WEBVTT - Warning on 'Free Super Reviews' 0:00:12.880 --> 0:00:15.960 Hello and welcome to The Australian's Money Puzzle podcast. I'm 0:00:16.040 --> 0:00:19.400 James Kirby. Welcome aboard everybody. If you're trying to figure 0:00:19.440 --> 0:00:23.320 out if or when the new supertax may affect you, well, 0:00:23.360 --> 0:00:27.080 the first thing to tell you is this, this completely 0:00:27.160 --> 0:00:30.960 daft new tax. Most likely it's going to be delayed. 0:00:31.480 --> 0:00:34.400 More than that, it's unlikely to work as the government planned, 0:00:34.440 --> 0:00:37.479 and we'll tell you how that is in a moment. 0:00:37.720 --> 0:00:42.720 We also need to warn you about three super reviews. 0:00:42.760 --> 0:00:44.479 You may not have heard of them, but you may 0:00:44.520 --> 0:00:47.239 have heard of the first Guardian scandal, which is breaking 0:00:47.280 --> 0:00:50.640 literally and unfolding as we speak. I also have an 0:00:50.680 --> 0:00:53.760 exceptionally good batch of questions from listeners this week, and 0:00:53.840 --> 0:00:56.360 to help me with all this is an exceptionally good 0:00:56.560 --> 0:01:02.440 financial advisor. It's Liam Short of the Saunas Wealth Group. 0:01:02.480 --> 0:01:03.200 How are you Liam? 0:01:03.480 --> 0:01:05.440 Fine? Thank you, James. Great to be richer again. 0:01:05.800 --> 0:01:08.240 Our listeners are familiar with the basics. Here right, there's 0:01:08.240 --> 0:01:10.600 a new super tax. It's supposed to be coming in. 0:01:10.840 --> 0:01:12.679 Here's the thing. Here's the first thing to tell you, folks. 0:01:12.680 --> 0:01:15.200 It's supposed to come in and be started basically, be 0:01:15.280 --> 0:01:19.160 effective from July one this year. Here we are, it's 0:01:19.280 --> 0:01:22.080 mid August. No sign of it, by the way, no 0:01:22.120 --> 0:01:25.320 sign of it even on the lists in Parliament. There 0:01:25.360 --> 0:01:27.800 is no deal done on this yet. There is no 0:01:27.920 --> 0:01:30.959 detail on this yet. So there's a lot basically to 0:01:30.959 --> 0:01:33.280 get a handle on. But I think Liam, there's a 0:01:33.319 --> 0:01:35.920 couple of things that you wanted to clarify with people. 0:01:36.319 --> 0:01:41.240 I'll explain to listeners why legislative Lee it's delayed, and 0:01:41.280 --> 0:01:44.319 you might tell us the realities of being an advisor, 0:01:44.360 --> 0:01:46.600 of being an investor in this area. So, folks, in 0:01:46.680 --> 0:01:49.200 terms of Parliament, there's no sign of it yet. It's 0:01:49.240 --> 0:01:51.720 not listed. As you know, the Economic Summit is on 0:01:52.080 --> 0:01:55.760 next week on the nineteenth of August, so it's unlikely 0:01:55.840 --> 0:01:58.320 to be dropped, you know, through that or before that. 0:01:58.800 --> 0:02:01.040 So it's a question of when they actually get the 0:02:01.240 --> 0:02:03.720 legislation through. If they do, there's going to be a 0:02:03.760 --> 0:02:06.800 fair bit of backdating about it. But we have to 0:02:06.880 --> 0:02:08.679 work on the basis that it is going to happen 0:02:08.720 --> 0:02:12.680 because they've got they've got the election mandate to do so. 0:02:12.680 --> 0:02:15.720 So Lim is just going to explain now, assuming it's 0:02:16.040 --> 0:02:18.280 coming in later than we think. There's also some aspects 0:02:18.280 --> 0:02:20.800 Lim you were telling me during the week, which is 0:02:21.520 --> 0:02:25.160 that SMSFS, which is the main target of this new tax, 0:02:25.360 --> 0:02:29.359 they don't file returns in the day on file. It's 0:02:29.360 --> 0:02:32.040 not like Australian super comes out in August and says 0:02:32.160 --> 0:02:34.760 here's our results to the year end of July, a 0:02:34.760 --> 0:02:39.639 week or two afterwards. I mean roughly when do SMSF 0:02:39.720 --> 0:02:42.640 results come in? How many months after the close of 0:02:42.680 --> 0:02:43.959 financial year do they come in? 0:02:45.040 --> 0:02:48.240 Usually nine to eleven months. Eleven months is a maximum. 