1 00:00:10,039 --> 00:00:13,000 Speaker 1: Hello, and welcome to the Australians Money Puzzitlive podcast. I'm 2 00:00:13,080 --> 00:00:17,520 Speaker 1: James Kirby. Welcome aboard everybody. So we did want to 3 00:00:17,560 --> 00:00:21,560 Speaker 1: know if you had any questions relating to the final shape, Okay, 4 00:00:21,640 --> 00:00:24,560 Speaker 1: the final we are to believe the final picture if 5 00:00:24,600 --> 00:00:27,600 Speaker 1: you like, on the new super tax. And you certainly 6 00:00:27,680 --> 00:00:30,479 Speaker 1: came to the party with a lot of correspondents and 7 00:00:30,520 --> 00:00:33,440 Speaker 1: a lot of questions. And I don't blame you because, 8 00:00:33,680 --> 00:00:36,360 Speaker 1: as I said, this is a new tax on top 9 00:00:36,400 --> 00:00:39,720 Speaker 1: of an existing complex tax system. I'm not surprised. So 10 00:00:39,760 --> 00:00:41,880 Speaker 1: we're going to have a look at that today. We're 11 00:00:41,920 --> 00:00:45,520 Speaker 1: also going to take a look a brief look basically 12 00:00:45,920 --> 00:00:49,280 Speaker 1: at annuities, which is something I know, I get correspondents 13 00:00:49,280 --> 00:00:51,879 Speaker 1: on all the time and in some ways it's changing. 14 00:00:51,920 --> 00:00:54,000 Speaker 1: And I have to say I'm not the first person 15 00:00:54,040 --> 00:00:56,240 Speaker 1: to say, if there was a really good annuity out there, hey, 16 00:00:56,240 --> 00:00:59,200 Speaker 1: why wouldn't you buy it? If there was and if 17 00:00:59,400 --> 00:01:02,720 Speaker 1: you could trust that was worth paying for. My guest 18 00:01:02,760 --> 00:01:05,720 Speaker 1: today is one of the favorite guests of listeners on 19 00:01:05,760 --> 00:01:08,840 Speaker 1: the show. It's James Gerard of Financial Advisor dot com 20 00:01:08,840 --> 00:01:10,120 Speaker 1: Dot you. How are you, James? 21 00:01:11,160 --> 00:01:11,840 Speaker 2: I'm doing great. 22 00:01:11,920 --> 00:01:14,000 Speaker 3: Thanks for having me on, James, and I guess before 23 00:01:14,000 --> 00:01:15,440 Speaker 3: we get going, I just wanted to call you. 24 00:01:15,440 --> 00:01:16,039 Speaker 2: Up on something. 25 00:01:16,080 --> 00:01:19,800 Speaker 3: I understand that on a podcast recently you spoke about 26 00:01:19,920 --> 00:01:22,800 Speaker 3: gold and as soon as you did that, you cursed 27 00:01:22,840 --> 00:01:25,880 Speaker 3: the trillion dollar gold industry. It fell by six percent. 28 00:01:26,040 --> 00:01:27,640 Speaker 3: So what have you got to say about yourself? And 29 00:01:27,680 --> 00:01:28,680 Speaker 3: what are you reckon about gold? 30 00:01:28,800 --> 00:01:31,560 Speaker 1: That's right, the commentator's curse. Do you ever watch cricket? 31 00:01:31,640 --> 00:01:33,080 Speaker 1: You know the guy comes out and says, this is 32 00:01:33,080 --> 00:01:35,560 Speaker 1: a new batsman. He's really good, he's fabulous, he's so 33 00:01:35,760 --> 00:01:38,280 Speaker 1: good where he's a new talent. He's coming through the 34 00:01:38,640 --> 00:01:41,720 Speaker 1: bank out for a dock. Yes, something like that, but 35 00:01:41,880 --> 00:01:45,319 Speaker 1: not quite not quite James, Okay, fair enough. I've been 36 00:01:45,319 --> 00:01:47,840 Speaker 1: wanting to do the story on gold. First of all, 37 00:01:48,200 --> 00:01:50,240 Speaker 1: let's clear the air. We have talked about gold for 38 00:01:50,360 --> 00:01:52,720 Speaker 1: years on the show. We regularly support the buying of 39 00:01:52,800 --> 00:01:55,960 Speaker 1: gold consistently so and I completely stand by that. 40 00:01:56,000 --> 00:01:56,520 Speaker 2: First of all. 41 00:01:57,080 --> 00:01:59,400 Speaker 1: Then we had Gemma Dale on from Naptrid. She was 42 00:01:59,440 --> 00:02:02,000 Speaker 1: really good, and we talked about gold and where it's 43 00:02:02,040 --> 00:02:04,040 Speaker 1: going to go and is it a good investment, and 44 00:02:04,040 --> 00:02:07,120 Speaker 1: we talk specifically and let it just in case you 45 00:02:07,160 --> 00:02:11,760 Speaker 1: missed this. Morgan Stanley Chief Investment Strategists, possibly the most 46 00:02:11,800 --> 00:02:16,880 Speaker 1: influential investment strategist in the world, the one to whom 47 00:02:16,919 --> 00:02:19,919 Speaker 1: twenty five of the top one hundred and fifty planners 48 00:02:19,919 --> 00:02:22,760 Speaker 1: on the Baron's list would be listening to, because it's 49 00:02:22,760 --> 00:02:26,640 Speaker 1: Morgan Stanley Wealth Management dominate the top players of financial advice. 50 00:02:26,680 --> 00:02:29,919 Speaker 1: And he had said that he recommended this is hard 51 00:02:29,960 --> 00:02:33,280 Speaker 1: to believe that you lift your allocation to gold to 52 00:02:33,320 --> 00:02:35,840 Speaker 1: a level of twenty percent. Now, everyone can lift an 53 00:02:35,919 --> 00:02:40,840 Speaker 1: allocation to go to whatever level they wish. But anyway, 54 00:02:41,000 --> 00:02:43,400 Speaker 1: funny thing, don't you know? The day after gold had 55 00:02:43,400 --> 00:02:46,200 Speaker 1: its worst day in twelve years and it fell six percent. 56 00:02:46,400 --> 00:02:49,000 Speaker 1: But here we are, it's Thursday morning, and I notice 57 00:02:49,200 --> 00:02:51,919 Speaker 1: that as I speak looking at the gold price right now, 58 00:02:52,280 --> 00:02:54,600 Speaker 1: that fall is over. For now, it would seem gold 59 00:02:54,680 --> 00:02:58,320 Speaker 1: is stabilizing. And I am completely comfortable with James with 60 00:02:58,639 --> 00:03:02,880 Speaker 1: gold as an acid allocation under these circumstances. And we 61 00:03:02,960 --> 00:03:04,880 Speaker 1: did say more than once it wouldn't go up on 62 00:03:04,880 --> 00:03:07,519 Speaker 1: a straight line. So I try to back on you, sir, 63 00:03:08,200 --> 00:03:10,120 Speaker 1: Where do you stand on gold? If I am, if 64 00:03:10,120 --> 00:03:13,160 Speaker 1: I'm sitting across your desk, and I say I really 65 00:03:13,200 --> 00:03:14,840 Speaker 1: think I should have gold and I don't have any 66 00:03:14,840 --> 00:03:16,799 Speaker 1: What do you say? 67 00:03:16,840 --> 00:03:19,560 Speaker 3: It's an interesting one because gold was much more attractive 68 00:03:19,639 --> 00:03:22,679 Speaker 3: for two three thousand dollars an ounce rather than over 69 00:03:22,720 --> 00:03:26,040 Speaker 3: six thousand dollars an ounce. I would say you had 70 00:03:26,040 --> 00:03:27,919 Speaker 3: to be my client years ago. We've built up gold 71 00:03:27,919 --> 00:03:29,840 Speaker 3: exposure for our clients, which is typically between two to 72 00:03:29,880 --> 00:03:31,240 Speaker 3: five percent of their portfolio. 