440 --> 0:07:20.280 financial advisors that, for the sake of efficiency and side 0:07:20.280 --> 0:07:24.240 stepping a mountain of red tape, many top advisors now 0:07:24.480 --> 0:07:27.960 just say we're wholesale only. They just say, sorry, our 0:07:27.960 --> 0:07:30.800 client book we're pretty full. You know, we just have 0:07:30.880 --> 0:07:33.880 to be efficient, so we're just taking people on who 0:07:33.920 --> 0:07:37.960 are strictly sophisticated. Are you familiar with that development. 0:07:38.760 --> 0:07:41.280 Yes, Look, there are certainly advisors out there that only 0:07:41.320 --> 0:07:44.160 give advice to wholes you know, to wholesale clients on 0:07:44.160 --> 0:07:48.520 that basis. Yes, that's true, and yeah, I think it's 0:07:48.520 --> 0:07:50.880 fair to say that there are some that provide advice 0:07:50.920 --> 0:07:53.120 to both types of clients. But absolutely there are some 0:07:53.240 --> 0:07:55.680 out there that are just focusing on wholesale clients and 0:07:55.720 --> 0:07:58.000 because of that, they don't need they're not subject for 0:07:58.000 --> 0:08:00.440 the same regulatory the supervision that others are. 0:08:00.600 --> 0:08:03.800 So, yeah, you can include your house in this. 0:08:05.360 --> 0:08:07.840 Yes, true. So the threshold that I mentioned that two 0:08:07.840 --> 0:08:09.920 and a half million dollars in net asset, you can 0:08:10.040 --> 0:08:12.680 include your house in that. And of course that's why 0:08:12.680 --> 0:08:15.280 there's so much discussion around these thresholds, because we know 0:08:15.360 --> 0:08:18.760 that house prices have significantly increased over the last two decades. 0:08:18.840 --> 0:08:21.440 So when these thresholds were first putting back in two 0:08:21.480 --> 0:08:24.320 thousand and one, housing prizes are certainly not what they 0:08:24.320 --> 0:08:26.960 are today. And you were saying before some of the figures, 0:08:26.960 --> 0:08:29.160 but you know, when these thresholds were first put in 0:08:29.200 --> 0:08:31.720 place in two thousand and one, around two percent of 0:08:31.760 --> 0:08:35.000 the adult population would classify or qualify potentially as a 0:08:35.000 --> 0:08:38.559 wholesale investor. Now it's close to twenty percent of the population, 0:08:38.640 --> 0:08:41.480 and they're forecasting by twenty forty one that you know, 0:08:41.520 --> 0:08:43.760 that percentage will be over forty percent of the adult 0:08:43.760 --> 0:08:47.040 population would actually meet the definition of a wholesale investor 0:08:47.120 --> 0:08:48.320 based on those thresholds. 0:08:48.840 --> 0:08:51.760 So it's it's gone up by ten times. Quick question, 0:08:51.880 --> 0:08:56.600 simple question in technical or academic investments work, and you 0:08:56.600 --> 0:09:01.320 would be you were previously course the tactical chiefs, you'd 0:09:01.320 --> 0:09:05.480 be right across this. A house is not seen from 0:09:05.480 --> 0:09:08.640 a textbook perspective as an investable asset. Is it a home? 0:09:09.520 --> 0:09:12.160 Not from a seal phone perspective? If you're living in it, 0:09:12.200 --> 0:09:16.839 obviously you can't hold those type of investments, and. 0:09:16.080 --> 0:09:19.400 So do you think it should be excluded. 