Latest / The Money Puzzle / Property investors brace for new super tax squeeze

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Property investors brace for new super tax squeeze · The Money Puzzle

0:09
Speaker 1: Hello, and welcome to The Australian's Money Puzzle podcast. I'm
0:13
Speaker 1: James Kirby. Now, after more than a year of intense debate,
0:17
Speaker 1: the big changes to super tax appear now to finally
0:21
Speaker 1: have been settled, and you've probably heard the Treasure has
0:24
Speaker 1: put forward a pretty shrewd, politically shrewd solution to the
0:28
Speaker 1: whole thing, whereby the very rich in our country, those
0:33
Speaker 1: at more than ten million in super will play a
0:36
Speaker 1: prohibitive rate of tax and there will be some offset.
0:40
Speaker 1: It's part of this package for low income miners, which
0:42
Speaker 1: should probably ensure it goes through Arliament. Right now, most
0:46
Speaker 1: listeners to the show will not be in either category.
0:49
Speaker 1: I expect you're not a low incommner and I expect
0:52
Speaker 1: you don't have more than ten million in super. Maybe
0:54
Speaker 1: I'm wrong, but I reckon ninety percent of listeners are
0:57
Speaker 1: in the category where quite simply, the news is that's
1:02
Speaker 1: super tax rates are going to double above three million dollars. Okay,
1:07
Speaker 1: so there's no tax up to two it's fifteen percent
1:10
Speaker 1: on earnings over two million, and from July one next
1:14
Speaker 1: year it's thirty percent on earnings in super over three million.
1:19
Speaker 1: I think that this will more than anything else hit
1:23
Speaker 1: property investors. And my guest today is ideal for this.
1:28
Speaker 1: It's Stuart Williams, property and finance expert. How are you, Stewart.
1:33
Speaker 2: I'm really well, James, and welcome back from you all leave.
1:36
Speaker 2: It's lovely that the Treasurer waited until you were back
1:39
Speaker 2: to make that announcement.
1:40
Speaker 1: Very thoughtful lot, I thought too. So yes, that's right.
1:43
Speaker 1: He more. I said he was going to redesign us
1:45
Speaker 1: a month ago, and folks, I have been. I have
1:48
Speaker 1: been away for a month. We had some pre records
1:50
Speaker 1: there and I had some great shows thanks to Julia
1:53
Speaker 1: Spragg who stood in for a number of shows which
1:56
Speaker 1: she recorded on the weeks. So we're back in the
1:59
Speaker 1: saddle tod. They try very hard to catch up with everything.
2:02
Speaker 1: Glad to have Stuart with me. So Stuart, could you
2:05
Speaker 1: spell out from July one next year what are the
2:09
Speaker 1: rates of tax on super And also I was crucially
2:13
Speaker 1: spell out that the whole thing about on Relo's games
2:15
Speaker 1: is got.
2:16
Speaker 2: Yes, and that's a really important point. And I think James,
2:20
Speaker 2: before we talk about it, my observation would be the
2:24
Speaker 2: consultation process has worked like okay, yes, maybe politicians come
2:29
Speaker 2: up with silly ideas to begin with, but the whole
2:32
Speaker 2: process should be, well, we go out to constituents, the industry,
2:36
Speaker 2: we get feedback, and we reflect that feedback in policy.
2:40
Speaker 2: So I know that there's a few articles sort of criticizing,
2:44
Speaker 2: calling a backflip, all these sorts of things. Of course,
2:46
Speaker 2: you know that's true in some sense, but in a way,
2:50
Speaker 2: well unto the treasure of fullystening to the feedback and
2:52
Speaker 2: coming up with something a little bit more sensible. Because
2:55
Speaker 2: SUPER was designed to fund retirement, not to be a
2:59
Speaker 2: tax savior. And you know, I think anyone that has
3:02
Speaker 2: more than ten million dollars in SUPER, it's no longer
3:04
Speaker 2: about retirement, it's about tax saving and a tax haven.
3:08
Speaker 2: So I totally support the revised policy. So essentially an accumulation.
