1 00:00:09,840 --> 00:00:13,160 Speaker 1: Hello, and welcome to The Australian's Money Puzzle podcast. I'm 2 00:00:13,240 --> 00:00:17,239 Speaker 1: James Kirby. Now, after more than a year of intense debate, 3 00:00:17,360 --> 00:00:21,120 Speaker 1: the big changes to super tax appear now to finally 4 00:00:21,160 --> 00:00:24,200 Speaker 1: have been settled, and you've probably heard the Treasure has 5 00:00:24,239 --> 00:00:28,280 Speaker 1: put forward a pretty shrewd, politically shrewd solution to the 6 00:00:28,320 --> 00:00:33,680 Speaker 1: whole thing, whereby the very rich in our country, those 7 00:00:33,720 --> 00:00:36,400 Speaker 1: at more than ten million in super will play a 8 00:00:36,440 --> 00:00:39,720 Speaker 1: prohibitive rate of tax and there will be some offset. 9 00:00:40,040 --> 00:00:42,319 Speaker 1: It's part of this package for low income miners, which 10 00:00:42,360 --> 00:00:46,560 Speaker 1: should probably ensure it goes through Arliament. Right now, most 11 00:00:46,600 --> 00:00:48,920 Speaker 1: listeners to the show will not be in either category. 12 00:00:49,520 --> 00:00:52,800 Speaker 1: I expect you're not a low incommner and I expect 13 00:00:52,800 --> 00:00:54,760 Speaker 1: you don't have more than ten million in super. Maybe 14 00:00:54,760 --> 00:00:57,520 Speaker 1: I'm wrong, but I reckon ninety percent of listeners are 15 00:00:57,560 --> 00:01:02,440 Speaker 1: in the category where quite simply, the news is that's 16 00:01:02,480 --> 00:01:06,959 Speaker 1: super tax rates are going to double above three million dollars. Okay, 17 00:01:07,040 --> 00:01:10,319 Speaker 1: so there's no tax up to two it's fifteen percent 18 00:01:10,440 --> 00:01:14,480 Speaker 1: on earnings over two million, and from July one next 19 00:01:14,560 --> 00:01:19,240 Speaker 1: year it's thirty percent on earnings in super over three million. 20 00:01:19,440 --> 00:01:23,000 Speaker 1: I think that this will more than anything else hit 21 00:01:23,240 --> 00:01:28,000 Speaker 1: property investors. And my guest today is ideal for this. 22 00:01:28,200 --> 00:01:33,120 Speaker 1: It's Stuart Williams, property and finance expert. How are you, Stewart. 23 00:01:33,920 --> 00:01:36,160 Speaker 2: I'm really well, James, and welcome back from you all leave. 24 00:01:36,200 --> 00:01:39,040 Speaker 2: It's lovely that the Treasurer waited until you were back 25 00:01:39,080 --> 00:01:40,160 Speaker 2: to make that announcement. 26 00:01:40,720 --> 00:01:43,440 Speaker 1: Very thoughtful lot, I thought too. So yes, that's right. 27 00:01:43,600 --> 00:01:45,640 Speaker 1: He more. I said he was going to redesign us 28 00:01:45,640 --> 00:01:48,240 Speaker 1: a month ago, and folks, I have been. I have 29 00:01:48,360 --> 00:01:50,320 Speaker 1: been away for a month. We had some pre records 30 00:01:50,320 --> 00:01:53,000 Speaker 1: there and I had some great shows thanks to Julia 31 00:01:53,200 --> 00:01:56,440 Speaker 1: Spragg who stood in for a number of shows which 32 00:01:56,480 --> 00:01:59,200 Speaker 1: she recorded on the weeks. So we're back in the 33 00:01:59,280 --> 00:02:02,120 Speaker 1: saddle tod. They try very hard to catch up with everything. 34 00:02:02,440 --> 00:02:05,480 Speaker 1: Glad to have Stuart with me. So Stuart, could you 35 00:02:05,520 --> 00:02:09,600 Speaker 1: spell out from July one next year what are the 36 00:02:09,680 --> 00:02:13,040 Speaker 1: rates of tax on super And also I was crucially 37 00:02:13,080 --> 00:02:15,120 Speaker 1: spell out that the whole thing about on Relo's games 38 00:02:15,200 --> 00:02:15,799 Speaker 1: is got. 39 00:02:16,520 --> 00:02:20,000 Speaker 2: Yes, and that's a really important point. And I think James, 40 00:02:20,040 --> 00:02:23,960 Speaker 2: before we talk about it, my observation would be the 41 00:02:24,080 --> 00:02:29,640 Speaker 2: consultation process has worked like okay, yes, maybe politicians come 42 00:02:29,720 --> 00:02:32,120 Speaker 2: up with silly ideas to begin with, but the whole 43 00:02:32,200 --> 00:02:36,560 Speaker 2: process should be, well, we go out to constituents, the industry, 44 00:02:36,639 --> 00:02:40,480 Speaker 2: we get feedback, and we reflect that feedback in policy. 45 00:02:40,600 --> 00:02:43,919 Speaker 2: So I know that there's a few articles sort of criticizing, 46 00:02:44,040 --> 00:02:46,520 Speaker 2: calling a backflip, all these sorts of things. Of course, 47 00:02:46,560 --> 00:02:49,080 Speaker 2: you know that's true in some sense, but in a way, 48 00:02:50,000 --> 00:02:52,200 Speaker 2: well unto the treasure of fullystening to the feedback and 49 00:02:52,240 --> 00:02:54,800 Speaker 2: coming up with something a little bit more sensible. Because 50 00:02:55,440 --> 00:02:59,480 Speaker 2: SUPER was designed to fund retirement, not to be a 51 00:02:59,520 --> 00:03:02,359 Speaker 2: tax savior. And you know, I think anyone that has 52 00:03:02,400 --> 00:03:04,680 Speaker 2: more than ten million dollars in SUPER, it's no longer 53 00:03:04,680 --> 00:03:08,120 Speaker 2: about retirement, it's about tax saving and a tax haven. 54 00:03:08,240 --> 00:03:13,960 Speaker 2: So I totally support the revised policy. So essentially an accumulation. 55 00:03:14,160 --> 00:03:17,520 Speaker 2: So as we're working, you're right, up to three million dollars, 56 00:03:17,560 --> 00:03:21,240 Speaker 2: we're paying fifteen percent. Between three and ten million were 57 00:03:21,240 --> 00:03:24,640 Speaker 2: paying thirty percent, and then over ten million we're paying 58 00:03:24,680 --> 00:03:28,799 Speaker 2: forty percent. And that's just on realize capital gains and 59 00:03:29,000 --> 00:03:32,360 Speaker 2: any investment income. So there's no tax on unrealized gains. 