0:02:48.240 --> 0:02:51.119 They must be in by May of the following tax year. 0:02:51.560 --> 0:02:55.239 But because with SMSFS and like your personal taxes, a 0:02:55.240 --> 0:02:58.440 lot of deductions, there's a lot of rental statements, you've 0:02:58.440 --> 0:03:01.000 got to get valuations on proper and things like that, 0:03:01.280 --> 0:03:04.360 it's often, you know, March April May of the next 0:03:04.440 --> 0:03:07.400 year that the financials are available. You know. So, for example, 0:03:07.400 --> 0:03:09.880 if we're trying to plan for this division two ninety six, 0:03:10.400 --> 0:03:12.520 if it's coming in on first of July twenty five, 0:03:12.880 --> 0:03:14.440 in a lot of cases we may not have the 0:03:14.480 --> 0:03:17.240 figures we need to work with until March or April 0:03:17.280 --> 0:03:20.040 next year, and that leaves us two months to the 0:03:20.120 --> 0:03:22.400 end of the year. Because thirty June twenty twenty six 0:03:22.560 --> 0:03:25.560 is the crucial date on when that three million cap. 0:03:26.639 --> 0:03:30.040 They're going to start collecting. Basically from July one, twenty 0:03:30.080 --> 0:03:33.360 twenty six, they're going to start collecting the revenue from 0:03:33.440 --> 0:03:35.640 this tax for the previous twelve months, being the twelve 0:03:35.680 --> 0:03:38.080 months we're in. Here's the problem, six weeks of it 0:03:38.240 --> 0:03:42.600 or have already passed as the legislative delay problem. And 0:03:42.640 --> 0:03:45.960 then on top of that is liam Is saying SMSF 0:03:46.120 --> 0:03:50.320 don't file their returns generally for a long time after 0:03:50.360 --> 0:03:53.080 the end of the financial year. Look, you're looking roughly 0:03:53.480 --> 0:03:55.960 at next May when they're coming in. I got to 0:03:56.000 --> 0:03:59.200 tell you there I see no chance on earth that 0:03:59.280 --> 0:04:04.800 this news will operate as planned by the government knowing 0:04:04.840 --> 0:04:07.680 what we know just now. That's a logjam. Is that 0:04:07.720 --> 0:04:10.080 a fair description of what's coming down on this one? 0:04:10.480 --> 0:04:12.800 Look, it will be a logjam. But my fear is 0:04:12.800 --> 0:04:15.760 that they they want to put it in on first 0:04:15.800 --> 0:04:18.520 of July twenty twenty five. That keep saying we told 0:04:18.560 --> 0:04:21.200 you about this in twenty twenty three, But you can't 0:04:21.240 --> 0:04:24.560 expect people to make decisions about their finances until they 0:04:24.560 --> 0:04:26.919 see the legislation. As you said that they've not agreed 0:04:26.920 --> 0:04:29.919 it totally yet, but if they need to change it 0:04:29.960 --> 0:04:32.680 from one twenty five to one twenty six, that may 0:04:32.720 --> 0:04:36.760 require them to go back and redo the legislation, which 0:04:36.760 --> 0:04:38.200 they don't want to do. So I think they're going 0:04:38.240 --> 0:04:40.599 to be really stubborn and try and push it through 0:04:40.600 --> 0:04:43.680 on one July twenty five, and it's looking that that 0:04:43.760 --> 0:04:48.080 won't be until the October sitting of Parliament, so you're 0:04:48.160 --> 0:04:50.120 talking five months into the text here. 0:04:50.680 --> 0:04:53.640 Wow, we really are looking at trouble here. But for 0:04:53.880 --> 0:04:57.520 most listeners, Liam, I think the important thing is not 0:04:57.600 --> 0:05:01.000 everyone's gonna be in this catchment, right, So fair enough, 0:05:01.160 --> 0:05:03.000 not everyone has three million super. In fact, only a 0:05:03.040 --> 0:05:05.680 minority of people have three million super. But I think 0:05:05.680 --> 0:05:07.440 what's really interesting that needs to be understood that a 0:05:07.480 --> 0:05:09.479 lot of people are worried about it, and they're worried 0:05:09.480 --> 0:05:11.359 that they'll be affected by it, or they're worried that 0:05:11.360 --> 0:05:13.520 in twenty years they'll be affected by it, et cetera, 0:05:13.560 --> 0:05:17.880 and that they are entirely