3:14
Speaker 2: So as we're working, you're right, up to three million dollars,
3:17
Speaker 2: we're paying fifteen percent. Between three and ten million were
3:21
Speaker 2: paying thirty percent, and then over ten million we're paying
3:24
Speaker 2: forty percent. And that's just on realize capital gains and
3:29
Speaker 2: any investment income. So there's no tax on unrealized gains.
3:32
Speaker 2: And that's particularly important for property investors because a lot
3:35
Speaker 2: of people that have used their SUPER to invest in property.
3:39
Speaker 2: Are only really thinking about, well, one day I will
3:41
Speaker 2: sell this in retirement, and then that's when I crystallize
3:44
Speaker 2: the capital gain. So at least we've removed the unrealized
3:47
Speaker 2: gains tax. Now, of course, once we enter into retirement,
3:51
Speaker 2: the only change there is the first two million dollars
3:54
Speaker 2: is now tax free. And so as I said, you know,
3:57
Speaker 2: I think, well, SUPER is there to fun retirement, and
4:00
Speaker 2: the progressive tax rates I think make a lot of sense.
4:03
Speaker 2: And even if you look at say a balance of
4:05
Speaker 2: five million dollars in retirement, the average tax rates about
4:09
Speaker 2: fifteen percent, So it's still not bad. It's not like
4:12
Speaker 2: we're punishing those people with a lot of money inside SUPER.
4:16
Speaker 2: And I would argue, anyone five million SUPER, can I
4:18
Speaker 2: afford to pay fifteen percent and make a contribution towards
4:21
Speaker 2: sort of tax revenue. I think they could have done
4:24
Speaker 2: a lot more on the incentives for lower income earners,
4:28
Speaker 2: because it's a bit unfair that if you've got someone
4:30
Speaker 2: on a very low income with a very low SUPER
4:32
Speaker 2: balance and they do want to save for retirement. Sure,
4:36
Speaker 2: now about the first five and a half thousand dollars
4:39
Speaker 2: in contributions is tax free because of the offset. But
4:42
Speaker 2: I would argue that if you're in a low income
4:45
Speaker 2: and you have a low SUPER balance, that you shouldn't
4:48
Speaker 2: pay any tax to put money into Super because it's
4:50
Speaker 2: in the government's best interest because it produces a burden
4:53
Speaker 2: on the welfare systems.
4:55
Speaker 1: No, you know, you've actually pay fifteen percent as it
4:57
Speaker 1: calls in, and it's like, ah, gosh, you know I
5:00
Speaker 1: was being encouraged. Okay, now, But for property investors, here's
5:04
Speaker 1: the thing. What happens next. So we all know now
5:09
Speaker 1: in the property market that there's a new tax rate
5:11
Speaker 1: coming in, and we all know that anyone who has
5:15
Speaker 1: accumulated property assets in Super the tax rate, assuming they're
5:22
Speaker 1: total super assets, and no doubt their total superassets would
5:28
Speaker 1: be heavily chunkily if you like, composed of property assets.
5:33
Speaker 1: The tax rate's going to double on earnings over from
5:40
Speaker 1: the tax lace basically between three and ten is going
5:42
Speaker 1: to double. Isn't it used to be fifteen percent and
5:45
Speaker 1: now it's going to be thirty percent on the earnings
5:48
Speaker 1: on assets above those above the actually shold and that
5:51
Speaker 1: would apply to property earnings. What does it mean for
5:54
Speaker 1: the property marked.
5:57
Speaker 2: Well, they're being a bit silent on how these util
6:00
Speaker 2: tax rates will apply to capital gains, because at the moment,
6:04
Speaker 2: super funds get a third reduction in capital gains tax rates.
6:08
Speaker 2: So income is taxed at fifteen percent, you know, between
6:11
Speaker 2: zero and three million dollars in accumulation, whereas capital gains
6:15
Speaker 2: are taxed at ten percent, so you get a third
6:17
Speaker 2: reduction on the tax rate. I would imagine they're going
6:22
Speaker 2: to apply the same principle to the new tax rates.
