Latest / The Money Puzzle / Sharing home ownership with the government: What could possibly go wrong?

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Sharing home ownership with the government: What could possibly go wrong? · The Money Puzzle

0:10
Speaker 1: Hello, and welcome to The Australian's Money Puzzle podcast. I'm
0:13
Speaker 1: James Kirkby. Welcome aboard everybody. I notice we haven't had
0:17
Speaker 1: many questions about this week's federal budget. That's probably because
0:23
Speaker 1: there wasn't an awful lot in it that is compared
0:26
Speaker 1: to a conventional budget. Don't be mistaken, though, because there
0:30
Speaker 1: was issues in it, right, I mean, keep an eye
0:33
Speaker 1: on that. There was a tax cut, Yes it was tiny,
0:36
Speaker 1: Yes it was at the lower band, but it was
0:38
Speaker 1: a tax cut. Nonetheless, there's a very interesting expansion of
0:42
Speaker 1: the plan to have shared home ownership that could be
0:46
Speaker 1: really interesting. That's the biggest sort of thing in the
0:49
Speaker 1: first home buyers market we've seen for a long time,
0:52
Speaker 1: and with anyone can up to one hundred thousand a
0:54
Speaker 1: year you can apply for that. So I think that's
0:57
Speaker 1: going to be a major feature of the residential property
1:01
Speaker 1: market going forward. There was also some very interesting sort
1:04
Speaker 1: of side steps inside the budget, in other words, things
1:08
Speaker 1: that were not mentioned but were important because they weren't.
1:11
Speaker 1: Give you an example, the deming rate. The deming rates unchanged.
1:15
Speaker 1: The deming rates is unchanged since twenty twenty. This is remarkable.
1:18
Speaker 1: Basically the rate that controls pension access is unchanged since
1:21
Speaker 1: twenty twenty. That's a giveaway, folks, it's a giveaway to
1:24
Speaker 1: older Australians. On the other hand, the coup, we call
1:27
Speaker 1: it notorious. Notorious plan to introduce a new super tax
1:33
Speaker 1: of fifteen percent on earnings above three million was nowhere
1:38
Speaker 1: mentioned in the budget papers. And I mean anywhere, because
1:41
Speaker 1: we were really digging and looking for it, myself and
1:43
Speaker 1: my colleagues inside the lock up, and we didn't see
1:46
Speaker 1: any mentioned at all. That well, I'm going to infer
1:49
Speaker 1: that it means that plan as we know, is never
1:51
Speaker 1: going to see the light of day. That doesn't mean
1:53
Speaker 1: they won't try something, but I'd like to think they're
1:56
Speaker 1: never going to try that. We talk about that in
1:58
Speaker 1: a moment with my guest today. One thing just before
2:01
Speaker 1: we start. As we speak, news has just come out
2:06
Speaker 1: that Trump has introduced a twenty five let me read
2:12
Speaker 1: this again. I got to be sure about this. A
2:14
Speaker 1: twenty five percent tariff on foreign made automobiles in the US.
2:20
Speaker 1: Can you believe this? This is how believable. Imagine if
2:23
Speaker 1: it was in Australia. It would be like bring us
2:24
Speaker 1: back to a hold and everybody driving a hold in
2:27
Speaker 1: or a Ford as we were back in the nineteen eighties.
2:30
Speaker 1: This is huge. This Trump tariff play. The big day supposedly,
2:36
Speaker 1: if he can stop leaking it before the big day
2:38
Speaker 1: is supposed to be Tuesday, April second. That's like the
2:41
Speaker 1: tariff day that he's supposed to deliver all the entire package.
2:45
Speaker 1: And that is just for our next show, which would
2:49
Speaker 1: be ideally timed. My guest will be Cameron Stuart. He's
2:52
Speaker 1: the chief international correspondent at the Australia and he's a
2:56
Speaker 1: Trump expert. He's covered the Trump elections, He's been at
2:59
Speaker 1: those Trump rallies. He really understands this controversial figure who's
3:03
Speaker 1: dictating the tempo of world investment markets. So look out
3:07
Speaker 1: for that one in a few days time. Now there
3:09
Speaker 1: is only one person I talked to about the budget
3:12
Speaker 1: each year, and we're going to talk about the budget.
3:14
Speaker 1: We're also going to talk about where we are this
3:16
Speaker 1: time of the year now that we know what was
3:17
Speaker 1: in the budget. It is of course Will Hamilton of
3:20
Speaker 1: Hamilton Investment Partners.
3:21
Speaker 2: How are you will very well, James, thank you for
3:24
Speaker 2: having me.
3:25
Speaker 1: You're very welcome. Great to have you. I mentioned the
3:28
Speaker 1: issues there on the budget, there was another tax cut.
3:31
Speaker 1: We've had a batch of tax cuts from the ALP.
3:34
Speaker 1: Now does that to some extent undermine the original ambitious
3:40
Speaker 1: multi year tax cut program that Josh Rodenberg and Morrison had.
