Speaker 1: Welcome to Sugar Mamma's Fireplay, the podcast that helps you
Speaker 1: build financial independence, create long term wealth, and protect your
Speaker 1: financial future with smart, mindful money decisions. I am your host,
Speaker 1: financial planner, Canna Campbell. In today's episode, we're tackling something
Speaker 1: that has sparked a lot of concern even fury in
Speaker 1: the financial world. That is the proposed thirty percent tax
Speaker 1: on unrealized capital gains inside superannuation for account balances over
Speaker 1: three million dollars. Now, I know that that number may
Speaker 1: sound far away for a lot of people, including myself,
Speaker 1: but this proposal has serious implications for all Australians, not
Speaker 1: just those with large super account balances. You see this
Speaker 1: potential tax, this changing rules actually represents a major shift
Speaker 1: in how our wealth could be taxed and even a
Speaker 1: road away, and we need to understand what this actually
Speaker 1: means for us and our long term financial security and
Speaker 1: retirement strategies. Now, this episode is not just for people
Speaker 1: with self managed super funds or high balances. This is
Speaker 1: for superannuation account holders like you and I, everyday people
Speaker 1: and of course everyone or anyone who actually wants to
Speaker 1: understand and protect their financial future, particularly if they do
Speaker 1: plan on having a long, luxurious and secure retirement. So
Speaker 1: let's get into this straight away. Bocome back everyone. As explained,
Speaker 1: we're going to talk about this proposed superannuation tax. Now
Speaker 1: what exactly is this? So Labor is proposing from the
Speaker 1: first of July in twenty twenty five, superbalances above three
Speaker 1: million dollars will face an extra fifteen percent on unrealized gains.
Speaker 1: The con t reversial part here is the word unrealized.
Speaker 1: The unrealized gains are going to be taxed. So what
Speaker 1: this means is even if you don't actually sell your
Speaker 1: asset within super or even receive any income. For example,
Speaker 1: you know your superannuation own say a property, and it
Speaker 1: grows one hundred thousand dollars just over the three million
Speaker 1: dollar mark, and say it's gone from being three million
Speaker 1: dollars to say three point one million dollars, So you've
Speaker 1: got one hundred thousand dollar game. You might have to
Speaker 1: come up with an additional thirty thousand dollars in tax
Speaker 1: without actually having to sell that property or even receive
Speaker 1: necessarily any rental income from that property. So this isn't
Speaker 1: just like a tax increase, it's actually a change in
Speaker 1: the underlying definition of taxable income because normally you only
Speaker 1: pay capital gains tax when you actually sell that asset.
Speaker 1: This is an unrealized definition and this is the biggest
Speaker 1: concern and worry and really what is making me really
Speaker 1: frustrated and angry because what it does is it undoes
Speaker 1: all the trust, all the attractiveness and the value that
Speaker 1: has been built since superannuation began in the early nineties. Now,
Speaker 1: why is this so dangerous? Is this really setting a precedent? Well, yes,
Speaker 1: I think so. You see, Australia's tax system has always
Speaker 1: been built around realized gains, so you know, you only
Speaker 1: once you had the money in your actual pocket after selling.
Speaker 1: So for example, you know, you buy property for say
Speaker 1: four hundred thousand dollars, and then you go and sell it,
Speaker 1: say five years later, for say six hundred thousand dollars,
Speaker 1: you've technically made a two hundred thousand dollars capital gain
Speaker 1: and you would only pay tax on that gain once
Speaker 1: you have sold it. And you would pay tax on
Speaker 1: that two hundred thousand dollars gain depending on your you know,
Speaker 1: how long you'd held the asset for where it's held
Speaker 1: and of course your marginal tax rate. Now, if this
Speaker 1: is passed by Senate, this could actually completely change the
Speaker 1: system because what it is is allowing for taxation to
Speaker 1: be triggered on paper wealth, not real wealth. So even
Speaker 1: though you haven't sold that asset, I'll use that example
Speaker 1: again of that four hundred thousand dollars asset, even though
Speaker 1: it isn't actually technically applicable because we're talking about three
Speaker 1: million dollar bounces here. But in that example I just used.