6:25
Speaker 2: So if you're paying, if you've got more than ten
6:28
Speaker 2: million dollars and you're paying forty percent, well you'll pay.
6:32
Speaker 2: You know, you'll probably get a third discount on that.
6:35
Speaker 2: And remember it's marginal as well. So even if you
6:38
Speaker 2: look at the average tax rate on say twenty million dollars,
6:41
Speaker 2: it's about thirty one percent on income, so it might
6:45
Speaker 2: be about twenty percent or so on capital gains. Well
6:48
Speaker 2: that's still probably the same more slightly less than what
6:51
Speaker 2: you'd pay if the if you crystallize that capital gain
6:54
Speaker 2: in your personal name, I'm not sure. I mean for
6:58
Speaker 2: someone that crystallizes a huge, huge capital gain, you might say, well,
7:02
Speaker 2: it's not worth it being side super and you should
7:05
Speaker 2: pull it out before you sell it or now. But
7:08
Speaker 2: I think for most people and most people listening to this,
7:11
Speaker 2: I don't think it changes very much. I still think
7:14
Speaker 2: the tax benefits aren't as great as they used to be,
7:17
Speaker 2: but they're still their relative to say, holding it in
7:20
Speaker 2: a family trust, to hold me in individual names or
7:22
Speaker 2: even in a company name.
7:24
Speaker 1: Okay, So you're saying, all right, So the point your
7:27
Speaker 1: first point is that in relative terms, compared to outside super,
7:32
Speaker 1: though it's not as good as it used to be,
7:35
Speaker 1: it remains better than many options outside super. Okay. And
7:38
Speaker 1: also then property income does property income coming in? So
7:42
Speaker 1: someone has saved has and their key acid in their
7:45
Speaker 1: super is let's say a small apartment and that small
7:48
Speaker 1: apartment block pays income each year, and the apartment block
7:51
Speaker 1: is worth more than three then their tax is going
7:54
Speaker 1: to double. Is that right? Yeah?
7:57
Speaker 2: It will. But if there's a balance is five million dollars,
8:01
Speaker 2: they're paying an average rate of fifteen percent. Well, you're
8:04
Speaker 2: probably going to pay more than that if the asset
8:07
Speaker 2: was held personally. If it was in a company, you're
8:09
Speaker 2: going to pay thirty percent. If it's in a family trust, again,
8:12
Speaker 2: it will end up in an individual name, so you're
8:14
Speaker 2: going to pay more than fifteen percent. So yes, there's
8:17
Speaker 2: a tax hike, but still Super remains attractive. And James,
8:22
Speaker 2: this is something that I talk to clients about a
8:23
Speaker 2: lot because a lot of people go, well, I don't
8:25
Speaker 2: want to concentrate on Super. They're always moving the rules,
8:28
Speaker 2: right they are. They will they will always change the
8:31
Speaker 2: Super rules. It's been like that since the early nineties
8:34
Speaker 2: when Super began, and it's going to be like that
8:36
Speaker 2: for the next twenty or thirty years. But it will
8:39
Speaker 2: always be concessionally taxed right at the end of the day,
8:42
Speaker 2: So it's always going to be an attractive proposition. Now
8:45
Speaker 2: that's not to say you put all your money into it,
8:47
Speaker 2: because someone with ten million dollars might start thinking about,
8:50
Speaker 2: you know, diversifying on your ship structures. But I think
8:53
Speaker 2: for most people listening to this podcast, it doesn't change.
8:57
Speaker 2: It doesn't really change the outcome. Super is still an
9:00
Speaker 2: attractive environment as well.
9:03
Speaker 1: Now, what about the impact at the upper end of
9:05
Speaker 1: the market. So there is a report already that perhaps
9:10
Speaker 1: you know, obviously the family home remains free of allttax
9:14
Speaker 1: couple of games exemption, so you would think the top
9:18
Speaker 1: end of the market even be juicier basically will even
9:22
Speaker 1: be more attractive than it used to be. So we
9:24
Speaker 1: may find even more heat coming into the housing market,
9:26
Speaker 1: particularly at your brand. What do you think of that
9:29
Speaker 1: Hereio it look?
