1 00:00:09,840 --> 00:00:12,840 Speaker 1: Hello, and welcome to The Australian's Money Puzzled podcast. I'm 2 00:00:12,920 --> 00:00:16,120 Speaker 1: James Kirby. Welcome aboard everybody. We have a lot going 3 00:00:16,120 --> 00:00:17,919 Speaker 1: on all of a sudden. First of all, we have 4 00:00:17,960 --> 00:00:21,360 Speaker 1: a budget now you might say unexpectedly, that is, the 5 00:00:21,360 --> 00:00:24,919 Speaker 1: government flip flopped on this, but has finally settled on 6 00:00:24,960 --> 00:00:27,920 Speaker 1: a date which is March twenty five, not far away. 7 00:00:28,080 --> 00:00:30,120 Speaker 1: Keep that in mind, folks. And we have an election, 8 00:00:30,200 --> 00:00:33,200 Speaker 1: of course, which will come up soon after that in May, 9 00:00:33,440 --> 00:00:36,919 Speaker 1: and they have already, of course, both sides of Parliament 10 00:00:36,960 --> 00:00:40,560 Speaker 1: have started handing out the goodies here in terms of election, 11 00:00:41,280 --> 00:00:45,600 Speaker 1: and there are some really important distinguishing features between the 12 00:00:45,600 --> 00:00:48,279 Speaker 1: two parties here. In fact, it's in this area of 13 00:00:48,320 --> 00:00:52,559 Speaker 1: investment and housing, student loans etc. That some of the 14 00:00:52,600 --> 00:00:55,680 Speaker 1: real distinction in party policy is emerging. So I think 15 00:00:55,680 --> 00:00:58,960 Speaker 1: it's going to be very important in the weeks ahead, 16 00:00:59,560 --> 00:01:03,760 Speaker 1: as in we need to always pay attention to budgets 17 00:01:03,840 --> 00:01:08,880 Speaker 1: because we can get things, we can get things taken away. Similarly, 18 00:01:09,440 --> 00:01:12,920 Speaker 1: the same goes for elections, and any investor should be 19 00:01:12,920 --> 00:01:15,679 Speaker 1: across what's going on to get across what's going on. 20 00:01:16,520 --> 00:01:20,119 Speaker 1: My guest today is James Gerard from Financial Advisor dot 21 00:01:20,120 --> 00:01:22,040 Speaker 1: com dot you awai, James. 22 00:01:22,080 --> 00:01:24,880 Speaker 2: I'm doing great. Thanks for having me on today, James. 23 00:01:24,640 --> 00:01:26,200 Speaker 1: I'm delighted to hear this is a budget. But then 24 00:01:26,319 --> 00:01:29,679 Speaker 1: I'm one of those sort of strange people who enjoys budgets. 25 00:01:29,959 --> 00:01:32,280 Speaker 1: I really do. It's a bit like going for a 26 00:01:32,440 --> 00:01:36,119 Speaker 1: long run. Don't necessarily enjoy it while you're doing it, 27 00:01:36,520 --> 00:01:39,080 Speaker 1: but afterwards you say that was good. Now I'm really 28 00:01:39,120 --> 00:01:41,920 Speaker 1: across everything, and for me at least, it's like a 29 00:01:41,959 --> 00:01:45,600 Speaker 1: reset for the year. I'm just looking at. First of all, 30 00:01:45,640 --> 00:01:48,600 Speaker 1: the twenty fifth is the date, and that, of course, 31 00:01:48,880 --> 00:01:52,000 Speaker 1: by nature will be a pre election budget. It gives 32 00:01:52,000 --> 00:01:56,840 Speaker 1: the incumbents the ALP chance to show the wide republic 33 00:01:56,840 --> 00:01:59,960 Speaker 1: where public finances are at and I mean there's raw 34 00:02:00,280 --> 00:02:01,800 Speaker 1: record of that all the time, but it gives them 35 00:02:01,840 --> 00:02:04,400 Speaker 1: a chance to actually a moment, if you like, in 36 00:02:04,440 --> 00:02:07,960 Speaker 1: front of the spotlight, to put their case as to 37 00:02:08,000 --> 00:02:11,600 Speaker 1: the standings of the broader big picture. But then there's 38 00:02:11,639 --> 00:02:14,400 Speaker 1: also measures, which is what we are always interested in. 39 00:02:14,440 --> 00:02:18,200 Speaker 1: What might they do, what might they aspart to do, 40 00:02:18,240 --> 00:02:21,359 Speaker 1: what might they promise going into the future. And there's 41 00:02:21,400 --> 00:02:22,840 Speaker 1: a lot going on. One of the things I want 42 00:02:22,880 --> 00:02:24,799 Speaker 1: to talk to you. First of all, was about that 43 00:02:24,919 --> 00:02:28,800 Speaker 1: distinction on terms of what parties are offering. One big 44 00:02:28,840 --> 00:02:33,720 Speaker 1: distinction is about super, really simple. The Coalition will let 45 00:02:33,760 --> 00:02:37,720 Speaker 1: you use your SUPER to buy a home. The ALP 46 00:02:37,880 --> 00:02:39,960 Speaker 1: will not let you do so that's a major distinction 47 00:02:40,040 --> 00:02:41,920 Speaker 1: between the two parties. I don't want to get too 48 00:02:41,960 --> 00:02:44,280 Speaker 1: political in this. It's hard to cover an election without 49 00:02:44,280 --> 00:02:46,320 Speaker 1: being political, but I don't want to get party political 50 00:02:46,400 --> 00:02:47,720 Speaker 1: on this. I want to look at it from an 51 00:02:47,720 --> 00:02:50,160 Speaker 1: investor's point of view. How powerful do you think that 52 00:02:50,400 --> 00:02:53,800 Speaker 1: tapping super, allowing people to tap super might be, James. 53 00:02:54,400 --> 00:02:58,720 Speaker 2: It's really powerful, particularly for people in Sydney, Melbourne, Brisbane 54 00:02:59,200 --> 00:03:02,960 Speaker 2: where property prices have gone up substantially over the past 55 00:03:03,200 --> 00:03:06,320 Speaker 2: five years or ten year period, and it's really tough 56 00:03:06,320 --> 00:03:08,919 Speaker 2: for these younger people in their twenties, thirties, even forties 57 00:03:09,200 --> 00:03:12,760 Speaker 2: to get into the property market where it's over ten 58 00:03:12,840 --> 00:03:15,520 Speaker 2: years of the average income to buy the average property, 59 00:03:15,560 --> 00:03:17,440 Speaker 2: and statistics show that you need to save at least 60 00:03:17,520 --> 00:03:19,799 Speaker 2: ten years work for savings to be able to get 61 00:03:19,800 --> 00:03:22,120 Speaker 2: that first property. So being able to fast track that 62 00:03:22,200 --> 00:03:25,560 Speaker 2: by fifty thousand dollars per person, So if you're a 63 00:03:25,560 --> 00:03:28,000 Speaker 2: couple that's one hundred thousand dollars that you can grab 64 00:03:28,000 --> 00:03:31,160 Speaker 2: from your super account towards a deposit. It'll go a 65 00:03:31,200 --> 00:03:34,080 Speaker 2: long way. But then there's the well, what does that 66 00:03:34,120 --> 00:03:35,920 Speaker 2: mean on the other end, where we're missing out on 67 00:03:36,000 --> 00:03:39,000 Speaker 2: between fifty to one hundred thousand dollars of capital there 68 00:03:39,040 --> 00:03:41,400 Speaker 2: that could have been compound in a way earning eight 69 00:03:41,520 --> 00:03:45,360 Speaker 2: percent nine percent return over thirty forty years until retirement. 70 00:03:45,760 --> 00:03:48,119 Speaker 2: That means that there'll be less money there for retirement. 71 00:03:48,120 --> 00:03:49,640 Speaker 2: But then I guess the argument that the way that 72 00:03:49,680 --> 00:03:51,840 Speaker 2: I would think about it is that it helps you 73 00:03:51,880 --> 00:03:54,360 Speaker 2: achieve this goal to get into the property market sooner. 74 00:03:54,680 --> 00:03:56,920 Speaker 2: You pay down your mortgage sooner because you're off the 75 00:03:56,960 --> 00:03:59,800 Speaker 2: rental ladder sooner, and then when you're in that sort 76 00:03:59,840 --> 00:04:02,640 Speaker 2: of five to ten year period before retirement, that's when 77 00:04:02,640 --> 00:04:04,720 Speaker 2: you can put back extra money because you don't have 78 00:04:04,760 --> 00:04:07,880 Speaker 2: the mortgage anymore, and that's where you can replenish the 79 00:04:07,920 --> 00:04:10,280 Speaker 2: fifty thousand plus the returns that you would have had 80 00:04:10,280 --> 00:04:11,040 Speaker 2: along the way. 81 00:04:12,120 --> 00:04:15,920 Speaker 1: I mean, I have to say I'm a reluctant supporter 82 00:04:16,000 --> 00:04:18,320 Speaker 1: of it for the simple reason that I know a 83 00:04:18,320 --> 00:04:21,360 Speaker 1: policy wise, it's not a great idea housing should fix 84 00:04:21,400 --> 00:04:25,320 Speaker 1: housing super should fix SUPER. However, I'm pragmatic. Here's the thing. 