1 00:00:10,039 --> 00:00:13,520 Speaker 1: Hello, and welcome to the Australians Money Puzzled podcast. I'm 2 00:00:13,640 --> 00:00:17,959 Speaker 1: James Kirby, was editor at the Australian. Welcome aboard everybody, 3 00:00:18,560 --> 00:00:21,640 Speaker 1: and thank you actually for having me on board and 4 00:00:21,720 --> 00:00:23,759 Speaker 1: back on board. Great to talk to you again. You 5 00:00:23,800 --> 00:00:26,960 Speaker 1: may have gathered I was off for a few weeks there. 6 00:00:27,240 --> 00:00:31,920 Speaker 1: Last week's shows were a precord. I will now freely 7 00:00:31,960 --> 00:00:35,160 Speaker 1: admit to you I hope you enjoyed the last few 8 00:00:35,200 --> 00:00:40,000 Speaker 1: weeks that James Gerard and Stuart Wems stood in and 9 00:00:40,120 --> 00:00:42,400 Speaker 1: I have to say I think they both did a 10 00:00:42,400 --> 00:00:46,040 Speaker 1: sterling job on the show and you will hear them. 11 00:00:46,040 --> 00:00:48,800 Speaker 1: Of course, we will have them both back as regular 12 00:00:48,840 --> 00:00:51,519 Speaker 1: guests very soon. I've been trying to catch up with 13 00:00:52,080 --> 00:00:56,320 Speaker 1: a month's worth of financial news and emails and everything else. 14 00:00:56,680 --> 00:00:58,600 Speaker 1: I've also been trying to catch up course with all 15 00:00:58,640 --> 00:01:01,440 Speaker 1: the questions that have come in and just looking at 16 00:01:01,440 --> 00:01:06,640 Speaker 1: this particular batch that I was confronted with on my return, 17 00:01:08,040 --> 00:01:11,760 Speaker 1: it struck me that there are quite a few of 18 00:01:11,800 --> 00:01:16,200 Speaker 1: the questions needed. What they needed was an accountant, you know, 19 00:01:16,360 --> 00:01:21,360 Speaker 1: and we haven't actually had an accountant on the show before. 20 00:01:21,920 --> 00:01:25,640 Speaker 1: And I have the ideal person to solve that particular issue. 21 00:01:26,080 --> 00:01:29,960 Speaker 1: Duncan Perkins of Tax Time Accountants is someone I talked 22 00:01:29,959 --> 00:01:31,960 Speaker 1: to quite regularly, but I haven't held him on the 23 00:01:31,959 --> 00:01:33,880 Speaker 1: show before, and I'm denighted to have him on today. 24 00:01:33,920 --> 00:01:34,639 Speaker 1: How are you, Duncan? 25 00:01:35,000 --> 00:01:36,959 Speaker 2: Hello, everyone, I'm very good. Thank you. 26 00:01:37,959 --> 00:01:40,720 Speaker 1: Great to have you on board. You know, sometimes you 27 00:01:40,800 --> 00:01:43,880 Speaker 1: come back from your holidays and you say, oh gosh, 28 00:01:43,920 --> 00:01:45,920 Speaker 1: you know, there hasn't been much news. And sometimes you 29 00:01:45,959 --> 00:01:48,880 Speaker 1: come back and you say, whoa. You know, I missed 30 00:01:48,920 --> 00:01:52,960 Speaker 1: a few things. And one thing certainly that caught my 31 00:01:53,040 --> 00:01:58,520 Speaker 1: eyes in recent days is this very intriguing for any 32 00:01:58,560 --> 00:02:02,040 Speaker 1: of the listeners that aren't or say with this. The 33 00:02:02,120 --> 00:02:06,600 Speaker 1: hottest issue tax wise in the nation beyond a doubt 34 00:02:06,720 --> 00:02:10,880 Speaker 1: really is the tax concessions granted to older people through 35 00:02:10,919 --> 00:02:14,880 Speaker 1: super or through the general population, with both negative gearing 36 00:02:14,919 --> 00:02:19,840 Speaker 1: and capital gains tax concessions. It is a hot today too. Politically. 37 00:02:21,200 --> 00:02:23,760 Speaker 1: Every politician that ever went near it didn't manage to 38 00:02:23,760 --> 00:02:26,120 Speaker 1: do it, and I include Paul Keating, who believe it, 39 00:02:26,240 --> 00:02:28,840 Speaker 1: our folks in nineteen eighty seven scrapped negative gearing and 40 00:02:28,919 --> 00:02:30,760 Speaker 1: had to bring it back after a year because it 41 00:02:30,800 --> 00:02:34,280 Speaker 1: was such a fiasco in many ways, more recently in 42 00:02:34,400 --> 00:02:39,919 Speaker 1: New Zealand, the Aherne government that's Jacinda Hearn, she tried 43 00:02:39,960 --> 00:02:43,040 Speaker 1: to scrap their version of negative gearing and capitally gains 44 00:02:43,080 --> 00:02:45,760 Speaker 1: tax and reformed of the new government has basically reversed 45 00:02:45,760 --> 00:02:50,560 Speaker 1: those changes and in the interm it's not the only reason, 46 00:02:50,680 --> 00:02:53,120 Speaker 1: but one of the things that happened in the course 47 00:02:53,200 --> 00:02:56,600 Speaker 1: of that attempt to change their tax deductions on property 48 00:02:57,040 --> 00:03:00,880 Speaker 1: is that New Zealand is now the worst by that 49 00:03:00,960 --> 00:03:03,720 Speaker 1: I mean the worst affordability rental market in the world. 50 00:03:03,840 --> 00:03:06,240 Speaker 1: Hard to believe, but if you live in Sidney or Melbourne, 51 00:03:06,320 --> 00:03:08,959 Speaker 1: you will know that there are an enormous amount of 52 00:03:09,000 --> 00:03:12,799 Speaker 1: young Diseasanders here and they are here because they think 53 00:03:12,880 --> 00:03:16,000 Speaker 1: our rents are cheap. So we have a real issue 54 00:03:16,000 --> 00:03:19,680 Speaker 1: there about negative gearing and capital gainst text. Now what's 55 00:03:19,680 --> 00:03:25,240 Speaker 1: happened is that a Treasury is reviewing both those issues. 56 00:03:25,360 --> 00:03:28,839 Speaker 1: The Prime Minister Anthony Albinizi has distanced himself and said, 57 00:03:28,919 --> 00:03:30,880 Speaker 1: you know that he didn't even know that this was 58 00:03:30,919 --> 00:03:35,440 Speaker 1: going on. Whatever Treasury will ultimately report on this and 59 00:03:35,520 --> 00:03:38,040 Speaker 1: if they suggest changes, the government will have to take 60 00:03:38,080 --> 00:03:41,960 Speaker 1: them seriously. Big deal. Duncan I imagine you spend a 61 00:03:41,960 --> 00:03:44,000 Speaker 1: lot of your time every. 62 00:03:43,880 --> 00:03:45,320 Speaker 2: Day every day. 63 00:03:46,400 --> 00:03:49,320 Speaker 1: Between kafiti gains and negative gearing, they're the two big 64 00:03:49,720 --> 00:03:54,840 Speaker 1: tax deductions available to the every person in Australia. Do 65 00:03:54,880 --> 00:03:56,680 Speaker 1: you think and do you think they'll actually do anything? 66 00:03:57,840 --> 00:04:00,480 Speaker 2: Although constantly do things in the negative gearing space and 67 00:04:00,760 --> 00:04:03,560 Speaker 2: the caprial gains tax space they have to New Zealand's 68 00:04:03,760 --> 00:04:05,360 Speaker 2: had a good go at it, and good on them. 69 00:04:05,480 --> 00:04:09,320 Speaker 2: I mean they move their interest rates before us up 70 00:04:09,640 --> 00:04:13,520 Speaker 2: and it's hurting them now. But look the every day 71 00:04:13,560 --> 00:04:15,520 Speaker 2: I would get a question of Doug and I bought 72 00:04:15,520 --> 00:04:17,599 Speaker 2: this property at such and such a time, I'm going 73 00:04:17,640 --> 00:04:20,600 Speaker 2: to be selling it. I think how much capraal gains. 74 00:04:20,320 --> 00:04:21,080 Speaker 1: Tax will I pay? 75 00:04:21,480 --> 00:04:24,560 Speaker 2: And a lot of the time people are well surprised 76 00:04:24,600 --> 00:04:28,279 Speaker 2: about it. I think you would be foolish if you 77 00:04:29,160 --> 00:04:31,480 Speaker 2: if there were any changes coming in this space and 78 00:04:31,560 --> 00:04:34,560 Speaker 2: you had a couple of properties, or even one investment 79 00:04:34,640 --> 00:04:38,640 Speaker 2: property and the matter of sticking your head in the 80 00:04:38,680 --> 00:04:42,880 Speaker 2: sand was your go to, it'ld be a very foolish 81 00:04:42,960 --> 00:04:44,840 Speaker 2: thing to do. You'd really need to speak to your 82 00:04:45,080 --> 00:04:49,559 Speaker 2: account and or financial planner or someone that's actually dealt 83 00:04:49,600 --> 00:04:51,360 Speaker 2: in the capital gains tax space. 84 00:04:51,560 --> 00:04:53,840 Speaker 1: But most people then listening to the show, or who 85 00:04:53,920 --> 00:04:56,080 Speaker 1: have property or aspire to have property, if when they 86 00:04:56,120 --> 00:05:01,920 Speaker 1: do their numbers right, they building an an assumption that 87 00:05:02,080 --> 00:05:06,520 Speaker 1: the two great sort of tax deductions up in the 88 00:05:06,640 --> 00:05:11,440 Speaker 1: area that have been around for generations now will will stay. 89 00:05:11,560 --> 00:05:16,400 Speaker 1: They assume one that any losses and that includes interest 90 00:05:16,560 --> 00:05:19,480 Speaker 1: costs on their investment property can be set against their 91 00:05:19,520 --> 00:05:23,200 Speaker 1: income tax big saying there's nothing else substantially can set 92 00:05:23,200 --> 00:05:26,120 Speaker 1: against your income taxes an every day Australian investor. And 93 00:05:26,240 --> 00:05:29,240 Speaker 1: they also assume the data sell the property, assuming they 94 00:05:29,279 --> 00:05:31,440 Speaker 1: hold it for more than a year, that they will 95 00:05:31,520 --> 00:05:35,159 Speaker 1: have a fifty percent discount on CGT, which basically works 96 00:05:35,160 --> 00:05:37,880 Speaker 1: out at your marginal rate. CGT basically works out to 97 00:05:37,880 --> 00:05:40,760 Speaker 1: your marginal rate of taxes. So are you saying then 98 00:05:40,839 --> 00:05:43,080 Speaker 1: that people should wake up and smell the coffee here 99 00:05:43,200 --> 00:05:46,800 Speaker 1: and say there could be changes to these two tax. 100 00:05:46,960 --> 00:05:49,520 Speaker 2: Even if there isn't. They should consdt review their return 101 00:05:49,600 --> 00:05:52,320 Speaker 2: on this return on asset, what they yield these on 102 00:05:52,440 --> 00:05:55,599 Speaker 2: their investment. If they they should look at their opportunity 103 00:05:55,680 --> 00:05:58,839 Speaker 2: costs as well. So many people out there that are 104 00:05:58,880 --> 00:06:01,280 Speaker 2: thinking they're making a fall and doing really good things 105 00:06:01,640 --> 00:06:03,920 Speaker 2: in the investment property market when when they get closer 106 00:06:03,960 --> 00:06:07,279 Speaker 2: to retirement, they could have or should have or should 107 00:06:07,320 --> 00:06:11,320 Speaker 2: be thinking about moving those investment properties into something like superannuation, 108 00:06:11,839 --> 00:06:13,880 Speaker 2: which has a lot less headaches and other things like 109 00:06:13,960 --> 00:06:15,920 Speaker 2: that and beneficial tax implication. 