3:46
Speaker 2: No, I don't think it does, because I think what
3:48
Speaker 2: you're saying is it's they're calling it the cup of
3:51
Speaker 2: coffee tax cut. It doesn't start for sixteen months, and
3:55
Speaker 2: then it does come in at five dollars a week,
3:57
Speaker 2: and then it goes to ten dollars twelve months after that.
4:00
Speaker 2: It's at the lower tax band, and I think this
4:02
Speaker 2: goes from sixteen to fifteen and then to fourteen percent.
4:05
Speaker 2: So the thing is it doesn't erode bracket creep. That
4:07
Speaker 2: the brecker creep at the top end. There's no erosion. Yeah,
4:10
Speaker 2: so it we've still got very substantial bracket creep and
4:14
Speaker 2: it's a big issue.
4:15
Speaker 1: Bracket creep, folks. I hope everyone is across a before
4:18
Speaker 1: we go any further. Bracker creep is that if the
4:22
Speaker 1: tax rates remain fixed at percentages, then what happens is,
4:27
Speaker 1: as you get a pay rise, you graduate into those
4:29
Speaker 1: tax bands and that means that you continually pay more tax.
4:35
Speaker 1: And actually if you look marvelous couple of slides from
4:38
Speaker 1: saul eslike the Independent Economist I saw this morning where
4:41
Speaker 1: he showed how the tax revenue year upon year upon
4:45
Speaker 1: year and into the future increasingly depends on income tax.
4:49
Speaker 1: So bracket creep is this controversy and the only way
4:52
Speaker 1: to plug it would be if they indexed the bands.
4:57
Speaker 1: Do you think either party whatever index to bands because
5:03
Speaker 1: it means either party could never announce the tax cut again.
5:06
Speaker 2: Really, I see there's an article in The Australian today
5:10
Speaker 2: that Dunton's being urged to do this. I think that
5:14
Speaker 2: I know he's been everyone's everyone, everyone's urging him to
5:17
Speaker 2: do and I think tax personal taxpayer contribution. When Morrison
5:22
Speaker 2: went out of power, I think it was about forty
5:24
Speaker 2: eight point three percent. In this budget, it's forecast now
5:28
Speaker 2: for twenty eight twenty nine to peak at fifty four percent.
5:31
Speaker 2: So that's the effect of bracket crep. Now we need
5:34
Speaker 2: major we need tax reform and I think one of
5:38
Speaker 2: the things that the Tier member and Wentworth elector Spend
5:41
Speaker 2: has been really calling for.
5:42
Speaker 1: Is indexation of the bands.
5:44
Speaker 2: Eah correct is that? But bigger tax reform and the
5:47
Speaker 2: thing is the people listening to this as individuals are
5:51
Speaker 2: being urged to contribute more and more to the total
5:54
Speaker 2: tax take, and that's wrong. It really is wrong. And
5:57
Speaker 2: I think that one of the biggest reasons is because
6:01
Speaker 2: there's two sides naturally to a budget. There's the revenue
6:04
Speaker 2: side and there's expenditure side, and both sides aren't tackling
6:09
Speaker 2: the spending side, and they're spending like drunken sailors.
6:12
Speaker 1: They're spending like drunken sailors. Okay, folks, you heard it
6:15
Speaker 1: here first from Will Hamilton, and actually I don't disagree
6:20
Speaker 1: with that. And the coalition's tactical electoral election policy of
6:26
Speaker 1: matching LP giveaways, particularly on the medical side, is well,
6:31
Speaker 1: basically it rulls into every time you spend, we spend too.
6:34
Speaker 1: So on that three million tax I think we have
6:37
Speaker 1: a question later on that, but it was nowhere to
6:40
Speaker 1: be seen. Do you think it's dead?
6:42
Speaker 2: It's surprising, was probably the number one question we got
6:45
Speaker 2: yesterday from people, because you know, look, our client base,
6:49
Speaker 2: this is a very relevant proposal that was put forward
6:52
Speaker 2: and there was no mention of it, and as we
6:56
Speaker 2: all know, it's sort of stuck in the center, killed
6:59
Speaker 2: by the Senate at the moment, everyone's expecting they'll have
7:02
Speaker 2: a go at it or but there's just no mention
7:05
Speaker 2: whatsoever about resurrecting that legislation in the Upper House or
7:09
Speaker 2: trying to alter it amend it. So where does it stand?
7:13
Speaker 2: And I think that's the big thing as far as
7:16
Speaker 2: our clients are concerned. So unless they can change the
7:20
Speaker 2: minds of Jackie Lambia at all, this thing's dead.
7:24
Speaker 1: Okay, I have to say, will I don't think it's dead.
7:26
Speaker 1: And I think they can change the minds of those
7:28
Speaker 1: people simply by offering them something that I didn't offer before.