0:09:20.080 --> 0:09:22.560 Well, it's an open question, James, as to whether the 0:09:22.800 --> 0:09:25.400 house should be included in the in that threshold. Now, 0:09:25.640 --> 0:09:28.559 there was a parliamentary inquiry that looked at this very 0:09:28.600 --> 0:09:31.800 issue as to whether these thresholds should actually be increased, 0:09:31.800 --> 0:09:35.120 and that inquiry was completed for the report came out 0:09:35.120 --> 0:09:38.160 earlier this year, and it may surprise some that they 0:09:38.240 --> 0:09:41.440 came to the conclusion that the thresholds shouldn't be changed. 0:09:41.600 --> 0:09:44.920 There were certainly plenty of submissions to that inquiry suggesting 0:09:44.960 --> 0:09:47.679 that the threshold should change because obviously it's been as 0:09:47.679 --> 0:09:50.240 we're saying it's been two decades now and they haven't changed. 0:09:50.840 --> 0:09:53.839 There are plenty of submissions suggesting that they shouldn't change. 0:09:53.920 --> 0:09:55.960 And some of the reasons that were put forward for 0:09:56.040 --> 0:09:58.599 that is that these thresholds are actually not out of 0:09:58.640 --> 0:10:01.080 step with the rest of the world. In other places 0:10:01.120 --> 0:10:02.960 around the world that they have these type of tests 0:10:03.040 --> 0:10:06.280 and our thresholds here are consistent with that. And there's 0:10:06.320 --> 0:10:09.200 an argument that as a community, we are more financially 0:10:09.280 --> 0:10:12.160 literate today than we were perhaps twenty years ago. There's 0:10:12.640 --> 0:10:14.199 access to information. 0:10:14.000 --> 0:10:16.200 I wonder, and I don't say that facetiously. I'm on 0:10:16.240 --> 0:10:19.840 the border of the Financial Literacy Foundation EXTRA and we 0:10:19.960 --> 0:10:22.600 know that the OBCD figures showed that Australia actually has 0:10:22.640 --> 0:10:26.560 to claimed in terms of financial literacy year after year internationally. 0:10:26.559 --> 0:10:29.760 So that doesn't stand up. But tell me, what did 0:10:29.800 --> 0:10:31.360 you want? What would you like to see in the 0:10:31.360 --> 0:10:33.840 investor tests? What was your what did your submission see? 0:10:34.840 --> 0:10:37.600 Well, we would like to see at least certification that 0:10:37.920 --> 0:10:40.760 individuals who have been classified as a whole sil investor 0:10:40.920 --> 0:10:44.000 absolutely are aware that they've been classified as a whole 0:10:44.040 --> 0:10:46.400 SiGe investor and that they acknowledge that, so that they 0:10:46.480 --> 0:10:48.679 understand the consequences of that. One of the problems with 0:10:48.720 --> 0:10:51.600 the current sy there's no requirement for someone who's been 0:10:51.600 --> 0:10:55.280 classified as a wholesale investor to actually acknowledge that and 0:10:55.360 --> 0:10:58.360 to fully understand the consequences have been treated as a 0:10:58.360 --> 0:11:00.680 whole stal investor. So, you know what we would like 0:11:00.720 --> 0:11:02.880 to see, and this is really a recommendation coming out 0:11:02.880 --> 0:11:04.960 of the Quality of Vice review which was undertaken a 0:11:04.960 --> 0:11:08.079 few years ago and now by Michelle Leedy, that investors 0:11:08.080 --> 0:11:12.000 should be required to acknowledge that yes to being treated 0:11:12.040 --> 0:11:14.520 as a whole tale investor, and that they are fully 0:11:14.520 --> 0:11:17.280 aware of the consequences of being treated as a whole 0:11:17.320 --> 0:11:18.000 sal investor. 0:11:19.400 --> 0:11:22.959 Okay, and what about competency in the form of knowledge 0:11:23.120 --> 0:11:26.439 as opposed to just having enough money? 