73 00:03:31,520 --> 00:03:32,680 Speaker 2: So they're happy. 74 00:03:32,720 --> 00:03:34,600 Speaker 3: But if you're someone who's seen it in the news, 75 00:03:34,639 --> 00:03:37,000 Speaker 3: you're looking at the lines in Mardin Place in Sydney 76 00:03:37,000 --> 00:03:39,880 Speaker 3: of people standing there wanted to buy gold bullion for 77 00:03:39,920 --> 00:03:43,200 Speaker 3: their super fund. I'd say, look, it's still got the 78 00:03:43,240 --> 00:03:45,120 Speaker 3: men term, it's got tow wings. You got very smart 79 00:03:45,160 --> 00:03:48,440 Speaker 3: people who were back in gold. However, things don't go 80 00:03:48,520 --> 00:03:50,240 Speaker 3: up in a straight line, as you say, so I'd 81 00:03:50,240 --> 00:03:52,360 Speaker 3: be waiting for a bit of a pullback, like on 82 00:03:52,640 --> 00:03:55,160 Speaker 3: the six percent drop day by on the dips. 83 00:03:55,400 --> 00:03:58,920 Speaker 1: Yeah. What do you think of the Morgan Stanley Michae Wilson. 84 00:03:58,960 --> 00:04:01,960 Speaker 1: I think it was chief investment officer at Morgan Stanley, 85 00:04:01,960 --> 00:04:05,000 Speaker 1: the most powerful financial advisor group in the world, really 86 00:04:05,440 --> 00:04:07,840 Speaker 1: saying twenty percent allocation. 87 00:04:09,160 --> 00:04:11,160 Speaker 2: Yeah, that's a really big call. 88 00:04:11,400 --> 00:04:13,920 Speaker 3: And I don't to throw shade his way, but you know, 89 00:04:13,960 --> 00:04:15,800 Speaker 3: why didn't you recommend that when the global price was 90 00:04:15,800 --> 00:04:19,040 Speaker 3: three thousand? And that's why you recommending it. 91 00:04:19,040 --> 00:04:21,360 Speaker 1: It's only a couple of weeks old. It's only a 92 00:04:21,400 --> 00:04:25,240 Speaker 1: couple of weeks ago. Gemma was Jemma who brought it up. 93 00:04:25,279 --> 00:04:28,719 Speaker 1: Said she literally double checked it because similarly she was like, 94 00:04:28,800 --> 00:04:31,839 Speaker 1: good lord, you know, because you know, basically it would 95 00:04:31,839 --> 00:04:34,400 Speaker 1: seem that gold bulls are talking about a five percent allocation. 96 00:04:34,880 --> 00:04:37,960 Speaker 1: So folks, there you are. It's not cheap, but it's 97 00:04:38,000 --> 00:04:40,560 Speaker 1: a six percent cheaper than it was earlier in the week. 98 00:04:40,920 --> 00:04:43,840 Speaker 1: Make your own mind of Okay, we have so many 99 00:04:43,920 --> 00:04:48,000 Speaker 1: questions and so many issues. Understandably, people wanted to know 100 00:04:48,800 --> 00:04:52,000 Speaker 1: about the final shape of the new super tax. 101 00:04:52,120 --> 00:04:52,880 Speaker 2: Now this is really. 102 00:04:52,760 --> 00:04:55,960 Speaker 1: Important and I think everyone should get across this. And 103 00:04:56,000 --> 00:04:57,880 Speaker 1: you might say, oh, you know, three million, don't worry 104 00:04:57,880 --> 00:05:01,839 Speaker 1: about it, it's not a problem for me. Well, you know, 105 00:05:02,600 --> 00:05:05,280 Speaker 1: if you were very if you had three million and 106 00:05:05,320 --> 00:05:09,960 Speaker 1: you were very conservatively invested, the income of that would 107 00:05:10,000 --> 00:05:13,800 Speaker 1: not be would not be enormous at all. And you 108 00:05:13,839 --> 00:05:15,520 Speaker 1: will be surprised how many people are in the look 109 00:05:15,520 --> 00:05:17,680 Speaker 1: they say eighty thousand it's going to be much much 110 00:05:17,720 --> 00:05:21,360 Speaker 1: bigger figger than that very quickly with inflation and everything else. 111 00:05:21,680 --> 00:05:23,680 Speaker 1: So I know it's indexed, but and that's one of 112 00:05:23,760 --> 00:05:25,359 Speaker 1: the things, by the way it will be indexed in 113 00:05:25,440 --> 00:05:28,600 Speaker 1: new arrangements. One of the questions that I have today, 114 00:05:28,839 --> 00:05:30,640 Speaker 1: and I think I'll actually just read it out because 115 00:05:30,680 --> 00:05:34,120 Speaker 1: it captures a lot of issues. It's from Bruce and 116 00:05:34,160 --> 00:05:39,400 Speaker 1: he says, I read that from July next year, earnings 117 00:05:39,440 --> 00:05:43,480 Speaker 1: on Super in retirement will be taxed, will be tax 118 00:05:43,520 --> 00:05:46,640 Speaker 1: free up to two million at this point onwards it 119 00:05:46,680 --> 00:05:49,800 Speaker 1: will be taxed at fifteen and then from three million 120 00:05:49,800 --> 00:05:53,080 Speaker 1: onwards it will be taxed at thirty percent. At ten million, 121 00:05:53,080 --> 00:05:55,960 Speaker 1: it will be taxed at forty percent. Is this new 122 00:05:56,240 --> 00:06:00,240 Speaker 1: or has something changed now? I think in thet VNS 123 00:06:00,279 --> 00:06:03,520 Speaker 1: debate and coverage about the new supertax about how you 124 00:06:03,560 --> 00:06:05,440 Speaker 1: were going to be a new tax over three million, 125 00:06:05,480 --> 00:06:08,800 Speaker 1: people seem to have forgotten that in fact Super is 126 00:06:08,839 --> 00:06:11,520 Speaker 1: taxed over two million, right, so Super is taxed. Tell 127 00:06:11,520 --> 00:06:13,279 Speaker 1: me if this is wrong, and we just call this out. 128 00:06:13,680 --> 00:06:15,919 Speaker 1: If you've more than two million and Super, the earnings 129 00:06:16,000 --> 00:06:20,159 Speaker 1: on that is taxed at fifteen percent, and then and 130 00:06:20,200 --> 00:06:22,960 Speaker 1: that's how it is right now and from July one 131 00:06:23,000 --> 00:06:23,479 Speaker 1: next year. 132 00:06:24,960 --> 00:06:27,640 Speaker 2: Additionally, if you. 133 00:06:27,720 --> 00:06:31,520 Speaker 1: Have super over three, the earnings are taxed at a 134 00:06:31,560 --> 00:06:34,240 Speaker 1: new fifteen or at a new fifteen, and that basically 135 00:06:34,279 --> 00:06:38,120 Speaker 1: brings it up to thirty percent. Similarly, if you are 136 00:06:38,160 --> 00:06:41,760 Speaker 1: so fortunate as to have super over ten million, then 137 00:06:42,120 --> 00:06:44,440 Speaker 1: another layer of tax comes in on top of that 138 00:06:45,040 --> 00:06:47,640 Speaker 1: and it brings it up to forty percent. An extra 139 00:06:47,720 --> 00:06:49,800 Speaker 1: ten is that how I got it right? Is that 140 00:06:49,839 --> 00:06:52,280 Speaker 1: what our listeners need to know you have. 141 00:06:52,520 --> 00:06:55,159 Speaker 2: Yeah, I can probably just add a little bit more 142 00:06:55,320 --> 00:06:55,680 Speaker 