60 00:03:32,520 --> 00:03:35,280 Speaker 2: And that's particularly important for property investors because a lot 61 00:03:35,320 --> 00:03:38,600 Speaker 2: of people that have used their SUPER to invest in property. 62 00:03:39,000 --> 00:03:41,400 Speaker 2: Are only really thinking about, well, one day I will 63 00:03:41,400 --> 00:03:44,680 Speaker 2: sell this in retirement, and then that's when I crystallize 64 00:03:44,680 --> 00:03:47,680 Speaker 2: the capital gain. So at least we've removed the unrealized 65 00:03:47,720 --> 00:03:51,160 Speaker 2: gains tax. Now, of course, once we enter into retirement, 66 00:03:51,520 --> 00:03:53,920 Speaker 2: the only change there is the first two million dollars 67 00:03:54,000 --> 00:03:56,920 Speaker 2: is now tax free. And so as I said, you know, 68 00:03:57,080 --> 00:03:59,880 Speaker 2: I think, well, SUPER is there to fun retirement, and 69 00:04:00,240 --> 00:04:02,960 Speaker 2: the progressive tax rates I think make a lot of sense. 70 00:04:03,640 --> 00:04:05,680 Speaker 2: And even if you look at say a balance of 71 00:04:05,760 --> 00:04:09,880 Speaker 2: five million dollars in retirement, the average tax rates about 72 00:04:09,880 --> 00:04:12,880 Speaker 2: fifteen percent, So it's still not bad. It's not like 73 00:04:12,920 --> 00:04:15,640 Speaker 2: we're punishing those people with a lot of money inside SUPER. 74 00:04:16,000 --> 00:04:18,280 Speaker 2: And I would argue, anyone five million SUPER, can I 75 00:04:18,279 --> 00:04:21,760 Speaker 2: afford to pay fifteen percent and make a contribution towards 76 00:04:21,760 --> 00:04:24,440 Speaker 2: sort of tax revenue. I think they could have done 77 00:04:24,480 --> 00:04:28,200 Speaker 2: a lot more on the incentives for lower income earners, 78 00:04:28,279 --> 00:04:30,560 Speaker 2: because it's a bit unfair that if you've got someone 79 00:04:30,600 --> 00:04:32,839 Speaker 2: on a very low income with a very low SUPER 80 00:04:32,839 --> 00:04:36,599 Speaker 2: balance and they do want to save for retirement. Sure, 81 00:04:36,680 --> 00:04:39,000 Speaker 2: now about the first five and a half thousand dollars 82 00:04:39,040 --> 00:04:42,640 Speaker 2: in contributions is tax free because of the offset. But 83 00:04:42,760 --> 00:04:45,520 Speaker 2: I would argue that if you're in a low income 84 00:04:45,880 --> 00:04:48,599 Speaker 2: and you have a low SUPER balance, that you shouldn't 85 00:04:48,600 --> 00:04:50,800 Speaker 2: pay any tax to put money into Super because it's 86 00:04:50,839 --> 00:04:53,440 Speaker 2: in the government's best interest because it produces a burden 87 00:04:53,480 --> 00:04:54,479 Speaker 2: on the welfare systems. 88 00:04:55,040 --> 00:04:57,120 Speaker 1: No, you know, you've actually pay fifteen percent as it 89 00:04:57,200 --> 00:05:00,200 Speaker 1: calls in, and it's like, ah, gosh, you know I 90 00:05:00,240 --> 00:05:04,719 Speaker 1: was being encouraged. Okay, now, But for property investors, here's 91 00:05:04,760 --> 00:05:08,560 Speaker 1: the thing. What happens next. So we all know now 92 00:05:09,200 --> 00:05:11,760 Speaker 1: in the property market that there's a new tax rate 93 00:05:11,800 --> 00:05:15,320 Speaker 1: coming in, and we all know that anyone who has 94 00:05:15,560 --> 00:05:21,720 Speaker 1: accumulated property assets in Super the tax rate, assuming they're 95 00:05:22,160 --> 00:05:28,360 Speaker 1: total super assets, and no doubt their total superassets would 96 00:05:28,360 --> 00:05:33,000 Speaker 1: be heavily chunkily if you like, composed of property assets. 97 00:05:33,720 --> 00:05:39,800 Speaker 1: The tax rate's going to double on earnings over from 98 00:05:40,279 --> 00:05:42,240 Speaker 1: the tax lace basically between three and ten is going 99 00:05:42,279 --> 00:05:44,919 Speaker 1: to double. Isn't it used to be fifteen percent and 100 00:05:45,000 --> 00:05:48,040 Speaker 1: now it's going to be thirty percent on the earnings 101 00:05:48,120 --> 00:05:51,880 Speaker 1: on assets above those above the actually shold and that 102 00:05:51,920 --> 00:05:54,719 Speaker 1: would apply to property earnings. What does it mean for 103 00:05:54,760 --> 00:05:56,000 Speaker 1: the property marked. 104 00:05:57,000 --> 00:05:59,960 Speaker 2: Well, they're being a bit silent on how these util 105 00:06:00,000 --> 00:06:03,479 Speaker 2: tax rates will apply to capital gains, because at the moment, 106 00:06:04,160 --> 00:06:08,039 Speaker 2: super funds get a third reduction in capital gains tax rates. 107 00:06:08,080 --> 00:06:11,640 Speaker 2: So income is taxed at fifteen percent, you know, between 108 00:06:11,760 --> 00:06:15,679 Speaker 2: zero and three million dollars in accumulation, whereas capital gains 109 00:06:15,680 --> 00:06:17,799 Speaker 2: are taxed at ten percent, so you get a third 110 00:06:17,839 --> 00:06:22,800 Speaker 2: reduction on the tax rate. I would imagine they're going 111 00:06:22,880 --> 00:06:25,599 Speaker 2: to apply the same principle to the new tax rates. 