Speaker 1: What this is saying is, well, guess that property you
Speaker 1: bought for four hundred thousand is now worth six hundred
Speaker 1: thousand dollars. Even though you haven't sold it, We're going
Speaker 1: to tax you anyway. So this is the frustrating part.
Speaker 1: You are still expected to pay some tax because of
Speaker 1: the perceived value. Now, if this is past and it's
Speaker 1: put into place, it could spread to investment properties outside
Speaker 1: of super It could include business assets, share portfolios, potentially
Speaker 1: the family home. This is a slippery slope, you see.
Speaker 1: Once this mechanism exists, the future governments can expand it.
Speaker 1: So it's think of it as like winning the lottery,
Speaker 1: or being taxed on winnings for the lottery before you
Speaker 1: actual numbers have been drawn. This is not a wealth tax,
Speaker 1: it's a fear tax. And at the end of the day,
Speaker 1: does this tax actually encourage us to work hard, contribute
Speaker 1: to our super and actually feel empowered about our financial future.
Speaker 1: Hell no, it certainly doesn't. And this is seriously destructive,
Speaker 1: dangerous and a huge concern for so many people within
Speaker 1: my industry as well as everyday Australians. So let's go
Speaker 1: and talk about the impact it has on self managed
Speaker 1: super funds, which I see is the biggest worry. Now,
Speaker 1: a lot of self managed super funds hold illiquid assets
Speaker 1: and that was probably one of the main reasons why
Speaker 1: they used a self managed super fund because of that,
Speaker 1: you know, flexibility, and they're you know things like property,
Speaker 1: business premises, like commercial property, private equities, you know, including startups.
Speaker 1: And then farmers. There are a lot of farmers who
Speaker 1: actually own their farms within a self managed superfund. Now,
Speaker 1: these types of assets cannot actually be sold easily to
Speaker 1: go and pay those tax bills. What this could mean
Speaker 1: is if this is past and a farmer gets hit
Speaker 1: with a bill and the farmer is a trustee of
Speaker 1: the self managed super fund, they could be forced to
Speaker 1: sell that entire farm to cover that tax bill for
Speaker 1: that year on a gain that they haven't actually received. Now,
Speaker 1: this is another problem that comes on this. There's a
Speaker 1: huge administration nightmare. How are we going to actually understand
Speaker 1: the valuations? This is really difficult. How do you value
Speaker 1: a farm? You know? How do you value a startup,
Speaker 1: particularly you know where it is in its journey and
Speaker 1: the risks it's taken and the debt and so forth.
Speaker 1: This is really difficult, and this is also incredibly expensive.
Speaker 1: You would really need to get a highly skilled accountant
Speaker 1: with a really niche you know, expertise to be able
Speaker 1: to do that would be incredibly expensive and also incredibly inconsistent.
Speaker 1: How can you actually know the true value of an
Speaker 1: asset if it isn't actually being sold. There's no one
Speaker 1: actually says they're saying, I'll give you four million dollars
Speaker 1: for that, or three million dollars that or nine million
Speaker 1: dollars for that. Like, how do we understand the true value?
Speaker 1: Like what is the formula that we're going to be
Speaker 1: able to use here? And the other big issue, which
Speaker 1: is particularly around startups, which a lot of you know,
Speaker 1: the big superannuation funds actually have exposure to, is the
Speaker 1: volatility You know, a business might be worth nothing when
Speaker 1: it first starts up, but it hits gold, you know,
Speaker 1: particularly maybe technology put a huge amount of money into it,
Speaker 1: and then all of a sudden it's gone for being
Speaker 1: worth nothing to say, thirty forty million dollars. That's how
Speaker 1: the volatility can exist for a lot of these, you know,
Speaker 1: venture capitalists. So how are we going to cope with that?
