Speaker 1: Hello, and welcome to the Money Puzzle podcast. I'm James
Speaker 1: Kirkby well T editor at The Australian. They welcome aboard everybody.
Speaker 1: I don't know about you, but the most entertaining interesting
Speaker 1: story financial story I thought in recent days. And by
Speaker 1: the way, there's been a few round if you follow
Speaker 1: a minrais, if you follow wisetech. But for me, certainly
Speaker 1: on the property side, had to be the Prime Minister's
Speaker 1: ill timed moved by a house by the sea four
Speaker 1: point three million dollars at Copacabana Beach there in central
Speaker 1: New South Wales. And here's the thing. It was a
Speaker 1: bargain right the Prime Minister. Let's make it clear about
Speaker 1: this house. Whatever the controversy is. Politically, he paid considerably
Speaker 1: less than the previous owner who bought it about three
Speaker 1: and a half years ago for four point six The
Speaker 1: Prime Minister got about three hundred thousands off there. So
Speaker 1: politically you wouldn't describe it as a good deal or
Speaker 1: even a good idea. But hey, as an investment it's
Speaker 1: pretty good. Now. Every spring who can resist this, including
Speaker 1: the PM, who can resist it? The lure of the
Speaker 1: holiday home there you're working on your ETFs and your
Speaker 1: dividends and your tax returns, and it's all very dry
Speaker 1: and it's all up in the cloud and no one
Speaker 1: sees anything. And you buy a holiday home and hey,
Speaker 1: you can sit on the veranda. You can sit on
Speaker 1: the veranda with your friends. Bricks and water. A lot
Speaker 1: to be said for it. So I decided I should
Speaker 1: have a guest on who is not just able to
Speaker 1: advise on things, not just across this, but it has
Speaker 1: direct first end experience and all this something we've often
Speaker 1: talked about. Actually, it's James Gerard Financial Advisor dot com
Speaker 1: dot you Hi, James, how are you hello? Good?
Speaker 2: Thanks for having me on the Pleasures always.
Speaker 1: Do you know that's part of the world, the Central
Speaker 1: Coast where the PM has a body's cliff top plot.
Speaker 2: I do know it very well. I my accountants up there,
Speaker 2: so I go up there to see the accountant. But
Speaker 2: I had a holiday house not too far from there
Speaker 2: as well, so I know that part of the world.
Speaker 1: Then you're going to be ideal to be interrogated on
Speaker 1: the wisdom strictly from an investment point of view of
Speaker 1: the holiday home. It is funny, isn't it. In spring
Speaker 1: it's only human. That's when all the holiday houses come online.
Speaker 1: That's when the season is. Spring is the season for
Speaker 1: all auctions, but particularly for holiday homes, because that's when
Speaker 1: everyone starts to think about them. You don't see many
Speaker 1: for sale in May or June, where the market completely
Speaker 1: goes flat. So first of all, I thought that was
Speaker 1: very interesting that I think a first class property really
Speaker 1: and if you look at it, it looks like you
Speaker 1: paid it off four point three but if you look
Speaker 1: at it closely, it's a hilltop, it's a cliff top plot.
Speaker 1: And I don't think anybody has any dispute with how
Speaker 1: much he paid. Not everyone could pay that. But we
Speaker 1: know Anthony alban is a big time property investor. We
Speaker 1: know this. We know he has a considerable investment property portfolio,
Speaker 1: residential property exactly what we talk about every week. It
Speaker 1: would be well across negative gearing. He even had to
Speaker 1: evict a tenant, which anybody would find uncomfortable excruciation, probably
Speaker 1: if you're a politician. But he had to evict a
Speaker 1: tenant from his place last from one of the places
Speaker 1: a few months ago. So that's the sort of downside,
Speaker 1: isn't it. That's the hard part of property investment. So, James,
Speaker 1: if I've got it right, you had a holiday home
Speaker 1: and now you don't have a holiday home, and so
Speaker 1: I imagine you're not exactly a holiday home flag waiver. But
Speaker 1: maybe I'm wrong from an investment point of view. First
Speaker 1: of all, what's your approach or attitude towards them.
Speaker 2: They can be good because you have a personal aspect
Speaker 2: to it in that you get to go to the place.
Speaker 2: And also, let's just be blunt about it, you have
Speaker 2: bragging rights. You're standing around at a barbecue on the wakend.
Speaker 1: I alluded to bragging rights at the start. Yeah, but
Speaker 1: you and I are above bagging bragging rights. So let's
Speaker 1: talk entirely theoretical here and the money point of view.