112 00:06:25,640 --> 00:06:28,880 Speaker 2: So if you're paying, if you've got more than ten 113 00:06:28,880 --> 00:06:32,200 Speaker 2: million dollars and you're paying forty percent, well you'll pay. 114 00:06:32,520 --> 00:06:34,640 Speaker 2: You know, you'll probably get a third discount on that. 115 00:06:35,839 --> 00:06:38,600 Speaker 2: And remember it's marginal as well. So even if you 116 00:06:38,640 --> 00:06:41,280 Speaker 2: look at the average tax rate on say twenty million dollars, 117 00:06:41,800 --> 00:06:45,040 Speaker 2: it's about thirty one percent on income, so it might 118 00:06:45,080 --> 00:06:48,720 Speaker 2: be about twenty percent or so on capital gains. Well 119 00:06:48,760 --> 00:06:51,839 Speaker 2: that's still probably the same more slightly less than what 120 00:06:51,880 --> 00:06:54,640 Speaker 2: you'd pay if the if you crystallize that capital gain 121 00:06:54,680 --> 00:06:58,080 Speaker 2: in your personal name, I'm not sure. I mean for 122 00:06:58,200 --> 00:07:02,200 Speaker 2: someone that crystallizes a huge, huge capital gain, you might say, well, 123 00:07:02,320 --> 00:07:05,320 Speaker 2: it's not worth it being side super and you should 124 00:07:05,320 --> 00:07:08,640 Speaker 2: pull it out before you sell it or now. But 125 00:07:08,760 --> 00:07:11,560 Speaker 2: I think for most people and most people listening to this, 126 00:07:11,800 --> 00:07:13,880 Speaker 2: I don't think it changes very much. I still think 127 00:07:14,160 --> 00:07:16,840 Speaker 2: the tax benefits aren't as great as they used to be, 128 00:07:17,160 --> 00:07:20,080 Speaker 2: but they're still their relative to say, holding it in 129 00:07:20,080 --> 00:07:22,800 Speaker 2: a family trust, to hold me in individual names or 130 00:07:22,880 --> 00:07:24,040 Speaker 2: even in a company name. 131 00:07:24,680 --> 00:07:27,320 Speaker 1: Okay, So you're saying, all right, So the point your 132 00:07:27,440 --> 00:07:31,800 Speaker 1: first point is that in relative terms, compared to outside super, 133 00:07:32,600 --> 00:07:34,080 Speaker 1: though it's not as good as it used to be, 134 00:07:35,040 --> 00:07:38,520 Speaker 1: it remains better than many options outside super. Okay. And 135 00:07:38,640 --> 00:07:41,920 Speaker 1: also then property income does property income coming in? So 136 00:07:42,080 --> 00:07:45,080 Speaker 1: someone has saved has and their key acid in their 137 00:07:45,160 --> 00:07:48,600 Speaker 1: super is let's say a small apartment and that small 138 00:07:48,600 --> 00:07:51,800 Speaker 1: apartment block pays income each year, and the apartment block 139 00:07:51,920 --> 00:07:54,600 Speaker 1: is worth more than three then their tax is going 140 00:07:54,640 --> 00:07:57,520 Speaker 1: to double. Is that right? Yeah? 141 00:07:57,600 --> 00:08:01,520 Speaker 2: It will. But if there's a balance is five million dollars, 142 00:08:01,640 --> 00:08:04,880 Speaker 2: they're paying an average rate of fifteen percent. Well, you're 143 00:08:04,880 --> 00:08:07,080 Speaker 2: probably going to pay more than that if the asset 144 00:08:07,160 --> 00:08:09,560 Speaker 2: was held personally. If it was in a company, you're 145 00:08:09,560 --> 00:08:12,000 Speaker 2: going to pay thirty percent. If it's in a family trust, again, 146 00:08:12,040 --> 00:08:14,160 Speaker 2: it will end up in an individual name, so you're 147 00:08:14,200 --> 00:08:17,480 Speaker 2: going to pay more than fifteen percent. So yes, there's 148 00:08:17,480 --> 00:08:22,000 Speaker 2: a tax hike, but still Super remains attractive. And James, 149 00:08:22,000 --> 00:08:23,840 Speaker 2: this is something that I talk to clients about a 150 00:08:23,840 --> 00:08:25,440 Speaker 2: lot because a lot of people go, well, I don't 151 00:08:25,480 --> 00:08:28,200 Speaker 2: want to concentrate on Super. They're always moving the rules, 152 00:08:28,320 --> 00:08:31,480 Speaker 2: right they are. They will they will always change the 153 00:08:31,560 --> 00:08:34,400 Speaker 2: Super rules. It's been like that since the early nineties 154 00:08:34,440 --> 00:08:36,200 Speaker 2: when Super began, and it's going to be like that 155 00:08:36,240 --> 00:08:39,160 Speaker 2: for the next twenty or thirty years. But it will 156 00:08:39,200 --> 00:08:42,760 Speaker 2: always be concessionally taxed right at the end of the day, 157 00:08:42,800 --> 00:08:45,280 Speaker 2: So it's always going to be an attractive proposition. Now 158 00:08:45,280 --> 00:08:47,040 Speaker 2: that's not to say you put all your money into it, 159 00:08:47,600 --> 00:08:50,440 Speaker 2: because someone with ten million dollars might start thinking about, 160 00:08:50,520 --> 00:08:53,360 Speaker 2: you know, diversifying on your ship structures. But I think 161 00:08:53,400 --> 00:08:57,240 Speaker 2: for most people listening to this podcast, it doesn't change. 162 00:08:57,440 --> 00:09:00,520 Speaker 2: It doesn't really change the outcome. Super is still an 163 00:09:00,559 --> 00:09:02,439 Speaker 2: attractive environment as well. 164 00:09:03,080 --> 00:09:05,760 Speaker 1: Now, what about the impact at the upper end of 165 00:09:05,800 --> 00:09:10,120 Speaker 1: the market. So there is a report already that perhaps 166 00:09:10,200 --> 00:09:14,160 Speaker 1: you know, obviously the family home remains free of allttax 167 00:09:14,320 --> 00:09:18,080 Speaker 1: couple of games exemption, so you would think the top 168 00:09:18,200 --> 00:09:22,200 Speaker 1: end of the market even be juicier basically will even 169 00:09:22,240 --> 00:09:24,000 Speaker 1: be more attractive than it used to be. So we 170 00:09:24,040 --> 00:09:26,679 Speaker 1: may find even more heat coming into the housing market, 171 00:09:26,720 --> 00:09:28,800 Speaker 