Latest / The Money Puzzle / Bull market bonanzas and back-flipping Budget moves

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Bull market bonanzas and back-flipping Budget moves · The Money Puzzle

0:10
Speaker 1: Hello, and welcome to the Australians Money Puzzled podcast. I'm
0:13
Speaker 1: James Kirkby. Welcome aboard everybody. Well for a few days,
0:17
Speaker 1: it's really been quite a remarkable week. I want to
0:20
Speaker 1: actually two major issues. I want to have a look
0:23
Speaker 1: at it in the show today. The first is the
0:25
Speaker 1: spectacular SpaceX story. Now we did touch off it last week,
0:31
Speaker 1: but what we didn't know, of course, was that this
0:33
Speaker 1: stock would go up by fifty percent, making it one
0:36
Speaker 1: of the biggest stocks in the world automatically. That's interesting
0:39
Speaker 1: of itself, but what's most interesting is there's never been
0:42
Speaker 1: a US Wall Street float where Australian retail investors were
0:47
Speaker 1: able to participate. And boy did they participate, thirty thousand
0:51
Speaker 1: or so alone in compseach thousands more in other brokers
0:55
Speaker 1: at McCrory at Cherseas and I think it's a line
0:58
Speaker 1: in the sand, folks, because we've known for years that
1:01
Speaker 1: you should be offshore investing, you shouldn't have all your
1:05
Speaker 1: money in the ASEX. We've started to inch into the
1:09
Speaker 1: US market through ETFs and some more adventures at Bestors
1:12
Speaker 1: had direct stocks Apple, etcetera. And they've been so well
1:16
Speaker 1: rewarded because the American market is so much more loocative
1:21
Speaker 1: than the AX, including dividends. But this is a new level,
1:26
Speaker 1: if you like, and there are more IPOs coming down
1:29
Speaker 1: the line, and this will happen again, and I think
1:31
Speaker 1: it's changed the whole nature of share investing in Australia forever,
1:36
Speaker 1: regardless of how spaceic bears in the fullness of time,
1:40
Speaker 1: and who knows, trading one hundred times revenue, the chances
1:43
Speaker 1: are that price that is not going to hold up,
1:45
Speaker 1: and it's certainly not going to go up on a
1:47
Speaker 1: straight line, as the Beast I could say, but that's
1:50
Speaker 1: of the point. The point is that basically a window
1:53
Speaker 1: to Wall Street has opened which has never opened before.
1:55
Speaker 1: And I think it's something that we should really talk
1:57
Speaker 1: about today. And I'm going to my guest. I'm also
1:59
Speaker 1: going to talk about the news which just broke, and
2:02
Speaker 1: I mean broke minutes before we started the show, that
2:06
Speaker 1: the Treasurer, Jim Chalmers has started i think the first
2:10
Speaker 1: of several key important exemptions backflips, if you want to
2:15
Speaker 1: put that politically, on his budget. If you recall this,
2:19
Speaker 1: there was the extraordinary story with which we actually broken
2:22
Speaker 1: the Australian that the testamentary discretionary trusts were to be
2:27
Speaker 1: included in the changes to trusts and the budget, and
2:32
Speaker 1: that they would have a minimum tax rate of thirty percent,
2:34
Speaker 1: which was terribly unfair and caught all sorts of people
2:38
Speaker 1: by surprise, no warning, and had no precedent. And I
2:43
Speaker 1: didn't know how basically they were going to proceed with that,
2:46
Speaker 1: and I always thought that they would backflip on it,
2:48
Speaker 1: and they have. We'll talk about that too, but first
2:50
Speaker 1: I want to talk about what has happened with this
2:54
Speaker 1: extraordinary Elon Musk spasic flow and what it means for
2:58
Speaker 1: you as an investor. My guest is Hugh Robertson at
3:01
Speaker 1: the Center. But how are you, Hugh?
3:03
Speaker 2: I'm good, James, how are you going good? Thank you?
3:06
Speaker 1: I imagine, like many advisors, you've you've been gently persuading
3:10
Speaker 1: your own client based for years that they need to
3:14
Speaker 1: broaden beyond their six What do you think with SpaceX?
3:19
Speaker 1: I bet you didn't think it was going to go
3:20
Speaker 1: well fifty percent in the first week.
3:21
Speaker 2: Did you. No.
3:23
Speaker 3: We had a really good conversation around this with our
3:25
Speaker 3: internal investment committee around you know what will happen and
3:30
Speaker 3: you know fundamentals get thrown out the window where there's
3:34
Speaker 3: you know, almost like a main stock, you know, of
3:37
Speaker 3: these proportions, and it feels like that momentum trade is
3:40
Speaker 3: in full effect right now with space.
3:43
Speaker 1: Definitely absolutely yeah, I know. I mean, I think it
3:46
Speaker 1: means stock's probably a bit too severe, but it's not
3:49
Speaker 1: game stop and this is an entirely elung Musk operation.
3:52
Speaker 2: It has.
