Latest / The Front / The furious army of young entrepreneurs coming for Albo

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The furious army of young entrepreneurs coming for Albo · The Front

• 0:03
  Speaker 1: From The Australian. Here's what's on the front. I'm Claire Harvey.
• 0:06
  Speaker 1: It's Thursday May twenty one, twenty twenty six. There's a
• 0:12
  Speaker 1: huge spike in the number of kids diagnosed with a disability.
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  Speaker 1: Last year, twenty seven percent of school children received disability
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  Speaker 1: support for conditions including autism, ADHD and fetal alcohol syndrome.
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  Speaker 1: That's up a huge seven percentage points since twenty nineteen.
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  Speaker 1: That story's live now at The Australian dot com dot au.
• 0:37
  Speaker 1: Young entrepreneurs are smashing up Anthony Albanezi on social media.
• 0:42
  Speaker 1: They're furious about his budget's changes to capital gains tax,
• 0:46
  Speaker 1: which they say punishes people who try to get ahead.
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  Speaker 1: The PM seems to think it's funny, but this is
• 0:53
  Speaker 1: no joke and our wellth editor Julianne Sprague is here
• 0:57
  Speaker 1: in just a moment with her take on a fight
• 1:00
  Speaker 1: back the government didn't see coming. Julianne Sprague is The
• 1:09
  Speaker 1: Australian's Wealth editor. Julianne, I've been amazed to see Anthony albanize.
• 1:13
  Speaker 1: He's been so busy lately. He's got all these new jobs.
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  Speaker 1: He works in a yoga studio, he's a trade what's
• 1:18
  Speaker 1: going on.
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  Speaker 2: He's here, there, and everywhere. He's across your social media feed,
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  Speaker 2: like his social media team never knew was possible. We
• 1:25
  Speaker 2: got Ozzie founders to start posting pictures with their new
• 1:27
  Speaker 2: co founder, and scrolling on my feed was quite hilarious today.
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  Speaker 1: No, I'm not complaining.
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  Speaker 2: Oh I wish I paid less tax. I'm not actually
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  Speaker 2: worried about me, So.
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  Speaker 3: I get it.
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  Speaker 1: It's at the point now where I'm ready to close
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  Speaker 1: down my business and go and get a government job,
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  Speaker 1: because that seems to be how we get a hit.
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  Speaker 2: And if the goal of the budget was to create
• 1:41
  Speaker 2: more equality for young Australians, we need to make sure
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  Speaker 2: that we're not accidentally taxing the very pathways that they're
• 1:46
  Speaker 2: using to create their own future. Look at first, my
• 1:50
  Speaker 2: feasae to blow up with this quite a few days ago,
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  Speaker 2: and I did have a laugh at it. I thought,
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  Speaker 2: this is actually quite funny, these entrepreneurs just making light
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  Speaker 2: of a very very serious situation. It was nice to
• 2:02
  Speaker 2: have something to sort of just have a bit of
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  Speaker 2: a giggle about. The unfortunate fact for this, though, is
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  Speaker 2: for a lot of these entrepreneurs, there's nothing to laugh over.
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  Speaker 2: They are very, very worried. There are lots of concerns
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  Speaker 2: that people might actually leave Australia to set up businesses.
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  Speaker 2: It's got a lot of people who never knew about
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  Speaker 2: capital gain SAX and the ins and outs of Australian
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  Speaker 2: tax law actually really caring about it.
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  Speaker 3: As the Wealth editor for the.
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  Speaker 2: Yours, my heart is warm by that who knew would
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  Speaker 2: be in this place where we get to know the
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  Speaker 2: ins and outs. But essentially the model that the government
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  Speaker 2: is proposing for capital gain SAX, while it might smooth
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  Speaker 2: things out from a property investment point of view, potentially
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  Speaker 2: for shares, when it comes to entrepreneurs, and I'll try
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  Speaker 2: and explain this as simply as I can. When they
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  Speaker 2: start a business, they don't often start with much capital.