2: to that. 143 00:06:56,040 --> 00:06:58,960 Speaker 3: In terms of that two million dollar cap that the 144 00:06:59,000 --> 00:07:01,839 Speaker 3: government lovelicating our lives, and that they did that from 145 00:07:01,920 --> 00:07:05,800 Speaker 3: twenty seventeen, they introduced this thing called the transfer balance cap, 146 00:07:06,080 --> 00:07:08,760 Speaker 3: and so they said that, okay, people can move up 147 00:07:08,760 --> 00:07:12,720 Speaker 3: to one point six million dollars into their retirement phase 148 00:07:13,000 --> 00:07:15,480 Speaker 3: and not pay any tax. And that's been indexed over 149 00:07:15,480 --> 00:07:18,640 Speaker 3: the years and now as it's a two million dollars, 150 00:07:18,880 --> 00:07:23,240 Speaker 3: so for people who had retired between twenty seventeen and now, 151 00:07:23,400 --> 00:07:25,480 Speaker 3: they may not have the full two million dollars and 152 00:07:25,560 --> 00:07:28,360 Speaker 3: maybe anywhere from one point six million dollars up to 153 00:07:28,400 --> 00:07:31,160 Speaker 3: two million dollars. That's onnly clarification that I'd add to that. 154 00:07:31,600 --> 00:07:34,440 Speaker 1: And by the way, folks, there are other clarifications, but 155 00:07:34,520 --> 00:07:37,560 Speaker 1: unfortunately the show doesn't last for four hours, so we 156 00:07:37,600 --> 00:07:40,400 Speaker 1: can't get through them all. But just at the risk 157 00:07:40,400 --> 00:07:44,480 Speaker 1: of simplification, what you need to know is from during 158 00:07:45,080 --> 00:07:48,920 Speaker 1: one next year. That is the new layout and it's steep. 159 00:07:48,960 --> 00:07:50,760 Speaker 1: You know, super is not as good as it used 160 00:07:50,760 --> 00:07:54,320 Speaker 1: to be. People would be paying thirty percent tax. A 161 00:07:54,320 --> 00:07:56,760 Speaker 1: lot of people would be paying thirty percent tax in 162 00:07:56,840 --> 00:08:01,200 Speaker 1: that band over three million below ten on the earnings 163 00:08:01,200 --> 00:08:04,320 Speaker 1: on the amounts above that number, and property I think 164 00:08:04,440 --> 00:08:07,400 Speaker 1: is particularly caught in it. Now, James, here comes a 165 00:08:07,480 --> 00:08:11,560 Speaker 1: trickier part, which is about CGT. I wonder should I 166 00:08:11,600 --> 00:08:13,960 Speaker 1: read one of the questions again. I think I will, 167 00:08:14,400 --> 00:08:17,400 Speaker 1: just to really shows what many people think and then 168 00:08:17,440 --> 00:08:19,680 Speaker 1: and then you might clarify as to what the reality is. 169 00:08:20,400 --> 00:08:23,520 Speaker 1: So the question from Paul. One thing I find quite 170 00:08:23,600 --> 00:08:26,480 Speaker 1: curious in the light of the treasurers walking back on 171 00:08:26,520 --> 00:08:31,400 Speaker 1: the tax of unrealized gains has been the lack of reporting. 172 00:08:31,480 --> 00:08:36,280 Speaker 1: Highlighting a major issue for SMSF owners are all super 173 00:08:36,440 --> 00:08:39,040 Speaker 1: savers that holding off on selling an asset in their 174 00:08:39,040 --> 00:08:43,640 Speaker 1: fund after they go into retirement. My understanding, Okay, let's 175 00:08:43,679 --> 00:08:47,880 Speaker 1: listen to this really clearly, says Paul. My understanding is 176 00:08:47,920 --> 00:08:50,280 Speaker 1: that under the current law, and I haven't seen anything 177 00:08:50,440 --> 00:08:53,960 Speaker 1: or heard anything changing, this is that once you convert 178 00:08:54,960 --> 00:08:59,839 Speaker 1: to the pension phase, all income and capital gains are 179 00:09:00,080 --> 00:09:03,360 Speaker 1: at zero. Okay, Is that true or force? 180 00:09:04,360 --> 00:09:08,280 Speaker 3: That's absolutely true, and that's a legitimate strategy. I actually 181 00:09:08,320 --> 00:09:11,640 Speaker 3: advised a client on this about two weeks ago. He 182 00:09:11,760 --> 00:09:14,760 Speaker 3: has a self managed super fund. He has several property 183 00:09:14,800 --> 00:09:18,080 Speaker 3: assets inside of that fund. He's fifty nine. He turns 184 00:09:18,120 --> 00:09:21,280 Speaker 3: sixty in December, and one of the properties held by 185 00:09:21,320 --> 00:09:25,480 Speaker 3: the superfund is a perspective development site and he wants 186 00:09:25,520 --> 00:09:29,600 Speaker 3: to start along this pathway to start developing and getting approvals. 187 00:09:29,600 --> 00:09:31,520 Speaker 3: And once he starts to do that and the property 188 00:09:31,520 --> 00:09:35,240 Speaker 3: gets revalued, the valuation will be much higher. So I've 189 00:09:35,280 --> 00:09:37,640 Speaker 3: said to him, don't do anything just now, just wait 190 00:09:37,720 --> 00:09:39,959 Speaker 3: till your sixty. We can then kick your super fund 191 00:09:40,000 --> 00:09:43,920 Speaker 3: into the retirement phase. He will stop working at that 192 00:09:44,000 --> 00:09:46,000 Speaker 3: point in time as well. That's an important thing as well, 193 00:09:46,040 --> 00:09:49,120 Speaker 3: because you need to be sixty and have retired or 194 00:09:49,200 --> 00:09:51,480 Speaker 3: be in between jobs. And he won't pay a cent 195 00:09:51,520 --> 00:09:54,920 Speaker 3: in tax if he then sells that property after the 196 00:09:55,000 --> 00:09:56,400 Speaker 3: valuation goes up. 197 00:09:56,480 --> 00:09:58,199 Speaker 2: So absolutely can do. 198 00:09:59,679 --> 00:10:02,960 Speaker 1: Now in terms of the capital what they call that 199 00:10:04,000 --> 00:10:07,680 Speaker 1: when people are over we talked it earlier. If you 200 00:10:07,760 --> 00:10:10,200 Speaker 1: recall and we make it clear again about how much 201 00:10:10,760 --> 00:10:13,760 Speaker 1: tax the new taxes are and they kick in over 202 00:10:13,800 --> 00:10:17,959 Speaker 1: those caps. When you're over those caps, how does capital 203 00:10:18,000 --> 00:10:18,600 Speaker 1: gains work? 204 00:10:20,000 --> 00:10:25,320 Speaker 3: People commonly think that fifty percent that discount applies to 205 00:10:25,480 --> 00:10:27,880 Speaker 3: capital gains inside a super but it doesn't. It's a 206 00:10:27,920 --> 00:10:31,640 Speaker 3: different discount rate. It's actually a one third discount rate. 207 00:10:31,720 --> 00:10:34,079 Speaker 1: So for the people, James, I just want to interrupt 208 00:10:34,080 --> 00:10:36,720 Speaker 1: you because this is the catch you see, you know, 209 00:10:37,280 --> 00:10:41,559 Speaker 1: but explain to listeners because what you've just said, I 210 00:10:41,559 --> 00:10:43,920 Speaker 1: would say it contradicts, but it needs to be clarified. 