Speaker 1: Hello, and welcome to The Australian's Money Puzzle podcast. I'm
Speaker 1: James Kirby, the World editor at The Australian. Welcome aboard everybody. Now,
Speaker 1: do you think that you should have a self managed
Speaker 1: super fun Maybe you have a self managed super fund?
Speaker 1: Do you think it's worth the effort? Or alternatively, if
Speaker 1: you had won, would you be better off? Would you
Speaker 1: be a more successful investor? I've had a self managed
Speaker 1: super fund for about twenty years, but I don't know
Speaker 1: as much as my guest today, it's Julie Dolan. She's
Speaker 1: fed up SMSF, self managed super funds and the state
Speaker 1: planning at KPMG. Hi, Julia, how are you?
Speaker 2: Hi? Good? Thanks Jones?
Speaker 1: How are you good? Thank you? Nice to have you on.
Speaker 1: It's great to have someone actually with a helicopter view
Speaker 1: of this area. It's the sort of two lines to it.
Speaker 1: I mean as a journalist I watch it in two ways.
Speaker 1: I watch it like as a sector is it getting bigger?
Speaker 1: Is it getting smaller? Or are the trends et cetera?
Speaker 1: And then I watch it as an investor does it
Speaker 1: still make sense for me individually to have one? And
Speaker 1: is it going well enough? And have I got it
Speaker 1: structured in the correct fashion. But like one of the things,
Speaker 1: I suppose just just first of all, usefully and this
Speaker 1: is pure coincidence, don't you know. It wasn't my smart
Speaker 1: planning or anything. But the new ATO numbers are out
Speaker 1: about participation if you like on self managed super funds.
Speaker 1: It's you'll immediately challenge me on this, I'm sure, but
Speaker 1: it seems to me that the number of super funds
Speaker 1: in Australia is stuck hard in or around five hundred
Speaker 1: and six hundred thousand for as long as I can remember.
Speaker 1: But I believe it's growing, but it seems to be
Speaker 1: only growing a little bit. What's theual numbers?
Speaker 2: Actually, yes, James, you must have had you must have
Speaker 2: had a magical wand on the figures because they actually
Speaker 2: came out yesterday from the ATO. They come out of supporter. Yeah.
Speaker 1: Yeah, I planned it all. Yeah, so what would.
Speaker 2: If you've planned out? So once again, yeah, the growth
Speaker 2: is the growth is consistent like it's once again, there
Speaker 2: was another seven three hundred setups in the in during
Speaker 2: the quarter and there's only in a small number of
Speaker 2: wind wind ups. But you have to I suppose when
Speaker 2: I look at it. I look at the legislative landscape
Speaker 2: and even setting up new funds these days, it's the
Speaker 2: ATO even most times, most times they're not will give
Speaker 2: a potential trustee a call and go through to make
Speaker 2: sure that they are a fit, that they're doing it
Speaker 2: for the proper reasons. So I don't mind the steady
Speaker 2: growth because then with all the changes that are happening
Speaker 2: at the moment, and the ATO being the regulators, there's
Speaker 2: is a stronger chance that the ones are getting set up,
Speaker 2: they're getting set up for the right purpose, and so
Speaker 2: it's maintaining even more so the credibility of the industry
Speaker 2: that it deserves. So the latest numbers, I've actually got
Speaker 2: them written here. We're six hundred and sixteen six six
Speaker 2: one hundred and sixteen thousand, four hundred funds and equipped,
Speaker 2: and that is made up of eight hundred and ninety
Speaker 2: six billion dollars. So we're literally just just behind the
Speaker 2: opera my gv MY super sector as the second largest,
Speaker 2: So we're definitely a big player.
Speaker 1: It's always it's always large because the people who have
Speaker 1: smsfs have more money, of course they do, and just
Speaker 1: a few other things separately, Investment trends and Vanguard released
Speaker 1: their report also released their report today that this is
Speaker 1: the one that triggered my idea to talk to you today.
Speaker 1: So very briefly, folks, if you're listening about the big picture,
Speaker 1: over an number of smsfs continues to rise. There's about
Speaker 1: six hundred and fifteen thousand sms ss across Australia and
Speaker 1: the average balance is and this is really interesting, right,
Speaker 1: it's three hundred and thirty thousand dollars, this is what
Speaker 1: they say. And of people establishing new funds that is
Speaker 1: the average balance is three hundred. Yeah, and the average
Speaker 1: age is forty seven. This is and this year. We
Speaker 1: talk about all the time on the show Julie, how
Speaker 1: much should you have who have an sms F. I
Speaker 1: mean you might say how long is a piece of strength?
Speaker 2: Exactly.
Speaker 1: I've had people on the show seriously saying you need
Speaker 1: a million dollars more typically maybe six seven hundred. I know,
Speaker 1: I'm trying to remember what the figure is from the
Speaker 1: professional associations, but obviously those figures are very low because
Speaker 1: they want as many people to join as possible. But
Speaker 1: I think you know money talk. So here's the number
Speaker 1: of folks for the average person age forty seven who's
Speaker 1: starting and SMSF At the moment, it's three hundred and
Speaker 1: thirty thousand dollars, Judy, is that is that enough money
Speaker 1: to start a fund?
