Speaker 1: Now on afternoon. All things financed with Blake were from
Speaker 1: Pretzel Wealth.
Speaker 2: Organize your free consultation at pretzelwealth dot com dot au. Yes,
Speaker 2: Blake is here one three one eight seven three zero
Speaker 2: four six zero eight seven three eight seven three. He'll
Speaker 2: talk about anything you like relating to personal wealth finance.
Speaker 1: How are you mate, good mate?
Speaker 3: Good?
Speaker 1: Yourself well? And a financial year you'd be pretty.
Speaker 4: Busy, pretty busy just trying to get contributions into super
Speaker 4: and move money's around. So it's an exciting time. It
Speaker 4: certainly keeps me up at night, but it's all good fun.
Speaker 2: Yes, I think with the the unexpected, it's fair to
Speaker 2: say in some quarters speculation about interest rates going down,
Speaker 2: we'd have a lot of self funded retirees thinking hmm,
Speaker 2: do I move my money around?
Speaker 4: Certainly, and you know some of the minutes that have
Speaker 4: come out from the RBA that there's question marks around Okay,
Speaker 4: what you know if tariffs from the US come back online,
Speaker 4: what does that mean for us? And the market is
Speaker 4: starting to talk about potentially a July rate cut again,
Speaker 4: so it's interesting to see some of that commentary. We'll
Speaker 4: no closer to the date, of course, what's happening there.
Speaker 1: But this is the.
Speaker 4: Theme now, bill It's interest rates are coming down. How
Speaker 4: quickly well, time will tell. But as they come down,
Speaker 4: that's great for mortgage holders. Not so great if you're
Speaker 4: a retiree with cash sitting in the bank.
Speaker 2: I've got three kids with mortgages. They know all about
Speaker 2: if they're in their thirties. They're trying to pay it
Speaker 2: down and doing a pretty good job. They're disciplined about it.
Speaker 2: But hey, if you're a self under retiree with a
Speaker 2: short term deposit, and those sort of things are important.
Speaker 2: Leaving super aside for a moment, but there's all those
Speaker 2: factors too.
Speaker 4: Certainly, you know you're now starting to think, Okay, do
Speaker 4: I leave my money in the high interest savings account?
Speaker 1: Do I leave it in cash sitting there?
Speaker 4: Yes, you might be getting a better interest rate than
Speaker 4: locking it up for twelve months, but maybe the term
Speaker 4: deposit or locking it up for a longer period of
Speaker 4: times the way to go, especially if we're thinking, well,
Speaker 4: there's going to be a few more rate cuts. So
Speaker 4: you know, whilst the average i'd say twelve month term
Speaker 4: deposits sitting at about four percent, that's lower than what
Speaker 4: you can get in a high entret savings account, high
Speaker 4: indret savings accounts a sort of sitting around that four
Speaker 4: and a half to four point seventy five percent on average.
Speaker 4: Some are giving you bonus rates in the five still,
Speaker 4: but certainly this is on people's minds. They're saying, well,
Speaker 4: what do we do now? And this is the conversation
Speaker 4: we're having. As COVID was kicking on when they started
Speaker 4: cutting rates quite aggressively, cash was effectively paying you nothing
Speaker 4: back then, and so alternatives had to be considered. Push
Speaker 4: people into the stock market, had to get money's invested.
Speaker 4: And I think that's where it's going to go again.
Speaker 1: And if so, for how long?
Speaker 2: That's the other thing pretend to be quest that's a
Speaker 2: piece of string question obviously when it comes to the economy.
Speaker 2: It's twenty to two calls, some text coming in already, mate,
Speaker 2: which is great. Thank you for not leaving it to
Speaker 2: the last minute, because we can't accommodate you if you
Speaker 2: do so, we really appreciate it. Brian, well done, you're
Speaker 2: first in the queue. How can Blake help?
Speaker 5: Yes, good afternoon. Every year I put the maximum amount
Speaker 5: of concessional contribution into my super whereby the super my
Speaker 5: superpund takes out fifteen percent of that and gives it
Speaker 5: to the government as tax at the time of my death.
Speaker 5: If it's the person who gets my inheritance from my
Speaker 5: super is not my spouse, it is my children, they
Speaker 5: are potentially able to be charged by the government fifteen
Speaker 5: to seventeen percent tax on that inheritance. What I want
Speaker 5: to know is, therefore I have what they call a
Speaker 5: taxable component in my superannuation fund, in my accumulation fund.
