Speaker 1: Hello, and welcome to The Australian's Money Puzzle podcast. I'm
Speaker 1: James Kirkby. Welcome aboard everybody. Would you like to be
Speaker 1: a sophisticated investor? It sounds good, doesn't it, And you'd
Speaker 1: get access to special investments that the everyday investor can access.
Speaker 1: And I mean I would think if you're an aspirational investor,
Speaker 1: of which I imagine most of our listeners are, you
Speaker 1: think you'd want to sign up for that and have
Speaker 1: that certificate. But I have to tell you sophisticated investor
Speaker 1: is as a status is currently under vigorous debate. Let
Speaker 1: me tell you across the market, inside the regulation sphere,
Speaker 1: and someone who's right across it and also across Division
Speaker 1: two nine to six the new super tax, which we'll
Speaker 1: talk about also in the show, is Peter Burgess. He's
Speaker 1: the CEO at the Self Managed Super Fund Association. And
Speaker 1: how are you, Peter?
Speaker 2: I'm good, Thank you, James, thank you for having me
Speaker 2: on the show.
Speaker 1: Lovely to have you on the show, and I'm amazed
Speaker 1: that it's actually your debut considering how often we talk,
Speaker 1: but great to have you on. Now, Sophisticated Investors. Here's
Speaker 1: the thing so when I tell people about this, it's
Speaker 1: only natural that they immediately want to join this club
Speaker 1: that they hadn't heard of. Right, so people understand there
Speaker 1: is a status, a legal status called sophisticated investor, and
Speaker 1: if it was introduced a long time ago, and the
Speaker 1: idea was it was for exotic investments basically that were
Speaker 1: risk quite risky and couldn't come under conventional consumer protection
Speaker 1: and people were allowed access out if they signed a certificate.
Speaker 1: That was how it worked. The issue these days is,
Speaker 1: I won't say every time Dick and Harry has one,
Speaker 1: but an awful lot of people are entitled to them.
Speaker 1: Could you explain what it is? And first of all,
Speaker 1: it's become yes.
Speaker 2: Now I think it, James, and you're right, this has
Speaker 2: been here for over two decades now. There was a
Speaker 2: change is made to the legislation back in two thousand
Speaker 2: and one to distinguish between what they call a retail
Speaker 2: investor and a wholesale investor. So the legislation makes that distinction.
Speaker 2: If you meet the criteria to be treated as a
Speaker 2: wholesale investor, it means that you have access to certain
Speaker 2: types of investments that may not be available to retail investors,
Speaker 2: and some of these investments, as you point out, could
Speaker 2: be higher risk type investments, but they also offer the
Speaker 2: opportunity for achieving larger returns. Now, in order to meet
Speaker 2: that criteria of being a wholesale investor, there are certain tests,
Speaker 2: and you only have to meet one of these tests
Speaker 2: in order to be classified as a whole stal investor.
Speaker 2: So there's a test around your net wealth. You need
Speaker 2: to have at least two point five million dollars in
Speaker 2: net assets. That's one of the tests. One of the
Speaker 2: other tests or income, if you have received two hundred
Speaker 2: and fifty thousand dollars or more in income over the
Speaker 2: two previous years, will then you satisfy the test. And
Speaker 2: the last one is where your investing amounts in excess
Speaker 2: of five hundred thousand dollars in one go into the product,
Speaker 2: then you meet that test. So you only have to
Speaker 2: meet one of those in order to be able to
Speaker 2: be classified as a wholesale investor.
Speaker 1: An accountant to assigned a certificate and you have that
Speaker 1: classification and then the product seller as such can deal
Speaker 1: with you.
Speaker 2: That's right, So you need to be signed off a
Speaker 2: recognized accountant.
Speaker 1: And nothing to do with your and we might come
Speaker 1: back to this, but nothing whatsoever to do with your
Speaker 1: experience or competence. You could be a very bad investor,
Speaker 1: but if you have the money, you qualify as sophisticated.
Speaker 1: But you might not be sophisticated per se.
Speaker 2: That's right. It's based on those income and assets tests.
