1 00:00:09,960 --> 00:00:13,280 Speaker 1: Hello, and welcome to The Australian's Money Puzzle podcast. I'm 2 00:00:13,400 --> 00:00:17,040 Speaker 1: James Kirby. Welcome aboard everybody, and thanks actually for the 3 00:00:17,120 --> 00:00:19,400 Speaker 1: wishes for the new year that came in. Thank you 4 00:00:19,440 --> 00:00:23,599 Speaker 1: from listeners, and thank you for the correspondence and questions 5 00:00:23,600 --> 00:00:26,080 Speaker 1: and queries that have been coming in and I am 6 00:00:26,120 --> 00:00:28,520 Speaker 1: going to get to some of them today. At last, 7 00:00:28,560 --> 00:00:34,559 Speaker 1: you might say, we will answer questions from you on 8 00:00:34,720 --> 00:00:37,360 Speaker 1: anything you like on every episode from now on. As 9 00:00:37,360 --> 00:00:40,120 Speaker 1: you know, we had an initial series to do when 10 00:00:40,159 --> 00:00:42,800 Speaker 1: we started the year. The majority of the questions so 11 00:00:42,960 --> 00:00:46,159 Speaker 1: far I can see will require the answer of a 12 00:00:46,200 --> 00:00:49,720 Speaker 1: financial adviser, and my guest today is a financial advisor, 13 00:00:49,880 --> 00:00:54,160 Speaker 1: particularly good one Liam short sh or Te of the 14 00:00:54,200 --> 00:00:57,880 Speaker 1: Sonas Group, who you would know who was recently also 15 00:00:58,360 --> 00:01:04,080 Speaker 1: voted sms of congratulations Liam. 16 00:01:03,440 --> 00:01:05,320 Speaker 2: Thank you very much. Happy twenty twenty six. 17 00:01:05,760 --> 00:01:08,360 Speaker 1: Well, happy new year. View. I suppose you're probably the 18 00:01:08,440 --> 00:01:10,200 Speaker 1: last guest on the show. I can say that too. 19 00:01:10,280 --> 00:01:14,560 Speaker 1: It's the Thursday, January twenty now, so I've got to stop. Now, 20 00:01:14,600 --> 00:01:16,600 Speaker 1: we've got to stop saying happy new year, and we're 21 00:01:16,600 --> 00:01:20,119 Speaker 1: moving into February. We're going to get to these questions folks. 22 00:01:20,120 --> 00:01:22,480 Speaker 1: But I also want to bring you up to split 23 00:01:22,600 --> 00:01:25,880 Speaker 1: on one or two newsy items that you should know 24 00:01:26,720 --> 00:01:29,840 Speaker 1: in relation to tax and other issues that are forming 25 00:01:29,920 --> 00:01:33,560 Speaker 1: this year. If you heard the show earlier this week 26 00:01:33,840 --> 00:01:38,240 Speaker 1: with Peter Esher, you will know that CGT is very 27 00:01:38,280 --> 00:01:42,600 Speaker 1: much under threat this year, the discount in particular for property. 28 00:01:42,640 --> 00:01:46,520 Speaker 1: There is a Senate inquiry which is starting in March, 29 00:01:47,600 --> 00:01:50,880 Speaker 1: and there is really, what would you say, concern across 30 00:01:51,080 --> 00:01:54,000 Speaker 1: industry stakeholders about that. And I'm not surprised because I 31 00:01:54,080 --> 00:01:57,560 Speaker 1: think that is a sitting doc basically for tax changes 32 00:01:57,720 --> 00:02:00,000 Speaker 1: in the new year. If you listen to that part 33 00:02:00,160 --> 00:02:03,480 Speaker 1: you'll see why. Separately, Liam, this new supertax, of course 34 00:02:03,680 --> 00:02:06,480 Speaker 1: was redrafted just before Christmas and we did try to 35 00:02:06,480 --> 00:02:08,079 Speaker 1: cover it. But of course now that everyone's had a 36 00:02:08,120 --> 00:02:10,520 Speaker 1: few weeks to read what they're actually saying, there's a 37 00:02:10,520 --> 00:02:13,440 Speaker 1: couple of things I think people should be aware of. 38 00:02:14,240 --> 00:02:17,560 Speaker 1: Very briefly, would you just explain what is the new supertax? 39 00:02:17,639 --> 00:02:19,640 Speaker 1: As we know what redrafted? How does it work? 40 00:02:20,280 --> 00:02:23,200 Speaker 2: Okay, So the new division two nine six, it's basically 41 00:02:23,200 --> 00:02:27,040 Speaker 2: a separate tax charge to the individual. If your balance 42 00:02:27,160 --> 00:02:30,360 Speaker 2: is over three million, you'll pay an extra fifteen percent 43 00:02:30,400 --> 00:02:33,560 Speaker 2: tax on your earnings. Now they've added in if your 44 00:02:33,560 --> 00:02:36,639 Speaker 2: balance is over ten million, it'll be further ten percent 45 00:02:36,720 --> 00:02:39,800 Speaker 2: on top of that fifteen on the earnings over ten million, 46 00:02:39,840 --> 00:02:43,040 Speaker 2: So it's really hitting the higher end, which nobody's got 47 00:02:43,120 --> 00:02:44,040 Speaker 2: much sympathy. 48 00:02:43,680 --> 00:02:46,800 Speaker 1: For, of course. Yeah, and most of our listeners would aspire, 49 00:02:47,160 --> 00:02:49,079 Speaker 1: they would aspire to get into the bracket where they're 50 00:02:49,080 --> 00:02:52,000 Speaker 1: playing the new supertax. But things can change, folks, and 51 00:02:52,320 --> 00:02:57,440 Speaker 1: life is long. Really what you need to know, we're 52 00:02:57,440 --> 00:02:59,840 Speaker 1: going to just talk a little bit about a couple 53 00:02:59,840 --> 00:03:03,320 Speaker 1: of crucial parts of it. One other thing Liam Worth 54 00:03:03,360 --> 00:03:05,880 Speaker 1: saying is that a lot of the rumpus last year, 55 00:03:06,040 --> 00:03:08,160 Speaker 1: of course, was that this tax originally was going to 56 00:03:08,200 --> 00:03:12,400 Speaker 1: be based on realized gains, which was a daft, silly, 57 00:03:13,080 --> 00:03:16,360 Speaker 1: unnecessary idea which we covered again and again, and the 58 00:03:16,400 --> 00:03:21,400 Speaker 1: government has actually had the political smarts to close that down. 59 00:03:21,600 --> 00:03:25,320 Speaker 1: So this tax is based on actual gains. So all right, 60 00:03:25,600 --> 00:03:28,079 Speaker 1: very good, that's what you need to know. There are 61 00:03:28,120 --> 00:03:30,560 Speaker 1: two things that have there are two items of debate 62 00:03:30,639 --> 00:03:33,840 Speaker 1: that have popped up on it in the new year, 63 00:03:34,120 --> 00:03:37,360 Speaker 1: and maybe we could very briefly just explain to our 64 00:03:37,400 --> 00:03:43,000 Speaker 1: readers the issue one is that under this new tax, 65 00:03:43,120 --> 00:03:49,560 Speaker 1: for the first time in super frank dividends will actually 66 00:03:49,600 --> 00:03:55,920 Speaker 1: come under a superannuation tax. And this is controversial. Could 67 00:03:55,960 --> 00:03:58,280 Speaker 1: you just explain in simple terms, to the extent that 68 00:03:58,320 --> 00:04:03,160 Speaker 1: anyone can explain frank dividends and in terms what's