1 00:00:09,680 --> 00:00:12,800 Speaker 1: Hello, and welcome to The Australian's Money Puzzle podcast. I'm 2 00:00:12,880 --> 00:00:16,080 Speaker 1: James Kirkby. Welcome aboard, everybody, Welcome aboard to a special 3 00:00:16,600 --> 00:00:20,680 Speaker 1: edition of the show. We have had so many questions 4 00:00:20,720 --> 00:00:24,680 Speaker 1: and so much correspondence on the new Supertax that what 5 00:00:24,720 --> 00:00:28,400 Speaker 1: we're going to do today is an episode and it's 6 00:00:28,440 --> 00:00:31,680 Speaker 1: going to be based on your questions that have come 7 00:00:31,720 --> 00:00:34,600 Speaker 1: in in recent weeks about what is this act, how 8 00:00:34,680 --> 00:00:37,400 Speaker 1: is it going to work? And to help me answer 9 00:00:37,400 --> 00:00:41,120 Speaker 1: those questions, I'm joined boy Hugh Robertson of the Center 10 00:00:41,280 --> 00:00:45,200 Speaker 1: Financial Services Group. Hugh's a Baron's top one point fifty 11 00:00:45,240 --> 00:00:50,800 Speaker 1: advisor regular on the show, and Hugh I will kick 12 00:00:50,800 --> 00:00:55,400 Speaker 1: straight over to you For the person who's just arrived 13 00:00:55,920 --> 00:00:59,360 Speaker 1: in Australia and has no idea how our super system 14 00:00:59,440 --> 00:01:02,160 Speaker 1: works and hasn't done the six week course to understand 15 00:01:02,200 --> 00:01:05,959 Speaker 1: the basics, could you explain what's changed? What is this 16 00:01:06,080 --> 00:01:08,399 Speaker 1: new super tax? Why is everyone so worried about it? 17 00:01:08,680 --> 00:01:08,760 Speaker 2: Hi? 18 00:01:08,920 --> 00:01:10,440 Speaker 3: James, Hi, everyone listening. 19 00:01:11,319 --> 00:01:14,560 Speaker 4: It's a really good question and it's I'm glad we're 20 00:01:14,560 --> 00:01:15,479 Speaker 4: doing an episode on. 21 00:01:15,400 --> 00:01:17,600 Speaker 2: This because we've really really got to raise. 22 00:01:17,400 --> 00:01:21,280 Speaker 4: The awareness as just so we can get that understanding. 23 00:01:21,400 --> 00:01:24,560 Speaker 4: So what is this give to nine to six tax. 24 00:01:25,120 --> 00:01:27,920 Speaker 4: It's going to be an additional a new tax for 25 00:01:28,040 --> 00:01:32,200 Speaker 4: balances over three million dollars. The tax itself is going 26 00:01:32,240 --> 00:01:35,920 Speaker 4: to be fifteen percent, so a lot of the stuff 27 00:01:35,920 --> 00:01:38,720 Speaker 4: that I've read, So if you're in accumulation phase, it's 28 00:01:38,760 --> 00:01:41,720 Speaker 4: going to mean that you know, it's an additional fifteen 29 00:01:41,720 --> 00:01:45,319 Speaker 4: percent on top of the fifteen percent on the first 30 00:01:45,360 --> 00:01:48,200 Speaker 4: three million if you're an accumulation phase. But remembering when 31 00:01:48,240 --> 00:01:51,000 Speaker 4: you're in pension phase, that first three million is going 32 00:01:51,040 --> 00:01:53,240 Speaker 4: to be still in the zero percent tax. 33 00:01:53,800 --> 00:01:55,920 Speaker 1: So just make it very easy for people at the 34 00:01:55,960 --> 00:01:59,800 Speaker 1: moment in super up to we see we make it 35 00:01:59,800 --> 00:02:03,920 Speaker 1: from July one you pay no tax in your super 36 00:02:04,200 --> 00:02:07,360 Speaker 1: up to two million, yes, and then over two million 37 00:02:07,400 --> 00:02:10,280 Speaker 1: you pay fifteen percent. And the government have said we've 38 00:02:10,280 --> 00:02:12,440 Speaker 1: got a new one now which is over three million, 39 00:02:12,560 --> 00:02:15,600 Speaker 1: there is another fifteen percent, and that means the effective 40 00:02:15,680 --> 00:02:18,400 Speaker 1: thirty percent top tax rasions super where it used to 41 00:02:18,440 --> 00:02:21,519 Speaker 1: be tax free. Okay, that's a big change, but it's 42 00:02:21,560 --> 00:02:25,320 Speaker 1: not People are not going bananas about this aspect that 43 00:02:25,360 --> 00:02:28,080 Speaker 1: it's three million. That's not really what they're going crazy about. 44 00:02:28,120 --> 00:02:31,840 Speaker 1: It's the nature of the new tax, which is on 45 00:02:32,360 --> 00:02:39,040 Speaker 1: realized gains. Can you explain to what that means? 46 00:02:39,160 --> 00:02:41,680 Speaker 3: A tax on unrealized gains. 47 00:02:43,000 --> 00:02:46,320 Speaker 4: Is a violation of the basic principles of tax that 48 00:02:46,360 --> 00:02:50,080 Speaker 4: we've always had. So if you, for example, the value 49 00:02:50,200 --> 00:02:52,960 Speaker 4: owned some shares in come Wealth Bank of Australia, which 50 00:02:52,960 --> 00:02:54,560 Speaker 4: a lot of the listeners here would own, comme Wealth 51 00:02:54,600 --> 00:02:57,960 Speaker 4: Bank shares, it's gone up from one hundred dollars to 52 00:02:57,960 --> 00:03:00,760 Speaker 4: one hundred and sixty dollars, and say within your portfolio, 53 00:03:00,880 --> 00:03:05,480 Speaker 4: that means that you've gone from you know, three million 54 00:03:05,520 --> 00:03:08,840 Speaker 4: to three and a half million within your super fund. 55 00:03:08,880 --> 00:03:12,160 Speaker 4: But you haven't sold any of these shares. You're now 56 00:03:12,200 --> 00:03:16,240 Speaker 4: going to pay at tax on that unrealized gain. So 57 00:03:16,280 --> 00:03:18,920 Speaker 4: even though you haven't sold the shares, that's still going 58 00:03:18,960 --> 00:03:19,840 Speaker 4: to form part. 59 00:03:19,600 --> 00:03:22,280 Speaker 2: Of a tax effectively a taxable. 60 00:03:21,800 --> 00:03:26,080 Speaker 4: Component and earnings, and that that's going to be a 61 00:03:26,120 --> 00:03:28,519 Speaker 4: purport I think interesting to point out also that it's 62 00:03:28,520 --> 00:03:33,920 Speaker 4: a proportion, so not to get too technical, but you 63 00:03:33,960 --> 00:03:38,160 Speaker 4: know the portion of the gain is three and a 64 00:03:38,200 --> 00:03:42,760 Speaker 4: half million divided by three million. That above as a 65 00:03:42,800 --> 00:03:46,000 Speaker 4: percentage is going to be the taxable multiplied by fifteen percent. 66 00:03:47,360 --> 00:03:48,840 Speaker 3: Even though you haven't sold anything. 67 00:03:49,360 --> 00:03:51,520 Speaker 1: So you're going to get a bill for the improvement 68 00:03:51,560 --> 00:03:55,960 Speaker 1: in value, paper improvement theoretical to some extent, hypothetical to 69 00:03:55,960 --> 00:03:59,480 Speaker 1: some extent improvement in value, and you're going to have 70 00:03:59,520 --> 00:04:01,000 Speaker 1: to pay that bill straight up. 71 00:04:01,080 --> 00:04:03,360 Speaker 2: You've got to pay it up, Yes, every year? 72 00:04:03,600 --> 00:04:07,920 Speaker 1: Okay. So so and then obviously the big concern then 73 00:04:08,440 --> 00:04:11,320 Speaker 1: across the market and among our listeners is it going 74 00:04:11,320 --> 00:04:13,360 Speaker 1: to affect me? And you might say, oh, well, it's 75 00:04:13,400 --> 00:04:15,680 Speaker 1: unlikely three million. I'm never going to have three million 76 00:04:15,680 --> 00:04:20,760 Speaker 1: in super But here's the thing, folks, it's unindexed and 77 00:04:21,400 --> 00:04:26,960 Speaker 1: what that means is that it never changes and three 78 00:04:27,040 --> 00:04:30,360 Speaker 1: million or a lower figure of which it could be 79 00:04:30,440 --> 00:04:33,200 Speaker 1: lowered of course in parliament because the new government has 80 00:04:33,240 --> 00:04:35,640 Speaker 1: a lot of power now, the Greens want it lowered. 