85 00:04:26,480 --> 00:04:28,760 Speaker 1: All the tax breaks in the system for the individual 86 00:04:29,160 --> 00:04:33,000 Speaker 1: hinge on owing your own home capital gains tax exemption, 87 00:04:33,040 --> 00:04:36,080 Speaker 1: which is a big CGT exemption for homeowners. You don't 88 00:04:36,120 --> 00:04:38,080 Speaker 1: get to benefit from that if you don't buy your house. 89 00:04:38,400 --> 00:04:40,560 Speaker 1: It goes through all your life right through too. When 90 00:04:40,560 --> 00:04:43,720 Speaker 1: you retire, you can get the family home is effectively 91 00:04:43,800 --> 00:04:49,479 Speaker 1: excluded from assessment of access to the pension. So the 92 00:04:49,520 --> 00:04:52,200 Speaker 1: point I make is that it's not just about buying 93 00:04:52,200 --> 00:04:54,640 Speaker 1: a house. It's about including yourself and the benefits of 94 00:04:54,680 --> 00:04:56,799 Speaker 1: the tax system. And I don't think the tax system 95 00:04:56,880 --> 00:04:59,599 Speaker 1: is going to change, So yes, I think there will 96 00:04:59,640 --> 00:05:03,560 Speaker 1: be more support than people realize. Important point which I 97 00:05:03,600 --> 00:05:05,919 Speaker 1: don't see very often covered. If you go in and 98 00:05:05,960 --> 00:05:09,080 Speaker 1: look at the actual policy. Yes, you can take fifty 99 00:05:09,120 --> 00:05:11,960 Speaker 1: thousand dollar of your SUPER towards the home, assuming you 100 00:05:11,960 --> 00:05:14,600 Speaker 1: have fifty thousand in there. The second thing is you've 101 00:05:14,600 --> 00:05:16,599 Speaker 1: got to put it back when you sell the house, 102 00:05:17,600 --> 00:05:19,960 Speaker 1: assuming you sell the house. But that's a proviso in 103 00:05:20,000 --> 00:05:21,920 Speaker 1: there which hasn't had a lot of attention. So from 104 00:05:21,960 --> 00:05:24,320 Speaker 1: a policy perspective, it's not quite open the doors and 105 00:05:24,400 --> 00:05:26,680 Speaker 1: let all the superflow out. It has to be the 106 00:05:26,720 --> 00:05:29,560 Speaker 1: amount taken out has to be returned in the fullness 107 00:05:29,600 --> 00:05:32,000 Speaker 1: of time when you sell the home. We might get 108 00:05:32,000 --> 00:05:34,320 Speaker 1: some more detail on that in the election. On the 109 00:05:34,320 --> 00:05:37,599 Speaker 1: other side, then, James, I think the outstanding budget election 110 00:05:38,240 --> 00:05:41,000 Speaker 1: carrot from the ALP, I think at least is the 111 00:05:41,080 --> 00:05:44,279 Speaker 1: HEX deal. It's so simple. You just say to someone, 112 00:05:44,760 --> 00:05:47,279 Speaker 1: if you vote a LP, if you return the government, 113 00:05:47,320 --> 00:05:49,000 Speaker 1: you get twenty percent off your HEX. I mean, it 114 00:05:49,120 --> 00:05:54,440 Speaker 1: is just so simple and so clearly a budget giveaway. 115 00:05:54,440 --> 00:05:58,160 Speaker 1: It's outrageous almost in its simplicity. But I think for 116 00:05:58,200 --> 00:06:00,240 Speaker 1: that portion of the population, which by the way is 117 00:06:00,279 --> 00:06:02,359 Speaker 1: the big portion, right, so the gen X and the 118 00:06:02,400 --> 00:06:05,479 Speaker 1: millenniums combined are now bigger than boomers for the first 119 00:06:05,520 --> 00:06:09,120 Speaker 1: time ever, So I think that one may really work 120 00:06:09,160 --> 00:06:11,440 Speaker 1: as well. Do you think the HEX one will cut through? 121 00:06:12,680 --> 00:06:15,520 Speaker 2: I think it will. I'm making an assumption here. I 122 00:06:15,520 --> 00:06:19,920 Speaker 2: feel that the younger generation will swing political parties. They're 123 00:06:19,960 --> 00:06:23,080 Speaker 2: less set in their ways election to election, so something 124 00:06:23,120 --> 00:06:25,159 Speaker 2: like this, which on average will save them about five 125 00:06:25,200 --> 00:06:27,919 Speaker 2: thousand dollars with that twenty percent of their HEX debt 126 00:06:28,120 --> 00:06:31,800 Speaker 2: wiped away, is really appealing and Also, the Labor Party 127 00:06:32,160 --> 00:06:34,839 Speaker 2: have another proposal around that, and that's where they're increased 128 00:06:34,960 --> 00:06:38,880 Speaker 2: or they're proposing to increase the threshold of mandatory hex repayment. 129 00:06:38,960 --> 00:06:41,159 Speaker 2: So currently, if you earn less than fifty four thousand 130 00:06:41,200 --> 00:06:43,679 Speaker 2: dollars per year, you don't have to pay anything back 131 00:06:44,000 --> 00:06:47,280 Speaker 2: of your HEX debt. But the Labor Party are proposing 132 00:06:47,320 --> 00:06:50,520 Speaker 2: to increase that to sixty seven thousand dollars per year. 133 00:06:50,720 --> 00:06:52,640 Speaker 2: So that means that someone on seventy thousand dollars per 134 00:06:52,680 --> 00:06:54,960 Speaker 2: year will will save about thirteen hundred per year in 135 00:06:55,040 --> 00:06:58,640 Speaker 2: mandatory hex repayment. So that also helps I guess from 136 00:06:58,680 --> 00:07:01,279 Speaker 2: the cost of living side of things, where people won't 137 00:07:01,279 --> 00:07:04,280 Speaker 2: be compelled to have to pay this hex stet, that 138 00:07:04,279 --> 00:07:07,040 Speaker 2: they can earn more money and still have that hexit 139 00:07:07,080 --> 00:07:09,640 Speaker 2: there accumulate at a low indexation rate every year. 140 00:07:10,920 --> 00:07:12,320 Speaker 1: This is one of the things that might happen is 141 00:07:12,320 --> 00:07:13,840 Speaker 1: that they'll copy each other. I mean there's a lot 142 00:07:13,840 --> 00:07:16,320 Speaker 1: of that going on. One party announces something and the 143 00:07:16,360 --> 00:07:18,560 Speaker 1: other party says, yes, we'll do that too, which is 144 00:07:18,600 --> 00:07:21,920 Speaker 1: a strange sort of mechanism which pushes the parties into 145 00:07:21,920 --> 00:07:25,960 Speaker 1: the center. But there are some things they can't copy, 146 00:07:26,000 --> 00:07:28,480 Speaker 1: so in theory, at least with the HEX at least 147 00:07:28,520 --> 00:07:31,480 Speaker 1: the Coalition might be able to respond on that, but 148 00:07:31,640 --> 00:07:34,000 Speaker 1: the ALP is probably never going to be able to 149 00:07:34,000 --> 00:07:36,480 Speaker 1: respond on allowing you to tap your super for a 150 00:07:36,480 --> 00:07:41,720 Speaker 1: home deposit because of the importance of the entire supersystem 151 00:07:41,800 --> 00:07:45,400 Speaker 1: to them, the SGC to them, the industry funds to 152 00:07:45,600 --> 00:07:48,400 Speaker 1: them as well, and that is a political point. But folks, 153 00:07:48,440 --> 00:07:50,520 Speaker 1: I thought it was really important to get up to 154 00:07:50,520 --> 00:07:52,520 Speaker 1: speed on what was going on around budget and election 155 00:07:52,600 --> 00:07:54,680 Speaker 1: that we know so far, and we'll take a break 156 00:07:54,720 --> 00:07:56,760 Speaker 1: and then we look at what also might happen back 157 00:07:56,800 --> 00:08:10,600 Speaker 1: in a moment. Hello, Welcome back to The Australian's Money 158 00:08:10,640 --> 00:08:15,240 Speaker 1: Puzzle podcast. I'm James Kirby talking to James Girard of 159 00:08:15,360 --> 00:08:18,520 Speaker 1: Financial Advisor dot com dot a regular guest on the show, 160 00:08:18,600 --> 00:08:25,200 Speaker 1: contributor of course to The Australian's Wealth Section. So what 161 00:08:25,360 --> 00:08:28,400 Speaker 1: else might we expect anything else going around in your 162 00:08:28,680 --> 00:08:32,400 Speaker 1: wonderful world of financial planning? Three million dollars tax for super. 