Speaker 2: As I see, there is another test called the sophisticated
Speaker 2: investor test. Now that's where the licensee, like a financial
Speaker 2: planning licensee, makes a judgment call based on the experience
Speaker 2: of the investor that they are sophisticated and that they
Speaker 2: need to ensure that the investor is aware of that,
Speaker 2: and the investor has acknowledged that they are being treated
Speaker 2: as a sophisticated investor. So that's an additional test in
Speaker 2: there as well. So there are a number of tests
Speaker 2: that apply. Of course, all the controversy, I guess, all
Speaker 2: the debate around these tests have been that they haven't
Speaker 2: changed since they were first introduced back in two thousand
Speaker 2: and one. So those thresholds that I talked about, the
Speaker 2: two and a half million dollars in net wealth and
Speaker 2: the two hundred and fifty thousand dollars income over the
Speaker 2: last two years, those thresholds have not changed in over
Speaker 2: twenty years, so that was.
Speaker 1: A lot of money and two or one right, So
Speaker 1: basically there was I don't know, let's pick a number,
Speaker 1: fifty thousand people who could qualify then and there was
Speaker 1: a lot of money. These days, well, I was just
Speaker 1: reading about how construction workers are earning two fifty, mine
Speaker 1: workers are earning two fifty and they're good salaries, but
Speaker 1: they're actually not spectacular compared to see investment banking or whatever. Similarly,
Speaker 1: two and a half million was a lot of money.
Speaker 1: Then it's just the price of two houses now in
Speaker 1: Sydney and Melbourne and so Peter, the issue is then,
Speaker 1: I think it was the A and you came out
Speaker 1: and said there's three million people will qualify or as
Speaker 1: we stand today, and that proportion is going to go
Speaker 1: through the roof in the future. The point I'm making
Speaker 1: is so it's not so much an exclusive club and anymore.
Speaker 1: The other thing, obviously is that it's strictly on dollars. Now,
Speaker 1: what are the criticisms? And I want to put this
Speaker 1: on for our listeners. Just by the way, folks, I
Speaker 1: do not want to you not to consider being a
Speaker 1: FA sophisticated investor absolutely, why not. You should go for
Speaker 1: everything you can, but I think we should make it
Speaker 1: clear that what is the price of it, Peter in
Speaker 1: terms of consumer protection, which isn't always mentioned in the
Speaker 1: coverage of this.
Speaker 2: Yeah, that's right. Certainly it gives you access to board
Speaker 2: a round's investment options. But the downside is that you
Speaker 2: don't have the same level of protection consumer protection that
Speaker 2: you would have if you're being treated as a retail investor. So,
Speaker 2: for example, the financial advisor that may be giving advice
Speaker 2: about the product is not bound by the requirement to
Speaker 2: act in your best interest when giving that advice. They
Speaker 2: don't need to issue you with what we call a
Speaker 2: statement of advice or a product disclosure statement, So there's
Speaker 2: much more relaxed disclosure rules around these things if you're
Speaker 2: treated as a wholesale investor. But also you don't have
Speaker 2: access to the complaints body so aftern we call it
Speaker 2: the use join Financial Complaints Authority. And also you don't
Speaker 2: have access to the advisor's internal dispute mechanism as well,
Speaker 2: So if you're not happy with the advice you received,
Speaker 2: then you don't have the ability to go to those
Speaker 2: complaint bodies like you would if you were a retail investor,
Speaker 2: and it's really important.
Speaker 1: If your investment gets wiped up, you're on your own.
Speaker 1: You're on your own. You're saying the document, you've presented
Speaker 1: yourself as a sophisticator's investor, and so that's it. That's
Speaker 1: the kind of price of it, is it.
Speaker 2: That's right, you don't have access to it is a
Speaker 2: compensation like you would have if you were all.
Speaker 1: Potentially it's a bit scary that the financial advisor doesn't
Speaker 1: have to act in your best interest. That's scary because
Speaker 1: of what I'm leading to is I know because I
Speaker 1: cover financial advice very thoroughly, and we publish a survey
Speaker 1: of course every year the top one hundred and fifty
Speaker 1: financial advisors that, for the sake of efficiency and side
Speaker 1: stepping a mountain of red tape, many top advisors now
Speaker 1: just say we're wholesale only. They just say, sorry, our
Speaker 1: client book we're pretty full. You know, we just have
Speaker 1: to be efficient, so we're just taking people on who
Speaker 1: are strictly sophisticated. Are you familiar with that development.
Speaker 2: Yes, Look, there are certainly advisors out there that only
Speaker 2: give advice to wholes you know, to wholesale clients on
Speaker 2: that basis. Yes, that's true, and yeah, I think it's
Speaker 2: fair to say that there are some that provide advice
Speaker 2: to both types of clients. But absolutely there are some
Speaker 2: out there that are just focusing on wholesale clients and
Speaker 2: because of that, they don't need they're not subject for
Speaker 2: the same regulatory the supervision that others are.
