Speaker 1: Hello, and welcome to the Australians Money Puzzle podcast. I'm
Speaker 1: James Kirby, Wealth editor at The Australian, and welcome to
Speaker 1: our Budget Special Budget Special Edition, which I do each
Speaker 1: year and have done now for some years with Will
Speaker 1: Hamilton of Hamilton Wealth Partners.
Speaker 2: How are you, Will, I'm very well, James, Thank you.
Speaker 1: I like that we do this forty eight hours after
Speaker 1: the budget because we get to see not just what
Speaker 1: every sort of the knee jerk reaction on the evening
Speaker 1: or the next morning, but we get to see a
Speaker 1: sort of distillation of the analysis of it where everybody
Speaker 1: has a chance to actually sit down and take a
Speaker 1: proper look at it. I think, I mean, we're going
Speaker 1: to talk, folks about what the budget is for investors,
Speaker 1: right and what it means for investors, and don't be
Speaker 1: don't ever be of the opinion I think anyway that
Speaker 1: the budgets don't matter. Every budget matters, and there is
Speaker 1: enormous information inside the budget if you know where to look.
Speaker 1: And people will often say, oh, there's nothing in the budget.
Speaker 1: Not true. Not true this year either, even in the
Speaker 1: way that some things didn't happen is actually news in
Speaker 1: and of itself and explain that as we go into it.
Speaker 1: But first of all, I suppose on the headlines, on
Speaker 1: the big picture, for any investor, people want to know, well,
Speaker 1: what's going on with rates? They were supposed to drop
Speaker 1: now they're drifting. Looking at this budget, which is our
Speaker 1: window into the local economy. Does it suggest the rates
Speaker 1: will still drop or will will they actually move higher?
Speaker 1: And that's linked with inflation. Is it an inflationary budget?
Speaker 1: So question one for Will Hamilton is it an inflationary budget?
Speaker 2: My view is the cost of living support is diametrically
Speaker 2: opposed to inflation control. And I think everyone is focusing
Speaker 2: on the three hundred dollars.
Speaker 1: That's right, that every household is going to get for
Speaker 1: energy bits.
Speaker 2: Correct spread over each quarter, seventy five dollars, And now
Speaker 2: they're saying, you know, if you've got multiple households, it
Speaker 2: could be that there's not enough talk about the tax
Speaker 2: cuts and the tax cuts coming in as well, and
Speaker 2: I think if that is meaningful, their meaningful. I actually
Speaker 2: think the three hundred dollars you spread across four quarters,
Speaker 2: I don't know if it's going to have any meaningful impact,
Speaker 2: but the tax cuts do have a meaningful impact, and
Speaker 2: people are saying it's the equivalent of two rate cuts
Speaker 2: and putting that disposable income into the system. Is it
Speaker 2: saved or is it spent. If it's spent, the inflationary
Speaker 2: impact on that. So I think it's a gamble on inflation.
Speaker 2: I really do. And I think that's what the Eussie
Speaker 2: dollar is telling us.
Speaker 1: Why what's the dollar was telling us?
Speaker 2: The dollars you know, it was mildly strong yesterday, it's
Speaker 2: strengthened a little bit over nigh. We're sitting there around
Speaker 2: sixty seven. I think what they're telling you is, whilst
Speaker 2: we are the figures that came out last night with
Speaker 2: respect to retail sales and CPI and the US people
Speaker 2: are talking about now ninety six percent chance of a
Speaker 2: cut in September, what the Aussie dollar is telling us
Speaker 2: is there's probably very little chance of a cut here
Speaker 2: in Australia. So that's all on the back of inflation.
Speaker 1: Okay, so there's very little chance, according to the markets,
Speaker 1: of a cut in Australia. Frost part second part is
Speaker 1: that there is an attempt for There is a big
Speaker 1: attempt in the budget to support and support all levels
Speaker 1: of society, which is very useful, particularly at the lower end,
Speaker 1: of course, but there's also this very broad Commonwealth Rent
Speaker 1: Assistant Energy Bill support and the government said they're not
Speaker 1: inflationary because technically technically they suspend inflationary pressure. But some
Speaker 1: very top economists, I mean a list of economists are saying, look,
Speaker 1: this may this does not bring down inflation. It simply
Speaker 1: holds it for a period, and the minute those supports
Speaker 1: are over, it goes back up again, or the awkward
Speaker 1: pressure goes back up again. Warwick mckibbon, for instance, former
Speaker 1: RBA board manager, what do you think of that argument?
Speaker 2: And I also think the fact that it's spread over
Speaker 2: the full year or four quarters, I agree on that.
Speaker 2: I think that it's it's more of the fact that
Speaker 2: it's it's going to halt us rather than say that
Speaker 2: coming down. And I think that as the same economists
Speaker 2: are saying, is the RBA will look through this, They
Speaker 2: will fact that on the back of a headline if
Speaker 2: this is how it's artificially it has had an effect,
Speaker 2: which I doubt they will look through this and take
Speaker 2: this into account.