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  Speaker 2: We write a lot of these stories about you know,
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  Speaker 2: starting on the smell of an oily rag, and it's
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  Speaker 2: very true. So they don't really come to it with
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  Speaker 2: a lot of assets. A lot of the time they're
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  Speaker 2: sacrificing their own salary. This kind of war between income
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  Speaker 2: owners and asset earners that the Prime Minister is on,
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  Speaker 2: it's kind of about that sharp end for entrepreneurs, so
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  Speaker 2: they will often not take a salary for many years
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  Speaker 2: because they're trying to grow a business. They will often
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  Speaker 2: try and get people into their business. They can't pay
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  Speaker 2: them big salaries, they can't put them on that top
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  Speaker 2: marginal tax rate to begin with, and so they'll get
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  Speaker 2: equity or shares in that company in lieu of that salary.
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  Speaker 2: And everyone's working their backsides off to grow this business
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  Speaker 2: because a lot of businesses will just fail. A lot
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  Speaker 2: of them will collapse within the first twelve to twenty
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  Speaker 2: four months. So if you get out the other side,
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  Speaker 2: and it's blood, sweat and tears, a lot of what
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  Speaker 2: we call sweat equity, and then you build this business.
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  Speaker 2: And now under this model, if you sell that business,
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  Speaker 2: you are likely to put yourself now into that top
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  Speaker 2: tax bracket, like forty seven percent of the gain of
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  Speaker 2: that business will go to the government. And hence why
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  Speaker 2: people are now making the link to Anthny alban Easy
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  Speaker 2: being their new shareholder. He took none of the downside.
• 4:00
  Speaker 2: He wasn't there late at night, so you can see
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  Speaker 2: what they would be a bit hot and bothered by.
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  Speaker 1: So this was an exclusive actually broken in the Australian
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  Speaker 1: even before last Tuesday's federal budget. But on budget night,
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  Speaker 1: Jim Chalmers announced this big change to capital gains tax.
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  Speaker 4: Will also introduce a minimum thirty percent tax rate on
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  Speaker 4: capital gains from July next year and on discretionary trust
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  Speaker 4: from July the year after. This is about better aligning
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  Speaker 4: the taxes paid on these types of income with the
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  Speaker 4: taxes paid on wages. These changes will level the playing
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  Speaker 4: field for workers and first home buyers and support investment
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  Speaker 4: in productive assets including new housing supply, and they will
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  Speaker 4: fund our new round of tax relief for more than
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  Speaker 4: thirty million Australian workers.
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  Speaker 1: Let's look at what the situation is now. So if
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  Speaker 1: I sell an asset right now, what happens in terms
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  Speaker 1: of capital gains tax to me?
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  Speaker 2: Under the existing arrangements, if you hold an asset for
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  Speaker 2: longer than twelve months and the new that asset, you
• 5:01
  Speaker 2: get a fifty percent capital gains discount. So say you
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  Speaker 2: make a million dollars because you're a great investor, Claire,
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  Speaker 2: you will then pay tax on five hundred thousand dollars.
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  Speaker 2: What the government is doing is moving back to a
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  Speaker 2: system that existed pre nineteen ninety nine, but it's going
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  Speaker 2: to go to an indexation model. And what they're trying
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  Speaker 2: to say is we're going to tax the real gain
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  Speaker 2: on assets, so we will strip out the impact of inflation.
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  Speaker 3: The issue is is depending on that asset class.
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  Speaker 2: So if you have a property that you bought for
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  Speaker 2: a million dollars and then you sell it for two
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  Speaker 2: million dollars, that's the one million gain. Under the old system,
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  Speaker 2: you are taxed on five hundred thousand dollars. Now, what
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  Speaker 2: the government will do is it'll give you a model
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  Speaker 2: of what the inflation is. Most of the work that
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  Speaker 2: we have done shows that just about on every measure,
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  Speaker 2: you're going to end up paying more tax for this.
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  Speaker 2: The ones that are hardest sit, of course, the entrepreneurs
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  Speaker 2: that we were talking about before.
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  Speaker 3: And so on.
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  Speaker 1: That whole million dollars that I've made, I would now
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  Speaker 1: be taxed at my marginal tax rate. So if I'm
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  Speaker 1: a very high come earner, that would be forty seven percent.
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  Speaker 1: And that's where they're getting this forty seven percent number.
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  Speaker 3: Is that right?
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  Speaker 2: Yeah, the highest tax rate is at forty five percent
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  Speaker 2: of the new factory in the Medicare levee, so you
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  Speaker 2: sit up at forty seven percent, So it gets quite high.
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  Speaker 3: Look, we had an.