7:33
Speaker 1: So for instance, you could package it. This is how
7:35
Speaker 1: they do these deals in Senate. You say, Okay, you
7:38
Speaker 1: might be crazy about this tax, but we want it through.
7:40
Speaker 1: And what we'll do is we'll do a double bill,
7:42
Speaker 1: you know. And they took in other goodies with it,
7:44
Speaker 1: which the others will find it resistible. That's political. More
7:48
Speaker 1: to the point that three m tax three million tax
7:51
Speaker 1: aren't super That is still on the agenda, and Jim
7:53
Speaker 1: Chalmers has reiterated that he wants to push it through
7:56
Speaker 1: put that on the agenda. It's not indexed either, right,
8:00
Speaker 1: so bracket creep would kick in there big time, wouldn't it.
8:03
Speaker 2: And the transfer balance cap is indexed and like it
8:06
Speaker 2: was interesting. Okay, So the transfer balance cap which you
8:08
Speaker 2: have will Flagg James is going from one point nine
8:10
Speaker 2: to two million a concessional and non concessional contribution, So
8:14
Speaker 2: the way to get money into Super has not been altered.
8:18
Speaker 1: Yeah, and I think that's really unfair. That was the
8:20
Speaker 1: point I'd brought up on budget coverage, even though it
8:22
Speaker 1: wasn't in the budget papers, but I wasn't going to
8:24
Speaker 1: ignore it, which is folks, I think this is really relevant.
8:27
Speaker 1: If you are older and if you have one point
8:31
Speaker 1: nine million this is individually per head in Super, and
8:35
Speaker 1: you've taxed free earnings on that, that cap is going
8:38
Speaker 1: to rise to two million on July one two million, okay. Now,
8:42
Speaker 1: but if you are in accumulation stage. Any of our
8:46
Speaker 1: listeners who aren't retired, which is a vast majority, let
8:48
Speaker 1: me tell you the most they can put into Super
8:52
Speaker 1: pre tax each year is thirty thousand dollars. Now, a
8:57
Speaker 1: couple of things you could put in thirty thousand dollars
8:59
Speaker 1: ten years ago, twenty years ago, and how many years
9:04
Speaker 1: would it take to get two million? How many years
9:07
Speaker 1: must do the calculation of that. But basically it's loaded
9:10
Speaker 1: towards older people, isn't it. Really?
9:11
Speaker 2: It isn't the thing that we've argued since from the
9:15
Speaker 2: point that Kelly I do ar Alter, this was the
9:19
Speaker 2: issue actually is getting money into super and that still
9:23
Speaker 2: and what they're doing and not altering these levels is
9:26
Speaker 2: making it even harder.
9:27
Speaker 1: Yes, that's right. It's really contradictory that you're letting the
9:31
Speaker 1: amount you can have tax free swell and you're not
9:35
Speaker 1: changing year after year the amount you can put in.
9:39
Speaker 1: But we'll put that to one side. But I want
9:41
Speaker 1: people to be aware of it. I'm sure listeners are
9:43
Speaker 1: aware of it, and it's I think it's crucial in
9:45
Speaker 1: terms of again one of these things that the budget
9:48
Speaker 1: did not cover. Okay, let's take a short break and
9:52
Speaker 1: we want to come back and just pick up one
9:54
Speaker 1: or two I think very important pre election issues for investors,
9:59
Speaker 1: because we have an election coming up in May, and
10:02
Speaker 1: we don't normally have a budget during an election campaign,
10:05
Speaker 1: and there is an election campaign on for all intents
10:08
Speaker 1: and purposes. I know it hasn't been called yet, but
10:10
Speaker 1: it will be called in a matter of days. Okay.
10:12
Speaker 1: Back in the moment. Hello, Welcome back to the Australians
10:26
Speaker 1: Money Puzzle podcast. James Kirby here talking to Will Hamilton
10:31
Speaker 1: of Hamilton Wealth Partners. We cover the budget every year together.
10:35
Speaker 1: Often we've so much in the budget we could talk
10:37
Speaker 1: for an hour. We're not going to talk for an
10:39
Speaker 1: hour on the budget this year we will because really
10:41
Speaker 1: there isn't an hour's worth in it. There is barely
10:43
Speaker 1: ten minutes worth. I think we've touched off the big issues.
10:47
Speaker 1: I just want to zone in one one issue that
10:49
Speaker 1: I think our listeners will find very interesting. For first
10:53
Speaker 1: home buyers. If you are one, if you want to
10:56
Speaker 1: be one, or if anyone related to you wants to
10:58
Speaker 1: be one, or a friend of yours wants to one.
11:00
Speaker 1: There's a couple of grants you can choose from. The
11:03
Speaker 1: most popular is the Home Loan Guarantee Grant Federal. These
11:06
Speaker 1: are federal grants where the government will cover will guarantee
11:11
Speaker 1: the deposit you don't have, basically so you can have
11:13
Speaker 1: a small deposit. This is the most popular off the schemes.