Speaker 1: So they can be good. Why can they be good?
Speaker 2: YEA, the good because it's a mixed asset. You have
Speaker 2: the ability to have personal enjoyment from that property. You're
Speaker 2: saving accommodation elsewhere by using your holiday house. But also
Speaker 2: could be a good financial investment depending on how you
Speaker 2: treat it. If you rented out on short term let insights,
Speaker 2: while you're not using it, you're generating income from the
Speaker 2: property and also grating hopefully capital growth as well. But
Speaker 2: then some people they stay there a week in the
Speaker 2: Christmas holidays, stay there over Easter, lock up the house
Speaker 2: when they leave, and then it just stays vacant after that,
Speaker 2: and they're a little bit more of a money pit
Speaker 2: because they're paying council rates the pain for repairs. There's
Speaker 2: a higher chance the property will get broken into because
Speaker 2: people in the area know that it's a holiday house
Speaker 2: and no one's using it. The only thing that has
Speaker 2: going for it is that the capital growth. If that's happening,
Speaker 2: so they.
Speaker 1: Can be good.
Speaker 2: And you mentioned that I sold my one, which I
Speaker 2: did a couple of years ago during stufter COVID, because
Speaker 2: what I've noticed was that the market pretty much doubled
Speaker 2: in the space of a year and a half because
Speaker 2: people were flocking out of Sydney, going up the coasts,
Speaker 2: going we're never going back to the office again. Interest
Speaker 2: rates it were low, all the conditions were right for
Speaker 2: growth in those coastal properties, and that's exactly what happened.
Speaker 2: So I thought, great, let us take that that profit.
Speaker 2: And since that point in time, seeing big corporates forcing
Speaker 2: people back to the office, and there's been a bit
Speaker 2: of weakness in that coastal market, and astute property investors
Speaker 2: like the PM himself have jumped in, so it's actually
Speaker 2: probably not a bad time to be buying these sort
Speaker 2: of coastal holiday regional type areas.
Speaker 1: Exactly. You timed very well, and I suppose to flow
Speaker 1: back to the city. Did happen? Probably a bit slower,
Speaker 1: I imagine that you thought, or anyone thought, it's still slower.
Speaker 1: But I was talking to another regular guest on the show,
Speaker 1: Eliza on and had a research a core logic, and
Speaker 1: I was saying, what about I was trying to get it,
Speaker 1: basically to talk directly about the Prime Minister's house, which
Speaker 1: obviously she was uncomfortable doing. But I said, okay, let's
Speaker 1: talk about that area. Let's just talk about central coast
Speaker 1: South Wales, which could be any area by the way,
Speaker 1: really by that economically, from an investment point of view,
Speaker 1: the coast is the coast, and if you can be
Speaker 1: within striking distance of any of the cities, then it's
Speaker 1: a lucrative, potentially lucrative and desirable zone. That would be
Speaker 1: anything from the Morrington Peninsula in Victoria right up along
Speaker 1: through the North and South Coast up and beyond Sydney.
Speaker 1: The particular area here Copa Capana Beach, which will become
Speaker 1: famous now of course, is between Sydney and Newcastle. So
Speaker 1: I said to Eliza, tell us about that market from
Speaker 1: the data. Just tell us about that market. And she said,
Speaker 1: there's a couple of really interesting things happening. There's a
Speaker 1: sea change reversal, so people are coming back to the
Speaker 1: city and we know that. And in many ways the
Speaker 1: voluntary part of that phase might be over and we're
Speaker 1: now into the involuntary part where companies are now demanding
Speaker 1: rather than asking people to come back to the office.
Speaker 1: Is a very different sort of tone to all that.