Speaker 1: They have to, yeah, they have to. So basically does
Speaker 1: some makes sense. It's politically death that you the measure
Speaker 1: of inflation that we all talk about will be affected
Speaker 1: by these But in terms of the market pressures, when
Speaker 1: when when these supports are taken away unless they leave
Speaker 1: them in forever and then the inflation just basically comes
Speaker 1: pouring back outs.
Speaker 2: Like it's reported in The Australian this afternoon that Chris
Speaker 2: Bowen on radio interview yesterday said well we're doing this
Speaker 2: to create a headline in inflation. Well is admitted what
Speaker 2: they're trying to do and the RBA will take that
Speaker 2: into account.
Speaker 1: Yeah, okay, very good. So folks, we're going to talk
Speaker 1: about the about what the investor should know about this
Speaker 1: budget and this new financial leader, which obviously the budget
Speaker 1: papers personage. Now, the big thing, as Will says, the
Speaker 1: biggest thing of all by a mile for investors is
Speaker 1: the tax cuts, and I just everyone should keep it
Speaker 1: in mind that how it works. Basically, the amount you pay,
Speaker 1: by the way, no tax upon. Interestingly, you think this
Speaker 1: doesn't matter, perhaps as an investor, it really does. They're
Speaker 1: eighteen thousand, two hundred a year. The first eighteen thousand,
Speaker 1: two hundred you make per year, there's no tax paid
Speaker 1: on that, and it hasn't changed, even though the other
Speaker 1: bands have changed, and there are tax cuts across the bands.
Speaker 1: What I'm alluding to here with the course is that
Speaker 1: people might start taking money out of super for various
Speaker 1: reasons in the future, and maybe that was one of
Speaker 1: the reasons the government held it at that, just to
Speaker 1: finish on the tax folks. So the starter band for
Speaker 1: tax will be eighteen thousand to forty five thousand, right,
Speaker 1: the rate will be sixteen percent, down from nineteen percent,
Speaker 1: and after that thirty two and a half percent rate
Speaker 1: will drop to thirty for forty five thousand two one
Speaker 1: three five thousand. Okay, have you with me so far?
Speaker 1: The thirty seven percent rate will kick in at one
Speaker 1: hundred and thirty five thousand, used to be one hundred
Speaker 1: and twenty, and the forty five percent rate now cuts
Speaker 1: in at one ninety up from one to eighty to
Speaker 1: which a lot of peop if we would say big deal.
Speaker 1: We thought it was going to be better than that.
Speaker 1: The implicit promise was that the top end would get
Speaker 1: these tax cuts as well, but across the government rearrange
Speaker 1: them a few months ago, and politically that has gone
Speaker 1: down well, and so I think we'll see more of
Speaker 1: this sort of engineering in the future. But basically, the
Speaker 1: new tax cuts are there. Everyone should be aware of them.
Speaker 1: They should be aware of their new tax ability. If
Speaker 1: you like with the new bands, familiar rize yourself with
Speaker 1: those bands. What do you think it means for investors generally?
Speaker 1: Will on the tax cuts? Now put out a survey
Speaker 1: saying that people are more likely to save than spend
Speaker 1: the tax cuts. I thought that was interesting. That would
Speaker 1: also mean investing them.
Speaker 2: Yeah, well that's the case. You will reduce that inflationary impact,
Speaker 2: there's no doubt about that. But no individual with taxable
Speaker 2: income of one hundred and thirty five thousand or lace
Speaker 2: is going to have a natural text right of more
Speaker 2: than thirty It seems to be this magical race that
Speaker 2: the government seems to be aiming everything at. You know,
Speaker 2: we've talked about the proposed to perinuation changes, et cetera.
Speaker 2: So what they're trying to do is look at this
Speaker 2: thirty percent seems to be this rate that they seem
Speaker 2: to be aiming at. I think that seems to be
Speaker 2: the big thing.
Speaker 1: The flat rate as such, if they were to bring
Speaker 1: in a flat rate, and originally the original plan of
Speaker 1: course was that would be larger the group in that,
Speaker 1: but they rearrange things. Okay, interesting, so keep that in mind, folks.
Speaker 1: Now after that, then there is an enormous amount of
Speaker 1: money going into housing. Most of it is social housing
Speaker 1: Commonwealth to rent assistance, but it's an enormous figure. And
Speaker 1: there's also initiatives for the construction industry at various levels.
Speaker 1: I mean the specifically, there's ten billion alone going into
Speaker 1: social housing, and I think I want to just point
Speaker 1: out from an investor's point of view again, will do
Speaker 1: you think that if this housing comes to pass, does
Speaker 1: it take some pressure off the vacancy rateing property which
Speaker 1: is currently one percent in residential property, which is one
Speaker 1: of the reasons people saw investors at least be so
Speaker 1: secure in property because you can rent anything and you
Speaker 1: can get rent increases each year.