11:18
Speaker 1: Roughly fifty thousand people have used it, maybe more. This
11:20
Speaker 1: is the last time I saw the figures. The other
11:22
Speaker 1: one is the first Home super Saber scheme. Some of
11:26
Speaker 1: our listeners have used that. They are heroes to use
11:30
Speaker 1: that because it is the most ghastly complicated scheme I've
11:33
Speaker 1: ever come across. However, thirty five thousand people or more
11:36
Speaker 1: have used it. They've used it because people will jump
11:40
Speaker 1: on anything that gets them into the market. The majority
11:43
Speaker 1: of people who don't have rich mom and dads who
11:46
Speaker 1: will give them quietly one hundred grand or two hundred
11:49
Speaker 1: grand to get them going. Most people don't have that.
11:51
Speaker 1: They depend on these grants, or they depend on whatever
11:54
Speaker 1: initiatives they can have. So will The point I'm making
11:57
Speaker 1: is the government's expanded shared home ownership scheme I think
12:01
Speaker 1: will go like hotcakes. I think it will be instantly popular.
12:04
Speaker 1: The deal is you can earn up to ninety thousand,
12:07
Speaker 1: up to one hundred thousand, and you can buy a
12:10
Speaker 1: house up to one point three million, which is quite something.
12:13
Speaker 1: That's it's regionally sectoralized. Basically Sydney's the highest makes sense,
12:18
Speaker 1: and it drops from there. The government will pay will
12:22
Speaker 1: put in thirty percent of an existing house and forty
12:25
Speaker 1: percent of a new house, right so you don't have
12:30
Speaker 1: to you share ownership. What do you think of the idea.
12:35
Speaker 2: Well, look, it's going to get people in. And the
12:38
Speaker 2: fact that they've also lifted the single salary cap from
12:41
Speaker 2: ninety two hundred thousand, you going to see this allow
12:44
Speaker 2: a lot more people in as well. So you're right,
12:47
Speaker 2: it's going to assist this market, and it's going to
12:49
Speaker 2: assist that you're up to that one point three million,
12:52
Speaker 2: it's going to assist it substantially.
12:54
Speaker 1: The only forty thousand spots will and that's over the
12:56
Speaker 1: budget papers.
12:57
Speaker 2: Twenty thousand places initially. Yeah, that's right.
12:59
Speaker 1: Yeah, th I notice demand will be strong. The demand
13:02
Speaker 1: will be strong, and I noticed real estates a councilors,
13:05
Speaker 1: et cetera yesterday asking from more spots already. So I
13:09
Speaker 1: think it will be. But let's just look at it
13:11
Speaker 1: for a moment. If you did this, so the upside
13:13
Speaker 1: would be that you could buy a house that you
13:15
Speaker 1: could not have bought previously, and that's substantial. The downside
13:22
Speaker 1: is you share, you're in a joint venture, and you're
13:24
Speaker 1: a joint venture with a government agency. What could go wrong?
13:29
Speaker 1: What could go wrong? A lot of things. What could
13:32
Speaker 1: go wrong?
13:34
Speaker 2: First one is if if it's reversed, but I don't
13:36
Speaker 2: see that happening. They may see if they stop, they
13:38
Speaker 2: may stop it. The other thing is is they're going
13:42
Speaker 2: to put some effectively interest rate or carry on it.
13:47
Speaker 2: I doubt that as well. So I think, what if
13:50
Speaker 2: you've got to change your government and they didn't like
13:52
Speaker 2: the scheme. I think it would just be worth ceasing it.
13:54
Speaker 1: Yeah, it would wither on the vine. But you wouldn't
13:56
Speaker 1: care about that if you were in and I noticed that.
13:59
Speaker 1: I don't want to preach George, but governments don't necessarily
14:02
Speaker 1: do that. Like the ALP got in. They are absolutely
14:05
Speaker 1: against using your super for buying a home. The Coalition
14:09
Speaker 1: is totally for it. But the first Home super Saver
14:12
Speaker 1: scheme which was introduced by the Morrison government was not unwound.
14:16
Speaker 1: It wasn't advertised, but it certainly wasn't unwound and continues
14:19
Speaker 1: under the EARP. So that's a precedent. I think. One
14:22
Speaker 1: of the things that perhaps is an issue with the
14:26
Speaker 1: shared ownership scheme, like any joint venture, is how does
14:29
Speaker 1: the partnership end. Would you ever actually get to completely
14:33
Speaker 1: own the house to be able to buy out that
14:35
Speaker 1: part that you that the government owns, and if the
14:38
Speaker 1: price went down, you'd be in a terrible pickle, wouldn't you.
14:43
Speaker 1: You'd be stuck in a half government own't house for
14:45
Speaker 1: who knows how long. How would you say that?
14:47
Speaker 2: So is there effectively imagine call we don't know that. Yeah,
14:51
Speaker 2: I look, I need to see the fine print.