Speaker 1: So, yeah, you can include your house in this.
Speaker 2: Yes, true. So the threshold that I mentioned that two
Speaker 2: and a half million dollars in net asset, you can
Speaker 2: include your house in that. And of course that's why
Speaker 2: there's so much discussion around these thresholds, because we know
Speaker 2: that house prices have significantly increased over the last two decades.
Speaker 2: So when these thresholds were first putting back in two
Speaker 2: thousand and one, housing prizes are certainly not what they
Speaker 2: are today. And you were saying before some of the figures,
Speaker 2: but you know, when these thresholds were first put in
Speaker 2: place in two thousand and one, around two percent of
Speaker 2: the adult population would classify or qualify potentially as a
Speaker 2: wholesale investor. Now it's close to twenty percent of the population,
Speaker 2: and they're forecasting by twenty forty one that you know,
Speaker 2: that percentage will be over forty percent of the adult
Speaker 2: population would actually meet the definition of a wholesale investor
Speaker 2: based on those thresholds.
Speaker 1: So it's it's gone up by ten times. Quick question,
Speaker 1: simple question in technical or academic investments work, and you
Speaker 1: would be you were previously course the tactical chiefs, you'd
Speaker 1: be right across this. A house is not seen from
Speaker 1: a textbook perspective as an investable asset. Is it a home?
Speaker 2: Not from a seal phone perspective? If you're living in it,
Speaker 2: obviously you can't hold those type of investments, and.
Speaker 1: So do you think it should be excluded.
Speaker 2: Well, it's an open question, James, as to whether the
Speaker 2: house should be included in the in that threshold. Now,
Speaker 2: there was a parliamentary inquiry that looked at this very
Speaker 2: issue as to whether these thresholds should actually be increased,
Speaker 2: and that inquiry was completed for the report came out
Speaker 2: earlier this year, and it may surprise some that they
Speaker 2: came to the conclusion that the thresholds shouldn't be changed.
Speaker 2: There were certainly plenty of submissions to that inquiry suggesting
Speaker 2: that the threshold should change because obviously it's been as
Speaker 2: we're saying it's been two decades now and they haven't changed.
Speaker 2: There are plenty of submissions suggesting that they shouldn't change.
Speaker 2: And some of the reasons that were put forward for
Speaker 2: that is that these thresholds are actually not out of
Speaker 2: step with the rest of the world. In other places
Speaker 2: around the world that they have these type of tests
Speaker 2: and our thresholds here are consistent with that. And there's
Speaker 2: an argument that as a community, we are more financially
Speaker 2: literate today than we were perhaps twenty years ago. There's
Speaker 2: access to information.
Speaker 1: I wonder, and I don't say that facetiously. I'm on
Speaker 1: the border of the Financial Literacy Foundation EXTRA and we
Speaker 1: know that the OBCD figures showed that Australia actually has
Speaker 1: to claimed in terms of financial literacy year after year internationally.
Speaker 1: So that doesn't stand up. But tell me, what did
Speaker 1: you want? What would you like to see in the
Speaker 1: investor tests? What was your what did your submission see?
Speaker 2: Well, we would like to see at least certification that
Speaker 2: individuals who have been classified as a whole sil investor
Speaker 2: absolutely are aware that they've been classified as a whole
Speaker 2: SiGe investor and that they acknowledge that, so that they
Speaker 2: understand the consequences of that. One of the problems with
Speaker 2: the current sy there's no requirement for someone who's been
Speaker 2: classified as a wholesale investor to actually acknowledge that and
Speaker 2: to fully understand the consequences have been treated as a
Speaker 2: whole stal investor. So, you know what we would like
Speaker 2: to see, and this is really a recommendation coming out
Speaker 2: of the Quality of Vice review which was undertaken a
Speaker 2: few years ago and now by Michelle Leedy, that investors
Speaker 2: should be required to acknowledge that yes to being treated
Speaker 2: as a whole tale investor, and that they are fully
Speaker 2: aware of the consequences of being treated as a whole
Speaker 2: sal investor.
Speaker 1: Okay, and what about competency in the form of knowledge
Speaker 1: as opposed to just having enough money?