Speaker 1: She mentioned that the mortgage rates were elevated and people
Speaker 1: who had two mortgage if you've got inflation like we have,
Speaker 1: even if the capital growth is there, it could be
Speaker 1: hard to keep those two mortgages running or you could
Speaker 1: have almost no money left. What's the point of having
Speaker 1: a holiday home if you can't fix your front fence
Speaker 1: or something. So that's definitely an issue. And there was
Speaker 1: a third issue that people had been hanging out for
Speaker 1: a raid cut and it hasn't come and every week
Speaker 1: it is less likely, and I think we can rule
Speaker 1: it out this year already, and we're talking early next
Speaker 1: year now for the holiday home investments or for any
Speaker 1: investor who wants a lower and it's dependent on rates
Speaker 1: coming down to keep it all rolling. What about then,
Speaker 1: the issue of a holiday home. Very few people would
Speaker 1: not like to have one. To me, it seems many
Speaker 1: people have them, and they say, we're never there as
Speaker 1: a constant complaint. We're never there. We were supposed to
Speaker 1: go down this weekend, but my nephew is playing soccer
Speaker 1: or whatever. Another one is that when they have a
Speaker 1: holiday home, they think that they might move down there
Speaker 1: whatever that never comes to. They think that there it
Speaker 1: would be wonderful for the wider family, but that never
Speaker 1: works out either, often because people aren't around. One person
Speaker 1: wants to go down, the other person never does, etc.
Speaker 1: So you have those complications. But that's thinking of it
Speaker 1: in the old fashioned way. I suppose as strictly an
Speaker 1: asset that's un mortgaged. But if we approach a holiday
Speaker 1: home from an investment point of view and say, look,
Speaker 1: it's another property. I have a negatively geared property in
Speaker 1: the metropolitan area, and now I'm going to have a
Speaker 1: regional coastal investment property. That happens to be a beach house,
Speaker 1: I can rent it, I could air be and be it.
Speaker 1: What about it as a proposal as a financial proposal
Speaker 1: under those terms, James.
Speaker 2: Good Yep, it works out well. When I looked at
Speaker 2: the numbers on my holiday house, which we had mainly
Speaker 2: as an airbnb, we'd stay there for the minority of
Speaker 2: the time. The utilization the amount of time that people
Speaker 2: were staying in the property was about forty percent, which
Speaker 2: meant that most weekends, holiday periods, people were renting out
Speaker 2: the property. And I stacked the numbers up side by
Speaker 2: side to say, if I put a permanent tenant in
Speaker 2: the property, I would get X per week. If I
Speaker 2: get forty percent utilization on stays and Airbnb, I get
Speaker 2: why return per year. And it worked out to be
Speaker 2: about a two percent increase in yield rental return if
Speaker 2: I rented out short term versus a permanent tenant, And
Speaker 2: that also sliced away a bit of time for family
Speaker 2: to go utilize the property as well. So for us
Speaker 2: it worked out perfectly. But it resonated what you said
Speaker 2: with regards to the common complaints as to what happens
Speaker 2: with holiday houses that we didn't go there a lot.
Speaker 2: We went there a lot in the first twelve months,
Speaker 2: but then after.
Speaker 1: That you take it for granted. We really need to
Speaker 1: go there.
Speaker 2: Other things pop up. It's always going to be there.
Speaker 2: We could go there another time, and you never really
Speaker 2: get around to it. Whereas if you go on a
Speaker 2: holiday somewhere else, you need to book a combination, you
Speaker 2: really need to put it in the calendar and it
Speaker 2: becomes an event that you look forward to, whereas a
Speaker 2: holiday house, again, you take it for granted.
Speaker 1: Interesting, I never thought about it that way. Yes, yeah,
Speaker 1: I imagine that's it. That is certainly an issue, and
Speaker 1: I'm one of the practical about it. Before we take
Speaker 1: a break, Apparently it's really hard to get treaties in
Speaker 1: these holiday areas. It's hard to get them in the
Speaker 1: middle of the city, so I presume it's considerably even
Speaker 1: more difficult in regional areas.
Speaker 2: It was awful trying to get trades people there, but
Speaker 2: it didn't help because we were on the lake Lake Macquarie,
Speaker 2: and there was ninety eight steps from the street down
Speaker 2: to the property, and I remember trying to get an
Speaker 2: electrician there and he came to the front. I heard
Speaker 2: his mute I saw him from down the bottom there.
Speaker 2: He looked at the ninety eight stairs, jump back in
Speaker 2: his ute and drove off again. So it was hard
Speaker 2: to get people there. But the thing is that once
Speaker 2: you find these good trades people, they're worth their weight
Speaker 2: in gold. So you just need to be patient and
Speaker 2: find the right one through trial and er and then
Speaker 2: you've got a great little network of electricians, plumbers, handyman
Speaker 2: to to help fix up the property. But I guess
Speaker 2: overall with holiday houses that they can work quite well.
Speaker 2: And the Prime Minister is very stuting that someone told
Speaker 2: me years ago that when you're buying property, one thing
Speaker 2: that you can't build more of, for get more of,
Speaker 2: is waterfront. There's only going to be a finite supply
Speaker 2: of properties on the lakes, on the oceans, and so
Speaker 2: you're pretty much assured a decent capital growth long term,
Speaker 2: assuming you don't buy the wrong point in the cycle.