14:53
Speaker 1: Yes, we don't know the details. One other thing, folks,
14:56
Speaker 1: by the way, is in the nature of these things,
14:59
Speaker 1: which are so times sort of perverse incentives, or you
15:02
Speaker 1: might say disincentives. Sometimes if you earn, if you go
15:06
Speaker 1: in let's say you're around ninety eight thousand, and you
15:08
Speaker 1: qualify for the scheme, and in the natural course of
15:12
Speaker 1: event you are promoted or you make more money as
15:14
Speaker 1: the years go buy then there is a close already
15:17
Speaker 1: in the proposal that the government will want you to
15:20
Speaker 1: buy them out faster than this planned. Under the conventional plan,
15:24
Speaker 1: you only have to buy out the government, or at
15:26
Speaker 1: least they have to get the money back for their
15:29
Speaker 1: stake is when you sell the house. But if you
15:32
Speaker 1: get promoted, you have to give them back some of
15:35
Speaker 1: their steak faster. That's one of those classic sort of
15:38
Speaker 1: disincentive things that you've got to watch that often get
15:42
Speaker 1: built into these things by accident.
15:45
Speaker 2: And you would expect that the people that weare the
15:47
Speaker 2: demand is for this game, they're the ones that will
15:50
Speaker 2: get Probably the cealariisers are going to be more rapid
15:53
Speaker 2: as well, so.
15:54
Speaker 1: They're the very ones, aren't they. Yeah, because they're first
15:56
Speaker 1: home buyers, so by definition they are going to ascew younger. Okay,
16:00
Speaker 1: very good. We don't know just yet. I don't want
16:03
Speaker 1: to talk about the election just yet in terms of
16:05
Speaker 1: the choices investors have, because we don't have all the
16:07
Speaker 1: details just yet. I noticed a couple of things we're
16:11
Speaker 1: coming to you before Dutton gives the budget reply. Budget
16:14
Speaker 1: replies are normally completely boring and no one pays attention
16:17
Speaker 1: to them. This time, people will pay attention because we
16:20
Speaker 1: aren't the middle love it, as I say, a de
16:22
Speaker 1: facto election campaign. Also, I notice that there is that
16:26
Speaker 1: what's that famous little item in the budget which is
16:30
Speaker 1: expenses on There's a phrase for it, but basically it's
16:35
Speaker 1: money they've put aside, which they have in details what
16:37
Speaker 1: they're going to do with. And there's two billion in
16:41
Speaker 1: there still unused, which may well be used yet by
16:46
Speaker 1: the government for some last minute election enticements in the
16:51
Speaker 1: next month or so. But we'll see where we go
16:55
Speaker 1: on that. I've got some terribly good questions I really
16:58
Speaker 1: want to get to with Will. In fact, as often
17:02
Speaker 1: the case, I've been saving these for a wik because
17:05
Speaker 1: they're particularly difficult. Thank you, You're welcome. And also there's
17:10
Speaker 1: a question that's about another guest. But that's the nature
17:13
Speaker 1: of it. There'll be questions about you Will that another
17:15
Speaker 1: guest will have to answer. That's just the nature of
17:17
Speaker 1: a rolling show. All right, we'll be back in a
17:19
Speaker 1: moment with some questions. Hello, welcome back to the Australians
17:31
Speaker 1: Money Puzzle. James Kirby and Will Hamilton here with you. Okay, folks.
17:36
Speaker 1: Now the first question is from declan I'm baffled by
17:41
Speaker 1: Roger Montgomery suggestion. Now Roger Montgomery was on the show
17:46
Speaker 1: two bad if you want to listen to it, very
17:48
Speaker 1: good as always. Roger Montgomery suggestion that people should calculate
17:53
Speaker 1: dividend heal based on the price they paid to acquire
17:56
Speaker 1: their shares, and he used Comewell Bank as an exam
18:00
Speaker 1: rather than based on the current value. The question and
18:03
Speaker 1: the investors should be asking themselves is would it be
18:06
Speaker 1: better off continuing to hold the shares I have or
18:09
Speaker 1: should I sell them and invest elsewhere. Okay, I don't
18:14
Speaker 1: really argue with that theoretical point brought up by Detton,
18:19
Speaker 1: but I don't have a problem either with Rogers. I mean,
18:21
Speaker 1: if I buy come Bank shares for thirty dollars, which
18:28
Speaker 1: is I think what I paid for them thirty six,
18:31
Speaker 1: and they're now nearly one hundred, and the dividend yield
18:35
Speaker 1: on paper, when I look at the tables, tellt me
18:38
Speaker 1: it's three and a half percent. But my dividend yield
18:41
Speaker 1: on those shares is much much higher than that. If
18:46
Speaker 1: I bought a property and you said to me, you know,
18:49
Speaker 1: the rental yield is only three percent, but I know
18:52
Speaker 1: that I bought that property, you know, for half half
18:54
Speaker 1: the cost it is today, so the rent is terrific
18:56
Speaker 1: on it, It seems to me. I think both points
18:59
Speaker 1: are pretty relevant.
