WEBVTT - Sharing home ownership with the government: What could possibly go wrong? 0:00:10.119 --> 0:00:13.280 Hello, and welcome to The Australian's Money Puzzle podcast. I'm 0:00:13.400 --> 0:00:17.560 James Kirkby. Welcome aboard everybody. I notice we haven't had 0:00:17.600 --> 0:00:22.920 many questions about this week's federal budget. That's probably because 0:00:23.000 --> 0:00:26.520 there wasn't an awful lot in it that is compared 0:00:26.560 --> 0:00:30.639 to a conventional budget. Don't be mistaken, though, because there 0:00:30.880 --> 0:00:33.599 was issues in it, right, I mean, keep an eye 0:00:33.680 --> 0:00:36.240 on that. There was a tax cut, Yes it was tiny, 0:00:36.640 --> 0:00:38.440 Yes it was at the lower band, but it was 0:00:38.479 --> 0:00:42.760 a tax cut. Nonetheless, there's a very interesting expansion of 0:00:42.800 --> 0:00:46.559 the plan to have shared home ownership that could be 0:00:46.640 --> 0:00:48.960 really interesting. That's the biggest sort of thing in the 0:00:49.000 --> 0:00:51.640 first home buyers market we've seen for a long time, 0:00:52.280 --> 0:00:54.680 and with anyone can up to one hundred thousand a 0:00:54.760 --> 0:00:57.400 year you can apply for that. So I think that's 0:00:57.440 --> 0:01:01.160 going to be a major feature of the residential property 0:01:01.200 --> 0:01:04.240 market going forward. There was also some very interesting sort 0:01:04.240 --> 0:01:08.240 of side steps inside the budget, in other words, things 0:01:08.240 --> 0:01:10.960 that were not mentioned but were important because they weren't. 0:01:11.920 --> 0:01:14.880 Give you an example, the deming rate. The deming rates unchanged. 0:01:15.000 --> 0:01:18.280 The deming rates is unchanged since twenty twenty. This is remarkable. 0:01:18.480 --> 0:01:21.600 Basically the rate that controls pension access is unchanged since 0:01:21.600 --> 0:01:24.080 twenty twenty. That's a giveaway, folks, it's a giveaway to 0:01:24.120 --> 0:01:27.920 older Australians. On the other hand, the coup, we call 0:01:27.959 --> 0:01:33.360 it notorious. Notorious plan to introduce a new super tax 0:01:33.800 --> 0:01:37.960 of fifteen percent on earnings above three million was nowhere 0:01:38.560 --> 0:01:41.160 mentioned in the budget papers. And I mean anywhere, because 0:01:41.200 --> 0:01:43.880 we were really digging and looking for it, myself and 0:01:43.920 --> 0:01:46.400 my colleagues inside the lock up, and we didn't see 0:01:46.600 --> 0:01:49.200 any mentioned at all. That well, I'm going to infer 0:01:49.480 --> 0:01:51.800 that it means that plan as we know, is never 0:01:51.840 --> 0:01:53.760 going to see the light of day. That doesn't mean 0:01:53.800 --> 0:01:56.520 they won't try something, but I'd like to think they're 0:01:56.560 --> 0:01:58.560 never going to try that. We talk about that in 0:01:58.600 --> 0:02:01.520 a moment with my guest today. One thing just before 0:02:01.560 --> 0:02:06.200 we start. As we speak, news has just come out 0:02:06.240 --> 0:02:12.480 that Trump has introduced a twenty five let me read 0:02:12.480 --> 0:02:14.800 this again. I got to be sure about this. A 0:02:14.919 --> 0:02:20.440 twenty five percent tariff on foreign made automobiles in the US. 0:02:20.520 --> 0:02:23.120 Can you believe this? This is how believable. Imagine if 0:02:23.160 --> 0:02:24.840 it was in Australia. It would be like bring us 0:02:24.880 --> 0:02:27.280 back to a hold and everybody driving a hold in 0:02:27.400 --> 0:02:30.240 or a Ford as we were back in the nineteen eighties. 0:02:30.720 --> 0:02:36.359 This is huge. This Trump tariff play. The big day supposedly, 0:02:36.440 --> 0:02:38.880 if he can stop leaking it before the big day 0:02:38.919 --> 0:02:41.560 is supposed to be Tuesday, April second. That's like the 0:02:41.600 --> 0:02:45.400 tariff day that he's supposed to deliver all the entire package. 