reasonable fears because it's not indexed, 0:05:17.960 --> 0:05:21.240 because it's poorly understood, because it's poorly legislated, it is 0:05:21.320 --> 0:05:25.880 poorly designed, and now it's poorly executed before it even 0:05:25.880 --> 0:05:29.240 gets going but the point you've really been keen to 0:05:29.279 --> 0:05:33.440 make to your own people and your clients who come 0:05:33.440 --> 0:05:36.880 in because they are in that frustrated position like everyone 0:05:36.960 --> 0:05:40.800 that's saying, how does it all work? Just reiterate, would 0:05:40.839 --> 0:05:43.760 you for our listeners about this, that it's wrong to 0:05:43.760 --> 0:05:47.680 say it's and it's a thirty percent that fifteen percent 0:05:47.760 --> 0:05:51.200 tax suddenly doubles thirty percent. We've got all sorts of 0:05:51.200 --> 0:05:55.560 misapprehensions about it. It's a completely new tax done in 0:05:55.560 --> 0:05:57.960 a completely new way that sits on top of the 0:05:58.160 --> 0:06:01.600 entire tax structure that exists. Have I got that part right? 0:06:02.520 --> 0:06:06.000 Yeah? So basically, you have your normal income tax in 0:06:06.000 --> 0:06:08.960 your SMSF, so in your accumulation you pay up to 0:06:09.000 --> 0:06:12.800 fifteen percent. In pension phase you pay nil, and you 0:06:12.839 --> 0:06:15.400 actually get a refund of franking credits. So it's really nice. 0:06:15.560 --> 0:06:19.120 So somebody could have three million in their superfund. They 0:06:19.120 --> 0:06:21.360 can have up to two million at the moment in 0:06:21.440 --> 0:06:24.880 pension phase transferred to pension phase, and that can grow. 0:06:25.080 --> 0:06:27.720 So you could have that portion two thirds of your 0:06:27.760 --> 0:06:31.600 current balance paying no tax whatsoever if income tax, and 0:06:31.960 --> 0:06:34.960 maybe you know, one third of it paying fifteen percent. 0:06:35.240 --> 0:06:37.719 So that's the income tax in the superfund, the new 0:06:37.760 --> 0:06:40.600 division two ninety six. It's a personal tax. It's not 0:06:40.680 --> 0:06:43.320 a tax on the superfund. It's a tax on your 0:06:43.360 --> 0:06:46.960 personal balance in the superfund, and it applies to the 0:06:47.080 --> 0:06:50.800 growth in earnings on the balance over three million. So 0:06:51.200 --> 0:06:54.200 and the portion of that growth that applies of the 0:06:54.240 --> 0:06:56.559 earnings that apply to the amount that's over the three million. 0:06:56.600 --> 0:06:58.960 So if you've got three million in year account at 0:06:59.040 --> 0:07:01.840 started a year, four million, at the end of the year, 0:07:02.200 --> 0:07:06.440 you've had one million, using simply say one million growth. 0:07:06.880 --> 0:07:10.880 So then your tax to fifteen percent on twenty five 0:07:10.920 --> 0:07:12.120 percent of that one million. 0:07:12.480 --> 0:07:14.040 Let me see, I assume I'm a listener, right, and 0:07:14.040 --> 0:07:16.240 I've been hanging on there really trying to understand it. 0:07:17.360 --> 0:07:21.720 In super once you retire, et cetera, you don't pay 0:07:21.840 --> 0:07:24.920 tax on your earnings until you get to two million. 0:07:25.840 --> 0:07:28.840 Once it's over two million, you pay fifteen percent on 0:07:28.920 --> 0:07:29.880 those earnings. 0:07:30.240 --> 0:07:33.680 No, you can move two million to pension phase and 0:07:33.720 --> 0:07:37.040 your pension can grow, so it's you only pay You 0:07:37.040 --> 0:07:40.520 pay no tax on the two million plus any growth 0:07:40.520 --> 0:07:41.760 in that portion of it. 0:07:43.000 --> 0:07:46.320 Okay, so once you up to two million, you don't 0:07:46.360 --> 0:07:49.480 pay tax. By the way, once the two million is in. 0:07:49.520 --> 0:07:51.640 It can keep growing. This is just trying to keep 0:07:51.640 --> 0:07:54.000 it simple. Now the government have come in and said, 0:07:54.040 --> 0:07:55.520 hang on a second, we're going to we're going to 0:07:55.920 --> 0:07:59.720 raft up the tax higher on super and up