changed, Liam. 69 00:04:03,640 --> 00:04:06,120 Speaker 2: Well, the main change is that, you know, the franking 70 00:04:06,160 --> 00:04:08,760 Speaker 2: credits will actually be added to the earnings of the 71 00:04:08,800 --> 00:04:10,560 Speaker 2: super front for the year when it's been when they're 72 00:04:10,560 --> 00:04:13,680 Speaker 2: calculating the division two, nine and six tax. So you know, 73 00:04:13,680 --> 00:04:15,280 Speaker 2: a lot of people say the whole idea of franking 74 00:04:15,320 --> 00:04:18,799 Speaker 2: credits was to avoid double taxation. The company pays its tax, 75 00:04:18,839 --> 00:04:21,039 Speaker 2: it gives you the franking credit so you don't have 76 00:04:21,120 --> 00:04:23,960 Speaker 2: to pay that part of the tax. Under this rule, 77 00:04:24,440 --> 00:04:26,400 Speaker 2: the company pays the tax and you're going to have 78 00:04:26,440 --> 00:04:28,880 Speaker 2: to probably pay at least, you know, fifteen percent tax 79 00:04:28,880 --> 00:04:31,719 Speaker 2: if your balance is over three million, and twenty five 80 00:04:31,760 --> 00:04:34,960 Speaker 2: percent if it's over ten million. So it's basically it 81 00:04:35,000 --> 00:04:38,080 Speaker 2: is double taxing the franking credits and reducing the refund 82 00:04:38,120 --> 00:04:38,880 Speaker 2: that people will get. 83 00:04:40,120 --> 00:04:41,840 Speaker 1: And I suppose the worst thing about it is that 84 00:04:41,839 --> 00:04:43,919 Speaker 1: a lot of people loaded up for years and years 85 00:04:43,960 --> 00:04:48,480 Speaker 1: on fully frank dividend shares because their advisor says to them, listen, 86 00:04:48,760 --> 00:04:51,279 Speaker 1: this is the best thing you could possibly do, because 87 00:04:51,320 --> 00:04:54,400 Speaker 1: not only are you in a tax sheltered environment when 88 00:04:54,400 --> 00:04:57,719 Speaker 1: you're retired, but franking credits. The nature of how it 89 00:04:57,800 --> 00:05:01,880 Speaker 1: works is that you, because there is zero tax investor 90 00:05:02,600 --> 00:05:07,680 Speaker 1: as a retiree, you will actually get a refund on 91 00:05:07,760 --> 00:05:11,680 Speaker 1: franking credits. But you're saying that if you for the 92 00:05:11,680 --> 00:05:15,240 Speaker 1: earnings the segment of your investments that go over three 93 00:05:15,320 --> 00:05:20,320 Speaker 1: million in super your franking credits will actually be a problem. 94 00:05:20,520 --> 00:05:23,640 Speaker 2: Is that right, Well, basically there'll be. The earnings will 95 00:05:23,680 --> 00:05:26,120 Speaker 2: be grossed up to include the franking credits. So yes, 96 00:05:26,200 --> 00:05:28,640 Speaker 2: you can pay fifteen percent tax on that higher man. 97 00:05:28,920 --> 00:05:31,240 Speaker 2: Franking credits are still beautiful, They're still a lovely thing 98 00:05:31,279 --> 00:05:34,359 Speaker 2: they have. Just the after tax return is going to 99 00:05:34,360 --> 00:05:37,560 Speaker 2: be slightly lower, so people should expect lower. People on 100 00:05:37,560 --> 00:05:40,400 Speaker 2: those higher balances should expect lower refunds. 101 00:05:40,520 --> 00:05:42,880 Speaker 1: Is it an exaggeration to say that the franking credits 102 00:05:43,080 --> 00:05:46,039 Speaker 1: under the new supertax for the segment where you're for 103 00:05:46,080 --> 00:05:48,120 Speaker 1: the taxes applicable are neutralized. 104 00:05:49,120 --> 00:05:53,040 Speaker 2: No, because it's still fifteen percent on over three million. 105 00:05:53,080 --> 00:05:55,839 Speaker 2: So the franking credits thirty percent, so there'll still be 106 00:05:55,880 --> 00:05:58,320 Speaker 2: some effect and you'll use those franking credits to offset 107 00:05:58,320 --> 00:06:00,000 Speaker 2: the division two nine and six tax as well. 108 00:06:00,040 --> 00:06:04,000 Speaker 1: Probably okay, but it might be an idea to review 109 00:06:04,080 --> 00:06:07,680 Speaker 1: if you're a heavily franked dividend, if your portfolio is 110 00:06:08,000 --> 00:06:10,599 Speaker 1: heavily secured towards frank dividend, if your whole game was 111 00:06:10,600 --> 00:06:12,400 Speaker 1: frank evident, it really might be time to have a 112 00:06:12,400 --> 00:06:15,320 Speaker 1: look at that, all right. One another thing, very briefly, 113 00:06:15,640 --> 00:06:18,800 Speaker 1: there is some people say a sneaky little death tax, 114 00:06:18,920 --> 00:06:21,599 Speaker 1: and everyone gets very upset about death taxes because we 115 00:06:21,640 --> 00:06:24,440 Speaker 1: don't have any in Australia technically, that is, we don't 116 00:06:24,440 --> 00:06:26,320 Speaker 1: have any death taxes. We don't have an inherit and 117 00:06:26,400 --> 00:06:29,440 Speaker 1: taxes formerly. But there's a little there's a nasty little 118 00:06:29,480 --> 00:06:32,240 Speaker 1: tweak in the new revision that people have discovered since. 119 00:06:32,279 --> 00:06:34,600 Speaker 1: Could you explain that to our listeners. 120 00:06:34,839 --> 00:06:38,560 Speaker 2: Yeah, So basically, under the old version, you're the tax 121 00:06:38,640 --> 00:06:40,440 Speaker 2: is going to apply based on your balance at the 122 00:06:40,560 --> 00:06:43,080 Speaker 2: end of the tax year. But now they've brought in 123 00:06:43,400 --> 00:06:46,120 Speaker 2: what they call a measure to avoid people, you know, 124 00:06:46,360 --> 00:06:47,160 Speaker 2: taking integrity. 125 00:06:47,440 --> 00:06:50,560 Speaker 1: I think they like to call it integrity and integrity 126 00:06:50,560 --> 00:06:51,159 Speaker 1: measure lyon. 127 00:06:51,440 --> 00:06:54,360 Speaker 2: Yeah, so now after the first year, so on the 128 00:06:54,400 --> 00:06:57,480 Speaker 2: first of July twenty twenty seven. From then on, your 129 00:06:57,560 --> 00:06:59,960 Speaker 2: division two nine six tax will be actually worked out 130 00:07:00,080 --> 00:07:02,719 Speaker 2: based on the hire of your balance at the start 131 00:07:02,760 --> 00:07:04,599 Speaker 2: of the year and your balance at the end of 132 00:07:04,640 --> 00:07:09,160 Speaker 2: the year. So if someone under the old rules had 133 00:07:09,200 --> 00:07:12,760 Speaker 2: died during the year and their member account was paid out, 134 00:07:12,800 --> 00:07:14,240 Speaker 2: they'd have nothing at the end of the year, So 135 00:07:14,280 --> 00:07:17,200 Speaker 2: there's no division two nine six tax under the new 136 00:07:17,360 --> 00:07:21,040 Speaker 2: version of it. If someone died, say in January, they'll 137 00:07:21,080 --> 00:07:23,040 Speaker 2: have had six months because the rule is going to 138 00:07:23,040 --> 00:07:25,760 Speaker 2: look at their balance in the first of July of 139 00:07:25,800 --> 00:07:28,800 Speaker 2: the year, and then a portion the division two nine 140 00:07:28,880 --> 00:07:31,120 Speaker 2: six to the earnings up to their date of death. 