Speaker 2: We need to design the houses, we need to get
Speaker 2: planning for the houses. Then we need to build the houses,
Speaker 2: and we need the people. I think they've allowed is
Speaker 2: it seventeen hundred on a migration basis to builders to
Speaker 2: come in, but we need but they're saying that, then
Speaker 2: the master build associations not saying that is enough. So
Speaker 2: we need the people to build the houses and yeah,
Speaker 2: the lag it's fantastic that they're doing this, but it's
Speaker 2: not going to happen. We're not going to wake up
Speaker 2: tomorrow and it's.
Speaker 1: Happened, right. So you think the vacancy rates so are
Speaker 1: going to be where they are super tight for the
Speaker 1: foresee of the future.
Speaker 2: Correact, Yeah, because I said you can design, planning and
Speaker 2: then build. Yes, so you're probably looking three years to
Speaker 2: be optimistic.
Speaker 1: Mm hmm, okay, very interesting, that is. I think that's
Speaker 1: very important folks for property investors to keep that in mind.
Speaker 1: That really for us in property investment, the big dynamics
Speaker 1: were around rates immigration, which of course kept the market
Speaker 1: particularly tight, and the forecast is for immigration to fall,
Speaker 1: and that's an important part part for property investors to
Speaker 1: know that. Look, the signals are that what will change
Speaker 1: will ease vacancy rates going forward, but they will be
Speaker 1: slow and we will have to see how they pan out,
Speaker 1: but there are signals at least that they will that
Speaker 1: the vacancy rate will ease. By that, I mean it
Speaker 1: will increase from its one percent, but it's not going
Speaker 1: to go to five or ten. Sorry, we'll be the
Speaker 1: regular one.
Speaker 2: The big issue and the need to reduce the red
Speaker 2: type so we can get these things built. That's and
Speaker 2: that that then gets down to state governments and local governments. Yeah,
Speaker 2: and that hasn't.
Speaker 1: Been Yes, okay, just before we talk about some individual
Speaker 1: measures that every investor should know, I think we might
Speaker 1: just take a look at on Super. So there was
Speaker 1: a few things that everyone should know on Super. The
Speaker 1: first thing is that your compulsory super moves up, of course,
Speaker 1: to eleven and a half percent in July one, on
Speaker 1: its way to twelve percent a year later. That's important.
Speaker 1: The amount you can contribute into Super is changing. That
Speaker 1: is the amount you can contribute on a pre tax
Speaker 1: basis what they call concession and moves from twenty seven
Speaker 1: thousand now twenty seven five hundred now to thirty thousand
Speaker 1: and July one. But that only brings us back to
Speaker 1: where we were a long time ago. Well, isn't that right?
Speaker 1: You used to be higher than thirty correct.
Speaker 2: I think that listeners have heard me so many times.
Speaker 2: The issue is not a super, it's getting money into Super,
Speaker 2: and it's very difficult to get in soupent on a
Speaker 2: non concessional basis of lifting that from one hundred and
Speaker 2: ten and twenty thousand, so that's the issue. These changes
Speaker 2: were brought in actually by the coalition government. They made
Speaker 2: it harder to get into SUPER, and I think that's
Speaker 2: the biggest issue.
Speaker 1: Yes, And these these increases in the amount you can
Speaker 1: put in, they're not structural. They are index indexing for inflation.
Speaker 1: They are only matching the inflation changes. So in real terms,
Speaker 1: the amount you can put in hasn't changed in any
Speaker 1: significant fashion.
Speaker 2: Correct. And also the transfer balance cap balance cap sorry,
Speaker 2: increases to one point nine million.
Speaker 1: Yes, yeah, it increases to one point nine million. That is,
Speaker 1: that is the amount you can happen Super before you
Speaker 1: pay the first tax band, which is fifteen percent. It's
Speaker 1: hard to keep all this in mind, folks, I know,
Speaker 1: but you need to learn it if you want to
Speaker 1: play the system in Super. You are not taxed on
Speaker 1: your earnings in SUPER when you retire up to one
Speaker 1: point nine million. And then there is a new plan,
Speaker 1: believe it or not, to bring in a second band
Speaker 1: at three million from the first of July twenty twenty five.
Speaker 1: Very controversial for the simple reason that it's not just
Speaker 1: another tax, it's taxed in a different way on realized
Speaker 1: gains it's about to be really kicked around in Parliament.
Speaker 1: Alegraspender has moved in motion today and I think it
Speaker 1: will be It will be debated, but I don't know
Speaker 1: because the Senate signed it off absolutely unchanged. That is
Speaker 1: the Senate inquiry. So what do you think the realistic
Speaker 1: chances are that it will be amended in anty fashion?
Speaker 2: Will I said that it wouldn't be changed, then I
Speaker 2: was hoping it more. Yeah, when I heard about the
Speaker 2: Senate inquiry, that they would see common sense and then
Speaker 2: we wouldn't be texting unrealized gains. I think that is
Speaker 2: just unconscionable. I really do.