110 00:06:16,120 --> 00:06:17,200 Speaker 1: So yeah, you. 111 00:06:17,160 --> 00:06:20,640 Speaker 2: Should always be reviewing what you're doing with property and 112 00:06:20,839 --> 00:06:23,600 Speaker 2: is that the best investment for you? If it's giving 113 00:06:23,640 --> 00:06:27,800 Speaker 2: you a two percent yield per anno net after your 114 00:06:27,880 --> 00:06:30,240 Speaker 2: tax and other things like that, you sit there and go, well, 115 00:06:30,279 --> 00:06:31,960 Speaker 2: why have I got this million dollar property with a 116 00:06:32,240 --> 00:06:34,240 Speaker 2: four hundred five hundred thousand dollars dead on it. I 117 00:06:34,279 --> 00:06:37,360 Speaker 2: could have six hundred thousand dollars in the bake doing nothing, 118 00:06:37,880 --> 00:06:41,360 Speaker 2: dealing with no tenants, no property managers, no repairs, no maintenance, 119 00:06:41,440 --> 00:06:44,080 Speaker 2: no rais and I'm getting four percent five percent on it? 120 00:06:44,520 --> 00:06:45,200 Speaker 2: Well when I do that. 121 00:06:46,000 --> 00:06:48,400 Speaker 1: So when you see the opportunity cost, do you mean 122 00:06:48,920 --> 00:06:52,840 Speaker 1: the opportunity cost that it could be in something like 123 00:06:52,960 --> 00:06:55,000 Speaker 1: the share market or do you mean it should be 124 00:06:55,000 --> 00:06:57,679 Speaker 1: in a different structure like super It could. 125 00:06:57,520 --> 00:06:59,400 Speaker 2: Be in any of those, And you have to look 126 00:06:59,400 --> 00:07:02,880 Speaker 2: at your opportunit unity cost in that regard. Also, diversification, 127 00:07:03,080 --> 00:07:05,760 Speaker 2: is that so many people that you talk to that 128 00:07:05,920 --> 00:07:08,719 Speaker 2: they have, say I don't know, a million dollar property 129 00:07:08,760 --> 00:07:10,760 Speaker 2: and that's their principal place of residence, and they might 130 00:07:10,800 --> 00:07:12,880 Speaker 2: have a five hundred thousand dollars homeland against that, which 131 00:07:12,880 --> 00:07:15,680 Speaker 2: is non tax do done. But they've also got an 132 00:07:15,760 --> 00:07:19,040 Speaker 2: investment property for let's say a million dollars, and why 133 00:07:19,080 --> 00:07:22,760 Speaker 2: having eight hundred thousand dollars debt on it if you're 134 00:07:22,760 --> 00:07:26,360 Speaker 2: working very long hours and et cetera to pay off 135 00:07:26,920 --> 00:07:29,560 Speaker 2: the five hundred thousand dollars homeland which is non tax deductible, 136 00:07:29,680 --> 00:07:31,920 Speaker 2: which has gone up from two point five percent to 137 00:07:32,560 --> 00:07:35,800 Speaker 2: six point five percent. So your cost of paying off 138 00:07:35,840 --> 00:07:40,160 Speaker 2: that non tax deductible debt is it's not good. 139 00:07:40,560 --> 00:07:43,400 Speaker 1: Okay. So let's say so this is really good for listeners, 140 00:07:43,440 --> 00:07:47,360 Speaker 1: particularly listeners who are saying mid career. So let's see 141 00:07:47,760 --> 00:07:53,120 Speaker 1: the listener has a home and they have a mortgage. 142 00:07:53,120 --> 00:07:54,920 Speaker 1: I'm just going to throw numbers out here, okay, And 143 00:07:55,000 --> 00:07:58,120 Speaker 1: they have that, and they have their home mortgagees five 144 00:07:58,200 --> 00:08:02,160 Speaker 1: hunder grand they also have and the investment property it 145 00:08:02,280 --> 00:08:05,320 Speaker 1: seems to be doing okay. The yield is hopeless, it's 146 00:08:05,360 --> 00:08:08,240 Speaker 1: two percent, but they expected that, and they also have 147 00:08:08,360 --> 00:08:11,280 Speaker 1: a mortgage on that, and that's about the same as 148 00:08:11,360 --> 00:08:15,200 Speaker 1: their whole mortgage, and they're you know, there are forty eight's. 149 00:08:15,360 --> 00:08:17,360 Speaker 1: But are you saying to them, are you saying to 150 00:08:17,440 --> 00:08:20,640 Speaker 1: them that property you've got to shift it into super? 151 00:08:21,000 --> 00:08:23,120 Speaker 1: What do you say sooner rather than later? And why 152 00:08:23,200 --> 00:08:24,320 Speaker 1: why would you say that to them? 153 00:08:24,640 --> 00:08:26,840 Speaker 2: Okay, so that the investment property has done really well 154 00:08:26,880 --> 00:08:28,960 Speaker 2: for you if it's grown in values, so you might 155 00:08:29,040 --> 00:08:31,360 Speaker 2: have bought it, I don't know, six hundred thousand dollars, 156 00:08:31,600 --> 00:08:33,920 Speaker 2: and that's worth a million dollars, so you may four 157 00:08:33,960 --> 00:08:36,120 Speaker 2: hundred thousand dollars on that, and you might have a 158 00:08:36,160 --> 00:08:41,839 Speaker 2: superannuation were one hundred thousand dollars and you're forty eight, Like, 159 00:08:42,040 --> 00:08:44,400 Speaker 2: get it across the super. It would be a smarter 160 00:08:44,559 --> 00:08:46,600 Speaker 2: would be a smarter movie. Then you've got some diversification 161 00:08:46,800 --> 00:08:49,520 Speaker 2: going on. Yeah, this is just general advice, but look 162 00:08:49,559 --> 00:08:52,640 Speaker 2: at your opportunity cost. Come. Well, I'm dealing with I'm 163 00:08:52,679 --> 00:08:55,400 Speaker 2: dealing with landlords. I'm dealing with not landlords, I'm dealing 164 00:08:55,440 --> 00:08:57,760 Speaker 2: with property managers. I'm dealing with tenants and repairs and 165 00:08:57,840 --> 00:08:59,600 Speaker 2: all this other stuff. I'm going to do a tax 166 00:08:59,640 --> 00:09:01,640 Speaker 2: returning a year ago, go and see dunk and I've 167 00:09:01,640 --> 00:09:04,719 Speaker 2: got to do these tax return that if would you 168 00:09:04,720 --> 00:09:06,439 Speaker 2: just shoved it into souper, how hard would that be? 169 00:09:06,800 --> 00:09:09,040 Speaker 2: And then every year now that I don't have an 170 00:09:09,080 --> 00:09:11,439 Speaker 2: investment property yet, all I have is my non tax 171 00:09:11,480 --> 00:09:13,920 Speaker 2: deductible online at I don't know. They sit down and 172 00:09:14,920 --> 00:09:16,000 Speaker 2: juggle the numbers around. 173 00:09:16,200 --> 00:09:19,640 Speaker 1: Yes, okay, very good. What's the downside here? The money's 174 00:09:19,679 --> 00:09:22,319 Speaker 1: in super forever right, So that's the only thing, isn't it. 175 00:09:22,720 --> 00:09:24,760 Speaker 1: You can you have only one thing you can do 176 00:09:24,880 --> 00:09:27,360 Speaker 1: with the money from that investment property. Then once you've 177 00:09:27,360 --> 00:09:30,160 Speaker 1: transferred it into soup, which is financing souper, you can't 178 00:09:30,160 --> 00:09:30,720 Speaker 1: do anything else. 179 00:09:31,360 --> 00:09:33,559 Speaker 2: The thing is that if the money's sitting in superannuation, 180 00:09:34,120 --> 00:09:36,199 Speaker 2: you know, in an industry fund or retail fund, or 181 00:09:36,280 --> 00:09:37,960 Speaker 2: sitting in a self managed super fund. 182 00:09:38,040 --> 00:09:38,760 Speaker 1: Who cares O. 183 00:09:39,000 --> 00:09:41,160 Speaker 2: Look, what does a person do with regards to an investment. 184 00:09:41,160 --> 00:09:44,160 Speaker 2: Probably when they first buy it, they don't sell it 185 00:09:44,280 --> 00:09:46,719 Speaker 2: and then go and spend it on a holiday or 186 00:09:47,200 --> 00:09:50,400 Speaker 2: to bround the world. They reinvest it back into other investments, 187 00:09:50,800 --> 00:09:54,760 Speaker 2: usually add a far lower yield than superannuation anyhow, Like, yeah, 188 00:09:54,880 --> 00:10:00,520 Speaker 2: superannuation did eleven percent last year in most industry funes. Proper, Yes, 189 00:10:00,640 --> 00:10:03,559 Speaker 2: may have done that, but then the taxation rates or 190 00:10:03,600 --> 00:10:05,880 Speaker 2: other things like that. So one of the things that 191 00:10:05,920 --> 00:10:09,199 Speaker 2: I learned at the university is skills, knowledge and attitude, 192 00:10:10,040 --> 00:10:12,280 Speaker 2: and skills is one plus one equals too, and then 193 00:10:12,320 --> 00:10:15,080 Speaker 2: you build your knowledge from the skills that you've acquired. 