1: particularly at your brand. What do you think of that 172 00:09:29,400 --> 00:09:30,440 Speaker 1: Hereio it look? 173 00:09:30,640 --> 00:09:33,640 Speaker 2: I think so at ten million dollars, the average traits 174 00:09:33,679 --> 00:09:36,040 Speaker 2: twenty three percent, So if you have more than ten 175 00:09:36,040 --> 00:09:38,800 Speaker 2: million dollars, you start to think about maybe pulling some 176 00:09:38,880 --> 00:09:40,720 Speaker 2: of that money out. It's a little bit of a 177 00:09:40,720 --> 00:09:43,240 Speaker 2: cautionarytail for most people. For some people as well, because 178 00:09:43,240 --> 00:09:46,440 Speaker 2: I've spoken our advice to this day to our clients 179 00:09:46,480 --> 00:09:48,200 Speaker 2: is don't do anything until it's law. We're not going 180 00:09:48,240 --> 00:09:50,800 Speaker 2: to do anything now. I know there's been a lot 181 00:09:50,800 --> 00:09:53,280 Speaker 2: of stories about people pulling money out of Super, giving 182 00:09:53,400 --> 00:09:57,520 Speaker 2: early inheritance, upgrading the family home, all those sorts of things. 183 00:09:57,520 --> 00:09:59,800 Speaker 2: So that's the thing we can learn from this exercise. 184 00:10:00,120 --> 00:10:03,880 Speaker 2: Don't jump at shadows, don't make changes until something is law. 185 00:10:04,320 --> 00:10:06,040 Speaker 2: But I think you're right, James. I think if for 186 00:10:06,080 --> 00:10:10,199 Speaker 2: those people that have super high balances inside Super excuse 187 00:10:10,200 --> 00:10:12,600 Speaker 2: the pun, I think that there's an incentive there to 188 00:10:12,640 --> 00:10:16,400 Speaker 2: start pulling out and maybe the early inheritance, maybe upgrading 189 00:10:16,440 --> 00:10:19,720 Speaker 2: the family home, taking those opportunities to try and avoid 190 00:10:19,760 --> 00:10:22,680 Speaker 2: that tax. But it's only going to impact a small 191 00:10:23,160 --> 00:10:27,080 Speaker 2: proportion of the community, of course. And I don't think anyone, 192 00:10:27,280 --> 00:10:29,800 Speaker 2: I don't think anyone ever criticized right from the beginning 193 00:10:29,800 --> 00:10:32,079 Speaker 2: that you know, someone with a one hundred million inside 194 00:10:32,080 --> 00:10:35,000 Speaker 2: super can afford to pay more tax and it's not great. 195 00:10:35,040 --> 00:10:36,840 Speaker 1: I got the yeah, and I think that was broadly 196 00:10:36,880 --> 00:10:40,280 Speaker 1: accepted across all investment markets. That's fair enough. Nobody was 197 00:10:40,360 --> 00:10:44,000 Speaker 1: Marchmont Streets or indeed to bort of having people having 198 00:10:44,120 --> 00:10:48,119 Speaker 1: enormous amounts and Super tendillion is an enormous amount. Very interesting, 199 00:10:48,320 --> 00:10:50,160 Speaker 1: great to get you on this morning. We take a 200 00:10:50,160 --> 00:10:52,120 Speaker 1: break and we're going to come back with one of 201 00:10:52,160 --> 00:10:54,560 Speaker 1: our favorite topics with the new anger that you may 202 00:10:54,600 --> 00:10:57,400 Speaker 1: not have considered before, which is where they're the big 203 00:10:57,520 --> 00:11:01,200 Speaker 1: in basement of the national property market is turning or 204 00:11:01,240 --> 00:11:13,960 Speaker 1: not Talk to you in a moment. Hello, Welcome back 205 00:11:14,000 --> 00:11:17,160 Speaker 1: to the Australians Money Puzzle podcast. James Kirby here with 206 00:11:17,240 --> 00:11:21,120 Speaker 1: Stuart Weens. Okay, so now we've got you up to date, 207 00:11:21,240 --> 00:11:24,560 Speaker 1: I hope with the new super tax. Folks, if you 208 00:11:24,640 --> 00:11:27,320 Speaker 1: want to know more, send in some questions the Money 209 00:11:27,360 --> 00:11:29,959 Speaker 1: Puzzle at the Australian dot Com Dot I know people 210 00:11:30,000 --> 00:11:33,199 Speaker 1: had any many questions about this during its sort of gestation, 211 00:11:33,880 --> 00:11:37,079 Speaker 1: it's trouble gestation, and they probably have even more questions 212 00:11:37,120 --> 00:11:40,080 Speaker 1: now because it's clear to us because we're watching it 213 00:11:40,120 --> 00:11:41,720 Speaker 1: every day, but it may not be clear to you. 214 00:11:41,800 --> 00:11:43,360 Speaker 1: So send let us know what you need to know 215 00:11:43,840 --> 00:11:47,800 Speaker 1: and we will answer that promptly. Okay. Now, the theme, 216 00:11:47,840 --> 00:11:51,120 Speaker 1: of course that I'm mentioning is Melbourne the bargain basement 217 00:11:51,240 --> 00:11:54,520 Speaker 1: were told of the national property market, and boy, it's 218 00:11:54,520 --> 00:11:58,480 Speaker 1: certainly cheap compared to the other cities, and some historically 219 00:11:58,520 --> 00:12:02,439 Speaker 1: are likely anomalous situations where for instance, it's cheaper than Adelaiding, 220 00:12:02,480 --> 00:12:05,319 Speaker 1: you don't mind, it's cheapid than Brismond, it's cheaper than Perth. 221 00:12:05,840 --> 00:12:09,360 Speaker 1: How can that be? So there are many interstated bests 222 00:12:09,360 --> 00:12:11,960 Speaker 1: who believe that's going to be a bargain and they've 223 00:12:11,960 --> 00:12:15,160 Speaker 1: come into the Melbourne market. Stuart Wins and his circle 224 00:12:15,240 --> 00:12:18,480 Speaker 1: would have been involved in this. Stuart, I've put it 225 00:12:18,480 --> 00:12:20,560 Speaker 1: to you recently. I've looked at the numbers of the 226 00:12:20,600 --> 00:12:24,920 Speaker 1: September quarter. The Melbourne things are still helpless. 