Speaker 1: Does that mean the whole business gets sold? You know,
Speaker 1: you imagine owning a residential investment inside a self managed
Speaker 1: super fund that you set up and it increases in
Speaker 1: value due to inflation, and that just tips you over
Speaker 1: that three million dollar threshold, but you don't want to
Speaker 1: sell it. But you've still receiving a massive tax bill,
Speaker 1: and then you don't actually have the cash within your
Speaker 1: super to actually fund that annual tax bill. So what
Speaker 1: does that mean? Well, you don't have the cash to
Speaker 1: pay the tax bill. You're over the three million dollar threshold.
Speaker 1: You're going to have to sell that entire property. Now
Speaker 1: what are you going to do? You can't sell the
Speaker 1: front door, the bedroom, the backyard. You're going to have
Speaker 1: to sell that entire property, which then triggers additional fees
Speaker 1: and expenses like agents, commissions, marketing expenses, legal and so on.
Speaker 1: And now your property you work so hard for in
Speaker 1: your self manister fund, you're out of the market. You've
Speaker 1: completely changed the investment strategy thanks to this tax. Now
Speaker 1: this problem continues on. It doesn't just stop there. It's
Speaker 1: actually potentially going to destroy the investment cycle. You see
Speaker 1: a lot of investors actually leverage growth to reinvest, you know,
Speaker 1: equity in property or shares, and taxing before it actually
Speaker 1: has been realized completely destroys this strategy. It completely pedalizes
Speaker 1: that strategic, long term thinking and planning when it comes
Speaker 1: to wealth accumulation, and it also encourages this knee jerk
Speaker 1: short term terminism and liquid assets doesn't actually uphold long
Speaker 1: term financial stability, security and independence, which is really concerning.
Speaker 1: The other thing we need to think about is this
Speaker 1: three million dollar figure is not indexed, and there doesn't
Speaker 1: seem to be much agreement around considering indexing it. Now.
Speaker 1: Three million dollars, yes, it is. It is a lot
Speaker 1: of money to happen superineuration. And you know, if you've
Speaker 1: got three million dollars in super you've worked hard, you've
Speaker 1: done well, You've made some great decisions. Now, if this
Speaker 1: stays in place and is not indexed over the next
Speaker 1: twenty thirty years, more and more of us will actually
Speaker 1: have three million dollars SUPER. And if you ever played
Speaker 1: around with my superannuation calculators on my website, you'll see
Speaker 1: that a three million dollars superannuation account balance isn't unfathomable.
Speaker 1: Hard work, dedication, commitment, you could have a three million
Speaker 1: dollars in SUPER and then new factor in things like inflation,
Speaker 1: compounding returns, regular contributions. You're SUPER guarantee, which is now
Speaker 1: up to approaching twelve percent. From the first of July.
Speaker 1: More and more people are going to hit this threshold,
Speaker 1: which includes younger investors, younger investors who have made brilliant
Speaker 1: smart investment decisions. You could hit that three million dollars fast,
Speaker 1: sooner than you realize. And then what about women, Women
Speaker 1: who have previously been impacted by Super working so hard
Speaker 1: to now build up they're Super consistently contributing investing, making
Speaker 1: great decisions, getting quality advice. They can also be caught
Speaker 1: up on this. Imagine that you work so hard to
Speaker 1: get your SUPER back on track and then you get penalized.