194 00:10:15,640 --> 00:10:18,360 Speaker 2: But the problem is from a financial planning or an 195 00:10:18,360 --> 00:10:20,760 Speaker 2: accounting perspective, is that as soon as we talk to 196 00:10:20,880 --> 00:10:24,719 Speaker 2: someone and we build their knowledge around that, And that's 197 00:10:24,800 --> 00:10:27,719 Speaker 2: with the listeners as well. As they start building their 198 00:10:27,760 --> 00:10:32,199 Speaker 2: knowledge around alternative investments, superinnoation or egs or whatever the 199 00:10:32,240 --> 00:10:36,800 Speaker 2: case they be, it doesn't matter because their attitude may 200 00:10:36,880 --> 00:10:40,360 Speaker 2: be property, so therefore it doesn't matter what you took. 201 00:10:40,400 --> 00:10:42,640 Speaker 2: It all sounds great, but I like property because my 202 00:10:42,760 --> 00:10:45,000 Speaker 2: dad did well in property, or my next door Yaby 203 00:10:45,040 --> 00:10:46,880 Speaker 2: did well in property, so I'm going to do well 204 00:10:46,920 --> 00:10:47,360 Speaker 2: in property. 205 00:10:47,960 --> 00:10:50,000 Speaker 1: Yeah, And there's a sense that it's easy. There's a 206 00:10:50,080 --> 00:10:52,000 Speaker 1: sense that, as you said, there's a sentence you here, 207 00:10:52,120 --> 00:10:54,040 Speaker 1: but it's not. It's another a lot more at work 208 00:10:54,280 --> 00:10:57,520 Speaker 1: than any other acetas I certainly would agree with you there. 209 00:10:57,600 --> 00:11:01,480 Speaker 1: But here's the thing about the sensible option. For many 210 00:11:01,600 --> 00:11:05,920 Speaker 1: people are holding an investment property. If you ever have 211 00:11:06,160 --> 00:11:08,560 Speaker 1: one or more than one, or aspire to have one 212 00:11:08,640 --> 00:11:12,760 Speaker 1: to have it in super. So is it which is 213 00:11:12,840 --> 00:11:15,920 Speaker 1: better than duncan? Is it better to have the investment 214 00:11:16,000 --> 00:11:19,080 Speaker 1: property for a few years and transfer it into your 215 00:11:19,120 --> 00:11:21,800 Speaker 1: superfund or is it better to start at the very 216 00:11:21,960 --> 00:11:25,280 Speaker 1: start and say, I know I'm only thirty or forty, 217 00:11:26,360 --> 00:11:29,040 Speaker 1: but I got to put I got to start with 218 00:11:29,240 --> 00:11:32,839 Speaker 1: the investment property in super always it's going to be 219 00:11:32,960 --> 00:11:35,599 Speaker 1: inside super from the beginning, and I have to have 220 00:11:35,679 --> 00:11:36,719 Speaker 1: an SMSF to do that. 221 00:11:36,880 --> 00:11:41,120 Speaker 2: Of course, that's another crazy idea because if you purchased 222 00:11:41,160 --> 00:11:44,880 Speaker 2: a property in superannuation, you're most likely going to need 223 00:11:45,000 --> 00:11:49,160 Speaker 2: to borrow for that, and the superannuation is a trust 224 00:11:49,320 --> 00:11:53,120 Speaker 2: type structure. So therefore you're talking negative gearing in a 225 00:11:53,160 --> 00:11:56,120 Speaker 2: superannuation vote which only has a text rate of fifteen 226 00:11:56,160 --> 00:11:59,319 Speaker 2: percent and a kapagainst sex rate of ten percent. Why 227 00:11:59,400 --> 00:12:01,680 Speaker 2: would you do in that investment, especially if you're earning 228 00:12:01,679 --> 00:12:03,920 Speaker 2: one hundred or two hundred thousand dollars you and salary, 229 00:12:04,160 --> 00:12:06,360 Speaker 2: you would use the negative gearing in the capital gains 230 00:12:06,360 --> 00:12:09,839 Speaker 2: tax advantages through your own personal name. So instead of 231 00:12:09,880 --> 00:12:14,120 Speaker 2: holding the asset in the superheus the only time that 232 00:12:14,160 --> 00:12:15,560 Speaker 2: you would buy super is with cash. 233 00:12:16,200 --> 00:12:20,920 Speaker 1: Okay, so you're saying that the optimum, the optimum way 234 00:12:21,000 --> 00:12:24,120 Speaker 1: to do it is to build up the investment property 235 00:12:24,200 --> 00:12:27,920 Speaker 1: capital access the negative gearing because you're paying loads of 236 00:12:28,040 --> 00:12:31,199 Speaker 1: tax in your mid career years, and then switch it 237 00:12:31,320 --> 00:12:33,439 Speaker 1: into super. We won't spend much longer on this, but 238 00:12:33,679 --> 00:12:36,559 Speaker 1: just tell the listeners, Just tell the listeners if you 239 00:12:36,679 --> 00:12:40,400 Speaker 1: could in succinctly about what you would have to do. 240 00:12:40,760 --> 00:12:42,720 Speaker 1: You know, basically you have to sell it to your 241 00:12:42,760 --> 00:12:46,000 Speaker 1: own super funded at market cost. Isn't that right? So 242 00:12:46,200 --> 00:12:46,840 Speaker 1: how does it work? 243 00:12:47,160 --> 00:12:49,959 Speaker 2: You can sell residential property to your own superinnoation phone, 244 00:12:50,440 --> 00:12:52,800 Speaker 2: so I would forget that. Look, you've already got a property. 245 00:12:52,800 --> 00:12:54,960 Speaker 2: You might have a probably with a ME in your owner. 246 00:12:55,080 --> 00:12:58,720 Speaker 2: So diversification is the key. So like, once you've paid 247 00:12:58,760 --> 00:13:01,000 Speaker 2: off your homeland, which is a non taxductible there to 248 00:13:01,040 --> 00:13:03,199 Speaker 2: pay off one hundred thousand dollars non tax duct but 249 00:13:03,320 --> 00:13:05,800 Speaker 2: you can basically earn two hundred thousand dollars pay tax 250 00:13:05,880 --> 00:13:08,240 Speaker 2: on that to pay off one hundred. So it's a 251 00:13:08,360 --> 00:13:11,760 Speaker 2: hard yard. And there's so many people out there getting 252 00:13:11,800 --> 00:13:15,360 Speaker 2: to retirement and they're say selling their investment property paying 253 00:13:15,400 --> 00:13:17,880 Speaker 2: capric gastics, et cetera. They've still got debt on their 254 00:13:17,920 --> 00:13:20,000 Speaker 2: own home. They don't move that money into their super 255 00:13:20,080 --> 00:13:22,520 Speaker 2: they actually pay off their own homeline. And then they 256 00:13:22,559 --> 00:13:24,959 Speaker 2: sit there with a property that they have worth a 257 00:13:25,040 --> 00:13:30,199 Speaker 2: million dollars, no debt, full pension, and no little to 258 00:13:30,280 --> 00:13:33,280 Speaker 2: no super And it's a horrible, a horrible way to 259 00:13:33,320 --> 00:13:35,160 Speaker 2: look at these It's hard work because the income is 260 00:13:35,240 --> 00:13:35,600 Speaker 2: so poor. 261 00:13:35,880 --> 00:13:38,079 Speaker 1: Just to expland to the listeners once more about the 262 00:13:38,200 --> 00:13:40,839 Speaker 1: nature of the property. If I own a shop, I 263 00:13:40,920 --> 00:13:44,200 Speaker 1: can transfer it into my super fu yes, commercial property, yes, Okay. 264 00:13:44,320 --> 00:13:46,439 Speaker 1: If I own a house down the street and it's 265 00:13:46,440 --> 00:13:48,679 Speaker 1: an investment property, I'd like to have it in my 266 00:13:48,840 --> 00:13:52,600 Speaker 1: super funds. No, well you say no, do you mean 267 00:13:52,640 --> 00:13:54,880 Speaker 1: it doesn't make sense or it's legally it's actually legal. 268 00:13:54,960 --> 00:13:56,959 Speaker 2: You can't do it. No, you can't do it, Okay, 269 00:13:57,040 --> 00:13:57,920 Speaker 2: just expland to people before. 270 00:13:57,960 --> 00:13:58,480 Speaker 1: You can't do it. 271 00:13:59,040 --> 00:14:02,280 Speaker 2: Well, it comes under the taxation, so what you're doing 272 00:14:02,400 --> 00:14:06,240 Speaker 2: is yours. It's almost tax avoidance. So you've got to 273 00:14:06,320 --> 00:14:09,719 Speaker 2: you've got a property that is a residential property and 274 00:14:09,840 --> 00:14:12,559 Speaker 2: you're moving it across to a superannuation fund. Then it 275 00:14:12,679 --> 00:14:15,760 Speaker 2: turns into pension phase. There's no taxes on that income 276 00:14:16,040 --> 00:14:18,319 Speaker 2: when it's in pension pose. So but even if it's 277 00:14:18,360 --> 00:14:21,680 Speaker 2: in superannuation accumulation shoe, it's still only tax fifteen cents 278 00:14:21,760 --> 00:14:23,600 Speaker 2: the dollar, and the capri gat tax is only ten 279 00:14:23,640 --> 00:14:24,280 Speaker 2: cents of the dollar. 280 00:14:24,640 --> 00:14:28,280 Speaker 1: Yeah yeah, yeah yeah so yeah so yeah, so you're so. 281 00:14:28,360 --> 00:14:33,600 Speaker 1: The point you're making is that tax wise, it's so 282 00:14:33,840 --> 00:14:36,000 Speaker 1: much better outside because of negative gearing. 283 00:14:36,480 --> 00:14:37,680 Speaker 2: That's right, yes, yes. 284 00:14:37,680 --> 00:14:39,960 Speaker 1: Okay, And I suppose, just to finish off on this, 285 00:14:40,160 --> 00:14:45,400 Speaker 1: negative gearing is as reds are relatively high at the moment, 286 00:14:45,520 --> 00:14:48,600 Speaker 1: negative gearing is relatively better I a film because it 287 00:14:48,760 --> 00:14:49,480 Speaker 1: is so higher. 288 00:14:49,640 --> 00:14:51,880 Speaker 2: Yeah yeah, but again it comes down to your net yield. 