3:53
Speaker 1: He has a treck record. He did create Tesla, after all,
3:56
Speaker 1: which was the most popular trade overseas stock for many
3:59
Speaker 1: of US investors for a long time. And this company, too,
4:03
Speaker 1: in and of itself, is impressive in many ways. Its
4:07
Speaker 1: issue is that it is it would seem to be
4:11
Speaker 1: widely overpriced at this point fifty percent from its IPO
4:15
Speaker 1: and immediately becoming one of the biggest stocks in the world.
4:17
Speaker 1: I think it's they're currently the sick. It's testing against
4:20
Speaker 1: Microsoft in terms of its time. I think it overtook Amazon. Yes, Amazon,
4:24
Speaker 1: that's right. What I want to ask you was how
4:26
Speaker 1: significant is it that tens of thousands of Australian investors
4:31
Speaker 1: went into a US IPO for the first time, because
4:34
Speaker 1: that was normally the preserve of the very wealthy, wasn't
4:36
Speaker 1: it really?
4:37
Speaker 2: Yes?
4:38
Speaker 3: And it's been interesting to know that these are I'm
4:42
Speaker 3: calling them mega IPOs. You know, normally, when you know,
4:45
Speaker 3: back when Apple floated or Amazon, they were sort of
4:48
Speaker 3: small companies, you know that there was a fair bit
4:51
Speaker 3: of risk entailed in them. And now these mega IPOs
4:54
Speaker 3: they've come to list on the stock market so much later,
4:58
Speaker 3: you know, in their life cycle, they're sort of proven
5:01
Speaker 3: vehicles now. And I think you know that IPO activity
5:04
Speaker 3: hasn't really we haven't seen anything like this ever. This
5:07
Speaker 3: was three times the size of Ali Barber which was
5:10
Speaker 3: two fourteen, and I think Saudi Aaron Coe was twenty nineteen.
5:15
Speaker 3: That was then the biggest of the time at twenty
5:17
Speaker 3: five point six, So this was three times that. And
5:20
Speaker 3: then now we've got you know, Anthropic will come out
5:23
Speaker 3: and AI will come out.
5:25
Speaker 2: You know what does that mean as well for the
5:26
Speaker 2: issraan investor?
5:27
Speaker 3: Are we going to try and get allocations into that
5:30
Speaker 3: those ones also more than likely?
5:33
Speaker 1: Yes, I was just talking to several brokers this morning,
5:36
Speaker 1: and of course they are and they expect to, and
5:39
Speaker 1: they make the point that each one is different and
5:42
Speaker 1: they are not. For instance, Moscue is the separator, if
5:45
Speaker 1: you like, it's a completely elail MOSC bet open AI,
5:48
Speaker 1: but I'm not so much interested in open AI per se.
5:51
Speaker 1: That's what it means for the wider market because our
5:55
Speaker 1: listeners and many retail investors have watched the future fund
5:59
Speaker 1: and watched the big grouper funds have much, but much
6:02
Speaker 1: much wider holdings in the US and offshore than the
6:06
Speaker 1: ESX Traditionally, our everyday investors who just sent to this
6:09
Speaker 1: show haven't. Do you think this will change things?
6:13
Speaker 3: Yes, opening up access into the US market via the
6:17
Speaker 3: direct shares via the exchange traded funds is a bit
6:21
Speaker 3: of a game changer. We've seen with platforms in the
6:24
Speaker 3: market off of that as well. And really what you're
6:28
Speaker 3: doing is if you're investing in the Australian market. We
6:31
Speaker 3: all remember, you know the peter Thornhills and the like
6:34
Speaker 3: that were you know, you get your dividends and you're in.
6:36
Speaker 3: But you go into the industrial shares, you get your dividends,
6:39
Speaker 3: your invest and you get your franking credits. That was
6:42
Speaker 3: kind of the basis of investing in the Australian market.
6:45
Speaker 3: And you know, back then, dividends plus franking credits far
6:49
Speaker 3: outweigh interest that you would have earned in a bank.
6:52
Speaker 2: The challenge that you're.
6:52
Speaker 3: Going to have as an investor is it's hard to
6:55
Speaker 3: see where innovation comes from in Australia, in Australian companies.
6:58
Speaker 3: So if you go into invest for gross, you know
7:03
Speaker 3: you might need to look abroad and even internally. We
7:05
Speaker 3: probably now allocate closer to forty percent globally and twenty
7:09
Speaker 3: percent to Australian equities on that basis that we just
7:13
Speaker 3: can't see where the growth is going to come from.
7:15
Speaker 1: That's a divers of her portfolio is forty percent offshore
7:17
Speaker 1: and twenty percent ASX.
7:20
Speaker 3: Yeah, because you really when you're and you've got that
7:22
Speaker 3: big cap risk, you know, that market capitalization risk in
7:25
Speaker 3: Australia where the big banks and the resource companies dominate,
7:29
Speaker 3: and so you know, maybe in the years gone by
7:32
Speaker 3: you were better diversified. You know, you're a diverse part
7:35
Speaker 3: across more sectors in the ASX and the Ausraian stock market.
7:39
Speaker 3: Now you're not really getting that.
7:40
Speaker 1: So it's all about the banks and minors now.