9:30
Speaker 2: I think so at ten million dollars, the average traits
9:33
Speaker 2: twenty three percent, So if you have more than ten
9:36
Speaker 2: million dollars, you start to think about maybe pulling some
9:38
Speaker 2: of that money out. It's a little bit of a
9:40
Speaker 2: cautionarytail for most people. For some people as well, because
9:43
Speaker 2: I've spoken our advice to this day to our clients
9:46
Speaker 2: is don't do anything until it's law. We're not going
9:48
Speaker 2: to do anything now. I know there's been a lot
9:50
Speaker 2: of stories about people pulling money out of Super, giving
9:53
Speaker 2: early inheritance, upgrading the family home, all those sorts of things.
9:57
Speaker 2: So that's the thing we can learn from this exercise.
10:00
Speaker 2: Don't jump at shadows, don't make changes until something is law.
10:04
Speaker 2: But I think you're right, James. I think if for
10:06
Speaker 2: those people that have super high balances inside Super excuse
10:10
Speaker 2: the pun, I think that there's an incentive there to
10:12
Speaker 2: start pulling out and maybe the early inheritance, maybe upgrading
10:16
Speaker 2: the family home, taking those opportunities to try and avoid
10:19
Speaker 2: that tax. But it's only going to impact a small
10:23
Speaker 2: proportion of the community, of course. And I don't think anyone,
10:27
Speaker 2: I don't think anyone ever criticized right from the beginning
10:29
Speaker 2: that you know, someone with a one hundred million inside
10:32
Speaker 2: super can afford to pay more tax and it's not great.
10:35
Speaker 1: I got the yeah, and I think that was broadly
10:36
Speaker 1: accepted across all investment markets. That's fair enough. Nobody was
10:40
Speaker 1: Marchmont Streets or indeed to bort of having people having
10:44
Speaker 1: enormous amounts and Super tendillion is an enormous amount. Very interesting,
10:48
Speaker 1: great to get you on this morning. We take a
10:50
Speaker 1: break and we're going to come back with one of
10:52
Speaker 1: our favorite topics with the new anger that you may
10:54
Speaker 1: not have considered before, which is where they're the big
10:57
Speaker 1: in basement of the national property market is turning or
11:01
Speaker 1: not Talk to you in a moment. Hello, Welcome back
11:14
Speaker 1: to the Australians Money Puzzle podcast. James Kirby here with
11:17
Speaker 1: Stuart Weens. Okay, so now we've got you up to date,
11:21
Speaker 1: I hope with the new super tax. Folks, if you
11:24
Speaker 1: want to know more, send in some questions the Money
11:27
Speaker 1: Puzzle at the Australian dot Com Dot I know people
11:30
Speaker 1: had any many questions about this during its sort of gestation,
11:33
Speaker 1: it's trouble gestation, and they probably have even more questions
11:37
Speaker 1: now because it's clear to us because we're watching it
11:40
Speaker 1: every day, but it may not be clear to you.
11:41
Speaker 1: So send let us know what you need to know
11:43
Speaker 1: and we will answer that promptly. Okay. Now, the theme,
11:47
Speaker 1: of course that I'm mentioning is Melbourne the bargain basement
11:51
Speaker 1: were told of the national property market, and boy, it's
11:54
Speaker 1: certainly cheap compared to the other cities, and some historically
11:58
Speaker 1: are likely anomalous situations where for instance, it's cheaper than Adelaiding,
12:02
Speaker 1: you don't mind, it's cheapid than Brismond, it's cheaper than Perth.
12:05
Speaker 1: How can that be? So there are many interstated bests
12:09
Speaker 1: who believe that's going to be a bargain and they've
12:11
Speaker 1: come into the Melbourne market. Stuart Wins and his circle
12:15
Speaker 1: would have been involved in this. Stuart, I've put it
12:18
Speaker 1: to you recently. I've looked at the numbers of the
12:20
Speaker 1: September quarter. The Melbourne things are still helpless.