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  Speaker 2: Interesting story last week about New Zealand property and our
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  Speaker 2: reporter Michelle Singer had a chat to a few people
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  Speaker 2: and searchers for New Zealand property went up twenty four
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  Speaker 2: percent this month. So it does show you people are thinking, Okay,
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  Speaker 2: if Australia's going to be so punitive, where can I go?
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  Speaker 2: So people are looking at New Zealand, they're looking at Singapore.
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  Speaker 3: Now this is a big.
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  Speaker 2: Gabble by the government because I really don't think they
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  Speaker 2: want our innovators, the people who are productive in the
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  Speaker 2: economy to leave the country altogether. I don't think that's
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  Speaker 2: the intent of their proposal. I also think I also
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  Speaker 2: think that the government didn't quite think this through, Like
• 6:50
  Speaker 2: far far be it from me to suggest this, but
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  Speaker 2: I think they were so focused on property and trying
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  Speaker 2: to fix the property market of sorts, and their big
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  Speaker 2: pitch for the budget was we've got this into generational inequity.
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  Speaker 2: We're going to try and fix it. And so it
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  Speaker 2: was all sort of geared to property. And we did
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  Speaker 2: notice in the budget papers that there was just this
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  Speaker 2: little line to say that they left the door ajart
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  Speaker 2: they will have consultation with the tech and startup sector,
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  Speaker 2: which to me says that the outcry that was happening
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  Speaker 2: a few days before the budget happened. They went, oh,
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  Speaker 2: hang on, we might have unintended car unintended consequences here,
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  Speaker 2: Like whoops, now they've opened up this door, and people
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  Speaker 2: are brightly, I think, saying, so why should it be
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  Speaker 2: tech that gets a carve out? Like what's so special
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  Speaker 2: about the tech bros? Exactly that they could get some
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  Speaker 2: sort of relief from the tax regime.
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  Speaker 3: Where you might have a.
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  Speaker 2: Physiotherapist, for instance, who you just set up their own
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  Speaker 2: business and they spent twenty or thirty years, and often
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  Speaker 2: their retirement plan is selling their business. They might have
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  Speaker 2: taken a hit to their superinnuation. There's all these sort
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  Speaker 2: of small businesses that get caught up into this that
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  Speaker 2: I don't know. If I was them and there was
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  Speaker 2: going to be a tech carve out, I would pretty
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  Speaker 2: much argue that I use the Internet every day and
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  Speaker 2: therefore I'm a tech business.
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  Speaker 3: That's a good idea. They're almost framing it as a
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  Speaker 3: moral issue.
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  Speaker 1: It's like, well, we are rewarding income that's earned from
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  Speaker 1: having a job, rather than income that is earned from
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  Speaker 1: people who.
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  Speaker 3: Are swimming in their millions of dollars.
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  Speaker 1: Drinking out of gold champagne flutes because that's who investors are.
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  Speaker 1: You know, that's a really kind of interesting and quite
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  Speaker 1: high risk move, isn't it, Because that's been taken as
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  Speaker 1: an insult by these hardworking entrepreneurs who you're talking about.
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  Speaker 3: Yeah, it's a really ideological debate.
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  Speaker 2: It's almost like they've created the meme of themselves about
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  Speaker 2: rich investors. And there are these amazing younger Australians who
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  Speaker 2: are doing what their parents actually couldn't do a generation.
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  Speaker 2: To go back in the day Clare to get into
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  Speaker 2: the stock market, you often had to have a stockbroker.
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  Speaker 2: You often needed tens of thousands of dollars. Now you
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  Speaker 2: can have three or four apps on your phone. It
• 8:50
  Speaker 2: takes you five hundred dollars for a minimum investment. You
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  Speaker 2: have a lot of these younger people investing in shares
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  Speaker 2: to help supplement their income, to help grow that depol
• 9:00
  Speaker 2: for the house that they want. Now what's happening is
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  Speaker 2: the tax is being applied to that and so their
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  Speaker 2: ability to save for that deposit now lengthens. It will
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  Speaker 2: take them longer to do it. Meanwhile, I can't see
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  Speaker 2: anything in this budget that means house prices will go down,
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  Speaker 2: they might not go up.
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  Speaker 3: As fast as they previously do.