81 00:04:35,839 --> 00:04:37,760 Speaker 1: They want it lower to two million. But the issue 82 00:04:37,800 --> 00:04:40,600 Speaker 1: is that two million today might sound a lot. Two 83 00:04:40,640 --> 00:04:42,839 Speaker 1: million when you retire in ten years time or twenty 84 00:04:42,880 --> 00:04:45,800 Speaker 1: years time will not be as much as you think. 85 00:04:45,880 --> 00:04:48,040 Speaker 1: I mean a million dollar house, Hey, one in three 86 00:04:48,040 --> 00:04:50,280 Speaker 1: houses in Australia, what's the million dollars? The point I'm 87 00:04:50,320 --> 00:04:53,960 Speaker 1: making is because this new tax is very controversial in 88 00:04:54,000 --> 00:04:56,599 Speaker 1: its nature. And then it's not index for inflation, and 89 00:04:56,640 --> 00:04:58,720 Speaker 1: the treasure keeps holding out on this. He has no 90 00:04:58,760 --> 00:05:01,560 Speaker 1: intention of changing it. He said, this is I think 91 00:05:01,600 --> 00:05:06,640 Speaker 1: what is really making people uneasy, and that this nature, 92 00:05:06,800 --> 00:05:13,239 Speaker 1: this technique of taxing paper gains could start to become 93 00:05:13,279 --> 00:05:15,719 Speaker 1: common in the system. Okay, so what don't you? 94 00:05:16,040 --> 00:05:16,400 Speaker 2: I thought. 95 00:05:16,880 --> 00:05:20,320 Speaker 1: What I tried to do was to put together some questions. 96 00:05:20,640 --> 00:05:25,240 Speaker 1: The first question is from Ross, is there any logical 97 00:05:25,360 --> 00:05:32,520 Speaker 1: economic reason to have tax breaks in super anyway? Reasonable question? 98 00:05:32,600 --> 00:05:34,520 Speaker 1: Why is there tax breaks for a super anyway? 99 00:05:34,839 --> 00:05:36,599 Speaker 4: We've got it, we used to have a three pillar 100 00:05:36,800 --> 00:05:39,440 Speaker 4: or we've got a three pillar sort of retirement saving system, 101 00:05:39,600 --> 00:05:43,080 Speaker 4: you know, your your own savings, your superannuation, and government support. 102 00:05:43,839 --> 00:05:47,480 Speaker 4: So the idea of superannuation when it was introduced, you know, 103 00:05:47,520 --> 00:05:50,480 Speaker 4: back in ninety two, was that people are going to 104 00:05:50,520 --> 00:05:53,560 Speaker 4: be able to be self funded to some extent. How 105 00:05:53,600 --> 00:05:56,799 Speaker 4: do you incentivize people to be self funded? You've effectively 106 00:05:56,800 --> 00:06:00,360 Speaker 4: got to give them tax benefits, so otherwise what would 107 00:06:00,360 --> 00:06:03,080 Speaker 4: be the benefit in them doing so? So I think 108 00:06:03,120 --> 00:06:07,520 Speaker 4: it's a very good question from Ross, and I get 109 00:06:07,600 --> 00:06:11,320 Speaker 4: from a budget deficit point of view, there's an argument 110 00:06:11,360 --> 00:06:15,000 Speaker 4: there that it should be taxable. But individually, I think 111 00:06:15,040 --> 00:06:17,839 Speaker 4: if the government's been able to get their fifteen percent 112 00:06:17,920 --> 00:06:21,800 Speaker 4: tax on earnings throughout their working life, you know, when 113 00:06:21,800 --> 00:06:24,000 Speaker 4: it goes into the draw down phase of pension and 114 00:06:24,000 --> 00:06:28,120 Speaker 4: they get it at nil. That's and again we're not 115 00:06:28,160 --> 00:06:30,840 Speaker 4: talking about one hundred million dollar super funds. We're talking 116 00:06:30,839 --> 00:06:33,240 Speaker 4: about mainstream, every day austraints that might have one to 117 00:06:33,320 --> 00:06:37,200 Speaker 4: two million. I think it's entirely appropriate to give them 118 00:06:37,240 --> 00:06:41,520 Speaker 4: the tax break. I suppose in you once there where 119 00:06:41,520 --> 00:06:43,359 Speaker 4: the government's been clever is when you are in that 120 00:06:43,440 --> 00:06:46,039 Speaker 4: drawdown phase, the government does make you draw the money out. 121 00:06:46,560 --> 00:06:48,440 Speaker 4: You know, there's the four percent, then it goes to 122 00:06:48,480 --> 00:06:50,560 Speaker 4: five percent, and once you get to ninety five it's 123 00:06:50,839 --> 00:06:53,960 Speaker 4: like fourteen percent. So you do get the tax benefit, 124 00:06:54,000 --> 00:06:56,919 Speaker 4: but that money is going to come out of the 125 00:06:56,960 --> 00:06:57,839 Speaker 4: system ultimately. 126 00:06:58,080 --> 00:07:01,080 Speaker 1: And I suppose an argument that I think the strongest 127 00:07:01,200 --> 00:07:04,679 Speaker 1: argument of all is that this is these tax breaks 128 00:07:04,680 --> 00:07:08,160 Speaker 1: in super are not a cost very simply because even 129 00:07:08,200 --> 00:07:11,720 Speaker 1: though Australia is going to have a very large portion 130 00:07:11,800 --> 00:07:15,880 Speaker 1: of the population that are older in the future and 131 00:07:15,920 --> 00:07:19,080 Speaker 1: we were heading towards big trouble if on that basis, 132 00:07:19,400 --> 00:07:23,960 Speaker 1: But believe it or not, pension as a portion of 133 00:07:24,000 --> 00:07:26,720 Speaker 1: the national budget is actually going to decrease in the future, 134 00:07:27,160 --> 00:07:31,920 Speaker 1: and that is because there is that system which allows 135 00:07:31,960 --> 00:07:36,400 Speaker 1: individuals incentivizes them to have their own super goes all 136 00:07:36,400 --> 00:07:38,240 Speaker 1: the way back to Paul Keating and incentives who are 137 00:07:38,240 --> 00:07:40,680 Speaker 1: in there at the very start, and they make as 138 00:07:40,720 --> 00:07:43,160 Speaker 1: much sense as ever I think. In answer to your 139 00:07:43,280 --> 00:07:46,560 Speaker 1: question Ross, the other part of your question is he says, 140 00:07:46,840 --> 00:07:51,320 Speaker 1: I don't think taxing unrealized gains is justifiable or manageable. 141 00:07:51,760 --> 00:07:54,480 Speaker 1: Why don't they just tax the realized gains when they occur? 