211 00:10:43,960 --> 00:10:47,280 Speaker 1: There is capital gains right in the super system for 212 00:10:47,320 --> 00:10:49,280 Speaker 1: some people at some levels. So it could you spell 213 00:10:49,360 --> 00:10:51,360 Speaker 1: out when they face it? 214 00:10:52,000 --> 00:10:55,680 Speaker 3: Yeah, absolutely so for majority of people who have say 215 00:10:55,679 --> 00:10:58,040 Speaker 3: five hundred thousand dollars in their super account, when they 216 00:10:58,440 --> 00:11:02,120 Speaker 3: retire while they they work in they get taxed at 217 00:11:02,320 --> 00:11:05,800 Speaker 3: between ten and fifteen percent on capital gains if they 218 00:11:05,840 --> 00:11:08,080 Speaker 3: hold the investment. They're super fun for less than twelve 219 00:11:08,120 --> 00:11:10,280 Speaker 3: months and sell it, there's a fifteen percent capital gains 220 00:11:10,360 --> 00:11:12,640 Speaker 3: tax bill. If they hold it for more than twelve months, 221 00:11:12,640 --> 00:11:14,800 Speaker 3: they get a one third discount, which drops it to 222 00:11:14,840 --> 00:11:15,360 Speaker 3: ten percent. 223 00:11:15,720 --> 00:11:17,120 Speaker 2: When they retire over. 224 00:11:16,920 --> 00:11:19,560 Speaker 3: The age of sixty and other caveat have less than 225 00:11:19,559 --> 00:11:23,880 Speaker 3: two million dollars in SUPER, they pay zero capital gains tax. 226 00:11:24,640 --> 00:11:30,480 Speaker 1: Yeah, let's say for this new regime, there are two 227 00:11:30,520 --> 00:11:36,760 Speaker 1: sets of people that this capital gains tax can affect. 228 00:11:38,240 --> 00:11:38,720 Speaker 2: In SUPER. 229 00:11:39,440 --> 00:11:41,560 Speaker 1: There are the people who have retired and they're over 230 00:11:41,600 --> 00:11:44,000 Speaker 1: the cap. That is, the amounts they have over the cap. 231 00:11:44,120 --> 00:11:45,880 Speaker 1: And we'll assume they didn't take it out of SUPER. 232 00:11:45,920 --> 00:11:48,520 Speaker 1: We assume we leave they left it in right. Those 233 00:11:48,600 --> 00:11:51,800 Speaker 1: amounts that are over the caps, they default, if you like, 234 00:11:51,840 --> 00:11:54,240 Speaker 1: into accumulation, don't they is that if they left it 235 00:11:54,280 --> 00:11:57,160 Speaker 1: in right, they default into the accumulation. And similarly, people 236 00:11:57,160 --> 00:12:00,680 Speaker 1: who are quite wealthy and haven't retired yet, that money 237 00:12:00,720 --> 00:12:04,840 Speaker 1: is also classified as accumulation when they're over the caps. 238 00:12:05,200 --> 00:12:08,480 Speaker 1: So the discount that you're talking about that is applied 239 00:12:08,520 --> 00:12:13,920 Speaker 1: to capital gains in the supersystem for people who are 240 00:12:14,000 --> 00:12:19,280 Speaker 1: over the caps. That discount, as you say, it's one third. 241 00:12:20,320 --> 00:12:22,520 Speaker 1: It's not just to make things complicated, it's not the 242 00:12:22,600 --> 00:12:26,679 Speaker 1: usual discount, right, which is it's fifty percent after you 243 00:12:26,040 --> 00:12:29,160 Speaker 1: hold an acid after twelve months. In this case, it's 244 00:12:29,160 --> 00:12:31,560 Speaker 1: one third if you hold an acid after twelve months. So, 245 00:12:31,800 --> 00:12:35,320 Speaker 1: James Gerard, does that mean the capital gains discount for 246 00:12:35,320 --> 00:12:40,880 Speaker 1: those affected by capital Gains in Super moves to what number? 247 00:12:40,920 --> 00:12:42,160 Speaker 1: Does it move to? 248 00:12:42,280 --> 00:12:42,559 Speaker 2: Ten? 249 00:12:42,920 --> 00:12:43,960 Speaker 1: Twenty and twenty seven? 250 00:12:44,040 --> 00:12:46,800 Speaker 2: Is that it? Have? I got it right? That's it? Yeah, 251 00:12:46,880 --> 00:12:49,839 Speaker 2: that's it. So that the normal fifteen percent drops to ten. 252 00:12:49,920 --> 00:12:52,040 Speaker 3: And then if you have more than three million dollars 253 00:12:52,040 --> 00:12:55,040 Speaker 3: in Super you pay that thirty percent tax on income, 254 00:12:55,120 --> 00:12:56,319 Speaker 3: and then if you've hold the asset for. 255 00:12:56,240 --> 00:12:58,200 Speaker 2: More than twelve months twenty percent. 256 00:12:58,360 --> 00:13:00,800 Speaker 3: Then new big one at ten million dollars, where it's 257 00:13:00,840 --> 00:13:04,320 Speaker 3: forty percent two thirds of twenty seven percent. 258 00:13:04,760 --> 00:13:08,680 Speaker 1: So for our listeners before they before in deep frustration 259 00:13:08,880 --> 00:13:12,160 Speaker 1: and tears, they actually close, they actually just walk away 260 00:13:12,440 --> 00:13:14,760 Speaker 1: from this podcast. They turn it off because they think 261 00:13:14,760 --> 00:13:18,280 Speaker 1: it's too hard. Can we just say, in very conceptual terms, 262 00:13:19,080 --> 00:13:21,360 Speaker 1: most people most of the time don't play capital Gains 263 00:13:21,360 --> 00:13:26,760 Speaker 1: in Super correct. However, people over the caps of which 264 00:13:26,800 --> 00:13:29,440 Speaker 1: there are at least eighty thousand we know in at 265 00:13:29,520 --> 00:13:34,360 Speaker 1: least retirees, not to mention wealthier people who haven't retired yet. 266 00:13:36,200 --> 00:13:38,280 Speaker 1: They do pay capital gains and they do get the 267 00:13:38,320 --> 00:13:43,120 Speaker 1: discount that's in capital gains. Is that a more thorough picture. 268 00:13:43,480 --> 00:13:46,960 Speaker 3: Then they is thorough without confusing the numbers too much. 269 00:13:47,040 --> 00:13:51,760 Speaker 1: And I hope so okay, okay, folks, is that clear? 270 00:13:51,960 --> 00:13:54,080 Speaker 1: Oh boy, I mean, we have to do it. We 271 00:13:54,160 --> 00:13:55,680 Speaker 1: have to tell you, we have to go through this. 272 00:13:56,080 --> 00:13:58,640 Speaker 1: I know it's tortuous, but hey, you need to know. 273 00:13:59,040 --> 00:14:01,880 Speaker 1: All right, that was very good, It was really useful. 274 00:14:02,080 --> 00:14:06,560 Speaker 1: Tell me about the new super tax, anything else we 275 00:14:06,640 --> 00:14:07,160 Speaker 1: need to know. 276 00:14:08,520 --> 00:14:10,199 Speaker 3: The other thing that you need to know is that 277 00:14:10,240 --> 00:14:11,920 Speaker 3: there are two things I would say. One is that 278 00:14:12,120 --> 00:14:15,560 Speaker 3: the wealth element, the wealth tax component, has been scrapped. 