0:11:26.520 --> 0:11:29.000 Yeah, look, I think you could argue that threshold and 0:11:29.200 --> 0:11:31.439 not the only thing that should be taken into consideration 0:11:31.520 --> 0:11:33.839 here when determining when there's someone's financial literate or not. 0:11:34.000 --> 0:11:36.160 And there is a place for some other types of assessments, 0:11:36.200 --> 0:11:39.160 but that could be complex as to how you introduce 0:11:39.240 --> 0:11:41.600 those type of things. But we certainly wouldn't be opposed 0:11:41.600 --> 0:11:44.520 to some other tests being applied that's based on experience 0:11:44.760 --> 0:11:47.240 similar to what we see for the sophisticated investor tests. 0:11:47.280 --> 0:11:50.040 Right now, if you're coming in through that pathway, then, 0:11:50.080 --> 0:11:52.720 as I said earlier on the licensee already has to 0:11:52.720 --> 0:11:55.319 get a declaration from you that you understand that you're 0:11:55.360 --> 0:11:57.440 being treated as a whole, stole investor and you understand 0:11:57.440 --> 0:11:58.160 the consequence. 0:11:58.320 --> 0:12:01.120 So you're to see first of all, rock bottom. You'd 0:12:01.120 --> 0:12:04.080 like to see evidence that the person knows that they 0:12:04.200 --> 0:12:06.840 think lassified, because it's pretty scary to think that they 0:12:06.920 --> 0:12:11.200 might know. Secondly, that you do some capacity for some 0:12:11.360 --> 0:12:13.000 knowledge test of some description. 0:12:13.240 --> 0:12:14.960 Is that right? Yeah, that's right? 0:12:15.320 --> 0:12:18.080 And okay, Acik, the regulator whatever came out of the 0:12:18.200 --> 0:12:22.480 parliamentary inquiry, ack the regulator, the peak regulator once it 0:12:22.520 --> 0:12:24.320 lifted to four point five million, we know that. What 0:12:24.400 --> 0:12:24.840 do you think? 0:12:26.080 --> 0:12:27.640 Yeah, Look, we were in that when we made a 0:12:27.640 --> 0:12:29.600 submission to this. We were part of a joint submission 0:12:29.640 --> 0:12:31.640 with a number of other associations, and we were in 0:12:31.640 --> 0:12:33.920 the camp. I was saying, well, yes, it makes sense 0:12:33.960 --> 0:12:37.080 that the threshold should increase, Acik. We're proposing an increase, 0:12:37.120 --> 0:12:39.280 I think in line with inflation. So if it had 0:12:39.320 --> 0:12:41.880 been increased in line with inflation, sits two thousand and one, 0:12:41.960 --> 0:12:44.000 we would be out around that four point six million 0:12:44.040 --> 0:12:46.480 dollars today and so that makes sense to us. So 0:12:46.520 --> 0:12:49.959 we were certainly in the camp of yes, increasing those thresholds, and. 0:12:49.960 --> 0:12:51.360 Did you want it indexed as well? 0:12:51.559 --> 0:12:54.320 Yes, we think there is grounds for indexation. It should 0:12:54.440 --> 0:12:56.960 be a certain forget threshold. We believe it's probe to 0:12:57.000 --> 0:12:59.280 have indexation in there as well. But you know, if 0:12:59.320 --> 0:13:02.040 you go to incre to reach these thresholds, it rises questions, 0:13:02.120 --> 0:13:03.839 Ryan grain fathering, what do we do with all these 0:13:03.880 --> 0:13:06.280 people that have been in there now and there's a 0:13:06.280 --> 0:13:08.160 lot to work through. You are going to increase the 0:13:08.200 --> 0:13:08.960 rest thresholds. 