to 0:07:59.760 --> 0:08:02.600 two million that is the transfer balance, that is the 0:08:02.640 --> 0:08:04.920 amount you start to pension on. And it can keep growing, right, 0:08:04.920 --> 0:08:07.360 But just for to keep some sense of logic here, 0:08:07.880 --> 0:08:12.640 up to two million, it's tax free. Over two million, 0:08:12.720 --> 0:08:16.760 the earnings become fifteen percent and new rule is coming in, 0:08:16.760 --> 0:08:20.080 which is once it's over three million, another fifty to 0:08:20.080 --> 0:08:25.000 fifteen percent tax has arrived. But it's a bit more 0:08:25.040 --> 0:08:28.800 than two Fifteen's make thirty because the new tax division 0:08:28.840 --> 0:08:31.440 two nine six is a completely new tax. It's also 0:08:31.480 --> 0:08:35.280 based on on realized gains, which is the movement in 0:08:35.320 --> 0:08:39.240 your balance over the year. But the tax as such 0:08:39.559 --> 0:08:44.920 only applies to the earnings of the little bits that 0:08:45.040 --> 0:08:48.960 are over three the earnings on the amounts over three. My, 0:08:49.120 --> 0:08:50.960 oh my, how do they come up with this? I mean, 0:08:50.960 --> 0:08:54.240 it's already a very complicated system. It must be marvelous 0:08:54.240 --> 0:08:56.319 for people like you. You've got work for the rest 0:08:56.320 --> 0:08:58.120 of your life. You could get harder fifty people. 0:08:58.120 --> 0:09:02.319 Tomorrow's looking like that. At the moment, it is very complicated, 0:09:02.320 --> 0:09:04.840 but look, we are coming out with calculators there are 0:09:05.400 --> 0:09:07.440 We are trying to show people what the effects are. 0:09:07.720 --> 0:09:12.000 And my main thing to people to say, plan, but 0:09:12.120 --> 0:09:15.600 don't move at the moment. Don't do any rush movements. 0:09:15.679 --> 0:09:18.280 Let's get the legislation in place. We can show you 0:09:18.400 --> 0:09:21.079 roughly at the moment some of the outcomes in different scenarios. 0:09:21.080 --> 0:09:24.160 If you're funded really well and had major growth or 0:09:24.280 --> 0:09:26.600 had you're just small bro, we can give you an 0:09:26.600 --> 0:09:28.440 idea of what the tax is going to be so 0:09:28.480 --> 0:09:29.679 that you don't need to panic. 0:09:30.080 --> 0:09:31.839 I understand what you say, don't panic, and you should 0:09:31.840 --> 0:09:35.600 never panic anyway as an investor. But why do you 0:09:35.720 --> 0:09:38.320 say don't do anything because it's going to happen, right 0:09:38.360 --> 0:09:41.080 They've been re elected. It's in front of parliament. It's 0:09:41.120 --> 0:09:42.600 only a question of the details. 0:09:42.800 --> 0:09:45.360 The main thing to understand is that it's the thirty 0:09:45.480 --> 0:09:48.960 to June twenty twenty six balance that desides whether you're 0:09:49.480 --> 0:09:52.480 going to be affected by this tax. If you can 0:09:52.520 --> 0:09:55.520 do something before thirty of June twenty twenty six to 0:09:55.600 --> 0:09:58.720 get your balance below three million on that date, you 0:09:58.760 --> 0:10:00.000 forget about the tax completely. 0:10:01.280 --> 0:10:04.040 Yeah, okay, and justice only on one other thing, Leon, 0:10:04.040 --> 0:10:06.600 which is so important. As you pointed out, this is 0:10:06.600 --> 0:10:10.440 a new tax. It's based on on realized gains, and 0:10:10.480 --> 0:10:12.720 it's a personal tax. The way to understand it, I 0:10:12.720 --> 0:10:15.960 think if anyone is already paying Division two ninety three, 0:10:16.600 --> 0:10:21.400 where you get basically penalized for a high income if 0:10:21.440 --> 0:10:24.360 you contribute to super. The way those bills come in 0:10:24.440 --> 0:10:26.800 is you get a bill as a person and you 0:10:26.840 --> 0:10:28.520 can pay it as a person, or you can pay 0:10:28.520 --> 0:10:31.240 it out of your super fund. And this new one, 0:10:31.360 --> 0:10:34.160 this three million tax, will be the same. You can 0:10:34.200 --> 0:10:36.680 pay it as a person or you can pay it 