Speaker 1: And just explain why, because someone who isn't very familiar
Speaker 1: with tax and investments might say, hey, listen, someone's got
Speaker 1: three million in super what's their problem and why are they?
Speaker 1: You know, what's wrong with them? That this new tax?
Speaker 1: What's wrong with it?
Speaker 2: Yeah? I think everyone's been concentrating on property, but I
Speaker 2: think Robert god Libson's really talked about private equity and
Speaker 2: I think that's probably a really good example. You've got
Speaker 2: a liquid growth investment in there, so it's growth without
Speaker 2: returning income, and the value of that goes from three
Speaker 2: million two let's say four million, but you're going to
Speaker 2: get taxed. That's thirty percent on that if you're three
Speaker 2: hundred thousand without any cash flow from it. But you
Speaker 2: have to find that cash flow pay that tax, by
Speaker 2: the way. But when backwards you don't get a refund,
Speaker 2: you get it only a credit. And that's it's just
Speaker 2: when I think everyone needs to pay taxes. I think,
Speaker 2: and in life everything needs to be fair. But this
Speaker 2: just is not fair.
Speaker 1: So it's not fair because it's on unrealized paper gains.
Speaker 1: It's on paper gains, right. So to make it simple,
Speaker 1: if I invested in a company with my super and
Speaker 1: it was a great little company, and I loved everybody
Speaker 1: in it, and I thought that we're brilliant. The thing is,
Speaker 1: and if they went up in value each year, though
Speaker 1: I couldn't get any money out, I'd be taxed on
Speaker 1: the amount of value increase that they are managing. Okay,
Speaker 1: And that's completely that's just out the window in terms
Speaker 1: of how the tax system works. So we've never seen
Speaker 1: that before.
Speaker 2: And I think in investment we all would agree that
Speaker 2: profit is not a profit until it's realized. Yeah, but
Speaker 2: they're telling you, well, hey, guys. Every year we're going
Speaker 2: to we want you to revalue your asset, and your
Speaker 2: unrealized game will be taxed.
Speaker 1: I wonder will though that's an interesting angle. The numbers
Speaker 1: suggest there isn't much investment in private enterprise and startups
Speaker 1: by so managed super funds. It's all in property. I
Speaker 1: think it's in property. It's really going to pinch.
Speaker 2: Yes, but I think we're robbed. God Libsin's coming on
Speaker 2: this angle. It's vibate. Equity and startups have a broad
Speaker 2: effect because they're growth and that's what the economy needs.
Speaker 2: And if you're starting the economy yes of growth, that
Speaker 2: has far far reaching consequences.
Speaker 1: It chokes off incentives, which is which is the problem
Speaker 1: that's all across this budget. I think people are saying,
Speaker 1: there's no incentives. There's an incentive to go on the pension,
Speaker 1: there's an incentive, there's an incentive you know for this
Speaker 1: and that, But but they're not incentives as such. They
Speaker 1: are incentives to to take part in social welfare, which
Speaker 1: is miles away from what we're talking about.
Speaker 2: Investor incentives aspiration that they're absolutely choking at and I
Speaker 2: think that's the problem.
Speaker 1: Okay, Also, look folks to cover off on on Super.
Speaker 1: The other thing that has come in is, of course
Speaker 1: parental leave. If you're talking about this for so long
Speaker 1: that you might think it's already done, it's not. It's
Speaker 1: finally confirmed. And how it works is that the superannuation
Speaker 1: will be paid on parental leave, government funded parental leave
Speaker 1: for twenty six weeks and it begins, it actually doesn't
Speaker 1: begin to July one, two, two five for all the headlines,
Speaker 1: but in any event, there it is coming through. That's
Speaker 1: another piece of news on Super. Okay, that's a bit
Speaker 1: to digest. We'll, we'll, we'll, we'll let everybody have a
Speaker 1: break and we'll be back to you with some very
Speaker 1: interesting parts of the budget that probably haven't been aired
Speaker 1: as much and you might find very interesting. Hello, welcome
Speaker 1: back to the Australians Budget Special. I'm James Kirkby, the
Speaker 1: Wealth editor at The Australian. I'm talking to Will Hamilton
Speaker 1: of Hamilton Wealth Partners and we are doing our budget
Speaker 1: special which we do each year. Okay, Will, here's some random,
Speaker 1: random thoughts and observations on the budget that are really unusual.