0:02:45.760 --> 0:02:49.160 And that is just for our next show, which would 0:02:49.160 --> 0:02:52.640 be ideally timed. My guest will be Cameron Stuart. He's 0:02:52.680 --> 0:02:55.880 the chief international correspondent at the Australia and he's a 0:02:56.000 --> 0:02:59.079 Trump expert. He's covered the Trump elections, He's been at 0:02:59.080 --> 0:03:03.680 those Trump rallies. He really understands this controversial figure who's 0:03:03.919 --> 0:03:07.359 dictating the tempo of world investment markets. So look out 0:03:07.400 --> 0:03:09.760 for that one in a few days time. Now there 0:03:09.800 --> 0:03:12.280 is only one person I talked to about the budget 0:03:12.360 --> 0:03:14.320 each year, and we're going to talk about the budget. 0:03:14.320 --> 0:03:16.360 We're also going to talk about where we are this 0:03:16.400 --> 0:03:17.840 time of the year now that we know what was 0:03:17.880 --> 0:03:20.240 in the budget. It is of course Will Hamilton of 0:03:20.280 --> 0:03:21.880 Hamilton Investment Partners. 0:03:21.919 --> 0:03:24.480 How are you will very well, James, thank you for 0:03:24.520 --> 0:03:24.840 having me. 0:03:25.520 --> 0:03:28.440 You're very welcome. Great to have you. I mentioned the 0:03:28.520 --> 0:03:31.720 issues there on the budget, there was another tax cut. 0:03:31.760 --> 0:03:34.359 We've had a batch of tax cuts from the ALP. 0:03:34.560 --> 0:03:40.320 Now does that to some extent undermine the original ambitious 0:03:40.480 --> 0:03:44.920 multi year tax cut program that Josh Rodenberg and Morrison had. 0:03:46.600 --> 0:03:48.160 No, I don't think it does, because I think what 0:03:48.200 --> 0:03:51.600 you're saying is it's they're calling it the cup of 0:03:51.600 --> 0:03:55.160 coffee tax cut. It doesn't start for sixteen months, and 0:03:55.200 --> 0:03:57.320 then it does come in at five dollars a week, 0:03:57.320 --> 0:03:59.680 and then it goes to ten dollars twelve months after that. 0:04:00.240 --> 0:04:02.400 It's at the lower tax band, and I think this 0:04:02.760 --> 0:04:05.040 goes from sixteen to fifteen and then to fourteen percent. 0:04:05.200 --> 0:04:07.760 So the thing is it doesn't erode bracket creep. That 0:04:07.840 --> 0:04:10.360 the brecker creep at the top end. There's no erosion. Yeah, 0:04:10.440 --> 0:04:14.400 so it we've still got very substantial bracket creep and 0:04:14.440 --> 0:04:15.480 it's a big issue. 0:04:15.320 --> 0:04:18.920 Bracket creep, folks. I hope everyone is across a before 0:04:18.960 --> 0:04:22.400 we go any further. Bracker creep is that if the 0:04:22.440 --> 0:04:27.000 tax rates remain fixed at percentages, then what happens is, 0:04:27.040 --> 0:04:29.800 as you get a pay rise, you graduate into those 0:04:29.839 --> 0:04:34.920 tax bands and that means that you continually pay more tax. 0:04:35.160 --> 0:04:38.120 And actually if you look marvelous couple of slides from 0:04:38.279 --> 0:04:41.320 saul eslike the Independent Economist I saw this morning where 0:04:41.360 --> 0:04:45.279 he showed how the tax revenue year upon year upon 0:04:45.440 --> 0:04:48.800 year and into the future increasingly depends on income tax. 0:04:49.720 --> 0:04:52.200 So bracket creep is this controversy and the only way 0:04:52.240 --> 0:04:56.080 to plug it would be if they indexed the bands. 0:04:57.320 --> 0:05:03.160 Do you think either party whatever index to bands because 0:05:03.200 --> 0:05:06.640 it means either party could never announce the tax cut again. 0:05:06.800 --> 0:05:10.039 Really, I see there's an article in The Australian today 0:05:10.080 --> 0:05:13.560 that Dunton's being urged to do this. I think that 0:05:14.120 --> 0:05:17.240 I know he's been everyone's everyone, everyone's urging him to 0:05:17.240 --> 0:05:22.120 do and I think tax personal taxpayer contribution. When Morrison 0:05:22.160 --> 0:05:24.120 went out of power, I think it was about forty 0:05:24.120 --> 0:05:27.760 eight point three percent. In this budget, it's forecast now 0:05:28.000 --> 0:05:31.440 for twenty eight twenty nine to peak at fifty four percent. 