163 00:08:32,600 --> 00:08:34,720 Speaker 1: If they get back in, they're going to bring that 164 00:08:34,800 --> 00:08:36,319 Speaker 1: back in again, aren't they. They're going to have a 165 00:08:36,360 --> 00:08:37,120 Speaker 1: second crack at that. 166 00:08:37,640 --> 00:08:41,080 Speaker 2: Ye, that's right. That legislation the Division two ninety six 167 00:08:41,240 --> 00:08:44,360 Speaker 2: legislation has gone through the lower House successfully and it's 168 00:08:44,400 --> 00:08:46,679 Speaker 2: in the Senate at the moment, and there's a lot 169 00:08:46,720 --> 00:08:49,200 Speaker 2: of debate. So the Coalition don't really like it. The 170 00:08:49,240 --> 00:08:52,679 Speaker 2: crossbenches have questions about it, and it hasn't been scheduled 171 00:08:52,679 --> 00:08:55,400 Speaker 2: for a vote before the election, and it looks unlikely 172 00:08:55,559 --> 00:08:57,680 Speaker 2: that will go through to a vote before the election. 173 00:08:58,280 --> 00:09:01,200 Speaker 2: With the AOP win, that push it to have that 174 00:09:01,840 --> 00:09:05,880 Speaker 2: go through, which is that extra tax above three million dollars. 175 00:09:05,880 --> 00:09:08,080 Speaker 2: But if the Coalition win, I'm pretty sure they're going 176 00:09:08,160 --> 00:09:10,000 Speaker 2: to scrap it because they've been quite vocal in saying 177 00:09:10,000 --> 00:09:12,720 Speaker 2: that we don't think this is fair, particularly taxing people 178 00:09:12,760 --> 00:09:14,880 Speaker 2: on unrealized gains in their super account. 179 00:09:15,160 --> 00:09:17,360 Speaker 1: Yeah, I need the ALP win. They'll do some sort 180 00:09:17,360 --> 00:09:19,880 Speaker 1: of deal with they'll hand pick a couple of senators 181 00:09:19,880 --> 00:09:22,000 Speaker 1: and they'll just make an offer the account refuse. They'll 182 00:09:22,040 --> 00:09:24,679 Speaker 1: strap it onto something else six basketball courts in your 183 00:09:24,679 --> 00:09:27,880 Speaker 1: constituency or something like that and make it very attractive. 184 00:09:28,200 --> 00:09:31,320 Speaker 1: So that's one that there's three million super tax, or 185 00:09:31,400 --> 00:09:35,120 Speaker 1: to put it more generally, folks, you know our wealth 186 00:09:35,720 --> 00:09:41,360 Speaker 1: on super is obviously on the agenda. If aop returns 187 00:09:41,800 --> 00:09:45,280 Speaker 1: and not on the agenda. Certainly not any shape or 188 00:09:45,280 --> 00:09:48,320 Speaker 1: form like the one that's proposed with the taxing unrealized 189 00:09:48,360 --> 00:09:51,800 Speaker 1: gains if the Coalition get back. I saw some other 190 00:09:52,040 --> 00:09:55,520 Speaker 1: issues around tax relief. It's funny, you know, normally, James, 191 00:09:55,520 --> 00:09:58,000 Speaker 1: when you have a budget, you've got people putting out 192 00:09:58,000 --> 00:10:02,600 Speaker 1: pre budget submissions and weeks. But because the government didn't 193 00:10:02,679 --> 00:10:04,480 Speaker 1: make it clear whether they were or they weren't going 194 00:10:04,480 --> 00:10:07,160 Speaker 1: to have a budget, I was looking, there's only a 195 00:10:07,160 --> 00:10:10,079 Speaker 1: handful of submissions around and you know they're pretty marginal. Really, 196 00:10:10,120 --> 00:10:12,439 Speaker 1: there isn't this sort of flood of pre budget submissions 197 00:10:12,480 --> 00:10:15,240 Speaker 1: because people didn't do the work understandably because they didn't 198 00:10:15,280 --> 00:10:17,520 Speaker 1: know there was going to be a budget. So why 199 00:10:17,520 --> 00:10:19,640 Speaker 1: would you put a policy team working on a budget 200 00:10:19,640 --> 00:10:21,160 Speaker 1: if you didn't know what was going to happen. And 201 00:10:21,200 --> 00:10:23,880 Speaker 1: when they finally announced it, which was this week, the 202 00:10:23,920 --> 00:10:27,400 Speaker 1: week of Monday, the tenth of March, only eleven days 203 00:10:27,400 --> 00:10:29,720 Speaker 1: out from the budget, which is unfair I think in 204 00:10:29,760 --> 00:10:33,000 Speaker 1: many ways. But there you go. Tax really financial advice 205 00:10:33,120 --> 00:10:34,959 Speaker 1: put simply, when you go into a financial advisor for 206 00:10:35,040 --> 00:10:37,559 Speaker 1: the first time, you can't deduct that bill. But if 207 00:10:37,559 --> 00:10:39,000 Speaker 1: you go in for the tenth time in a row, 208 00:10:39,040 --> 00:10:40,640 Speaker 1: you can could you explain to people how it works 209 00:10:40,679 --> 00:10:41,720 Speaker 1: on what could change? 210 00:10:42,320 --> 00:10:45,600 Speaker 2: Yes, it's similar to earning an investment property. When you 211 00:10:45,640 --> 00:10:49,720 Speaker 2: buy an investment property, you cannot deduct the cost of 212 00:10:49,760 --> 00:10:52,320 Speaker 2: the conveyan to for example. That forms part of what 213 00:10:52,320 --> 00:10:54,720 Speaker 2: we call the capital base. So when you sell the property, 214 00:10:54,800 --> 00:10:57,040 Speaker 2: you get to add that back and reduce capital gains tax. 215 00:10:57,320 --> 00:11:00,440 Speaker 2: With financial planning in the financial advisory fhees pay up 216 00:11:00,440 --> 00:11:03,480 Speaker 2: front are largely similar to that where we give you 217 00:11:03,520 --> 00:11:07,600 Speaker 2: advice to invest into something using a certain structure that 218 00:11:07,679 --> 00:11:10,439 Speaker 2: generally has not been tax deductible in your and your 219 00:11:10,480 --> 00:11:13,200 Speaker 2: tax return. But if you invest and then you make 220 00:11:13,360 --> 00:11:15,440 Speaker 2: capital gains you can then claim the cost of that 221 00:11:15,520 --> 00:11:19,319 Speaker 2: advice down the track. Well, the changes are that this 222 00:11:19,480 --> 00:11:22,480 Speaker 2: happened from an ATO tax ruling in around October last 223 00:11:22,559 --> 00:11:25,840 Speaker 2: year from memory, where the tax officers clarified things and 224 00:11:25,880 --> 00:11:29,800 Speaker 2: said that, well, we nowadays recognize financial advisors as a 225 00:11:29,880 --> 00:11:33,160 Speaker 2: creditor to give some tax advice. So if the financial 226 00:11:33,200 --> 00:11:36,880 Speaker 2: plans cover tax advice, this could be something like salary 227 00:11:36,920 --> 00:11:40,560 Speaker 2: sacrificing in debt recycling these type of strategies, that portion 228 00:11:40,679 --> 00:11:43,440 Speaker 2: of the financial plan is tax deductible. 229 00:11:43,520 --> 00:11:48,079 Speaker 1: Oh that's just so ridiculous. That is just daft. How 230 00:11:48,120 --> 00:11:49,640 Speaker 1: on earth are you going to apply that, James? What 231 00:11:49,640 --> 00:11:51,400 Speaker 1: are you going to do? Take yourself for something and 232 00:11:51,400 --> 00:11:53,280 Speaker 1: send it into the ETO, and says, for six minutes 233 00:11:53,280 --> 00:11:55,400 Speaker 1: we talked about tax, and for eight minutes we talked 234 00:11:55,440 --> 00:11:57,120 Speaker 1: about didn't talk about tax. 235 00:11:57,400 --> 00:12:03,439 Speaker 2: Oh yeah, well get this. If I recommend income protection insurance, 236 00:12:03,920 --> 00:12:07,120 Speaker 2: the part of that plan is tax deductible. But where 237 00:12:07,120 --> 00:12:09,760 Speaker 2: I talk about life insurance and critical illness insurance, that 238 00:12:09,800 --> 00:12:12,160 Speaker 2: part is not tax deductible in the tax return. 