0:13:11.240 --> 0:13:15.280 Okay, Interesting about the indexing, which is a most perfect 0:13:15.320 --> 0:13:17.680 segue to what I want to talk to you about next, 0:13:18.120 --> 0:13:20.080 which is the super tax, which of course you are 0:13:20.360 --> 0:13:24.160 in the vanguard of that debate representing self managed super 0:13:24.200 --> 0:13:27.520 fund investors who were very much in the frame, if 0:13:27.559 --> 0:13:30.760 not in the target, of the measure. We'll be back 0:13:30.760 --> 0:13:32.200 in a moment and we're going to catch up on 0:13:32.280 --> 0:13:44.000 exactly what's going on with the new supertax. Hello, welcome 0:13:44.000 --> 0:13:46.800 back to The Australian's Money Puzzle podcast. I'm James Kirby 0:13:46.840 --> 0:13:50.480 talking to Peter Burgess of the Self Managed Super Funds Association, 0:13:50.880 --> 0:13:53.480 the CEO and someone who is in the thick of it. 0:13:53.559 --> 0:13:56.959 Let me tell you about the new supertax. Okay, how 0:13:56.960 --> 0:13:59.240 do I do this? How about I say to you, Peter, 0:13:59.360 --> 0:14:01.600 this is what I think is going on with the 0:14:01.640 --> 0:14:05.720 new supertax. It is technically has happened. 0:14:06.320 --> 0:14:07.360 It's a law. 0:14:07.880 --> 0:14:11.600 It adds fifteen percent tax on earnings above three million 0:14:12.040 --> 0:14:16.960 and it is based on realized gains. It started on 0:14:17.080 --> 0:14:21.720 July one, being roughly seven weeks ago. However, it hasn't 0:14:21.720 --> 0:14:23.600 passed parliament yet. That's all I know. 0:14:24.280 --> 0:14:24.880 What do you know? 0:14:27.160 --> 0:14:32.000 That's why ally of that it hasn't been passed. It's 0:14:32.040 --> 0:14:34.480 not even on the list as I understand. But what 0:14:34.520 --> 0:14:35.320 do you understand? 0:14:36.000 --> 0:14:39.479 Yes, there's been no sign of the legislation being reintroduced 0:14:39.520 --> 0:14:41.960 into parliament because of course it was introduced into the 0:14:41.960 --> 0:14:45.080 previous parliament but didn't pass prior to the election being 0:14:45.080 --> 0:14:47.920 called to it lapsed and we haven't seen it reintroduced 0:14:47.920 --> 0:14:50.640 into the new parliament yet. Now the Treasurer has made 0:14:50.640 --> 0:14:53.440 it very clear that he intends to proceed with this measure, 0:14:53.560 --> 0:14:57.840 so we are expecting to see this legislation introduced into Parliament, 0:14:57.920 --> 0:14:59.720 possibly in the next sitting, which will be at the 0:14:59.840 --> 0:15:03.160 end of October. Now, at this point in time, the 0:15:03.200 --> 0:15:05.800 government is saying that they want this to apply from 0:15:05.880 --> 0:15:08.720 one July twenty twenty five, which was the There has 0:15:08.720 --> 0:15:11.200 always been the start date for this particular measure, which 0:15:11.520 --> 0:15:14.120 you know, if it's not passed until late October, we're 0:15:14.160 --> 0:15:16.800 well into this financial year and that's going to be 0:15:16.880 --> 0:15:20.040 backdated to the first July twenty twenty five. We have 0:15:20.120 --> 0:15:22.400 to take the Treasure on face value that he is 0:15:22.600 --> 0:15:25.720 certainly keen to proceed with this. We think it is 0:15:25.920 --> 0:15:28.480 likely to happen. I think what the debate right now 0:15:28.640 --> 0:15:31.680 is all about is what should that start date be. Now. 0:15:31.800 --> 0:15:35.720 In our view, it's inappropriate, we think, and unfair for 0:15:35.840 --> 0:15:37.840 this tax to be backdated to the first of July 0:15:37.920 --> 0:15:41.280 twenty twenty five. What it means, of course, is that 0:15:41.320 --> 0:15:43.520 people will won't have a lot of time to make 0:15:43.600 --> 0:15:48.160 adjustments to their financial affairs for this tax, because what 0:15:48.200 --> 0:15:51.040 we call the first test time, which is thirty June 0:15:51.080 --> 0:15:53.720 twenty twenty six, assuming it does start from one July 0:15:53.840 --> 0:15:56.680 twenty twenty five, we've got our first test time Now 0:15:56.680 --> 0:15:59.160 that's the first date in which people will be assessed 0:15:59.160 --> 0:16:01.760 against the three minute, not a threshold they're collecting. 