Speaker 2: But if you buy something that's on the water, it's
Speaker 2: always going to be a scarce resource.
Speaker 1: That's so true. That is so true. We'll come back
Speaker 1: to that in a moment, folks. We'll take a short break. Hello,
Speaker 1: Welcome back to the Australian's Money puzzle James Kirby with
Speaker 1: James Gerard, and thank you James for hosting in September
Speaker 1: when I was aware that was great, Thank you very much.
Speaker 1: I meant to say that at the start, the medium
Speaker 1: price at that coastal reserve where the PM board is
Speaker 1: one point nine, and he paid four point three. And
Speaker 1: I remember thinking when I saw the first photograph, I
Speaker 1: said four point three for this house. That looked house,
Speaker 1: but it's by no means outstanding, and the area isn't
Speaker 1: particularly well known either. However, on closer inspection you realize
Speaker 1: that what he boat was exactly what you're saying. Absolute
Speaker 1: water frontage. If you see aerial pictures, it's on a cliff,
Speaker 1: so it's actually a really terrific slice of land I
Speaker 1: saw even just doing the numbers, if you look at
Speaker 1: Airbnb that place, the house is what the up to
Speaker 1: nine hundred a night, nine hundred dollars a night on Airbnb,
Speaker 1: which would put it in the top shelf I would
Speaker 1: imagine of Airbnb properties. One other thing which I think
Speaker 1: would be very interesting. I just thought i'd bring this up.
Speaker 1: I think our listeners would find it really interesting. We
Speaker 1: were talking about holiday homes and how they work on
Speaker 1: the economics of it. If you do your work, as
Speaker 1: James says, you can make them work. And there are
Speaker 1: aspects to them that are a drag, like any investment property,
Speaker 1: and that means bills and repairs and the ongoings, etc.
Speaker 1: And one of the issues with the holiday homes that
Speaker 1: they for everybody is that they don't get used enough.
Speaker 1: Some people don't like renting. You're putting their property on
Speaker 1: AB and B. But a few months ago I came
Speaker 1: upon something James and I were talking about this a
Speaker 1: while ago called Third Home and Third Home is a
Speaker 1: US group and they they're basically what they call a
Speaker 1: luxury holiday home Exchange club. And what you do is
Speaker 1: you join and you become a member, and then you
Speaker 1: get to swap houses with other members around the world.
Speaker 1: And here's the catch, if you like or the threshold
Speaker 1: of what makes it special, the rock bottom minimum value
Speaker 1: that your property must be worth to join this club
Speaker 1: is US one million, which which puts Copoa Cabana comfortably inside,
Speaker 1: but maybe not for most people. I wonder what the
Speaker 1: average holiday home is worth. I presume it's under US
Speaker 1: one million. Have you familiar with those guys, James, what
Speaker 1: do you think of that arrangement.
Speaker 2: I've heard of similar concepts, not that particular company in detail,
Speaker 2: and it's worked well for people. The feedback that I
Speaker 2: had from friends and family who've used similar things was
Speaker 2: that the availability of homes overseas was somewhat limited, and
Speaker 2: so they had lots of requests for people to stay
Speaker 2: in their place, but they couldn't really find or get
Speaker 2: accepted to places overseas, and making the dates match up
Speaker 2: nicely with busy work schedules was difficult as well. So
Speaker 2: in theory sounds great, can work, but there's a little
Speaker 2: bit of work involved with it. And you mentioned that
Speaker 2: the PM's place where nine hundred to night is that
Speaker 2: with miss Alberteazy serving you toast and coffee in the morning,
Speaker 2: is at nine hundred.
Speaker 1: A night and telling jokes written for him by former
Speaker 1: journalists on the Australian. Yes, yes, okay. Put that to
Speaker 1: one side. Where were we? Yes? Now James cutting to
Speaker 1: the serious part of the show. If someone's listening and
Speaker 1: they want to do this, and this is a we
Speaker 1: have many listeners who are very engaged in property, it
Speaker 1: would seem, and the PM has flagged this very clearly.