7:43
Speaker 3: Yeah, And I think for you know, miners obviously can
7:46
Speaker 3: be very volatile and the banks are so expensive, so
7:50
Speaker 3: I think for the Australian investor now is probably the
7:54
Speaker 3: perfect opportunity to start looking abroad at you know, what's
7:57
Speaker 3: available out there if you want that sector diversification, global diversification,
8:02
Speaker 3: and what I think we will see in the Australian
8:04
Speaker 3: market is just some more innovative products. So instead of
8:08
Speaker 3: investing just in CBA for its dividend and frankin credit,
8:13
Speaker 3: you know, there will be products that get created that
8:16
Speaker 3: are you know, dividend generating products, and they might do
8:19
Speaker 3: that in innovative ways. So for the listener, that's kind
8:22
Speaker 3: of where they're going to start to really trying to
8:25
Speaker 3: educate themselves on what they want to do.
8:27
Speaker 2: But for the purposes of what we're.
8:29
Speaker 3: Talking about, I think global investing is now something that's
8:34
Speaker 3: just it's so easy to do.
8:35
Speaker 2: The barriers aren't difficult anymore.
8:37
Speaker 1: Yes, and that's what again this pleads into that. I mean,
8:40
Speaker 1: this was the next step you could never was upon
8:43
Speaker 1: a time if we just couldn't buy obviously his shares.
8:46
Speaker 1: Now you can buy obviously these IPOs should you wish
8:48
Speaker 1: to do so, and we're certainly not recommending it.
8:50
Speaker 2: Okay.
8:51
Speaker 1: Now, one point about the budgets recently, and we talk
8:54
Speaker 1: about the budget, some developments and the budgets in the
8:57
Speaker 1: budget very soon. But folks, the essential nature of the
9:02
Speaker 1: budget in its CGT reforms is that growth gets taxed
9:11
Speaker 1: more heavily than it used to be because the CGT
9:15
Speaker 1: change is no longer a fifty percent discount after a year.
9:17
Speaker 1: It's just linked with inflation, which would give is perhaps
9:20
Speaker 1: a very modest discount compared to the fifty percent, and
9:24
Speaker 1: that would entice, under normal circumstances Australian investors to go
9:28
Speaker 1: back into dividend paying stocks. But as you was saying,
9:31
Speaker 1: first of all, we've got terrible concentration in the market
9:34
Speaker 1: and secondly, our dividend listened as good as it used
9:37
Speaker 1: to be. Anyway, it's fallen, hasn't it from about four
9:40
Speaker 1: and a half two? Mull it three in a bit
9:42
Speaker 1: at this stage or high trees, but it's dropped. That's
9:45
Speaker 1: one thing which so it's not as attractive anyway. But
9:48
Speaker 1: also does the budget, whether it's inadvertent or not anti
9:55
Speaker 1: growth stance additionally, lure investor overseas.
10:02
Speaker 3: It's a good question and that's certainly been our take
10:05
Speaker 3: with the budget was that you know, if you're going
10:07
Speaker 3: to invest in a show, you are there for the
10:09
Speaker 3: income now because of these CGT changes. You know, if
10:13
Speaker 3: you are going to be investing for growth, you would
10:16
Speaker 3: go overseas. I probably think based off the budget that
10:20
Speaker 3: dividend is valuable because you're not getting the you know
10:24
Speaker 3: that that arbitrary thirty percent minimum CGT game. But important,
10:30
Speaker 3: I think, probably importantly for the listeners is superannuation wasn't
10:35
Speaker 3: impacted by this? Yes, that's right where the majority they're
10:40
Speaker 3: the investors are probably so.
10:42
Speaker 1: Many people, especially smsfs, they are better than they used
10:45
Speaker 1: to be. Absolutely, just one last thing on the whole
10:48
Speaker 1: issue of SpaceX, and not so much SpaceX, but the opening,
10:51
Speaker 1: the widening of the doorway to the US market through
10:56
Speaker 1: IPOs broadly circulated to the retail base in Australia, which
11:02
Speaker 1: may well be a good or bad example through SpaceX
11:07
Speaker 1: from money listeners, do you think that we still have
11:09
Speaker 1: an excess bias towards the A SX and it's time
11:11
Speaker 1: perhaps to reconsider your AX exposure the level of Yes.
11:17
Speaker 3: And I think even just as we've talked about with
11:20
Speaker 3: those budget changes, you know with your superannuation you would
11:24
Speaker 3: like to invest for growth where you would want to
11:26
Speaker 3: look overseas, you know, and if it was not through superannuation,
11:31
Speaker 3: then that's probably where you you might still look at
11:33
Speaker 3: the AX for dividends for more of that income and
11:36
Speaker 3: capital growth because of that those tax changes. But yeah,
11:40
Speaker 3: for if I'm an investor with my superannuation, I'm definitely
11:44
Speaker 3: looking abroad. Now, that's where our growth will come from.
11:47
Speaker 3: That's where the innovation is. And even the Australian companies
11:50
Speaker 3: that are innovative, you know, we always look to canvas.
11:53
Speaker 1: They list overseas, they list overseas, list overseas, they skip
11:58
Speaker 1: the AX they don't need. Yeah, okay, I think quite
12:02
Speaker 1: clearly made. All Right, we're going to take a break.