289 00:14:52,480 --> 00:14:56,880 Speaker 1: Yes, yes, yes, unless us it must be improving a 290 00:14:56,960 --> 00:14:58,440 Speaker 1: bit with rent scoring up so much. 291 00:14:59,080 --> 00:15:01,520 Speaker 2: Yeah, but there's always a peak to that. I think 292 00:15:01,600 --> 00:15:04,920 Speaker 2: property will always give you a gross five percent. So 293 00:15:05,320 --> 00:15:07,080 Speaker 2: in other words, if you've got one hundred thousand dollar 294 00:15:07,120 --> 00:15:09,280 Speaker 2: property and it's giving you ten thousand dollars a year rent, 295 00:15:09,440 --> 00:15:11,280 Speaker 2: you say, well, it's giving you ten percent, Ill you're 296 00:15:11,400 --> 00:15:14,400 Speaker 2: speaking rubbish, duncrent. I say, no, your property is actually 297 00:15:14,480 --> 00:15:18,600 Speaker 2: probably worth closer to five hundred thousand dollars. So therefore 298 00:15:18,640 --> 00:15:23,480 Speaker 2: your yield comes back to more than five percent. So 299 00:15:23,640 --> 00:15:25,440 Speaker 2: if you've got if, you've got, if you've got costs 300 00:15:25,480 --> 00:15:28,520 Speaker 2: and other things on top of that and repairs the mate. 301 00:15:28,520 --> 00:15:31,800 Speaker 2: It's just hard. It's a hard it's a hard thing 302 00:15:31,880 --> 00:15:34,400 Speaker 2: when you've got a massive home liun So, what the 303 00:15:34,480 --> 00:15:37,840 Speaker 2: easiest thing to do is buy a property, live in it, 304 00:15:38,360 --> 00:15:40,600 Speaker 2: do it up. When it's too big or too small 305 00:15:40,640 --> 00:15:43,280 Speaker 2: for you, sell it, take your tax free wing roll 306 00:15:43,320 --> 00:15:45,560 Speaker 2: it into the next venture. There's a lot of people 307 00:15:45,600 --> 00:15:47,960 Speaker 2: that have made a lot of money just in their 308 00:15:47,960 --> 00:15:50,800 Speaker 2: principal place of residence. You get bigger discounts and everything 309 00:15:50,880 --> 00:15:52,800 Speaker 2: like that, and then build your wealth over there in 310 00:15:52,840 --> 00:15:56,240 Speaker 2: your superinuation or building in your etf or or other 311 00:15:56,320 --> 00:15:58,920 Speaker 2: little side hustles, and you've got nice diversification. 312 00:15:59,600 --> 00:16:02,400 Speaker 1: Very good, but very good. Dude. You're we haven't heard 313 00:16:02,400 --> 00:16:04,480 Speaker 1: you on the show before, but we can hear clearly 314 00:16:04,920 --> 00:16:07,960 Speaker 1: you're a hard numbers man. I should have accountants on 315 00:16:08,040 --> 00:16:10,600 Speaker 1: the show more often. Okay, folks, but take a short break. 316 00:16:10,640 --> 00:16:17,440 Speaker 1: We'll be back with Duncan in a moment. Hello. Well, 317 00:16:17,440 --> 00:16:20,640 Speaker 1: welcome back to the Australians Money Puzzle Podcast. I'm James 318 00:16:20,720 --> 00:16:23,520 Speaker 1: Kirby and I'm talking to Duncan, but Can of the 319 00:16:23,720 --> 00:16:29,440 Speaker 1: Tax Time Accountants group. Now, Duncan wants to tell you 320 00:16:30,040 --> 00:16:33,400 Speaker 1: a little bit about home equity and the home equity 321 00:16:33,480 --> 00:16:36,760 Speaker 1: access schemes. Just to introduce this to again to listeners. 322 00:16:36,800 --> 00:16:39,080 Speaker 1: I'm sure most of them are familiar with it. But 323 00:16:39,480 --> 00:16:42,600 Speaker 1: there is a growing appetise and a growing supply of 324 00:16:42,680 --> 00:16:47,560 Speaker 1: products whereby you can access the equity in your home 325 00:16:47,680 --> 00:16:51,080 Speaker 1: to do other things. Mostly this is older people. So 326 00:16:51,320 --> 00:16:55,560 Speaker 1: for instance, let's say someone is whatever, seventy seven and 327 00:16:55,800 --> 00:16:59,120 Speaker 1: they have you know, a small pension income, but they're 328 00:16:59,200 --> 00:17:01,240 Speaker 1: sitting on a house and it's worth you know, a 329 00:17:01,360 --> 00:17:05,000 Speaker 1: million dollars or two million dollars. This is completely common 330 00:17:05,400 --> 00:17:08,879 Speaker 1: in our bigger cities now. So there are products. One 331 00:17:08,920 --> 00:17:12,119 Speaker 1: of them is a government product that allows you to 332 00:17:12,560 --> 00:17:15,840 Speaker 1: do an arrangement basically where you get some cash as 333 00:17:15,960 --> 00:17:18,400 Speaker 1: income and then you pay the price for that cash 334 00:17:18,440 --> 00:17:20,560 Speaker 1: at the far end when you sell your home. This 335 00:17:20,680 --> 00:17:24,640 Speaker 1: is home equity. There's also there's also product. They don't 336 00:17:24,680 --> 00:17:27,040 Speaker 1: have to be older. And I've heard some stories which 337 00:17:27,160 --> 00:17:33,000 Speaker 1: make me shudder, Duncan about quite young people who in 338 00:17:33,160 --> 00:17:36,080 Speaker 1: one case, I've heard stories of people who inherited homes 339 00:17:36,320 --> 00:17:38,920 Speaker 1: and two seconds later we're tapping the home equity to 340 00:17:39,040 --> 00:17:42,560 Speaker 1: do who knows what, you know, just have fun. Tell 341 00:17:42,680 --> 00:17:45,080 Speaker 1: us about that and what opportunities might be out there 342 00:17:45,119 --> 00:17:45,760 Speaker 1: for the listeners. 343 00:17:46,040 --> 00:17:47,679 Speaker 2: Yeah, okay, so I'll talk about that how I make 344 00:17:47,720 --> 00:17:50,359 Speaker 2: with the actress game first, and your example, they're a 345 00:17:50,440 --> 00:17:53,640 Speaker 2: million dollars with no debt, little old seventy seven years 346 00:17:53,680 --> 00:17:56,320 Speaker 2: of age, maybe has been passed away ten years earlier. 347 00:17:57,320 --> 00:18:01,359 Speaker 2: Your listeners are probably a young listener, and so this 348 00:18:01,480 --> 00:18:04,439 Speaker 2: applies to your parents. Maybe I don't know, but anyway, 349 00:18:04,560 --> 00:18:07,880 Speaker 2: so mum's sitting in there. The gutters are falling down, 350 00:18:08,240 --> 00:18:11,160 Speaker 2: the house needs repair. She's been in there since the seventies. 351 00:18:11,240 --> 00:18:13,680 Speaker 2: She raised ther kids there and she loves the home. 352 00:18:14,320 --> 00:18:15,440 Speaker 2: But she's got no money. 353 00:18:15,440 --> 00:18:15,800 Speaker 1: In the main. 354 00:18:16,040 --> 00:18:17,920 Speaker 2: She gets the full pension, which is about twenty three 355 00:18:17,960 --> 00:18:20,720 Speaker 2: thousand dollars a year. She could get access to the 356 00:18:20,800 --> 00:18:22,840 Speaker 2: home equity access gain, which is twenty percent of the 357 00:18:22,920 --> 00:18:25,720 Speaker 2: value of the asset, and she can get one hundred 358 00:18:25,720 --> 00:18:28,720 Speaker 2: and fifty percent of the value of the pension. So 359 00:18:28,760 --> 00:18:30,880 Speaker 2: in other words, that would give her roughly about ten 360 00:18:31,000 --> 00:18:34,520 Speaker 2: thousand dollars extra a year in cash flow, which would 361 00:18:35,280 --> 00:18:38,680 Speaker 2: help her with living just that day to day living. 362 00:18:38,800 --> 00:18:41,080 Speaker 2: So it's a great product and it's only at three 363 00:18:41,080 --> 00:18:41,760 Speaker 2: point nine to five. 364 00:18:42,560 --> 00:18:43,840 Speaker 1: There's a government product. 365 00:18:44,080 --> 00:18:45,920 Speaker 2: Yeah, it's a cracker, and it's a cracker. 366 00:18:46,000 --> 00:18:49,000 Speaker 1: It's a cracker because it's three for for SAI because 367 00:18:49,040 --> 00:18:51,520 Speaker 1: it's way cheaper. Therace is way. 368 00:18:51,440 --> 00:18:55,280 Speaker 2: Lower than commercial prostructs, which is yeah, and it capitalizes 369 00:18:55,320 --> 00:18:58,119 Speaker 2: on itself, so there's no repayments forer my bet, so 370 00:18:58,200 --> 00:19:00,639 Speaker 2: we just capitalize us. So in this first year she 371 00:19:00,680 --> 00:19:02,920 Speaker 2: would have a ten thousand dollar alone, roughly a little 372 00:19:02,920 --> 00:19:04,439 Speaker 2: bit more than that because of the three point nine 373 00:19:04,480 --> 00:19:06,840 Speaker 2: to five percent interest capitalizing herself. But then that a 374 00:19:06,920 --> 00:19:08,720 Speaker 2: year after that it's twenty one thousand dollars. In a 375 00:19:08,800 --> 00:19:11,399 Speaker 2: year after that it's about thirty. Well, she's she's got 376 00:19:11,440 --> 00:19:14,280 Speaker 2: a two hundred thousand dollars limit their jokes, so she's 377 00:19:14,400 --> 00:19:17,800 Speaker 2: never going to use all of that money up. But 378 00:19:18,000 --> 00:19:20,520 Speaker 2: it just gives her some quality of life, gets her 379 00:19:20,560 --> 00:19:22,119 Speaker 2: to go down and see a green. It's on the 380 00:19:22,280 --> 00:19:23,800 Speaker 2: side of the it's really good. 381 00:19:23,880 --> 00:19:27,280 Speaker 1: You get you stay in the house, and certainly your 382 00:19:27,320 --> 00:19:30,120 Speaker 1: income goes from twenty three thousands to whatever thirty three 383 00:19:30,119 --> 00:19:31,920 Speaker 1: pout thirty three way better. 