141 00:07:31,720 --> 00:07:35,920 Speaker 2: The issue is that for somebody trying to handle a 142 00:07:36,000 --> 00:07:38,440 Speaker 2: deceased state, they want to get the money out of 143 00:07:38,560 --> 00:07:41,600 Speaker 2: the grieving family, but now they've got to work out 144 00:07:42,760 --> 00:07:44,520 Speaker 2: they've got to wait till thirty to June, look at 145 00:07:44,520 --> 00:07:46,840 Speaker 2: what the earnings were for the full year, do all 146 00:07:46,880 --> 00:07:49,840 Speaker 2: the calculations, wait for the ATOTI issue a notice for 147 00:07:49,880 --> 00:07:52,440 Speaker 2: the division two nine six, and then make sure they've 148 00:07:52,520 --> 00:07:55,239 Speaker 2: kept money in that estate or had a member's account 149 00:07:55,480 --> 00:07:57,320 Speaker 2: to pay any division two nine six tax. 150 00:07:57,760 --> 00:08:00,360 Speaker 1: There's a new death tax has arrived in a very 151 00:08:00,400 --> 00:08:04,320 Speaker 1: sort of subtle way, and admittedly in relatively limited circumstances, 152 00:08:04,320 --> 00:08:08,440 Speaker 1: but it's the precedent I think that investors might take 153 00:08:08,560 --> 00:08:11,680 Speaker 1: note of on the basis that once you start doing this, 154 00:08:12,000 --> 00:08:14,680 Speaker 1: you can expand it. So there's now two death taxes 155 00:08:14,720 --> 00:08:16,520 Speaker 1: and super what is in the division two nine SI 156 00:08:16,520 --> 00:08:18,440 Speaker 1: except femus just explained, and of course there's the other 157 00:08:18,520 --> 00:08:21,680 Speaker 1: standard one. When you inherit super as an adult, you 158 00:08:21,720 --> 00:08:24,240 Speaker 1: basically get hit with seventeen percent tax. But as I 159 00:08:24,240 --> 00:08:26,840 Speaker 1: said at the start, in theory, we've no inheritance taxes, 160 00:08:26,880 --> 00:08:30,280 Speaker 1: in reality we have now got two. Okay, very broadally, 161 00:08:30,480 --> 00:08:33,440 Speaker 1: one last thing just before we go to break, what's 162 00:08:33,480 --> 00:08:37,800 Speaker 1: your advice for the general reader on this new tax 163 00:08:37,840 --> 00:08:41,760 Speaker 1: in terms of long term structuring, We'll take it that 164 00:08:41,800 --> 00:08:43,440 Speaker 1: people who have that amount of money know how to 165 00:08:43,480 --> 00:08:46,400 Speaker 1: do get money out, watch out your capital against take 166 00:08:46,440 --> 00:08:49,320 Speaker 1: cash out for instance. That's the easiest way to reduce 167 00:08:49,360 --> 00:08:52,439 Speaker 1: it without complicating tax. I'm sure. But what about long 168 00:08:52,520 --> 00:08:55,040 Speaker 1: term for the person who's in the accumulation phase. 169 00:08:54,880 --> 00:08:57,360 Speaker 2: They basically just need to look at what their options 170 00:08:57,360 --> 00:09:02,720 Speaker 2: are going forward. Really content trade on equalizing balances for couples. 171 00:09:03,240 --> 00:09:05,000 Speaker 2: You know, you know, if one of the couple has 172 00:09:05,040 --> 00:09:07,240 Speaker 2: a high balance, start concentrating and building up the other 173 00:09:07,679 --> 00:09:10,360 Speaker 2: member of the couple's balance. You can do super splitting. 174 00:09:10,400 --> 00:09:14,040 Speaker 2: Each year of the higher balanced person's contributions, you can 175 00:09:14,080 --> 00:09:17,000 Speaker 2: look to boost the smaller balance the index. You know. 176 00:09:17,080 --> 00:09:19,760 Speaker 2: The good move is that the actual the thresholds are 177 00:09:19,760 --> 00:09:22,079 Speaker 2: going to be indexed each year, so that will help 178 00:09:22,360 --> 00:09:25,120 Speaker 2: longer term, you know, so people don't get hit with 179 00:09:25,240 --> 00:09:29,000 Speaker 2: know invexiation, and then look at alternative places to be 180 00:09:29,080 --> 00:09:32,160 Speaker 2: investing a lot of people who want to retire at 181 00:09:32,160 --> 00:09:35,200 Speaker 2: fifty five. If you can't, if you can't access your 182 00:09:35,200 --> 00:09:37,920 Speaker 2: SUPERTL sixty, you need to be building some wealth up 183 00:09:38,000 --> 00:09:40,920 Speaker 2: outside of super as well. So that's either in the 184 00:09:40,920 --> 00:09:45,200 Speaker 2: lower spouse's name or maybe an insurance bond or investment bond. 185 00:09:45,600 --> 00:09:48,520 Speaker 2: Looking for those options that are that complement super. 186 00:09:48,920 --> 00:09:51,200 Speaker 1: Okay, I mean, and we re absolutely daft if you 187 00:09:51,320 --> 00:09:53,640 Speaker 1: knew that you had at risk of crossing that and 188 00:09:53,720 --> 00:09:56,040 Speaker 1: paying extra tax that you don't need to because one 189 00:09:56,080 --> 00:09:59,000 Speaker 1: partner makes three times as much as the other partner 190 00:09:59,040 --> 00:10:01,280 Speaker 1: and the other partner is eyes away from never getting 191 00:10:01,280 --> 00:10:05,080 Speaker 1: across that, then why not just split the contributions or 192 00:10:05,160 --> 00:10:07,480 Speaker 1: non concession. I imagine it'd be a really fast way to 193 00:10:07,480 --> 00:10:08,200 Speaker 1: do it, Is that right? 194 00:10:08,320 --> 00:10:12,400 Speaker 2: Yes, yeah, especially people get inheritances, they may sell properties. 195 00:10:12,640 --> 00:10:14,720 Speaker 2: That's when you build up the spouses balance. 196 00:10:15,400 --> 00:10:18,000 Speaker 1: There's no negative in that. There is any negative to 197 00:10:18,080 --> 00:10:21,079 Speaker 1: that plan in terms of compounding or fees or anything. 198 00:10:21,600 --> 00:10:24,120 Speaker 2: No, but we just see there's often a difference in ages, 199 00:10:24,600 --> 00:10:26,280 Speaker 2: so you've got to consider who's going to be into 200 00:10:26,280 --> 00:10:29,239 Speaker 2: pension phase first. But often if it's a high incommerder, 201 00:10:29,240 --> 00:10:31,240 Speaker 2: they're probably gonna they probably love the juggling and to 202 00:10:31,280 --> 00:10:34,280 Speaker 2: continue working till sixty five. But their spouse may finish 203 00:10:34,280 --> 00:10:37,600 Speaker 2: at sixty even though they're younger. So in a lot 204 00:10:37,640 --> 00:10:39,560 Speaker 2: of cases it still works out benefit get the money 205 00:10:39,559 --> 00:10:42,079 Speaker 2: into sparses name, because we can get it into pension 206 00:10:42,080 --> 00:10:44,280 Speaker 2: phase at sixty rather than waiting until sixty five or 207 00:10:44,320 --> 00:10:44,920 Speaker 2: sixty seven. 