12:04
Speaker 1: We'll be back in a moment. Hello, Welcome back to
12:13
Speaker 1: The Australian's Money Positive podcast. James Kirby here with Hugh
12:17
Speaker 1: robertson regular on the show from the Centaur Financial Services
12:20
Speaker 1: Group ce NTAU or Now. I have a lot of
12:25
Speaker 1: experience in news and financial news, and there are periods
12:30
Speaker 1: where you have no news really, you have just little
12:34
Speaker 1: teeny little tweaks to the system that you're familiar with,
12:37
Speaker 1: and then you have peers where there's torrents of news.
12:40
Speaker 1: And what's extraordinary I think just now is that there
12:43
Speaker 1: is a torrent of news on all fronts. I mean,
12:45
Speaker 1: we are in an extraordinary share market situation. There are
12:49
Speaker 1: even issues today which might have dominated headlines on a
12:55
Speaker 1: normal week, like, for instance, the private equity boom, where
12:59
Speaker 1: not enough questions have been asked at all, is finally
13:02
Speaker 1: coming under the microscope from ACIK, who are clearly winding
13:06
Speaker 1: up to do an investigation across that sector because of
13:12
Speaker 1: a lack of transparency to put it very mildly, in
13:15
Speaker 1: that area. At the same time that a lot of
13:17
Speaker 1: funds are freezing or semi freezing the ability of people
13:21
Speaker 1: to take money out, and we had a period where
13:24
Speaker 1: d equity basically was the dominant theme for some time,
13:28
Speaker 1: and that would be front page news except that the
13:31
Speaker 1: shere market is going absolutely wild. And on top of that,
13:34
Speaker 1: we've had the biggest budget, the most ambitious budget, I
13:38
Speaker 1: don't know for a generation, and today, Hugh, just before
13:42
Speaker 1: we started, I'm just going to quote the treasure Gin
13:45
Speaker 1: Charmers had a press conference where altimy Albini is. He
13:48
Speaker 1: stood right beside him, and I detected almost their reluctance
13:52
Speaker 1: with to get going and start to say what he
13:55
Speaker 1: had to say, because of course politically, it's a backflip
14:02
Speaker 1: on important part of his very ambitious budget. And once
14:05
Speaker 1: you start to concede, there will be arguments for more concessions,
14:10
Speaker 1: but I think they're entirely legitimate arguments. So anyway, the
14:15
Speaker 1: outstanding one he's going to do some startup tax break concessions.
14:19
Speaker 1: He hasn't said what they are. He's going to increase
14:21
Speaker 1: the turnover threshold for existing small businesses fifty percent active
14:27
Speaker 1: asset CGT concession from two million to ten million. But
14:30
Speaker 1: the big one is that Prime Minister said, we're confirming
14:36
Speaker 1: the government will exempt income from all types of discretionary
14:40
Speaker 1: testamentary trusts from the minimum tax, provided they are established
14:44
Speaker 1: for genuin testamentary purposes. In other words, they highly controversial
14:49
Speaker 1: decision to impose the thirty percent minimum tax on testamentary
14:54
Speaker 1: discretionary trusts, which are the discretionary trust that most people
14:57
Speaker 1: have attached to their wills. He's backfliped. Could you explain
15:02
Speaker 1: to everyone really for what they are, what you thought
15:06
Speaker 1: about it when you heard that they had actually decided
15:09
Speaker 1: to tax them, and they didn't really announce it properly.
15:11
Speaker 1: We found out, reporters found out in Australia. We disclosed
15:14
Speaker 1: it basically, and then they came to party. They certainly
15:17
Speaker 1: didn't advertise it on the day and now they've backflip.
15:19
Speaker 1: Could you explain to people what it's all about.
15:21
Speaker 3: Yes, So it felt like the government threw all trust
15:25
Speaker 3: in together. A testamentary trustee is something that's set up
15:28
Speaker 3: when upon your debt in testament to you effectively, you know,
15:33
Speaker 3: and usually you do it for a number of reasons
15:35
Speaker 3: around you know, asset protection for your bloodline, you know,
15:38
Speaker 3: for tax treatment, and it's effectively in a state planning tool.
15:42
Speaker 2: It's not a.
15:43
Speaker 3: Tax avoidance tool, which it may have felt to us
15:47
Speaker 3: that the government thought that all trusts were designed for,
15:51
Speaker 3: you know, tax avoidance.
15:52
Speaker 2: They certainly aren't.
15:53
Speaker 3: They're legitimate vehicles, and they kind of got thrown out,
15:56
Speaker 3: you know, with everything else, with that minimum thirty percent tax.
16:00
Speaker 3: So this is a correct move for them to go
16:03
Speaker 3: back on that and say you know that and remove
16:06
Speaker 3: that minimum tax because all you know, all testamentary trust
16:10
Speaker 3: are set up, I would believe genuinely for the benefit
16:15
Speaker 3: of the family in facet protection, not just to avoid tax.
16:19
Speaker 1: And I suppose that the issue was we branded it
16:21
Speaker 1: as a death tax, and the government of course didn't
16:25
Speaker 1: like this and they were furious that it was so.