0:05:31.920 --> 0:05:34.600 So that's the effect of bracket crep. Now we need 0:05:34.720 --> 0:05:38.200 major we need tax reform and I think one of 0:05:38.240 --> 0:05:41.600 the things that the Tier member and Wentworth elector Spend 0:05:41.600 --> 0:05:43.000 has been really calling for. 0:05:42.960 --> 0:05:44.520 Is indexation of the bands. 0:05:44.600 --> 0:05:47.800 Eah correct is that? But bigger tax reform and the 0:05:47.839 --> 0:05:51.760 thing is the people listening to this as individuals are 0:05:51.800 --> 0:05:54.320 being urged to contribute more and more to the total 0:05:54.360 --> 0:05:57.760 tax take, and that's wrong. It really is wrong. And 0:05:57.800 --> 0:06:01.560 I think that one of the biggest reasons is because 0:06:01.600 --> 0:06:04.200 there's two sides naturally to a budget. There's the revenue 0:06:04.200 --> 0:06:08.240 side and there's expenditure side, and both sides aren't tackling 0:06:09.240 --> 0:06:12.520 the spending side, and they're spending like drunken sailors. 0:06:12.839 --> 0:06:15.680 They're spending like drunken sailors. Okay, folks, you heard it 0:06:15.760 --> 0:06:20.839 here first from Will Hamilton, and actually I don't disagree 0:06:20.880 --> 0:06:25.960 with that. And the coalition's tactical electoral election policy of 0:06:26.120 --> 0:06:31.080 matching LP giveaways, particularly on the medical side, is well, 0:06:31.400 --> 0:06:34.240 basically it rulls into every time you spend, we spend too. 0:06:34.680 --> 0:06:37.280 So on that three million tax I think we have 0:06:37.360 --> 0:06:40.200 a question later on that, but it was nowhere to 0:06:40.279 --> 0:06:41.880 be seen. Do you think it's dead? 0:06:42.920 --> 0:06:45.240 It's surprising, was probably the number one question we got 0:06:45.320 --> 0:06:49.240 yesterday from people, because you know, look, our client base, 0:06:49.320 --> 0:06:52.560 this is a very relevant proposal that was put forward 0:06:52.880 --> 0:06:56.120 and there was no mention of it, and as we 0:06:56.160 --> 0:06:59.280 all know, it's sort of stuck in the center, killed 0:06:59.320 --> 0:07:02.479 by the Senate at the moment, everyone's expecting they'll have 0:07:02.520 --> 0:07:05.120 a go at it or but there's just no mention 0:07:05.279 --> 0:07:09.640 whatsoever about resurrecting that legislation in the Upper House or 0:07:09.720 --> 0:07:13.480 trying to alter it amend it. So where does it stand? 0:07:13.560 --> 0:07:16.080 And I think that's the big thing as far as 0:07:16.080 --> 0:07:20.200 our clients are concerned. So unless they can change the 0:07:20.280 --> 0:07:23.520 minds of Jackie Lambia at all, this thing's dead. 0:07:24.360 --> 0:07:26.360 Okay, I have to say, will I don't think it's dead. 0:07:26.360 --> 0:07:28.280 And I think they can change the minds of those 0:07:28.320 --> 0:07:33.520 people simply by offering them something that I didn't offer before. 0:07:33.560 --> 0:07:35.600 So for instance, you could package it. This is how 0:07:35.600 --> 0:07:38.080 they do these deals in Senate. You say, Okay, you 0:07:38.160 --> 0:07:40.520 might be crazy about this tax, but we want it through. 0:07:40.560 --> 0:07:42.320 And what we'll do is we'll do a double bill, 0:07:42.520 --> 0:07:44.760 you know. And they took in other goodies with it, 0:07:44.800 --> 0:07:47.960 which the others will find it resistible. That's political. More 0:07:48.000 --> 0:07:51.200 to the point that three m tax three million tax 0:07:51.280 --> 0:07:53.840 aren't super That is still on the agenda, and Jim 0:07:53.920 --> 0:07:56.400 Chalmers has reiterated that he wants to push it through 0:07:56.680 --> 0:07:59.240 put that on the agenda. It's not indexed either, right, 0:08:00.760 --> 0:08:03.520 so bracket creep would kick in there big time, wouldn't it. 0:08:03.560 --> 0:08:06.120 And the transfer balance cap is indexed and like it 0:08:06.280 --> 0:08:08.600 was interesting. Okay, So the transfer balance cap which you 0:08:08.640 --> 0:08:10.800 have will Flagg James is going from one point nine 0:08:10.840 --> 0:08:14.360 to two million a concessional and non concessional contribution, So 0:08:14.520 --> 0:08:17.480 the way to get money into Super has not been altered. 