Speaker 1: I just wanted to talk to about first of all,
Speaker 1: talking about social welfare or helping people. The three hundred
Speaker 1: dollar energy rebate, of course, that goes to every house
Speaker 1: in the country. That would include every single person on
Speaker 1: the rich list, that would include all the billionaires, Anthony Pratt,
Speaker 1: Gina Reinhardt. They'll all get their three hundred dollars rebate,
Speaker 1: which would seem daft, but obviously giving them the benefit
Speaker 1: of the doubt, it's just they sound. It sounds like
Speaker 1: it would be very difficult to administer it in a
Speaker 1: in a more precise fashion. But the other caught my
Speaker 1: eye was the tax credits for the miners, seven billion
Speaker 1: dollars into tax credits for critical minerals lithium and nickel
Speaker 1: in particular, and the shares immediately moved on this. So
Speaker 1: we have we have the government through the prism of
Speaker 1: made in Australia and protecting things and all that sort
Speaker 1: of thing. But they're picking winners. Is that from an
Speaker 1: investor point of view? What do you think of a
Speaker 1: government picking winners and apportioning billions of dollars into areas
Speaker 1: like the quantum computing as well, which of course is
Speaker 1: a spectacular example of it.
Speaker 2: I don't think governments have a good track record in
Speaker 2: picking winners, and I think pumping money into things where
Speaker 2: I think private enterprise otherwise I think has played a
Speaker 2: far better role and a far more efficient role, and
Speaker 2: they've taken the risk on I think that there's over
Speaker 2: the over history, there's plenty of reasons we can sort
Speaker 2: of bring up things where they've made a mistake. Now
Speaker 2: I don't agree with that at all.
Speaker 1: Sorry, you don't agree with with the provision of picking
Speaker 1: a sector and giving it special treatment, No.
Speaker 2: I don't. But on the other hand, I do see
Speaker 2: what I know why they've picked critical, critical minerals in particular.
Speaker 2: There is a defense reason around a lot of this,
Speaker 2: and especially with Orcus and with the agreements we've got
Speaker 2: with you Outed States. There are some agreements there that
Speaker 2: that's the reasons why, uh, certain minerals have you got
Speaker 2: benefits there.
Speaker 1: But I mean the US themselves are doing it, aren't
Speaker 1: They will to be fair then that's the ultimate free market.
Speaker 1: But they're actually doing it too. So there is an
Speaker 1: element of national security here on this way. But at
Speaker 1: the end of the day, you're giving special treatment to
Speaker 1: stock market, this to the companies, and hey, uh, is
Speaker 1: it any surprise that there was immediate action on the
Speaker 1: market this week, folks. On those stocks that we're getting
Speaker 1: government help, I'll name them. So of course it's at
Speaker 1: the margins because they're so big, like BHP or West Farmers,
Speaker 1: Pilbur Minerals will get money. But as you get smaller,
Speaker 1: linetown Resources, et cetera, as the companies get smaller, they
Speaker 1: are more directly pumped, if you like, by by this,
Speaker 1: by this move by the government. Okay, Now I wanted
Speaker 1: to talk quickly about a couple of things that didn't happen.
Speaker 1: Often in a budget there is news in what didn't happen.
Speaker 1: And if you remember, at the start of the show,
Speaker 1: we was talking about inflation and we were mentioning how
Speaker 1: the inflation indexing has changed some things already in the budget.
Speaker 1: For instance, you'll be able to put in thirty thousand
Speaker 1: pre tax into your super because of inflation, because it's
Speaker 1: been adjusted up from twenty seven and a half. Now
Speaker 1: here's the thing the government, it's entirely random how they index.
Speaker 1: They can index whatever they want. There's no rules, and
Speaker 1: the index one thing and they don't index the other.
Speaker 1: So for instance, there's two interesting things for older Australians.
Speaker 1: Deeming is the mechanics by which you can access the
Speaker 1: pension or how much you get in the pension. A
Speaker 1: part pension is deeming, and what deeming is is how
Speaker 1: the government makes a deemed assessment of how much you've
Speaker 1: made on your investments. They apply that and it is
Speaker 1: then will dictate your access to to to the pension.
Speaker 1: It might reduice it would it would reduce it. For instance,
Speaker 1: the top rates two and a half to the quarter
Speaker 1: percent to a quarter, yeah, to in a quarter. The
Speaker 1: bank built cash rate in the r b A is
Speaker 1: four point three five. This this rate was screaming to
Speaker 1: to be raised. I talked to the Association of Independent
Speaker 1: Retirees Wayne strad Quist on Monday. He said, we have us,
Speaker 1: we have we assume it's going up, and it didn't move.
Speaker 1: It didn't move. So what does that mean for investors? Well,
Speaker 1: could you explain why what why it's a curiosity, but
Speaker 1: also why it's useful in some ways.
Speaker 2: Well, so it's the government's assumed return on your on
Speaker 2: your investments and you've just talked about Yeah, the resksk
Speaker 2: fray right, So people only need to take into account
Speaker 2: two point twenty five is the deeming as opposed to
Speaker 2: what they're actually returning, so it's got a positive effect
Speaker 2: for so I've heard five hundred thousand pensioners.
Speaker 1: Yeah, so basically you're going to be off on this.