Speaker 1: This disproportionately impacts responsible investors like you and me, and
Speaker 1: it is so fucking messed up. Now, the AMP Deputy
Speaker 1: Chief Economist, Diana Mussina, she did some modeling and she
Speaker 1: actually showed that the average twenty two year old is
Speaker 1: actually going to be hit by this exact tax by
Speaker 1: the time they go to retire. So if you're thinking
Speaker 1: this is not going to be something your kids need
Speaker 1: to worry about, grandkids or even like you, you are
Speaker 1: so wrong. We've all got to wake up and put
Speaker 1: our hands up in the air and jump up and
Speaker 1: down so this doesn't actually get past. There's also the
Speaker 1: psychological damage here and being the impact on our confidence
Speaker 1: and our fucking trust in superannuation. And I'm sorry just
Speaker 1: where but this is just disgraceful. I feel like this
Speaker 1: is like daylight robbery that's happening right now. So superannuation
Speaker 1: was designed to be predictable, it was designed to be
Speaker 1: for the long term, and it was also designed to
Speaker 1: be fair. There's also the obvious this was designed to
Speaker 1: actually make people be financially independent, not rely on the government,
Speaker 1: so destroying people's superinnuation seems completely counterintuitive. But anyway, all right,
Speaker 1: I digress. So superinheration back when it was created in
Speaker 1: the early nineties was designed to empower people like you
Speaker 1: and I to create our own financial dependence and today
Speaker 1: control of our money because we can pick where that
Speaker 1: money is invested. This rule change mid game makes me
Speaker 1: and I think everyone else feel unsafe. It feels erratic,
Speaker 1: and it feels cruel. It's like a fucking punishment. Australians
Speaker 1: may react in a really negative way, and that is
Speaker 1: pull their money out of superannuation if they can, which
Speaker 1: could weaken the entire system. They could pull money out
Speaker 1: of property, money out of the share market, money out
Speaker 1: of the Australian economy, the economy, our economy, and that
Speaker 1: would then impact our productivity and growth. And to be honest,
Speaker 1: if you're one of these people that's thinking, yeah, that's
Speaker 1: what I was thinking of doing, Canna, I don't blame
Speaker 1: you for thinking like that. It's not what I'm obviously recommending,
Speaker 1: but you start to think, well, okay, what should I
Speaker 1: be doing elsewhere? Because I definitely don't want to remintain
Speaker 1: this commitment to my sexy superinnovation because it's certainly not
Speaker 1: looking as sexy anymore. If this does get past. So
Speaker 1: if people stop trusting the rules, they start looking for
Speaker 1: ways outside of the system. Money will go offshore, people
Speaker 1: will start utilizing family trusts and private lending. The damage
Speaker 1: done to our economy could be irrepairable or because of
Speaker 1: this one stupid change in rules is a little bit
Speaker 1: like a marriage between you and your retirement. If you
Speaker 1: keep changing the rules, you start to wonder whether it's
Speaker 1: worth actually staying in the relationship anymore. And as angry
Speaker 1: as I am, I don't want anyone's eyes wondering. Because
Speaker 1: under the current system as it is today, without this
Speaker 1: stupid rule in place, superannuation is still sexy. It helps
Speaker 1: create financial stability. It also takes away temptation to go
Speaker 1: and blow that money and spend that money when it's
Speaker 1: for our long term financial security, freedom and independence. So
Speaker 1: why would we want to go and mess with it?
Speaker 1: Especially when our system, our superannuation system that is is
Speaker 1: known as being one of the best in the world.
Speaker 1: It is really admired, respected and there are a lot
Speaker 1: of other countries really looking into what we do and
Speaker 1: seeing how they can incorporate it in their own country.
Speaker 1: So let's keep moving on this, because whilst I like
Speaker 1: to talk about the problem. I also like to talk
Speaker 1: about solutions, ideas and strategies. So what can we do? Obviously,
Speaker 1: Number one, we've got to stay informed. This policy is
Speaker 1: still a proposal, it's not actually more yet. You've got
Speaker 1: to go and talk to your financial planner and your
Speaker 1: accountant sooner rather than later, talking to them about super splitting.
Speaker 1: Is this something that you can do? You know, depending
Speaker 1: on how many members you've got and obviously how much money,
Speaker 1: and if your partner is in your superannuation. Looking at valuations,
Speaker 1: self managed superfunded valuations, looking at liquidity strategies, particularly, you know,
Speaker 1: looking at making sure that you've got cash and perhaps
Speaker 1: the strategy now changes so that you're not making new investments,
Speaker 1: you're perhaps piling up cash and letting it sit in
Speaker 1: the self mattered super fund. Also looking about tax planning,
Speaker 1: looking at potentially shares Australian shares with franking credits that
Speaker 1: can help reduce that tax. Or you know, if you
Speaker 1: are over preservation age, which promotivus is around about sixty
Speaker 1: or above, perhaps you need to look at taking some
Speaker 1: money at a superannuation. But of course don't go and
Speaker 1: do that without professional and formal advice from your accountant
Speaker 1: and your financial planner. You also may want to look
Speaker 1: at maybe looking at some more liquid assets. If your
Speaker 1: self managed super fund is predominantly filled up with property
Speaker 1: like commercial property or residential property that's not liquid, perhaps
Speaker 1: you need to start including other assets that you can
Speaker 1: actually sell one hundred thousand dollars worth or ten thousand
Speaker 1: dollars worth, or you know whatever you need to potentially
Speaker 1: fund these things that you're not ever backed into a
Speaker 1: situation where we have to sell the whole entire property.