279 00:14:15,559 --> 00:14:20,440 Speaker 3: So that was that hugely unpopular proposal to tax unrealized 280 00:14:20,480 --> 00:14:21,360 Speaker 3: gains every year. 281 00:14:21,400 --> 00:14:25,120 Speaker 1: So that's firmly it's deadonbury, we hope. Yeah. 282 00:14:25,480 --> 00:14:28,400 Speaker 3: The other thing is that it still needs to pass 283 00:14:28,520 --> 00:14:31,240 Speaker 3: the Senate, and the labor parties still need the support 284 00:14:31,280 --> 00:14:34,360 Speaker 3: of either the Greens or the crossbenches. And I was 285 00:14:34,360 --> 00:14:37,080 Speaker 3: digging through the Green's website trying to find what they 286 00:14:37,120 --> 00:14:40,960 Speaker 3: think of this amended proposal from the Treasurer and they're 287 00:14:40,960 --> 00:14:42,760 Speaker 3: not that happy actually, so I don't think they're going 288 00:14:42,800 --> 00:14:46,000 Speaker 3: to support it, they said the Green spokesperson, the Economic 289 00:14:46,520 --> 00:14:49,760 Speaker 3: Justice spokesperson, said that this just enables rich Australians to 290 00:14:49,920 --> 00:14:52,920 Speaker 3: keep hoarding investment properties and then went on to say 291 00:14:52,960 --> 00:14:56,320 Speaker 3: things about it's labor blackflip Greens one fair attack system. 292 00:14:56,360 --> 00:14:58,520 Speaker 3: They want the wealthare to pay more tax. So in short, 293 00:14:58,760 --> 00:15:00,680 Speaker 3: they're not really going, yeah, we're on board of this. 294 00:15:01,360 --> 00:15:03,440 Speaker 1: Yes, they didn't want the caps to be so high 295 00:15:03,520 --> 00:15:07,000 Speaker 1: basically in dollar terms. Politically, we would hope that this 296 00:15:07,040 --> 00:15:10,440 Speaker 1: gets clarified and done. Chances are that what they'll do 297 00:15:10,480 --> 00:15:12,400 Speaker 1: with the Greens is they'll do a package whether they 298 00:15:12,400 --> 00:15:14,320 Speaker 1: say if you say yes to this, we'll also do 299 00:15:14,480 --> 00:15:17,760 Speaker 1: this and this, and they will get it through. And 300 00:15:17,800 --> 00:15:20,040 Speaker 1: the other reason that folks I left it until this 301 00:15:20,080 --> 00:15:23,120 Speaker 1: show to clarify and all that was because there was 302 00:15:23,320 --> 00:15:27,480 Speaker 1: very intermittent communication from the Treasurer's office about that CGT 303 00:15:27,640 --> 00:15:30,720 Speaker 1: and how it would actually apply. They didn't do it 304 00:15:30,760 --> 00:15:32,720 Speaker 1: on the day of the announcement and it's been coming 305 00:15:32,760 --> 00:15:35,240 Speaker 1: out in dribs and drabs since then. So I thope 306 00:15:35,440 --> 00:15:37,920 Speaker 1: today we would take the opportunity to make it really 307 00:15:37,920 --> 00:15:40,360 Speaker 1: clear to the extent that it can be really clear. 308 00:15:40,720 --> 00:15:42,880 Speaker 1: So you just listen to it again, okay, because it 309 00:15:42,920 --> 00:15:52,840 Speaker 1: all makes sense. All right, We'll be back in a moment. Hello, 310 00:15:52,920 --> 00:15:56,320 Speaker 1: Welcome back to the Australians Money Puzzle podcast. James Kirby 311 00:15:56,360 --> 00:16:01,360 Speaker 1: here with James Girard, financial advisor, regular contractor of course 312 00:16:01,360 --> 00:16:06,400 Speaker 1: to the Wealth section on the Australian. Okay, so we've 313 00:16:06,440 --> 00:16:10,440 Speaker 1: covered gold hot issue, we've covered super tax hot issue. 314 00:16:10,920 --> 00:16:14,480 Speaker 1: Now here's something really interesting. I think this is really 315 00:16:14,520 --> 00:16:17,720 Speaker 1: shocking myself. I was, okay at a report during the 316 00:16:17,720 --> 00:16:24,360 Speaker 1: week and do you know in the cohort age group 317 00:16:24,480 --> 00:16:27,920 Speaker 1: in Australia of the over fifty fives, okay, that is 318 00:16:27,960 --> 00:16:34,680 Speaker 1: the cohort coming through and just about to retire, almost 319 00:16:34,720 --> 00:16:38,280 Speaker 1: half of them, almost half fifty six percent of them 320 00:16:38,640 --> 00:16:42,320 Speaker 1: are going to retire with the mortgage, which was unknown. 321 00:16:42,600 --> 00:16:45,520 Speaker 1: I mean it was like unknown. Traditionally in Australia, people 322 00:16:45,560 --> 00:16:48,640 Speaker 1: did not retire with mortgages, just didn't happen. And so 323 00:16:48,840 --> 00:16:53,120 Speaker 1: this whole issue of how we deal with retiring and 324 00:16:53,160 --> 00:16:57,280 Speaker 1: how we finance our retirement is becoming front and center. 325 00:16:57,320 --> 00:16:59,720 Speaker 1: And I think you'll find when the super tax debate, 326 00:17:00,200 --> 00:17:03,680 Speaker 1: like dissires as it may in the weeks ahead. This 327 00:17:03,760 --> 00:17:06,320 Speaker 1: is going to become a huge thing retirement income and 328 00:17:06,359 --> 00:17:09,560 Speaker 1: how it works, and how it should work, and whether 329 00:17:09,640 --> 00:17:12,679 Speaker 1: people so for instance, should be so at risk in 330 00:17:12,720 --> 00:17:16,160 Speaker 1: the markets with their super So once upon a time 331 00:17:16,200 --> 00:17:17,600 Speaker 1: when people had super you know, they didn't have to 332 00:17:17,640 --> 00:17:20,200 Speaker 1: worry about the markets, right, they had to find benefit pensions. 333 00:17:20,240 --> 00:17:22,080 Speaker 1: It didn't matter if there was a stock market crash. 334 00:17:22,119 --> 00:17:24,000 Speaker 1: They got what they were going to get. Most of 335 00:17:24,080 --> 00:17:26,600 Speaker 1: us are not in that boat. Vast majority of the 336 00:17:26,640 --> 00:17:29,240 Speaker 1: listeners in this show aren't in that boat. One of 337 00:17:29,280 --> 00:17:32,280 Speaker 1: the things that's put forward all the time as a 338 00:17:32,320 --> 00:17:36,679 Speaker 1: potential solution are annuities. James, would you explain in simple 339 00:17:36,840 --> 00:17:39,800 Speaker 1: but not simplistic times what an innuity is? 340 00:17:40,920 --> 00:17:44,400 Speaker 3: Of course, James, So when annuity works whereby you give 341 00:17:44,480 --> 00:17:48,080 Speaker 3: a lump sum of cash to the annuity provider and 342 00:17:48,320 --> 00:17:51,399 Speaker 3: in exchange for that lump sumber of cash, they will 343 00:17:51,520 --> 00:17:55,520 Speaker 3: promise to pay you a regular income for the rest 344 00:17:55,520 --> 00:17:58,280 Speaker 3: of your life and doesn't matter if you live to 345 00:17:58,800 --> 00:18:01,439 Speaker 3: eighty one, which I found out was the men's average 346 00:18:01,480 --> 00:18:04,560 Speaker 3: life expectancy, or eighty five if you're women, or if 347 00:18:04,600 --> 00:18:06,520 Speaker 3: you live to one hundred