239 00:12:13,320 --> 00:12:15,240 Speaker 1: Oh, this is so stupid. It's so stupid. I don't 240 00:12:15,240 --> 00:12:19,160 Speaker 1: want to talk about it anymore. Okay, folks, Just so 241 00:12:19,280 --> 00:12:21,640 Speaker 1: you know, right in principle, first of all, when you 242 00:12:21,640 --> 00:12:24,760 Speaker 1: go into the initial financial advisor, which is when it 243 00:12:24,800 --> 00:12:26,640 Speaker 1: costs you the most, and which is where most people 244 00:12:26,720 --> 00:12:28,559 Speaker 1: have their hurdle of going in for the first time 245 00:12:28,559 --> 00:12:30,320 Speaker 1: because it's going to cost a lot the first time, 246 00:12:30,760 --> 00:12:33,800 Speaker 1: that's not tax deductible. On an ongoing basis, what shall 247 00:12:33,840 --> 00:12:36,640 Speaker 1: we say? Bits of it are more bits are than 248 00:12:36,679 --> 00:12:39,880 Speaker 1: there used to be, but still not all. Is that broadly? O? 249 00:12:40,080 --> 00:12:42,480 Speaker 2: God, that's fair to say? Yeah? Rule of thumb, you'd 250 00:12:42,520 --> 00:12:46,199 Speaker 2: be able to claim the vast majority of ongoing financial 251 00:12:46,280 --> 00:12:49,280 Speaker 2: advice fees. So that's not so much of a concern. 252 00:12:49,320 --> 00:12:52,760 Speaker 2: It's more the upfront. There's this big calculation that needs 253 00:12:52,800 --> 00:12:57,559 Speaker 2: to be done around what minutes, what paragraphs deductible not deductible. 254 00:12:57,679 --> 00:12:59,640 Speaker 1: What if I walk into you and say, hey, I 255 00:12:59,640 --> 00:13:03,559 Speaker 1: don't want to talk about anything except tax, and you say, okay, 256 00:13:03,840 --> 00:13:05,640 Speaker 1: is that one hundred percent tax deductible? 257 00:13:05,679 --> 00:13:08,000 Speaker 2: Then it is. Yeah, it is. As long as you 258 00:13:08,000 --> 00:13:10,120 Speaker 2: go to a financial advisor who's a credited to give 259 00:13:10,160 --> 00:13:13,240 Speaker 2: you tax advice, which most of them are these days, 260 00:13:13,240 --> 00:13:16,240 Speaker 2: well then yeah, your whole upfront bill can be tax deductible. 261 00:13:16,600 --> 00:13:20,120 Speaker 1: That would seem to be useful piece of information. We 262 00:13:20,160 --> 00:13:24,160 Speaker 1: don't give advice, but that would seem to be useful information, folks. Okay, 263 00:13:24,400 --> 00:13:26,480 Speaker 1: in terms of what I've seen around that, we will 264 00:13:26,520 --> 00:13:28,680 Speaker 1: know a lot more very soon, folks. But because the 265 00:13:28,679 --> 00:13:30,560 Speaker 1: budget has just been called, because this is only an 266 00:13:30,600 --> 00:13:34,680 Speaker 1: eleven day run up to it, that's all we can 267 00:13:34,760 --> 00:13:37,360 Speaker 1: tell you seriously just now. And we have such good 268 00:13:37,480 --> 00:13:41,040 Speaker 1: questions I want to jump straight chew them from Phil 269 00:13:41,080 --> 00:13:53,160 Speaker 1: and Evelyn and Lucas and Andrew back in a moment. Hello, 270 00:13:53,240 --> 00:13:56,440 Speaker 1: Welcome back to the Australians Money Puzzle podcast. James Kirby 271 00:13:56,440 --> 00:13:59,240 Speaker 1: here with James Gerard. For the first question. We'll do 272 00:13:59,360 --> 00:14:02,240 Speaker 1: with promptly because it's from Phil and he says, is 273 00:14:02,280 --> 00:14:06,040 Speaker 1: the twenty percent reduction on student loans and other empty promise. 274 00:14:06,280 --> 00:14:09,280 Speaker 1: I have not heard any update on this promise. No, Phil, 275 00:14:09,440 --> 00:14:13,040 Speaker 1: no update, but doesn't need to be. They said, basically, 276 00:14:13,120 --> 00:14:15,440 Speaker 1: in very broad terms, if they're re elected, because it 277 00:14:15,480 --> 00:14:18,160 Speaker 1: doesn't kick into the next June, they'll take twenty percent 278 00:14:18,200 --> 00:14:21,920 Speaker 1: off your HEX and they'll also push the threshold at 279 00:14:21,960 --> 00:14:24,600 Speaker 1: which you must pay hex of what was it, James, 280 00:14:24,600 --> 00:14:27,000 Speaker 1: From low fifties to high sixties something like that. 281 00:14:27,240 --> 00:14:31,040 Speaker 2: Yeah, that's right. From fifty four to sixty seven thousand 282 00:14:31,240 --> 00:14:32,280 Speaker 2: is the proposed threshold. 283 00:14:32,520 --> 00:14:37,400 Speaker 1: Yeah, so Phil, it stands, but it hinges on the 284 00:14:37,440 --> 00:14:42,560 Speaker 1: government being re elected. Okay. Evelyn says, my husband and 285 00:14:42,680 --> 00:14:45,920 Speaker 1: I are in our forties and we finally in a 286 00:14:46,000 --> 00:14:49,000 Speaker 1: financial position to buy our dream home. We would like 287 00:14:49,040 --> 00:14:52,120 Speaker 1: to pay this home completely in fifteen years. However, in 288 00:14:52,160 --> 00:14:54,480 Speaker 1: the event we can't do that, can we apply a 289 00:14:54,520 --> 00:14:59,800 Speaker 1: reverse mortgage on the home after retirement? Okay? Reverse mortgages 290 00:15:00,080 --> 00:15:03,200 Speaker 1: always an interesting area. This is not advice evivent, but 291 00:15:03,840 --> 00:15:09,040 Speaker 1: information only suddenly really starting to steam. I think reverse mortgages. 292 00:15:09,040 --> 00:15:11,440 Speaker 1: I haven't seen the new numbers, but I've seen the 293 00:15:11,520 --> 00:15:14,960 Speaker 1: action on the corporate side of the reverse mortgage providers 294 00:15:15,000 --> 00:15:18,440 Speaker 1: if you like, really starting expand and raise capital and 295 00:15:18,520 --> 00:15:21,480 Speaker 1: as takeovers going on. There lots happening. But on the 296 00:15:21,560 --> 00:15:25,560 Speaker 1: simple question about applying a reverse mortgage on your home 297 00:15:25,600 --> 00:15:29,640 Speaker 1: after you retire, first of all, I'm sure there's nothing 298 00:15:30,360 --> 00:15:31,640 Speaker 1: blocking you, is there? Legally? 299 00:15:33,000 --> 00:15:33,640 Speaker 2: No, there isn't. 300 00:15:34,760 --> 00:15:36,880 Speaker 1: Is it a useful strategy for some people? 301 00:15:38,280 --> 00:15:41,520 Speaker 2: Some people it has its place, But of course there's 302 00:15:41,680 --> 00:15:43,520 Speaker 2: a cost, and a very large cost. When it comes 303 00:15:43,520 --> 00:15:46,640 Speaker 2: to reverse mortgages for starters. The interest rate is higher 304 00:15:46,920 --> 00:15:49,160 Speaker 2: than what a normal home loan would be. So where 305 00:15:49,200 --> 00:15:51,360 Speaker 2: a normal home loan is say six six and a 306 00:15:51,360 --> 00:15:55,040 Speaker 2: half percent, today, reverse mortgages add two percent or more 307 00:15:55,160 --> 00:15:57,600 Speaker 2: on top of that. And the other thing is that 308 00:15:57,640 --> 00:16:01,840 Speaker 2: the interests capitalized. So although you're not making a repayment 309 00:16:02,040 --> 00:16:05,200 Speaker 2: on that reverse mortgage, which may seem great down the track, 310 00:16:05,240 --> 00:16:06,720 Speaker 2: if you ever need to sell the house to go 311 00:16:06,760 --> 00:16:09,640 Speaker 2: into an age care facility and pay a bond, or 312 00:16:09,880 --> 00:16:12,560 Speaker 2: you want to leave something to your family. There may 313 00:16:12,560 --> 00:16:15,240 Speaker 2: be a rude shock there because there's a very large 314 00:16:15,360 --> 00:16:17,240 Speaker 2: bill that will need to be settled if you sell 315 00:16:17,240 --> 00:16:19,240 Speaker 2: your house down the track. If you have a reverse. 316 00:16:18,960 --> 00:16:22,960 Speaker 1: Mortgage, and you by definition, we'll be selling your house 317 00:16:22,960 --> 00:16:25,640 Speaker 1: down the track. If you have a reverse mortgage. 