Speaker 2: Do you think, Well, I've got clients. It absolutely depends.
Speaker 2: I've got clients who are starting it in their twenties
Speaker 2: because they want to. It's not necessarily to me about
Speaker 2: the money. Obviously, you do need to do your cost
Speaker 2: benefit analysis. But at the end of the day, it's
Speaker 2: the type of person that you are as well. So
Speaker 2: if you really do want to have control and transparency
Speaker 2: and you really do want to have the ability to
Speaker 2: invest accordingly and grow your superinnuation earlier the better.
Speaker 1: The sooner the better, I suppose. So, yeah, but the
Speaker 1: sooner the better. You're not going to have three hundred
Speaker 1: Most people aren't going to have three hundred and thirty thousand,
Speaker 1: are there.
Speaker 2: No, it's more the fact of the obviously the age,
Speaker 2: it's their ability of how much money they have outside.
Speaker 2: And also we're in a different world too, in the
Speaker 2: sense that the younger than someone is, it's the more
Speaker 2: of their the superinnovation of their job. They're super guarantee
Speaker 2: that's going in so that consistent ability. And also insurances,
Speaker 2: so if insurances are going to go into the fund,
Speaker 2: that that can potentially make it a small fund to
Speaker 2: potentially a very large fund should it triggering it ben occur.
Speaker 2: And also whatever assets are sit outside. So I don't
Speaker 2: have a hard and fast rule. You know, obviously you
Speaker 2: don't start one with a very very small amount, but
Speaker 2: it does.
Speaker 1: Is there a rock bottom minimum that you would see?
Speaker 2: I would probably say that to two hundred two fifty.
Speaker 2: I'm sort of comfortable with that based on doing analysis
Speaker 2: that sits outside.
Speaker 1: Okay, that's very interesting now, folks, I find with surf
Speaker 1: managed super funds. I was probably younger than most people
Speaker 1: when I did it, but that was because I was
Speaker 1: writing about it and I thought, you know, you should
Speaker 1: sort of walk the talk. But I find this in
Speaker 1: terms of manage super funds. In terms of people thinking
Speaker 1: about it, the average age is forty seven, which is
Speaker 1: useful to a point. That's the commencement age. The average age,
Speaker 1: of course is older, will skew older because by definition,
Speaker 1: if people start on average at forty seven, then if
Speaker 1: you think about it, it's older people who have them,
Speaker 1: and older people are wealthier because they saved for longer.
Speaker 1: That all makes sense, but Judy, it seems to be
Speaker 1: the two types of people who kind of think about
Speaker 1: actively think about self managed super funds, who may not
Speaker 1: have them as a young person or young young up
Speaker 1: to the age of forty seven, which are who are thinking, Hey,
Speaker 1: you know, I could do a lot more, I could
Speaker 1: have control. Crucially, people will often say I want to
Speaker 1: put a property in there. I know property. I like property,
Speaker 1: and my big fund, my Australian super Cibus or whatever.
Speaker 1: They're not doing that. They can't buy the house around
Speaker 1: the corner that I want to buy. That's a big
Speaker 1: distinction for funds. The other thing that happens is on
Speaker 1: the other side where people have big savings and super
Speaker 1: where they have I wish we could get a clear
Speaker 1: number on this, but there is a point in the
Speaker 1: big super funds be there retail or industry where really
Speaker 1: they're designed for the average investor, and you're not an
Speaker 1: average investor anymore. And certainly in many funds you're crosss
Speaker 1: opsidizing other in terms of the fees you're paying and
Speaker 1: all that you could be paying much less. Could you
Speaker 1: explain that to us?
Speaker 2: Yeah, it's it is interesting because even when you look
Speaker 2: at the statistics on the industry funds, obviously the amounts
Speaker 2: are a lot smaller and they're an accumulation phase too.
Speaker 2: When you look at the self managed fund where on
Speaker 2: it's a very high level of pension drawdown phase and
Speaker 2: the fund and the money is still increasing. So that's
Speaker 2: a very important point.
Speaker 1: Allow yeah, yeah, yeah.
Speaker 2: So we're in a very heavy drawdown phase. So it
Speaker 2: once again does come back to the person and their
Speaker 2: willingness to to have that very clear transparency in control
Speaker 2: and also to invest in other assets that may not
Speaker 2: fall within the you know, their prove product listing or
Speaker 2: structure of their industry fund. And there's there's a lot
Speaker 2: of reasons that I see people set them up. A
Speaker 2: lot of them do they do if they're in business.
Speaker 2: It's part of their structuring in businesses, especially if they've
Speaker 2: got commercial property.
Speaker 1: A lot of those. It's another huge thing that if
Speaker 1: you have a business, you can buy your fund, can
Speaker 1: buy a property and you can rent from your fund basically,
Speaker 1: which is such a winner if you have a business.
Speaker 2: Yes, that's that is that is quite common. And then
Speaker 2: it's it's people coming up to look, there's there's a whole.