142 00:07:54,880 --> 00:07:57,040 Speaker 1: Why don't they just tax the realized gains? That's why 143 00:07:57,040 --> 00:08:00,640 Speaker 1: they always do what's this idea of paper game? Why 144 00:08:00,680 --> 00:08:01,200 Speaker 1: they do that? 145 00:08:01,560 --> 00:08:05,880 Speaker 4: When you go through the inquiries that happened a year 146 00:08:06,000 --> 00:08:10,240 Speaker 4: or two ago when they were talking about putting Div 147 00:08:10,240 --> 00:08:12,960 Speaker 4: two ninety six in, it was actually that the systems 148 00:08:13,000 --> 00:08:16,200 Speaker 4: couldn't handle the administration of it, in particular things like 149 00:08:16,280 --> 00:08:18,960 Speaker 4: industry funds and the like. So the self made super 150 00:08:18,960 --> 00:08:22,520 Speaker 4: fund Association kind of said, well, hang on, we can 151 00:08:23,760 --> 00:08:26,960 Speaker 4: directly break down our components, so let's do it that way. 152 00:08:27,000 --> 00:08:29,800 Speaker 4: But the government was pretty clear they want just one 153 00:08:30,120 --> 00:08:34,680 Speaker 4: one system and the administration cost to get it to 154 00:08:34,760 --> 00:08:38,600 Speaker 4: be able to do the realized versus unrealized was just 155 00:08:38,640 --> 00:08:40,040 Speaker 4: too expensive to do. 156 00:08:40,240 --> 00:08:43,520 Speaker 1: Unfortunately, that's their explanation. Okay, we can kick that around 157 00:08:43,559 --> 00:08:45,240 Speaker 1: as much as we want, but that's their explanation. 158 00:08:45,360 --> 00:08:47,520 Speaker 2: All too hard, and we agree it makes no sense. 159 00:08:47,520 --> 00:08:50,959 Speaker 1: We agree it makes no sense for us. We are 160 00:08:51,040 --> 00:08:54,400 Speaker 1: in furious agreement on that. Can you see the next 161 00:08:54,440 --> 00:08:57,760 Speaker 1: question from Ryan. I'm just interested in the second part 162 00:08:57,800 --> 00:09:00,080 Speaker 1: here where he talks about what he has to pee. 163 00:09:00,559 --> 00:09:05,480 Speaker 4: Yeah, So here we've got Ryan saying I've got to 164 00:09:05,480 --> 00:09:08,920 Speaker 4: pay land tax and council rates in South Australia and Queensland. 165 00:09:08,960 --> 00:09:11,079 Speaker 4: And this is based on the estimated value of the land. 166 00:09:11,600 --> 00:09:14,520 Speaker 4: These are a mixture of investments and owner occupier. The 167 00:09:14,600 --> 00:09:17,360 Speaker 4: land value has gone up, but also in the meantime, 168 00:09:17,360 --> 00:09:19,720 Speaker 4: my taxes on this land keep going up. Does this 169 00:09:19,800 --> 00:09:23,880 Speaker 4: qualify as paying tax for in brackets unrealized gains? 170 00:09:24,120 --> 00:09:25,760 Speaker 1: Yeah, well what do you think. 171 00:09:25,800 --> 00:09:28,959 Speaker 4: One hundred percent? You know, we typically don't see them 172 00:09:28,960 --> 00:09:31,480 Speaker 4: going down. And James, you and I had a conversation 173 00:09:31,559 --> 00:09:33,360 Speaker 4: on this the other day, saying this is. 174 00:09:33,400 --> 00:09:35,440 Speaker 2: Exactly where they got it from. 175 00:09:35,480 --> 00:09:38,080 Speaker 4: It feels like with the land, everyone feels good the 176 00:09:38,160 --> 00:09:42,559 Speaker 4: land's going up, so people are happy to pay you know, higher. 177 00:09:42,320 --> 00:09:47,400 Speaker 3: Rates, more land tax. But again it's there's a really. 178 00:09:47,200 --> 00:09:49,560 Speaker 4: Good argument that it doesn't cost the government a lot 179 00:09:49,640 --> 00:09:52,800 Speaker 4: more just because your value has gone up. There's a 180 00:09:52,880 --> 00:09:55,439 Speaker 4: lot of these taxes that come in, but this is 181 00:09:55,600 --> 00:09:58,280 Speaker 4: this is definitely a case of an unrealized gains tax. 182 00:09:58,360 --> 00:10:01,559 Speaker 1: So it's like so like land tax issues written in 183 00:10:01,640 --> 00:10:05,880 Speaker 1: large really in that at least often with land tax, 184 00:10:05,920 --> 00:10:09,040 Speaker 1: it's land right to sitting on a farm, and it 185 00:10:09,120 --> 00:10:13,000 Speaker 1: might be furious and infuriating to know that the land 186 00:10:13,040 --> 00:10:15,440 Speaker 1: tax has gone up if your income went down, for instance, 187 00:10:15,480 --> 00:10:19,520 Speaker 1: in a year. However it is it is. It is 188 00:10:19,559 --> 00:10:23,320 Speaker 1: a tangible acid. But if it was something much more volatile, 189 00:10:23,360 --> 00:10:25,079 Speaker 1: like a share which you mentioned at the start. You 190 00:10:25,160 --> 00:10:27,439 Speaker 1: mentioned a great year collin well Bank, but it might 191 00:10:27,559 --> 00:10:30,000 Speaker 1: become well Bank. It might be at my gold mining 192 00:10:30,040 --> 00:10:32,319 Speaker 1: company that just goes up one hundred percent one year 193 00:10:32,360 --> 00:10:35,000 Speaker 1: in falls ninety percent the next. That's where there's real 194 00:10:35,040 --> 00:10:39,160 Speaker 1: problems I think coming down the line. Okay, Russell says, 195 00:10:39,720 --> 00:10:44,120 Speaker 1: there's a lot of talk recently after the election about 196 00:10:44,120 --> 00:10:48,040 Speaker 1: the unrealized gainst tax on super for over three million 197 00:10:48,120 --> 00:10:51,480 Speaker 1: or maybe even two million. The reason Russell says it 198 00:10:51,559 --> 00:10:54,160 Speaker 1: might be two million is because the Greens have the 199 00:10:54,200 --> 00:10:56,440 Speaker 1: balance of power in the Senate, and the Greens have 200 00:10:56,559 --> 00:11:00,520 Speaker 1: said they will support this new tax on unrealized gains, 201 00:11:00,880 --> 00:11:04,360 Speaker 1: but only if the government drop it from three million 202 00:11:04,400 --> 00:11:06,440 Speaker 1: to two million. So you can see this is a 203 00:11:06,480 --> 00:11:09,640 Speaker 1: movable feast to some extent. Now, Russell says, I wonder 204 00:11:09,679 --> 00:11:13,800 Speaker 1: whether the three million amount applies to each individual fund 205 00:11:14,320 --> 00:11:18,160 Speaker 1: a person holds. Could someone holds, say two million in 206 00:11:18,200 --> 00:11:21,200 Speaker 1: each of three separate funds and avoid the tax, or 207 00:11:21,240 --> 00:11:24,719 Speaker 1: does the total mean the tax will apply? So how 208 00:11:24,840 --> 00:11:27,040 Speaker 1: is it applied? Is it? Is it per fund? Is 209 00:11:27,080 --> 00:11:28,080 Speaker 1: it per individual? 210 00:11:28,440 --> 00:11:29,240 Speaker 3: Is it it? 211 00:11:29,280 --> 00:11:32,079 Speaker 1: Does it try to capture everything the individual has in 212 00:11:32,120 --> 00:11:33,280 Speaker 1: the supersystem. 213 00:11:33,840 --> 00:11:37,080 Speaker 4: It's you're the total super that you've got in the system, okay, 214 00:11:37,160 --> 00:11:37,959 Speaker 4: attributable to you. 215 00:11:38,080 --> 00:11:40,319 Speaker 1: It doesn't matter whether if you've got some in an 216 00:11:40,320 --> 00:11:43,160 Speaker 1: industry fund and some in AMP or a bank and 217 00:11:43,200 --> 00:11:48,560 Speaker 1: something else in your SMSF. They count the entirety you 218 00:11:48,640 --> 00:11:52,200 Speaker 1: have in all your super accounts and the degree to 219 00:11:52,240 --> 00:11:55,600 Speaker 1: which that combined number moves higher. 