318 00:16:25,720 --> 00:16:27,520 Speaker 2: That's right. Well, some of the providers say that we're 319 00:16:27,560 --> 00:16:29,920 Speaker 2: not going to force you to sell this in your lifetime, 320 00:16:30,040 --> 00:16:32,400 Speaker 2: and that's probably why there's only a limited number of 321 00:16:32,440 --> 00:16:35,400 Speaker 2: reverse mortgages providers because they need to wait a long 322 00:16:35,440 --> 00:16:37,800 Speaker 2: time before they get their money back on paper. They're 323 00:16:37,840 --> 00:16:40,200 Speaker 2: accumulating all this interest against you or your house. But 324 00:16:40,560 --> 00:16:42,480 Speaker 2: they say, we're not going to force you to sell. 325 00:16:42,680 --> 00:16:44,160 Speaker 2: We can wait for you to move to an age 326 00:16:44,200 --> 00:16:47,720 Speaker 2: care facility or pass away and then we'll settle out 327 00:16:47,760 --> 00:16:50,440 Speaker 2: our debt. Then when we force you to sell the property. 328 00:16:51,000 --> 00:16:54,920 Speaker 1: Or alternatively, it's either as you say, in effect, and 329 00:16:54,960 --> 00:16:59,040 Speaker 1: this is really pragmatic, folks. If not a touch prosaic 330 00:17:00,120 --> 00:17:04,400 Speaker 1: means the amount you have in retirement for edge care shrinks, 331 00:17:05,119 --> 00:17:07,000 Speaker 1: or should you be so lucky as to never go 332 00:17:07,080 --> 00:17:09,800 Speaker 1: through that particular phase, the amount you're going to give 333 00:17:09,840 --> 00:17:13,719 Speaker 1: as an inheritance, it's going to shrink because the reverse 334 00:17:13,760 --> 00:17:16,720 Speaker 1: mortgage provider has to get their money back. And as 335 00:17:16,760 --> 00:17:20,280 Speaker 1: you say, James, the really crucial thing, isn't it in 336 00:17:20,320 --> 00:17:23,159 Speaker 1: reverse mortgage is exact. The interest is being capitalized all 337 00:17:23,200 --> 00:17:26,160 Speaker 1: the time, and that can really rack up as years 338 00:17:26,200 --> 00:17:28,720 Speaker 1: go by. So someone said, oh, you know the house 339 00:17:28,840 --> 00:17:30,720 Speaker 1: is worth whatever. The house is worth half a million, 340 00:17:30,760 --> 00:17:32,520 Speaker 1: the house is worth a million, and you know the 341 00:17:32,560 --> 00:17:36,280 Speaker 1: loan is only X. But that loan is building all 342 00:17:36,359 --> 00:17:38,720 Speaker 1: the time as they capitalize the interest. And that's what 343 00:17:38,760 --> 00:17:41,760 Speaker 1: you're saying. Shocks people when they find out after ten 344 00:17:41,840 --> 00:17:46,120 Speaker 1: years that what the percentage of the home proceeds that 345 00:17:46,200 --> 00:17:47,919 Speaker 1: they won't get gets bigger and bigger. 346 00:17:48,000 --> 00:17:51,040 Speaker 2: Touching on another part of Evelyn's question with regards to 347 00:17:51,200 --> 00:17:53,280 Speaker 2: is it better to pay off the mortgage completely when 348 00:17:53,280 --> 00:17:56,919 Speaker 2: they retire. Over the years, I've advised a few people 349 00:17:57,200 --> 00:18:01,639 Speaker 2: where they've maintained their home loan into retirement, so to 350 00:18:01,680 --> 00:18:04,720 Speaker 2: be clear that they've stopped working, but they still have 351 00:18:04,760 --> 00:18:07,560 Speaker 2: a residual mortgage, you know, say two hundred three hundred 352 00:18:07,560 --> 00:18:11,440 Speaker 2: thousand dollars. They do have sufficient funds, usually in superinuation, 353 00:18:11,760 --> 00:18:14,439 Speaker 2: to pull that out and pay down the mortgage. But 354 00:18:14,800 --> 00:18:17,320 Speaker 2: then it's an ongoing question to say, well, what's the 355 00:18:17,400 --> 00:18:20,480 Speaker 2: interest rate on my home loan versus what's the tax 356 00:18:20,520 --> 00:18:23,040 Speaker 2: free return that I'm getting inside of my superfund? And 357 00:18:23,160 --> 00:18:25,879 Speaker 2: is it better for me to keep more capital in 358 00:18:25,960 --> 00:18:29,959 Speaker 2: my superfund which might be generating seven or eight percent return, 359 00:18:30,440 --> 00:18:34,200 Speaker 2: and use some of that interest to pay down my mortgage, 360 00:18:34,200 --> 00:18:36,600 Speaker 2: which depending on the time, at the moment, it's more 361 00:18:37,520 --> 00:18:39,920 Speaker 2: beneficial to take money out of super to pay down 362 00:18:39,920 --> 00:18:42,080 Speaker 2: the mortgage because interest rates are so high. But cast 363 00:18:42,080 --> 00:18:44,119 Speaker 2: your mind back three or four years ago when Homeland 364 00:18:44,119 --> 00:18:45,280 Speaker 2: interest rates were two percent. 365 00:18:45,480 --> 00:18:48,480 Speaker 1: I remember people on the show seeing the complete opposite, James. 366 00:18:48,840 --> 00:18:52,120 Speaker 1: So there are periods where it makes sense and those 367 00:18:52,160 --> 00:18:53,600 Speaker 1: periods for it doesn't make sense. 368 00:18:53,760 --> 00:18:54,119 Speaker 2: Correct. 369 00:18:54,160 --> 00:18:57,080 Speaker 1: Yeah, And at the moment, rits are so relatively high. 370 00:18:57,640 --> 00:18:59,920 Speaker 1: Keep that in mind. Thank you very much for that. 371 00:19:00,280 --> 00:19:03,159 Speaker 1: Even I hoped that was useful to you. But for 372 00:19:03,400 --> 00:19:05,800 Speaker 1: simple answer, yes, you can apply a reverse mortgage on 373 00:19:05,840 --> 00:19:08,440 Speaker 1: the whole after retirement. And is it better to pay 374 00:19:08,480 --> 00:19:11,520 Speaker 1: off the mortgage completely. It depends on your particular case 375 00:19:11,600 --> 00:19:14,600 Speaker 1: and stage. We're with rates, and at the moment we've 376 00:19:14,640 --> 00:19:16,840 Speaker 1: got pretty high rates. Okay, Lucas. 377 00:19:17,200 --> 00:19:21,200 Speaker 2: Lucas says my wife started a sole trader speech pathology 378 00:19:21,440 --> 00:19:24,320 Speaker 2: business eight months ago and we're now looking to transition 379 00:19:24,400 --> 00:19:27,480 Speaker 2: to a proprietary limited company. What should we consider when 380 00:19:27,480 --> 00:19:30,880 Speaker 2: deciding if we should be both directors or beneficial owners? 381 00:19:30,960 --> 00:19:33,920 Speaker 2: Are their tax advantages to having it solely in her 382 00:19:34,280 --> 00:19:35,920 Speaker 2: name versus both of us? 383 00:19:36,240 --> 00:19:40,560 Speaker 1: Very particular question, more of business tax question. But if 384 00:19:40,560 --> 00:19:42,960 Speaker 1: you could, perhaps to all the Lucases in the world 385 00:19:43,040 --> 00:19:45,960 Speaker 1: give abroad commentary on that. 386 00:19:46,800 --> 00:19:49,840 Speaker 2: I can, so the general comments I would make there 387 00:19:50,119 --> 00:19:55,000 Speaker 2: is that if you're in a relationship to partners who 388 00:19:55,040 --> 00:19:59,960 Speaker 2: are married, consider one person being the quote unquote risky person. 