0:08:18.560 --> 0:08:20.360 Yeah, and I think that's really unfair. That was the 0:08:20.360 --> 0:08:22.600 point I'd brought up on budget coverage, even though it 0:08:22.640 --> 0:08:24.560 wasn't in the budget papers, but I wasn't going to 0:08:24.600 --> 0:08:27.640 ignore it, which is folks, I think this is really relevant. 0:08:27.680 --> 0:08:31.760 If you are older and if you have one point 0:08:31.840 --> 0:08:35.000 nine million this is individually per head in Super, and 0:08:35.040 --> 0:08:38.560 you've taxed free earnings on that, that cap is going 0:08:38.559 --> 0:08:42.800 to rise to two million on July one two million, okay. Now, 0:08:42.840 --> 0:08:46.000 but if you are in accumulation stage. Any of our 0:08:46.000 --> 0:08:48.719 listeners who aren't retired, which is a vast majority, let 0:08:48.760 --> 0:08:51.560 me tell you the most they can put into Super 0:08:52.679 --> 0:08:57.320 pre tax each year is thirty thousand dollars. Now, a 0:08:57.320 --> 0:08:59.720 couple of things you could put in thirty thousand dollars 0:08:59.760 --> 0:09:04.640 ten years ago, twenty years ago, and how many years 0:09:04.720 --> 0:09:07.199 would it take to get two million? How many years 0:09:07.360 --> 0:09:10.160 must do the calculation of that. But basically it's loaded 0:09:10.160 --> 0:09:11.640 towards older people, isn't it. Really? 0:09:11.960 --> 0:09:15.960 It isn't the thing that we've argued since from the 0:09:15.960 --> 0:09:19.720 point that Kelly I do ar Alter, this was the 0:09:19.800 --> 0:09:23.600 issue actually is getting money into super and that still 0:09:23.840 --> 0:09:26.200 and what they're doing and not altering these levels is 0:09:26.240 --> 0:09:27.280 making it even harder. 0:09:27.880 --> 0:09:31.840 Yes, that's right. It's really contradictory that you're letting the 0:09:31.880 --> 0:09:35.440 amount you can have tax free swell and you're not 0:09:35.600 --> 0:09:38.800 changing year after year the amount you can put in. 0:09:39.080 --> 0:09:41.120 But we'll put that to one side. But I want 0:09:41.120 --> 0:09:43.160 people to be aware of it. I'm sure listeners are 0:09:43.240 --> 0:09:45.560 aware of it, and it's I think it's crucial in 0:09:45.640 --> 0:09:48.640 terms of again one of these things that the budget 0:09:48.640 --> 0:09:52.760 did not cover. Okay, let's take a short break and 0:09:52.800 --> 0:09:54.360 we want to come back and just pick up one 0:09:54.440 --> 0:09:59.000 or two I think very important pre election issues for investors, 0:09:59.040 --> 0:10:02.199 because we have an election coming up in May, and 0:10:02.440 --> 0:10:05.800 we don't normally have a budget during an election campaign, 0:10:05.800 --> 0:10:08.760 and there is an election campaign on for all intents 0:10:08.800 --> 0:10:10.800 and purposes. I know it hasn't been called yet, but 0:10:10.960 --> 0:10:12.760 it will be called in a matter of days. Okay. 0:10:12.840 --> 0:10:26.240 Back in the moment. Hello, Welcome back to the Australians 0:10:26.400 --> 0:10:31.080 Money Puzzle podcast. James Kirby here talking to Will Hamilton 0:10:31.120 --> 0:10:34.880 of Hamilton Wealth Partners. We cover the budget every year together. 0:10:35.400 --> 0:10:37.520 Often we've so much in the budget we could talk 0:10:37.559 --> 0:10:39.160 for an hour. We're not going to talk for an 0:10:39.160 --> 0:10:41.360 hour on the budget this year we will because really 0:10:41.400 --> 0:10:43.679 there isn't an hour's worth in it. There is barely 0:10:43.760 --> 0:10:47.320 ten minutes worth. I think we've touched off the big issues. 