0:16:01.800 --> 0:16:06.320 Basically, they're collecting tax revenue from that date looking back 0:16:06.400 --> 0:16:07.800 over the previous twelve months. 0:16:07.840 --> 0:16:10.680 Is that if you're over three million dollars at thirty 0:16:10.720 --> 0:16:13.960 June twenty twenty six, well then you will pay Division 0:16:13.960 --> 0:16:16.240 two nine to six tax for that for the twenty 0:16:16.240 --> 0:16:17.880 five twenty six financial year. 0:16:17.960 --> 0:16:21.160 Now, what is your sort of rough bottom demand here? 0:16:21.440 --> 0:16:24.880 Well, we've opposed this tax from the outset. I should 0:16:24.920 --> 0:16:26.680 say that, you know, I'm yet to speak to one 0:16:26.680 --> 0:16:29.640 of our members yet that disagrees that, you know, tax 0:16:29.640 --> 0:16:33.360 concessions for those with excessively large superheroation balances shouldn't be 0:16:33.840 --> 0:16:36.760 reduced in some way. It's the design of this tax 0:16:36.800 --> 0:16:41.920 though that everyone is against. It's taxing the unrealized capital 0:16:42.040 --> 0:16:44.440 gains is not the solution here. There are other ways 0:16:44.440 --> 0:16:46.880 in which we can go about reducing tax concessions for 0:16:46.920 --> 0:16:50.400 people that have very large supernoation balances. This is not 0:16:50.520 --> 0:16:53.480 the solution taxing people on an unrealized capital gain. So, 0:16:54.000 --> 0:16:56.720 you know, we have put forward different ideas to government. 0:16:56.840 --> 0:16:59.920 We've put forward amendments to the existing legislation to make it. 0:17:00.800 --> 0:17:03.640 If we're going to have a tax on earnings like this, 0:17:03.840 --> 0:17:05.720 then it has to be based on what we call 0:17:05.800 --> 0:17:08.720 actual tax bill ownings, because as soon as you move 0:17:08.760 --> 0:17:11.600 away from that, then you are taxing people and unrealized 0:17:11.640 --> 0:17:14.080 capital gains. And so we've been trying to convince the 0:17:14.119 --> 0:17:17.280 government that they need to make amendments to this legislation 0:17:17.400 --> 0:17:20.440 to get it back to actual tax will income. I think, 0:17:20.480 --> 0:17:23.000 as I said, we will see this legislation introduced. I 0:17:23.080 --> 0:17:26.320 expect the Government will be very keen to get this 0:17:26.440 --> 0:17:29.800 through quickly, so they'll need the Greens support, and not 0:17:29.840 --> 0:17:32.560 only to support the bill, but they'll also need the 0:17:32.600 --> 0:17:35.040 Greens we think, to support what we call a guillotine motion, 0:17:35.680 --> 0:17:37.880 because I think the government will be keen to bypass 0:17:37.960 --> 0:17:41.480 the normal debate phase in Parliament and also committee stage 0:17:41.480 --> 0:17:43.760 of this, and they want to go to a vote 0:17:43.800 --> 0:17:44.439 and they'll need. 0:17:44.280 --> 0:17:46.160 The Gun and then do a trade off. I want 0:17:46.160 --> 0:17:48.879 to do this. What's your worst case scenario that the 0:17:48.880 --> 0:17:51.840 Greens get their way and the whole thing goes through 0:17:51.880 --> 0:17:55.400 as planned, except that Kapp is two million instead of three. 0:17:55.600 --> 0:17:56.760 What's your worst case scenario? 