389 00:20:00,240 --> 00:20:03,240 Speaker 2: That person should be the one that if the worst 390 00:20:03,280 --> 00:20:07,200 Speaker 2: case happens and bankruptcy was to occur, that's limited to 391 00:20:07,560 --> 00:20:10,359 Speaker 2: one spouse. So obviously that spouse you don't want it 392 00:20:10,400 --> 00:20:12,440 Speaker 2: to have all the assets. So then you have the 393 00:20:12,800 --> 00:20:16,080 Speaker 2: other spouse, who we call the assets spouse. So you 394 00:20:16,119 --> 00:20:18,520 Speaker 2: have one that wears the hat of being the director 395 00:20:18,560 --> 00:20:20,959 Speaker 2: of the business or the businesses. And then you have 396 00:20:21,040 --> 00:20:23,960 Speaker 2: the other spouse who sits as the trustee of the 397 00:20:23,960 --> 00:20:27,160 Speaker 2: family trust, who owns the family home in their name. 398 00:20:27,480 --> 00:20:29,440 Speaker 2: And this isn't rocket science. This is what builders have 399 00:20:29,520 --> 00:20:32,200 Speaker 2: done for the past fifu and. 400 00:20:32,160 --> 00:20:34,439 Speaker 1: The one who's allowed go bankropt is obviously not the 401 00:20:34,440 --> 00:20:37,159 Speaker 1: one that is the trustee of the superint blah blah blah. 402 00:20:37,200 --> 00:20:40,560 Speaker 1: I mean, yeah, very obvious stuff there, but hey, not 403 00:20:40,680 --> 00:20:43,520 Speaker 1: everyone knows it, not everyone is familiar with it. But 404 00:20:43,600 --> 00:20:47,119 Speaker 1: there is always that guiding principle. Obviously. That's because there 405 00:20:47,200 --> 00:20:51,040 Speaker 1: is usefulness in a duel, and you can stack certain 406 00:20:51,040 --> 00:20:53,919 Speaker 1: things towards one side of the jewel when you need to, 407 00:20:54,280 --> 00:20:56,720 Speaker 1: so you get the broad drift there, Lucas, I'm sure, okay. 408 00:20:56,880 --> 00:21:00,000 Speaker 1: Question from Sandy, could you deal with annuities on the show? 409 00:21:00,160 --> 00:21:02,160 Speaker 1: On the face of it, they appear to just give 410 00:21:02,200 --> 00:21:04,919 Speaker 1: your money back to you. Well, not quite unless you 411 00:21:05,000 --> 00:21:09,520 Speaker 1: can access more old age pension. They are worthless, Sandy. Oh, 412 00:21:10,240 --> 00:21:16,520 Speaker 1: let's rewind the tape there. Annuities not very common, however, 413 00:21:17,200 --> 00:21:21,240 Speaker 1: in principle terribly attractive. Who would not like to be 414 00:21:21,280 --> 00:21:24,399 Speaker 1: able to buy a product which would give you a 415 00:21:24,440 --> 00:21:26,840 Speaker 1: guaranteed return for the rest of your life if that 416 00:21:26,920 --> 00:21:31,600 Speaker 1: product was really good? In principle, who wouldn't In practice, 417 00:21:31,760 --> 00:21:37,080 Speaker 1: All sorts of issues around annuities traditionally but continually revisited 418 00:21:37,119 --> 00:21:39,679 Speaker 1: by the market because people want them to work, and 419 00:21:39,720 --> 00:21:44,240 Speaker 1: there's also some specific advantages of having annuities in the 420 00:21:44,480 --> 00:21:48,359 Speaker 1: age pension system Centralink. Could you talk to Sandy a 421 00:21:48,400 --> 00:21:49,920 Speaker 1: little about that one, James. 422 00:21:50,640 --> 00:21:53,040 Speaker 2: Yeah, I've advised someone in the past twelve months with 423 00:21:53,080 --> 00:21:55,720 Speaker 2: regards to taking Now it's an annuity and it's not 424 00:21:55,760 --> 00:21:58,320 Speaker 2: something which I would go to as my first preference. 425 00:21:58,359 --> 00:22:01,200 Speaker 2: I'd rather people put into a high interest. 426 00:22:01,520 --> 00:22:04,919 Speaker 1: Why is it your default position not to go to them? 427 00:22:05,320 --> 00:22:08,280 Speaker 2: Because you're involving a company that you're giving your money 428 00:22:08,320 --> 00:22:10,160 Speaker 2: to on the hope that they're going to keep paying 429 00:22:10,160 --> 00:22:11,919 Speaker 2: you a monthly return on that. 430 00:22:12,160 --> 00:22:14,800 Speaker 1: But it's a promise, isn't it. It's a problem hop. 431 00:22:15,000 --> 00:22:17,720 Speaker 2: Yeah, it's a promise, but if that company faces financial 432 00:22:17,800 --> 00:22:20,919 Speaker 2: difficulties and ensure We're in a highly regulated society in 433 00:22:20,920 --> 00:22:23,359 Speaker 2: Australia with the financial services system, but there is a 434 00:22:23,480 --> 00:22:26,960 Speaker 2: very small chance that annuity provider evaporates and so does 435 00:22:27,000 --> 00:22:29,000 Speaker 2: your your capital if that's the case. And the other 436 00:22:29,040 --> 00:22:31,760 Speaker 2: reason is that when I break down annuities and look 437 00:22:31,760 --> 00:22:34,360 Speaker 2: at the underlying rates of return, so how can they 438 00:22:34,400 --> 00:22:37,960 Speaker 2: pay you this monthly benefit? What interest are they effectively 439 00:22:37,960 --> 00:22:40,720 Speaker 2: paying you on the capital that you give them? It's 440 00:22:40,840 --> 00:22:43,720 Speaker 2: always and I say always less than term deposit rates 441 00:22:43,920 --> 00:22:46,800 Speaker 2: because there's a company involved. They're there to make a profit, 442 00:22:46,960 --> 00:22:50,320 Speaker 2: they have overheads, So you're complicating the way that you're 443 00:22:50,560 --> 00:22:52,760 Speaker 2: managing you're your money when you use an annuity. So 444 00:22:52,760 --> 00:22:55,359 Speaker 2: that's why my default position is just keep it simple, 445 00:22:55,480 --> 00:22:57,080 Speaker 2: keep it in a high interest bank account, keep it 446 00:22:57,080 --> 00:22:59,080 Speaker 2: in a term deposit. You'll end up with more interest 447 00:22:59,400 --> 00:23:02,800 Speaker 2: with less risk. However, they do have their place, and 448 00:23:02,840 --> 00:23:05,560 Speaker 2: that's usually where you're on the fringe of eligibility for 449 00:23:05,680 --> 00:23:08,240 Speaker 2: the age pension, where you have little level of assets 450 00:23:08,280 --> 00:23:10,280 Speaker 2: that means that you're not going to get a pension, 451 00:23:10,560 --> 00:23:13,399 Speaker 2: or you want to increase your part pension and you 452 00:23:13,480 --> 00:23:15,880 Speaker 2: hit it on the head. There's an asset test benefit 453 00:23:15,920 --> 00:23:18,720 Speaker 2: there where not the whole value of the annuity, only 454 00:23:18,760 --> 00:23:20,960 Speaker 2: part of it gets counted towards the asset test. So 455 00:23:21,520 --> 00:23:24,040 Speaker 2: it can be better in those situations if center link 456 00:23:24,119 --> 00:23:27,119 Speaker 2: is important to you to on one hand take a 457 00:23:27,119 --> 00:23:29,240 Speaker 2: lower return from the anuities, but then on the other hand, 458 00:23:29,280 --> 00:23:31,080 Speaker 2: get a higher age pension benefit. 459 00:23:32,240 --> 00:23:35,680 Speaker 1: So the annuities have some place in terms of pension access, 460 00:23:35,680 --> 00:23:38,639 Speaker 1: don't they they're exempted, are they to some degree? 461 00:23:38,680 --> 00:23:42,160 Speaker 2: Is that they used to be exempted, but then it's changed, 462 00:23:42,240 --> 00:23:46,280 Speaker 2: so depending on age and circumstances, it's roughly fifty to 463 00:23:46,600 --> 00:23:49,440 Speaker 2: three quarters of it can be exempt from the age 464 00:23:49,480 --> 00:23:52,600 Speaker 2: pension there, so yeah, it can help those people who 465 00:23:52,640 --> 00:23:56,520 Speaker 2: are just outside of the eligibility threshold for the age 466 00:23:56,560 --> 00:23:58,480 Speaker 2: pension due to their level of assets. 467 00:23:58,440 --> 00:24:00,000 Speaker 1: Due to their high level of assets. 468 00:24:00,119 --> 00:24:01,080 Speaker 2: High level of assets. 469 00:24:01,160 --> 00:24:04,199 Speaker 1: Yeah, okay, we won't try and put a number on that, 470 00:24:04,240 --> 00:24:07,320 Speaker 1: but very broadly it would be something what four hundred thousand, 471 00:24:07,320 --> 00:24:08,840 Speaker 1: six hundred thousand that range. 472 00:24:09,280 --> 00:24:11,560 Speaker 2: Yeah, it's a bit of a four hundred thousand for 473 00:24:11,960 --> 00:24:15,399 Speaker 2: there's all these different situations. If you're a couple, a homeowner, 474 00:24:15,440 --> 00:24:17,600 Speaker 2: if you want the full pension, it was a circle 475 00:24:17,920 --> 00:24:19,320 Speaker 2: for I think it's actually a bit high now for 476 00:24:19,400 --> 00:24:22,280 Speaker 2: the indexation, maybe four hundred and eighty thousand from memory. 