0:10:36.679 --> 0:10:38.720 out of your super fund. But you got to pay 0:10:38.720 --> 0:10:42.040 it as first thing, and you can carry it forward, 0:10:42.520 --> 0:10:44.840 for instance, if you have losses, you can carry the 0:10:44.920 --> 0:10:49.160 losses forward like just like CGT for instance. So that's 0:10:49.200 --> 0:10:52.760 another parallel. I think that's there's some logical elements to this, 0:10:52.960 --> 0:10:56.839 but it is as I say, it's staffed. There was 0:10:56.920 --> 0:10:58.800 easier ways to bring in a new tax for people 0:10:58.840 --> 0:11:00.679 who have a lot of money and super Why they 0:11:00.720 --> 0:11:04.240 went to such extraordinary lengths to make it complicated, I 0:11:04.240 --> 0:11:07.960 don't know, Liam, and I think we understand it. We 0:11:08.040 --> 0:11:09.640 did our best in that segment. I hope it was 0:11:09.720 --> 0:11:12.520 useful to you. Something much easier to understand coming up 0:11:12.520 --> 0:11:16.080 in our second segment, which is free reviews of Super? 0:11:16.440 --> 0:11:18.640 Have you been offered a free review of Super? Have 0:11:18.720 --> 0:11:21.120 you seen adverts? Have you seen promotions on the internet? 0:11:21.200 --> 0:11:24.080 What are they? Should you go near them? Back in 0:11:24.080 --> 0:11:35.480 a moment, Hello and welcome back to the Australians Money 0:11:35.480 --> 0:11:38.640 Puzzle podcast. Only someone like Liam Short could even have 0:11:38.800 --> 0:11:42.840 walked the title we just walked explaining the new supertext 0:11:42.840 --> 0:11:46.720 there in segment one. Much easier to understand the dangers 0:11:46.720 --> 0:11:51.200 of the second segment theme, which is free Super reviews. 0:11:51.920 --> 0:11:54.160 Nothing in life is free, Liam, tell us about these 0:11:54.440 --> 0:11:56.240 free Super reviews? What have you got to say? 0:11:56.840 --> 0:11:59.680 Yeah? Look, Super innuation is a big honeypop. There's a 0:11:59.679 --> 0:12:02.199 lot of people looking to make some money out of it. Okay, 0:12:02.240 --> 0:12:04.880 so what's But what's happening now is the drive of 0:12:04.960 --> 0:12:08.920 social media and call calls. There are now marketing firms 0:12:09.000 --> 0:12:12.199 running these systems. Okay, what they do is they're offering 0:12:12.200 --> 0:12:14.760 you a free review. They're offering you know, telling you 0:12:14.800 --> 0:12:16.679 that you know you should compare your Super. It's a 0:12:16.920 --> 0:12:19.600 responsible thing to do. But what they do then is 0:12:19.640 --> 0:12:23.120 they funnel you They sell you to another advisor, to 0:12:23.200 --> 0:12:26.840 an advisor, okay. In often in these cases it's actually 0:12:26.840 --> 0:12:30.640 a marketing firm that's actually connected specifically to an advice group, 0:12:30.880 --> 0:12:34.600 and that's what happened with First Guardian. So basically they 0:12:34.760 --> 0:12:37.319 pre sell you that you must do the review, and 0:12:37.559 --> 0:12:39.440 they tell you that they've done the review and you 0:12:39.440 --> 0:12:41.680 can do much better. Let us put you in touch 0:12:41.720 --> 0:12:44.319 with an advisor. And then suddenly put in touch with 0:12:44.360 --> 0:12:46.720 an advisor, and they will be charging you a fee 0:12:46.920 --> 0:12:51.079 for what for to actually move you to a better fund. Now, 0:12:51.120 --> 0:12:53.280 in a lot of cases when they're connected like these, 0:12:54.000 --> 0:12:57.280 they're recommending you're going to funder a platform where they're 0:12:57.320 --> 0:13:00.400 managing the investments, and they're saying that they can do 0:13:00.440 --> 0:13:02.440 better than you've done in your industry fund or your 0:13:02.480 --> 0:13:05.840 retail fund. What they're doing is they're basically, you know, 0:13:05.960 --> 0:13:08.720 they're clipping the ticket along the way on everything. Okay, 0:13:08.800 --> 0:13:12.840 And then often with the investments that they're recommending, they 0:13:12.840 --> 0:13:15.360 don't have a major