Speaker 5: How why do I have to pay additional Will my
Speaker 5: children need to pay additional tax on that? Why is
Speaker 5: it called a taxable component? And how can I not
Speaker 5: be in that position?
Speaker 4: Okay, So this all comes back to how super was
Speaker 4: created and the treatment of tax under certain circumstances.
Speaker 1: So you're quite right.
Speaker 4: If you pass away and your super goes to your spouse,
Speaker 4: no tax on that on that amount. But if it
Speaker 4: goes to adult children, your taxable component will be taxed
Speaker 4: fifteen percent if it goes to them via the will
Speaker 4: or the estate. If you transfer the or the superinnuation
Speaker 4: ends up going to the children directly, So you nominate
Speaker 4: the children as beneficiaries on your superfund. Then there is
Speaker 4: a fifteen percent rate of tax plus medicare because obviously
Speaker 4: medicare is important, so they slap on a two.
Speaker 1: Percent medicare charge on that. Getting around that, there's two ways.
Speaker 4: One is, if you're young enough, so under the age
Speaker 4: of seventy five, you could consider a recontribution strategy, also
Speaker 4: subject to I suppose you're toe superbalance. If you're less
Speaker 4: than one point nine million dollars at the moment, you
Speaker 4: can do these recontribution strategies. Moneys would come out of Super.
Speaker 4: Monies would then go back into Super subject to contribution limits,
Speaker 4: so you can effectively get in one hundred and twenty
Speaker 4: thousand or three hundred and sixty thousand back into Super.
Speaker 4: So essentially money's out, money's in. If you're mindful that
Speaker 4: maybe there's not so much time left, you could withdraw
Speaker 4: Super in its entirety. So if you can pull the
Speaker 4: total balance out of Super, then that will negate any
Speaker 4: death taxes applicable to superannuation.
Speaker 1: So two options.
Speaker 4: The second option really is a bit tricky because we
Speaker 4: don't know what time we've got left, and it's very
Speaker 4: difficult to sort of try to pinpoint that. So option
Speaker 4: one's the preferred option. Get some advice around this. Moneys
Speaker 4: need to leave super go back in, and when they
Speaker 4: go back in, it enters the tax free component. And
Speaker 4: when you pass away, it doesn't matter who gets the
Speaker 4: super If a component of that superinnuation is tax free,
Speaker 4: there's no tax applicable to that.
Speaker 1: So, yeah, you quite make it. Make a good point Bright.
Speaker 4: Not too many people are aware of this death tax
Speaker 4: that sits there in super. Fifteen percent tax has been
Speaker 4: paid in. It's in a concessional environment. You're able to
Speaker 4: start income streams later on in life through retirement and
Speaker 4: enjoy the benefits of potentially having it all tax free.
Speaker 4: But the government certainly wants to take their share at the.
Speaker 5: End with my superfund handle that reconstitute reconstitution amount? Would
Speaker 5: they do that or would I have to pay a
Speaker 5: financial advisor to do that?
Speaker 1: They can help you.
Speaker 4: They would have financial advisors that can assist with that strategy.
Speaker 4: You may have to pay for the advice from the superfund,
Speaker 4: but I would always encourage getting some advice around that,
Speaker 4: because you don't want to sort of pull too much
Speaker 4: out of super can't get it back in, and so
Speaker 4: have a chat with the super fund. They may be
Speaker 4: able to point you in the right direction, but they
Speaker 4: may end up saying, look, go speak to one of
Speaker 4: our advisors and there may be a charge for that.
Speaker 5: Okay, very hellful, Thank you, Blake.
Speaker 1: Thanks Brian, good luck, Brian.
Speaker 2: I think we'll probably you've probably answered a lot of
Speaker 2: this next one on the text line, Blake, but it
Speaker 2: might be slightly different, so I'll ask it anyway. This
Speaker 2: is from Robin who says I have a super account
Speaker 2: where I have nominated my two sons as fifty percent
Speaker 2: each beneficiaries. I understand they would need to pay tax
Speaker 2: at their current tax rate once the funds were distributed
Speaker 2: to them. However, if it was paid to my estate instead,
Speaker 2: are they still liable for tax?