Speaker 1: If you're ever going to buy one. In terms of value,
Speaker 1: they are relatively better value than they were. That house again,
Speaker 1: the PM's house. He bought it for four point three
Speaker 1: three years ago. It sold for four point six. And
Speaker 1: there is discounted prices all around the country. I mentioned
Speaker 1: the Mornington Peninsula, which is outstanding in Victoria because Victoria,
Speaker 1: of course the whole market's week. So the holiday house
Speaker 1: market's going to be weaker because it does tend. They
Speaker 1: do tend to overdo it, don't they, James. They fly
Speaker 1: higher than the rest when things are going up, and
Speaker 1: they sink harder when everything else is dropping because they're discretionary. Really,
Speaker 1: are there any spots around the country you're aware of
Speaker 1: where there is relative value. Yeah.
Speaker 2: I'd say there's a lot of places in most states
Speaker 2: actually that are a regional and coastal that have weakened
Speaker 2: over the past couple of years due to the things
Speaker 2: that you've mentioned, with high interest rates, that reversal of
Speaker 2: working from home type trends, general cost of living pressure.
Speaker 2: People have been offloading those discretionary assets. And you can
Speaker 2: find good land with homes on it for less than
Speaker 2: half a million dollars in a lot of places, and
Speaker 2: The way that I purchased my holiday house on about
Speaker 2: one hour outside of Sydney was that it would be
Speaker 2: somewhere that I could downsize to in the future. So
Speaker 2: I locked in my retirement property in today's dollars rather
Speaker 2: than have to buy it down to the track. And
Speaker 2: we saw it because we didn't actually like the lifestyle
Speaker 2: up there. We preferred the hustle and bustle of Sydney.
Speaker 2: So we ended up purchasing and property on the low
Speaker 2: off shore that looks into the harbor and see the
Speaker 2: fireworks on New Year's Eve, and that really agreed with us.
Speaker 2: So having a holiday house, you need to think about
Speaker 2: why you're doing it. Is it because you want to
Speaker 2: enjoy it now with yourself, friends, family? Do you want
Speaker 2: to get capital growth? Do you want high income from it?
Speaker 2: Do you want to lock something in that you give
Speaker 2: yourself options that you can downsize into in the future.
Speaker 2: So in terms of where to buy, you.
Speaker 1: Might like to got under for your holidays. Let's not
Speaker 1: forget the original principle of the holiday home.
Speaker 2: True.
Speaker 1: Keep that in mind, folks, you might actually use it
Speaker 1: for holidays. It's ironic, isn't it. The people that have
Speaker 1: the drive perhaps, and the drive more than anything else,
Speaker 1: and the tempo to have multiple investments and have a
Speaker 1: holiday home are probably not the same people who can
Speaker 1: sit on the veranda for very long. That's one of
Speaker 1: the ironies of life. Okay, I hope that you found
Speaker 1: that interesting, folks. It's been something that I wanted to
Speaker 1: do for a long time. And thank you to the
Speaker 1: Prime Minister for triggering the notion of a show based
Speaker 1: on holiday homes, because I've been waiting to do it.
Speaker 1: Now we have some really good questions, so I want
Speaker 1: to move on to them pretty quickly, and they are
Speaker 1: actually quite properly focused, these questions, and James has seen them.
Speaker 1: So we're going to come back in a moment and
Speaker 1: we'll be covering those. Hello and welcome back to the
Speaker 1: Australians Money Puzzle Podcast James Kirkby with James Gerard. Okay,
Speaker 1: I'm going to I'll read out the first one James,
Speaker 1: and these first two questions they are a tiny bit specific,
Speaker 1: so I will say, first of all, we don't give
Speaker 1: advice on this show, and I will probably minimize some
Speaker 1: of the detail. I don't need this much detail, folks.
Speaker 1: When you send in your questions, Okay, here we go.
Speaker 1: The first question from James. I bought a regional house
Speaker 1: in a regional town for two seventy k. It's been
Speaker 1: geared ever since, low maintenance, probably worth five fifty now.
Speaker 1: Growth has been great, renting easy. That sounds good. How
Speaker 1: do I know when it's time to sell? That's a
Speaker 1: really good question that comes up all the time, and
Speaker 1: it's asked by so many people. That question, which I
Speaker 1: think actually is from Michelle. I'm sorry, Michelle. She says
Speaker 1: I'm on the highest tax backet, but love to have
Speaker 1: your thoughts, not advice. Never advise Michelle? When is it
Speaker 1: time to sell? Zillion dollar? A question? What would you say?
Speaker 1: If she? What would you see?