track record. So I'm saying that 0:13:15.400 --> 0:13:17.760 people look at the five, seven, and ten year track 0:13:17.800 --> 0:13:20.880 record of your superfund before you start considering going to 0:13:20.920 --> 0:13:24.680 anybody who's promising you anything, because in truth, we're advisors, 0:13:24.679 --> 0:13:28.160 we're you know, we can't determine how the market's going 0:13:28.240 --> 0:13:31.480 to perform. But if you've been in an industry fund 0:13:31.520 --> 0:13:33.480 or a retail fund that's delivered more than seven and 0:13:33.520 --> 0:13:35.160 a half r eight and a half percent per year 0:13:35.800 --> 0:13:38.800 for the last five or seven years, yeah, your first 0:13:38.840 --> 0:13:41.640 question is why why should I move? Why would I move? 0:13:42.280 --> 0:13:44.480 And the problem is we've seen a lot of these 0:13:44.559 --> 0:13:46.640 have moved to scams. 0:13:47.160 --> 0:13:49.199 It's terrible, isn't it. I mean, you've got to say that. 0:13:49.360 --> 0:13:52.439 The first thing is there's nothing free, right, So if 0:13:52.480 --> 0:13:55.920 someone approaches you, or more typically a promotion is put 0:13:56.000 --> 0:13:58.720 in front of you, possibly on social media, on the 0:13:58.720 --> 0:14:04.160 internet and a free superview, you first question, why am 0:14:04.200 --> 0:14:07.760 I being offered something for free? Nothing's free in financial services. 0:14:07.960 --> 0:14:11.080 Number two, let's even assume that they review, and let's 0:14:11.120 --> 0:14:17.000 even assume that the fund is below average, Well where 0:14:17.000 --> 0:14:19.480 are they going to send you? Are you making the 0:14:19.560 --> 0:14:22.840 decision or are they making the decision? Why did they 0:14:22.840 --> 0:14:24.840 do it in the first place. There's no way they're 0:14:24.880 --> 0:14:26.320 doing it out the goodness of their hearts. 0:14:26.360 --> 0:14:30.160 Liam not what the amount of compliance that we have 0:14:30.200 --> 0:14:31.800 to do nowadays, the amount of work we have to 0:14:31.800 --> 0:14:34.040 do to on board a client. Nothing's for free. 0:14:34.880 --> 0:14:36.480 They're doing it because they want to send you to 0:14:36.520 --> 0:14:39.320 something else. This is as soft as we can be 0:14:39.440 --> 0:14:41.680 on this because we don't want to be sued by anyone. 0:14:42.080 --> 0:14:44.240 But they are doing it to get you to change 0:14:44.280 --> 0:14:46.720 your ways. They're not asking you to review your super. 0:14:46.760 --> 0:14:49.080 They're asking you to move your super and find justification 0:14:49.200 --> 0:14:51.680 for it. And the big question is where are they 0:14:51.720 --> 0:14:54.640 asking you to move to? And we have evidence of 0:14:54.760 --> 0:14:56.960 late in the first guard in super collapse, which is 0:14:57.000 --> 0:15:01.920 the worst collapse we've seen this century in Australian financial services, 0:15:01.920 --> 0:15:04.680 still unfolding, and this was going on in the middle 0:15:04.720 --> 0:15:06.680 of that collapse, was it Yep? 0:15:06.800 --> 0:15:10.520 And so they were not just targeting people in retail 0:15:10.520 --> 0:15:14.040 funds or they were targeting everybody. They had a solution 0:15:14.120 --> 0:15:17.960 for everybody, and that solution was funneling it into their funds. 0:15:18.240 --> 0:15:20.320 I bet they never said we've reviewed your super and 0:15:20.480 --> 0:15:23.600 everything's fine. That's it, say where you are. 0:15:24.440 --> 0:15:26.520 So one of the tips I would say to people is, 0:15:27.120 --> 0:15:30.240 if you go with one of these people, give somebody 0:15:30.320 --> 0:15:32.120 else a third party you call, even if it's just 0:15:32.240 --> 0:15:35.120 your super fund or go to chant West and run 0:15:35.160 --> 0:15:38.320 a comparison of your superfund with some other ones, just 0:15:38.360 --> 0:15:40.840 to see how it's been performing over the years. You 0:15:40.840 --> 0:15:42.280 can do these for free. 0:15:42.400 --> 0:15:45.520 Yes, for