0:10:47.360 --> 0:10:49.640 I just want to zone in one one issue that 0:10:49.720 --> 0:10:53.360 I think our listeners will find very interesting. For first 0:10:53.360 --> 0:10:56.079 home buyers. If you are one, if you want to 0:10:56.120 --> 0:10:58.560 be one, or if anyone related to you wants to 0:10:58.559 --> 0:11:00.360 be one, or a friend of yours wants to one. 0:11:00.400 --> 0:11:03.280 There's a couple of grants you can choose from. The 0:11:03.360 --> 0:11:06.720 most popular is the Home Loan Guarantee Grant Federal. These 0:11:06.760 --> 0:11:11.000 are federal grants where the government will cover will guarantee 0:11:11.280 --> 0:11:13.800 the deposit you don't have, basically so you can have 0:11:13.840 --> 0:11:17.199 a small deposit. This is the most popular off the schemes. 0:11:18.000 --> 0:11:20.599 Roughly fifty thousand people have used it, maybe more. This 0:11:20.679 --> 0:11:22.920 is the last time I saw the figures. The other 0:11:22.960 --> 0:11:26.040 one is the first Home super Saber scheme. Some of 0:11:26.080 --> 0:11:29.960 our listeners have used that. They are heroes to use 0:11:30.000 --> 0:11:32.960 that because it is the most ghastly complicated scheme I've 0:11:33.000 --> 0:11:36.560 ever come across. However, thirty five thousand people or more 0:11:36.600 --> 0:11:40.640 have used it. They've used it because people will jump 0:11:40.679 --> 0:11:43.680 on anything that gets them into the market. The majority 0:11:43.679 --> 0:11:46.319 of people who don't have rich mom and dads who 0:11:46.360 --> 0:11:49.160 will give them quietly one hundred grand or two hundred 0:11:49.160 --> 0:11:51.120 grand to get them going. Most people don't have that. 0:11:51.360 --> 0:11:54.120 They depend on these grants, or they depend on whatever 0:11:54.160 --> 0:11:56.959 initiatives they can have. So will The point I'm making 0:11:57.080 --> 0:12:01.680 is the government's expanded shared home ownership scheme I think 0:12:01.720 --> 0:12:04.480 will go like hotcakes. I think it will be instantly popular. 0:12:04.920 --> 0:12:07.200 The deal is you can earn up to ninety thousand, 0:12:07.280 --> 0:12:10.000 up to one hundred thousand, and you can buy a 0:12:10.040 --> 0:12:13.280 house up to one point three million, which is quite something. 0:12:13.360 --> 0:12:18.200 That's it's regionally sectoralized. Basically Sydney's the highest makes sense, 0:12:18.840 --> 0:12:22.360 and it drops from there. The government will pay will 0:12:22.400 --> 0:12:25.680 put in thirty percent of an existing house and forty 0:12:25.720 --> 0:12:30.200 percent of a new house, right so you don't have 0:12:30.320 --> 0:12:34.760 to you share ownership. What do you think of the idea. 0:12:35.840 --> 0:12:38.280 Well, look, it's going to get people in. And the 0:12:38.320 --> 0:12:41.160 fact that they've also lifted the single salary cap from 0:12:41.240 --> 0:12:44.199 ninety two hundred thousand, you going to see this allow 0:12:44.200 --> 0:12:47.160 a lot more people in as well. So you're right, 0:12:47.360 --> 0:12:49.920 it's going to assist this market, and it's going to 0:12:49.960 --> 0:12:52.079 assist that you're up to that one point three million, 0:12:52.080 --> 0:12:53.520 it's going to assist it substantially. 0:12:54.480 --> 0:12:56.880 The only forty thousand spots will and that's over the 0:12:56.960 --> 0:12:58.080 budget papers. 0:12:57.840 --> 0:12:59.760 Twenty thousand places initially. Yeah, that's right. 0:12:59.800 --> 0:13:02.840 Yeah, th I notice demand will be strong. The demand 0:13:02.840 --> 0:13:05.280 will be strong, and I noticed real estates a councilors, 0:13:05.320 --> 0:13:09.760 et cetera yesterday asking from more spots already. So I 0:13:09.800 --> 0:13:11.400 think it will be. But let's just look at it 0:13:11.400 --> 0:13:13.439 for a moment. If you did this, so the upside 0:13:13.440 --> 0:13:15.520 would be that you could buy a house that you 0:13:15.600 --> 0:13:21.920 could not have bought previously, and that's substantial. The downside 0:13:22.000 --> 0:13:24.600 is you share, you're in a joint venture, and you're 0:13:24.600 --> 0:13:29.040 a joint venture with a government agency. What could go wrong? 0:13:29.360 --> 0:13:32.200 What could go wrong? A lot of things. What could 0:13:32.200 --> 0:13:32.560 go wrong? 