384 00:19:32,280 --> 00:19:36,240 Speaker 2: Well, children have concerns over that because they feel that 385 00:19:36,640 --> 00:19:40,360 Speaker 2: mum's home is being eaten away from the reverse mortgage 386 00:19:40,440 --> 00:19:42,840 Speaker 2: aspect of it. But again, as I said, it's only 387 00:19:42,880 --> 00:19:44,600 Speaker 2: three point nine to five percent, and the value of 388 00:19:44,680 --> 00:19:47,639 Speaker 2: that home is probably increasing per annum by five or 389 00:19:47,680 --> 00:19:51,480 Speaker 2: six percent, so you'll probably fine it. Really, it's I 390 00:19:51,640 --> 00:19:53,800 Speaker 2: believe that if it was my mother in that position, 391 00:19:53,960 --> 00:19:56,480 Speaker 2: I would be more than happy for her to load 392 00:19:56,600 --> 00:19:59,639 Speaker 2: up on a facility like that. But also in regards 393 00:19:59,680 --> 00:20:01,800 Speaker 2: of that facility, what if you've got a couple that 394 00:20:01,920 --> 00:20:04,720 Speaker 2: have got two million dollars in a two million dollar 395 00:20:04,800 --> 00:20:07,359 Speaker 2: home and no debt, and they've got a million dollars 396 00:20:07,400 --> 00:20:11,080 Speaker 2: in their bay. They're self undered retirees there, and that 397 00:20:11,280 --> 00:20:15,119 Speaker 2: investment's earning them seven or eight or nine percent in income. 398 00:20:16,080 --> 00:20:18,520 Speaker 2: They have to keep drawing down on that investment, don't they. 399 00:20:18,840 --> 00:20:21,440 Speaker 2: But if they're entitled to the home Equity Access scheme 400 00:20:21,480 --> 00:20:24,159 Speaker 2: as well, which is one hundred and fifty percent of 401 00:20:24,200 --> 00:20:26,760 Speaker 2: their joint income, so they'd give about sixty five thousand 402 00:20:26,800 --> 00:20:29,919 Speaker 2: dollars a year income at three point nine five percent, 403 00:20:30,640 --> 00:20:34,320 Speaker 2: it's not means tested, no, no, no, no, it's sixty seven. 404 00:20:34,640 --> 00:20:37,160 Speaker 2: What you're saying is once you are sixty seven years 405 00:20:37,160 --> 00:20:39,679 Speaker 2: of each, that's the only entry code here. That's right, 406 00:20:39,680 --> 00:20:41,960 Speaker 2: it's one hundred and fifty percent of your age pension 407 00:20:42,520 --> 00:20:45,680 Speaker 2: less you're existing age pension. So that couple are not 408 00:20:45,880 --> 00:20:49,240 Speaker 2: getting an age pension because they've got money in the bay, 409 00:20:49,520 --> 00:20:51,320 Speaker 2: so they can get sixty five thousand. 410 00:20:51,560 --> 00:20:53,480 Speaker 1: That's that's really terrific. And you know, I had doctor 411 00:20:53,560 --> 00:20:55,879 Speaker 1: Sam Binley on the show and he called that it's 412 00:20:55,920 --> 00:20:58,680 Speaker 1: the best cap secret in Australian finance. Two cents. 413 00:20:58,720 --> 00:21:02,119 Speaker 2: I love it. So can pay that to reverse mortgages 414 00:21:02,400 --> 00:21:05,760 Speaker 2: or equity release mortgages where you're giving the example where 415 00:21:05,840 --> 00:21:08,159 Speaker 2: the young couple have just ripped everything out and water portion, 416 00:21:08,960 --> 00:21:10,919 Speaker 2: holiday overseas and other things like that, and then all 417 00:21:10,960 --> 00:21:12,239 Speaker 2: of a sudden they go, oh, we've got a lot 418 00:21:12,240 --> 00:21:14,000 Speaker 2: of debt. It's three hundred thousand dollars. This is really 419 00:21:14,080 --> 00:21:15,440 Speaker 2: hard for us to pay off. We do know what 420 00:21:15,480 --> 00:21:17,920 Speaker 2: we're doing here. We inherited this mell and one point 421 00:21:18,000 --> 00:21:22,040 Speaker 2: five million dollar home from mum and now we we've 422 00:21:22,040 --> 00:21:23,639 Speaker 2: got to earn all this money to pay off. Is 423 00:21:23,760 --> 00:21:26,159 Speaker 2: yet not going to happen? Yeah? Maybe, so you home 424 00:21:26,480 --> 00:21:28,919 Speaker 2: take the win. You'll probably make another eight hundred three 425 00:21:29,000 --> 00:21:30,720 Speaker 2: hundred thousand dollars on the sale of the one point 426 00:21:30,760 --> 00:21:33,199 Speaker 2: five million dollar home that you inherited, but get rid 427 00:21:33,240 --> 00:21:35,159 Speaker 2: of that debt real fast because otherwise that debt is 428 00:21:35,200 --> 00:21:38,400 Speaker 2: going to accumulate. And there you'll be joking if you'd 429 00:21:38,440 --> 00:21:40,720 Speaker 2: be choking as close to ten percent on those types 430 00:21:40,760 --> 00:21:41,199 Speaker 2: of planes. 431 00:21:41,880 --> 00:21:44,920 Speaker 1: It's sounds that you're deeply intolerant to non tax the 432 00:21:45,000 --> 00:21:47,120 Speaker 1: doctor ble desks. Would that be a fair things to say? 433 00:21:47,280 --> 00:21:50,280 Speaker 2: Well, absolutely, because you've got to earn nearly twice the 434 00:21:50,400 --> 00:21:52,680 Speaker 2: amount of to pay back the debt. So if you 435 00:21:52,760 --> 00:21:55,280 Speaker 2: borrow ten thousand dollars from me, you've got to go 436 00:21:55,359 --> 00:21:58,520 Speaker 2: and earn twenty thousand dollars depending on your tax rate, 437 00:21:59,440 --> 00:22:02,000 Speaker 2: pay the then just to pay me back the ten 438 00:22:02,080 --> 00:22:05,159 Speaker 2: thousand dollars. But again then there's if there's interest on that, 439 00:22:05,600 --> 00:22:07,240 Speaker 2: you're going to pay the interest at the same time 440 00:22:07,280 --> 00:22:10,960 Speaker 2: as well. So yeah, I'm deadly against it. So yeah, yeah, 441 00:22:10,960 --> 00:22:11,720 Speaker 2: you're dead against it. 442 00:22:11,920 --> 00:22:14,520 Speaker 1: And I can see why. Okay, very interesting, just to 443 00:22:14,600 --> 00:22:17,159 Speaker 1: cover back on that, folks. So this is the whole MAC. 444 00:22:17,480 --> 00:22:19,320 Speaker 1: It used to be called a pension loan scheme. It 445 00:22:19,480 --> 00:22:25,320 Speaker 1: was upgraded and improved by the previous government actually changing. 446 00:22:25,520 --> 00:22:29,040 Speaker 1: I'm pretty certain did all this and it opened it up. 447 00:22:29,480 --> 00:22:31,520 Speaker 1: It used to have all sorts of limits, right, but 448 00:22:31,760 --> 00:22:34,040 Speaker 1: now it doesn't. You just have to be fixed sixty 449 00:22:34,119 --> 00:22:39,359 Speaker 1: seven or over. It's government funders, it's government run. It 450 00:22:39,520 --> 00:22:42,920 Speaker 1: has some limitations compared to the commercial ones, but not many. 451 00:22:43,320 --> 00:22:46,800 Speaker 1: And it has a rate which is I'm not kidding 452 00:22:47,160 --> 00:22:49,879 Speaker 1: it don't can it's it's coming up on for half 453 00:22:50,119 --> 00:22:54,040 Speaker 1: the commercial rates. Yeah, so so don't check it out. 454 00:22:54,200 --> 00:22:56,000 Speaker 2: And it capitalizes on itself as well. 455 00:22:56,200 --> 00:23:00,320 Speaker 1: Yeah, if you have a parent in that situation, or 456 00:23:00,600 --> 00:23:03,040 Speaker 1: if you are in that situation, just have a look 457 00:23:03,119 --> 00:23:05,480 Speaker 1: at it. It's sitting there on the web. It's quite 458 00:23:05,560 --> 00:23:11,640 Speaker 1: well explained. They're not as they're not as fast as 459 00:23:11,760 --> 00:23:14,920 Speaker 1: private operators. But hey, if they're giving it to you 460 00:23:15,040 --> 00:23:17,600 Speaker 1: for half the price, I imagine that's a worth. 461 00:23:17,640 --> 00:23:19,920 Speaker 2: Just one really quick note on that too. If you've 462 00:23:20,080 --> 00:23:22,720 Speaker 2: already if you're already seventy seven years of age and 463 00:23:22,840 --> 00:23:26,200 Speaker 2: you already have one hundred thousand loan against that property 464 00:23:26,560 --> 00:23:28,920 Speaker 2: as a child, he may want to pay that out 465 00:23:29,000 --> 00:23:32,200 Speaker 2: for your parents, and they're only paying three point nine 466 00:23:32,280 --> 00:23:35,000 Speaker 2: quart perxtent, but you're paying six point five percent against 467 00:23:35,080 --> 00:23:38,520 Speaker 2: your mortgage. The income that they're receding from there will 468 00:23:38,560 --> 00:23:41,280 Speaker 2: actually well and truly cover it until they do get 469 00:23:41,359 --> 00:23:45,120 Speaker 2: the home equity access gain. So yeah, So if there's 470 00:23:45,160 --> 00:23:46,720 Speaker 2: a way that you feel, oh we're not going to 471 00:23:46,760 --> 00:23:49,960 Speaker 2: get it because of X y Z, look at it differently, 472 00:23:50,119 --> 00:23:51,880 Speaker 2: you look at right outside the box. 473 00:23:51,960 --> 00:23:56,040 Speaker 1: Yeah, look at it creatively. Very good. Okay, thank you Doucin. 474 00:23:56,080 --> 00:23:57,840 Speaker 1: All right, hey you would take a short break and 475 00:23:58,400 --> 00:24:01,160 Speaker 1: we will come back and do with of the questions 476 00:24:01,240 --> 00:24:13,240 Speaker 1: that have been accumulating. Okay, back in the second folks, Hello, 477 00:24:13,440 --> 00:24:16,760 Speaker 1: welcome back to The Australian's Money Puzzle podcast. James Kirby 478 00:24:16,840 --> 00:24:21,760 Speaker 1: talking to Duncan Parkins of Tax Time Accountants, a debut 479 00:24:21,960 --> 00:24:24,879 Speaker 1: guest on the show. Duncan, you're okay with the questions? 480 00:24:25,080 --> 00:24:26,320 Speaker 1: Have you had a look at them all? Are you 481 00:24:26,440 --> 00:24:28,080 Speaker 1: able to have a go with them? We're try and 482 00:24:28,160 --> 00:24:32,199 Speaker 1: get through them all. Howard, my friend's parents bought an 483 00:24:32,200 --> 00:24:35,800 Speaker 1: investment property for one hundred thousand in the nineteen nineties. 