free. Oh look, folks, even easier. I mean 0:15:45.640 --> 0:15:48.640 just go on to your pet AI, sit or Google 0:15:48.720 --> 0:15:52.200 and say what was the median return of the average 0:15:52.200 --> 0:15:55.960 Australian super fund last year? And if your number is 0:15:55.960 --> 0:15:59.480 anywhere near that then I'd be really slow to move. 0:16:00.160 --> 0:16:02.760 That's not hard, it doesn't cost anything, it's free. We'll 0:16:02.800 --> 0:16:04.440 take a break. We've got some great questions back in 0:16:04.440 --> 0:16:18.800 a moment. Hello, Welcome back to the Australians Money Puzzle Podcast. 0:16:18.920 --> 0:16:23.040 James Kirby here with Liam short sho Orte of the 0:16:23.240 --> 0:16:26.800 Sounas Wealth Group. Now, in the first segment we were 0:16:26.840 --> 0:16:29.760 talking about the new supertax. The main point I wanted 0:16:29.760 --> 0:16:31.720 to make to you there, folks, I want to make 0:16:31.720 --> 0:16:33.240 to you is that this is going to be delayed. 0:16:33.720 --> 0:16:37.320 It's going to run much later than people realized. We're 0:16:37.360 --> 0:16:39.600 already well into the first year in which it's supposed 0:16:39.640 --> 0:16:42.640 to be effectively operating, and that the legislation hasn't even 0:16:42.640 --> 0:16:45.440 been put through parliament. Part one, Part two was that 0:16:45.480 --> 0:16:49.120 Liam makes the point which probably hasn't been med enough. 0:16:49.800 --> 0:16:52.800 It isn't that the high wealth end of super the 0:16:52.880 --> 0:16:56.320 taxes go from fifteen to thirty percent. That's not the 0:16:56.360 --> 0:16:58.600 way to think about it. The way to think about 0:16:58.600 --> 0:17:01.160 it is, there is an existing tax of fifteen percent 0:17:01.320 --> 0:17:04.000 up to two million. They are introducing a new one 0:17:04.880 --> 0:17:09.200 where over three there's an existing tax of fifteen percent. 0:17:09.280 --> 0:17:11.840 Over two million, they're introducing a new one where over 0:17:11.960 --> 0:17:15.399 three million, a whole new tax comes in. It happens 0:17:15.400 --> 0:17:19.040 to be at fifteen percent, but it's based on unrealized gains. 0:17:19.560 --> 0:17:22.399 It comes in a different way. You literally get a statement. 0:17:22.440 --> 0:17:24.159 You're going to get a statement in the post or 0:17:24.240 --> 0:17:28.360 through the email which says you've got a Division two 0:17:28.440 --> 0:17:31.159 nine six tax bill. This is what it is because 0:17:31.160 --> 0:17:33.960 you had these earnings on these amounts of over three million, 0:17:34.200 --> 0:17:37.200 and we want it now. It's a personal tax paid 0:17:37.240 --> 0:17:40.480 by you. If you can't get it from your cassion, 0:17:40.560 --> 0:17:41.879 the bank, you've got to take it out of your 0:17:41.920 --> 0:17:44.439 super fund. That's how it's going to work. This is 0:17:44.440 --> 0:17:47.280 why people are so upset about this fund. This is 0:17:47.560 --> 0:17:52.200 super change to super funds because it's in a whole 0:17:52.240 --> 0:17:56.840 new tax methodology basically being applied to super which was 0:17:56.960 --> 0:18:00.480 never seen before, unrealized gains. That's what you want from 0:18:00.560 --> 0:18:03.680 Jeff Wilson across to Liam, who's with me today is 0:18:03.680 --> 0:18:07.680 annoyed about all right? Questions, Evan, can you explain the 0:18:07.760 --> 0:18:11.240 types of trust briefly and what they're used for, Unit trust, 0:18:11.320 --> 0:18:16.359 investment trust, and discretionary trust in particular, could you briefly 0:18:16.480 --> 0:18:19.679 explain the difference between those key trusts, because people do 0:18:19.800 --> 0:18:22.760 talk about trusts loosely, Liam. 0:18:22.880 --> 0:18:25.719 So a unit trust probably a good example of that 0:18:25.840 --> 0:18:29.640 is a managed fund like a Platinum or a Magellan, 0:18:29.680 --> 0:18:32.240 where you buy units in the trust and you get 0:18:32.240 --> 0:18:35.080 a share of profits for that year based on your 0:18:35.160 --> 0:18:37.719 units in the trust. On a smaller scale, it might 0:18:37.760 --> 0:18:41.040 be something like three business partners open a trust to 0:18:41.080 --> 0:18:43.679 own their business and each owned thirty three percent. So 0:18:43.720 --> 0:18:46.960 it's a fixed demand and profits are divided that way, 0:18:47.280 --> 0:18:49.880 so it's fixed. If they want to bring a new capital, 0:18:50.040 --> 0:18:52.080 new units are issued to the person that brings in 0:18:52.080 --> 0:18:55.280 the new capital. Okay, So that's the basic fixed trust. 