Speaker 1: It'll be better off because it was in the natural
Speaker 1: order of things, it should have gone up and it
Speaker 1: should be considerably higher than that. But they've left it
Speaker 1: alone for one more year. So keep that in minded
Speaker 1: for older Australians. And similarly, similarly, in a very similar
Speaker 1: sort of non event that turns out to be news
Speaker 1: because it didn't happen. The government's reverse mortgage scheme, the
Speaker 1: wome Ekery Access scheme. The lending rate on that is
Speaker 1: three point ninety five percent and in the commercial market
Speaker 1: all the rates are about eight or nine and they
Speaker 1: didn't move that either. Do you think they just forgot
Speaker 1: to move it?
Speaker 2: Will Well, I just need to remind people that we're
Speaker 2: going to add with the next twelve months as there's
Speaker 2: going to be an election. And I said the two
Speaker 2: hundred thousand people have been positively acted from the daming rate,
Speaker 2: let alone those that you just mentioned as well.
Speaker 1: Yeah, so look, what can I say, folks, It's there
Speaker 1: to be used. As I say, it's always worth reading
Speaker 1: budget and budget coverage because opportunities arise right left and center.
Speaker 1: If I knew across them that there are some of
Speaker 1: the some of the some of the bigger issues in
Speaker 1: the budget in terms of how the government played this.
Speaker 1: But what would you like to have seen? Will? That
Speaker 1: wasn't there?
Speaker 2: I suppose the biggest thing is I for me was this.
Speaker 2: I think the biggest issue out there at a federal
Speaker 2: level is this unrealized capital gains. And I was and
Speaker 2: there were just wasn't a mention of that three million level.
Speaker 2: So I think when it comes to super was it's
Speaker 2: about what wasn't discussed And as you rightly said, amendments
Speaker 2: and then you put forward in the last twenty four
Speaker 2: hours by the tials.
Speaker 1: By the tials, Yeah, they're hoping to get amendments. So
Speaker 1: specifically folks for trying to get in terms of amendments,
Speaker 1: And as Will says, it's it's important. It's not so
Speaker 1: much that it's a particular tax on super at a
Speaker 1: particular level. It's the nature of the tax that if
Speaker 1: you start taxing paper gains, where does it stop. How
Speaker 1: would we invest or make any plans long term? This
Speaker 1: is the argument against it. So the two two key amendments,
Speaker 1: as I understand alec Rispender has pushed for em Parliament today,
Speaker 1: is that it is not only on realized gains. And
Speaker 1: the second one is that it's indexed. Because funnily enough,
Speaker 1: as I said, as I said in a minute ago,
Speaker 1: the index whatever they like and it don't index other things,
Speaker 1: and that they plan not to index this new tax.
Speaker 1: What have you heard of any alternative mechanism that you
Speaker 1: could introduce this new supertax that doesn't involve on realized gains?
Speaker 2: Will Now, I think that there was well flagged what
Speaker 2: was coming in. And it's amazing how when it was
Speaker 2: brought in the number of our clients that have said, okay,
Speaker 2: we'll accept it. It's only fair, you know, we've had
Speaker 2: it so good for so long. But when the fine
Speaker 2: print was seen it should be a thirty percent above
Speaker 2: that level on realized gains like it is on everything
Speaker 2: else within in companies, on your own personal taxation, et cetera.
Speaker 2: As anyway, and then to index it. You're right because
Speaker 2: you know, what's three million? I think Alan chris Bender said,
Speaker 2: what's three million going to be worth in twenty sixty four?
Speaker 2: I think they were the very words.
Speaker 1: Year yes, right, or even five years time. Yeah, sure
Speaker 1: of course. And the other I suppose absurdity here is
Speaker 1: that the lower band super tax being fifteen percent. Ah,
Speaker 1: it's not indexed. Is indexed, I'm sorry, it is index
Speaker 1: So it's just going to swell year and get bigger
Speaker 1: and bigger. So already got from one point six.
Speaker 2: Yeah, I've had a view on this that what's happening
Speaker 2: is they're going to let that just get to the
Speaker 2: three million level and then you're going to have zero
Speaker 2: and thirty.
Speaker 1: Percent, right, yes, I see, and then you'll.
Speaker 2: Then start seeing a being indexed after that. I think
Speaker 2: that's probably what the long term game game is.
Speaker 1: Okay, all right, yeah, yeah, it's a real curiosity. We'll see,
Speaker 1: as I understand from a parliamentary voting point of view,
Speaker 1: that's going to be very hard to stop this, and
Speaker 1: the Senate committee that examined it signed it off unchallenged
Speaker 1: without any amendments. There is some the teals David Pocock
Speaker 1: is it's apparently he's important. It's not clear of where
Speaker 1: he's coming from. It's clear where a legal spender at
Speaker 1: least is coming from, and perhaps some other teals so
Speaker 1: that will play out in the days ahead. Okay, very interesting.
Speaker 1: Uh anything you think that we didn't cover their will
Speaker 1: for investors in the budget. I know it was a
Speaker 1: very technical session, folks, but that's the nature of it.