that will keep paying you 348 00:18:06,640 --> 00:18:08,760 Speaker 3: that payment that they promise to pay you, and they'll 349 00:18:08,760 --> 00:18:12,200 Speaker 3: increase it with inflation each year. And so that's attractive 350 00:18:12,200 --> 00:18:15,120 Speaker 3: to some people. And then there's some SENTI link benefits 351 00:18:15,119 --> 00:18:16,359 Speaker 3: attached to it as well. 352 00:18:17,119 --> 00:18:19,280 Speaker 1: I thought it was very attractive depending on how much 353 00:18:19,280 --> 00:18:21,560 Speaker 1: they pay you and how much it costs. I mean, 354 00:18:21,600 --> 00:18:25,800 Speaker 1: the concept is terribly attractive, or at the very least 355 00:18:25,840 --> 00:18:28,399 Speaker 1: you could. You know, a person might say, okay, you know, 356 00:18:28,760 --> 00:18:31,359 Speaker 1: I'll take half the risk out of my super I 357 00:18:31,440 --> 00:18:33,639 Speaker 1: put half of it into annuity. It'll pay me X 358 00:18:33,680 --> 00:18:39,119 Speaker 1: per year, and then I'll I will use my investment 359 00:18:39,480 --> 00:18:44,960 Speaker 1: skill and ambition to improve everything else. But traditionally I 360 00:18:45,000 --> 00:18:47,720 Speaker 1: don't know you and I know why because there's a 361 00:18:47,720 --> 00:18:51,240 Speaker 1: bad history of annuities in Australia. But there's a lot 362 00:18:51,280 --> 00:18:55,120 Speaker 1: of talk more recently that they are coming back in 363 00:18:55,240 --> 00:18:58,800 Speaker 1: our market. It's very heavily dominated by one operator called Challenger, 364 00:18:59,640 --> 00:19:02,840 Speaker 1: but there are talks, there are a serious sort of 365 00:19:02,880 --> 00:19:05,600 Speaker 1: hite papers, etcetera coming out that the government could actually 366 00:19:06,200 --> 00:19:11,040 Speaker 1: stimulate this market, maybe even underpin this market providing annuities. 367 00:19:12,520 --> 00:19:13,080 Speaker 1: What do you think? 368 00:19:13,119 --> 00:19:13,840 Speaker 2: What's your view? 369 00:19:14,000 --> 00:19:15,600 Speaker 1: I know you were very skeptical about them for a 370 00:19:15,600 --> 00:19:17,240 Speaker 1: long time. Where do you come from now and has 371 00:19:17,240 --> 00:19:18,080 Speaker 1: anything improved? 372 00:19:19,560 --> 00:19:22,199 Speaker 3: I still don't have the greatest opinion of them for 373 00:19:22,280 --> 00:19:26,679 Speaker 3: the pure fact that when you calculate the amount of 374 00:19:27,000 --> 00:19:29,600 Speaker 3: payments that they give you, or maybe if I jump 375 00:19:29,640 --> 00:19:31,120 Speaker 3: back a step, when you give them a bucket load 376 00:19:31,200 --> 00:19:33,520 Speaker 3: of money, they need to do something with it to 377 00:19:33,560 --> 00:19:36,000 Speaker 3: be able to pay you your regular annuity payments. So 378 00:19:36,440 --> 00:19:39,199 Speaker 3: they go invest it primarily into bond markets. I put 379 00:19:39,200 --> 00:19:40,920 Speaker 3: a little bit into share markets, but they need to 380 00:19:40,920 --> 00:19:42,960 Speaker 3: protect that capital so it's there to pay you your 381 00:19:43,000 --> 00:19:46,920 Speaker 3: regular payments. So they've got to be really conservative, really 382 00:19:46,920 --> 00:19:50,919 Speaker 3: conservative with it. And so where the RBA cash rate 383 00:19:51,000 --> 00:19:54,080 Speaker 3: drops to zero point one percent and the bond portfolio 384 00:19:54,119 --> 00:19:56,560 Speaker 3: that companies like Challenger have a pay next to nothing 385 00:19:56,560 --> 00:20:00,719 Speaker 3: in interest, that then relates to the of how much 386 00:20:00,760 --> 00:20:02,679 Speaker 3: they'll pay you every month if you approach them to 387 00:20:02,720 --> 00:20:05,480 Speaker 3: take out an annuity. But as we're seeing over the 388 00:20:05,520 --> 00:20:07,520 Speaker 3: past couple of years, the RBA cash rate go up 389 00:20:07,520 --> 00:20:09,440 Speaker 3: so many times, and even though's coming down the other side, 390 00:20:09,480 --> 00:20:12,760 Speaker 3: it's still relatively high the rate of return that you 391 00:20:12,800 --> 00:20:14,679 Speaker 3: get from an annuity. If you break it down, if 392 00:20:14,680 --> 00:20:16,199 Speaker 3: you go all right, how much are they paying me 393 00:20:16,359 --> 00:20:19,840 Speaker 3: every month between now and my expected life expectancy. The 394 00:20:19,920 --> 00:20:21,720 Speaker 3: rate of return that you get from that is around 395 00:20:21,760 --> 00:20:25,200 Speaker 3: about four percent. So my argument is that why don't 396 00:20:25,240 --> 00:20:27,400 Speaker 3: you just take your money, chuck it into a term 397 00:20:27,440 --> 00:20:30,000 Speaker 3: depositor or an online bank account, earn your four percent, 398 00:20:30,280 --> 00:20:33,720 Speaker 3: and just bypass the complexity of an innuity. So that's 399 00:20:33,840 --> 00:20:36,960 Speaker 3: my cynicism of it. But I'd say on the pro 400 00:20:37,119 --> 00:20:41,200 Speaker 3: side of an annuity two reasons. One, if your family 401 00:20:41,520 --> 00:20:46,440 Speaker 3: genes are very good and mother, grandmother, great grandfather lived 402 00:20:46,480 --> 00:20:49,200 Speaker 3: to over one hundred, well, then you have a chance 403 00:20:49,200 --> 00:20:52,760 Speaker 3: of beating quote unquote beating the annuity company because they're 404 00:20:52,800 --> 00:20:55,520 Speaker 3: calculating their payments based on you living somewhere between eighty 405 00:20:55,520 --> 00:20:56,800 Speaker 3: one to eighty five years of age. 406 00:20:56,800 --> 00:20:59,720 Speaker 1: But you could be an actuary outlier. 407 00:21:00,800 --> 00:21:03,919 Speaker 2: Winner. You be an outlier. If you're an outlier, you're 408 00:21:03,920 --> 00:21:05,040 Speaker 2: going to beat the annuity company. 409 00:21:05,040 --> 00:21:07,080 Speaker 3: But an outlier on the good end, you don't want 410 00:21:07,080 --> 00:21:09,239 Speaker 3: to die early, but you die later, you win. 411 00:21:09,359 --> 00:21:10,280 Speaker 2: The other thing is that. 412 00:21:10,359 --> 00:21:12,560 Speaker 1: If you die early, not only do you die early, 413 00:21:12,560 --> 00:21:16,480 Speaker 1: which is disappointect, but you'll finance someone else and their annuities. 414 00:21:17,480 --> 00:21:18,040 Speaker 2: That's right. 