Speaker 2: I'd say to people generally who have investment properties and
Speaker 2: they're not sure and when to seal is why do
Speaker 2: you want to sell? And what happens if you sell?
Speaker 2: What are you going to do with the money? Is
Speaker 2: there a purpose non deductible debt against your house? Do
Speaker 2: you want to purchase another investment property? What's the outlook
Speaker 2: for the investment property that you hold? Will it continue
Speaker 2: to go up or do you think it's hit its
Speaker 2: peak and thus it might be a good time to sell.
Speaker 2: And also for people on the highest marginal tax bracket,
Speaker 2: they're going to have to pay twenty three and a
Speaker 2: half percent capital gains tax assuming that they've held the
Speaker 2: property for more than twelve months. There is a fifty
Speaker 2: percent discount off the forty seven percent, but still it's
Speaker 2: twenty three and a half. Alternatively, if people wait until
Speaker 2: they retire five ten years away, for someone in there
Speaker 2: their fifties or early sixties, and they don't have their
Speaker 2: employment income pushing them up into the highest marginal tax rate,
Speaker 2: if they then choose to sell the property, then they're
Speaker 2: going to pay a lot less capital gains tax. So
Speaker 2: you need to think about what you're going to do
Speaker 2: with the money. How much capital gains tax would you
Speaker 2: pay now if you're sold versus if you waited it
Speaker 2: and sell it down the track. So put all these
Speaker 2: things together and then you can make an informed decision.
Speaker 1: So if I buy a holiday house and I said
Speaker 1: I'm sixty four, I pay CGT. And if I retire
Speaker 1: and I said it when I'm sixty six, I paen
Speaker 1: noal CGT.
Speaker 2: Less CGT because you're you're starting income is zero, assuming
Speaker 2: that there's no other sources of income that you have
Speaker 2: for your tax return, whereas while you're working, the average
Speaker 2: worker makes one hundred thousand year, so they're reready in
Speaker 2: the thirty something percent tax bracket, and then the CGT
Speaker 2: gets added on top of that.
Speaker 1: Yep, all right, So it's something to consider. And income
Speaker 1: stream would be free of course too, wouldn't it. If
Speaker 1: you're the income. If you're getting twenty grand a year
Speaker 1: from the house or thirty or whatever, then pre retirement
Speaker 1: you pay income tax on your income, and post retirement
Speaker 1: you would possibly have no tax at all unless you're
Speaker 1: over at one point nine million assets. Yeah, is that
Speaker 1: how I got that right?
Speaker 2: Yeah, that's right. Personally you can earn depending on whether
Speaker 2: you're a singer or a couple. But in the ballpark
Speaker 2: of twenty five thousand a year when you apply tax
Speaker 2: offsets in terms of personal income and not pay any tax.
Speaker 2: And then if you have property in super you're right
Speaker 2: up to that one point nine million dollars of asset
Speaker 2: value in super you pay no capital gains tax. And
Speaker 2: just touch on something really quickly. It's interesting that holiday houses,
Speaker 2: even if you don't rent them out at all, there's
Speaker 2: still a CGT asset. There's no exemption there. You only
Speaker 2: get one exemption, which is your primary residence. And then
Speaker 2: holiday houses, even if you use as a personal asset,
Speaker 2: are still subject to capital gains tax.
Speaker 1: Okay, that's really interesting. Yeah, so keep that in mind, folks,
Speaker 1: really interesting approach, and always keep that in mind that
Speaker 1: your tax situation changes after you retire. So just consider
Speaker 1: that for a moment. It may be the case that
Speaker 1: you hadn't planned that or hadn't thought about that. That's
Speaker 1: two Michelle and all the Michows out there. Okay, So
Speaker 1: the next question is from andre A and d r
Speaker 1: z DJ. Would you like to read it?
Speaker 2: James, So, Andrea's rights. We bought a block of land
Speaker 2: in a small coastal town south of Perth, built a
Speaker 2: house on it fifteen years ago, and then thirteen years
Speaker 2: ago they bought the neighboring block of land and they
Speaker 2: amalgamated the two blocks together because they just wanted one
Speaker 2: set of rates and they were looking in at building
Speaker 2: a shed on the block, which Andres didn't do. We
Speaker 2: would also like a large garden and no rear neighbors.