484 00:24:35,840 --> 00:24:38,399 Speaker 1: Oh those were the days. Let's say it's worth a 485 00:24:38,440 --> 00:24:40,920 Speaker 1: million today. They move in to it and live out 486 00:24:40,960 --> 00:24:43,240 Speaker 1: their days in this property when they die and the 487 00:24:43,320 --> 00:24:45,720 Speaker 1: property passes down to my friend, would it be exempt 488 00:24:45,760 --> 00:24:47,640 Speaker 1: from CGT if it were sold? 489 00:24:48,400 --> 00:24:48,440 Speaker 2: No? 490 00:24:50,080 --> 00:24:53,640 Speaker 1: No, okay. Alternatively, my friend could live in it as 491 00:24:53,840 --> 00:24:57,159 Speaker 1: principal praise of residence, which I assume would reset the 492 00:24:57,240 --> 00:25:02,520 Speaker 1: cost space of the property. Both thoughts okay, So I'll 493 00:25:02,640 --> 00:25:03,399 Speaker 1: just break it down of it. 494 00:25:03,520 --> 00:25:06,120 Speaker 2: So QUARTD for one hundred thousand and the nineties worth 495 00:25:06,119 --> 00:25:09,480 Speaker 2: a million today as of today, with no changes to 496 00:25:09,560 --> 00:25:13,360 Speaker 2: negative viewing or capital gains tax in the future. You've 497 00:25:13,359 --> 00:25:15,520 Speaker 2: got to assume that. So let's just look at the 498 00:25:15,560 --> 00:25:19,360 Speaker 2: situation today, nine hundred thousand dollars gain fifty percent discount, 499 00:25:20,160 --> 00:25:22,600 Speaker 2: four hundred and fifty thousand dollars, you're going to be 500 00:25:22,800 --> 00:25:25,760 Speaker 2: probably paying around about two hundred thousand dollars worth of 501 00:25:25,840 --> 00:25:29,520 Speaker 2: tax there. That's the So that's if the parents own 502 00:25:29,600 --> 00:25:32,800 Speaker 2: at fifty to fifty. So therefore each each person would 503 00:25:32,800 --> 00:25:36,080 Speaker 2: be assessed on roughly one hundred thousand dollars income each. Now, 504 00:25:36,400 --> 00:25:39,760 Speaker 2: if they're retired and they've got no income, really, you'd 505 00:25:39,760 --> 00:25:42,840 Speaker 2: probably be about maybe twenty thousand dollars tax each. So 506 00:25:43,720 --> 00:25:46,240 Speaker 2: so my thoughts are is, take your wing, take you 507 00:25:46,320 --> 00:25:51,040 Speaker 2: nine hundred thousand dollars in a year, that you're not 508 00:25:51,119 --> 00:25:55,360 Speaker 2: working anyway, I would not play around with the future 509 00:25:55,560 --> 00:25:58,480 Speaker 2: of what's going to happen in ten years time because 510 00:25:59,040 --> 00:26:02,000 Speaker 2: it will hurt and had heard big coock. So we've 511 00:26:02,119 --> 00:26:05,000 Speaker 2: actually had one very similar to this recently where the 512 00:26:05,400 --> 00:26:08,000 Speaker 2: grandmother died and passed the asset down to the daughter 513 00:26:08,520 --> 00:26:10,680 Speaker 2: and anyway, it's a bit of a mess, but capital 514 00:26:10,720 --> 00:26:12,800 Speaker 2: gains tax on that is around about four hundred thousand 515 00:26:12,840 --> 00:26:15,320 Speaker 2: dollars and they're not happy about that. So what they 516 00:26:15,359 --> 00:26:18,000 Speaker 2: should have done is sell the asset years ago. But anyway, 517 00:26:18,320 --> 00:26:21,560 Speaker 2: it's a wonderful thing. So when they die probably passes 518 00:26:21,600 --> 00:26:25,320 Speaker 2: down would have be no we said that, so even 519 00:26:25,359 --> 00:26:28,920 Speaker 2: if the parents pass away, the capital gains tax is 520 00:26:28,920 --> 00:26:32,359 Speaker 2: still calculated from the nineties to say today when they 521 00:26:32,480 --> 00:26:35,560 Speaker 2: moved into it, and then there's a percentage rule that 522 00:26:35,680 --> 00:26:40,320 Speaker 2: you use and convoluted and calculated it. But the estate, 523 00:26:41,119 --> 00:26:43,520 Speaker 2: the estate would pay the capital gains tax, and then 524 00:26:43,560 --> 00:26:47,719 Speaker 2: the person receiving it, like the person the sun, the beneficiary, 525 00:26:48,119 --> 00:26:50,800 Speaker 2: they would receive that with no tax, and if it 526 00:26:50,880 --> 00:26:53,560 Speaker 2: was their principal place of residence, they could sell that 527 00:26:53,680 --> 00:26:57,680 Speaker 2: within twelve months, six six weeks whatever, and then there'd 528 00:26:57,680 --> 00:26:59,760 Speaker 2: be no tax on that pull them either. 529 00:27:00,520 --> 00:27:02,320 Speaker 1: All right, I hope that makes sense. And by the way, 530 00:27:02,560 --> 00:27:06,320 Speaker 1: Howard and all the Howards out there, this is never advice. 531 00:27:06,440 --> 00:27:10,520 Speaker 1: This is information only, as you all know. Okay, Graham says, 532 00:27:10,920 --> 00:27:14,600 Speaker 1: this is this question was specially curated for you, Doug Goods. 533 00:27:15,000 --> 00:27:18,639 Speaker 1: Is it worth purchasing accounting software to help with bookkeeping 534 00:27:19,040 --> 00:27:22,480 Speaker 1: prior to sending to an accountant you around your returns? 535 00:27:22,840 --> 00:27:25,639 Speaker 1: Or is it reasonable to just use an Excel document? 536 00:27:25,840 --> 00:27:27,800 Speaker 1: Or someone might say is it reasonable to bring in 537 00:27:27,880 --> 00:27:30,399 Speaker 1: an envelope full of receipts and spread them out on 538 00:27:30,520 --> 00:27:31,160 Speaker 1: the tables. 539 00:27:31,720 --> 00:27:35,000 Speaker 2: Yeah, those days are going, especially with single touch, single 540 00:27:35,040 --> 00:27:37,920 Speaker 2: touch pyrole requirements and other things like that. There's so many. 541 00:27:38,640 --> 00:27:41,560 Speaker 2: I mean, if you can staff, you have to have 542 00:27:41,640 --> 00:27:44,040 Speaker 2: single touch pyrole. What I would holly recommend they The 543 00:27:44,119 --> 00:27:46,240 Speaker 2: best one to have is the one that your bookkeeper 544 00:27:46,400 --> 00:27:49,800 Speaker 2: or your accountant uses. So don't run off and boring 545 00:27:49,880 --> 00:27:52,760 Speaker 2: off the shelf, block out a zero or moil or 546 00:27:52,800 --> 00:27:55,440 Speaker 2: whatever and then you find it your bookkeeper heights moil 547 00:27:55,560 --> 00:27:57,560 Speaker 2: or hight zero. Sorry, lot that The best one to 548 00:27:57,680 --> 00:27:59,840 Speaker 2: have is the one the bookkeeper of the account uses. 549 00:28:00,200 --> 00:28:02,399 Speaker 2: And they're all pretty good. They're all most of them 550 00:28:02,440 --> 00:28:04,840 Speaker 2: are all CLAOUD based, so you can sit at home 551 00:28:04,880 --> 00:28:07,280 Speaker 2: and look at your bookkeeping in your accounting and your 552 00:28:07,280 --> 00:28:09,440 Speaker 2: account can look at it exactly at the same time. 553 00:28:09,600 --> 00:28:12,600 Speaker 1: So okay, and there's that. What about for people, say 554 00:28:12,680 --> 00:28:14,520 Speaker 1: doing an SMSA for something or the only thing that 555 00:28:14,600 --> 00:28:14,879 Speaker 1: you like? 556 00:28:15,560 --> 00:28:18,080 Speaker 2: So our self managed sheep I fun. They're very specialized programs. 557 00:28:18,240 --> 00:28:20,159 Speaker 2: BGL is one that we use is a couple of 558 00:28:20,200 --> 00:28:23,119 Speaker 2: others out there. But for a self many sleep, you 559 00:28:23,880 --> 00:28:27,440 Speaker 2: probably better off linking up with your accountant and again 560 00:28:27,680 --> 00:28:30,560 Speaker 2: using the program and the system that they use. As 561 00:28:30,600 --> 00:28:33,040 Speaker 2: I said, ours is big also, that would be the 562 00:28:33,080 --> 00:28:33,760 Speaker 2: best one for us. 563 00:28:33,960 --> 00:28:37,760 Speaker 1: Yeah, okay, now thank you for that one. Andrews says, 564 00:28:38,160 --> 00:28:41,640 Speaker 1: from the recent podcast with Bruce Brammel, there were some 565 00:28:41,800 --> 00:28:44,920 Speaker 1: details about the six year rule, which I've always been 566 00:28:44,960 --> 00:28:48,520 Speaker 1: fascinated with. I'd also like to pulp Bruce, I think 567 00:28:48,640 --> 00:28:51,600 Speaker 1: consciously said six or six point five years, which I've 568 00:28:51,680 --> 00:28:53,960 Speaker 1: also heard from others. Perhaps it's not even a six 569 00:28:54,080 --> 00:28:57,520 Speaker 1: year rule. After all these six year rules, could you 570 00:28:57,720 --> 00:29:01,200 Speaker 1: explain what it is and why our audience should know 571 00:29:01,280 --> 00:29:01,720 Speaker 1: about us? 572 00:29:02,080 --> 00:29:04,880 Speaker 2: So the six year old was originally brought in I 573 00:29:05,120 --> 00:29:08,280 Speaker 2: believe back in the day when a lot of us 574 00:29:08,360 --> 00:29:13,680 Speaker 2: worked in banks, police officers, teachers, nurses and you were 575 00:29:13,840 --> 00:29:18,480 Speaker 2: transferred to be promoted within the job. Those days have 576 00:29:19,480 --> 00:29:24,040 Speaker 2: literally gone. Also, fringe benefits taxes wiped out a lot 577 00:29:24,080 --> 00:29:26,280 Speaker 2: of the benefit from that. So to give you an example, 578 00:29:26,280 --> 00:29:28,520 Speaker 2: if a police officer was living in Brisbane and they 579 00:29:28,560 --> 00:29:33,000 Speaker 2: were transferred to Cannes as the sergeant, there was usually 580 00:29:33,720 --> 00:29:38,200 Speaker 2: a police officer's home provided for them, and so they 581 00:29:38,280 --> 00:29:40,680 Speaker 2: were going, oh, I've just been transferred from Brisbane, I've 582 00:29:40,720 --> 00:29:43,200 Speaker 2: just bought a house with my wife and two kids, 583 00:29:43,400 --> 00:29:44,720 Speaker 2: and now I've got to go and work up in 584 00:29:44,800 --> 00:29:49,640 Speaker 2: cans So the government had a relaxation around capital gay 585 00:29:49,680 --> 00:29:52,520 Speaker 2: sex on that they said, okay, if you're forced to 586 00:29:52,560 --> 00:29:56,200 Speaker 2: sell your home because of work, you got up to 587 00:29:56,320 --> 00:30:01,120 Speaker 2: six years to sell their home. So the that police 588 00:30:01,120 --> 00:30:03,760 Speaker 2: officer could have bought that home a week before he 589 00:30:03,840 --> 00:30:07,160 Speaker 2: found out about his transfer. There's no real timeline in regards. 