19:00
Speaker 2: What do you think, will, I think you've got to
19:03
Speaker 2: look look what Roger's saying in some respects is right.
19:07
Speaker 2: I think that and CBA, the dividend you're late late
19:10
Speaker 2: last year went down and then it's gone up because
19:14
Speaker 2: the share price is adjusted, I mean, and the share
19:16
Speaker 2: prices recently it's recently fallen twenty percent. So yeah, it's
19:20
Speaker 2: by that nature gone up. But I think you've got
19:22
Speaker 2: to look at I have an issue with people just
19:26
Speaker 2: purely looking at dividend yield when they look at a stock.
19:30
Speaker 2: At equities, you invest in equities for growth, so one
19:33
Speaker 2: component of the return is income, the other is growth.
19:37
Speaker 2: Now people were scratching their heads when CBA was going up,
19:41
Speaker 2: and why is it going up? It's ten year EPs
19:46
Speaker 2: growth average has been half a percent. So you look
19:50
Speaker 2: at se earnings per share and you look at the yield,
19:53
Speaker 2: and I think that's what You've got to look at
19:55
Speaker 2: the total return that you're expecting from that and make
19:58
Speaker 2: a judgment from it. Right, if you paid thirty six
20:01
Speaker 2: dollars for the stock, the dividend you're getting is based
20:05
Speaker 2: off that thirty six dollars, So it's relevant.
20:08
Speaker 1: I know whatvant of course that there are. People will
20:11
Speaker 1: always say that, look at your share portfolio, would you
20:13
Speaker 1: buy that stock today? Very powerfuct point, of course, it is.
20:16
Speaker 1: I think with dividend machine stock which come bank is
20:21
Speaker 1: and all the banks are, that particular point is diluted
20:25
Speaker 1: to some extent. That's where I would come from at least.
20:27
Speaker 1: But it's a very good question. Thank you. Debt all right, James.
20:32
Speaker 2: James asks about six months ago you had an accountant
20:34
Speaker 2: on the show, Duncan Perkins tax Time Accountants. I believe
20:38
Speaker 2: I found it very informative and with one eye on
20:40
Speaker 2: the end of the financial year, I'd love to hear
20:42
Speaker 2: more about putting the appropriate structures in place now to
20:46
Speaker 2: minimize your tax liabilities down the line. In addition, I'd
20:50
Speaker 2: love to hear more about debt recycling and the associated
20:53
Speaker 2: tax benefits in additions to the risks involved. I think
20:57
Speaker 2: appropriate structures aren't just for one James. You should be
21:01
Speaker 2: looking if you're going to put a tax structure in place,
21:05
Speaker 2: it's for a long term, not just for one year. Yeah.
21:07
Speaker 2: So if you're presently investing in your own name and
21:10
Speaker 2: you going forward and looking at a family trust, that's
21:16
Speaker 2: you're with that trust for a number of years and
21:18
Speaker 2: likewise transferring assets from your name into a trust realizes
21:22
Speaker 2: capital gains.
21:24
Speaker 1: Yeah, okay, but maybe perhaps you might explain to the
21:28
Speaker 1: general listener of what debt recycling is.
21:34
Speaker 2: So on debt recycling, it's are you moving debt for
21:38
Speaker 2: also from one entity to another?
21:41
Speaker 1: Why would you do that.
21:44
Speaker 2: Due to tax? So, for instance, your mortgage that you
21:50
Speaker 2: have in your own name is being paid in after
21:54
Speaker 2: tax dollars. And whereas if you've got debts, this is
22:01
Speaker 2: in you know that you put that in a family trust,
22:06
Speaker 2: or it's on against an investment portfolio or property in
22:09
Speaker 2: your own name that is being paid in pre tax dollars. Debt.
22:14
Speaker 1: Yeah, correct, okay, yeah.
22:16
Speaker 2: And that's the big thing to ensure that you efficiently run.
22:20
Speaker 2: You have your debt structured in an efficient way. We
22:23
Speaker 2: have a number we have a number of people, so
22:25
Speaker 2: we have a number of people coming in and you
22:27
Speaker 2: know that they've got that ability to pay off their
22:28
Speaker 2: home loan and look at debt in other vehicles and
22:33
Speaker 2: they never thought of it, that hold on that debt
22:36
Speaker 2: of my home loan is in after tax dollars and
22:40
Speaker 2: therefore there's no efficiency in it.
22:42
Speaker 1: So what's the worst sort of debt?
22:44
Speaker 2: It is the worst sort of debt if you can
22:46
Speaker 2: afford it.
22:46
Speaker 1: So is it by definition the first sort of debt
22:49
Speaker 1: you should get rid of?
22:51
Speaker 2: Correct?
22:52
Speaker 1: Yes, So that's absolutely.