415 00:21:18,240 --> 00:21:20,280 Speaker 3: Yeah, And then the other case of annuities is where 416 00:21:20,359 --> 00:21:23,800 Speaker 3: you set at the fringe of eligibility for the age pension, which, 417 00:21:23,800 --> 00:21:25,760 Speaker 3: if I remind all of our listeners, people can apply 418 00:21:25,840 --> 00:21:29,400 Speaker 3: from age sixty seven. So you turn sixty seven and 419 00:21:29,560 --> 00:21:31,679 Speaker 3: you have let's just say, a few hundred thousand dollars 420 00:21:31,760 --> 00:21:34,280 Speaker 3: over the maximum threshold for either a full pension or 421 00:21:34,280 --> 00:21:36,359 Speaker 3: a part pension, and you really want to get this 422 00:21:36,440 --> 00:21:39,800 Speaker 3: age pension, you can put some money into annuities and 423 00:21:39,880 --> 00:21:44,000 Speaker 3: basically only sixty percent of the income and the value 424 00:21:44,040 --> 00:21:46,800 Speaker 3: of the annuity is counted towards center link and so 425 00:21:46,880 --> 00:21:48,960 Speaker 3: that on paper helps you get down your assets test 426 00:21:49,560 --> 00:21:52,320 Speaker 3: threshold and then can increase your age pension entitlement. So 427 00:21:52,359 --> 00:21:54,639 Speaker 3: that's the other use case of an annuity from my perspective. 428 00:21:55,359 --> 00:22:00,320 Speaker 1: That's in a government complex, but perhaps useful to some 429 00:22:00,600 --> 00:22:05,120 Speaker 1: attempt by the government to stimulate this market of annuities 430 00:22:05,280 --> 00:22:07,639 Speaker 1: because the annuities people were saying that they were in 431 00:22:07,680 --> 00:22:09,760 Speaker 1: some way sort of you know, that they weren't being 432 00:22:09,760 --> 00:22:12,439 Speaker 1: treated as fairly as they might have been in the market. 433 00:22:12,680 --> 00:22:14,680 Speaker 1: I don't think that people have been rushing into that one, 434 00:22:14,680 --> 00:22:15,040 Speaker 1: have they. 435 00:22:16,080 --> 00:22:19,480 Speaker 3: No, there's been more interesting annuities, you know, go back 436 00:22:19,560 --> 00:22:21,600 Speaker 3: six months to a year and a half ago as 437 00:22:21,600 --> 00:22:24,560 Speaker 3: the RBA cash rate went up, because those monthly payments 438 00:22:24,600 --> 00:22:27,800 Speaker 3: on offer, we're going up as the underlying rate increase. 439 00:22:27,840 --> 00:22:29,720 Speaker 3: So I would say there has been more interest there, 440 00:22:29,760 --> 00:22:32,920 Speaker 3: but still the issues that exist for annuities that are there, 441 00:22:32,960 --> 00:22:36,240 Speaker 3: and so most advisors will construct portfolio that don't have 442 00:22:36,320 --> 00:22:40,840 Speaker 3: those same capital restrictions. Remembering that innuity companies take your 443 00:22:40,840 --> 00:22:44,399 Speaker 3: capital if you die under this lifetime annuity, but they 444 00:22:44,440 --> 00:22:46,720 Speaker 3: will give you back part or all of the capital 445 00:22:46,720 --> 00:22:49,960 Speaker 3: if you die relatively quickly, So go check the term 446 00:22:49,960 --> 00:22:52,520 Speaker 3: the conditions yourselves, but something roughly like if you die 447 00:22:52,920 --> 00:22:55,719 Speaker 3: in the first eight years of taking out a lifetime annuity, 448 00:22:56,040 --> 00:22:58,640 Speaker 3: most of the neuity companies will go, all right, fair enough, 449 00:22:58,680 --> 00:23:00,919 Speaker 3: we'll give you back your whole one hundred percent of 450 00:23:00,920 --> 00:23:03,160 Speaker 3: what you put into this annuity. But if you die 451 00:23:03,200 --> 00:23:06,040 Speaker 3: somewhere between eight to fifteen or sixteen years, it's on 452 00:23:06,080 --> 00:23:08,320 Speaker 3: a sliding scale down to woulds that you get part 453 00:23:08,320 --> 00:23:09,639 Speaker 3: of the capitol back, But then when you hit that 454 00:23:09,680 --> 00:23:11,800 Speaker 3: sort of fifteen year mark, you get nothing back if 455 00:23:11,840 --> 00:23:12,680 Speaker 3: you die after that point. 456 00:23:13,000 --> 00:23:17,359 Speaker 1: And when you say that, the cash rate influences how 457 00:23:17,440 --> 00:23:20,840 Speaker 1: much you're paid. You do a deal where you get 458 00:23:20,840 --> 00:23:23,680 Speaker 1: paid so much for sure. 459 00:23:23,720 --> 00:23:24,320 Speaker 2: Always. 460 00:23:24,880 --> 00:23:28,679 Speaker 1: So it's really the cash right influences the terms on 461 00:23:28,680 --> 00:23:33,280 Speaker 1: which you begin. That's it, because once you begin, it's 462 00:23:33,280 --> 00:23:34,720 Speaker 1: a promise right, and it doesn't vary. 463 00:23:34,800 --> 00:23:38,080 Speaker 2: They take that risk. That's it. You're you're fixed. You're 464 00:23:38,080 --> 00:23:39,520 Speaker 2: you're fixed in your your rate. 465 00:23:39,600 --> 00:23:42,560 Speaker 3: So from my perspective, annuities are more attractive when the 466 00:23:42,680 --> 00:23:44,480 Speaker 3: RBA cash rate is at its highest. 467 00:23:44,880 --> 00:23:48,800 Speaker 1: Yes, yeah, good point, good point. And you know, ironically, 468 00:23:48,800 --> 00:23:50,960 Speaker 1: maybe we're at the bottom of the cycle here. That's 469 00:23:50,960 --> 00:23:53,479 Speaker 1: what Tim Lawas was saying on Tuesday. He doesn't think 470 00:23:53,480 --> 00:23:56,760 Speaker 1: there's much more in it in terms of where we are. Okay, 471 00:23:57,040 --> 00:23:58,960 Speaker 1: very interesting, we'll be back in the moment with some 472 00:23:59,040 --> 00:24:09,160 Speaker 1: very good questions. Hello, Welcome back to The Australian's Money 473 00:24:09,200 --> 00:24:12,800 Speaker 1: Puzzle podcast. James Kirby here with James Girard of Financial 474 00:24:12,880 --> 00:24:16,840 Speaker 1: Advisor dot com dot au regular on the show. Okay, 475 00:24:16,880 --> 00:24:19,000 Speaker 1: there was a question on a new recease. It was 476 00:24:19,040 --> 00:24:24,439 Speaker 1: from Dean and he is inside Australian super and he 477 00:24:24,560 --> 00:24:29,240 Speaker 1: talks about how they've continually deferred their Income Strategy Products 478 00:24:29,240 --> 00:24:32,960 Speaker 1: CIPO what he calls it. He says naturally, Challenger and 479 00:24:33,040 --> 00:24:36,239 Speaker 1: others provide an option. But as industry super funds are 480 00:24:36,280 --> 00:24:39,840 Speaker 1: not for profit, I expect their products could be more attractive. Yeah, 481 00:24:39,880 --> 00:24:43,679 Speaker 1: well that's a logical dean. So his question is what's 482 00:24:43,720 --> 00:24:47,000 Speaker 1: the delay in releasing them? Are they too complex? Are 483 00:24:47,000 --> 00:24:50,360 Speaker 1: they too high risk? Does no one want to move first? Yeah? 484 00:24:50,920 --> 00:24:53,040 Speaker 1: Hard to know that one, I said chicken and egg. 485 00:24:53,080 --> 