16:28
Speaker 1: But the reality is that you have to die to
16:32
Speaker 1: activate the trust. I mean, what else can you call it? Yeah, so,
16:38
Speaker 1: I know politically it was a hot potato, but more
16:40
Speaker 1: than that, it was unfair to do so, and I
16:43
Speaker 1: think it's important that we kind of larify that. And
16:46
Speaker 1: of course they made a big deal about the fact
16:47
Speaker 1: that fixed testamentary trusts were on touch, but then nobody
16:51
Speaker 1: uses them, I think, if I'm right, Hugh, among the
16:54
Speaker 1: other points you met there, is it the case that
16:57
Speaker 1: with the testamentary discretionary trust, the whole thing is that
17:01
Speaker 1: it's discretionary. So, for instance, just to give a case study,
17:05
Speaker 1: the hypothetically, if you were to make a will and
17:08
Speaker 1: have this trust that you had three kids, for instance,
17:13
Speaker 1: and you wanted them or to to have a certain
17:17
Speaker 1: lifestyle a certain way as best you could plan. But
17:23
Speaker 1: the trustee, not you, obviously, because you've gone. The trustee
17:27
Speaker 1: has discretion If one of those kids turns out to
17:30
Speaker 1: be a fraudster, a sociopath who was robbing everybody, including
17:36
Speaker 1: their own family, the discretionary trust allows the trustee to
17:41
Speaker 1: police that and to change things for the better. Is
17:46
Speaker 1: that it's essential value.
17:49
Speaker 3: Yes, yeah, to protect you know, the members, and sometimes
17:53
Speaker 3: that's protecting them from themselves.
17:55
Speaker 2: And you know, it's not ruling from the grave.
17:58
Speaker 3: It's just you know, you've worked hard for that much,
18:00
Speaker 3: and it's you know, you want to see it as
18:02
Speaker 3: years and you want to keep it within your family
18:04
Speaker 3: typically for as long as.
18:05
Speaker 1: You can, of course, yeah, yeah, and all sorts of
18:08
Speaker 1: other variations, because as anyone will tell you who's been
18:12
Speaker 1: in the state planning in any way, we can try
18:16
Speaker 1: and make plans and it doesn't matter whether you have
18:19
Speaker 1: one hundred thousand in the bank or a billion in
18:23
Speaker 1: the bank. You can have teams of lawries and you're
18:25
Speaker 1: making all the plans you wish. But basically, over the
18:28
Speaker 1: fullness of time, it's very hard to get. You can't
18:32
Speaker 1: foresee what's going to happen. And that's the marvelous thing
18:35
Speaker 1: about the discretionary trust, the discretionary testamentary trust. It should
18:39
Speaker 1: never have been taxed in the way it is. It's
18:41
Speaker 1: clearly going to be. In fact, it's it's confirmed. We
18:44
Speaker 1: are confirming the government will exempt income from all types
18:47
Speaker 1: of discretionary testamentary trust from the minimum tax that Adndsony
18:51
Speaker 1: alb Andasy politically sadly as always stepping away from an
18:57
Speaker 1: absolute shocker that he was going to have a lot
18:59
Speaker 1: of trouble with and he can do it, so at
19:01
Speaker 1: least he sent the sense to pull out fast.
19:03
Speaker 2: Very good.
19:04
Speaker 1: All right, folks. One of the reasons I wanted to
19:07
Speaker 1: talk to you today is I know the questions have
19:09
Speaker 1: been mounting on the show, and of course we've had
19:11
Speaker 1: a lot of questions off the back of the budgets
19:15
Speaker 1: where Hugh and I were just talking earlier how we
19:17
Speaker 1: can't look all the budgets where people were talking about
19:19
Speaker 1: it for five weeks solid. So we'll be back with
19:22
Speaker 1: some of those questions in a moment. Hello, Welcome back
19:32
Speaker 1: to The Australian's Money Positive podcast James Kirby with Hugh Robertson. Okay,
19:36
Speaker 1: I've got a couple of questions. I'm going to try
19:39
Speaker 1: and cover a handful of them. Bear with us if
19:44
Speaker 1: it's the case that we might see a bit quick
19:47
Speaker 1: in our answers, we will try and be fair to everybody.
19:50
Speaker 1: Jack six. Everyone keep saying Super is the big winner
19:54
Speaker 1: in this budget. No it's not. Super is one of
19:56
Speaker 1: the only things that hasn't got worse isn't the same
20:00
Speaker 1: as winning. Okay, thank you, Jack point taking. Yeah, it's
20:05
Speaker 1: relatively better. The point but super is that it's relatively better,
20:10
Speaker 1: especially in relation to CGT than the rest because it
20:13
Speaker 1: was untouched and your effective tax rate is ten percent.