Speaker 2: Yeah, look, I think you could argue that threshold and
Speaker 2: not the only thing that should be taken into consideration
Speaker 2: here when determining when there's someone's financial literate or not.
Speaker 2: And there is a place for some other types of assessments,
Speaker 2: but that could be complex as to how you introduce
Speaker 2: those type of things. But we certainly wouldn't be opposed
Speaker 2: to some other tests being applied that's based on experience
Speaker 2: similar to what we see for the sophisticated investor tests.
Speaker 2: Right now, if you're coming in through that pathway, then,
Speaker 2: as I said earlier on the licensee already has to
Speaker 2: get a declaration from you that you understand that you're
Speaker 2: being treated as a whole, stole investor and you understand
Speaker 2: the consequence.
Speaker 1: So you're to see first of all, rock bottom. You'd
Speaker 1: like to see evidence that the person knows that they
Speaker 1: think lassified, because it's pretty scary to think that they
Speaker 1: might know. Secondly, that you do some capacity for some
Speaker 1: knowledge test of some description.
Speaker 2: Is that right? Yeah, that's right?
Speaker 1: And okay, Acik, the regulator whatever came out of the
Speaker 1: parliamentary inquiry, ack the regulator, the peak regulator once it
Speaker 1: lifted to four point five million, we know that. What
Speaker 1: do you think?
Speaker 2: Yeah, Look, we were in that when we made a
Speaker 2: submission to this. We were part of a joint submission
Speaker 2: with a number of other associations, and we were in
Speaker 2: the camp. I was saying, well, yes, it makes sense
Speaker 2: that the threshold should increase, Acik. We're proposing an increase,
Speaker 2: I think in line with inflation. So if it had
Speaker 2: been increased in line with inflation, sits two thousand and one,
Speaker 2: we would be out around that four point six million
Speaker 2: dollars today and so that makes sense to us. So
Speaker 2: we were certainly in the camp of yes, increasing those thresholds, and.
Speaker 1: Did you want it indexed as well?
Speaker 2: Yes, we think there is grounds for indexation. It should
Speaker 2: be a certain forget threshold. We believe it's probe to
Speaker 2: have indexation in there as well. But you know, if
Speaker 2: you go to incre to reach these thresholds, it rises questions,
Speaker 2: Ryan grain fathering, what do we do with all these
Speaker 2: people that have been in there now and there's a
Speaker 2: lot to work through. You are going to increase the
Speaker 2: rest thresholds.
Speaker 1: Okay, Interesting about the indexing, which is a most perfect
Speaker 1: segue to what I want to talk to you about next,
Speaker 1: which is the super tax, which of course you are
Speaker 1: in the vanguard of that debate representing self managed super
Speaker 1: fund investors who were very much in the frame, if
Speaker 1: not in the target, of the measure. We'll be back
Speaker 1: in a moment and we're going to catch up on
Speaker 1: exactly what's going on with the new supertax. Hello, welcome
Speaker 1: back to The Australian's Money Puzzle podcast. I'm James Kirby
Speaker 1: talking to Peter Burgess of the Self Managed Super Funds Association,
Speaker 1: the CEO and someone who is in the thick of it.
Speaker 1: Let me tell you about the new supertax. Okay, how
Speaker 1: do I do this? How about I say to you, Peter,
Speaker 1: this is what I think is going on with the
Speaker 1: new supertax. It is technically has happened.
Speaker 2: It's a law.
Speaker 1: It adds fifteen percent tax on earnings above three million
Speaker 1: and it is based on realized gains. It started on
Speaker 1: July one, being roughly seven weeks ago. However, it hasn't
Speaker 1: passed parliament yet. That's all I know.
Speaker 2: What do you know?
Speaker 1: That's why ally of that it hasn't been passed. It's
Speaker 1: not even on the list as I understand. But what
Speaker 1: do you understand?
Speaker 2: Yes, there's been no sign of the legislation being reintroduced
Speaker 2: into parliament because of course it was introduced into the
Speaker 2: previous parliament but didn't pass prior to the election being
Speaker 2: called to it lapsed and we haven't seen it reintroduced
Speaker 2: into the new parliament yet. Now the Treasurer has made
Speaker 2: it very clear that he intends to proceed with this measure,
Speaker 2: so we are expecting to see this legislation introduced into Parliament,
Speaker 2: possibly in the next sitting, which will be at the
Speaker 2: end of October. Now, at this point in time, the
Speaker 2: government is saying that they want this to apply from
Speaker 2: one July twenty twenty five, which was the There has
Speaker 2: always been the start date for this particular measure, which
Speaker 2: you know, if it's not passed until late October, we're
Speaker 2: well into this financial year and that's going to be
Speaker 2: backdated to the first July twenty twenty five. We have
Speaker 2: to take the Treasure on face value that he is
Speaker 2: certainly keen to proceed with this. We think it is
Speaker 2: likely to happen. I think what the debate right now
Speaker 2: is all about is what should that start date be. Now.