208 00:10:45,559 --> 00:10:49,480 Speaker 1: Yeah, very good and very good. Okay, very interesting, All right, folks, 209 00:10:49,559 --> 00:11:02,840 Speaker 1: will take a break back in the moment. Hello, welcome 210 00:11:02,880 --> 00:11:07,000 Speaker 1: back to the Australians Money Puzzle podcast. James Kirby here 211 00:11:07,040 --> 00:11:12,520 Speaker 1: with Liam Short of the saunas well sonas Now Liam. 212 00:11:12,559 --> 00:11:14,640 Speaker 1: We'll get to all that. There's lots of questions for you. 213 00:11:14,760 --> 00:11:16,840 Speaker 1: I want to deal with them. But just before we do, 214 00:11:16,960 --> 00:11:19,480 Speaker 1: I have a bit of news in terms of the 215 00:11:19,600 --> 00:11:22,880 Speaker 1: new thresholds and caps that are going to come in 216 00:11:22,960 --> 00:11:26,160 Speaker 1: July this year. Folks worth thinking about. If you're contributing 217 00:11:26,160 --> 00:11:28,080 Speaker 1: to super and you're a bit frustrated you can only 218 00:11:28,080 --> 00:11:32,959 Speaker 1: put in thirty a year, which is much too low. 219 00:11:33,400 --> 00:11:35,640 Speaker 1: That's going to improve. Everything's going to improve a little bit. 220 00:11:35,640 --> 00:11:38,600 Speaker 1: Could you just briefly tell us what the new caps 221 00:11:38,600 --> 00:11:41,080 Speaker 1: are expected to be on the basis of the inflation 222 00:11:41,160 --> 00:11:41,880 Speaker 1: that we have seen. 223 00:11:42,440 --> 00:11:45,200 Speaker 2: Yeah, so based on the CPI figures which come out. 224 00:11:45,120 --> 00:11:47,040 Speaker 1: For December, which are getting worse and worse. 225 00:11:47,480 --> 00:11:49,760 Speaker 2: Yeah, they come out of three point eight percent. Based 226 00:11:49,760 --> 00:11:52,479 Speaker 2: on those, the transfer balance cap and the total superbounds, 227 00:11:52,520 --> 00:11:55,560 Speaker 2: so the amount you can move into pension phase and 228 00:11:55,600 --> 00:11:58,400 Speaker 2: the amount you can have in super their bo can 229 00:11:58,440 --> 00:12:01,800 Speaker 2: arise from two million to two point one million. Okay, 230 00:12:02,280 --> 00:12:03,959 Speaker 2: So that means that people will have a little bit 231 00:12:03,960 --> 00:12:07,040 Speaker 2: more that they can move into pension phase, which is great. Now, 232 00:12:07,679 --> 00:12:10,880 Speaker 2: although the concessional caps and non concession they're not tied 233 00:12:10,880 --> 00:12:13,680 Speaker 2: to this CPI, they're tied to Awati the average week 234 00:12:13,679 --> 00:12:16,559 Speaker 2: in the ordinary tournament. Those figures will come out later 235 00:12:16,640 --> 00:12:21,320 Speaker 2: in February, okay, but it's already very likely that they 236 00:12:21,360 --> 00:12:24,439 Speaker 2: are also going to trigger an increase from thirty thousand 237 00:12:24,440 --> 00:12:27,440 Speaker 2: for the concessional to thirty two thy five hundred, which 238 00:12:27,520 --> 00:12:30,200 Speaker 2: means that the non concessional will go from one twenty 239 00:12:30,360 --> 00:12:33,760 Speaker 2: year two one thirty and a three year bring forward 240 00:12:33,800 --> 00:12:36,880 Speaker 2: will go from three sixty to three ninety. So it'll 241 00:12:36,880 --> 00:12:39,240 Speaker 2: mean that be a fair amount of extra money that 242 00:12:39,240 --> 00:12:41,720 Speaker 2: can be put into super for those near retirement that 243 00:12:41,760 --> 00:12:44,000 Speaker 2: want to build their balances terrific. 244 00:12:44,040 --> 00:12:45,800 Speaker 1: Okay, I know it's all about technical folks, but I'm 245 00:12:45,800 --> 00:12:48,960 Speaker 1: sure you're across it very We have a very bright audience. 246 00:12:48,960 --> 00:12:51,040 Speaker 1: They can capture all this. You can if it's if 247 00:12:51,080 --> 00:12:53,800 Speaker 1: you find it difficult. There is a transcript always with 248 00:12:53,880 --> 00:12:56,320 Speaker 1: these shows. Take a look and obviously we cover this 249 00:12:56,360 --> 00:12:58,880 Speaker 1: in the World section of the Australian all the time, 250 00:12:58,920 --> 00:13:03,080 Speaker 1: but very briefly, the transfer bands cap that you're allowed 251 00:13:03,080 --> 00:13:05,680 Speaker 1: to start your tax free retirement in the amount you 252 00:13:05,679 --> 00:13:07,480 Speaker 1: can put in the day you retire moves from two 253 00:13:07,559 --> 00:13:09,920 Speaker 1: million to two point one. The amount you can put 254 00:13:09,920 --> 00:13:13,280 Speaker 1: in pre tax Okay, pre tex that's concessional pre tax 255 00:13:13,440 --> 00:13:17,160 Speaker 1: salary sacrifice moves from thirty thousand years to thirty two thousand, 256 00:13:17,200 --> 00:13:20,480 Speaker 1: five hundred. Did you say, Liam in July one? And 257 00:13:20,559 --> 00:13:23,720 Speaker 1: the amount you can put in concessionel that is after tax? 258 00:13:23,720 --> 00:13:25,520 Speaker 1: Should you be so lucky to have big lumps of 259 00:13:25,520 --> 00:13:27,520 Speaker 1: money hanging around that you'd like to put into super 260 00:13:28,240 --> 00:13:31,680 Speaker 1: inheritance or whatever? That goes from one hundred and twenty 261 00:13:31,760 --> 00:13:36,760 Speaker 1: thousand a year to one hundred and thirty thousand a year. Okay, 262 00:13:36,880 --> 00:13:39,800 Speaker 1: very good. All right, let's catch up with the listener questions. 263 00:13:39,840 --> 00:13:43,920 Speaker 1: Here we go. Number one Andrew asks, I want to 264 00:13:43,960 --> 00:13:47,080 Speaker 1: know about defensive investments. And I don't blame you because 265 00:13:47,120 --> 00:13:50,000 Speaker 1: this market is red hot and it's wonderful. It's great. 266 00:13:50,600 --> 00:13:52,920 Speaker 1: I mean, who doesn't like to see markets jumping up 267 00:13:52,920 --> 00:13:55,160 Speaker 1: by a percent a day? But I tell you what 268 00:13:55,720 --> 00:13:58,920 Speaker 1: a time will come people will say, oh gee, what 269 00:13:59,000 --> 00:14:01,800 Speaker 1: do I have that isn't she so? And you asked 270 00:14:01,840 --> 00:14:05,200 Speaker 1: in particular cash bonds, term deposits and whether it's still 271 00:14:05,240 --> 00:14:08,480 Speaker 1: a role for hybrids. Now there's a lot there, I 272 00:14:08,520 --> 00:14:12,640 Speaker 1: think obviously. Can I just jump and say make sure 273 00:14:12,679 --> 00:14:16,640 Speaker 1: you do have non listed investments in an investment portfolio. 