22:54
Speaker 2: You get rid of that after the debt that's been
22:57
Speaker 2: paid off in after tax dollars. And if you wanted
23:02
Speaker 2: to take on debt, make sure and you've got the
23:05
Speaker 2: ability to make sure that it is therefore in tax
23:08
Speaker 2: deductible or pre tax on the repayments.
23:12
Speaker 1: What about the reciting part. Is there something more that
23:15
Speaker 1: he's alluding to there? Maybe when rates change or whatever.
23:20
Speaker 2: That's another thing. Yeah, as well, when you're looking at
23:23
Speaker 2: your locking when rates change, and we are going through
23:26
Speaker 2: a rate changing at the moment, so you're not wanting
23:28
Speaker 2: to know you've had fixed rate loans as interest rates
23:32
Speaker 2: go up, as rates go down. You want it to
23:34
Speaker 2: have variable but our rates. But the gamble there is
23:38
Speaker 2: how farabile rates go.
23:40
Speaker 1: You're skeptical about them dropping.
23:42
Speaker 2: I think there'll be one more, but I don't one.
23:44
Speaker 1: More zero point two five percent cut? That means the
23:47
Speaker 1: entire site think cutting is a half a percent.
23:49
Speaker 2: Yeah, we didn't go We didn't go up as far
23:52
Speaker 2: as others did. James. Yeah, we were one hundred basis
23:55
Speaker 2: points less on our aid increases. Yeah.
23:58
Speaker 1: Yeah, very interesting. But the economists are still hanging on
24:02
Speaker 1: to two or three more cuts. You skeptical about that?
24:06
Speaker 2: I am skeptical where if we're going to get more cats,
24:08
Speaker 2: it means that the economy is struggling.
24:11
Speaker 1: To say, Yeah, I was going to say, why are
24:13
Speaker 1: you skeptical because the economy.
24:16
Speaker 2: I think it's it's effectively going sideways. I'm just not
24:22
Speaker 2: saying that. Yeah, that extreme weakness was I'm not, don't
24:25
Speaker 2: get me wrong. I actually think on a relative basis,
24:27
Speaker 2: Australia is a under performing the rest of the world,
24:30
Speaker 2: and that's a that's for a different podcast. But I
24:32
Speaker 2: think that it's effectively flat lining.
24:35
Speaker 1: And it's tipping along. And I suppose on the upside,
24:38
Speaker 1: unemployment or employment, whichever way you look at it is
24:41
Speaker 1: also flat lining in and around four percent, and the
24:44
Speaker 1: forecast and the budget leave it there. Okay. I hope
24:47
Speaker 1: that's useful to you, James. Now Sam says, I am
24:52
Speaker 1: struggling to find had to then there's an answer to
24:56
Speaker 1: the following question, Sam and all the Sam's out there.
25:00
Speaker 1: We never give advice on the show. This is information only.
25:03
Speaker 1: Is interest on a loan taken out to pay a
25:06
Speaker 1: sole trader's tax debts tax deductible? Is interested on a
25:12
Speaker 1: loan taken out to pay a soul traders tax debts,
25:15
Speaker 1: including quarterly payments with bas tax deductible.
25:19
Speaker 2: You need to get accountants advice on this one. We can't.
25:21
Speaker 2: We're not let your text advice James. Sorry, Sam, that's
25:26
Speaker 2: really it's legally we're going down a dangerous pass.
25:30
Speaker 1: I made the assumption i'd get an answer there. That's
25:32
Speaker 1: all right. Put that on the put that to one side.
25:34
Speaker 1: I will come back to you, Sam, don't worry. I
25:37
Speaker 1: will be so organized that I will put this back
25:40
Speaker 1: into the questions folder that we get all the time.
25:43
Speaker 1: Every day we get questions, and I'm delighted to see
25:46
Speaker 1: them all right now. Bouncing along to Andrew. If you
25:51
Speaker 1: have a loan or loans from a bank, fully offset
25:55
Speaker 1: with deposits at the same bank and not paying any interest,
26:00
Speaker 1: and the bank goes busted, are you still liable for
26:03
Speaker 1: the loan? Oh my, Look two parts to that. Let's
26:06
Speaker 1: just answer it straight first of all, and then we'll
26:08
Speaker 1: answer it in a more realistic way.
26:10
Speaker 2: For the net ad standing balance. You're liable.
26:13
Speaker 1: You're liable, yeah, correct. But if the bank went under,
26:17
Speaker 1: it would have included your loan, wouldn't it. And it
26:19
Speaker 1: still would have gone under.
26:21
Speaker 2: And there's a thing that code a receiver or liquid
26:24
Speaker 2: ida that will be appointed, and the first thing they'll
26:26
Speaker 2: be doing is chasing your date.
26:27
Speaker 1: The first thing they do is is chase your date
26:31
Speaker 1: if the bank was in receivership. However, in the real world, Andrew,
26:37
Speaker 1: and we don't mean to be complacent. Don't be complacent
26:40
Speaker 1: at all. However, Number one, there's a bank guarantee, which
26:43
Speaker 1: I'm sure you know about, and that's on the positive course,
26:46
Speaker 1: two hundred and fifty thousand per person per bank. But
26:49
Speaker 1: also there isn't an explicit guarantee about loans, et cetera.