Speaker 2: In our view, it's inappropriate, we think, and unfair for
Speaker 2: this tax to be backdated to the first of July
Speaker 2: twenty twenty five. What it means, of course, is that
Speaker 2: people will won't have a lot of time to make
Speaker 2: adjustments to their financial affairs for this tax, because what
Speaker 2: we call the first test time, which is thirty June
Speaker 2: twenty twenty six, assuming it does start from one July
Speaker 2: twenty twenty five, we've got our first test time Now
Speaker 2: that's the first date in which people will be assessed
Speaker 2: against the three minute, not a threshold they're collecting.
Speaker 1: Basically, they're collecting tax revenue from that date looking back
Speaker 1: over the previous twelve months.
Speaker 2: Is that if you're over three million dollars at thirty
Speaker 2: June twenty twenty six, well then you will pay Division
Speaker 2: two nine to six tax for that for the twenty
Speaker 2: five twenty six financial year.
Speaker 1: Now, what is your sort of rough bottom demand here?
Speaker 2: Well, we've opposed this tax from the outset. I should
Speaker 2: say that, you know, I'm yet to speak to one
Speaker 2: of our members yet that disagrees that, you know, tax
Speaker 2: concessions for those with excessively large superheroation balances shouldn't be
Speaker 2: reduced in some way. It's the design of this tax
Speaker 2: though that everyone is against. It's taxing the unrealized capital
Speaker 2: gains is not the solution here. There are other ways
Speaker 2: in which we can go about reducing tax concessions for
Speaker 2: people that have very large supernoation balances. This is not
Speaker 2: the solution taxing people on an unrealized capital gain. So,
Speaker 2: you know, we have put forward different ideas to government.
Speaker 2: We've put forward amendments to the existing legislation to make it.
Speaker 2: If we're going to have a tax on earnings like this,
Speaker 2: then it has to be based on what we call
Speaker 2: actual tax bill ownings, because as soon as you move
Speaker 2: away from that, then you are taxing people and unrealized
Speaker 2: capital gains. And so we've been trying to convince the
Speaker 2: government that they need to make amendments to this legislation
Speaker 2: to get it back to actual tax will income. I think,
Speaker 2: as I said, we will see this legislation introduced. I
Speaker 2: expect the Government will be very keen to get this
Speaker 2: through quickly, so they'll need the Greens support, and not
Speaker 2: only to support the bill, but they'll also need the
Speaker 2: Greens we think, to support what we call a guillotine motion,
Speaker 2: because I think the government will be keen to bypass
Speaker 2: the normal debate phase in Parliament and also committee stage
Speaker 2: of this, and they want to go to a vote
Speaker 2: and they'll need.
Speaker 1: The Gun and then do a trade off. I want
Speaker 1: to do this. What's your worst case scenario that the
Speaker 1: Greens get their way and the whole thing goes through
Speaker 1: as planned, except that Kapp is two million instead of three.
Speaker 1: What's your worst case scenario?
Speaker 2: Yeah, look, the worst cast scenario is that it does
Speaker 2: go through with lower threshold, So it goes through without changes,
Speaker 2: So they do tax unrealized capital gains in the threshold
Speaker 2: applies for two million dollars. Now, you know, I would
Speaker 2: be amazed if the government agrees to reduce the thresholder
Speaker 2: two million dollars. It would mean even more people are
Speaker 2: going to be infected by the taxing underrealized capital gains.
Speaker 2: And of course they are cropping a fever of heat
Speaker 2: about that. So I'd be very surprised if agrees to
Speaker 2: drop it to two million dollars.
Speaker 1: And your best case that they push it forward a
Speaker 1: year perhaps and do some amendments, and what might those
Speaker 1: amendments feasibly be.
Speaker 2: Yeah, So look, our best case here would be we
Speaker 2: want this tax to ferd by at least twelve months.