227 00:12:24,559 --> 00:12:26,480 Speaker 2: They are, but if you look at the fundamentals, they're 228 00:12:26,480 --> 00:12:30,199 Speaker 2: pretty strong. James, you've got Melbourne, Victoria has the second 229 00:12:30,480 --> 00:12:34,040 Speaker 2: highest population growth in percent each terms, but in absolute 230 00:12:34,120 --> 00:12:37,880 Speaker 2: terms one hundred and twenty five thousand people. That population 231 00:12:37,960 --> 00:12:40,240 Speaker 2: increased one hundred and twenty five thousand people over the 232 00:12:40,280 --> 00:12:43,679 Speaker 2: last twelve months. That's more than double Perth and New 233 00:12:43,679 --> 00:12:46,600 Speaker 2: South Wales is about one hundred thousand. So in absolute terms, 234 00:12:47,000 --> 00:12:51,040 Speaker 2: strongest population growth. Unemployment, I mean, because everyone sort of 235 00:12:51,040 --> 00:12:55,520 Speaker 2: criticizes the economy. Unemployment is four point four percent nationally 236 00:12:55,800 --> 00:12:58,120 Speaker 2: or at four point two percent. There's not a big 237 00:12:58,120 --> 00:13:01,480 Speaker 2: difference there. Vacancy rates over the last twelve months have 238 00:13:01,640 --> 00:13:03,920 Speaker 2: reduced from about one point eight percent to about one 239 00:13:03,960 --> 00:13:06,960 Speaker 2: point three percent. Having said that, those other markets you 240 00:13:07,080 --> 00:13:10,320 Speaker 2: just mentioned in are below one percent now, so the 241 00:13:10,360 --> 00:13:13,600 Speaker 2: fundamentals are very strong. What we're seeing on the ground 242 00:13:13,720 --> 00:13:17,760 Speaker 2: from feedback from buyers agents, the results are patching. So 243 00:13:17,920 --> 00:13:21,320 Speaker 2: if a couple of sales on the weekend, one exceeded 244 00:13:21,400 --> 00:13:24,360 Speaker 2: expectations by about three hundred thousands so sold for one 245 00:13:24,400 --> 00:13:28,120 Speaker 2: to five, they were creating one two. Another property that 246 00:13:28,240 --> 00:13:32,040 Speaker 2: was considered superior failed to sold for one point four 247 00:13:32,080 --> 00:13:34,040 Speaker 2: to five, so failed to even get to one five. 248 00:13:34,080 --> 00:13:35,720 Speaker 2: And even though it was probably worth more. 249 00:13:35,880 --> 00:13:38,439 Speaker 1: Seeing a grounds for just yit so just to put 250 00:13:38,480 --> 00:13:40,560 Speaker 1: the numbers in, like, there is some growth in the 251 00:13:40,559 --> 00:13:45,720 Speaker 1: Melbourne market, but considering it is anomalous in its in 252 00:13:45,800 --> 00:13:50,040 Speaker 1: its law price against all other cities, and considering everyone 253 00:13:50,080 --> 00:13:54,320 Speaker 1: knows this. Now Sydney grew faster than the September quarter 254 00:13:54,400 --> 00:13:56,760 Speaker 1: the national average group if I've got it right, it's 255 00:13:56,760 --> 00:13:58,880 Speaker 1: coming up on six percent of Milduran was over three. 256 00:13:59,120 --> 00:14:00,560 Speaker 1: Is that I know? There was just the biggest Which 257 00:14:00,559 --> 00:14:01,280 Speaker 1: ones do you use? 258 00:14:01,920 --> 00:14:04,560 Speaker 2: I use karality because they are sort of comparing apples 259 00:14:04,559 --> 00:14:07,160 Speaker 2: with apples, So it looks at the attributes of property 260 00:14:07,160 --> 00:14:10,440 Speaker 2: and compares like for like if you like, so five 261 00:14:10,880 --> 00:14:14,920 Speaker 2: capital city aggregates about four point six percent over the 262 00:14:14,960 --> 00:14:17,520 Speaker 2: last year. Melbourne's two point two is half the growth 263 00:14:17,640 --> 00:14:19,680 Speaker 2: you know in yashin the national pace. 264 00:14:19,880 --> 00:14:22,880 Speaker 1: Yeah, and the thing is okay, so you've taken heart 265 00:14:23,240 --> 00:14:28,520 Speaker 1: with some macro facts and so some wider investments specialists 266 00:14:28,520 --> 00:14:31,280 Speaker 1: and experts, and the number you really hang on to 267 00:14:31,400 --> 00:14:34,640 Speaker 1: there was the fact that the population, the net migration, 268 00:14:35,360 --> 00:14:38,720 Speaker 1: the population is growing, which is all very fine. And 269 00:14:38,720 --> 00:14:41,680 Speaker 1: there's two things I think that I the concerns on 270 00:14:41,720 --> 00:14:44,720 Speaker 1: the other side, One is hasn't Melbourne got the best 271 00:14:44,720 --> 00:14:47,560 Speaker 1: supply for us two of all the states, and the 272 00:14:47,600 --> 00:14:51,000 Speaker 1: second is that the net migration figure if we really 273 00:14:51,040 --> 00:14:56,040 Speaker 1: burrow into it. Is it true that the explanation is 274 00:14:56,200 --> 00:14:59,760 Speaker 1: that the Melbournians aren't leaving anymore because they can't afford 275 00:14:59,800 --> 00:15:05,000 Speaker 1: to go the Queen's lab Yeah, possibly, James, although could 276 00:15:05,200 --> 00:15:07,640 Speaker 1: could it be an interpretation of the figures? 