0:13:34.000 --> 0:13:36.760 First one is if if it's reversed, but I don't 0:13:36.760 --> 0:13:38.800 see that happening. They may see if they stop, they 0:13:38.840 --> 0:13:42.679 may stop it. The other thing is is they're going 0:13:42.679 --> 0:13:47.440 to put some effectively interest rate or carry on it. 0:13:47.600 --> 0:13:50.040 I doubt that as well. So I think, what if 0:13:50.040 --> 0:13:51.960 you've got to change your government and they didn't like 0:13:52.000 --> 0:13:54.199 the scheme. I think it would just be worth ceasing it. 0:13:54.679 --> 0:13:56.600 Yeah, it would wither on the vine. But you wouldn't 0:13:56.640 --> 0:13:59.000 care about that if you were in and I noticed that. 0:13:59.040 --> 0:14:02.280 I don't want to preach George, but governments don't necessarily 0:14:02.320 --> 0:14:05.359 do that. Like the ALP got in. They are absolutely 0:14:05.440 --> 0:14:09.120 against using your super for buying a home. The Coalition 0:14:09.200 --> 0:14:12.560 is totally for it. But the first Home super Saver 0:14:12.679 --> 0:14:15.960 scheme which was introduced by the Morrison government was not unwound. 0:14:16.320 --> 0:14:19.440 It wasn't advertised, but it certainly wasn't unwound and continues 0:14:19.520 --> 0:14:22.760 under the EARP. So that's a precedent. I think. One 0:14:22.800 --> 0:14:26.360 of the things that perhaps is an issue with the 0:14:26.400 --> 0:14:29.480 shared ownership scheme, like any joint venture, is how does 0:14:29.520 --> 0:14:33.240 the partnership end. Would you ever actually get to completely 0:14:33.280 --> 0:14:35.600 own the house to be able to buy out that 0:14:35.680 --> 0:14:38.840 part that you that the government owns, and if the 0:14:38.880 --> 0:14:42.840 price went down, you'd be in a terrible pickle, wouldn't you. 0:14:43.000 --> 0:14:45.320 You'd be stuck in a half government own't house for 0:14:45.480 --> 0:14:47.480 who knows how long. How would you say that? 0:14:47.520 --> 0:14:51.560 So is there effectively imagine call we don't know that. Yeah, 0:14:51.600 --> 0:14:53.520 I look, I need to see the fine print. 0:14:53.920 --> 0:14:56.040 Yes, we don't know the details. One other thing, folks, 0:14:56.040 --> 0:14:59.400 by the way, is in the nature of these things, 0:14:59.440 --> 0:15:02.320 which are so times sort of perverse incentives, or you 0:15:02.400 --> 0:15:06.480 might say disincentives. Sometimes if you earn, if you go 0:15:06.600 --> 0:15:08.760 in let's say you're around ninety eight thousand, and you 0:15:08.840 --> 0:15:12.320 qualify for the scheme, and in the natural course of 0:15:12.360 --> 0:15:14.480 event you are promoted or you make more money as 0:15:14.520 --> 0:15:17.600 the years go buy then there is a close already 0:15:17.680 --> 0:15:20.160 in the proposal that the government will want you to 0:15:20.240 --> 0:15:24.600 buy them out faster than this planned. Under the conventional plan, 0:15:24.720 --> 0:15:26.800 you only have to buy out the government, or at 0:15:26.920 --> 0:15:29.040 least they have to get the money back for their 0:15:29.080 --> 0:15:32.480 stake is when you sell the house. But if you 0:15:32.520 --> 0:15:35.520 get promoted, you have to give them back some of 0:15:35.560 --> 0:15:38.880 their steak faster. That's one of those classic sort of 0:15:38.920 --> 0:15:42.360 disincentive things that you've got to watch that often get 0:15:42.360 --> 0:15:45.160 built into these things by accident. 0:15:45.480 --> 0:15:47.720 And you would expect that the people that weare the 0:15:47.720 --> 0:15:50.120 demand is for this game, they're the ones that will 0:15:50.160 --> 0:15:53.480 get Probably the cealariisers are going to be more rapid 0:15:53.480 --> 0:15:54.200 as well, so. 0:15:54.440 --> 0:15:56.320 They're the very ones, aren't they. Yeah, because they're first 0:15:56.360 --> 0:16:00.480 home buyers, so by definition they are going to ascew younger. Okay, 0:16:00.640 --> 0:16:03.480 very good. We don't know just yet. I don't want 0:16:03.520 --> 0:16:05.240 to talk about the election just yet in terms of 0:16:05.280 --> 0:16:07.520 the choices investors have, because we don't have