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  Speaker 2: I think the Treasury calculations is the house prices will
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  Speaker 2: grow two percent less than they ordinarily would. Thirty five
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  Speaker 2: thousand homes might come out of the market. The government
• 9:27
  Speaker 2: seems to be hanging its hat on the idea that
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  Speaker 2: it's going to build another sixty five thousand homes through
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  Speaker 2: its home building plan, but they're already behind on the
• 9:37
  Speaker 2: previous plan for one point two million homes. So I
• 9:39
  Speaker 2: sort of look at it and think, I don't trust you
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  Speaker 2: to deliver that. So I don't know that house prices
• 9:44
  Speaker 2: will go down. You haven't been able to contain inflation.
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  Speaker 2: You're putting pressure on the Reserve Bank to raise rates again.
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  Speaker 2: So even if house prices came down a little bit,
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  Speaker 2: inflation is going to gobble that up. Inflation will be up.
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  Speaker 2: The RBA's likely lift rates. It makes housing more difficult
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  Speaker 2: for young people, and in the same measures you have
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  Speaker 2: made their ability to make money off their assets all
• 10:05
  Speaker 2: that more harder.
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  Speaker 1: Coming up the big change to the way we can
• 10:13
  Speaker 1: leave our kids and inheritance.
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  Speaker 3: You mentioned trust, No trust, let's talk about trusts.
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  Speaker 1: And on Budget night you were in the budget locker,
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  Speaker 1: rifling through the papers along with all of the rest
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  Speaker 1: of the journalists in Australia, and you noticed something about
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  Speaker 1: trust that even though the Australian had broken some stories
• 10:43
  Speaker 1: about what was going to happen in the budget, we
• 10:44
  Speaker 1: didn't actually see this particular part of it coming.
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  Speaker 3: And that's about testamentary trust. Just tell us what you
• 10:51
  Speaker 3: saw and what kind of light bulb went off in
• 10:53
  Speaker 3: your head.
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  Speaker 2: There's what's known as a family trust and a lot
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  Speaker 2: of people will use this. What the government is trying
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  Speaker 2: to stamp out is better off people, for want of
• 11:03
  Speaker 2: a better word, splitting income amongst you know, children and
• 11:06
  Speaker 2: grandchildren and taking advantage of lower tax rates. But this
• 11:09
  Speaker 2: is a trust structure that sits up in while you
• 11:12
  Speaker 2: are living, and that sits to one side. So I
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  Speaker 2: understand while the government has moved to try and clamp
• 11:18
  Speaker 2: down on some of the stuff that's going.
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  Speaker 3: On in there.
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  Speaker 2: But there are these things called a testamentary trust. And
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  Speaker 2: what that is is a trust you set up and
• 11:26
  Speaker 2: you establish it in your will, so you establish it
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  Speaker 2: while you're living, but it can only come into effect.
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  Speaker 2: It only starts when you die, So you die and
• 11:35
  Speaker 2: then your assets are put into this trust. And there
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  Speaker 2: are two types of testinaty trust. Clear it's all going
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  Speaker 2: to be such an exciting conversation. There's a fixed trust
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  Speaker 2: and a discretionary trust. And what the government is saying
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  Speaker 2: is the fixed trust can just we're not touching that one.
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  Speaker 3: That's totally fine.
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  Speaker 2: Say it's your two kids, So I'm going to sit
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  Speaker 2: up in my will should I die, I'm going to
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  Speaker 2: split my assets fifty fifty to my two kits. For
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  Speaker 2: a fixed trust, your wishes have to be followed through,
• 12:00
  Speaker 2: so fifty to fifty goes to your kids. And not
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  Speaker 2: wanting to put the macOS on any of this, but
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  Speaker 2: say you make this and your kids are ten years old,
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  Speaker 2: they're ten and twelve. If later in life one of
• 12:08
  Speaker 2: them becomes a drug addict, if later in life one
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  Speaker 2: of them marries someone who's not very good to them,
• 12:13
  Speaker 2: there's a family that comes after some assets, it's very
• 12:16
  Speaker 2: difficult to unwind that situation. The money has to keep
• 12:20
  Speaker 2: flowing to those kids no matter what.
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  Speaker 3: If you have a.