00:24:55,879 Speaker 1: I suppose to some degree, if more people, you know, 486 00:24:55,880 --> 00:24:57,760 Speaker 1: if more people want them, there'll be more products. But 487 00:24:57,840 --> 00:25:01,520 Speaker 1: because they are somewhat subdued still they remain i won't 488 00:25:01,520 --> 00:25:04,760 Speaker 1: say marginal, but a minority product as opposed to our 489 00:25:04,760 --> 00:25:08,760 Speaker 1: majority product. There's a lot more governments could do and 490 00:25:08,800 --> 00:25:12,679 Speaker 1: big super funds could do to amp up this area. 491 00:25:12,760 --> 00:25:15,679 Speaker 1: And maybe not all our listeners and maybe even not 492 00:25:15,760 --> 00:25:18,000 Speaker 1: our typical listener would go for a Newsies, but there 493 00:25:18,000 --> 00:25:21,359 Speaker 1: are many people who would. And you know, what's the 494 00:25:21,400 --> 00:25:23,399 Speaker 1: price of peace of mind? What's the price? I've been 495 00:25:23,440 --> 00:25:26,159 Speaker 1: able to not look at the fact that the markets 496 00:25:26,160 --> 00:25:29,040 Speaker 1: are becoming more volatile and worrying about them as the 497 00:25:29,119 --> 00:25:32,280 Speaker 1: vis climbs as we speak, as we get big moves, 498 00:25:32,320 --> 00:25:34,159 Speaker 1: you know, even like gold going down six percent in 499 00:25:34,200 --> 00:25:37,479 Speaker 1: a day that's volatility, and that's what is okay when 500 00:25:37,560 --> 00:25:40,120 Speaker 1: you're accumulating. But I'm sure if you've been retired for 501 00:25:40,200 --> 00:25:42,719 Speaker 1: thirty years or something, it gets a bit tiresome. All 502 00:25:42,840 --> 00:25:49,040 Speaker 1: right now. The final question is from Tina. Hi James 503 00:25:49,040 --> 00:25:51,800 Speaker 1: love the podcast, learned a lot, even bought my first shares. 504 00:25:51,800 --> 00:25:56,040 Speaker 1: Good for you, Tina. A friend recently inherited a home 505 00:25:56,600 --> 00:26:00,639 Speaker 1: but was advised if she sold it within twelve there 506 00:26:00,680 --> 00:26:03,760 Speaker 1: would be no capital gains tax. Is that the case 507 00:26:03,840 --> 00:26:06,280 Speaker 1: only in New South Wales? And is that still the 508 00:26:06,320 --> 00:26:10,040 Speaker 1: case if she rented it out in a twelve month period? Okay, 509 00:26:10,440 --> 00:26:12,439 Speaker 1: this is not advice. This is for all the Tinas 510 00:26:12,440 --> 00:26:14,760 Speaker 1: in the world who might know people all around New 511 00:26:14,800 --> 00:26:18,760 Speaker 1: Southwars and further Afield in something of a similar situation. 512 00:26:19,119 --> 00:26:21,240 Speaker 1: You've got to break that question down, James, are reconic 513 00:26:21,359 --> 00:26:22,320 Speaker 1: component parts? 514 00:26:22,359 --> 00:26:23,120 Speaker 2: Do you want to have a girl? 515 00:26:24,160 --> 00:26:27,480 Speaker 3: I will, and thank you for the general advice disclaim. 516 00:26:27,520 --> 00:26:28,720 Speaker 3: I was going to crank it out, but you did 517 00:26:28,840 --> 00:26:30,960 Speaker 3: a very good job of doing that, So you're right 518 00:26:31,040 --> 00:26:32,679 Speaker 3: breaking down this question. 519 00:26:32,760 --> 00:26:34,920 Speaker 2: There's probably three different parts to it. 520 00:26:35,000 --> 00:26:39,639 Speaker 3: There's the capital gains tax part after someone dies and 521 00:26:39,720 --> 00:26:41,960 Speaker 3: Tenna's mentioned twelve months, but it's actually twenty four months. 522 00:26:42,000 --> 00:26:43,800 Speaker 2: So if unfortunately someone. 523 00:26:43,640 --> 00:26:47,920 Speaker 3: Passes away and you inherit their home, their principal place 524 00:26:47,960 --> 00:26:50,760 Speaker 3: of residence, you have up to twenty four months to 525 00:26:50,880 --> 00:26:55,000 Speaker 3: dispose of that property and not pay any capital gains tax. 526 00:26:55,440 --> 00:26:57,960 Speaker 3: So that's one thing to note. The next thing is 527 00:26:57,960 --> 00:27:00,639 Speaker 3: with regards to is this only a New South Wales 528 00:27:00,680 --> 00:27:04,080 Speaker 3: seeing No, it's not so. The rules around taxation of 529 00:27:04,560 --> 00:27:07,560 Speaker 3: estates and capital gains tax is governed by the Income 530 00:27:07,640 --> 00:27:10,600 Speaker 3: Tax Assessment Act of nineteen ninety seven, which is a 531 00:27:10,640 --> 00:27:13,720 Speaker 3: federal act, so it's not a state based thing. And 532 00:27:13,760 --> 00:27:15,600 Speaker 3: then the third one, I don't know the answer. You 533 00:27:15,640 --> 00:27:17,159 Speaker 3: have to speak to a tax person, which is what 534 00:27:17,200 --> 00:27:19,680 Speaker 3: happens if you rent out the property within that two 535 00:27:19,760 --> 00:27:22,000 Speaker 3: year period and then you sell it. I would have 536 00:27:22,000 --> 00:27:24,080 Speaker 3: thought that because when you're alive, you can move out 537 00:27:24,119 --> 00:27:25,960 Speaker 3: of your home for up to six years and you 538 00:27:26,000 --> 00:27:29,560 Speaker 3: get this scene called the former residence CGT exemption, So 539 00:27:29,600 --> 00:27:31,720 Speaker 3: you can move out of your home, rent it out 540 00:27:31,760 --> 00:27:34,360 Speaker 3: as long as you don't buy another property, you can 541 00:27:34,480 --> 00:27:37,720 Speaker 3: resume living back in your home again within six years 542 00:27:37,720 --> 00:27:39,640 Speaker 3: and not pay any capital gains tax down the track 543 00:27:39,640 --> 00:27:41,800 Speaker 3: when you sell your property. So Basically, the Tax Office 544 00:27:42,040 --> 00:27:44,919 Speaker 3: disregards that you used your home as an investment property 545 00:27:45,000 --> 00:27:47,880 Speaker 3: for up to six years. But I'm not sure if 546 00:27:47,880 --> 00:27:50,600 Speaker 3: that rule transposers when somebody dies, and. 547 00:27:50,560 --> 00:27:52,560 Speaker 1: We don't want to guess. I mean, you'd like to 548 00:27:52,560 --> 00:27:55,880 Speaker 1: say it should, but who knows. Who knows what those 549 00:27:55,920 --> 00:27:58,359 Speaker 1: people in the tax office have cooked up on that one. 550 00:27:58,560 --> 00:28:01,760 Speaker 1: Oh key, terrific. Thank you very much, James, love you 551 00:28:01,800 --> 00:28:04,240 Speaker 1: to have you on the show as usual, My pleasure. 552 00:28:04,320 --> 00:28:07,160 Speaker 1: Thank you, James, and keep the emails coming the money 553 00:28:07,200 --> 00:28:10,600 Speaker 1: Puzzle at the Australian dot com dot au. Talk to 554 00:28:10,640 --> 00:28:11,000 Speaker 1: you soon.