20:17
Speaker 1: All right, I'll move onto the question from Tim, which
20:21
Speaker 1: he has asked about transitional arrangements for estates in relation
20:25
Speaker 1: to the Testamentary trusts. Look, with the Prime Minister's the
20:29
Speaker 1: announcement this morning, I think you'll find that transitional arrangements
20:33
Speaker 1: and all arrangements will be put on ice, and hopefully
20:37
Speaker 1: nobody will end up ever paying this minimum thirty percent
20:41
Speaker 1: tax rate our testamentary trust. So I think that's probably
20:43
Speaker 1: the best way to deal with that one. Sorry, Hugh,
20:45
Speaker 1: you're not getting much of a bite in here, but
20:47
Speaker 1: I'm trying to get to the questions that you will
20:49
Speaker 1: be very useful to answer.
20:50
Speaker 2: Okay.
20:50
Speaker 1: Richard says, in relation to SMSFS, when the fifty percent
20:55
Speaker 1: CGT discount was introduced, the main reason was to reduce
20:58
Speaker 1: the admin complexity of tracking cost base. The cost and
21:01
Speaker 1: complexity is the change back to the more complex method
21:05
Speaker 1: of inflation indexing seems to have been tossed over. I
21:09
Speaker 1: remember my dad using his calculator and pencil updates of
21:13
Speaker 1: his shares cost base in the big Ledger book. Have
21:15
Speaker 1: the government assume that the systems are there to make
21:19
Speaker 1: the implementation to revert to this system of annual indexation.
21:24
Speaker 1: What are your thoughts? Well, you well, I suppose we've
21:28
Speaker 1: had some development in computers and AI since his dad
21:31
Speaker 1: had a ledger and a pencil.
21:32
Speaker 3: There has been that, and you know, maybe open eye
21:35
Speaker 3: and anthropic will solve the problem.
21:37
Speaker 2: Even more so the government.
21:39
Speaker 3: He's right, you know, since nineteen ninety nine, you know,
21:41
Speaker 3: the discount was into the fifty percent discount was introduced.
21:45
Speaker 3: From our point of view, you know, the government's flag
21:48
Speaker 3: that there's a market evaluation option as at one July
21:50
Speaker 3: twenty seven, so you know that's for AX for listed shares,
21:55
Speaker 3: that's going to be easy to do. For unlisted you know,
21:59
Speaker 3: shares or property inherited assets, that's going to be a challenge.
22:04
Speaker 3: And I think from our point of view, know, the
22:06
Speaker 3: joke we've kind of made internally is that you know
22:09
Speaker 3: it's this budget was a really good budget for accountants
22:12
Speaker 3: and valuers they're going to be very busy. So I
22:16
Speaker 3: don't think it's going to be as onerous as people
22:18
Speaker 3: think it is to calculate what their cost base is
22:21
Speaker 3: as at you know, thirty June twenty twenty seven. It's
22:25
Speaker 3: just going to be the valuation method afterwards, and the
22:27
Speaker 3: government said that they're going to have, you know, a
22:30
Speaker 3: tool that's going to be able to calculate the capital
22:32
Speaker 3: gains tax to assist. So yeah, if you've been doing
22:35
Speaker 3: though dividend or investment or something like that and you
22:38
Speaker 3: haven't really accounted for that, that's going to be a challenge.
22:42
Speaker 1: Oh yeah, I thought of that, right. Well, surely they'd
22:45
Speaker 1: have widgets for all this sort of thing and they'll
22:47
Speaker 1: all be designed in the government's favor, were there.
22:50
Speaker 2: Yes, that's why your note keeping is very important.
22:55
Speaker 1: No, I don't mean to be facetious. But folks, you
22:58
Speaker 1: see on the valuation, if you take a default valuation,
23:02
Speaker 1: tell me if I'm wrong about this. You we took
23:03
Speaker 1: a default valuation, see our property, then it's all your government.
23:08
Speaker 1: Default valuation is always going to be very low, very
23:10
Speaker 1: conservative by definition. But in the world we're living in
23:15
Speaker 1: here where we're about to flip over to a different system.
23:20
Speaker 1: Then it's very possible that an investor might leave money
23:23
Speaker 1: on the table because if you get an active on
23:27
Speaker 1: the d precise market evaluation of a property, it's probably
23:32
Speaker 1: going to be higher than some default valuation out of
23:35
Speaker 1: the ATO, and that means you'd get a better discount basically,
23:39
Speaker 1: wouldn't you then before and extra light than you would
23:44
Speaker 1: after it?
23:45
Speaker 2: Yeah?
23:45
Speaker 3: And I think what we want to see some discussion
23:48
Speaker 3: around is what's going to be a legitimate valuation?
23:51
Speaker 2: Is it? Yes?
23:53
Speaker 3: Years gone by you've seen sometimes people have just evaluation
23:57
Speaker 3: by a real estate agent said yes, your house is
23:59
Speaker 3: worth that. So what will the ATO? You know, accept
24:03
Speaker 3: as evaluation is going to be important as well, just
24:05
Speaker 3: so you have that, you know, that confidence and that
24:08
Speaker 3: clarity over what your caps tax will be.
24:10
Speaker 1: Have you any guidance on that?
24:12
Speaker 2: Yes?
24:12
Speaker 1: No, not that I've not the bread Yeah, like curbside
24:16
Speaker 1: valuation probably won't do, you wouldn't think, So Okay, Hey,
24:20
Speaker 1: can I just ask you one of the questions without
24:22
Speaker 1: notice about this testamentary discussion you to us backflip by
24:26
Speaker 1: the treasure? Did you have guys asking you what to
24:29
Speaker 1: do and where they're worried?