Speaker 2: Fair enough, they're in a residential area. They're three hundred
Speaker 2: meters from the beach. They've got three thousand square meters
Speaker 2: of land. Property prices that are booming there. So Andre's
Speaker 2: question is around he knows that he can't sell a
Speaker 2: part of your house to raise cash, but what if
Speaker 2: he subdivided the land and sold off a piece. What
Speaker 2: do you have to pay capital gains tax on the
Speaker 2: part that he subdivided, which I assume would be that backyard,
Speaker 2: that second lot that they purchased. And then can they
Speaker 2: put some of the proceeds into his wife super And
Speaker 2: I'm assuming Andres's referring to the downsize of contribution, where
Speaker 2: you can put up to three hundred thousand dollars as
Speaker 2: a nonconcessional contribution if you've lived in your property for
Speaker 2: ten years. So it's really interesting. It's probably worthwhile getting
Speaker 2: advice from a tax accounter because it's quite a specialized
Speaker 2: situation here. But I would have thought generally that if
Speaker 2: you had two blocks of land you lived in a
Speaker 2: house on one you bought the other one made into
Speaker 2: your garden or looking to put a shed or something
Speaker 2: on it, you didn't generate any income from it. I
Speaker 2: would have thought that if you separated the get and
Speaker 2: sold the back part, there'd be no capital gains tax.
Speaker 2: But that's just my personal.
Speaker 1: Thoughts, because you're selling a part of your principal place
Speaker 1: of residence exactly place of residence enlarged that one point,
Speaker 1: which is entirely feasible. Okay, that's a guide on the situation,
Speaker 1: hypothetical situation where they occur. Listeners, and I'm sure you
Speaker 1: can all follow that. Okay, very interesting. Yeah, funny that
Speaker 1: never came up before. Okay, Gordon says, I'm the sure.
Speaker 1: Jackie C. Shark advised. Maybe she didn't advise Gordon. She
Speaker 1: said that you could get some basic advice from mates.
Speaker 1: From mates, I have a fairly decent grasp of finance,
Speaker 1: and says Gordon, I have my emergency funds sorted. I
Speaker 1: realize many of my friends haven't done this, and did
Speaker 1: at a point start providing some very generic advice. I
Speaker 1: asked a clarifying question in a closed Facebook group on
Speaker 1: something I had been doing. People who were all fairly
Speaker 1: clewed up, were very adamant that this could be interpreted
Speaker 1: as advice which I am not qualified to give. Since then,
Speaker 1: I've never offered this to friends. Where did the boundary
Speaker 1: line sit? Oh? Yes, million dollar question, Gordon look, there
Speaker 1: is advice, is there's general advice, and there is individual advice.
Speaker 1: So there is actually there is layers to it. But
Speaker 1: I wouldn't worry about advice from one person to another.
Speaker 1: If I meet my neighbor on the street and my
Speaker 1: neighbor says should I sell my house? I'm thinking of it,
Speaker 1: and I say, yeah, I go for it, that's not advice,
Speaker 1: and that's not formulated advice given on a statement of advice.
Speaker 1: There's no license in the seeing or whatever. That's casual
Speaker 1: that happens every day in every city. There is a
Speaker 1: at the other end of the spectrum. If you go
Speaker 1: into a financial advisor like James, fully qualified, fully credentioned,
Speaker 1: licensed in giving you advice, he has to go through
Speaker 1: an enormous amount of paperwork, this thing called the statement
Speaker 1: of advice, which is supposed to be clear or possibly
Speaker 1: dropped all together in this new regime being very slowly
Speaker 1: put through Parliament, but it remains a place for the moment.
Speaker 1: There's layers. Also, there is a general advice. Again, when
Speaker 1: we talked, we never talked specifically on the show. For instance,
Speaker 1: if Frank comes in with a question about his particular
Speaker 1: situation and he owns two houses and he wants to
Speaker 1: sell one. We don't talk about that one person. We
Speaker 1: talk about a character. If a person in Australia was
Speaker 1: in that situation, what they could do, and that is
Speaker 1: how we approached its information only. So I hope that's
Speaker 1: untangled things. Just from your perspective, James, as a qualified
Speaker 1: licensed advisor, is it dangerous for you if you're sitting
Speaker 1: on the train and someone you never met in your
Speaker 1: life stars talking to you and they say, I'm thinking
Speaker 1: of whatever? Are you? Actually? What happens if you say
Speaker 1: something to them?
Speaker 2: You're bound with liability to give them a statement of
Speaker 2: advice if you make statements to them which are of
Speaker 2: a personal advice nature. And the thing is that the
Speaker 2: vast majority of financial advisors really care about people and
Speaker 2: they just want to help people and they want to
Speaker 2: share the information and knowledge that they have, but unfortunately
Speaker 2: we have all this red tape and regulations and you
Speaker 2: hit the nail on the head with general versus personal.