0:18:55.560 --> 0:18:59.480 What we see more often used nowadays is called discretionary 0:18:59.480 --> 0:19:04.120 trusts or family trusts, and that's where the trustee each 0:19:04.200 --> 0:19:06.919 year chooses who the beneficiaries will be to receive the 0:19:06.920 --> 0:19:09.800 trust income and any capital distributions, and they do that 0:19:09.840 --> 0:19:13.760 on an annual basis, so it's at the full discretion 0:19:13.840 --> 0:19:15.919 of the trustee to decide who to do it. So 0:19:16.000 --> 0:19:18.760 if there's mom and dad and say an eighteen year 0:19:18.800 --> 0:19:21.359 old in university and a thirty year old who's a 0:19:21.400 --> 0:19:24.920 lawyer on big income, the parents might go, okay, well, 0:19:24.920 --> 0:19:27.919 we'll allocate a certain amount to mom and dad up 0:19:27.960 --> 0:19:30.800 to say the limit of the thirty thirty percent tax 0:19:30.840 --> 0:19:33.080 bracket at one hundred and thirty five. Then they will 0:19:33.080 --> 0:19:36.600 allocate to the eighteen year old because they've they're earning 0:19:36.880 --> 0:19:39.560 very little or you know, and they allocates of money 0:19:39.600 --> 0:19:42.879 to them, and they'll decide not to allocate anything to 0:19:42.920 --> 0:19:44.800 the thirty year old because they're already on a big 0:19:44.880 --> 0:19:48.040 taxable income. So the idea is you've got that discretion 0:19:48.200 --> 0:19:51.359 to be able to push the income where you want to. 0:19:51.520 --> 0:19:54.080 And most family trusts are run like that. I think 0:19:54.119 --> 0:19:55.840 is that basically the. 0:19:56.560 --> 0:19:59.119 ATO again has been clamping down on them. So if 0:19:59.160 --> 0:20:01.840 you are going to allo cape money to an eighteen 0:20:01.880 --> 0:20:04.080 year old or a nineteen year old, you want to 0:20:04.080 --> 0:20:06.720 make sure that you're saying, what that you've spent money 0:20:06.720 --> 0:20:09.320 on you that money's gone to those people. So I 0:20:09.359 --> 0:20:12.080 get clients to keep a track record of paying for 0:20:12.119 --> 0:20:14.880 their car insurance, paying for the car, paying for their 0:20:14.880 --> 0:20:18.080 phone bills, things like that, showing that the money actually 0:20:18.480 --> 0:20:19.400 has been used for that. 0:20:19.400 --> 0:20:22.520 Person's This will as the new supertax comes in, or 0:20:22.520 --> 0:20:24.560 whatever final details it comes in, it will sure as 0:20:24.600 --> 0:20:28.040 hell come in. We'll find that trust become more popular 0:20:28.080 --> 0:20:30.040 and we'll probably come back to them a retty soon. 0:20:30.160 --> 0:20:32.200 All right, there's one other question I wanted to just 0:20:32.320 --> 0:20:36.080 zone in on. Liam was from Mark. He says financial 0:20:36.119 --> 0:20:39.800 advisor Doug Turek, or at least advisor Doug Churek mentioned 0:20:39.800 --> 0:20:44.320 in last week's podcast you can earn up the twenty 0:20:44.320 --> 0:20:49.120 five thousand before paying tax. But he then, Mark, reasonably 0:20:49.200 --> 0:20:53.000 enough says, I looked at the ATO tax scales and 0:20:53.119 --> 0:20:57.160 the first eighteen thousand, two hundred is all you can 0:20:57.240 --> 0:21:01.920 earn as an individual in Australia at any age tax free. 0:21:02.440 --> 0:21:05.320 How what's the explanation of the gap between the eighteen 0:21:05.359 --> 0:21:09.320 and the twenty five? Liam's It's true, I imagine, first 0:21:09.320 --> 0:21:11.800