Speaker 4: So the simple answer is yes, they would be liable
Speaker 4: for tax irrespective, but it's not at their marginal tax rates.
Speaker 4: It's at a captu rate of fifteen percent. However, if
Speaker 4: it goes the goes to your sons directly, there's a
Speaker 4: fifteen percent rate of tax plus two percent medicare levy.
Speaker 4: So it's terribly important Whilst you can to try to
Speaker 4: clean up the death tax, of course we need to
Speaker 4: have access to super so generally speaking, over the age
Speaker 4: of sixty. If you've met a conditioner of release, you
Speaker 4: can access SUPER. All be sixty five years of age
Speaker 4: and still working, that's fine, but you have to do
Speaker 4: this before turning seventy five, So terribly important to get
Speaker 4: this right and get this completed in time, Otherwise there
Speaker 4: might be.
Speaker 1: Some taxes paid in it.
Speaker 4: At the end of the day, it just means less
Speaker 4: money going to kids or whoever you're intending, whoever you're
Speaker 4: intending to have the money's go to.
Speaker 2: We've got Mark on the line with another question for you.
Speaker 2: A lot of SUPER questions today, which is understandable, I
Speaker 2: suppose for all the talk around from the federal government.
Speaker 3: Good a Mark, Yeah, good afternoon, Thanks for taking my call.
Speaker 3: I've just got a question in relation to a self
Speaker 3: managed superannuation fund that I've got set up, which I've
Speaker 3: got with two other family members or all trustees. Next year,
Speaker 3: when we meet a condition to release and move it
Speaker 3: from accumulation into pension phase. We have a property within
Speaker 3: the fund. If we were to sell that property next
Speaker 3: year when it's moved into pension phase, is a capital
Speaker 3: gains tax free with im mediate effect, or is there
Speaker 3: like a waiting period before it becomes capital gains tax
Speaker 3: free once the property involved.
Speaker 1: So there's a few things here.
Speaker 4: So one, you've mentioned that there's other family members involved
Speaker 4: in the super fund, So generally speaking, all members would
Speaker 4: need to be in pension phase in order to sell
Speaker 4: the asset tax free. There may be a path for
Speaker 4: segregating assets, but often is the case that that's a
Speaker 4: little bit too tricky to pull off. But generally speaking,
Speaker 4: all members should be in pension phase if you're trying
Speaker 4: to sell it capital gains tax free. The second one
Speaker 4: is just around the timing. So what we want to
Speaker 4: do is, if we're not segregating the assets inside the
Speaker 4: self managed super fund, we want to be in pension
Speaker 4: phase for the full financial year, so that means from
Speaker 4: one July right through to thirty to June. We want
Speaker 4: to be in pension phase through that period because it
Speaker 4: means that one hundred percent of the time, one hundred
Speaker 4: percent of the assets are in pension phase. So that
Speaker 4: way you're selling the asset completely takes free. If, for example,
Speaker 4: you were to go into pension phase on the first
Speaker 4: of January, well only half of that time that's elapsed
Speaker 4: throughout that financial year has been in pension phase and
Speaker 4: so only half of the game will be wiped essentially,
Speaker 4: so there still could be some capital gains.
Speaker 1: So two things to keep.
Speaker 4: In mind, Mark, One is all members need to be
Speaker 4: in pension phase and the second one is all members
Speaker 4: need to be in pension phase for the full financial year,
Speaker 4: so just be cautious of that. Speak to your accountant
Speaker 4: or the self many superfund administrator. They'll be able to
Speaker 4: guide you as to what the possible outcomes will look like.
Speaker 4: But it's a very common strategy. You've got money in
Speaker 4: super you've got an asset a house potentially in soup.
Speaker 4: Your wait until getting to retirement phase to then sell
Speaker 4: that asset. Capital gains tax free, so it's a good
Speaker 4: good move on that side.
Speaker 3: Okay, So essentially you've got to hang on to it
Speaker 3: when you're in pension phase for a good twelve months.
Speaker 3: Aren't all selling that set?
Speaker 1: No?
Speaker 4: Sorry, sorry, Mark, You can sell that straight away. But
Speaker 4: what needs to have happened is you're all in pension
Speaker 4: phase from the start of the financial year, so you
Speaker 4: don't have to hold onto it for the full twelve months.