26:54
Speaker 1: But there is a de facto, extremely strong historical priests
27:00
Speaker 1: in this country that banks are not allowed to go under.
27:04
Speaker 1: And anytime banks have been in trouble right back, you
27:08
Speaker 1: can go as far back as you like. Stay in
27:10
Speaker 1: Bank of Victoria I think late nineteen eighties. Was it
27:13
Speaker 1: Bank West in the GFC that comeback basically had to
27:16
Speaker 1: takeover I think bank I say, sure, all the state
27:21
Speaker 1: banks really, once upon a time, bank I say, spectacular one,
27:24
Speaker 1: once upon a time. But the point I'm making is
27:28
Speaker 1: that it doesn't happen. The government ensures that the big
27:31
Speaker 1: four banks will take over a bank that's in trouble.
27:33
Speaker 1: If one of the big four banks is in trouble,
27:35
Speaker 1: another bank will take it over. If they don't, the
27:37
Speaker 1: government will step in. If the banking system collapses, the
27:40
Speaker 1: economy collapses. They don't let it happen. In the historical
27:44
Speaker 1: precedent is that separately, there's a government guarantee on deposits. However,
27:50
Speaker 1: strictly to answer your question, Andrew, you bet they will
27:53
Speaker 1: be chasing you further loan if there was a receiver
27:56
Speaker 1: appointed to the biggest receivership imaginable, which would be Big
28:00
Speaker 1: four bank. But there have been times, haven't there will?
28:02
Speaker 1: I mean Westpacland very close to the line, very close?
28:05
Speaker 1: When was that ninety one two?
28:08
Speaker 2: Yeah, Peka came in and bailed them out.
28:10
Speaker 1: There you go, you see, But somebody will invariably come in.
28:13
Speaker 1: Because the other thing is, of course, that there is
28:15
Speaker 1: an oligopoly in the Australian banking system. There's four banks.
28:20
Speaker 1: They don't even try to expand outside Australia. They're completely
28:23
Speaker 1: domestically focused. It's a mortgage machine, it's government guaranteed. Really,
28:30
Speaker 1: it's a pretty good.
28:31
Speaker 2: Business on the dead side. Now they're a lot more
28:34
Speaker 2: conservative than there were, especially even compared to the GFS.
28:37
Speaker 1: Yes, because the capital adequacy rules have continually been ramped
28:41
Speaker 1: up by APPRA, the regulator, the Australian prudential with Australian
28:45
Speaker 1: Prudential Regulation Authority. Worth knowing all that, Andrew, what a
28:49
Speaker 1: good question, which is in a way a theoretical question.
28:53
Speaker 1: All right, terrific. Hey, thank you, Will.
28:56
Speaker 2: You're welcome, James. You started the podcast in talking on terror. Yes,
29:01
Speaker 2: And I found a great quote by Ivan Calhoun. Well,
29:07
Speaker 2: Ivan Cahoune.
29:08
Speaker 1: Posted remind our listens who he is.
29:10
Speaker 2: He was a NAB but before that he was the
29:14
Speaker 2: chief economist at Deutsche Bank, and he posted a quote
29:19
Speaker 2: from David Kelly, the JP Morgan Asset Management Global Chief strategist,
29:25
Speaker 2: and he said, the trouble with tariffs, to be descind
29:27
Speaker 2: is that they raise prices, slow economic growth, cut profits,
29:31
Speaker 2: increase unemployment, worseen inequality, diminished productivity, and increase global tensions.
29:37
Speaker 2: Other than that, they're fine.
29:40
Speaker 1: That's right. I used that quote about three weeks ago
29:43
Speaker 1: on the weekend. I saw it somewhere and I said,
29:45
Speaker 1: oh boy, that's a corker. But more than that, it's
29:48
Speaker 1: not just that it's a corker, it's who it's from,
29:51
Speaker 1: the heart of Wall Street, the heart of Wall Street
29:54
Speaker 1: JP Morgan, and one of the biggest jobs in that
29:56
Speaker 1: investment bank take it on board folks. A lot more
30:00
Speaker 1: more coming on that one, and we will be talking
30:02
Speaker 1: about that with Cameron Stewart in a few days. Okay,
30:05
Speaker 1: thank you. Keep the emails rolling. You're very shy on
30:09
Speaker 1: the voice memos. It's very easy, you know, it's very easy,
30:13
Speaker 1: and we'd love to hear you. But we're always happy
30:15
Speaker 1: to read you out of course, what we'd love to
30:17
Speaker 1: hear you too, So think about that. Here's the email
30:20
Speaker 1: the money puzzle at the Australian dot com dot Au.
30:24
Speaker 1: Today's show was produced by Leah Samuel Gluuke. Talk to
30:27
Speaker 1: you soon,