220 00:11:55,679 --> 00:11:57,920 Speaker 4: Yes, But if you have a spouse, they've got a 221 00:11:57,920 --> 00:12:01,439 Speaker 4: different number to you. So so a husband and wife can 222 00:12:01,480 --> 00:12:06,200 Speaker 4: effectively have six million dollars in total superannuation. An individual 223 00:12:06,280 --> 00:12:08,760 Speaker 4: can have three. And I think where this kind of 224 00:12:09,040 --> 00:12:11,560 Speaker 4: question and a little bit of confusion comes from is, 225 00:12:11,960 --> 00:12:13,840 Speaker 4: you know, with the bank sales the government two hundred 226 00:12:13,880 --> 00:12:16,680 Speaker 4: and fifty thousand dollars bank guarantee, but then you could 227 00:12:16,679 --> 00:12:19,080 Speaker 4: have a million dollars split across four and you've got 228 00:12:19,120 --> 00:12:22,479 Speaker 4: the guarantee for a million. So there's been some inconsistency 229 00:12:22,600 --> 00:12:26,360 Speaker 4: in government policy that leads, you know, the poor listeners 230 00:12:26,360 --> 00:12:29,480 Speaker 4: to kind of wonder had the best play it in 231 00:12:29,520 --> 00:12:30,480 Speaker 4: the best possible way. 232 00:12:30,600 --> 00:12:33,320 Speaker 1: So a lot and clear Russell, the tax is applied 233 00:12:33,360 --> 00:12:35,760 Speaker 1: on an individual basis on the total amounts you have 234 00:12:35,840 --> 00:12:39,800 Speaker 1: in super so. Again, you see that headline number sounds big, 235 00:12:40,000 --> 00:12:43,240 Speaker 1: and it is big, and the amount of argument that 236 00:12:43,600 --> 00:12:46,440 Speaker 1: anyone can live very comfortably on those numbers in super so. 237 00:12:46,559 --> 00:12:49,360 Speaker 1: It's not the headline number that really matters that everyone 238 00:12:49,440 --> 00:12:53,040 Speaker 1: is worried about, concerned about. It's the nature of the 239 00:12:53,080 --> 00:12:56,200 Speaker 1: tax that it's paper gains or on regalized gains. This 240 00:12:56,280 --> 00:13:00,160 Speaker 1: is the core of the issue. Okay, Now, hopefully I've 241 00:13:00,200 --> 00:13:03,200 Speaker 1: met a fairly good fist of explaining the basics. We've 242 00:13:03,200 --> 00:13:06,040 Speaker 1: got some really good questions now coming up about how 243 00:13:06,080 --> 00:13:13,880 Speaker 1: it all works. Maybe back in a moment, Hello, and 244 00:13:13,920 --> 00:13:16,959 Speaker 1: welcome back to The Australian's Money Puzzle. James Kirby here 245 00:13:17,000 --> 00:13:20,360 Speaker 1: talking to Hugh Robertson of Centaur Financial Services, and we 246 00:13:20,440 --> 00:13:22,880 Speaker 1: are talking about the new supertax and what I'm trying 247 00:13:22,880 --> 00:13:27,439 Speaker 1: to do today, folks, is to allow you to understand 248 00:13:27,760 --> 00:13:30,120 Speaker 1: the nature of the tax, the design of the tax, 249 00:13:30,600 --> 00:13:33,040 Speaker 1: how it's actually going to work. I've had so many 250 00:13:33,160 --> 00:13:36,520 Speaker 1: questions and I've collected your questions into a special episode 251 00:13:36,559 --> 00:13:39,160 Speaker 1: of the show. We are not in the business of 252 00:13:39,240 --> 00:13:42,640 Speaker 1: winding up how it might or might not happen. I'm 253 00:13:42,640 --> 00:13:45,480 Speaker 1: not really interested in the political dimension of this is 254 00:13:45,480 --> 00:13:49,920 Speaker 1: it's entirely from an investor point of view. What's happening, 255 00:13:50,200 --> 00:13:53,120 Speaker 1: how will it come to pass? What will it mean? Okay, 256 00:13:53,520 --> 00:13:56,640 Speaker 1: sticking to your questions, this question is from Lil She says, 257 00:13:56,679 --> 00:14:01,000 Speaker 1: with looming changes to the tax treatment of superannuation, it's 258 00:14:01,040 --> 00:14:04,920 Speaker 1: time to seriously look at tax efficient structures outside of super. 259 00:14:05,000 --> 00:14:08,679 Speaker 1: And now I'd love if you would provide an episode 260 00:14:08,800 --> 00:14:12,280 Speaker 1: on investment bonds also known as insurance bonds or indeed 261 00:14:12,440 --> 00:14:16,679 Speaker 1: education bonds. An increasing number of financial planets are highlighting 262 00:14:16,679 --> 00:14:19,560 Speaker 1: this as an alternative outside of super Yes they are, 263 00:14:20,520 --> 00:14:25,160 Speaker 1: and we have covered this area. And I will say 264 00:14:25,240 --> 00:14:28,400 Speaker 1: to you, Lil that most people, most on the time 265 00:14:28,440 --> 00:14:32,480 Speaker 1: on the show have not been particularly supportive of them. 266 00:14:33,600 --> 00:14:36,360 Speaker 1: And generally the advisors I have on the show, who 267 00:14:36,360 --> 00:14:40,760 Speaker 1: tend to be top advisors in their field, will say 268 00:14:40,800 --> 00:14:45,920 Speaker 1: that there's better deals elsewhere. Basically, Hugh, you might answer 269 00:14:45,960 --> 00:14:49,400 Speaker 1: that one and maybe perhaps this time around give you 270 00:14:49,440 --> 00:14:53,800 Speaker 1: give a wider lens on it for Lil that to 271 00:14:53,920 --> 00:14:56,480 Speaker 1: some people it probably doesn't make sense, but there there 272 00:14:56,520 --> 00:14:58,120 Speaker 1: is a layer where it might make sense. 273 00:14:58,600 --> 00:15:03,200 Speaker 4: So an investment bond is an internally taxed product. It 274 00:15:03,440 --> 00:15:07,120 Speaker 4: originally came out of insurance law, so it had different 275 00:15:07,280 --> 00:15:10,280 Speaker 4: rules and regulations to the normal investment trusts that we had. 276 00:15:10,680 --> 00:15:15,040 Speaker 4: So it's internally taxed up to thirty percent, and then 277 00:15:15,160 --> 00:15:18,320 Speaker 4: there's some really good rules there. If you hold the 278 00:15:18,360 --> 00:15:22,400 Speaker 4: bond itself for ten years, it's actually CGT. 279 00:15:21,880 --> 00:15:26,440 Speaker 3: Three and then it's pro routed over the year's eight. 280 00:15:26,320 --> 00:15:27,800 Speaker 2: To nine as well. 281 00:15:28,280 --> 00:15:31,640 Speaker 4: The benefits of it are within the actual bond itself. 282 00:15:31,680 --> 00:15:34,080 Speaker 2: You could get if you had a. 283 00:15:33,480 --> 00:15:37,520 Speaker 4: You know, one hundred percent fully franked share fund in 284 00:15:37,560 --> 00:15:40,000 Speaker 4: there for a strange share fund, for example, you would 285 00:15:40,040 --> 00:15:42,960 Speaker 4: pay less than the thirty percent tax. And there's another 286 00:15:43,000 --> 00:15:46,560 Speaker 4: really good benefit of the insurance bonds that you can 287 00:15:46,640 --> 00:15:49,200 Speaker 4: switch switch them out CGT three. 288 00:15:49,240 --> 00:15:50,960 Speaker 2: So if I've had really. 