all the 0:16:07.560 --> 0:16:10.960 details just yet. I noticed a couple of things we're 0:16:11.120 --> 0:16:14.000 coming to you before Dutton gives the budget reply. Budget 0:16:14.040 --> 0:16:17.560 replies are normally completely boring and no one pays attention 0:16:17.600 --> 0:16:20.480 to them. This time, people will pay attention because we 0:16:20.520 --> 0:16:22.680 aren't the middle love it, as I say, a de 0:16:22.800 --> 0:16:26.800 facto election campaign. Also, I notice that there is that 0:16:26.880 --> 0:16:30.200 what's that famous little item in the budget which is 0:16:30.560 --> 0:16:35.240 expenses on There's a phrase for it, but basically it's 0:16:35.320 --> 0:16:37.400 money they've put aside, which they have in details what 0:16:37.440 --> 0:16:41.080 they're going to do with. And there's two billion in 0:16:41.160 --> 0:16:46.080 there still unused, which may well be used yet by 0:16:46.160 --> 0:16:51.760 the government for some last minute election enticements in the 0:16:51.800 --> 0:16:55.360 next month or so. But we'll see where we go 0:16:55.440 --> 0:16:58.200 on that. I've got some terribly good questions I really 0:16:58.240 --> 0:17:02.480 want to get to with Will. In fact, as often 0:17:02.520 --> 0:17:05.680 the case, I've been saving these for a wik because 0:17:05.680 --> 0:17:10.640 they're particularly difficult. Thank you, You're welcome. And also there's 0:17:10.680 --> 0:17:13.399 a question that's about another guest. But that's the nature 0:17:13.440 --> 0:17:15.960 of it. There'll be questions about you Will that another 0:17:15.960 --> 0:17:17.760 guest will have to answer. That's just the nature of 0:17:17.800 --> 0:17:19.720 a rolling show. All right, we'll be back in a 0:17:19.720 --> 0:17:31.440 moment with some questions. Hello, welcome back to the Australians 0:17:31.480 --> 0:17:36.520 Money Puzzle. James Kirby and Will Hamilton here with you. Okay, folks. 0:17:36.560 --> 0:17:41.680 Now the first question is from declan I'm baffled by 0:17:41.760 --> 0:17:45.560 Roger Montgomery suggestion. Now Roger Montgomery was on the show 0:17:46.560 --> 0:17:48.800 two bad if you want to listen to it, very 0:17:48.840 --> 0:17:53.480 good as always. Roger Montgomery suggestion that people should calculate 0:17:53.520 --> 0:17:55.960 dividend heal based on the price they paid to acquire 0:17:56.040 --> 0:17:59.800 their shares, and he used Comewell Bank as an exam 0:18:00.880 --> 0:18:03.639 rather than based on the current value. The question and 0:18:03.720 --> 0:18:06.880 the investors should be asking themselves is would it be 0:18:06.880 --> 0:18:09.800 better off continuing to hold the shares I have or 0:18:09.840 --> 0:18:14.720 should I sell them and invest elsewhere. Okay, I don't 0:18:14.720 --> 0:18:18.800 really argue with that theoretical point brought up by Detton, 0:18:19.280 --> 0:18:21.919 but I don't have a problem either with Rogers. I mean, 0:18:21.960 --> 0:18:28.240 if I buy come Bank shares for thirty dollars, which 0:18:28.280 --> 0:18:30.480 is I think what I paid for them thirty six, 0:18:31.000 --> 0:18:35.119 and they're now nearly one hundred, and the dividend yield 0:18:35.240 --> 0:18:37.960 on paper, when I look at the tables, tellt me 0:18:38.000 --> 0:18:40.960 it's three and a half percent. But my dividend yield 0:18:41.400 --> 0:18:46.680 on those shares is much much higher than that. If 0:18:46.680 --> 0:18:49.840 I bought a property and you said to me, you know, 0:18:49.880 --> 0:18:51.879 the rental yield is only three percent, but I know 0:18:52.000 --> 0:18:54.320 that I bought that property, you know, for half half 0:18:54.400 --> 0:18:56.679 the cost it is today, so the rent is terrific 0:18:56.720 --> 0:18:59.359 on it, It seems to me. I think both points 0:18:59.359 --> 0:19:00.000 are pretty relevant. 0:19:00.520 --> 0:19:03.159 What do you think, will, I think you've got to 0:19:03.160 --> 0:19:06.840 look look what Roger's saying in some respects is right. 