590 00:30:07,240 --> 00:30:09,600 Speaker 2: It's not a twelve month waiting period or anything like that. 591 00:30:10,120 --> 00:30:12,680 Speaker 1: Do you have six years to enjoy the benefits of 592 00:30:12,760 --> 00:30:15,240 Speaker 1: the tax of the capital against tax exemption? 593 00:30:16,280 --> 00:30:18,680 Speaker 2: That's right, so you can claim all of the expenses, 594 00:30:18,760 --> 00:30:21,680 Speaker 2: the rates and mortgage rates, maintenance, insurance interest, except that 595 00:30:21,720 --> 00:30:24,120 Speaker 2: you can claim all of that and then if you 596 00:30:24,320 --> 00:30:27,160 Speaker 2: move back into the property, it starts again. And that's 597 00:30:27,200 --> 00:30:29,480 Speaker 2: what happened a lot of the time. You'd be promoted 598 00:30:29,520 --> 00:30:31,840 Speaker 2: and moved up north, or you'd be moved out west 599 00:30:31,920 --> 00:30:35,560 Speaker 2: or something, and then you So I think that may 600 00:30:35,680 --> 00:30:40,600 Speaker 2: actually be an area that government and ATO may focus 601 00:30:40,720 --> 00:30:44,680 Speaker 2: on changing. Because so in the if a bank officer 602 00:30:44,840 --> 00:30:47,960 Speaker 2: was transferred, they actually stayed in a bank officer home 603 00:30:48,640 --> 00:30:50,560 Speaker 2: and they lived in that home and it was provided 604 00:30:50,600 --> 00:30:52,440 Speaker 2: for by the banker, that was part of their package. 605 00:30:52,640 --> 00:30:54,280 Speaker 2: Well they actuala looked at that and they went, hay, 606 00:30:54,320 --> 00:30:57,320 Speaker 2: in a second, that's a fringe benefit, so therefore we 607 00:30:57,440 --> 00:30:59,719 Speaker 2: need to tax you on that. So the banks all 608 00:30:59,760 --> 00:31:03,200 Speaker 2: set said, well, we can't provide housing for staff anymore. 609 00:31:03,640 --> 00:31:07,280 Speaker 2: So the and again the whole banking system and the 610 00:31:07,680 --> 00:31:10,920 Speaker 2: transferring has changed pot of work. But again fride benefits 611 00:31:11,000 --> 00:31:14,040 Speaker 2: is not government. It's not a government tax. So therefore 612 00:31:14,200 --> 00:31:17,680 Speaker 2: state government so police officers and nurses and that they 613 00:31:17,720 --> 00:31:20,840 Speaker 2: still have housing. But it's a very interesting space. There 614 00:31:20,880 --> 00:31:22,880 Speaker 2: will be some major changes in there. But a lot 615 00:31:22,920 --> 00:31:25,840 Speaker 2: of people now what they're doing through what they call 616 00:31:25,920 --> 00:31:29,400 Speaker 2: rent festing is that they buy a home, a unit 617 00:31:29,480 --> 00:31:31,560 Speaker 2: or something like that, they rent it out and then 618 00:31:31,680 --> 00:31:33,640 Speaker 2: they call it their principal place of residence and then 619 00:31:33,640 --> 00:31:36,120 Speaker 2: they move back into mum and dad's flights and so 620 00:31:36,280 --> 00:31:40,320 Speaker 2: that's called rentfesting. So people are abusing that rule. 621 00:31:41,120 --> 00:31:43,120 Speaker 1: Some mom who does toost for six years or up 622 00:31:43,200 --> 00:31:43,840 Speaker 1: to six years. 623 00:31:43,960 --> 00:31:48,600 Speaker 2: Yeah, that's true. Yeah, I understand. So that rule is 624 00:31:48,680 --> 00:31:52,120 Speaker 2: being abused. And once you start abusing it, the ATO 625 00:31:52,680 --> 00:31:53,880 Speaker 2: and the government will actually start. 626 00:31:54,000 --> 00:31:56,640 Speaker 1: So it sounds to me like you accountants are of 627 00:31:56,760 --> 00:31:58,800 Speaker 1: the opinion they can't last forever. But do you know 628 00:31:58,920 --> 00:32:01,160 Speaker 1: anything more than that is just supposition? 629 00:32:01,320 --> 00:32:07,320 Speaker 2: Are Now that's just the Duncan theory. It's just wait, definitely, 630 00:32:07,840 --> 00:32:10,680 Speaker 2: But watch this spice. I watched this space. There's a 631 00:32:10,680 --> 00:32:11,560 Speaker 2: lot of people doing it. 632 00:32:12,160 --> 00:32:13,960 Speaker 1: There's a lot of people do Yeah. Yeah, there's a 633 00:32:13,960 --> 00:32:15,719 Speaker 1: lot of people doing it, and we've just told them 634 00:32:15,760 --> 00:32:19,040 Speaker 1: all about it. Okay, very good. Now there are three 635 00:32:19,080 --> 00:32:22,320 Speaker 1: more questions and they are all about ETFs. So I'm 636 00:32:22,360 --> 00:32:25,840 Speaker 1: going to try and put them together if I could. James, 637 00:32:26,280 --> 00:32:32,840 Speaker 1: Josh and Joe's soapd and exchange funds are terribly increasingly 638 00:32:32,920 --> 00:32:36,040 Speaker 1: forpular everyone I'm sure on the show knows the basics. 639 00:32:36,080 --> 00:32:40,200 Speaker 1: They know the basics that you buy these funds. Let's 640 00:32:40,200 --> 00:32:43,040 Speaker 1: say you buy the Australian market where you buy the 641 00:32:43,400 --> 00:32:46,160 Speaker 1: NASDAC and you get whatever return that market did in 642 00:32:46,240 --> 00:32:48,960 Speaker 1: the year up or down. You can't do better than 643 00:32:49,000 --> 00:32:51,120 Speaker 1: the market, you can't do worse. That's good enough for 644 00:32:51,520 --> 00:32:54,640 Speaker 1: lots of people, and that's the traditional ETF. So the 645 00:32:55,440 --> 00:33:01,200 Speaker 1: variety of questions around that, especially the main theme from 646 00:33:01,280 --> 00:33:06,200 Speaker 1: these three questions is actually about children and kids. And 647 00:33:06,360 --> 00:33:09,280 Speaker 1: I used to get to sophab two on radios when 648 00:33:09,320 --> 00:33:11,680 Speaker 1: I did these radio shows for people would call in 649 00:33:12,200 --> 00:33:14,880 Speaker 1: and they say, you know, I want to buy something 650 00:33:15,000 --> 00:33:18,320 Speaker 1: for my kids. How do I start? Once upon a 651 00:33:18,440 --> 00:33:20,360 Speaker 1: time you'd say, oh, look, you know, buy one of 652 00:33:20,400 --> 00:33:22,200 Speaker 1: the banks and one of the miners and start to 653 00:33:22,240 --> 00:33:24,600 Speaker 1: build out from there. I mean, there was nobody tfs 654 00:33:24,680 --> 00:33:28,280 Speaker 1: or index funds, so now they're there. But the teams 655 00:33:28,320 --> 00:33:30,360 Speaker 1: of these three questions is I want to do it 656 00:33:30,440 --> 00:33:32,520 Speaker 1: for my kids. How did they do it? 657 00:33:33,560 --> 00:33:36,120 Speaker 2: Well, that'll be in the parents name either it could 658 00:33:36,120 --> 00:33:37,880 Speaker 2: be you could either a trust structure or something like that, 659 00:33:38,280 --> 00:33:40,480 Speaker 2: but you can't be in the kids names because they're miners. 660 00:33:40,840 --> 00:33:43,600 Speaker 2: One of them is under one year of age, so 661 00:33:43,920 --> 00:33:46,040 Speaker 2: it must be in your name. So therefore you're going 662 00:33:46,080 --> 00:33:49,080 Speaker 2: to be paying any tax on any income that rolls 663 00:33:49,160 --> 00:33:52,920 Speaker 2: in from that investment. So if you're on two hundred 664 00:33:52,960 --> 00:33:55,120 Speaker 2: thousand dollars a year, every dollar that comes in the 665 00:33:55,200 --> 00:33:58,600 Speaker 2: young JOWI two year old child, it's going to hurt you. 666 00:33:58,680 --> 00:34:02,160 Speaker 2: So that you you should probably lean towards looking at 667 00:34:02,240 --> 00:34:06,840 Speaker 2: your growth type investments. So CSL was one share that 668 00:34:07,280 --> 00:34:09,160 Speaker 2: I made told me to buy when my daughter was 669 00:34:09,239 --> 00:34:11,279 Speaker 2: born back in two thousand and two. 670 00:34:11,800 --> 00:34:14,520 Speaker 1: What I got suggestion that was idiot. 671 00:34:14,600 --> 00:34:16,600 Speaker 2: Didn't buy it. He bought ten thousand dollars with a 672 00:34:16,680 --> 00:34:21,520 Speaker 2: BHP because because I watched the share price go from 673 00:34:21,560 --> 00:34:23,920 Speaker 2: twenty eight dollars down to twelve dollars because of our 674 00:34:24,320 --> 00:34:27,600 Speaker 2: hepatitis C scare. So I said, oh, well, I'm smarter 675 00:34:27,680 --> 00:34:30,520 Speaker 2: than umrate, I'll buyo BHP And it was the stupidest 676 00:34:30,560 --> 00:34:33,319 Speaker 2: thing I ever did. But yeah, So, so you want 677 00:34:33,360 --> 00:34:36,400 Speaker 2: to look at your super high growth type ets. 678 00:34:36,600 --> 00:34:40,360 Speaker 1: My suggestion anyhow, Duncan you're suggesting that because they have 679 00:34:40,480 --> 00:34:43,000 Speaker 1: little dividends and you don't want to be pintact. 680 00:34:43,080 --> 00:34:45,920 Speaker 2: That's right, Yes, that's right. Really no income, only growth. 