274 00:14:16,720 --> 00:14:18,280 Speaker 1: Look at the big super funds and look at the 275 00:14:18,320 --> 00:14:20,200 Speaker 1: future funds. Of course they have shares, but they're not 276 00:14:20,240 --> 00:14:23,200 Speaker 1: all in shares. They're not all at risk. And I 277 00:14:23,240 --> 00:14:26,240 Speaker 1: think the cash bonds except to speak for themselves. An 278 00:14:26,280 --> 00:14:31,240 Speaker 1: important one is hybrids. There. I thought they were closing down, 279 00:14:31,480 --> 00:14:33,560 Speaker 1: but then I've had someone and said to me, listen, 280 00:14:33,760 --> 00:14:36,360 Speaker 1: hybrids are really good. They're really good now. They're actually 281 00:14:36,520 --> 00:14:42,080 Speaker 1: underestimated and they are paying good, low risk rates of return. 282 00:14:42,400 --> 00:14:45,800 Speaker 2: What do you think, Liam, Yeah, so there's no new 283 00:14:45,880 --> 00:14:48,920 Speaker 2: hybrids being issued to the retail market, so at the 284 00:14:48,960 --> 00:14:51,000 Speaker 2: existing ones they will just phase out. As you know, 285 00:14:51,000 --> 00:14:53,680 Speaker 2: most of them are six or seven year terms for 286 00:14:53,760 --> 00:14:56,680 Speaker 2: the first call. So yes, they're still there, they're still available. 287 00:14:56,800 --> 00:14:58,920 Speaker 2: Yes they are paying good rights. We bought a lot 288 00:14:58,960 --> 00:15:01,080 Speaker 2: of them at the lower and interest rates were lower 289 00:15:01,120 --> 00:15:04,400 Speaker 2: because as interest rates went up, most of the hybrids 290 00:15:04,400 --> 00:15:07,200 Speaker 2: were pecked at the bank builds upright, So yes, they're good, 291 00:15:07,240 --> 00:15:10,680 Speaker 2: decent income. Just be careful. That may be a trap 292 00:15:10,720 --> 00:15:12,840 Speaker 2: liquidity wise of getting out of them as they become 293 00:15:12,920 --> 00:15:16,200 Speaker 2: unpopular and people move to other things. But I think 294 00:15:16,200 --> 00:15:17,880 Speaker 2: it will be a niche for people who know the risk, 295 00:15:18,000 --> 00:15:20,800 Speaker 2: understand the risk. They're happy with the big banks. They'll 296 00:15:20,800 --> 00:15:22,440 Speaker 2: still be able to get decent income from them for 297 00:15:22,440 --> 00:15:23,320 Speaker 2: a few years. 298 00:15:23,880 --> 00:15:25,720 Speaker 1: So when you say a few years, could you put 299 00:15:25,720 --> 00:15:26,560 Speaker 1: a time frame on it. 300 00:15:27,200 --> 00:15:29,960 Speaker 2: I think the last ones will expire around twenty twenty nine, 301 00:15:30,080 --> 00:15:32,520 Speaker 2: twenty thirty. The one thing you have to be careful 302 00:15:32,560 --> 00:15:35,080 Speaker 2: is the ones that are paying good rates, be careful 303 00:15:35,120 --> 00:15:37,680 Speaker 2: of the actual cost because they have one hundred dollars 304 00:15:37,680 --> 00:15:39,720 Speaker 2: face value. A lot of the ones that are paying 305 00:15:39,720 --> 00:15:41,960 Speaker 2: decent income, they're trading at one o two or one 306 00:15:41,960 --> 00:15:44,920 Speaker 2: oh three, So you're paying hard in the capital value. 307 00:15:44,960 --> 00:15:46,720 Speaker 2: So make sure you ad just the yield that you're 308 00:15:46,720 --> 00:15:49,560 Speaker 2: seeing for the actual cost of the bond that you're buying. 309 00:15:49,840 --> 00:15:51,640 Speaker 1: And most people I imagine are going to go into 310 00:15:51,680 --> 00:15:54,760 Speaker 1: bank and being realistic about it, and the liquidity should 311 00:15:54,800 --> 00:15:56,680 Speaker 1: be there for at least, let's say, for at least 312 00:15:56,680 --> 00:16:01,320 Speaker 1: two years. Separate on Andrew also defensive investments. I mean 313 00:16:01,320 --> 00:16:06,320 Speaker 1: there's the obvious, there's the obvious cash bonds, term deposits, 314 00:16:06,400 --> 00:16:11,680 Speaker 1: which are perhaps going to improve because we're going to 315 00:16:11,680 --> 00:16:13,800 Speaker 1: see interest rates lift this year. 316 00:16:14,280 --> 00:16:16,680 Speaker 2: Yeah, for once, the banks have actually been increasing the 317 00:16:16,760 --> 00:16:20,640 Speaker 2: term deposit rates before the interest rate comes in expectation of. 318 00:16:20,680 --> 00:16:22,160 Speaker 1: It genuinely competitive. 319 00:16:22,160 --> 00:16:27,280 Speaker 2: That change you only unforeseen. So yeah, look at the moment, 320 00:16:27,320 --> 00:16:29,680 Speaker 2: I'm getting four point sixty five percent for six months. 321 00:16:29,960 --> 00:16:31,880 Speaker 2: I'm reluctant to looking for twelve months because we know 322 00:16:31,920 --> 00:16:33,920 Speaker 2: the interest rates may arise. But you can get a 323 00:16:33,920 --> 00:16:36,680 Speaker 2: really good six point five percent for six months, and 324 00:16:36,800 --> 00:16:38,840 Speaker 2: that will probably rise when the interest if the interest 325 00:16:38,920 --> 00:16:42,160 Speaker 2: rate goes up next week. Always also, maybe look at 326 00:16:42,160 --> 00:16:44,520 Speaker 2: annuities as well, because at the moment they tend to 327 00:16:44,560 --> 00:16:47,640 Speaker 2: be paying about a quarter to a half percent extra 328 00:16:47,720 --> 00:16:50,480 Speaker 2: on top of the term deposit rates. So there are 329 00:16:50,720 --> 00:16:53,360 Speaker 2: sources out there where you can get about a five 330 00:16:53,360 --> 00:16:57,120 Speaker 2: percent return risk free. So look at those options. 331 00:16:57,280 --> 00:17:00,920 Speaker 1: Is it possible to get an annuity in a small way? 332 00:17:01,120 --> 00:17:02,560 Speaker 1: By that, I mean can someone just go in and 333 00:17:02,560 --> 00:17:04,200 Speaker 1: put ten and twenty grand in an annuity? 