277 00:15:08,120 --> 00:15:11,040 Speaker 2: Well, like you and I've spoken about, there's other reasons 278 00:15:11,080 --> 00:15:14,560 Speaker 2: while we stay in Victoria other than you know, our 279 00:15:14,800 --> 00:15:19,920 Speaker 2: ability to move into state, things like family, business, jobs, 280 00:15:20,320 --> 00:15:22,320 Speaker 2: these sorts of things that kind of keep us here. 281 00:15:22,840 --> 00:15:26,200 Speaker 2: I guess given the whole negative sentiment, anyone that doesn't 282 00:15:26,240 --> 00:15:29,960 Speaker 2: have those ties has moved, and you know, there's the 283 00:15:30,000 --> 00:15:32,400 Speaker 2: rest of us are trapped here if you like, because 284 00:15:32,440 --> 00:15:35,720 Speaker 2: of either jobs or family. But it's true, it's really 285 00:15:35,760 --> 00:15:39,840 Speaker 2: the decline in departures rather than and there's been actually 286 00:15:39,920 --> 00:15:43,480 Speaker 2: a small decline in arrivals, but departures are declined by more. 287 00:15:43,880 --> 00:15:47,920 Speaker 2: That's turned the interstate migration positive. So that's kind of 288 00:15:48,000 --> 00:15:50,280 Speaker 2: naturally you should expect that. And the data is very 289 00:15:50,320 --> 00:15:52,360 Speaker 2: noisy over the last five years because of COVID, so 290 00:15:52,440 --> 00:15:56,160 Speaker 2: it's really difficult to draw trends necessary trends that are 291 00:15:56,160 --> 00:15:59,200 Speaker 2: going to repeat themselves. But the other thing, James, you know, 292 00:15:59,200 --> 00:16:01,800 Speaker 2: when we talk about the data, the thing we've got 293 00:16:01,800 --> 00:16:05,760 Speaker 2: to be conscious of is this first home guarantee it 294 00:16:06,240 --> 00:16:09,920 Speaker 2: and its impact on the data because the price caps 295 00:16:09,920 --> 00:16:14,400 Speaker 2: for this guarantee are around about the median value. So therefore, 296 00:16:14,480 --> 00:16:17,960 Speaker 2: if we increase the transactions that are below the median value, 297 00:16:17,960 --> 00:16:21,000 Speaker 2: it's actually going to pull the medium value down because 298 00:16:21,120 --> 00:16:24,280 Speaker 2: we're looking at the midpoint of all that data. 299 00:16:25,040 --> 00:16:28,400 Speaker 1: I see what you're saying, absolutely, anagress. It's unlimited, right universal, 300 00:16:28,560 --> 00:16:32,320 Speaker 1: So anyone bunder Frostco Is entitled to this skin. 301 00:16:32,920 --> 00:16:35,200 Speaker 2: And I'm told an agent was talking to a mortgage 302 00:16:35,200 --> 00:16:37,840 Speaker 2: broker that was based in sin Killary and Melbourne and 303 00:16:37,880 --> 00:16:40,920 Speaker 2: he was saying that there's fifteen he's got fifteen clients 304 00:16:40,920 --> 00:16:44,000 Speaker 2: have been approved to go and buy property that if 305 00:16:44,000 --> 00:16:46,320 Speaker 2: it wasn't for that guarantee, they wouldn't be there. And 306 00:16:46,320 --> 00:16:49,720 Speaker 2: when other buyers agents saying definitely there's first time buyers 307 00:16:49,960 --> 00:16:52,480 Speaker 2: more active out there in terms of bidding and so forth. 308 00:16:52,520 --> 00:16:55,640 Speaker 2: So I think there's going to be an increasing transactions 309 00:16:55,640 --> 00:16:58,000 Speaker 2: that are sort of sub that million dollar mark, and 310 00:16:58,040 --> 00:17:01,920 Speaker 2: that's actually going to pull welling medium values down. And 311 00:17:01,920 --> 00:17:04,480 Speaker 2: that's why I think that coality data is important because 312 00:17:04,840 --> 00:17:07,840 Speaker 2: we need to look at data for houses and apartments separately, 313 00:17:07,920 --> 00:17:10,400 Speaker 2: and we try need to try and marry up some 314 00:17:10,480 --> 00:17:13,439 Speaker 2: sort of comparison, so we're comparing like with like. 315 00:17:13,560 --> 00:17:15,720 Speaker 1: And that's a very interesting point, Stuart. So at one thing, 316 00:17:16,119 --> 00:17:18,040 Speaker 1: it will pull the media down everywhere. Right, So now 317 00:17:18,160 --> 00:17:20,480 Speaker 1: yes say it's a right, yeah, very interesting. I don't 318 00:17:20,480 --> 00:17:22,400 Speaker 1: thought about that. Okay, keep an eye on that, folks. 319 00:17:22,440 --> 00:17:24,480 Speaker 1: We'll take a short break out some great questions I 320 00:17:24,480 --> 00:17:26,520 Speaker 1: have been collecting. I want to catch up on them. 321 00:17:26,560 --> 00:17:28,400 Speaker 1: We haven't had some questions for a while, so back 322 00:17:28,400 --> 00:17:39,000 Speaker 1: in a moment, Hello, Welcome back to the Australians Money 323 00:17:39,000 --> 00:17:41,720 Speaker 1: Puzzle podcast. James Kirby here with Sturet Wims of pro 324 00:17:41,880 --> 00:17:46,479 Speaker 1: Solution on a milestone week when the new super tax, 325 00:17:46,600 --> 00:17:50,480 Speaker 1: which has been a major distraction in the market for 326 00:17:50,520 --> 00:17:57,440 Speaker 1: a long time, seems to have been sorted politically. And 327 00:17:56,840 --> 00:17:59,879 Speaker 1: I don't have to say that there was absolutely white 328 00:18:00,080 --> 00:18:03,720 Speaker 1: it Google or the decision from the treasure to chuck 329 00:18:03,760 --> 00:18:07,159 Speaker 1: away a notion of on realized gains and just to 330 00:18:07,160 --> 00:18:10,160 Speaker 1: have a straight tax on actual earnings and he's basically 331 00:18:10,160 --> 00:18:13,200 Speaker 1: what he's done is he doubled the amount of tax 332 00:18:13,240 --> 00:18:16,879 Speaker 1: you pay in super on earnings between three million and 333 00:18:16,920 --> 00:18:19,639 Speaker 1: ten million. And that's the big news basically, which will 334 00:18:19,680 --> 00:18:21,920 Speaker 1: hit most people. It's got a bit also, it's got lost, 335 00:18:21,960 --> 00:18:23,919 Speaker 1: but it's probably a little bit sort of buried in 336 00:18:23,960 --> 00:18:27,640 Speaker 1: the wider noise around it because he introduced another new 337 00:18:27,760 --> 00:18:32,840 Speaker 1: tax in super. Yes, sir, for the very wealthy group 338 00:18:32,880 --> 00:18:34,760 Speaker 1: who have more than ten million assets and super and 339 00:18:34,800 --> 00:18:37,720 Speaker 1: they will pay in effect of forty percent tax on super. 