Speaker 2: I call it the life cycle of the self managed fund. There,
Speaker 2: it's a constantly moving depending on the profile, what members
Speaker 2: are in, what members are coming in, what are the
Speaker 2: what are the needs and wishes of those specific members.
Speaker 2: So it constantly changes and moves. And that's why I
Speaker 2: love them so much, because it can ebb and flow
Speaker 2: for a family depending on that specific members investment needs
Speaker 2: and desires and requirements.
Speaker 1: You mentioned how having a certain matter of super fund
Speaker 1: apart from the control, apart from that, you should be
Speaker 1: paying less in You should be, but you may not
Speaker 1: be paying less in fees. Depends on how much you
Speaker 1: have and how you operate, and whether you have loads
Speaker 1: of bts in there, for instance, and it's just this
Speaker 1: minimum low touch fund, or whether you're this incredibly diversified
Speaker 1: fund and your accountant is bamboos of every with your
Speaker 1: new investments. But then you're going to have higher fees.
Speaker 1: But what I want to ask you is you mentioned
Speaker 1: other assets. The obvious one is direct property. Is there
Speaker 1: other asset classes that I can put into my SMSF
Speaker 1: that I don't get a big fund?
Speaker 2: Yeah? The main one is property, definitely, and it may
Speaker 2: also be investments with related parties around allowable and investments
Speaker 2: and structures. So without going into too much complexity, it
Speaker 2: maybe going into lend leverage and ultimately it usually is
Speaker 2: property but leveraging the superinnoation with a related party to
Speaker 2: go in in tenants and common to acquire property or
Speaker 2: into an unrelated trust to do certain things. So there
Speaker 2: is a subset of different investments that an industry fund
Speaker 2: won't allow for. And it's also another big thing with
Speaker 2: self managed funds. It's the timing. It's the timing of
Speaker 2: when you put your contributions in. It's the timing of
Speaker 2: when you pay your tax yes point, timing of starting retirement,
Speaker 2: the timing of making sure the who, when and how
Speaker 2: of your superinnoation goes to your loved ones. So it's
Speaker 2: it's also it comes back to that control of making
Speaker 2: sure that you really are maximizing the life journey of
Speaker 2: your contributions to retirement, to a state planning and the
Speaker 2: most affected by for your family. It's very difficult with
Speaker 2: an industry fund because you just dominate. You're just controlled
Speaker 2: by forms ben sent out to you and you don't
Speaker 2: know what's happening behind the scene.
Speaker 1: Yeah, and they are designed for that. They are designed
Speaker 1: for mass engaged there and they work very well on
Speaker 1: that basis. But they do, but not if you want
Speaker 1: to do so you're talking about timing, I mean, I
Speaker 1: think another point what timing is in terms of asset
Speaker 1: allocation and tactical asset allocation. You can decide if you
Speaker 1: think that the market is overheating, you can reallocate the
Speaker 1: money out into something else. Likewise, if you think a
Speaker 1: certain area is undercooked and it's going to come flying back,
Speaker 1: you can move it around or even the safe spaces
Speaker 1: of chairs. Right, So the shaar is tanking. You know,
Speaker 1: it's tanking. The whole world it's tanking. The big super
Speaker 1: funds are going to be very slow to get around
Speaker 1: to getting out there, but you can do seconds and
Speaker 1: you can have true diversification.
Speaker 2: You can have true diversification where you can go I
Speaker 2: want I even want cash, I want turned deposits, I
Speaker 2: want list of securities in these industries, and I want
Speaker 2: like you can really work with a financial advisor, even
Speaker 2: depending on how savvy the investor is to to really
Speaker 2: have that investment strategy that is required for your fund
Speaker 2: to be that proactive investment strategy that dictates how you
Speaker 2: are going to invest for your retirement. So it does
Speaker 2: allow you that control and transparency of those words I
Speaker 2: keep using, but they're very much the case. You can
Speaker 2: very much, you know. But there's a flip side. The
Speaker 2: flip side means that you are required to follow strict
Speaker 2: rules that are that are handed down by the ATO
Speaker 2: because they are the regulator. And it is a very
Speaker 2: very high tax concession environment. So there is you do
Speaker 2: have to follow a subset of rules and it does
Speaker 2: take time. It's another it's another entity that needs tax
Speaker 2: returns to me.
Speaker 1: The flip side, if I look back at twenty years
Speaker 1: of having a Serve super fund, is the spinning out
Speaker 1: forms which seems to get worse worse. It gets worse
Speaker 1: and worse, and the length and the complexity of these
Speaker 1: forms get worse and worse. I'm just doing one at
Speaker 1: the moment. What is it? Oh, this isn't even something
Speaker 1: I want to do. This is an existing organization which
Speaker 1: has changed its rules and has said to me I
Speaker 1: must update my form filling for them. And it's just
Speaker 1: one asset, you know, it's good for it's worth ah, yes,
Speaker 1: but it doesn't really matter what it is. The point
Speaker 1: I'm making is that people have to they really have
Speaker 1: you really have to say, Okay, I take that on board.
Speaker 1: I'm going to have to do it.
Speaker 2: Yeah, you put the time into it board. Yeah.