Speaker 2: We think people need more time to make adjustments to
Speaker 2: their financial affairs, and Treasury acknowledge this when the legislation
Speaker 2: was first announced, that people would need a long lead
Speaker 2: in time in order to adjust to this tax. Now,
Speaker 2: in some cases it requires people to be selling property
Speaker 2: out of their self many superfund That takes time. So
Speaker 2: there was an ignowledgment back then that at least twelve
Speaker 2: months now, we're not going to have that if they
Speaker 2: push forward to the star date of one to low
Speaker 2: twenty five. So yes, we want to see pherrel. We
Speaker 2: think that we'll give the government an opportunity to sit
Speaker 2: down with the industry and talk through some other ways
Speaker 2: to go about this and hopefully address the taxing unrealized
Speaker 2: capital gains. We believe there are ways amendments that can
Speaker 2: be made this legislation to get it back to using
Speaker 2: actual taxble earnings and if we get back to that,
Speaker 2: then we're not taxing unrealized gains. And that's the big
Speaker 2: problem with this tax. Big problem the designer this tax
Speaker 2: that we've been against since day one, and we'll keep
Speaker 2: advocating against it as long as we can.
Speaker 1: Right one last thing. If they're pushing forward a year,
Speaker 1: there are revenue estimates. Obviously in the budget I think
Speaker 1: I saw our political team said it would cost three
Speaker 1: hundred million in last revenue. So that would wear against
Speaker 1: your hoops.
Speaker 2: Well well pit potentially, yes, but in the scheme of things,
Speaker 2: I'd like to think that's a rounding error, and then
Speaker 2: there is scope for the government to sit down with
Speaker 2: the industry. Gives more time, as I said, to consult
Speaker 2: on some of the design features of this tax which
Speaker 2: have been non negotiable today.
Speaker 1: Okay, very good, All right, well folks, there you are.
Speaker 1: That's the latest on the new super tax. It's fascinating
Speaker 1: that it isn't even pasted in Parliament that was supposed
Speaker 1: to have started seven weeks ago. It's also fascinating, as
Speaker 1: Peter said, that they may do what they call it guillotine,
Speaker 1: and what that means is that basically, one afternoon, out
Speaker 1: of the blue, they say it's going through now and
Speaker 1: you've got about an hour to fix it, and there's
Speaker 1: a deal done, a backroom deal. Basically they say to
Speaker 1: the Green something entirely different, utterly different, like they'll put
Speaker 1: three windmills in somewhere else, or nothing to do with
Speaker 1: super whatsoever. It's called a guillotine. They package it all
Speaker 1: up and they go bang, it's done. And that obviously
Speaker 1: is the distinct risk here, I would think. All right,
Speaker 1: back in the moment, I've got some good questions ready
Speaker 1: for Peter. Hello and welcome back to The Australian's Money
Speaker 1: Puzzle podcast. I'm with Peter Burgess. He's the chief executive
Speaker 1: officer of the self managed super funds souciation, which represents,
Speaker 1: as you may well know, something like how many people now, Peter,
Speaker 1: one point three or four million?
Speaker 2: Oh my, we're two million trustees, six hundred and forty
Speaker 2: thousand odd self many super funds.
Speaker 1: Okay, yeah, yes, one point two million people in the
Speaker 1: self man super funds now, which is good, good to see,
Speaker 1: and it's a marvelous way for people who do the
Speaker 1: work and do the homework to invest. And it's something
Speaker 1: that yes, I am enthusiastic about because I think for
Speaker 1: someone who was an active investor, it does open up
Speaker 1: all sorts of opportunities if you're willing to do the
Speaker 1: work and take the responsibility. All right, now, a first
Speaker 1: piece of correspondence is this is a piece of correspondence
Speaker 1: that came in. The person wanted to keep their name,
Speaker 1: didn't want their name used at all, first name or
Speaker 1: second name, so I'll have to stick with that. But
Speaker 1: here it is your last podcast on financial literacy as
Speaker 1: the ultimate defense against scandals. Particularly resonated with me. Last
Speaker 1: year we had a family member involved in a scandal.
Speaker 1: They lost a lot of money. Family was in a
Speaker 1: state of shock. We try to report or engaged with
Speaker 1: the bank this person's account was with, but they showed
Speaker 1: no interest blaming the victim. I was surprised, as with
Speaker 1: the high level of automation based on computer processing we
Speaker 1: currently have, someone should have been able to pick up
Speaker 1: the sudden increase in activity with this one account, but
Speaker 1: no one did. We tried reporting also to the local police,
Speaker 1: again no response. We have reported it to scam Watch.