334 00:17:04,760 --> 00:17:07,640 Speaker 2: I think the minimum is twenty Okay, so you can 335 00:17:07,720 --> 00:17:08,240 Speaker 2: look at. 336 00:17:08,680 --> 00:17:13,440 Speaker 1: You can bite sized annuity. Yeah, all right. So, because 337 00:17:13,440 --> 00:17:15,439 Speaker 1: one of the questions that has come up regularly is 338 00:17:15,680 --> 00:17:18,280 Speaker 1: people say, okay, you know, in defensive investments, I know 339 00:17:18,320 --> 00:17:19,919 Speaker 1: I can get cash, and I can get bonds, and 340 00:17:19,920 --> 00:17:21,520 Speaker 1: I can get hybrids, and and I can get my three, 341 00:17:21,600 --> 00:17:23,439 Speaker 1: four or five percent, and I know I can go 342 00:17:23,480 --> 00:17:26,159 Speaker 1: to the other end and I can do secured mortgages 343 00:17:26,280 --> 00:17:28,680 Speaker 1: or debt funds or infrastructure, and I can probably get 344 00:17:28,760 --> 00:17:31,359 Speaker 1: nine percent. But what's in the middle. What's in the 345 00:17:31,400 --> 00:17:34,520 Speaker 1: middle between the four percent and the nine percent? Well, 346 00:17:34,600 --> 00:17:35,960 Speaker 1: is there anything that comes to mind? 347 00:17:36,520 --> 00:17:41,240 Speaker 2: Really? It's good quality corporate bonds, the Tier two bank 348 00:17:41,280 --> 00:17:44,480 Speaker 2: credit and stuff. Everything is a trade off. Though, if 349 00:17:44,520 --> 00:17:46,840 Speaker 2: you're getting more than the four and a half percent, 350 00:17:47,760 --> 00:17:50,679 Speaker 2: you're taking some risk. A lot of people, like, you know, 351 00:17:50,840 --> 00:17:52,640 Speaker 2: despite what happened in the GFC, a lot of people 352 00:17:52,680 --> 00:17:55,119 Speaker 2: are still confident with some of the mortgage funds, but 353 00:17:55,400 --> 00:17:57,480 Speaker 2: you really want one that's got a lot of experience, 354 00:17:57,520 --> 00:18:01,200 Speaker 2: like a track record. They're paying about sixty so that's yeah, 355 00:18:01,720 --> 00:18:03,600 Speaker 2: But again you need to be careful about how much 356 00:18:03,600 --> 00:18:07,040 Speaker 2: you put in them and understand the risk that's involved. 357 00:18:07,640 --> 00:18:10,000 Speaker 2: Bonds have really taken ay, they've been on a roller 358 00:18:10,000 --> 00:18:11,960 Speaker 2: coaster for the last five years. That were meant to be, 359 00:18:12,520 --> 00:18:15,119 Speaker 2: you know, a counterbalance to equeries if the market's changed. 360 00:18:15,640 --> 00:18:17,960 Speaker 2: Whenever the markets went down, the bond market just seemed 361 00:18:18,000 --> 00:18:19,879 Speaker 2: to go down as well. So a lot of people 362 00:18:19,880 --> 00:18:24,679 Speaker 2: have lost confidence in individual bonds especially so but they 363 00:18:24,720 --> 00:18:26,840 Speaker 2: will have their day and that they may be coming 364 00:18:26,840 --> 00:18:33,280 Speaker 2: in twenty twenty six. So I would just say, look, 365 00:18:33,480 --> 00:18:37,200 Speaker 2: try and avoid individual bonds. Maybe use a managed fund 366 00:18:37,240 --> 00:18:38,720 Speaker 2: er an ETF bond funds. 367 00:18:38,840 --> 00:18:43,760 Speaker 1: Yeah, yeah, okay, very good, And folks, this is information only, 368 00:18:43,840 --> 00:18:46,399 Speaker 1: it's advice, as you know. All right, I want to 369 00:18:46,400 --> 00:18:48,840 Speaker 1: get through through questions. I will take a short break. 370 00:18:49,119 --> 00:18:51,960 Speaker 1: We have a couple of very interesting questions from Sandra, 371 00:18:52,119 --> 00:19:01,080 Speaker 1: from Mark, from Daniel coming up. Hello, welcome back to 372 00:19:01,280 --> 00:19:04,040 Speaker 1: the money Puzzle. Liam Short is my guest on the 373 00:19:04,080 --> 00:19:08,840 Speaker 1: show today from the Sonas Wealth Groups Sonas Okay, soundra. 374 00:19:09,800 --> 00:19:12,680 Speaker 1: I'm in my early fifties. Super is at the forefront 375 00:19:12,720 --> 00:19:15,520 Speaker 1: of my mind. I've worked in the UK for sixteen 376 00:19:15,720 --> 00:19:19,560 Speaker 1: years and I have a fair amount of super over 377 00:19:19,560 --> 00:19:21,399 Speaker 1: there that they wouldn't call it super there, of course, 378 00:19:21,640 --> 00:19:24,200 Speaker 1: and they'd call it something else, pensions is it? They 379 00:19:24,280 --> 00:19:26,679 Speaker 1: just call it? The question is do I bring it 380 00:19:26,760 --> 00:19:32,679 Speaker 1: back now? It sounds actually in her fifties, wondering what 381 00:19:32,760 --> 00:19:35,960 Speaker 1: your thoughts are on those who oversee SUPER. I know 382 00:19:36,040 --> 00:19:40,879 Speaker 1: it's never individual information here, very broad brush look at 383 00:19:40,880 --> 00:19:42,280 Speaker 1: that issue. Liam. 384 00:19:42,920 --> 00:19:45,560 Speaker 2: Okay, So the first point is you can't bring it 385 00:19:45,600 --> 00:19:48,879 Speaker 2: back before age fifty five, okay, so you have to 386 00:19:48,920 --> 00:19:51,720 Speaker 2: be very careful about that. And also there are very 387 00:19:51,760 --> 00:19:54,440 Speaker 2: limited options now for bringing it back into what funds 388 00:19:54,440 --> 00:19:57,320 Speaker 2: you can bring it back. The main option is to 389 00:19:57,320 --> 00:20:00,399 Speaker 2: have an SMSF where you exclude members on the fifty 390 00:20:00,440 --> 00:20:04,239 Speaker 2: five because the UK pension rules do not allow for 391 00:20:04,400 --> 00:20:10,159 Speaker 2: early access before fifty five. My personal view is I 392 00:20:10,280 --> 00:20:12,959 Speaker 2: believe people should look to bring the money back, depending 393 00:20:12,960 --> 00:20:15,679 Speaker 2: on their circumstances, after fifty five to get rid of 394 00:20:15,680 --> 00:20:17,439 Speaker 2: that exchange r at risk. If you're going to be 395 00:20:17,480 --> 00:20:20,800 Speaker 2: living in Australian retirement, do you really want you know, 396 00:20:20,880 --> 00:20:23,600 Speaker 2: a lot of your super innuation or your UK pension. 397 00:20:24,080 --> 00:20:29,520 Speaker 2: You've got the exchange rate exposure on that, but really 398 00:20:29,560 --> 00:20:33,400 Speaker 2: get specific advice. There's a lot of people who play 399 00:20:33,440 --> 00:20:37,560 Speaker 2: part time in this area. We use absolute experts in 400 00:20:37,600 --> 00:20:39,639 Speaker 2: that niche. I don't touch it myself. I'd get the 401 00:20:39,680 --> 00:20:42,360 Speaker 2: experts in to do it, and it's amazing what they 402 00:20:42,440 --> 00:20:44,399 Speaker 2: can do and how they can reduce the tax on 403 00:20:44,440 --> 00:20:45,960 Speaker 2: it if it's planned properly. 404 00:20:46,400 --> 00:20:49,080 Speaker 1: Okay, So Sandra, it's not hard to find that, just 405 00:20:49,160 --> 00:20:52,480 Speaker 1: google it. Basically, there are UK pension fund experts they're 406 00:20:52,720 --> 00:20:55,880 Speaker 1: switching to Australia is what you might call a sizeable 407 00:20:55,960 --> 00:20:58,960 Speaker 1: Niche sorry for taking so long to answer your question, Sandra. 