Speaker 1: Have you if I walked into your office and said,
Speaker 1: how long is it going to take me every year
Speaker 1: or every month? Have you got a benchmark answer?
Speaker 2: Well, there's obviously the investing. It depends on how active
Speaker 2: you want to be as an investor and where you are.
Speaker 2: So if you the more active you are, obviously the
Speaker 2: more time it's going to take. Or if you're a
Speaker 2: set and forget or if you're this part of your
Speaker 2: portfolio that you set and forget, well it doesn't take
Speaker 2: too much time. But it's a big thing. Is once
Speaker 2: again the investment strategy that you need to put your
Speaker 2: mind to. The ATO doesn't want to see just a
Speaker 2: standard template. They actually want you to go. As a trustee,
Speaker 2: I'm different to a member. I have trustees duties. That's
Speaker 2: a covenant, that's that is required that you must act
Speaker 2: in the best interest of members, be it yourself in
Speaker 2: the sense of looking at the investment strategy of the
Speaker 2: fund and making sure it's in line with the sole
Speaker 2: purpose of retirement for the members be yourself.
Speaker 1: Yeah, so what's new in this area? Like what has
Speaker 1: changed SMSFS for there was there was a period obviously
Speaker 1: where they were front and center of the news for
Speaker 1: the simple reason that you could put any amount into
Speaker 1: super in those days it was uncapped. And then on
Speaker 1: top of that, the whole area was new and it's
Speaker 1: mushroomed and now it's uh now it's matured or so
Speaker 1: years in yeah, gentle pace of growth. It's sort of
Speaker 1: more or less a proxy with the wider population. Uh So,
Speaker 1: so what is different now than than that period?
Speaker 2: Definitely maturity. Maturity the industry is absolute, and maturity the
Speaker 2: industry is actually carved out certain rules that you know,
Speaker 2: people were potentially maybe taking advantage of that. We're going
Speaker 2: against the intention of the laws. Political but you know,
Speaker 2: obviously a different elected, different different government coming through unfortunately,
Speaker 2: they've wanted to have a look at the rules that
Speaker 2: sit over there and what can be tweaked, which I
Speaker 2: would like for that to stop for a little while.
Speaker 1: Personally, I mean, I mean, in a way, it's in
Speaker 1: a way it's a it's a live beast, right, I mean, in.
Speaker 2: A way, it's a huge amount of money.
Speaker 1: Are we dreaming that they will ever be left alone?
Speaker 1: And maybe that's part of the past that we have
Speaker 1: to take on and see if you want to be
Speaker 1: active with SUPER. Part of that has been across the rules,
Speaker 1: which not that they're changing, but that they will never
Speaker 1: stop changing.
Speaker 2: It's like it's like income tax rules as well. It
Speaker 2: is just what tax tax changes all the time. But
Speaker 2: you know, I could talk for hours about the concept
Speaker 2: where superannuation sits within the landscape of our retirement policy
Speaker 2: and how much tweaking can get too much because at
Speaker 2: the end of the day, it is one of the pillars,
Speaker 2: and one of the pillars is government support. One of
Speaker 2: is self funding through superinnoation, and one of it is
Speaker 2: assets that sit outside of super. And the government support
Speaker 2: side is obviously shrinking. The coffers are shrinking, and so
Speaker 2: it is encouraged. It should be more encouragement to be
Speaker 2: able to self self serve and self invest and be
Speaker 2: self sufficient. So changing these rules all the time and
Speaker 2: cutting the ability to continue to contribute is got to me,
Speaker 2: is going against this self ability to self you know,
Speaker 2: fun to your own retirement. So it's a blind line
Speaker 2: of tweaking.
Speaker 1: If I said to you, apart from indexation inflation indexation
Speaker 1: which was built in anyway that all changes of lead,
Speaker 1: I haven't seen any. I haven't seen one encouraging change
Speaker 1: to super for years. No, they're generally discouraging, am I
Speaker 1: is that totally great?
Speaker 2: And it shouldn't be discouraging. It should be encouraging. So
Speaker 2: we want to save and we want to be able
Speaker 2: to be self sufficient in retirement because we need to be.
Speaker 2: You know, we're seeing this even now without cost of
Speaker 2: living crisis, We're needing to be even more self sufficient
Speaker 2: moving forward. So I feel like it's a band aid
Speaker 2: approach consistently on these changes, and even I could once
Speaker 2: again spend hours talking about the three million dollar proposed change.
Speaker 2: It's a band aid's there's no logic behind it.
Speaker 1: Okay, all right, well we might deal with that in moments.
Speaker 1: We might take you for that break. Yes I have,
Speaker 1: I hope I've come. I've learned how to actually explain
Speaker 1: this tax in less than thirty seconds.
Speaker 2: I prepared to because I'd be glad to hear it.
Speaker 1: Yeah, yeah you can. After the break, Hello and welcome
Speaker 1: back to The Australian's Money Puzzle podcast. I'm James Kirby,
Speaker 1: the editor at The Australian. I'm talking to Julie Dolan,
Speaker 1: who is the head of SMSs and the State Planning. Julie,
Speaker 1: I've just thought in terms of your job title, they're
Speaker 1: not supposed to be related to SMSs.