0:19:07.000 --> 0:19:10.360 I think that and CBA, the dividend you're late late 0:19:10.440 --> 0:19:13.960 last year went down and then it's gone up because 0:19:14.000 --> 0:19:16.280 the share price is adjusted, I mean, and the share 0:19:16.320 --> 0:19:20.080 prices recently it's recently fallen twenty percent. So yeah, it's 0:19:20.240 --> 0:19:22.439 by that nature gone up. But I think you've got 0:19:22.480 --> 0:19:26.359 to look at I have an issue with people just 0:19:26.600 --> 0:19:29.879 purely looking at dividend yield when they look at a stock. 0:19:30.080 --> 0:19:33.320 At equities, you invest in equities for growth, so one 0:19:33.359 --> 0:19:37.080 component of the return is income, the other is growth. 0:19:37.560 --> 0:19:41.640 Now people were scratching their heads when CBA was going up, 0:19:41.680 --> 0:19:46.720 and why is it going up? It's ten year EPs 0:19:46.840 --> 0:19:50.440 growth average has been half a percent. So you look 0:19:50.480 --> 0:19:53.399 at se earnings per share and you look at the yield, 0:19:53.600 --> 0:19:55.320 and I think that's what You've got to look at 0:19:55.320 --> 0:19:57.960 the total return that you're expecting from that and make 0:19:58.000 --> 0:20:01.560 a judgment from it. Right, if you paid thirty six 0:20:01.600 --> 0:20:05.359 dollars for the stock, the dividend you're getting is based 0:20:05.400 --> 0:20:08.159 off that thirty six dollars, So it's relevant. 0:20:08.400 --> 0:20:11.360 I know whatvant of course that there are. People will 0:20:11.359 --> 0:20:13.359 always say that, look at your share portfolio, would you 0:20:13.400 --> 0:20:15.959 buy that stock today? Very powerfuct point, of course, it is. 0:20:16.600 --> 0:20:21.240 I think with dividend machine stock which come bank is 0:20:21.359 --> 0:20:24.960 and all the banks are, that particular point is diluted 0:20:25.000 --> 0:20:27.520 to some extent. That's where I would come from at least. 0:20:27.520 --> 0:20:31.320 But it's a very good question. Thank you. Debt all right, James. 0:20:32.040 --> 0:20:34.560 James asks about six months ago you had an accountant 0:20:34.560 --> 0:20:38.200 on the show, Duncan Perkins tax Time Accountants. I believe 0:20:38.440 --> 0:20:40.800 I found it very informative and with one eye on 0:20:40.880 --> 0:20:42.680 the end of the financial year, I'd love to hear 0:20:42.720 --> 0:20:46.119 more about putting the appropriate structures in place now to 0:20:46.160 --> 0:20:50.160 minimize your tax liabilities down the line. In addition, I'd 0:20:50.160 --> 0:20:52.919 love to hear more about debt recycling and the associated 0:20:53.000 --> 0:20:57.280 tax benefits in additions to the risks involved. I think 0:20:57.720 --> 0:21:01.280 appropriate structures aren't just for one James. You should be 0:21:01.359 --> 0:21:04.200 looking if you're going to put a tax structure in place, 0:21:05.000 --> 0:21:07.600 it's for a long term, not just for one year. Yeah. 0:21:07.720 --> 0:21:10.479 So if you're presently investing in your own name and 0:21:10.520 --> 0:21:15.359 you going forward and looking at a family trust, that's 0:21:16.040 --> 0:21:18.120 you're with that trust for a number of years and 0:21:18.200 --> 0:21:22.560 likewise transferring assets from your name into a trust realizes 0:21:22.640 --> 0:21:23.320 capital gains. 0:21:24.480 --> 0:21:28.240 Yeah, okay, but maybe perhaps you might explain to the 0:21:28.400 --> 0:21:31.600 general listener of what debt recycling is. 0:21:34.520 --> 0:21:38.840 So on debt recycling, it's are you moving debt for 0:21:38.920 --> 0:21:40.840 also from one entity to another? 0:21:41.520 --> 0:21:42.440 Why would you do that. 0:21:44.600 --> 0:21:50.840 Due to tax? So, for instance, your mortgage that you 0:21:50.920 --> 0:21:54.000 have in your own name is being paid in after 0:21:54.119 --> 0:22:01.240 tax dollars. And whereas if you've got debts, this is 0:22:01.320 --> 0:22:05.840 in you know that you put that in a family trust, 0:22:06.040 --> 0:22:09.040 or it's on against an investment portfolio or property in 0:22:09.080 --> 0:22:13.840