0:17:57.240 --> 0:17:59.360 Yeah, look, the worst cast scenario is that it does 0:17:59.400 --> 0:18:02.639 go through with lower threshold, So it goes through without changes, 0:18:02.680 --> 0:18:05.240 So they do tax unrealized capital gains in the threshold 0:18:05.280 --> 0:18:08.080 applies for two million dollars. Now, you know, I would 0:18:08.080 --> 0:18:11.240 be amazed if the government agrees to reduce the thresholder 0:18:11.240 --> 0:18:13.600 two million dollars. It would mean even more people are 0:18:13.640 --> 0:18:16.040 going to be infected by the taxing underrealized capital gains. 0:18:16.040 --> 0:18:18.200 And of course they are cropping a fever of heat 0:18:18.200 --> 0:18:21.159 about that. So I'd be very surprised if agrees to 0:18:21.200 --> 0:18:22.440 drop it to two million dollars. 0:18:22.880 --> 0:18:25.000 And your best case that they push it forward a 0:18:25.080 --> 0:18:28.160 year perhaps and do some amendments, and what might those 0:18:28.160 --> 0:18:29.320 amendments feasibly be. 0:18:30.720 --> 0:18:32.800 Yeah, So look, our best case here would be we 0:18:32.840 --> 0:18:34.720 want this tax to ferd by at least twelve months. 0:18:34.800 --> 0:18:37.480 We think people need more time to make adjustments to 0:18:37.520 --> 0:18:40.399 their financial affairs, and Treasury acknowledge this when the legislation 0:18:40.600 --> 0:18:43.440 was first announced, that people would need a long lead 0:18:43.520 --> 0:18:45.840 in time in order to adjust to this tax. Now, 0:18:45.880 --> 0:18:49.000 in some cases it requires people to be selling property 0:18:49.000 --> 0:18:51.800 out of their self many superfund That takes time. So 0:18:51.840 --> 0:18:53.920 there was an ignowledgment back then that at least twelve 0:18:53.960 --> 0:18:56.199 months now, we're not going to have that if they 0:18:56.280 --> 0:18:57.960 push forward to the star date of one to low 0:18:58.040 --> 0:19:00.679 twenty five. So yes, we want to see pherrel. We 0:19:00.760 --> 0:19:03.680 think that we'll give the government an opportunity to sit 0:19:03.760 --> 0:19:06.960 down with the industry and talk through some other ways 0:19:07.000 --> 0:19:09.880 to go about this and hopefully address the taxing unrealized 0:19:09.920 --> 0:19:13.479 capital gains. We believe there are ways amendments that can 0:19:13.520 --> 0:19:15.840 be made this legislation to get it back to using 0:19:15.880 --> 0:19:18.000 actual taxble earnings and if we get back to that, 0:19:18.440 --> 0:19:20.879 then we're not taxing unrealized gains. And that's the big 0:19:21.000 --> 0:19:23.520 problem with this tax. Big problem the designer this tax 0:19:23.520 --> 0:19:25.800 that we've been against since day one, and we'll keep 0:19:25.920 --> 0:19:27.920 advocating against it as long as we can. 0:19:30.160 --> 0:19:33.760 Right one last thing. If they're pushing forward a year, 0:19:34.160 --> 0:19:36.720 there are revenue estimates. Obviously in the budget I think 0:19:36.760 --> 0:19:39.399 I saw our political team said it would cost three 0:19:39.480 --> 0:19:44.959 hundred million in last revenue. So that would wear against 0:19:45.040 --> 0:19:46.120 your hoops. 0:19:46.960 --> 0:19:49.560 Well well pit potentially, yes, but in the scheme of things, 0:19:49.600 --> 0:19:51.239 I'd like to think that's a rounding error, and then 0:19:51.280 --> 0:19:53.200 there is scope for the government to sit down with 0:19:53.240 --> 0:19:55.760 the industry. Gives more time, as I said, to consult 0:19:55.800 --> 0:19:57.960