Speaker 2: And I know I do fad into each other.
Speaker 1: We are told it sober told the have nothing to
Speaker 1: do with each other. But there you are with that.
Speaker 1: I would just leave that for our listeners to ponder. Okay, now,
Speaker 1: if I've got an SMS and I see that the
Speaker 1: big funds are knocking out of the park and they're
Speaker 1: doing ten percent a year, and that's not the case anymore,
Speaker 1: but there was a year or two where they were
Speaker 1: doing ten percent a year, or I read you know,
Speaker 1: obviously you always read about the most successful fund right,
Speaker 1: so there's always going to be a couple of funds
Speaker 1: that do great and we paid ess to the ones
Speaker 1: who are appalling. How do I score myself. I've got
Speaker 1: an SMSF Why do I score myself? Should I just say, okay,
Speaker 1: I take a fund see bus are super and I've
Speaker 1: got to pick them every year? That has the approach.
Speaker 2: Oh, it's so difficult because you're comparing apples to orangers like,
Speaker 2: unless you're really understanding what the underlying investment methodology is
Speaker 2: and how active they are versus if it's just set
Speaker 2: and forget versus if it's active management, then the fee structure,
Speaker 2: it's it's and then even just trying to, you know,
Speaker 2: get to the real bottom figures and not just the
Speaker 2: broadcasted figures, it's it's very difficult. I think with a
Speaker 2: self managed fund, you need to be comfortable with your
Speaker 2: own profile. So you need to be comfortable with you
Speaker 2: as an investor and how much risk you're prepared to take,
Speaker 2: and then then invest accordingly. Don't try and chase returns
Speaker 2: because you know, and don't try to look backwards on
Speaker 2: past performance. We know that that that's not the way
Speaker 2: to go. So sitting there going this is me as
Speaker 2: an investor, and me and my timeline towards when I
Speaker 2: want to retire or whatever your situation is, this is
Speaker 2: what I'm comfortable with, and based on that profile, you
Speaker 2: seek competent advice or invest accordingly based on what your
Speaker 2: comfort level is.
Speaker 1: Well, is there a rock bottom the turn where you said, look,
Speaker 1: you'd really want to be doing x percent above at
Speaker 1: least want.
Speaker 2: To keep CPI. You want at least you don't want
Speaker 2: to be going backwards with your dollars, that's for sure.
Speaker 2: You don't want to be sitting at all in cash
Speaker 2: and going backwards. But some people are some people comfortable
Speaker 2: with that.
Speaker 1: Yeah, I wonder how they're comfortable with that.
Speaker 2: It's a very hard one to do. Every Actually, every
Speaker 2: fund is different, Every single super fund is different. That's
Speaker 2: why I love about them in essence, because they're investing
Speaker 2: accordingly based and it's not only just based on them,
Speaker 2: it's based on the profile of their family.
Speaker 1: Yeah.
Speaker 2: Yeah, and that even gets even more interesting when the
Speaker 2: kids come in.
Speaker 1: Yes, and of course all funds have too. Generally, generally
Speaker 1: it tends to be two partners, husband and wife or whatever. Yeah,
Speaker 1: that's a sort of a core unit in super But
Speaker 1: you can have up to six people in the fund. Now, Yeah,
Speaker 1: but what's the average since.
Speaker 2: It's still dominant, it's still a dominant two member fund. Still,
Speaker 2: there's there's pros and cons of bringing children into the
Speaker 2: fund or even prize and cons of having business partners
Speaker 2: in there.
Speaker 1: Yes, yeah, yeah, okay, I won't go down that ali
Speaker 1: just for the moment, because I wanted to ask you
Speaker 1: one or two other things, more contemporary issues. So we
Speaker 1: had a budget recently, and we've had some well's. There's
Speaker 1: text the main news cross out of the budget, none
Speaker 1: of which was in the budget per se. But this
Speaker 1: year is there are tax cuts personal tax cuts across
Speaker 1: the board. The ones on the upper end are smaller
Speaker 1: than they were going to be, but there are still
Speaker 1: tax cuts for everybody, as they like to tell us.
Speaker 1: Now in terms of Super and tax, the biggest news
Speaker 1: probably for a long time, is that, apart from inflation
Speaker 1: indexing as I mentioned, where the amount you can put
Speaker 1: in has increased a little bit, pre tax contributions has
Speaker 1: gone from twenty seven and a half thousand to thirty thousand,
Speaker 1: and the SGC, the compulsory amount that must go into
Speaker 1: SUPER on your behalf each year goes from a eleven
Speaker 1: to eleven point five percent in July. So we all
Speaker 1: know that. But the newest thing in tax and super
Speaker 1: is that, for a long time, being the last couple
Speaker 1: of years, how tax worked in super was once you
Speaker 1: had more than one point nine her capitac her head
Speaker 1: per remember, then you started to pay tax and it
Speaker 1: was at fifteen percent, and then out of the blue,
Speaker 1: the government has announced a second tax, a new tax,
Speaker 1: a fresh tax. This tax kicks in at three million,
Speaker 1: and once you've more than three million, you pay another
Speaker 1: fifteen percent tax. And this tax is completely different. It's
Speaker 1: based on paper gains and people are furious about this.