Speaker 2: Yeah, for small businesses, they get the they're extending the
Speaker 2: twenty thousand dollars instant right off for small business. Again,
Speaker 2: I think that's important. I didn't expect that, and I thought,
Speaker 2: you know, I'm pleased to see that they're doing that,
Speaker 2: of course, you know, and so it's up. It's for
Speaker 2: businesses that have a turnover of less than ten million dollars.
Speaker 2: And the other thing, which actually I think is fair,
Speaker 2: which was pre announced, and that text relief. So yes,
Speaker 2: the lower of CPI or what the average average wage increases,
Speaker 2: and I do think that is actually a fair thing
Speaker 2: to do. But again the government's calling this cost of
Speaker 2: reliving relief. Doesn't change what you actually pay you back,
Speaker 2: So it's not cost a living, it's not cost of
Speaker 2: living relief. It's just that's a matter of fairness.
Speaker 1: I don't think the reason I didn't actually even mention
Speaker 1: the heck's there in that list was it's not any
Speaker 1: restructuring of hects in any substantial degree. I know we've
Speaker 1: got a lot of headlines because it was leaked in advance,
Speaker 1: but really this is only the smallest variation in how
Speaker 1: you apply indexation. I hope nobody's under the illusion that
Speaker 1: they've made major changes to HEX, because I don't think
Speaker 1: they have. And actually the Minister justin Claire, he said
Speaker 1: when they announced it's that Sunday afternoon that he said
Speaker 1: there would be more about HEX coming down the line.
Speaker 1: But I don't see another thing actually, So it's a folks.
Speaker 1: All you can say is that you know there'll be
Speaker 1: a slightly fair there'll be a fairer method of indexing
Speaker 1: HEX for inflation, which should have been there all the time,
Speaker 1: but I would be careful not to say that it's
Speaker 1: been greatly improved in any fashion. Okay, all right, we'll
Speaker 1: take a short break. We've got some questions which you
Speaker 1: do want to deal with. Though it's a special show.
Speaker 1: People love the questions, so we'll be back to you
Speaker 1: in a moment. Hello, welcome back to the Australians Money
Speaker 1: Puzzle podcast. I'm James Kirby, the will editor at The Australian,
Speaker 1: and we have been talking about the budget and if
Speaker 1: you are now utterly sort of weighed down and swamped
Speaker 1: with budget detail, we'll give you some light relief with
Speaker 1: our weekly segment where we deal with the listeners questions.
Speaker 1: And there's some great questions, so I just want to
Speaker 1: put them to Will. Ben says in a recent podcast,
Speaker 1: your guest was looking for government support for people who
Speaker 1: retired at sixty in the budget. Get me the world's
Speaker 1: smallest violin, He says, I think the last thing we
Speaker 1: should be doing is incentivizing people to retire at sixty. Well,
Speaker 1: Ben and all the Bens out there, I did make
Speaker 1: the point that the incentives and the budget tend to be,
Speaker 1: you know, to take up more social welfare, and the
Speaker 1: incentives to invest are missing, and in fact, as Will says,
Speaker 1: there's active disincentive built into the plans for the new
Speaker 1: super tax. So thank you for that, Ben. I thing
Speaker 1: to add to that one, Will, it's.
Speaker 2: A brave government that goes out there to increase the
Speaker 2: retirement age, especially in France.
Speaker 1: Yeah, yeah, absolutely, yes, indeed. Okay, Steve asks, do you
Speaker 1: want toy? Can you see those questions?
Speaker 2: Will would? Yeah? Yeah, So Steve, perhaps the most crucial
Speaker 2: component of anyone's investment strategy is the performance of our
Speaker 2: super fund. Because these funds are so big and so diverse.
Speaker 2: Is it a situation similar to a broad market ETF
Speaker 2: or managed fund where in a normal year, the best
Speaker 2: result one could hope for would be a return somewhere
Speaker 2: around the return of the market, or would it be
Speaker 2: a fair fair target to aspire to In reviewing one's
Speaker 2: super performance, it's not about just the market, you know,
Speaker 2: the super funds. These super funds invest in inequities, develop
Speaker 2: market equities, emerging market equities, private equity, diversified credit, direct
Speaker 2: property bonds, cash, defensive alternatives. So it's about a blended benchmark,
Speaker 2: so that each one of these asset classes has a
Speaker 2: benchmark or several benchmarket benchmarks within those components, and so
Speaker 2: it's about the blended benchmark all the basket of investments
Speaker 2: that it has.