Speaker 1: We've moved on with life, but we feel as if
Speaker 1: the banks are only there as a big ATM, not
Speaker 1: to help safeguard our livelihood. That's a genuine peace correspondence
Speaker 1: from someone who was scammed, and I recommend you do
Speaker 1: listen to last week's Peace podcast with doctor Tracy West
Speaker 1: of the Extra Foundation, who was the education manager there
Speaker 1: about basically, we can do a lot of regulation, you
Speaker 1: can have piles of regulation, but there's nothing strong I
Speaker 1: think as self defense in terms of financially financially interested
Speaker 1: getting up to speed to yourself or getting your kids
Speaker 1: up to speed in school, which is something we were
Speaker 1: driving at in that podcast. All right, Don asks, well,
Speaker 1: the fifteen percent supertax apply to both accumulation or pension
Speaker 1: balances of a three million, and will it include pension withdraws, so.
Speaker 2: It will include both your accumulation assets as well as
Speaker 2: your pension So the way it works based on your
Speaker 2: total superbalance and the movement in your total superbalance from
Speaker 2: the start of the financial year to the end. So
Speaker 2: your total superbalance includes money you've got in the accumulation
Speaker 2: phase as well as money you have in the pension phase,
Speaker 2: so it applies to both phases. In terms of pension payments,
Speaker 2: any pension payment made during the course of the income
Speaker 2: year will be added back to your balance for the
Speaker 2: purpose of calculating your earnings for the years. So there
Speaker 2: is a formula they use to calculate earnings under the
Speaker 2: Vision two nine and six. It is based on the
Speaker 2: movement of your balance from the start to the end.
Speaker 2: But they do make adjustments for things like withdrawals and
Speaker 2: contributions that you've made made during the course of the
Speaker 2: year too.
Speaker 1: And show And that's just a conventional accounting, isn't it.
Speaker 1: I mean that's not as such. I mean you would
Speaker 1: this is what you would naturally do, that's right.
Speaker 2: They're doing it to ensure that the earnings figure is
Speaker 2: not overstated or understated by the fact that your contributions
Speaker 2: will will take the withdrawals out.
Speaker 1: And just one last thing on that. So the fifteen
Speaker 1: percent the new tax, it applies on accumulation and pensions.
Speaker 1: So if you haven't retired, let's say you're fifty and
Speaker 1: you cross the three million, you're you're in the tax
Speaker 1: net from then on, even though you haven't retired.
Speaker 2: Is that right, Well, that's right. This tax will apply
Speaker 2: a gallus when you're retired or not. It's purely based
Speaker 2: on your So if you have a balance and excess
Speaker 2: of three million dollars, then you will be subject to
Speaker 2: a division two nine six on the earnings portion above
Speaker 2: three million dollars. So you know, division does not apply
Speaker 2: to your whole balance, the earnings of all of your balance.
Speaker 2: It's just that fortunate above three million dollars.
Speaker 1: Yeah, the portion above, And that's an important point. It's
Speaker 1: just to recap folks, sits on earnings above three million.
Speaker 2: And it's on your One of the other misconceptions here,
Speaker 2: it's based on the balance of your self many superfund.
Speaker 2: But it's not based on your combined balance. It's your
Speaker 2: individual superheroation balance that you used to determine whether you're
Speaker 2: over that's three million dollars per capita.
Speaker 1: So if there's two in the fund, it's divided by
Speaker 1: two of the six in the fund that's divided by six.
Speaker 2: Is that it? Yeah, So you could have a situation
Speaker 2: where the total fund balance is five million dollars, but
Speaker 2: the rise of two min two members, both who have
Speaker 2: two point five million dollars, they don't pay division two
Speaker 2: one six because they're not own neither of them over
Speaker 2: that's three million dollars threshold.
Speaker 1: Terrific. Great, great to have you on and great to
Speaker 1: have you answering the questions. A perfectly place to do so.
Speaker 1: That was Peter Burgess of the Self Managed Super Funds
Speaker 1: Association the See You're great to have him on the show.
Speaker 1: Thanks Peter, Thanks James, and keep the emails rolling the
Speaker 1: money puzzle at the Australian dot com dot au. Talk
Speaker 1: to you soon.