Speaker 4: You could sell at any time. It's mainly around how
Speaker 4: the members are structured in the superfund that matters more
Speaker 4: so so that property could be sold. But just make
Speaker 4: sure you're all in pension phase for the full financial year.
Speaker 3: For the full financial year. Okay, great, all right, thank
Speaker 3: you very.
Speaker 2: Much, Matt, Thanks for you col mate.
Speaker 1: Good luck with that.
Speaker 2: We'll try and rip through some of these questions on
Speaker 2: the text line Blake, with only a few minutes remaining,
Speaker 2: I wonder how many people actually understand how unitized superfunds operate,
Speaker 2: says Michael, for example, incurring capital gains tax for other
Speaker 2: members cashing out. Does Blake have an opinion on switching
Speaker 2: to an ETF based superfund?
Speaker 3: Ye?
Speaker 4: So unitized fund so industry fun Just think of industry
Speaker 4: funds there you're all in the pool together, so you're
Speaker 4: sharing tax benefits and tax consequences, I suppose. So something
Speaker 4: to bear in mind. If you don't like that idea,
Speaker 4: then consider switching ETF super fund. So there's Vanguard who
Speaker 4: offer ETFs via surper. Look, you can consider that low
Speaker 4: cost way of investing funds. Before you do anything, just.
Speaker 1: Get some advice around. Is that the right move?
Speaker 4: There may be some things that you need to consider.
Speaker 4: Are you invested correctly? Do they invest on your behalf.
Speaker 4: Do you have to choose the investment, so just get
Speaker 4: some advice before moving.
Speaker 2: David has a question on the text line, could you
Speaker 2: advise how long I get to sell my deceased mother's
Speaker 2: house without playing capital gains taxes?
Speaker 1: Exactly?
Speaker 2: Is it exactly two years from her death or is
Speaker 2: it the rest of the financial year plus two full
Speaker 2: financial years.
Speaker 4: Yep, that's a good question. It's two years from the
Speaker 4: date of death. So if you go beyond two years
Speaker 4: from the date of death, what ends up happening is
Speaker 4: the price of the property as it the date of
Speaker 4: death is the cost base of that property, and so
Speaker 4: whatever you sell it for beyond that point, there may
Speaker 4: be some capital gains tax on that portion, not from
Speaker 4: when a parent or a loved one purchased the property Originally.
Speaker 2: Les wants to know, would my children need to pay
Speaker 2: tax with a funeral plan pay out when I die
Speaker 2: it's not in.
Speaker 1: Super generally tax free funeral plans.
Speaker 3: Yes.
Speaker 2: Maryland wants to know. Only heard the very end of
Speaker 2: the beneficiary's entitlement to superinheritance today. Is there some where
Speaker 2: I can hear this interview again as a podcast? Yes,
Speaker 2: I think Joel it'll be up pretty soon after the
Speaker 2: show's finished on the two GB website Maryland, so you
Speaker 2: can get all that. How do you declare you're in
Speaker 2: pension age or pension phase? I think they mean with
Speaker 2: a self managed superfund.
Speaker 4: Okay, so this is paperwork, so speak to the administrator.
Speaker 4: There may be some minutes that need to be signed
Speaker 4: off on, but you're effectively making a self declaration to
Speaker 4: yourself because you are the super fund essentially.
Speaker 2: And I think we've got just enough time to answer
Speaker 2: one more question. Tom wants to know working full time
Speaker 2: employer still put in contributions after I'm seventy five years
Speaker 2: of age.
Speaker 4: Yes, the employer can put in super fund, so as
Speaker 4: long as it's part of your agreements. You're not sort
Speaker 4: of a contract or anything like that. You're employed on
Speaker 4: a full time, part time, casual basis and you're entitled
Speaker 4: to super Yes, super guarantee comes through.
Speaker 2: Okay, Now, don't forget Blake from Pretzel Wealth. We'll be
Speaker 2: back at this time next week, so make sure if
Speaker 2: you haven't got any if you haven't been able to
Speaker 2: get a question in today, you'll get a chance when
Speaker 2: Michael comes back and we do this segment again next week. Blake,
Speaker 2: thank you very much for coming in, made all.
Speaker 1: The best pleasure. Good to see um there he is.
Speaker 1: Blake went from pretzel wealth