12:24
Speaker 2: They are, but if you look at the fundamentals, they're
12:26
Speaker 2: pretty strong. James, you've got Melbourne, Victoria has the second
12:30
Speaker 2: highest population growth in percent each terms, but in absolute
12:34
Speaker 2: terms one hundred and twenty five thousand people. That population
12:37
Speaker 2: increased one hundred and twenty five thousand people over the
12:40
Speaker 2: last twelve months. That's more than double Perth and New
12:43
Speaker 2: South Wales is about one hundred thousand. So in absolute terms,
12:47
Speaker 2: strongest population growth. Unemployment, I mean, because everyone sort of
12:51
Speaker 2: criticizes the economy. Unemployment is four point four percent nationally
12:55
Speaker 2: or at four point two percent. There's not a big
12:58
Speaker 2: difference there. Vacancy rates over the last twelve months have
13:01
Speaker 2: reduced from about one point eight percent to about one
13:03
Speaker 2: point three percent. Having said that, those other markets you
13:07
Speaker 2: just mentioned in are below one percent now, so the
13:10
Speaker 2: fundamentals are very strong. What we're seeing on the ground
13:13
Speaker 2: from feedback from buyers agents, the results are patching. So
13:17
Speaker 2: if a couple of sales on the weekend, one exceeded
13:21
Speaker 2: expectations by about three hundred thousands so sold for one
13:24
Speaker 2: to five, they were creating one two. Another property that
13:28
Speaker 2: was considered superior failed to sold for one point four
13:32
Speaker 2: to five, so failed to even get to one five.
13:34
Speaker 2: And even though it was probably worth more.
13:35
Speaker 1: Seeing a grounds for just yit so just to put
13:38
Speaker 1: the numbers in, like, there is some growth in the
13:40
Speaker 1: Melbourne market, but considering it is anomalous in its in
13:45
Speaker 1: its law price against all other cities, and considering everyone
13:50
Speaker 1: knows this. Now Sydney grew faster than the September quarter
13:54
Speaker 1: the national average group if I've got it right, it's
13:56
Speaker 1: coming up on six percent of Milduran was over three.
13:59
Speaker 1: Is that I know? There was just the biggest Which
14:00
Speaker 1: ones do you use?
14:01
Speaker 2: I use karality because they are sort of comparing apples
14:04
Speaker 2: with apples, So it looks at the attributes of property
14:07
Speaker 2: and compares like for like if you like, so five
14:10
Speaker 2: capital city aggregates about four point six percent over the
14:14
Speaker 2: last year. Melbourne's two point two is half the growth
14:17
Speaker 2: you know in yashin the national pace.
14:19
Speaker 1: Yeah, and the thing is okay, so you've taken heart
14:23
Speaker 1: with some macro facts and so some wider investments specialists
14:28
Speaker 1: and experts, and the number you really hang on to
14:31
Speaker 1: there was the fact that the population, the net migration,
14:35
Speaker 1: the population is growing, which is all very fine. And
14:38
Speaker 1: there's two things I think that I the concerns on
14:41
Speaker 1: the other side, One is hasn't Melbourne got the best
14:44
Speaker 1: supply for us two of all the states, and the
14:47
Speaker 1: second is that the net migration figure if we really
14:51
Speaker 1: burrow into it. Is it true that the explanation is
14:56
Speaker 1: that the Melbournians aren't leaving anymore because they can't afford
14:59
Speaker 1: to go the Queen's lab Yeah, possibly, James, although could
15:05
Speaker 1: could it be an interpretation of the figures?
15:08
Speaker 2: Well, like you and I've spoken about, there's other reasons
15:11
Speaker 2: while we stay in Victoria other than you know, our
15:14
Speaker 2: ability to move into state, things like family, business, jobs,
15:20
Speaker 2: these sorts of things that kind of keep us here.