24:31
Speaker 2: Yes, yep, it was.
24:34
Speaker 3: We'd even gone and thought legal opinion on it as
24:37
Speaker 3: to you know, how is it going to operate because
24:40
Speaker 3: it does this intergenerational wealth transfer is you know, assive
24:44
Speaker 3: and it actually it felt to us and again trying
24:49
Speaker 3: to be controversial, but felt like they saw we mentioned
24:52
Speaker 3: death tax for it felt like I saw this really
24:55
Speaker 3: big bag of wealth there and went, well, this can
24:58
Speaker 3: solve some problems.
24:59
Speaker 1: Yeah, and it, I mean there's a gigantic wealth chats
25:02
Speaker 1: for coming down the line and what tax office would
25:04
Speaker 1: might to get a slice of it. But when you
25:06
Speaker 1: say legal opinion, I presume that wasn't a constitutional lawyer.
25:10
Speaker 1: That was a lawyer. What did you need to.
25:11
Speaker 3: Know just around how if it did come in, what
25:15
Speaker 3: would we be trying to do with our clients right
25:18
Speaker 3: around that?
25:19
Speaker 2: You know?
25:19
Speaker 3: And part of it might be around do you get
25:21
Speaker 3: money away to the kids while you're still living?
25:24
Speaker 2: Around those kind of mechanics of how you could operate.
25:28
Speaker 1: So right right, it's interesting. Die with Zero well, great book,
25:32
Speaker 1: one of the most When we did the show Die
25:34
Speaker 1: with Zero on the book, it was one of the
25:36
Speaker 1: most popular shows. And I say, I was in Japan
25:39
Speaker 1: and we did to a bookshop. There was a whole
25:40
Speaker 1: all of them die with zero, but the only book
25:42
Speaker 1: I recognized in the whole shop. Actually all right? Question
25:46
Speaker 1: from Kim. She says, this would be off the back
25:49
Speaker 1: of our show with Paul clither All recently on financial literacy,
25:53
Speaker 1: which was terrific. You've missed it to have a listen
25:55
Speaker 1: to it, She says, I'd like to offer an alternative
25:58
Speaker 1: perspective regarding the question who should receive financial literacy education.
26:03
Speaker 1: I agree school students are an important group and they
26:05
Speaker 1: will ultimately benefit society, but there is an unavoidable delay
26:09
Speaker 1: before those benefits are realized. Wouldn't it be worthwhile to
26:12
Speaker 1: focus on education current income earners, particularly those receiving government support.
26:20
Speaker 1: It seems this could be implemented relatively simply which training
26:25
Speaker 1: and it could be delivered online, are face to face
26:29
Speaker 1: rather than suspending payments entirely from non completion, and more
26:33
Speaker 1: balanced approach, maybe to reduce benefits incrementally until the training
26:36
Speaker 1: has met whow kin you've been plotting. I will say
26:40
Speaker 1: that financial literacy is largely focused on schools and children,
26:45
Speaker 1: and of course, education theory is that the sooner you
26:49
Speaker 1: get someone, the more important it is and this would
26:52
Speaker 1: be the case too with a lot of the programs
26:54
Speaker 1: that are put through the schools. Five hundred thousand kids
26:56
Speaker 1: in Australia have been put through the Extra Ecstra program,
27:00
Speaker 1: which Paul is a chairman of. But it's an interesting idea.
27:05
Speaker 1: I mean, you sit across team from people all the time.
27:09
Speaker 1: Do you think that's an issue for actually? I mean
27:11
Speaker 1: do you think that people should Are you surprised sometimes
27:14
Speaker 1: while people don't know?
27:15
Speaker 3: It's funny because you know, money is such an important thing,
27:19
Speaker 3: yet people don't really understand how interest works.
27:21
Speaker 2: They don't have to stand compounding.
27:23
Speaker 3: And there was I think there was the Queen of
27:27
Speaker 3: Jordan one time that said, you know, if you educate
27:30
Speaker 3: a man, you educate a man. If you educate a woman,
27:32
Speaker 3: you educate a family. So when I first thought of this,
27:34
Speaker 3: I thought, well, you know, educating women on financial literacy
27:38
Speaker 3: probably helps it get through the system better. Or they
27:41
Speaker 3: can just listen to the money puzzle.
27:42
Speaker 2: Obviously.
27:43
Speaker 1: Look, it's certainly something that I just want to say.
27:46
Speaker 1: One of the things that Paul and from that show,
27:48
Speaker 1: which is very clear, is that the political direction is
27:51
Speaker 1: really missing folks. And there was a national strategy. It
27:55
Speaker 1: used to be run by assic. It's not anymore. It
27:57
Speaker 1: seems to be lost in treasury somewhere. It really years
28:00
Speaker 1: time for a national strategy. We're falling behind. We're falling
28:03
Speaker 1: behind on all the key measures internationally, and they always
28:05
Speaker 1: see details, and we used to actually be leading a
28:08
Speaker 1: leading country in it. So it's something I think that's
28:11
Speaker 1: really important. I think we will come back to thank
28:13
Speaker 1: you Kim for that. Okay, This one file ones from Paul.