Speaker 1: All I want to say to you is, is there
Speaker 1: any reason to think that it's not going to go
Speaker 1: through as planned?
Speaker 2: I'm still keeping my fingers and toes crossed. So where
Speaker 2: we currently stand is obviously they're the Senate to Elect Committee.
Speaker 2: There was a report done back seventeenth of May, and
Speaker 2: they supported supported that report to say go through unchanged.
Speaker 1: Yeah, they said. They basically said, it's fine, it's fine. Yeah,
Speaker 1: paper gains, it's fine, not even putting in it.
Speaker 2: Yeah, even though as an industry we've been fighting hard, fighting, fighting, fighting, fighting,
Speaker 2: even coming to as another solution of doing a deeming rate.
Speaker 2: And so there's been there's been all sorts. So last
Speaker 2: week it went through the Lower House and it actually
Speaker 2: got adjourned a few times because there was an about
Speaker 2: twelve to fifteen MPs really really showing distaste and concern
Speaker 2: about a lot of policies, and mainly around the unrealized
Speaker 2: gains and the lack of indexation and the flow on effect.
Speaker 2: There's so many flow on effects. Those two are highlighted,
Speaker 2: but when you actually get into the nitty gritty of
Speaker 2: the proposed changes, there's a whole lot of subset of consequences,
Speaker 2: which there's a lot there. And where we currently stand
Speaker 2: now is it's going into Senate to the upper house,
Speaker 2: and we expect that there will be a very strong debate.
Speaker 2: So government's trying to push through it to be legislated
Speaker 2: by thirty June. We've still got another election as well
Speaker 2: that's going to be sitting on the side. So I'm
Speaker 2: praying and hoping that common sense will still prevail even
Speaker 2: though we're getting to the twenty end. I'm being an
Speaker 2: optimist here and I'm sitting out all my energy.
Speaker 1: Right all right, Well, I just don't know. I don't know.
Speaker 1: I don't know how parliament really works. But I suppose that's.
Speaker 2: Where we stand, that that's the actual facts right now.
Speaker 1: So there is a distinct possibility that there could be
Speaker 1: some sort of detail understandate that amends this tax. That
Speaker 1: remains a distinct possibility, doesn't it.
Speaker 2: And we've still got a way to go. We do
Speaker 2: have still a way to go.
Speaker 1: So okay, yeah, all right, and so that's uh. With
Speaker 1: that way against smfs and the participation in them, do
Speaker 1: you think difficultes through.
Speaker 2: Well, it will definitely affect the funds that are at
Speaker 2: maturity and the ones that have got more than you know,
Speaker 2: obviously the three mil with luck of indexation, will affect
Speaker 2: funds going forward. So that is that is, it's a
Speaker 2: it's a there differently will be didn't That's for sure.
Speaker 2: There'll be a release if it goes through. There'll be
Speaker 2: a strong, a big release of funds, which will which
Speaker 2: will cause issues in its own right in the sense
Speaker 2: of potential full sale of assets which weren't planning to
Speaker 2: be sold and unnecessary transaction. Causes a whole lot of
Speaker 2: stuff that may come out of this. Another big sleeper,
Speaker 2: which I spent a lot of time talking to clients on,
Speaker 2: is not only the proposed div two ninety six tax,
Speaker 2: but it's the death benefit tax that sits on top
Speaker 2: of it.
Speaker 1: Just before you tell us about that the two nine six, folks,
Speaker 1: is the three million tax.
Speaker 2: Just just so everyone's sorry, it's I mean accounting nerd there.
Speaker 1: That's all right for all notes. It's just some of us.
Speaker 1: I'll pay to translate a bit. So tell us what
Speaker 1: we wanted to say about the death pack death benefits.
Speaker 2: Yeah, so a lot of clients, so everyone, you know, James,
Speaker 2: you get your own financials and you have part of that.
Speaker 2: You have your member statements, and if you're over sixty
Speaker 2: and you take you can you can access your superinnuation
Speaker 2: without paying any tax as a lump summer a pension,
Speaker 2: beautiful system, beautiful thing. But still on your member statement,
Speaker 2: you would have a tax free and a taxable component
Speaker 2: that's shown there. And basically that tax free amount is
Speaker 2: your after tax money so that you've been able to
Speaker 2: put into the fund over the years, and the balance
Speaker 2: is all the earnings that it's made and all your
Speaker 2: your super guarantee contributions that it's built out. Now a
Speaker 2: lot of funds, that's quite a big especially for how
Speaker 2: long you know you've been in yours for twenty years, James,
Speaker 2: you may have quite a large taxable component there too.
Speaker 2: So what that means is dependent on who it goes
Speaker 2: on your passing. If it says goes out to ultimately
Speaker 2: goes out to adult financially independent children. There is up
Speaker 2: to seventeen percent tax on that amount.
Speaker 1: Yes, bux, a compustible component is taxed at seventeen percent effectively. Yeah,
Speaker 1: something changed.