340 00:18:37,760 --> 00:18:41,040 Speaker 1: That's the news news as it hits listeners. I expect 341 00:18:41,040 --> 00:18:44,280 Speaker 1: this that simple piece of information that on earning is 342 00:18:44,280 --> 00:18:47,360 Speaker 1: about three million, the super tax you pay will move 343 00:18:47,440 --> 00:18:50,359 Speaker 1: to thirty percent. But as Stewart said, see is in 344 00:18:50,400 --> 00:18:54,320 Speaker 1: context still lower than just about anything else out there. Okay, 345 00:18:54,520 --> 00:18:56,960 Speaker 1: some really good questions. Let's have the first one from 346 00:18:57,000 --> 00:18:59,040 Speaker 1: Helena if you want to read that once? 347 00:18:59,040 --> 00:19:02,479 Speaker 2: Sure, yeah, absolutely so. Helena writes, I hope you're having 348 00:19:02,480 --> 00:19:05,679 Speaker 2: a lovely day. You recently hosted James O'Reilly on The 349 00:19:06,080 --> 00:19:09,120 Speaker 2: Money Puzzle, who spoke about buying property through a self 350 00:19:09,119 --> 00:19:12,800 Speaker 2: marrige superfund and that it could leave you a million 351 00:19:12,840 --> 00:19:16,080 Speaker 2: dollars worse off. The problem isn't that the self married 352 00:19:16,119 --> 00:19:20,800 Speaker 2: Superfund underperformed. It's that the calculations when comparing four hundred 353 00:19:20,880 --> 00:19:24,720 Speaker 2: thousand fully invested into shares to only one hundred and 354 00:19:24,800 --> 00:19:28,600 Speaker 2: sixty thousand deployed into property, when you actually modeled out 355 00:19:28,640 --> 00:19:32,280 Speaker 2: both sides correctly, the so called million dollar loss disappears. 356 00:19:32,880 --> 00:19:35,920 Speaker 1: Okay, thank you, Helena. I mean there's one key point 357 00:19:36,000 --> 00:19:38,920 Speaker 1: I think that that that that MOSCIP agree with, which 358 00:19:38,960 --> 00:19:43,119 Speaker 1: is having properly an SMSs, having a property asset in 359 00:19:43,200 --> 00:19:49,360 Speaker 1: an SMSSI, which many people will now be pondering, especially 360 00:19:49,359 --> 00:19:51,760 Speaker 1: if they already have one, because the tax has changed 361 00:19:51,800 --> 00:19:55,240 Speaker 1: on it. The issue is that you pay higher rates 362 00:19:55,640 --> 00:19:59,120 Speaker 1: than other people. And also the negative gearing isn't as 363 00:19:59,119 --> 00:20:02,720 Speaker 1: good right because because it's insight So they're the crucial points. 364 00:20:02,760 --> 00:20:05,719 Speaker 1: Of course, people can make succests out of property in 365 00:20:05,760 --> 00:20:08,479 Speaker 1: an s MESSIVE. But I think James had some very 366 00:20:08,560 --> 00:20:14,480 Speaker 1: valid point about the fundamental sort of hurdles that aren't 367 00:20:14,560 --> 00:20:16,920 Speaker 1: very clear sometimes and certainly it wouldn't be made clear 368 00:20:16,960 --> 00:20:18,560 Speaker 1: to you by someone who was trying to sell you 369 00:20:18,600 --> 00:20:22,160 Speaker 1: the of putting property into your an SMSSI that's why 370 00:20:22,200 --> 00:20:22,920 Speaker 1: we have this show. 371 00:20:23,720 --> 00:20:25,959 Speaker 2: I just add to that. Sorry, if James you know 372 00:20:26,000 --> 00:20:28,439 Speaker 2: that there's I think I have two comments. Firstly, we 373 00:20:28,480 --> 00:20:32,199 Speaker 2: can model comparisons, and it's correct that you should. You know, 374 00:20:32,200 --> 00:20:35,520 Speaker 2: if you if you're modeling sort of two different strategies, 375 00:20:35,600 --> 00:20:39,080 Speaker 2: you should assume the same return on both asset classes, 376 00:20:39,119 --> 00:20:42,760 Speaker 2: because it's about a strategy comparison rather than asset class comparison. 377 00:20:43,480 --> 00:20:47,159 Speaker 2: But also the flip side is that you should strategy, 378 00:20:47,359 --> 00:20:51,800 Speaker 2: you should model your own scenarios. So in James's scenario, 379 00:20:51,840 --> 00:20:54,000 Speaker 2: it was like leave all the super or take some 380 00:20:54,119 --> 00:20:56,080 Speaker 2: put it in as a deposit, and then leave some 381 00:20:56,320 --> 00:20:59,000 Speaker 2: cash left over to investors a bit of a buffer. 382 00:20:59,480 --> 00:21:01,680 Speaker 2: And so what he was modeling is what he would 383 00:21:01,760 --> 00:21:05,120 Speaker 2: actually do, and so I think that's what we need 384 00:21:05,160 --> 00:21:08,199 Speaker 2: to be careful and not saw a drawing conclusions on 385 00:21:08,640 --> 00:21:12,360 Speaker 2: modeling outcomes unless they really apply to our own situation. 386 00:21:12,800 --> 00:21:15,880 Speaker 2: And I think the general theme of what James was saying, 387 00:21:15,920 --> 00:21:19,120 Speaker 2: which I totally agree with, was that not any property 388 00:21:19,160 --> 00:21:21,800 Speaker 2: will work inside Super. If you're going to invest in 389 00:21:21,880 --> 00:21:25,160 Speaker 2: property inside Super, absolutely make sure it's a great property. 