289 00:15:50,720 --> 00:15:53,800 Speaker 4: Good gains in an international share within the insurance bond product, 290 00:15:54,120 --> 00:15:55,920 Speaker 4: I could then transfer that And I had a call 291 00:15:55,960 --> 00:15:58,960 Speaker 4: that with Trump, you know, Presidency, maybe I want to 292 00:15:59,000 --> 00:16:01,600 Speaker 4: go back to Australian share. I could switch that investment 293 00:16:01,640 --> 00:16:04,800 Speaker 4: out and not pay capital gains tax, which. 294 00:16:04,600 --> 00:16:05,160 Speaker 2: Is really good. 295 00:16:05,160 --> 00:16:08,000 Speaker 4: There's some advantages on when you draw money out of 296 00:16:08,080 --> 00:16:09,200 Speaker 4: thirty percent credit. 297 00:16:10,080 --> 00:16:12,080 Speaker 3: But when you look at who's. 298 00:16:11,800 --> 00:16:14,640 Speaker 4: Going to use them, typically it would be if you 299 00:16:15,560 --> 00:16:20,800 Speaker 4: traditional let's say traditionally it's been used with grandparents typically 300 00:16:20,800 --> 00:16:23,840 Speaker 4: helping out grandchildren is a bit of a savings account 301 00:16:23,840 --> 00:16:25,840 Speaker 4: for them that they're going to access when they're eighteen 302 00:16:25,920 --> 00:16:27,280 Speaker 4: or twenty one or twenty. 303 00:16:26,960 --> 00:16:30,080 Speaker 1: Five, don't. They often promote them as education bonds, though 304 00:16:30,120 --> 00:16:33,400 Speaker 1: that there's no thing really they are investment bonds. Yes, 305 00:16:33,680 --> 00:16:36,920 Speaker 1: could you explain how they sell them or traditionally said 306 00:16:36,960 --> 00:16:40,480 Speaker 1: to people their education bonds and people I think part 307 00:16:40,520 --> 00:16:43,720 Speaker 1: of the problem was they misled people thinking they were 308 00:16:43,800 --> 00:16:47,120 Speaker 1: specially for education. They're not. They just happened to be 309 00:16:47,600 --> 00:16:50,280 Speaker 1: tax effective. Long term investment fear because that if you 310 00:16:50,440 --> 00:16:53,760 Speaker 1: were able and committed to saving for ten years, even 311 00:16:53,760 --> 00:16:56,960 Speaker 1: with a straight salary, no tricks, no companies on the side, 312 00:16:57,040 --> 00:17:01,880 Speaker 1: you actually get as substantial tax been. Is it better 313 00:17:01,920 --> 00:17:02,400 Speaker 1: than Super? 314 00:17:03,080 --> 00:17:06,080 Speaker 4: No, it's a tax but charge where you say, if 315 00:17:06,080 --> 00:17:08,640 Speaker 4: you're a high income earner and you can make sure 316 00:17:08,720 --> 00:17:11,280 Speaker 4: the tax you pay is thirty percent versus your marginal 317 00:17:11,320 --> 00:17:14,720 Speaker 4: tax rate, it's that's better. So if you're on forty 318 00:17:14,760 --> 00:17:17,320 Speaker 4: five cents in the dollar, thirty cents is obviously better, 319 00:17:17,359 --> 00:17:21,520 Speaker 4: but Super is better because it's fifteen. The challenge that 320 00:17:21,560 --> 00:17:23,960 Speaker 4: you've got is with Super, it's you know, you're not 321 00:17:24,040 --> 00:17:26,439 Speaker 4: able to access it until you meet a condition of release, 322 00:17:27,119 --> 00:17:29,880 Speaker 4: which is usually sixty and retired is probably the most 323 00:17:29,880 --> 00:17:33,919 Speaker 4: common one where and the bonds. The bonds kind of 324 00:17:34,080 --> 00:17:36,800 Speaker 4: are having a bit of a revival right now with 325 00:17:37,240 --> 00:17:40,359 Speaker 4: the two nine six. There is opportunity definitely something worth 326 00:17:40,440 --> 00:17:43,159 Speaker 4: looking at. What you really want to see, though, is 327 00:17:43,160 --> 00:17:44,960 Speaker 4: what are the fees and charges involved. 328 00:17:45,000 --> 00:17:45,919 Speaker 3: You want to see what. 329 00:17:45,800 --> 00:17:48,160 Speaker 2: The product choices are. 330 00:17:48,840 --> 00:17:52,359 Speaker 4: The conversations that you and I James have had you 331 00:17:52,440 --> 00:17:54,840 Speaker 4: know in prior podcast, would be that if you're a 332 00:17:54,920 --> 00:17:57,800 Speaker 4: high net Wells investor, you could instead of utilizing the 333 00:17:57,800 --> 00:18:02,200 Speaker 4: insurance bond product, probably just go and start up and 334 00:18:02,560 --> 00:18:05,360 Speaker 4: own sort of your own company, you know, which costs 335 00:18:05,359 --> 00:18:06,760 Speaker 4: a couple hundred bucks to set up. 336 00:18:06,720 --> 00:18:09,280 Speaker 1: Which is which is thirty percent, which is the same 337 00:18:09,320 --> 00:18:11,280 Speaker 1: as the tax applied on the bond. 338 00:18:11,400 --> 00:18:14,119 Speaker 4: Yes, and then you can have the product choice that 339 00:18:14,200 --> 00:18:18,879 Speaker 4: you want as opposed to a limited range of investment bonds. Okay, 340 00:18:19,000 --> 00:18:22,160 Speaker 4: but I do note that all the investment bond companies 341 00:18:22,160 --> 00:18:24,320 Speaker 4: are heavily invested in their products now to try and 342 00:18:24,680 --> 00:18:27,600 Speaker 4: take advantage of this opportunity with the DIP two ninety six. 343 00:18:27,720 --> 00:18:30,200 Speaker 1: Yes, golden moment for them, because they're saying, hey, there 344 00:18:30,240 --> 00:18:34,360 Speaker 1: is another tax break for the for the average earner 345 00:18:35,040 --> 00:18:36,840 Speaker 1: that you may not have known about. Us ade of 346 00:18:36,840 --> 00:18:40,680 Speaker 1: super we're here all the time. There is some advantages 347 00:18:40,720 --> 00:18:42,840 Speaker 1: to those to some people in some situations. I think 348 00:18:42,840 --> 00:18:45,160 Speaker 1: he was saying, but as an alternative to super, it's true, 349 00:18:45,200 --> 00:18:48,280 Speaker 1: doesn't beat it. And as you say, as an alternative 350 00:18:48,320 --> 00:18:53,399 Speaker 1: to high income super or wealth super affected by this 351 00:18:53,680 --> 00:18:56,520 Speaker 1: forthcoming tax division two ninety six, this new super tax. 352 00:18:57,119 --> 00:18:59,879 Speaker 1: It's it doesn't it. It doesn't give you anything like 353 00:19:00,000 --> 00:19:01,960 Speaker 1: the options you had if you had a company, for instance, 354 00:19:02,480 --> 00:19:04,560 Speaker 1: or Super itself, where you can you know whatever, it's 355 00:19:04,600 --> 00:19:07,120 Speaker 1: failings and it's restrictions. You can buy anything you want 356 00:19:07,520 --> 00:19:10,040 Speaker 1: more or less. While the investment found the you must 357 00:19:10,040 --> 00:19:11,159 Speaker 1: buy what's on the menu. 358 00:19:11,400 --> 00:19:12,320 Speaker 3: That's a good summary. 