477 00:24:22,480 --> 00:24:24,720 Speaker 2: So if you have more than that and you want 478 00:24:24,760 --> 00:24:26,800 Speaker 2: to get the full pension, you don't want to keep 479 00:24:26,960 --> 00:24:28,840 Speaker 2: the part pension, well then have it a look at 480 00:24:28,920 --> 00:24:31,080 Speaker 2: an annuity. But you just need to break it down 481 00:24:31,119 --> 00:24:33,840 Speaker 2: and understand what you're getting when you put your money 482 00:24:33,840 --> 00:24:35,040 Speaker 2: into an annuity. 483 00:24:35,000 --> 00:24:38,080 Speaker 1: Because the pension is so valuable. It's just so valuable 484 00:24:38,119 --> 00:24:40,480 Speaker 1: if you think about it, Let's say there was no pensions, 485 00:24:41,480 --> 00:24:43,600 Speaker 1: but you wanted to get twenty nine thousand a year 486 00:24:44,359 --> 00:24:46,520 Speaker 1: as a single individual, Then how much would you have 487 00:24:46,600 --> 00:24:50,120 Speaker 1: to have in savings or investments to get that. That's 488 00:24:50,119 --> 00:24:51,480 Speaker 1: the way to look at it. You know, it's at 489 00:24:51,560 --> 00:24:54,200 Speaker 1: least half a million. That is fine. Pension or access 490 00:24:54,240 --> 00:24:58,200 Speaker 1: to it is so precious and it's such a serious 491 00:24:58,240 --> 00:25:02,119 Speaker 1: part of your design of your own retirement plans, folks, 492 00:25:02,119 --> 00:25:04,520 Speaker 1: it really is. And if you're lucky enough that it 493 00:25:04,520 --> 00:25:06,520 Speaker 1: doesn't matter to you, that's all fine, and we might 494 00:25:06,560 --> 00:25:09,120 Speaker 1: have all aspire to that, But many people, the majority 495 00:25:09,119 --> 00:25:14,080 Speaker 1: of people, actually will have access to some level of pension, 496 00:25:14,119 --> 00:25:17,280 Speaker 1: and you can manage that opera down depending on how 497 00:25:17,280 --> 00:25:22,080 Speaker 1: cleverly and astrutely you manage your own affairs and annuities 498 00:25:22,119 --> 00:25:25,520 Speaker 1: could be part of that. Now, final question from Andrew. 499 00:25:25,760 --> 00:25:28,200 Speaker 1: Perhaps it was you that was talking about in species transfers. 500 00:25:28,200 --> 00:25:28,960 Speaker 1: I can't remember. 501 00:25:30,359 --> 00:25:33,000 Speaker 2: Potentially I can't recall either, but Andrew asked the idea 502 00:25:33,040 --> 00:25:35,280 Speaker 2: of in specie transfers was briefly mentioned on The Money 503 00:25:35,320 --> 00:25:38,280 Speaker 2: Puzzle a few times over the past few years. It'd 504 00:25:38,359 --> 00:25:40,040 Speaker 2: be good to know more about it on the show 505 00:25:40,119 --> 00:25:42,200 Speaker 2: with the right guests. You're the right guest, Jen, I'm 506 00:25:42,200 --> 00:25:44,920 Speaker 2: the right guest. Here we go. In particular, I'm curious 507 00:25:44,920 --> 00:25:47,960 Speaker 2: if there's any age restrictions around it. Could someone in 508 00:25:48,000 --> 00:25:51,439 Speaker 2: their forties transfer of basket of CBA shares into Super 509 00:25:51,520 --> 00:25:55,080 Speaker 2: slash self managed Super or are their trigger points at 510 00:25:55,359 --> 00:25:58,440 Speaker 2: sixty sixty five or sixty seven years of age? 511 00:25:58,440 --> 00:26:01,080 Speaker 1: This a great question, you know, it's a really good question, Andrew, 512 00:26:01,119 --> 00:26:03,280 Speaker 1: thank you very much for that. So in special transfer, 513 00:26:03,320 --> 00:26:06,800 Speaker 1: as folks, just to remember you have something outside Super. Right, 514 00:26:07,000 --> 00:26:09,120 Speaker 1: you've got one hundred grands worth of come Work Bank 515 00:26:09,160 --> 00:26:10,920 Speaker 1: shares because you were really lucky because you've bought them 516 00:26:10,920 --> 00:26:13,040 Speaker 1: for very little many years ago, but you didn't have 517 00:26:13,080 --> 00:26:14,959 Speaker 1: them in Super. You want to put them in Super. 518 00:26:15,400 --> 00:26:16,959 Speaker 1: You can move them in, but you have to do 519 00:26:17,000 --> 00:26:19,200 Speaker 1: it at the market rate. And when you do it 520 00:26:19,240 --> 00:26:23,360 Speaker 1: at the market rate across, then that's coded in specie transfer. 521 00:26:23,480 --> 00:26:27,400 Speaker 1: Is that broadly correct? Is there anything? Is your age 522 00:26:27,400 --> 00:26:29,280 Speaker 1: in any way relevant to this exercise? Ever? 523 00:26:29,960 --> 00:26:32,040 Speaker 2: It is the reason is that when you do in 524 00:26:32,119 --> 00:26:35,800 Speaker 2: specie transfers, they are a relatively simple exercise. You just 525 00:26:36,000 --> 00:26:39,280 Speaker 2: pick up the ownership of your shares, your CBA shares 526 00:26:39,359 --> 00:26:41,600 Speaker 2: and your personal name and then you drop them into 527 00:26:41,640 --> 00:26:43,639 Speaker 2: your super fund. And the way that you do that 528 00:26:43,840 --> 00:26:47,040 Speaker 2: is an off market transfer form and it takes a 529 00:26:47,160 --> 00:26:50,400 Speaker 2: couple of weeks to process it. There's minimal fees involved 530 00:26:50,680 --> 00:26:52,920 Speaker 2: with that. It's really just dealing with the share registry 531 00:26:52,960 --> 00:26:54,800 Speaker 2: to process that change. 532 00:26:55,040 --> 00:26:57,119 Speaker 1: And the inspecie part is that you transfer at the 533 00:26:57,160 --> 00:26:59,320 Speaker 1: price on the day or at the market price. 534 00:27:00,080 --> 00:27:02,840 Speaker 2: Correct. Yeah, yeah, from memory there might be a little 535 00:27:02,880 --> 00:27:05,360 Speaker 2: bit of flexibility, so I feel like there's a window there. 536 00:27:05,359 --> 00:27:07,000 Speaker 2: So from memory it is maybe like twenty or twenty 537 00:27:07,040 --> 00:27:09,440 Speaker 2: eight days where you could choose the price that you 538 00:27:09,680 --> 00:27:12,399 Speaker 2: pick it up, but somewhere between on the day or 539 00:27:13,160 --> 00:27:15,240 Speaker 2: days around it that you get to pick the price, 540 00:27:15,280 --> 00:27:17,040 Speaker 2: but you basically pick it up, you move it into 541 00:27:17,320 --> 00:27:21,120 Speaker 2: the super fund. Now age comes into it because when 542 00:27:21,119 --> 00:27:24,919 Speaker 2: you move that investment from your personal name into the superfund, 543 00:27:25,520 --> 00:27:28,320 Speaker 2: that's a contribution to your superfund. And so we need 544 00:27:28,320 --> 00:27:31,280 Speaker 2: to take into account the concessional contribution cap, the non 545 00:27:31,320 --> 00:27:34,800 Speaker 2: concessional contribution cap, and of course these things are dictated 546 00:27:34,800 --> 00:27:38,320 Speaker 2: by age. But in short, as long as you're under 547 00:27:38,400 --> 00:27:41,359 Speaker 2: age seventy five, it's relatively straightforward to be able to 548 00:27:41,720 --> 00:27:44,000 Speaker 2: pick up assets and put that into SUPER if that 549 00:27:44,000 --> 00:27:46,600 Speaker 2: amount is less than three hundred and sixty thousand, because 550 00:27:46,680 --> 00:27:50,000 Speaker 2: the annual cap that you can put into SUPER with 551 00:27:50,160 --> 00:27:53,280 Speaker 2: your after tax money which includes these in specie transfers, 552 00:27:53,480 --> 00:27:55,800 Speaker 2: is one hundred and twenty thousand. And you can use 553 00:27:55,840 --> 00:27:58,600 Speaker 2: these things called the bring forward provision while you're under 554 00:27:58,600 --> 00:28:01,119 Speaker 2: the age of seventy five to then two future years 555 00:28:01,119 --> 00:28:04,040 Speaker 2: in which is three hundred and sixty thousand. 