15:22
Speaker 2: I guess given the whole negative sentiment, anyone that doesn't
15:26
Speaker 2: have those ties has moved, and you know, there's the
15:30
Speaker 2: rest of us are trapped here if you like, because
15:32
Speaker 2: of either jobs or family. But it's true, it's really
15:35
Speaker 2: the decline in departures rather than and there's been actually
15:39
Speaker 2: a small decline in arrivals, but departures are declined by more.
15:43
Speaker 2: That's turned the interstate migration positive. So that's kind of
15:48
Speaker 2: naturally you should expect that. And the data is very
15:50
Speaker 2: noisy over the last five years because of COVID, so
15:52
Speaker 2: it's really difficult to draw trends necessary trends that are
15:56
Speaker 2: going to repeat themselves. But the other thing, James, you know,
15:59
Speaker 2: when we talk about the data, the thing we've got
16:01
Speaker 2: to be conscious of is this first home guarantee it
16:06
Speaker 2: and its impact on the data because the price caps
16:09
Speaker 2: for this guarantee are around about the median value. So therefore,
16:14
Speaker 2: if we increase the transactions that are below the median value,
16:17
Speaker 2: it's actually going to pull the medium value down because
16:21
Speaker 2: we're looking at the midpoint of all that data.
16:25
Speaker 1: I see what you're saying, absolutely, anagress. It's unlimited, right universal,
16:28
Speaker 1: So anyone bunder Frostco Is entitled to this skin.
16:32
Speaker 2: And I'm told an agent was talking to a mortgage
16:35
Speaker 2: broker that was based in sin Killary and Melbourne and
16:37
Speaker 2: he was saying that there's fifteen he's got fifteen clients
16:40
Speaker 2: have been approved to go and buy property that if
16:44
Speaker 2: it wasn't for that guarantee, they wouldn't be there. And
16:46
Speaker 2: when other buyers agents saying definitely there's first time buyers
16:49
Speaker 2: more active out there in terms of bidding and so forth.
16:52
Speaker 2: So I think there's going to be an increasing transactions
16:55
Speaker 2: that are sort of sub that million dollar mark, and
16:58
Speaker 2: that's actually going to pull welling medium values down. And
17:01
Speaker 2: that's why I think that coality data is important because
17:04
Speaker 2: we need to look at data for houses and apartments separately,
17:07
Speaker 2: and we try need to try and marry up some
17:10
Speaker 2: sort of comparison, so we're comparing like with like.
17:13
Speaker 1: And that's a very interesting point, Stuart. So at one thing,
17:16
Speaker 1: it will pull the media down everywhere. Right, So now
17:18
Speaker 1: yes say it's a right, yeah, very interesting. I don't
17:20
Speaker 1: thought about that. Okay, keep an eye on that, folks.
17:22
Speaker 1: We'll take a short break out some great questions I
17:24
Speaker 1: have been collecting. I want to catch up on them.
17:26
Speaker 1: We haven't had some questions for a while, so back
17:28
Speaker 1: in a moment, Hello, Welcome back to the Australians Money
17:39
Speaker 1: Puzzle podcast. James Kirby here with Sturet Wims of pro
17:41
Speaker 1: Solution on a milestone week when the new super tax,
17:46
Speaker 1: which has been a major distraction in the market for
17:50
Speaker 1: a long time, seems to have been sorted politically. And
17:56
Speaker 1: I don't have to say that there was absolutely white
18:00
Speaker 1: it Google or the decision from the treasure to chuck
18:03
Speaker 1: away a notion of on realized gains and just to
18:07
Speaker 1: have a straight tax on actual earnings and he's basically
18:10
Speaker 1: what he's done is he doubled the amount of tax
18:13
Speaker 1: you pay in super on earnings between three million and
18:16
Speaker 1: ten million. And that's the big news basically, which will
18:19
Speaker 1: hit most people. It's got a bit also, it's got lost,
18:21
Speaker 1: but it's probably a little bit sort of buried in
18:23
Speaker 1: the wider noise around it because he introduced another new
18:27
Speaker 1: tax in super. Yes, sir, for the very wealthy group
18:32
Speaker 1: who have more than ten million assets and super and
18:34
Speaker 1: they will pay in effect of forty percent tax on super.