390 00:21:25,600 --> 00:21:27,560 Speaker 2: And I totally support that. If you're just going to 391 00:21:27,560 --> 00:21:30,200 Speaker 2: go out and buy any property or be sold any 392 00:21:30,240 --> 00:21:32,800 Speaker 2: property that it's not going to work. 393 00:21:33,040 --> 00:21:34,439 Speaker 1: It's not going to work because it has to be 394 00:21:34,520 --> 00:21:37,440 Speaker 1: very good because it has particular hurdles. As he is 395 00:21:37,480 --> 00:21:39,200 Speaker 1: being at the bomb with the girl. All right, one 396 00:21:39,240 --> 00:21:43,200 Speaker 1: final question which is from Josh, do you know why 397 00:21:43,240 --> 00:21:45,960 Speaker 1: the government brought forward the starting dead for the first 398 00:21:45,960 --> 00:21:49,359 Speaker 1: home buyers five percent? Positive skin and do you really 399 00:21:49,400 --> 00:21:53,680 Speaker 1: need only five percent to buy a home now? Josh, careful. 400 00:21:56,000 --> 00:21:58,040 Speaker 1: This has happened a couple of times, and I've noticed 401 00:21:58,119 --> 00:22:03,760 Speaker 1: on the show people the folks that scheme universal scheme 402 00:22:04,040 --> 00:22:06,600 Speaker 1: getting so much attention, which is changing the numbers, as 403 00:22:06,640 --> 00:22:08,960 Speaker 1: Stewart explained, and it will bring down the medium price, 404 00:22:09,000 --> 00:22:11,359 Speaker 1: believe it or off, because everybody has to buy under 405 00:22:11,800 --> 00:22:15,240 Speaker 1: the cap. If you like, that is allowed rule the scheme, 406 00:22:15,320 --> 00:22:20,360 Speaker 1: the cap on the house price you're allowed by You aren't. 407 00:22:19,680 --> 00:22:26,280 Speaker 1: You'll just have five percent. You it's not just five percent. 408 00:22:27,840 --> 00:22:31,320 Speaker 1: This is how it works. You put down you only 409 00:22:31,359 --> 00:22:35,399 Speaker 1: need a deposit of five percent, but the other ninety 410 00:22:35,440 --> 00:22:39,720 Speaker 1: five percent is paid by your loan, your mortgage. Okay, 411 00:22:39,760 --> 00:22:43,480 Speaker 1: the government is only covering the potential insurance obligation on 412 00:22:43,520 --> 00:22:46,159 Speaker 1: that amount, which you would have had to pay if 413 00:22:46,200 --> 00:22:49,400 Speaker 1: they didn't do this scheme, So keep that in mind. 414 00:22:49,840 --> 00:22:52,320 Speaker 1: You don't have an eighty percent mortgage, but you have 415 00:22:52,359 --> 00:22:55,240 Speaker 1: a ninety five percent mortgage. If you join the first 416 00:22:55,280 --> 00:22:59,320 Speaker 1: home buyer deposit scheme at five percent, it's fine. I 417 00:22:59,359 --> 00:23:03,280 Speaker 1: suppose baricycles for some people, but all those people Stewart 418 00:23:03,359 --> 00:23:06,159 Speaker 1: will be on ninety five percent mortgages. So as a 419 00:23:06,160 --> 00:23:10,160 Speaker 1: whole new class, isn't there a homeowner in Australia being 420 00:23:10,200 --> 00:23:13,080 Speaker 1: encouraged by the government who would sit there on ninety 421 00:23:13,080 --> 00:23:16,400 Speaker 1: five percent mortgages? Probably for the average you know who 422 00:23:16,440 --> 00:23:19,480 Speaker 1: knows they have one hundred persent mortgages and that's going 423 00:23:19,560 --> 00:23:20,800 Speaker 1: to take a long time to pay down. 424 00:23:22,200 --> 00:23:25,919 Speaker 2: Yep, that's right. It's not a solution to housing affordability. 425 00:23:25,960 --> 00:23:29,639 Speaker 2: It's a solution to borrowing capacity. Yeah, that's all it is. 426 00:23:29,800 --> 00:23:33,240 Speaker 2: And but we you know, like anything, borrowing is a 427 00:23:33,280 --> 00:23:36,960 Speaker 2: fantastic servant, but a terrible master. So you must make 428 00:23:37,000 --> 00:23:39,320 Speaker 2: sure that what you're borrowing is affordable and you can 429 00:23:39,359 --> 00:23:42,280 Speaker 2: repay it and all those sorts of things. Having said 430 00:23:42,280 --> 00:23:43,960 Speaker 2: all that, you know, if I had my time again, 431 00:23:44,040 --> 00:23:46,960 Speaker 2: and I was in my twenties buying my first property, 432 00:23:47,520 --> 00:23:49,520 Speaker 2: I would certainly swing for the fences. I think if 433 00:23:49,520 --> 00:23:51,880 Speaker 2: I look back over the last twenty or thirty years 434 00:23:51,880 --> 00:23:55,960 Speaker 2: as a property or an investor, I've probably been two 435 00:23:56,000 --> 00:24:00,440 Speaker 2: conservative times with my decision making. And you know, when 436 00:24:00,440 --> 00:24:03,480 Speaker 2: you ever have a look back, if you're old like 437 00:24:03,720 --> 00:24:05,720 Speaker 2: James and I, you can look back and think about 438 00:24:05,760 --> 00:24:08,560 Speaker 2: property you own twenty or thirty years ago, you go wow, 439 00:24:08,680 --> 00:24:09,160 Speaker 2: you're not sure. 440 00:24:10,000 --> 00:24:12,840 Speaker 1: Oh yeah, And so what you're saying is, yep, you're 441 00:24:12,880 --> 00:24:16,280 Speaker 1: offering me nineteen five percent mortgage. I take it, yeah, 442 00:24:16,480 --> 00:24:19,760 Speaker 1: by five percent deposit on the assumption that you know 443 00:24:19,800 --> 00:24:21,679 Speaker 1: what you're doing, and you'll know what you're doing if 444 00:24:21,680 --> 00:24:23,960 Speaker 1: you keep listening to us. All right, folks, That was 445 00:24:24,000 --> 00:24:27,199 Speaker 1: Stuart Williams of pros Solutions. Thanks Stuart, Thank you James. 446 00:24:27,359 --> 00:24:29,320 Speaker 1: Always great to have you back on the show. Great 447 00:24:29,320 --> 00:24:31,840 Speaker 1: to be back on the show, folks. As I say, 448 00:24:32,320 --> 00:24:34,879 Speaker 1: I am wide open to questions on anything you like 449 00:24:34,960 --> 00:24:37,560 Speaker 1: the money Puzzle at the Australian dot com dot au. 450 00:24:37,720 --> 00:24:38,400 Speaker 1: Talk to you soon.