556 00:28:04,400 --> 00:28:07,080 Speaker 1: Just to make it really complicated, are the concessional rules 557 00:28:07,200 --> 00:28:08,000 Speaker 1: irrelevant here? 558 00:28:08,240 --> 00:28:11,879 Speaker 2: They're not irrelevant. If you wanted to put in a 559 00:28:11,920 --> 00:28:14,199 Speaker 2: bit more than three hundred and sixty thousand, well, then 560 00:28:14,240 --> 00:28:17,320 Speaker 2: you could also put part of or you could classify 561 00:28:17,440 --> 00:28:19,840 Speaker 2: part of that in specie transfer as a concessional. 562 00:28:20,160 --> 00:28:24,280 Speaker 1: Could you classify a certain section of it as concessional 563 00:28:24,320 --> 00:28:26,040 Speaker 1: and the next section is non concessional? 564 00:28:26,480 --> 00:28:31,399 Speaker 2: Absolutely? Yeah, So if you wanted to maximize your thirty 565 00:28:31,480 --> 00:28:35,159 Speaker 2: thousand concessional contribution cap, you could definitely do that, and 566 00:28:35,200 --> 00:28:37,480 Speaker 2: then the rest you could do as non concessional. So 567 00:28:37,720 --> 00:28:40,239 Speaker 2: usually people be working with their tax accountant or their 568 00:28:40,280 --> 00:28:44,840 Speaker 2: financial advisor to firstly identify what assets to transfer, why 569 00:28:45,040 --> 00:28:46,800 Speaker 2: is that a good idea? And then the next part 570 00:28:46,960 --> 00:28:49,479 Speaker 2: is how do we account for that with regards to 571 00:28:49,680 --> 00:28:52,880 Speaker 2: the contribution into the superfund with that in specie transfer, 572 00:28:52,960 --> 00:28:55,440 Speaker 2: will it be concessional or non concessional or mix of both. 573 00:28:56,000 --> 00:28:58,680 Speaker 1: Okay, so there you are. I think Andrew that would 574 00:28:58,720 --> 00:29:01,600 Speaker 1: answer it for you. And the course then eventually with 575 00:29:01,680 --> 00:29:04,360 Speaker 1: James's alluding to, is that there's a point which you're 576 00:29:04,360 --> 00:29:07,640 Speaker 1: limited in what you can contribute because you might be retired. 577 00:29:08,040 --> 00:29:09,719 Speaker 1: But it was seemed to me that it wasn't an 578 00:29:09,720 --> 00:29:11,760 Speaker 1: issue for you. The main age restriction is to make 579 00:29:11,800 --> 00:29:14,520 Speaker 1: sure you have the time to get their money in. 580 00:29:14,960 --> 00:29:16,440 Speaker 1: And if the amount you want to put in is 581 00:29:16,440 --> 00:29:19,440 Speaker 1: more than you're allowed in a single year, then what 582 00:29:19,480 --> 00:29:21,440 Speaker 1: you would do is you would start to string them together, 583 00:29:21,480 --> 00:29:23,920 Speaker 1: and you're allowed to put three years worth together. That's 584 00:29:23,960 --> 00:29:28,640 Speaker 1: called the carry forward provisions. Thank you my pleasure, James. 585 00:29:28,640 --> 00:29:30,479 Speaker 1: And look, one thing when you're speaking about the budget 586 00:29:30,600 --> 00:29:33,200 Speaker 1: earlier I forgot to raise was you told me a 587 00:29:33,240 --> 00:29:35,600 Speaker 1: little while ago. Remember you used to go every single 588 00:29:35,680 --> 00:29:39,760 Speaker 1: year to Canberra and there used to be like lockdown facility, lockdown, 589 00:29:39,800 --> 00:29:41,720 Speaker 1: lock up, lock up facility. 590 00:29:42,360 --> 00:29:44,200 Speaker 2: I think the listen will be interested to hear that 591 00:29:44,200 --> 00:29:47,760 Speaker 2: that process and whether that still happens now unfortunately. 592 00:29:47,920 --> 00:29:49,920 Speaker 1: I mean, some people think it's great that it doesn't happen, 593 00:29:50,520 --> 00:29:54,160 Speaker 1: but after COVID. In COVID, of course, sadly they realize 594 00:29:54,200 --> 00:29:57,880 Speaker 1: you don't have to fly everybody up to Canberra, and 595 00:29:57,920 --> 00:29:59,640 Speaker 1: you don't have to put them all up in hotels, 596 00:29:59,640 --> 00:30:01,200 Speaker 1: and you don't have to allow them all to meet 597 00:30:01,240 --> 00:30:03,520 Speaker 1: after the budget and have a big night out in 598 00:30:03,560 --> 00:30:06,640 Speaker 1: Canberra where you have the busiest Tuesday night in Canberra 599 00:30:06,760 --> 00:30:10,320 Speaker 1: of the year. And consequently, what happened in COVID was 600 00:30:10,360 --> 00:30:13,440 Speaker 1: they started to do lock ups in the cities. You 601 00:30:13,440 --> 00:30:15,760 Speaker 1: could do it in Melbourne, you could do it in Canberra, Brisbane, 602 00:30:15,800 --> 00:30:18,680 Speaker 1: wherever you want. But more recently than really only the 603 00:30:18,920 --> 00:30:21,840 Speaker 1: mostly just the Canberra bureaus and maybe TV or whatever 604 00:30:21,960 --> 00:30:25,000 Speaker 1: go to Canberra. But it's no longer necessary for everyone 605 00:30:25,080 --> 00:30:28,640 Speaker 1: to go to Canberra, and unfortunately we all have our 606 00:30:28,800 --> 00:30:33,160 Speaker 1: own individual lockups now, which are interesting, but not quite 607 00:30:33,160 --> 00:30:34,800 Speaker 1: as interesting as it used to be when you had 608 00:30:35,040 --> 00:30:38,680 Speaker 1: hundredths of financial journalists all in Canberra who rarely met 609 00:30:38,680 --> 00:30:40,960 Speaker 1: each other. So it was a great, great social occasion 610 00:30:41,440 --> 00:30:43,760 Speaker 1: in its day, not quite as social now as it 611 00:30:43,880 --> 00:30:46,600 Speaker 1: used to be. So there you are Okay, hey, thanks 612 00:30:46,600 --> 00:30:50,120 Speaker 1: for all your questions and thanks for getting James to 613 00:30:50,120 --> 00:30:52,680 Speaker 1: bring me up to speed on all that. With the 614 00:30:52,720 --> 00:30:55,480 Speaker 1: lock up. Our guys in it, I imagine Will be 615 00:30:55,560 --> 00:30:58,440 Speaker 1: told probably told you yesterday hey, by the way, there's 616 00:30:58,480 --> 00:31:01,920 Speaker 1: a lockup in in eleven days and probably gulped because 617 00:31:01,920 --> 00:31:06,320 Speaker 1: they've got to get a huge facility ready and it 618 00:31:06,360 --> 00:31:08,680 Speaker 1: has to be you know, closed off, you can't call 619 00:31:08,720 --> 00:31:12,520 Speaker 1: a friend, etc. Has to be secure. Treasury officials have 620 00:31:12,600 --> 00:31:15,200 Speaker 1: to come in and they pace up and down just 621 00:31:15,240 --> 00:31:17,280 Speaker 1: like your examiner. Have you ever had an old fashioned 622 00:31:17,320 --> 00:31:19,680 Speaker 1: exam where the examiner walked up and down. The treasure 623 00:31:19,720 --> 00:31:22,560 Speaker 1: officials walk up and down. Just in case you're up 624 00:31:22,600 --> 00:31:25,880 Speaker 1: to anything that's most unusual set up in the budget, 625 00:31:25,880 --> 00:31:27,840 Speaker 1: but there you are. It is what it is, and 626 00:31:27,920 --> 00:31:30,720 Speaker 1: they were happy to report it to you. And we'll 627 00:31:30,720 --> 00:31:33,400 Speaker 1: have a budget special also. Of course I do the 628 00:31:33,400 --> 00:31:36,240 Speaker 1: budget every year with Will Hamilton and I will do 629 00:31:36,320 --> 00:31:38,720 Speaker 1: with this year with him too. That's coming up. Okay. 630 00:31:39,000 --> 00:31:41,120 Speaker 1: Thank you for your emails, Keep them rolling the Money 631 00:31:41,120 --> 00:31:44,040 Speaker 1: Puzzle at the Australian dot com dot au. Thanks to 632 00:31:44,160 --> 00:31:46,880 Speaker 1: Leah Sam mcglue for producing the show, and thanks most 633 00:31:46,880 --> 00:31:50,040 Speaker 1: of all to James Gerard Financial advisor dot com dot au. 634 00:31:50,200 --> 00:31:51,480 Speaker 1: Talk to you again, James. 635 00:31:51,600 --> 00:32:01,800 Speaker 2: Thank you, see you next time. The Charter of FOM