681 00:34:46,040 --> 00:34:48,200 Speaker 2: So therefore they don't pay they don't pay a lot 682 00:34:48,280 --> 00:34:52,000 Speaker 2: in dividends or you know, investment income. And then just 683 00:34:52,560 --> 00:34:54,759 Speaker 2: just put it in the bottom drawer and look at 684 00:34:54,800 --> 00:34:56,719 Speaker 2: it once a year and let it grow. And then 685 00:34:57,000 --> 00:34:58,520 Speaker 2: so I was actually only talking to a mate on 686 00:34:58,560 --> 00:35:01,200 Speaker 2: the weekend, and he did, he did one hundred dollars 687 00:35:01,360 --> 00:35:03,520 Speaker 2: a month at each one of his kids. And they've 688 00:35:03,960 --> 00:35:06,200 Speaker 2: they've just all been handed over one hundred and twenty 689 00:35:06,239 --> 00:35:07,239 Speaker 2: thousand dollars. 690 00:35:07,520 --> 00:35:09,880 Speaker 1: Each, and so it was just he just said it 691 00:35:09,960 --> 00:35:11,279 Speaker 1: was simple. I just shoved it away. 692 00:35:11,320 --> 00:35:13,360 Speaker 2: I didn't look at it. It was growth. Fun. And 693 00:35:13,440 --> 00:35:15,640 Speaker 2: then he go, kids, he's one hundred and twenty thousand dollars. 694 00:35:15,680 --> 00:35:17,880 Speaker 2: So it's a it's a great way to go. And 695 00:35:18,320 --> 00:35:20,319 Speaker 2: you know, I really like the concept. If you want 696 00:35:20,360 --> 00:35:22,920 Speaker 2: to add a little bit of spice to it, probably 697 00:35:23,040 --> 00:35:28,359 Speaker 2: more so in your own personal ETF diversification portfolio. Never 698 00:35:28,760 --> 00:35:33,520 Speaker 2: buy ETFs with cash or try and always borrow to 699 00:35:33,600 --> 00:35:37,239 Speaker 2: buy the ETFs because it's tax deductible. And so you 700 00:35:37,280 --> 00:35:41,520 Speaker 2: would never buy an investment property with cash. You'd always 701 00:35:41,560 --> 00:35:43,759 Speaker 2: buy it with borrowings, wouldn't you. So why wouldn't you 702 00:35:43,800 --> 00:35:44,800 Speaker 2: do the same with ETFs. 703 00:35:45,920 --> 00:35:49,040 Speaker 1: Yeah, well, well why wouldn't you do the same with ETFs? 704 00:35:49,520 --> 00:35:53,000 Speaker 1: Good question, look, very good point. Why do you think 705 00:35:53,040 --> 00:35:55,200 Speaker 1: that is? Why do you think people are so confident 706 00:35:55,280 --> 00:35:58,960 Speaker 1: of borrowing to by property and not confident to buy shares, 707 00:35:59,200 --> 00:36:03,880 Speaker 1: especially eat when we know that the track record of these. 708 00:36:04,560 --> 00:36:08,319 Speaker 2: Well GFC is two thousand and eight. That put an 709 00:36:08,440 --> 00:36:11,759 Speaker 2: end to all of that margin lending ideas. But I 710 00:36:11,800 --> 00:36:14,600 Speaker 2: think margin lending is fine. If you've got a million 711 00:36:14,640 --> 00:36:16,839 Speaker 2: dollar property in a one hundred and fifty thousand dollars 712 00:36:16,880 --> 00:36:20,399 Speaker 2: home loan, you've got eight hundred and fifty thousand dollars 713 00:36:20,440 --> 00:36:22,960 Speaker 2: with equity in your home. If you take a small 714 00:36:23,080 --> 00:36:26,239 Speaker 2: split facility and borrow against that facility and drop it 715 00:36:26,320 --> 00:36:30,359 Speaker 2: into an ATF through dollar cost averaging, you won't go right. 716 00:36:30,680 --> 00:36:32,799 Speaker 2: You're not gonna you're not gonna have you higher celled 717 00:36:32,840 --> 00:36:35,759 Speaker 2: up on you and you get a getty interest taxedession. 718 00:36:35,800 --> 00:36:37,920 Speaker 1: Call just one not thing. Explain that again to the 719 00:36:38,040 --> 00:36:42,520 Speaker 1: audience that it is a person thought that they were 720 00:36:42,560 --> 00:36:44,399 Speaker 1: going to help their kids and when and they look 721 00:36:44,400 --> 00:36:45,880 Speaker 1: at them, that the city out in the garden, and 722 00:36:45,920 --> 00:36:47,680 Speaker 1: they raised at nine and they say, I really should 723 00:36:47,680 --> 00:36:50,719 Speaker 1: do something so so so, so we both agree that's 724 00:36:50,719 --> 00:36:53,239 Speaker 1: by an ETF. But you were saying, just explain the 725 00:36:53,320 --> 00:36:55,640 Speaker 1: notion of how they might take What's what is the 726 00:36:55,760 --> 00:36:57,920 Speaker 1: nature or the form of the loan or the gearing 727 00:36:58,000 --> 00:36:58,840 Speaker 1: that they would do on it. 728 00:36:59,480 --> 00:37:01,520 Speaker 2: Oh well, I'll give you an examp. So a million 729 00:37:01,520 --> 00:37:03,760 Speaker 2: dollar home and you've got one hundred and fifty thousand 730 00:37:03,760 --> 00:37:06,920 Speaker 2: dollars mortgage against it, which is just a normal standard homeland. 731 00:37:07,160 --> 00:37:09,320 Speaker 2: I would go to your boat broker or bank. I 732 00:37:09,400 --> 00:37:11,399 Speaker 2: would top that up to say, you know, I don't 733 00:37:11,440 --> 00:37:13,360 Speaker 2: know three hundred thousand dollars, So now you've got a 734 00:37:13,360 --> 00:37:15,520 Speaker 2: one hundred and fifty thousand dollar limit with a zero 735 00:37:15,640 --> 00:37:17,680 Speaker 2: debt on it. That's your investment, so would he. And 736 00:37:17,760 --> 00:37:19,600 Speaker 2: then you've got one hundred and fifty thousand dollars home 737 00:37:19,680 --> 00:37:21,279 Speaker 2: loan with a limit of one hundred and fifty years, 738 00:37:21,320 --> 00:37:23,680 Speaker 2: zero debt. And it's called debt recycling. You can do 739 00:37:23,719 --> 00:37:26,440 Speaker 2: a YouTube onto people and then you just all you 740 00:37:26,560 --> 00:37:29,600 Speaker 2: do is your dolar cost average out of the new facility, 741 00:37:29,680 --> 00:37:32,200 Speaker 2: which has a zero ballance of zero and a limited 742 00:37:32,239 --> 00:37:35,600 Speaker 2: one fifty. You're pour instead of taking money out of 743 00:37:35,680 --> 00:37:37,799 Speaker 2: your savings to the detriment of your homelan. So your 744 00:37:37,800 --> 00:37:40,760 Speaker 2: homeland is going to reduce very fast, that your investment 745 00:37:40,800 --> 00:37:43,720 Speaker 2: borrowings is going to increase. Before you hit one hundred 746 00:37:43,719 --> 00:37:46,760 Speaker 2: and fifty thousand dollars worth of borrowings in investment borrowings, 747 00:37:46,800 --> 00:37:49,560 Speaker 2: which is fully tax deductible, your home loan will be smashed. 748 00:37:49,560 --> 00:37:53,040 Speaker 2: It'll be wide out. And so all the only borrowings 749 00:37:53,080 --> 00:37:55,719 Speaker 2: that you have within a couple of years or five 750 00:37:55,800 --> 00:37:58,080 Speaker 2: year sent the only borrowings that you have is tax 751 00:37:58,120 --> 00:37:59,000 Speaker 2: deductible borrowings. 752 00:37:59,400 --> 00:38:02,799 Speaker 1: It's not only that, but the borrowings that you both 753 00:38:02,840 --> 00:38:06,279 Speaker 1: the ETF song are on mortgage rates which are lower 754 00:38:06,360 --> 00:38:07,680 Speaker 1: than all other commercial rates. 755 00:38:07,840 --> 00:38:10,560 Speaker 2: Yeah, and any interest that you're paying over this text, well, 756 00:38:10,640 --> 00:38:12,920 Speaker 2: but it's in an invest it's in an ATF. It's 757 00:38:12,920 --> 00:38:15,640 Speaker 2: probably giving and a growth EGF. It's probably giving you 758 00:38:15,719 --> 00:38:18,799 Speaker 2: eleven percent or eight percent. You know me, so. 759 00:38:20,400 --> 00:38:23,320 Speaker 1: Very good, Yes, I like it. I like it terrific. 760 00:38:23,880 --> 00:38:25,680 Speaker 1: Thank you very much, Duncan. Great to have you on 761 00:38:25,760 --> 00:38:29,840 Speaker 1: the show today. Quite wein and some really interesting issues 762 00:38:29,880 --> 00:38:32,680 Speaker 1: we picked up there, folks, I thought you I'm sure 763 00:38:32,680 --> 00:38:35,840 Speaker 1: you found that very interesting. Interesting about the property in 764 00:38:36,040 --> 00:38:39,920 Speaker 1: SMSFS or at least the you know, the outstanding advantage 765 00:38:39,960 --> 00:38:44,240 Speaker 1: of property outside super because of negative gearing. Also about 766 00:38:44,400 --> 00:38:47,080 Speaker 1: the ETFs, It's funny we talk about ETFs all the time, 767 00:38:47,160 --> 00:38:50,480 Speaker 1: but we haven't talked about financing them or gearing them. 768 00:38:51,120 --> 00:38:54,759 Speaker 1: And and why don't people do it? Since their track 769 00:38:54,840 --> 00:38:59,560 Speaker 1: report is would be comparable long term with the residential 770 00:39:00,000 --> 00:39:04,439 Speaker 1: average residential home returns over across the country years. 771 00:39:05,040 --> 00:39:06,520 Speaker 2: The ATF can be sold to yourself. 772 00:39:07,600 --> 00:39:10,239 Speaker 1: Yes, that's fine. And they have no gutfers and they 773 00:39:10,320 --> 00:39:16,320 Speaker 1: have no maintenance. Yeah, okay, very good. Oh just to 774 00:39:16,440 --> 00:39:21,239 Speaker 1: let you know, we have no Whittaker, the legendary. No 775 00:39:21,400 --> 00:39:24,080 Speaker 1: Whittaker on the show on Thursday, everybody, so look out 776 00:39:24,160 --> 00:39:27,160 Speaker 1: for that. Keep the emails running to the money posit 777 00:39:27,280 --> 00:39:29,640 Speaker 1: at the Australian dot com dot au and we'll talk 778 00:39:29,800 --> 00:39:30,640 Speaker 1: to you soon