28:16
Speaker 1: He says, this is about CGT. Really interesting. If I
28:20
Speaker 1: bore see ten thousand important compak shares in twenty twenty
28:24
Speaker 1: six and I sold them in November twenty twenty eight,
28:27
Speaker 1: but the gains be calculated using two different methods, the
28:31
Speaker 1: all fifty percent method on gains up to the first
28:34
Speaker 1: of July and the new method on gains made thereafter. Yes, yes,
28:41
Speaker 1: two methods. So whatever happens that the CG compilation, then
28:45
Speaker 1: we're compiling one system up to July and another system after.
28:49
Speaker 1: That's complicated, isn't it.
28:51
Speaker 3: Yeah, And this is the dilemma with you know, years
28:53
Speaker 3: gone by, you make a complicated tax system.
28:56
Speaker 2: You know, we talk about financial literacy.
28:59
Speaker 3: Is people then sort of throw their hands in the
29:02
Speaker 3: end go, well, it's just too hard. And our challenge is,
29:05
Speaker 3: you know, we can kind of see now that the
29:07
Speaker 3: government said, you know, use supernuation as Yore Sagan's vehicle,
29:12
Speaker 3: you know, so we need legislative certainty there that they
29:15
Speaker 3: don't change your rules. You know, if you're going to
29:17
Speaker 3: go outside super they've pretty much said, well we're going
29:21
Speaker 3: to get your thirty percent tax no matter what. So
29:23
Speaker 3: okay that that might provide some certainty, but that really
29:26
Speaker 3: impacts you know, in this example of Paul's, it impacts
29:30
Speaker 3: the CGT impacts someone who's a low income earner in
29:33
Speaker 3: you know, the western suburbs of Sydney with that sent
29:37
Speaker 3: it doesn't impact someone who's above that as a tax rate.
29:40
Speaker 3: But to answer Paul's question, yes, the first from when
29:44
Speaker 3: he purchased it until one July twenty seven, provided that's
29:47
Speaker 3: over over twelve months, that would give the fifty percent
29:50
Speaker 3: CGT discount. And then you know, the new from one
29:56
Speaker 3: July twenty seven to when he sold it would be
29:59
Speaker 3: under the indication method.
30:01
Speaker 1: And crucially, folks, it's all CGT assets. All CGT assets
30:05
Speaker 1: that includes property for instance, so your property over the
30:08
Speaker 1: same time period, it would be how you know one section,
30:13
Speaker 1: the early section would be fifty after a year discount
30:17
Speaker 1: and the data section would be indexed. And believe it
30:21
Speaker 1: or not, I thought this morning, we're collectibles. Believe it
30:24
Speaker 1: or not, collectibles are GCGT assets, and so CGT assets
30:28
Speaker 1: being collectibles, your tolt me JUG or maybe your goals
30:32
Speaker 1: told me JUG is going to actually have two CGT
30:37
Speaker 1: and it probably need to be valued as well.
30:39
Speaker 3: So the feedback we've got from a lot of clients
30:42
Speaker 3: I suppose today is that they've kind of put CGT
30:46
Speaker 3: and negative gearing together in their minds, and it's kind
30:50
Speaker 3: of important, I think for the listener that separate. But
30:53
Speaker 3: the negative gearing is really around the housing, the existing
30:57
Speaker 3: housing stock, you know, whereas commercial properties going to be
31:00
Speaker 3: okay to negatively gear still, you know, shares are going
31:03
Speaker 3: to be able to be negatively geared still, new residential
31:06
Speaker 3: property negatively geared.
31:09
Speaker 2: So it's just.
31:10
Speaker 3: Something that I've noticed a lot of people saying, oh,
31:11
Speaker 3: you know, there's no point in doing anything for you know,
31:14
Speaker 3: wealth accumulation and so well you can still negatively gear.
31:17
Speaker 3: It's just they're trying to, in that bit solve for
31:21
Speaker 3: the housing problem.
31:23
Speaker 1: You just can't do it for an existing house, which
31:25
Speaker 1: was the most popular asset.
31:26
Speaker 3: Yeah, and the challenge we've got is we feel that,
31:29
Speaker 3: you know, new build residential property is just going to
31:32
Speaker 3: go up through the roof.
31:34
Speaker 2: That that that's quite possibly a challenge.
31:37
Speaker 1: Right, interesting point. I think I will I think I
31:40
Speaker 1: will leave it hanging out there like a you know,
31:43
Speaker 1: like a cliffhanger for the end of this show. Thank
31:45
Speaker 1: you very much, Hugh Robertson, the Central groupbriate to have
31:48
Speaker 1: you on the show.
31:49
Speaker 2: Thank you very much.
31:50
Speaker 1: Jones always the pleasure that was Hugh Robertson, Folks. Today's
31:54
Speaker 1: show was produced by Leah Sam mcglue. Lots of questions,
31:57
Speaker 1: Let's have lots more the money Pottle the Australian dot
32:01
Speaker 1: com don't you love to hear from