Speaker 2: No, it's just the fact that this additional tax with
Speaker 2: in the fund is another tax on top of another
Speaker 2: tax that will potentially it's working through with clients saying
Speaker 2: all right, well you're in this space, now what do
Speaker 2: we do in start to move? Is a hybrid model?
Speaker 1: Well, I guess, I said, because this notion of double tax,
Speaker 1: which will ask you.
Speaker 2: One wels you're alive to take to take money out?
Speaker 1: Yes, yeah, so it's the it's the it's the effective folks.
Speaker 1: Just to clarify in case you're you're not following this,
Speaker 1: and it is. It's super. So it's tricky. But like
Speaker 1: people say, what happens to you if you? If you
Speaker 1: if in terms of inheritance and super is becoming more
Speaker 1: and more correct me band things around here, Julie. Inheritances
Speaker 1: become more important in relation to SUPER. Right, so often
Speaker 1: people will have more on SUPER than anything else except home.
Speaker 2: Correct.
Speaker 1: The taxable component that Julie's talking about, there the believe
Speaker 1: it or not, the little bit that you got a
Speaker 1: tax concession zones over the years, they will tax that
Speaker 1: part when you die in your death benefit and effectively
Speaker 1: works out as seventeen percent. So that's that's what you're
Speaker 1: you're alluding to, Is that right?
Speaker 2: Yeah? So it's if you're in that category where you've
Speaker 2: got a highest superinnuation balance and you do have a
Speaker 2: high taxable component, and you have potentially this additional tax
Speaker 2: that may apply. It's working through. I work through with
Speaker 2: clients on what is the best structure, what is it?
Speaker 2: What are your potential plan B and c this If
Speaker 2: this tax comes through, do we look to move some
Speaker 2: money out? And if we do, what structure does it
Speaker 2: go into the potentially having like a hybrid model of
Speaker 2: investment vehicles?
Speaker 1: Okay, I have two more questions through and try and
Speaker 1: make them short. One this thing about having a threshold
Speaker 1: and super extreme is it effectively a cap? I mean
Speaker 1: really basically, would you be a fool to have more
Speaker 1: than three million and super ever under these new rules?
Speaker 1: Oh do you want to put that? Do you want
Speaker 1: to put that question to one side? Put it? What
Speaker 1: did they say a reserve result?
Speaker 2: Yeah? The way the reels work because you can have
Speaker 2: a really high balance that not have to pay the tax.
Speaker 2: So there's a whole misconception around how it works.
Speaker 1: Well, isn't it also the case that you could leave
Speaker 1: the money in the super system, per se the system,
Speaker 1: and only pay fifteen percent on it rather than the
Speaker 1: bit that success couldn't you have it in the system,
Speaker 1: but you'd only be paying fifteen You wouldn't be paying
Speaker 1: marginal rates or anything.
Speaker 2: Well, no, you'd have to take it out of the system,
Speaker 2: maybe have it in another tax vehicle too, meant to
Speaker 2: keep the rates down.
Speaker 1: You might, But if you did nothing, if you were
Speaker 1: if inertia, then what would happen if it would be taxed?
Speaker 2: Yes, if you had over three million, it's not the
Speaker 2: it's not all the amount over three million, it's what
Speaker 2: your balance is at one July twenty twenty five when
Speaker 2: it comes in. Yes, so f your balance is at
Speaker 2: seven million and it increases just seven and a half,
Speaker 2: it's only that half a million dollars that that's the
Speaker 2: baseline of the calculation. So it's always important to note
Speaker 2: that too. It's not everything over three million. This is
Speaker 2: just a standard cap.
Speaker 1: So keep all that in mind, folks. Should you be
Speaker 1: in the fortuer position to have that amount in super
Speaker 1: and I'm sure many listeners are saying, really, I don't
Speaker 1: have this problem, which you probably don't, but if they
Speaker 1: don't index it for inflation, you'd yeah, how fast it
Speaker 1: comes around. Let me tell you if you think about
Speaker 1: house prices and how much they've moved, well, just just.
Speaker 2: It's not only about that time. Yeah, it's not about that,
Speaker 2: James too. It's just the fact also that it's going
Speaker 2: against the basic tax principles.
Speaker 1: You don't tax paper gains.
Speaker 2: Yeah, and that's that's really the heart of the problem here,
Speaker 2: is that there.
Speaker 1: Yeah, Okay, we take and we certainly will take that.
Speaker 1: Take that on board. Yeah, okay, we will break and
Speaker 1: we will be back with some great questions designed specifically
Speaker 1: for Julie because I have a couple of the SMSF
Speaker 1: questions which I've collected for her. Okay, back in a moment, Hello,
Speaker 1: and welcome back to The Australian's Money Puzzle podcast. James
Speaker 1: Kirby talking to Julie Dolan from KPMG. Okay, Tracy says,
Speaker 1: my husband and I have a self manager super fund
Speaker 1: and also two daughters and a younger son. What would
Speaker 1: be the positives and negatives of incorporating them into the
Speaker 1: s MSF now that it can have six members. You
Speaker 1: mentioned that briefly.