359 00:19:12,400 --> 00:19:15,800 Speaker 1: Oh okay, yeah, all right, say but I suppose to 360 00:19:15,840 --> 00:19:19,600 Speaker 1: the wider issue than Lil's question, whereas whereas can you 361 00:19:19,680 --> 00:19:24,280 Speaker 1: go if you don't like Super and you don't like 362 00:19:24,320 --> 00:19:27,520 Speaker 1: what's happening. Another thing I suppose that's worth mentioning that 363 00:19:27,520 --> 00:19:30,600 Speaker 1: people shouldn't forget is that, in fact, outside of Super, 364 00:19:30,640 --> 00:19:36,000 Speaker 1: say you're retired, you don't pay tax anyway. No one 365 00:19:36,040 --> 00:19:38,520 Speaker 1: pays tax up to what nineteen now is it nineteen 366 00:19:38,520 --> 00:19:41,600 Speaker 1: thousand dollars. Your first nineteen thousand is tax free. So 367 00:19:41,960 --> 00:19:42,680 Speaker 1: keep that in mind. 368 00:19:42,920 --> 00:19:45,200 Speaker 4: You and I think they're saying because I went onto 369 00:19:45,400 --> 00:19:47,960 Speaker 4: a tax calculated before and thought, well, what if we 370 00:19:48,000 --> 00:19:51,399 Speaker 4: had retirees only sixty thousand dollars a year, just individual 371 00:19:51,480 --> 00:19:55,159 Speaker 4: retire if they owned sixty thousand dollars a year without 372 00:19:55,320 --> 00:19:58,560 Speaker 4: any of the you know, any deductions to Super or 373 00:19:58,600 --> 00:20:01,080 Speaker 4: anything that pay around. 374 00:20:01,680 --> 00:20:04,200 Speaker 3: It was around seven thousand dollars in tax. 375 00:20:04,760 --> 00:20:06,920 Speaker 4: Yeah, so sixty thousand dollars sorry, and it was Yeah, 376 00:20:07,040 --> 00:20:10,000 Speaker 4: the numbers there told me they'd get a low income 377 00:20:10,040 --> 00:20:14,040 Speaker 4: tax off set, they'd get Medicare, yes, and on sixty 378 00:20:14,080 --> 00:20:16,920 Speaker 4: thousand dollars they'd pay nine eight hundred and eighty eight 379 00:20:16,920 --> 00:20:19,560 Speaker 4: in tax, which is about sixteen and a half percent. Yes, 380 00:20:20,240 --> 00:20:22,600 Speaker 4: so he kind of go, so it's not Yeah, you 381 00:20:22,640 --> 00:20:24,639 Speaker 4: had a husband and wife earned sixty thousand each from 382 00:20:24,640 --> 00:20:28,920 Speaker 4: an investment. They're paying about the super rate and that's 383 00:20:28,960 --> 00:20:32,479 Speaker 4: better than a thirty percent rates you would pay inside 384 00:20:32,480 --> 00:20:35,600 Speaker 4: a bond. So don't forget our personal tax rates matter. 385 00:20:35,480 --> 00:20:38,760 Speaker 1: On the street. Simple income tax rates from the ETL. 386 00:20:39,600 --> 00:20:42,639 Speaker 1: Your first individually, your first nineteen thousand, isn't it? 387 00:20:42,640 --> 00:20:44,359 Speaker 3: It was eighteen thousand, two hundred. 388 00:20:45,560 --> 00:20:48,679 Speaker 1: Course with a cigar, eighteen thousand, two hundred. Okay, thank you? 389 00:20:49,320 --> 00:20:52,800 Speaker 1: All right, now can you read the question from Paul? 390 00:20:53,040 --> 00:20:54,200 Speaker 3: So this is from Paul. 391 00:20:54,359 --> 00:20:56,960 Speaker 4: He's asked it may be unfair, but couldn't those who 392 00:20:56,960 --> 00:21:00,520 Speaker 4: were worried about the unfair taxation of unrealized gains just 393 00:21:00,560 --> 00:21:05,560 Speaker 4: remove their farms, businesses other well from super Paul. To 394 00:21:05,640 --> 00:21:07,320 Speaker 4: do that, you've got to be able to meet the 395 00:21:07,359 --> 00:21:11,600 Speaker 4: condition of release first, you know, and typically we just 396 00:21:11,640 --> 00:21:13,679 Speaker 4: sort of commented on that before that you've got to 397 00:21:13,680 --> 00:21:16,640 Speaker 4: be aged over sixty and retired or age sixty five, 398 00:21:17,240 --> 00:21:22,199 Speaker 4: and in which case then then you could without penalties. 399 00:21:23,480 --> 00:21:25,520 Speaker 3: So from that perspective you could. 400 00:21:25,560 --> 00:21:28,800 Speaker 4: But the people that are in that a big farmer, 401 00:21:29,000 --> 00:21:31,800 Speaker 4: you know, they might not be able to do that 402 00:21:31,880 --> 00:21:35,119 Speaker 4: right now because they're not of age or a condition 403 00:21:35,200 --> 00:21:37,480 Speaker 4: of release to get the money out. 404 00:21:37,560 --> 00:21:39,399 Speaker 1: So that was always the problem, wasn't it. With Silper 405 00:21:39,400 --> 00:21:42,000 Speaker 1: It's a lobster pot. You can put your money in, 406 00:21:42,160 --> 00:21:44,560 Speaker 1: you can't get it out to retire. And there was 407 00:21:44,600 --> 00:21:48,520 Speaker 1: always that fear that because it was trapped as such 408 00:21:48,760 --> 00:21:52,080 Speaker 1: a locked the government could change the rules while it 409 00:21:52,119 --> 00:21:54,160 Speaker 1: was locked in side, which is exactly what's happening right. 410 00:21:54,840 --> 00:21:56,760 Speaker 4: I suppose there's an even greater part of this is 411 00:21:56,760 --> 00:21:59,600 Speaker 4: that we want all the strains to have confidence in 412 00:21:59,600 --> 00:22:02,280 Speaker 4: the supernuation system, so they do that so that they 413 00:22:02,280 --> 00:22:05,439 Speaker 4: can become self funded to the best extent possible. And 414 00:22:05,840 --> 00:22:09,920 Speaker 4: I know the comments from our clients have been really 415 00:22:09,960 --> 00:22:12,159 Speaker 4: around that, well, it feels like they're just going to 416 00:22:12,200 --> 00:22:13,400 Speaker 4: keep changing the rules and. 417 00:22:13,400 --> 00:22:14,960 Speaker 2: It breeds that uncertainty. 418 00:22:15,680 --> 00:22:18,959 Speaker 4: But what we can take sort of from that is 419 00:22:19,600 --> 00:22:21,320 Speaker 4: from Paul's question, is that we are going to come 420 00:22:21,400 --> 00:22:24,160 Speaker 4: up with strategies for clients so that we're not going 421 00:22:24,200 --> 00:22:27,480 Speaker 4: to put them in that disadvantageous position. And really it's 422 00:22:27,480 --> 00:22:32,320 Speaker 4: the unrealized gains that's causing the biggest issue. And something 423 00:22:32,359 --> 00:22:35,200 Speaker 4: that I've said to you know, James previously as well, 424 00:22:35,320 --> 00:22:37,800 Speaker 4: is that there's about eighty thousand people that are going 425 00:22:37,840 --> 00:22:40,440 Speaker 4: to be impacted by this, and that's going to grow 426 00:22:40,680 --> 00:22:43,000 Speaker 4: about five six times over the next twenty thirty years. 