408 00:20:59,000 --> 00:21:00,639 Speaker 1: I know that's been sitting in or in box for 409 00:21:00,720 --> 00:21:03,920 Speaker 1: some time, and at least the exchange rate hasn't caused 410 00:21:03,920 --> 00:21:09,159 Speaker 1: you any problems and times in fact, your inactivity was 411 00:21:09,200 --> 00:21:13,400 Speaker 1: probably very much in your favor. All right, Mark says, 412 00:21:13,720 --> 00:21:16,119 Speaker 1: we are working on a combin This is very interesting. 413 00:21:16,160 --> 00:21:19,280 Speaker 1: We are working out a combination of a loan and 414 00:21:19,320 --> 00:21:23,040 Speaker 1: a gift to help ease the financial burden for our daughter. 415 00:21:23,920 --> 00:21:26,280 Speaker 1: Fair enough, and you wouldn't be the only person, Mark, 416 00:21:26,320 --> 00:21:30,520 Speaker 1: I'm sure many people have this issue with their adult 417 00:21:30,680 --> 00:21:35,840 Speaker 1: children or young adult children facing enormous costs that generations 418 00:21:35,880 --> 00:21:41,600 Speaker 1: never faced, particularly housing. Mark's question is from the perspective 419 00:21:41,680 --> 00:21:46,919 Speaker 1: of the income and assets added stubility assessment for the 420 00:21:46,960 --> 00:21:49,639 Speaker 1: age pension. Is the amount of a loan viewed in 421 00:21:49,680 --> 00:21:52,679 Speaker 1: the same way as a gift In relation to the 422 00:21:52,720 --> 00:21:55,240 Speaker 1: five year rule? Also, does a loan agreement need to 423 00:21:55,240 --> 00:22:00,440 Speaker 1: be legally prepared or formally signed with our daughter? That's 424 00:22:00,440 --> 00:22:03,360 Speaker 1: a complicated question and there's center link issues and five 425 00:22:03,440 --> 00:22:06,600 Speaker 1: year rules in there. Could you try and synopsize the 426 00:22:06,640 --> 00:22:08,359 Speaker 1: whole issue of which is better a loan or a 427 00:22:08,400 --> 00:22:16,439 Speaker 1: gift for someone to whom center Link pension accessibility is 428 00:22:16,680 --> 00:22:17,280 Speaker 1: an ambition. 429 00:22:18,240 --> 00:22:22,000 Speaker 2: Yeah, so for somebody in that in those circumstances, a 430 00:22:22,119 --> 00:22:25,520 Speaker 2: gift an amount that your gift will fall off your 431 00:22:25,560 --> 00:22:29,040 Speaker 2: asset test with Centerlink after five years. A loan is 432 00:22:29,080 --> 00:22:31,520 Speaker 2: separate because the loan is a continuing asset of yours 433 00:22:31,560 --> 00:22:34,040 Speaker 2: where you've lent money to your family. So even after 434 00:22:34,080 --> 00:22:36,800 Speaker 2: five years, you still have that loan in place. Even 435 00:22:36,800 --> 00:22:39,320 Speaker 2: if you forgive it, it's still a loan that will 436 00:22:39,320 --> 00:22:41,520 Speaker 2: be there for another five years. So you've got to 437 00:22:41,560 --> 00:22:42,200 Speaker 2: be careful. 438 00:22:41,960 --> 00:22:45,680 Speaker 1: About what's the thing about five years? Why they why 439 00:22:45,680 --> 00:22:47,360 Speaker 1: did they wait five years long time? 440 00:22:48,040 --> 00:22:50,520 Speaker 2: Or because so many people were teaching assets to their 441 00:22:50,520 --> 00:22:54,000 Speaker 2: families just before pension age just to try and get 442 00:22:54,320 --> 00:22:57,360 Speaker 2: maximize their age pension. So Centerling brought in this five 443 00:22:57,400 --> 00:23:00,199 Speaker 2: year rule that's saying that, look, if you just before 444 00:23:00,200 --> 00:23:02,680 Speaker 2: you come to pension phase, give all this money away, 445 00:23:02,800 --> 00:23:05,200 Speaker 2: just get the age pension, guess what you're gonna have 446 00:23:05,200 --> 00:23:08,960 Speaker 2: to wait five years to get any benefit from. Well, 447 00:23:09,000 --> 00:23:10,760 Speaker 2: I still do it, doing it all the time. 448 00:23:10,800 --> 00:23:14,120 Speaker 1: It's a defective penalty for doing it. I see, I see, 449 00:23:14,200 --> 00:23:16,040 Speaker 1: all right, five year penalty. 450 00:23:16,440 --> 00:23:19,680 Speaker 2: The second part of that question about the loan agreement. Yes, Look, 451 00:23:19,720 --> 00:23:24,000 Speaker 2: we believe any written contract is better than verbal, especially 452 00:23:24,040 --> 00:23:26,760 Speaker 2: if you're dealing with family breakdown or if your children 453 00:23:26,800 --> 00:23:29,600 Speaker 2: are involved in the business. You want a loan agreement 454 00:23:29,600 --> 00:23:32,000 Speaker 2: in place that if something goes wrong, you can call 455 00:23:32,080 --> 00:23:34,160 Speaker 2: back in that loan for the family. You've worked hard 456 00:23:34,160 --> 00:23:35,560 Speaker 2: to build that money. You want to keep it in 457 00:23:35,600 --> 00:23:38,879 Speaker 2: your family. Call back in the loan when the trouble ends, 458 00:23:39,040 --> 00:23:42,760 Speaker 2: or the separation happens, or the business has gone you 459 00:23:42,800 --> 00:23:44,480 Speaker 2: can give them money back to your children again for 460 00:23:44,520 --> 00:23:46,720 Speaker 2: the future, so that they have something to start again with. 461 00:23:48,359 --> 00:23:54,520 Speaker 1: Yes, so the loan amount is ring fenced. Okay, very good, 462 00:23:54,560 --> 00:23:57,720 Speaker 1: all right, okay, final question from Daniel. We are really 463 00:23:57,800 --> 00:24:00,240 Speaker 1: rolling around on this one. We needed someone very good 464 00:24:00,640 --> 00:24:05,560 Speaker 1: to answer these questions. Daniel asks, but the ever increasing 465 00:24:05,680 --> 00:24:10,520 Speaker 1: interest in buying US shares through Australian brokers. I've been 466 00:24:10,560 --> 00:24:15,600 Speaker 1: trying to understand the tax implications in the US for 467 00:24:15,720 --> 00:24:21,000 Speaker 1: an estate. What happens to your estate if you hold 468 00:24:21,240 --> 00:24:24,080 Speaker 1: US shares? Interesting because no one used to hold US 469 00:24:24,119 --> 00:24:26,119 Speaker 1: shares once upon time, and it's quite rare Now this 470 00:24:26,240 --> 00:24:29,480 Speaker 1: is very common because it's very easy through all the 471 00:24:29,520 --> 00:24:33,040 Speaker 1: online platforms. So Daniel says it's a technical question and 472 00:24:33,080 --> 00:24:36,119 Speaker 1: I'm but I'm sure it's relevant to some listeners. My 473 00:24:36,160 --> 00:24:39,639 Speaker 1: accountant has no experience with this, and my internet searching 474 00:24:39,680 --> 00:24:42,120 Speaker 1: has produced confusing answers. That's why you have to listen 475 00:24:42,119 --> 00:24:45,480 Speaker 1: to a show like this. Okay, Liam hard One, I 476 00:24:45,640 --> 00:24:49,440 Speaker 1: never heard this question before. Very interesting, what do you think? 