Speaker 2: Yes, yes, So the positives are it's obviously bringing the
Speaker 2: power of bringing more money into the one the one area,
Speaker 2: into the one bank account per se or the one
Speaker 2: structure to invest. So you've got you've got the leverage
Speaker 2: of more capital to invest. So that's that's a very
Speaker 2: positive piece. The other piece is education. I like the
Speaker 2: fact that you know your children are on the journey
Speaker 2: with you on educating around how to invest and learning
Speaker 2: what everything around that means. And you know, obviously it's
Speaker 2: a reduction in fees potentially by bringing consolidating the family
Speaker 2: super together, so they'd be the main advantages. The main
Speaker 2: the disadvantages are you are all in it together, so
Speaker 2: there could be they always you know, that could be
Speaker 2: cause issues on the family side around disagreements on investing.
Speaker 1: Yes, you're always killing each other. Would be killing each
Speaker 1: other inside in the SMSF meeting too. Maybe that's what
Speaker 1: you're alluding to.
Speaker 2: Also too, it's not to underestimate underestimate the responsibility of
Speaker 2: the children having to be directors.
Speaker 1: Yes, of course that's a big one, and I would
Speaker 1: think also we have because this is new, it's not
Speaker 1: being tested. But if you have very old parents who
Speaker 1: just want income, and you've got very young, very relatively
Speaker 1: younger adult participants, and they want something entirely different, and
Speaker 1: I think of.
Speaker 2: This whole area of elder abuse that's coming through each abuse.
Speaker 1: Yeah, which a new corridor if you like our potential
Speaker 1: new corridor to it. Yeah, that's an article for me
Speaker 1: to write some day, Julie your mind, Okay, I think unfortunately,
Speaker 1: just on time we can fish in. One more question.
Speaker 1: It's from Mask. After substandard returns over two years, I've
Speaker 1: decided to take over the management of my self managed
Speaker 1: super Fun and I plan I think he means the
Speaker 1: investment allocation. I plan to move about twelve stocks and
Speaker 1: three managed funds to over and flit them into a
Speaker 1: few selected exchange traded funds. Is there anything I should
Speaker 1: be considering before doing this, tax implications, et cetera. Is
Speaker 1: there a recommended way of making a change.
Speaker 2: Yeah?
Speaker 1: So of course everyone loves ETS. Certainly they love its simplicity,
Speaker 1: low fees, and this concept that you can only go
Speaker 1: so wrong and I can't go any more wrong than
Speaker 1: anybody else. But and this is never advice, folks. This
Speaker 1: is information only, but from a universal perspective, when someone
Speaker 1: has some sort of eureka moment and says, gee, you
Speaker 1: know my fund is too complicated, I'll slam it all
Speaker 1: into ETFs, one for the US, one for Australia, you know,
Speaker 1: one for bonds.
Speaker 2: What what? What?
Speaker 1: What's your got reaction to that, Judy.
Speaker 2: My gut reaction to that is, never do anything for
Speaker 2: tax reasons. So do it purely if it's a good
Speaker 2: investment for you. So once again, you know, based on
Speaker 2: as you mentioned, James, if it's getting too complex, if
Speaker 2: the risk is getting a little bit skewed to what
Speaker 2: you're comfortable with, do it for you based on your
Speaker 2: investment principles. Don't don't ever do an investment decision for tax,
Speaker 2: because it's just it's a byproduct.
Speaker 1: Yes, of course, and that's the point that that's regularly
Speaker 1: made by advisors across across all investing. You don't do
Speaker 1: it for tax. Do it, does it makes sense, and
Speaker 1: then see what the taxes correct? Exactly. Terrific. That's a
Speaker 1: good way to finish I think, thank you very.
Speaker 2: Much, thank you, James. I really enjoyed journey on.
Speaker 1: Show and thank you very much. We haven't we haven't
Speaker 1: talked much before, we haven't had you on the show before,
Speaker 1: but it was great. Thank you much very much. We
Speaker 1: will have you again, lovely to talk. That was Julie Dolan, Folks,
Speaker 1: head of SMSF and Estate Planning at KPMG. Okay, I
Speaker 1: didn't get through all the questions because Julie was so
Speaker 1: interesting and there was so much to talk about there.
Speaker 1: And I know that we don't do SMSs perhaps as
Speaker 1: often as we should. It's a great area. I recommend
Speaker 1: anyone who's an active investor to look at them. I'm
Speaker 1: not saying get one, do one, but certainly check them
Speaker 1: out and see what they suit you. And as I say,
Speaker 1: I've had one myself for twenty years or so and
Speaker 1: it's been real education. As you can imagine, through the years,
Speaker 1: through the GFC, through everything as at COVID and everything else.
Speaker 1: You are tested, that's for sure at times with them,
Speaker 1: because you're on your own and you can't just hope
Speaker 1: that the committee investment committee at a big super fund
Speaker 1: is getting it right. That's the thing I think that
Speaker 1: we should all keep in mind. All right, let's have
Speaker 1: some more questions. The money puzzle at the Australian dot com.
Speaker 1: Dot au is the email I hope to you soon