Speaker 2: So someone sitting on the train and they say to me, James,
Speaker 2: what do you think of ETFs? So they a good
Speaker 2: idea and should I should? And tell me about salary
Speaker 2: sacrifice as well? I can talk about that. Yep, these
Speaker 2: what ETFs are, basket of stocks blah blah blah. This
Speaker 2: is what salary sacrifice is. Thirty thousand per year limits
Speaker 2: catch up concessionals and they go, oh, do you think
Speaker 2: I should buy some ETFs? And do you think that
Speaker 2: I should salary sacrife in the superb Then that's where
Speaker 2: the line is drawn. I can't respond to that.
Speaker 1: No, but you can't. You could say many Australians like ETFs,
Speaker 1: so are many Australians sacrifice into super and it works
Speaker 1: for many Australians, etc. And basically turned that into a
Speaker 1: generic but not a particular or an individual conversation. I
Speaker 1: hope that's useful to you, Gordon. It's interesting. Now, perfect
Speaker 1: segue into the next question, which brings up this subject. David,
Speaker 1: who would you like to read that one? James?
Speaker 2: Sure? David right. So, I enjoyed your recent show and
Speaker 2: declining numbers of financial advisors and the increasing advisor fees
Speaker 2: to me, the financial advice regulations are an example of
Speaker 2: why over the zealous regulation is flatlining productivity. More generally
Speaker 2: in Australia. We recently asked our financial advisor of almost
Speaker 2: twenty years if we should switch our superinnuation to the
Speaker 2: pension phase. We receive back a statement of advice of
Speaker 2: twenty six pages plus three other compliance documents. Of the
Speaker 2: twenty six pages, six were relevant, the rest were complying.
Speaker 2: It could have been written in two pages, including modeling.
Speaker 2: In David's opinion, David's question is what happened to the
Speaker 2: Michelle Levy Quality of Financial Advice Review?
Speaker 1: Indeed, indeed, so there's the statement of advice we're talking about,
Speaker 1: and the only thing to say to you, David is
Speaker 1: that your advisor was probably just as I knowed about
Speaker 1: that statement as you were. They must buy load do that,
Speaker 1: they must buy load do that. This is the problem.
Speaker 1: What happened to Michelle's Quality of Advice review is that
Speaker 1: the government orchestrated a potential new regime for financial advice
Speaker 1: called Delivering Better Outcomes, but they broke it into phases.
Speaker 1: The first phase is through, but it's some very minor
Speaker 1: red tape clear ups and some small issues to do
Speaker 1: with big super funds. But the big changes remain on,
Speaker 1: not through Parliament and not put in yet. There's a
Speaker 1: variety of things. They are much greater simplification of advice,
Speaker 1: including the removal of that statement of advice for something else,
Speaker 1: allowing big super funds to really get in and give
Speaker 1: advice in the way that we are as we know it.
Speaker 1: That still coming down the lines. That's where we are
Speaker 1: on all that. Hey, thank you very much, James. Very
Speaker 1: interesting to hear your views. I knew that I knew
Speaker 1: that you'd be good on this one because you've been
Speaker 1: in one door and out the other on that. And
Speaker 1: if ever there was a time to do the holiday
Speaker 1: home show, this was it. So thanks very much, my pleasure.
Speaker 2: Thanks James.
Speaker 1: Great to have you on. Okay, folks. On Thursday, I'm
Speaker 1: having I am having Alex Moffat on the anniversary of
Speaker 1: the Great Stockmore market crash, the Great Crash of nineteen
Speaker 1: eighty seven. He was on the floor trading as a
Speaker 1: stockbroker when it happened. Not many people around that can
Speaker 1: really give us a clear view of what it's like
Speaker 1: to wake up in the morning with the twenty five
Speaker 1: percent drop overnight in the value of your shares. It's
Speaker 1: something everyone should know could happen again. And I want
Speaker 1: to talk about that. This is coming Thursday, but Alex
Speaker 1: so looking forward to that. Let's have some questions, observations, comments,
Speaker 1: love to have them. The Money Puzzle at the Australian
Speaker 1: dot com dot au is the email and do mention
Speaker 1: us to any of your friends that you'd like to show.
Speaker 1: That would be really good and we'd appreciate that and
Speaker 1: talk to you soon