477 00:24:50,160 --> 00:24:52,080 Speaker 2: Yep? So, look, there's a few things you need to 478 00:24:52,080 --> 00:24:55,240 Speaker 2: be aware of. First, you know, if you're handling the estate, 479 00:24:55,640 --> 00:24:59,359 Speaker 2: you need to get a WABN eform into. 480 00:24:59,160 --> 00:25:01,600 Speaker 1: The Shouldn't they get that at the day that buy 481 00:25:01,600 --> 00:25:03,200 Speaker 1: the shares? They can you get it later? 482 00:25:03,640 --> 00:25:07,119 Speaker 2: No, but remember in your personal name it's the wa BN. 483 00:25:07,600 --> 00:25:09,719 Speaker 2: Once it moves into a state, it's a trust, so 484 00:25:09,800 --> 00:25:13,520 Speaker 2: it's a separate form. It's a DASHE form that needs 485 00:25:13,560 --> 00:25:16,800 Speaker 2: to go through capital gains. Tax Wise, the sale of 486 00:25:16,920 --> 00:25:20,960 Speaker 2: US shares is Australian CGT, not US, so that it'll 487 00:25:20,960 --> 00:25:24,160 Speaker 2: be dealt with under the Australian system, mister Boultro broker here. 488 00:25:24,720 --> 00:25:27,879 Speaker 2: A state tax then, is the other issue. In the US. 489 00:25:27,880 --> 00:25:31,600 Speaker 2: You may have federal taxes and state taxes on the estate. 490 00:25:31,960 --> 00:25:35,080 Speaker 2: But there was a nineteen fifty three tax agreement between 491 00:25:35,119 --> 00:25:37,600 Speaker 2: Australia and the US which means you would have to 492 00:25:37,600 --> 00:25:40,600 Speaker 2: have had a very large estate in order for state 493 00:25:40,800 --> 00:25:44,160 Speaker 2: duty to be charged. This is one where it all 494 00:25:44,200 --> 00:25:46,879 Speaker 2: depends on your circumstances and the level of your state. 495 00:25:46,920 --> 00:25:50,600 Speaker 2: But you know, for suddenly very basic, it's you know, 496 00:25:50,760 --> 00:25:53,920 Speaker 2: you just get some legal advice and probably I'll go back. 497 00:25:54,000 --> 00:25:55,840 Speaker 2: The first thing you should be doing is telling your 498 00:25:55,960 --> 00:25:59,080 Speaker 2: lawyer that you have these overseas assets when they're drafting 499 00:25:59,119 --> 00:26:01,919 Speaker 2: your will, because that will be used to apply for 500 00:26:02,000 --> 00:26:06,119 Speaker 2: provid in wherever those assets are, and your lawyer may 501 00:26:06,160 --> 00:26:08,400 Speaker 2: say you need a separate asset for a separate will 502 00:26:08,440 --> 00:26:11,960 Speaker 2: for overseas assets and a separate one for Australian So. 503 00:26:12,000 --> 00:26:16,800 Speaker 1: If someone in Australia goes and just simply buys Microsoft 504 00:26:17,240 --> 00:26:23,960 Speaker 1: on the US Exchange, hoose it forever they die, that's 505 00:26:24,000 --> 00:26:25,240 Speaker 1: an issue for their estates. 506 00:26:25,760 --> 00:26:27,760 Speaker 2: It could be depending on the level of their estate 507 00:26:27,840 --> 00:26:30,320 Speaker 2: and they would need to get advice. My simple tip, 508 00:26:30,560 --> 00:26:34,200 Speaker 2: James is to look to buy Australian domicile US ETFs 509 00:26:34,200 --> 00:26:37,280 Speaker 2: on those shares the basket shares, so that it's dealt 510 00:26:37,280 --> 00:26:41,879 Speaker 2: with under Australian rules, not You know, you used to 511 00:26:41,960 --> 00:26:44,880 Speaker 2: have to buy overseas. If you want to do overseas shares, 512 00:26:44,960 --> 00:26:47,199 Speaker 2: you used to have to use it overseas broken and 513 00:26:47,200 --> 00:26:50,879 Speaker 2: overseas exchange. Now that all can be done here in Australia. 514 00:26:50,960 --> 00:26:54,160 Speaker 1: It can there's some stuff you just can't buy unfortunately, 515 00:26:54,280 --> 00:26:55,919 Speaker 1: I mean you can't. The big ones tend to have 516 00:26:56,080 --> 00:26:58,840 Speaker 1: their version of the listing here, the very big stocks, 517 00:26:58,840 --> 00:27:02,640 Speaker 1: and of course the ETFs as well. And I think 518 00:27:02,800 --> 00:27:06,800 Speaker 1: broadly it could be an issue, but it's only an 519 00:27:06,800 --> 00:27:09,760 Speaker 1: issue for a small amount of people. It's unlikely to 520 00:27:09,800 --> 00:27:11,960 Speaker 1: be an issue for most people. Can we safely say that. 521 00:27:12,560 --> 00:27:14,360 Speaker 2: Yes we can, But there are a lot of US 522 00:27:14,400 --> 00:27:17,640 Speaker 2: people looking to move to Australia so with what's going 523 00:27:17,640 --> 00:27:19,800 Speaker 2: on there. But yeah, it's just one of those things. 524 00:27:20,160 --> 00:27:22,600 Speaker 2: If you've got overseas assets, you should always be talking 525 00:27:22,600 --> 00:27:25,800 Speaker 2: to your lawyer and your accountant about it in advance 526 00:27:26,160 --> 00:27:28,760 Speaker 2: because you could be living a nightmare for your children 527 00:27:28,800 --> 00:27:31,800 Speaker 2: to try and deal with paperwork wise, every time I've 528 00:27:31,800 --> 00:27:33,840 Speaker 2: had to deal with it, you know, any US assets 529 00:27:33,920 --> 00:27:36,879 Speaker 2: or UK assets, it's the time and the paperwork involved 530 00:27:36,920 --> 00:27:37,880 Speaker 2: in the stress involved. 531 00:27:38,160 --> 00:27:41,760 Speaker 1: It's just overwhelming, very good and there's enough paperwork in 532 00:27:41,800 --> 00:27:45,879 Speaker 1: those situations already. Okay, terrific. Thank you very much. Liam 533 00:27:45,880 --> 00:27:47,879 Speaker 1: Short from the Son as Well group, love you to 534 00:27:47,880 --> 00:27:48,720 Speaker 1: have you on the show again. 535 00:27:49,400 --> 00:27:50,159 Speaker 2: Really enjoyed it. 536 00:27:50,160 --> 00:27:52,480 Speaker 1: Thank you, James, and we'll have lim. You will hear 537 00:27:52,520 --> 00:27:54,679 Speaker 1: Liam again during the year. Don't you worry about that. 538 00:27:54,920 --> 00:27:58,720 Speaker 1: He is absolutely terrific on all issues. And that was 539 00:27:58,720 --> 00:28:01,000 Speaker 1: the test, wasn't it. We really injured around the world. 540 00:28:01,320 --> 00:28:04,520 Speaker 1: All right, let's have some more correspondents. Love to hear 541 00:28:04,600 --> 00:28:07,680 Speaker 1: more questions and queries from you the Money Puzzle at 542 00:28:07,720 --> 00:28:09,800 Speaker 1: the Australian dot com dot Au. 543 00:28:09,960 --> 00:28:10,560 Speaker 2: Talk to you soon.