Speaker 1: Well, I suppose also keep an eye on what you know,
Speaker 1: super big super is achieving. They're doing about eight percent
Speaker 1: a year in recent times. The big funds the best funds,
Speaker 1: and in a way you want to you you would
Speaker 1: like to see that you match that, and you might
Speaker 1: allow for some fee difference if you were exclusively in
Speaker 1: ETFs by that I mean, the ETFs pay charge you lespies,
Speaker 1: but that's in terms of a target to aspire to
Speaker 1: in reviewing your performance. That's the thanks Steve. And also
Speaker 1: you can also go on my super of course, so
Speaker 1: you can go on the ATO website and see how
Speaker 1: the super funds perform against each other. And though that
Speaker 1: is an exercise which is imperfect, it is marvelous that
Speaker 1: it actually exists. And for many years there was nothing
Speaker 1: at all to be in a way to compare one
Speaker 1: super fund to another. So that's very useful, I hope.
Speaker 1: And remember, folks, this is always information. It's not advice,
Speaker 1: but I think it's safe to say to someone like
Speaker 1: Steve that you should have been able to measure a
Speaker 1: super performance or targets quite easily. Now with that, with
Speaker 1: the ability to look at the heat maps, et cetera
Speaker 1: on super and you get the public figures from the
Speaker 1: big funds, and you get ETF returns quite easily as well.
Speaker 1: All right, final question from Martin. If you had two
Speaker 1: options to give five thousand dollars to an eighteen year
Speaker 1: old living at home and studying, what would be your choice.
Speaker 1: Pay it into HEX or pay it into SUPER or
Speaker 1: that's such a great question, especially that we are all
Speaker 1: alert to HEX all of a sudden, because well, the
Speaker 1: average HEX bill is twenty six thousand dollars. The average
Speaker 1: HEX bill is twenty six thousand dollars, and lots and
Speaker 1: lots of our listeners would have HEX bills of fifty
Speaker 1: seventy one hundred thousand dollars. I ask people all the
Speaker 1: time when I meet them monster hexill, especially younger people,
Speaker 1: and it's it's really quite serious what their bills are
Speaker 1: are becoming. So will million dollar question, what does a
Speaker 1: person in Martin's position do?
Speaker 2: Normally, I would be saying supers could always put it
Speaker 2: into super IF for the long term. But I think
Speaker 2: one of the things that has changed with HEX in
Speaker 2: the last five years or so is this restricts in
Speaker 2: individuals your balance, restricts in individual's ability to borrow.
Speaker 1: Oh yeah, in the bank, at the bank from a mortgage, Yes,
Speaker 1: of course, correct.
Speaker 2: So I I think that's in fairness to the fact
Speaker 2: that this individual is eighteen and the in ten years
Speaker 2: time will definitely want to have purchased a property and
Speaker 2: this is going to have a negative effect on their
Speaker 2: borrowing ability. I think that's something you need to take
Speaker 2: into a camp as well.
Speaker 1: Sounds like you go awfully close to saying HEX over
Speaker 1: super you are. Yeah, yeah, very interesting, and it's a
Speaker 1: killer point, I think folks that will have just made that.
Speaker 1: People say, oh, it doesn't matter, you know, it's on hex.
Speaker 1: It's okay. There's no interest on that. Yeah, yeah, sure,
Speaker 1: but there's an inflation indexing on it. And they say, yeah, yeah,
Speaker 1: but it's okay. You know, it doesn't really get in
Speaker 1: the way of other things. It does is a success
Speaker 1: when you go to the bank. Let me tell you
Speaker 1: something interesting. Well, on the show, I said once or
Speaker 1: twice Appra demanded the banks include the assessment of HEX
Speaker 1: your HEX bill in their assessment of your ability to
Speaker 1: take a home loan. And APRA came on to me
Speaker 1: and said, you have to correct that. It's not true.
Speaker 1: We expect, we expect the banks, we don't demand the banks.
Speaker 1: And I will leave with that our listeners to make
Speaker 1: this semantic difference there, because it's very important to OPRA,
Speaker 1: all right, So you know what I'm saying. In any event, folks,
Speaker 1: HEX has become terribly important, So keep an eye on
Speaker 1: it if you can pay it back due. And it's interesting.
Speaker 1: I thought Will's answer very very interesting. Shows that X
Speaker 1: has become the bills have become bigger and their impact
Speaker 1: has become wider because they affect your ability to get
Speaker 1: a mortgage. If you learned one thing from the show
Speaker 1: today that would be well worth taking home with you.
Speaker 1: Thanks very much, Will. Terrific to have you as always
Speaker 1: on the Budget show. I don't know how many times
Speaker 1: have we done it, three or four or five. Well,
Speaker 1: thank you very much and I hope you have me.
Speaker 1: You'll be with me the next time and terrific as always.
Speaker 1: That was Will Hamilton of Hamilton Wealth Partners. Okay, folks,
Speaker 1: believe it or not, I have a shortage of questions.
Speaker 1: I had too many for too long, and now I
Speaker 1: have the capacity to answer more. Send them in. Surely
Speaker 1: there's questions on what we just covered the architecture of
Speaker 1: the tax system as we know it from the Budget.
Speaker 1: Here's the email the Money Puzzle at the Australian dot
Speaker 1: com dot au. Talk to you soon.