Speaker 1: The other thing you want to be talking about, your
Speaker 1: financial planner, where is looking at assets for your investment
Speaker 1: strategy or retirement strategy that are perhaps less volatile, so
Speaker 1: that you don't need to worry about a spike in
Speaker 1: volatility where it pushes you over temporarily over that three
Speaker 1: million dollar threshold triggering this tax for you. Perhaps you
Speaker 1: need to look at more boring, stable, less volatile and investments.
Speaker 1: Perhaps this really is important to you. Know, it pays
Speaker 1: to be prepared, and you know this is not a
Speaker 1: time to panic, but it's certainly not a time to
Speaker 1: stay silent because this is grossly unfair to all of us.
Speaker 1: So you know, you pick up the phone, write a
Speaker 1: letter to your MP. Policies like this shouldn't ever be rushed,
Speaker 1: and I feel like this is being rushed through at
Speaker 1: a disturbing, concerning rate. So as I wrap up today's episode,
Speaker 1: and I think I have literally like spattal over my
Speaker 1: mirancrophone because I got in so passionate about this. You know,
Speaker 1: whether your superbalance is thirty thousand dollars or three million dollars,
Speaker 1: this proposed change should really concern you. This may look
Speaker 1: like a rich person's problem, but if it is past,
Speaker 1: it is going to eventually impact all of us. Furthermore,
Speaker 1: this isn't just about tax It's about changing the rules
Speaker 1: of the game, shifting the burden and punishing the very
Speaker 1: behaviors that we're actually trying to encourage, like long term planning,
Speaker 1: financial independence, growing your future wealth responsibly so that we
Speaker 1: don't end up on the government demanding an age pension
Speaker 1: every single year. So I'm sorry if I've gotten a
Speaker 1: little bit passionate. I'm sorry if I've offended you with
Speaker 1: my swearing. I promise you I wasn't trying to scare you,
Speaker 1: but I want to empower you. I want to help
Speaker 1: you understand what is happening and why your voice and
Speaker 1: your plan matters more than ever before. I don't want
Speaker 1: you to wake up one day go gosh, what's this tax?
Speaker 1: Why am I now being asked to pay this tax?
Speaker 1: What's this all about? And think why didn't Cano ever
Speaker 1: tell me about this? Well I am. I'm telling you
Speaker 1: right now so that we can do something and hopefully
Speaker 1: get it shut down for good. Now, if you are
Speaker 1: one of those very fortunate people who does have three
Speaker 1: million dollars or more in super can, I strongly recommend
Speaker 1: getting advice, not advice from influencer or from listening to
Speaker 1: a podcast like this or reading a blog post, go
Speaker 1: and get personal advice professional advice from your accountant and
Speaker 1: your financial planner as soon as possible. Whilst this may
Speaker 1: not necessarily be passed, it may be delayed for a
Speaker 1: little bit in past, say in six months time or
Speaker 1: a year's time, it is still worth getting proactive advice
Speaker 1: so that you can make any recommended changes smoothly while
Speaker 1: being completely informed and knowing what is best for you
Speaker 1: and your goals, and of course all the costs and
Speaker 1: risks involved. So all right, let's keep the pressure for
Speaker 1: as smart, successful superanneration policy as it should be, and
Speaker 1: as well, continue to invest with purpose, keep an iron
Speaker 1: our economy and what's right for everyone, and support productivity
Speaker 1: and innovation in this country. Now as always, as a
Speaker 1: wrap up today's episode, keep that financial fire burning right within.
Speaker 1: This is Sugar Mamma's fireplay.