427 00:22:43,000 --> 00:22:44,760 Speaker 4: So we're going to have about half a million people 428 00:22:45,320 --> 00:22:48,240 Speaker 4: that are going to be impacted by this two ninety six. 429 00:22:48,520 --> 00:22:52,800 Speaker 1: On its current settings and terms. Yeah, okay, Now what 430 00:22:52,840 --> 00:22:54,080 Speaker 1: we would do with the next part of the show 431 00:22:54,160 --> 00:22:56,400 Speaker 1: is we'll just happen look at some of the some 432 00:22:56,440 --> 00:22:58,520 Speaker 1: of the issues that are around, some of the speculation, 433 00:22:58,880 --> 00:23:01,640 Speaker 1: what might happen, where is it going to go, who 434 00:23:01,640 --> 00:23:03,720 Speaker 1: will it affect, how many will it affect in what way, 435 00:23:04,200 --> 00:23:06,359 Speaker 1: and what might go on in Parliament. There's really good 436 00:23:06,440 --> 00:23:16,159 Speaker 1: questions on that. Back in the moment, Hello and welcome 437 00:23:16,200 --> 00:23:19,679 Speaker 1: back to the Australian Special edition money puzzle on the 438 00:23:19,720 --> 00:23:22,920 Speaker 1: new supertax. Now, let me tell you something that something 439 00:23:22,960 --> 00:23:26,560 Speaker 1: that does infuriate people. Needless to say about this new 440 00:23:26,600 --> 00:23:33,720 Speaker 1: supertax is it's not applicable to some politicians who are 441 00:23:33,760 --> 00:23:38,000 Speaker 1: of course sitting there drafting it. That's one thing. And separately, 442 00:23:39,400 --> 00:23:45,000 Speaker 1: manny sor what would have been sior functionaries if you like, 443 00:23:45,000 --> 00:23:48,520 Speaker 1: in the government are undefined benefit funds that they're fading 444 00:23:48,560 --> 00:23:52,240 Speaker 1: away because they're not around much anymore. But all the 445 00:23:52,320 --> 00:23:57,080 Speaker 1: senior figures in the army and law and other public 446 00:23:57,119 --> 00:24:01,600 Speaker 1: service areas, including my add the ABC, are on defined 447 00:24:02,080 --> 00:24:06,080 Speaker 1: benefits and that means that they just get paid as 448 00:24:06,119 --> 00:24:09,359 Speaker 1: a promise of how much a certain amount every year 449 00:24:09,720 --> 00:24:11,879 Speaker 1: regardless of what happens. It doesn't matter if there's a 450 00:24:11,880 --> 00:24:15,959 Speaker 1: stock market crash. So it's a great number to be on. 451 00:24:16,400 --> 00:24:19,840 Speaker 1: Question from Stan is it possible for Labor and Greens 452 00:24:19,880 --> 00:24:25,040 Speaker 1: to include politicians over generous defined benefit scheme in their 453 00:24:25,080 --> 00:24:28,560 Speaker 1: proposed superinnuation tax to be fair to everyone. That's the 454 00:24:28,560 --> 00:24:31,280 Speaker 1: first part of stance question and the second And as 455 00:24:31,320 --> 00:24:33,639 Speaker 1: I say, folks, if you're sending you questions, send in 456 00:24:33,680 --> 00:24:36,640 Speaker 1: two or three. Anytime. I love to see multiple questions. 457 00:24:36,840 --> 00:24:40,200 Speaker 1: Stan also asks, is there a way to expose which 458 00:24:40,280 --> 00:24:45,920 Speaker 1: politicians have the highest superbalances from scamming taxpayers money, similar 459 00:24:46,000 --> 00:24:52,160 Speaker 1: to how the ATO publicizes who has the highest SMSF balances. Okay, Stan, 460 00:24:52,200 --> 00:24:55,120 Speaker 1: thank you for that. Now we just have to put 461 00:24:55,119 --> 00:24:58,160 Speaker 1: it on the table. The way it works, some politicians, 462 00:24:58,160 --> 00:25:01,520 Speaker 1: senior figures in parliament are a excluded under some laws. 463 00:25:01,680 --> 00:25:04,800 Speaker 1: So just take that on board. And the worse the 464 00:25:04,840 --> 00:25:06,639 Speaker 1: tax gets on super the better it must be to 465 00:25:06,680 --> 00:25:12,400 Speaker 1: be exempt's that's a numerically relatively small but hot issue. 466 00:25:12,960 --> 00:25:17,199 Speaker 1: More commonly defined benefit funds. So if you mentioned it, 467 00:25:17,520 --> 00:25:19,600 Speaker 1: if you recall I mentioned that there is the fine 468 00:25:19,640 --> 00:25:23,000 Speaker 1: benefit schemes and you get paid a certain amount per year. 469 00:25:23,040 --> 00:25:27,480 Speaker 1: It's a promise basically, and you get a certain whatever 470 00:25:27,480 --> 00:25:30,800 Speaker 1: your salary was, you get a portion of that. Just 471 00:25:30,840 --> 00:25:33,280 Speaker 1: pick a number thirty two percent of that salary forever, 472 00:25:34,760 --> 00:25:37,919 Speaker 1: regardless of what happens in the world. It must be lovely. 473 00:25:38,640 --> 00:25:41,119 Speaker 1: So stanzas, how are they going to include these people? 474 00:25:41,320 --> 00:25:43,560 Speaker 1: They don't know how they're going to include them, stand 475 00:25:43,560 --> 00:25:47,320 Speaker 1: is the short answer. They haven't fixed it yet. They 476 00:25:47,320 --> 00:25:51,400 Speaker 1: haven't sorted it out yet. But the notion is that 477 00:25:51,480 --> 00:25:57,439 Speaker 1: they will use existing what would you say, metrics that 478 00:25:57,560 --> 00:26:02,879 Speaker 1: are used, for instance, in divorce and that sort of 479 00:26:02,880 --> 00:26:05,600 Speaker 1: thing family law, where they've already had to deal with 480 00:26:05,800 --> 00:26:09,320 Speaker 1: defined benefits and how they're divided how much they're worth. 481 00:26:09,600 --> 00:26:12,000 Speaker 1: So they're reverse engineered these things and they say, well, 482 00:26:12,040 --> 00:26:15,400 Speaker 1: if you get, if you get you know, ninety thousand 483 00:26:15,400 --> 00:26:19,480 Speaker 1: a year, then that is worth so much because you 484 00:26:19,560 --> 00:26:21,280 Speaker 1: have to have so much to make ninety thousand a 485 00:26:21,320 --> 00:26:25,480 Speaker 1: year in the investment markets. How on earth are they 486 00:26:25,560 --> 00:26:27,919 Speaker 1: going to do it? Hugh, you know everything, what's the answer. 487 00:26:29,840 --> 00:26:33,080 Speaker 4: I think there's going to be a great difficulty in 488 00:26:33,280 --> 00:26:34,720 Speaker 4: valuing a lot of these things. 489 00:26:34,760 --> 00:26:37,679 Speaker 3: So I agree they if women live. 490 00:26:37,640 --> 00:26:40,560 Speaker 4: Longer than men, which statistically they do, how do we 491 00:26:40,680 --> 00:26:44,920 Speaker 4: value their benefit versus you know, the husband's benefit. 492 00:26:46,040 --> 00:26:49,080 Speaker 3: What do we do around that? The mechanisms that they're 493 00:26:49,080 --> 00:26:49,800 Speaker 3: going to need to be able to. 494 00:26:49,800 --> 00:26:51,879 Speaker 4: Implement this are going to be very very difficult, very 495 00:26:51,960 --> 00:26:56,560 Speaker 4: very challenging. And it's very similar to also outside of 496 00:26:56,600 --> 00:26:58,840 Speaker 4: the defined benefit, But how do they how are they 497 00:26:58,960 --> 00:27:02,080 Speaker 4: going to value you antiques. 498 00:27:01,640 --> 00:27:03,720 Speaker 2: Collectibles like cars, like. 499 00:27:04,800 --> 00:27:07,320 Speaker 3: The whole implementation. 500 00:27:06,760 --> 00:27:09,359 Speaker 1: Of it's this legislation night merriage. 