18:37
Speaker 1: That's the news news as it hits listeners. I expect
18:41
Speaker 1: this that simple piece of information that on earning is
18:44
Speaker 1: about three million, the super tax you pay will move
18:47
Speaker 1: to thirty percent. But as Stewart said, see is in
18:50
Speaker 1: context still lower than just about anything else out there. Okay,
18:54
Speaker 1: some really good questions. Let's have the first one from
18:57
Speaker 1: Helena if you want to read that once?
18:59
Speaker 2: Sure, yeah, absolutely so. Helena writes, I hope you're having
19:02
Speaker 2: a lovely day. You recently hosted James O'Reilly on The
19:06
Speaker 2: Money Puzzle, who spoke about buying property through a self
19:09
Speaker 2: marrige superfund and that it could leave you a million
19:12
Speaker 2: dollars worse off. The problem isn't that the self married
19:16
Speaker 2: Superfund underperformed. It's that the calculations when comparing four hundred
19:20
Speaker 2: thousand fully invested into shares to only one hundred and
19:24
Speaker 2: sixty thousand deployed into property, when you actually modeled out
19:28
Speaker 2: both sides correctly, the so called million dollar loss disappears.
19:32
Speaker 1: Okay, thank you, Helena. I mean there's one key point
19:36
Speaker 1: I think that that that that MOSCIP agree with, which
19:38
Speaker 1: is having properly an SMSs, having a property asset in
19:43
Speaker 1: an SMSSI, which many people will now be pondering, especially
19:49
Speaker 1: if they already have one, because the tax has changed
19:51
Speaker 1: on it. The issue is that you pay higher rates
19:55
Speaker 1: than other people. And also the negative gearing isn't as
19:59
Speaker 1: good right because because it's insight So they're the crucial points.
20:02
Speaker 1: Of course, people can make succests out of property in
20:05
Speaker 1: an s MESSIVE. But I think James had some very
20:08
Speaker 1: valid point about the fundamental sort of hurdles that aren't
20:14
Speaker 1: very clear sometimes and certainly it wouldn't be made clear
20:16
Speaker 1: to you by someone who was trying to sell you
20:18
Speaker 1: the of putting property into your an SMSSI that's why
20:22
Speaker 1: we have this show.
20:23
Speaker 2: I just add to that. Sorry, if James you know
20:26
Speaker 2: that there's I think I have two comments. Firstly, we
20:28
Speaker 2: can model comparisons, and it's correct that you should. You know,
20:32
Speaker 2: if you if you're modeling sort of two different strategies,
20:35
Speaker 2: you should assume the same return on both asset classes,
20:39
Speaker 2: because it's about a strategy comparison rather than asset class comparison.
20:43
Speaker 2: But also the flip side is that you should strategy,
20:47
Speaker 2: you should model your own scenarios. So in James's scenario,
20:51
Speaker 2: it was like leave all the super or take some
20:54
Speaker 2: put it in as a deposit, and then leave some
20:56
Speaker 2: cash left over to investors a bit of a buffer.
20:59
Speaker 2: And so what he was modeling is what he would
21:01
Speaker 2: actually do, and so I think that's what we need
21:05
Speaker 2: to be careful and not saw a drawing conclusions on
21:08
Speaker 2: modeling outcomes unless they really apply to our own situation.
21:12
Speaker 2: And I think the general theme of what James was saying,
21:15
Speaker 2: which I totally agree with, was that not any property
21:19
Speaker 2: will work inside Super. If you're going to invest in
21:21
Speaker 2: property inside Super, absolutely make sure it's a great property.
21:25
Speaker 2: And I totally support that. If you're just going to
21:27
Speaker 2: go out and buy any property or be sold any
21:30
Speaker 2: property that it's not going to work.