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  Speaker 2: Discretionary trust, you can have a trustee that can make
• 12:25
  Speaker 2: decisions based on the best interests of the people involved here,
• 12:30
  Speaker 2: so you know if one of the kids develops a
• 12:32
  Speaker 2: drug habit, maybe we're not going to give them an
• 12:34
  Speaker 2: income of a thousand dollars a month, ten thousand, whatever
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  Speaker 2: the money might be. A lot of people use this
• 12:40
  Speaker 2: if they've got children with disabilities. A lot of people,
• 12:42
  Speaker 2: a lot of parents are very worried what happens to
• 12:45
  Speaker 2: their kids once they're no longer there to look after them,
• 12:48
  Speaker 2: and so you want to have this mechanism involved that
• 12:50
  Speaker 2: allows the flexibility that this trust provides. What the government
• 12:54
  Speaker 2: is doing is putting a thirty percent minimum flaw on there.
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  Speaker 2: So what it means is the kids that have tax
• 13:01
  Speaker 2: free thresholds, they're not income owners, they don't they don't
• 13:04
  Speaker 2: awn income, will actually pay thirty percent on their tax.
• 13:08
  Speaker 2: And the way I see that is it is another
• 13:11
  Speaker 2: way of a death duty. Because you have died for
• 13:14
  Speaker 2: this to come into effect. This money is flowing to
• 13:17
  Speaker 2: your children. And what the government is now saying is
• 13:19
  Speaker 2: we're going to put a minimum thirty percent flaw on that,
• 13:22
  Speaker 2: a thirty percent tax that wasn't previously there.
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  Speaker 3: And only on the discretionary trust. Throw on discretion me.
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  Speaker 2: They are saying that you can move to fix now
• 13:30
  Speaker 2: the estate lawyers that we have spoken to, so no
• 13:32
  Speaker 2: one uses the fix for the reasons that I've pointed
• 13:34
  Speaker 2: out before, they're just not flexible enough. I spoke to
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  Speaker 2: someone who set a discretionary trust up for his kids,
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  Speaker 2: and what he is saying and what he might do
• 13:41
  Speaker 2: is move to the fixed trust so that should he die,
• 13:42
  Speaker 2: his kids don't get slugs with thirty percent tax. And
• 13:45
  Speaker 2: then once they're adults, we move into a discretionary trust
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  Speaker 2: because there would be effectively, you would hope, in jobs
• 13:51
  Speaker 2: and paying tax. Anyway, my great hope, Claire, is that
• 13:54
  Speaker 2: the government kind of hears some of this stuff. I
• 13:56
  Speaker 2: mean out in the Albany is he certainly has seen
• 13:58
  Speaker 2: the memes. I mean, I found it peculiar little that
• 14:00
  Speaker 2: he was flattered by the memes, and I think I'm
• 14:02
  Speaker 2: not sure that was the point.
• 14:03
  Speaker 4: I think some of them are very flattering, and I
• 14:05
  Speaker 4: thanked them for picking very nice photos of me, and
• 14:10
  Speaker 4: I thank them for that.
• 14:12
  Speaker 2: People have used a nice picture of me. Oh, I
• 14:14
  Speaker 2: wish I could do the splits. Ali could make me
• 14:16
  Speaker 2: do the splits. I mean, if only Ali could fix
• 14:17
  Speaker 2: your budget.
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  Speaker 3: That probably could. Actually we should probably put it in,
• 14:21
  Speaker 3: but by next year it probably can. Yeah.
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  Speaker 2: But look, I think the good thing about all this,
• 14:26
  Speaker 2: I would say, is at least we're having a healthy
• 14:28
  Speaker 2: debate about tax laws and what might be. And we
• 14:31
  Speaker 2: had Chris Breichy, who's the founder of stock spot, write
• 14:34
  Speaker 2: a column for us where he just throw up a
• 14:36
  Speaker 2: totally different idea like maybe we have a tapering system
• 14:38
  Speaker 2: for CGT.
• 14:39
  Speaker 3: I hadn't read about that before.
• 14:40
  Speaker 2: I think anyone's hoping for anything but what we've got
• 14:43
  Speaker 2: right now.
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  Speaker 3: Time will tell. Juliane Sprague, thank you very much. Thank you.
• 14:55
  Speaker 1: Julianne Sprague is The Australian's Wealth editor. You can read
• 14:58
  Speaker 1: all Julienne's reporting, plus the best in finance, politics and
• 15:02
  Speaker 1: much more any time at the Australian dot com dot
• 15:06
  Speaker 1: u