501 00:27:09,840 --> 00:27:13,320 Speaker 4: It's gonna be it's fraught with difficulty and quite this 502 00:27:13,400 --> 00:27:15,280 Speaker 4: is then, this is why all the listeners, this is 503 00:27:15,320 --> 00:27:18,440 Speaker 4: why all the all the industry bodies are advocating. Can 504 00:27:18,440 --> 00:27:20,919 Speaker 4: we at least kick it, kick the can down the 505 00:27:21,000 --> 00:27:23,480 Speaker 4: road to year and get some clarity on how we're 506 00:27:23,480 --> 00:27:25,280 Speaker 4: going to do this. You don't have to do anything 507 00:27:25,320 --> 00:27:27,960 Speaker 4: before you know, the end of this financial year or 508 00:27:27,960 --> 00:27:30,560 Speaker 4: even the start of next financial year. But as it 509 00:27:30,600 --> 00:27:33,280 Speaker 4: currently stands, we're going to have to do something before 510 00:27:33,320 --> 00:27:34,640 Speaker 4: the end of next financial year. 511 00:27:34,800 --> 00:27:36,920 Speaker 1: As it currently stands, it's due to come into effect 512 00:27:37,359 --> 00:27:41,080 Speaker 1: on July one, with the first collection point. You'd be 513 00:27:41,240 --> 00:27:45,320 Speaker 1: like being July twenty twenty six, isn't that right? Yes, 514 00:27:46,640 --> 00:27:49,840 Speaker 1: so stand by. But as I say each day, there's 515 00:27:49,840 --> 00:27:53,720 Speaker 1: no clarification or any signal from the treasure that's on timing, 516 00:27:54,560 --> 00:28:01,600 Speaker 1: on the indexation, on the unrealized gains. Couldn't they just 517 00:28:02,359 --> 00:28:06,120 Speaker 1: do a deeming thing like they have for the pensions anyway, 518 00:28:06,160 --> 00:28:10,600 Speaker 1: So when the pension access to the pension, they don't 519 00:28:10,640 --> 00:28:13,400 Speaker 1: count how much everyone's got in investments. They just say 520 00:28:13,440 --> 00:28:15,200 Speaker 1: how much have you got there on the side, and 521 00:28:15,240 --> 00:28:17,359 Speaker 1: the presence says, I've got one hundred thousand dollars and 522 00:28:17,400 --> 00:28:19,800 Speaker 1: they say, okay, well we reckon that makes you know, 523 00:28:19,920 --> 00:28:22,679 Speaker 1: two point five percent a year, which is which is, 524 00:28:22,800 --> 00:28:25,520 Speaker 1: which is a very generous way of doing it. But 525 00:28:25,680 --> 00:28:30,520 Speaker 1: they just deem and amount is made. Couldn't they do that? 526 00:28:31,920 --> 00:28:34,800 Speaker 3: Sometimes common sense isn't common James. 527 00:28:35,840 --> 00:28:40,479 Speaker 4: The SMSF association, they went through looking at it, at 528 00:28:40,480 --> 00:28:43,120 Speaker 4: the difference between the unrealized the current method that they're 529 00:28:43,360 --> 00:28:46,080 Speaker 4: they're proposing, and the demon, and there wasn't much in 530 00:28:46,120 --> 00:28:50,120 Speaker 4: it in terms of tax revenue. So the ATO would 531 00:28:50,120 --> 00:28:52,360 Speaker 4: have got thereabouts the same amount, and it would have 532 00:28:52,400 --> 00:28:55,480 Speaker 4: been something that could have been administered. I think I 533 00:28:55,480 --> 00:28:57,320 Speaker 4: think there was some comments around, well what if you 534 00:28:57,360 --> 00:29:01,440 Speaker 4: have negative years? You know that the demon is disadvantageous 535 00:29:02,040 --> 00:29:07,040 Speaker 4: to the approach that they're that they're advocating for. But 536 00:29:07,400 --> 00:29:11,560 Speaker 4: I think a deeming approach would have been common sense. 537 00:29:11,640 --> 00:29:14,280 Speaker 4: Yeah right, and you know, the AHA would have won. 538 00:29:14,400 --> 00:29:17,440 Speaker 4: So that that one is a perplexing one. Why they 539 00:29:17,440 --> 00:29:17,880 Speaker 4: didn't do. 540 00:29:17,880 --> 00:29:21,600 Speaker 1: That it is indeed, So we'll leave it there and 541 00:29:21,640 --> 00:29:23,720 Speaker 1: we'll see where they go. I hope that was useful 542 00:29:23,760 --> 00:29:27,320 Speaker 1: to you. I think anyone who who went, especially as 543 00:29:27,360 --> 00:29:30,800 Speaker 1: we took the listeners questions, there we've got a clear picture. 544 00:29:30,840 --> 00:29:33,760 Speaker 1: Now it's a new tax. There is no tax paid 545 00:29:33,800 --> 00:29:36,520 Speaker 1: up to about two million on super I say up 546 00:29:36,520 --> 00:29:38,720 Speaker 1: to about two million because it's one point nine now 547 00:29:38,880 --> 00:29:41,240 Speaker 1: goes to two million on July one. There is then 548 00:29:42,160 --> 00:29:48,120 Speaker 1: fifteen percent tax after that figure sort of sky is 549 00:29:48,120 --> 00:29:49,479 Speaker 1: the limit at the moment, and they're going to come 550 00:29:49,520 --> 00:29:51,160 Speaker 1: in and say hang on now when it goes after 551 00:29:51,240 --> 00:29:52,880 Speaker 1: three million, there's a new tax on top of the 552 00:29:52,920 --> 00:29:56,880 Speaker 1: fifteen that's already there, and that brings it to thirty 553 00:29:56,920 --> 00:30:00,800 Speaker 1: combined tax. The issue is not some the number there, 554 00:30:00,880 --> 00:30:03,160 Speaker 1: it's the way they're going to do it on unrealnized 555 00:30:03,200 --> 00:30:05,040 Speaker 1: gains paper games. I think you did a very good 556 00:30:05,080 --> 00:30:08,200 Speaker 1: example at the very start about how that is. It's 557 00:30:08,280 --> 00:30:13,240 Speaker 1: really unfair, it's a bad technique, it's messy, it's ridiculously 558 00:30:13,280 --> 00:30:17,600 Speaker 1: difficult to try and to try and compute accurately. And 559 00:30:17,760 --> 00:30:20,120 Speaker 1: what did you call it a violation of the tax system? 560 00:30:20,440 --> 00:30:22,680 Speaker 1: Was that it a violation of the tax system? 561 00:30:23,000 --> 00:30:23,920 Speaker 3: There you are principle. 562 00:30:24,080 --> 00:30:26,960 Speaker 1: It's also on indexed, which again you know, I mean 563 00:30:27,280 --> 00:30:30,480 Speaker 1: it's a retirement tax. The pension ist is not just 564 00:30:30,600 --> 00:30:33,680 Speaker 1: index The pension is indexed twice a year. So I 565 00:30:33,720 --> 00:30:36,560 Speaker 1: think there's a lot on the table here. It's hard 566 00:30:36,560 --> 00:30:38,240 Speaker 1: to believe it's going to start in July one, but 567 00:30:38,280 --> 00:30:40,400 Speaker 1: we have to work on the basis that it will. 568 00:30:40,520 --> 00:30:44,720 Speaker 1: We'll see in the weeks ahead if the government budge 569 00:30:44,760 --> 00:30:48,280 Speaker 1: on this. H. Robinson, thanks very much for for heroic 570 00:30:48,280 --> 00:30:51,120 Speaker 1: effort trying to explain it to us all. 571 00:30:52,000 --> 00:30:53,760 Speaker 4: Thank you very much for having me. I hope it 572 00:30:53,800 --> 00:30:56,400 Speaker 4: provided some valuable insights to your listeners. 573 00:30:56,520 --> 00:30:56,880 Speaker 2: I'm sure. 574 00:30:57,200 --> 00:30:59,440 Speaker 1: Thanks everyone for sending in your questions. I couldn't use 575 00:30:59,480 --> 00:31:01,280 Speaker 1: them all, of course, but I was able to I think, 576 00:31:01,400 --> 00:31:04,600 Speaker 1: capture the main issues from those questions that we had today. 577 00:31:04,640 --> 00:31:08,680 Speaker 1: Thanks a lot for listening. Keep your emails rolling the 578 00:31:08,760 --> 00:31:13,600 Speaker 1: money puzzle at the Australian dot com dot au. Talk 579 00:31:13,600 --> 00:31:14,040 Speaker 1: to you soon.