21:33
Speaker 1: It's not going to work because it has to be
21:34
Speaker 1: very good because it has particular hurdles. As he is
21:37
Speaker 1: being at the bomb with the girl. All right, one
21:39
Speaker 1: final question which is from Josh, do you know why
21:43
Speaker 1: the government brought forward the starting dead for the first
21:45
Speaker 1: home buyers five percent? Positive skin and do you really
21:49
Speaker 1: need only five percent to buy a home now? Josh, careful.
21:56
Speaker 1: This has happened a couple of times, and I've noticed
21:58
Speaker 1: on the show people the folks that scheme universal scheme
22:04
Speaker 1: getting so much attention, which is changing the numbers, as
22:06
Speaker 1: Stewart explained, and it will bring down the medium price,
22:09
Speaker 1: believe it or off, because everybody has to buy under
22:11
Speaker 1: the cap. If you like, that is allowed rule the scheme,
22:15
Speaker 1: the cap on the house price you're allowed by You aren't.
22:19
Speaker 1: You'll just have five percent. You it's not just five percent.
22:27
Speaker 1: This is how it works. You put down you only
22:31
Speaker 1: need a deposit of five percent, but the other ninety
22:35
Speaker 1: five percent is paid by your loan, your mortgage. Okay,
22:39
Speaker 1: the government is only covering the potential insurance obligation on
22:43
Speaker 1: that amount, which you would have had to pay if
22:46
Speaker 1: they didn't do this scheme, So keep that in mind.
22:49
Speaker 1: You don't have an eighty percent mortgage, but you have
22:52
Speaker 1: a ninety five percent mortgage. If you join the first
22:55
Speaker 1: home buyer deposit scheme at five percent, it's fine. I
22:59
Speaker 1: suppose baricycles for some people, but all those people Stewart
23:03
Speaker 1: will be on ninety five percent mortgages. So as a
23:06
Speaker 1: whole new class, isn't there a homeowner in Australia being
23:10
Speaker 1: encouraged by the government who would sit there on ninety
23:13
Speaker 1: five percent mortgages? Probably for the average you know who
23:16
Speaker 1: knows they have one hundred persent mortgages and that's going
23:19
Speaker 1: to take a long time to pay down.
23:22
Speaker 2: Yep, that's right. It's not a solution to housing affordability.
23:25
Speaker 2: It's a solution to borrowing capacity. Yeah, that's all it is.
23:29
Speaker 2: And but we you know, like anything, borrowing is a
23:33
Speaker 2: fantastic servant, but a terrible master. So you must make
23:37
Speaker 2: sure that what you're borrowing is affordable and you can
23:39
Speaker 2: repay it and all those sorts of things. Having said
23:42
Speaker 2: all that, you know, if I had my time again,
23:44
Speaker 2: and I was in my twenties buying my first property,
23:47
Speaker 2: I would certainly swing for the fences. I think if
23:49
Speaker 2: I look back over the last twenty or thirty years
23:51
Speaker 2: as a property or an investor, I've probably been two
23:56
Speaker 2: conservative times with my decision making. And you know, when
24:00
Speaker 2: you ever have a look back, if you're old like
24:03
Speaker 2: James and I, you can look back and think about
24:05
Speaker 2: property you own twenty or thirty years ago, you go wow,
24:08
Speaker 2: you're not sure.
24:10
Speaker 1: Oh yeah, And so what you're saying is, yep, you're
24:12
Speaker 1: offering me nineteen five percent mortgage. I take it, yeah,
24:16
Speaker 1: by five percent deposit on the assumption that you know
24:19
Speaker 1: what you're doing, and you'll know what you're doing if
24:21
Speaker 1: you keep listening to us. All right, folks, That was
24:24
Speaker 1: Stuart Williams of pros Solutions. Thanks Stuart, Thank you James.
24:27
Speaker 1: Always great to have you back on the show. Great
24:29
Speaker 1: to be back on the show, folks. As I say,
24:32
Speaker 1: I am wide open to questions on anything you like
24:34
Speaker 1: the money Puzzle at the Australian dot com dot au.
24:37
Speaker 1: Talk to you soon.