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Special Edition: Your questions answered on new super tax · The Money Puzzle

• 0:09
  Speaker 1: Hello, and welcome to The Australian's Money Puzzle podcast. I'm
• 0:12
  Speaker 1: James Kirkby. Welcome aboard, everybody, Welcome aboard to a special
• 0:16
  Speaker 1: edition of the show. We have had so many questions
• 0:20
  Speaker 1: and so much correspondence on the new Supertax that what
• 0:24
  Speaker 1: we're going to do today is an episode and it's
• 0:28
  Speaker 1: going to be based on your questions that have come
• 0:31
  Speaker 1: in in recent weeks about what is this act, how
• 0:34
  Speaker 1: is it going to work? And to help me answer
• 0:37
  Speaker 1: those questions, I'm joined boy Hugh Robertson of the Center
• 0:41
  Speaker 1: Financial Services Group. Hugh's a Baron's top one point fifty
• 0:45
  Speaker 1: advisor regular on the show, and Hugh I will kick
• 0:50
  Speaker 1: straight over to you For the person who's just arrived
• 0:55
  Speaker 1: in Australia and has no idea how our super system
• 0:59
  Speaker 1: works and hasn't done the six week course to understand
• 1:02
  Speaker 1: the basics, could you explain what's changed? What is this
• 1:06
  Speaker 1: new super tax? Why is everyone so worried about it?
• 1:08
  Speaker 2: Hi?
• 1:08
  Speaker 3: James, Hi, everyone listening.
• 1:11
  Speaker 4: It's a really good question and it's I'm glad we're
• 1:14
  Speaker 4: doing an episode on.
• 1:15
  Speaker 2: This because we've really really got to raise.
• 1:17
  Speaker 4: The awareness as just so we can get that understanding.
• 1:21
  Speaker 4: So what is this give to nine to six tax.
• 1:25
  Speaker 4: It's going to be an additional a new tax for
• 1:28
  Speaker 4: balances over three million dollars. The tax itself is going
• 1:32
  Speaker 4: to be fifteen percent, so a lot of the stuff
• 1:35
  Speaker 4: that I've read, So if you're in accumulation phase, it's
• 1:38
  Speaker 4: going to mean that you know, it's an additional fifteen
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  Speaker 4: percent on top of the fifteen percent on the first
• 1:45
  Speaker 4: three million if you're an accumulation phase. But remembering when
• 1:48
  Speaker 4: you're in pension phase, that first three million is going
• 1:51
  Speaker 4: to be still in the zero percent tax.
• 1:53
  Speaker 1: So just make it very easy for people at the
• 1:55
  Speaker 1: moment in super up to we see we make it
• 1:59
  Speaker 1: from July one you pay no tax in your super
• 2:04
  Speaker 1: up to two million, yes, and then over two million
• 2:07
  Speaker 1: you pay fifteen percent. And the government have said we've
• 2:10
  Speaker 1: got a new one now which is over three million,
• 2:12
  Speaker 1: there is another fifteen percent, and that means the effective
• 2:15
  Speaker 1: thirty percent top tax rasions super where it used to
• 2:18
  Speaker 1: be tax free. Okay, that's a big change, but it's
• 2:21
  Speaker 1: not People are not going bananas about this aspect that
• 2:25
  Speaker 1: it's three million. That's not really what they're going crazy about.
• 2:28
  Speaker 1: It's the nature of the new tax, which is on
• 2:32
  Speaker 1: realized gains. Can you explain to what that means?
• 2:39
  Speaker 3: A tax on unrealized gains.
• 2:43
  Speaker 4: Is a violation of the basic principles of tax that
• 2:46
  Speaker 4: we've always had. So if you, for example, the value
• 2:50
  Speaker 4: owned some shares in come Wealth Bank of Australia, which
• 2:52
  Speaker 4: a lot of the listeners here would own, comme Wealth
• 2:54
  Speaker 4: Bank shares, it's gone up from one hundred dollars to
• 2:57
  Speaker 4: one hundred and sixty dollars, and say within your portfolio,
• 3:00
  Speaker 4: that means that you've gone from you know, three million
• 3:05
  Speaker 4: to three and a half million within your super fund.
• 3:08
  Speaker 4: But you haven't sold any of these shares. You're now
• 3:12
  Speaker 4: going to pay at tax on that unrealized gain. So
• 3:16
  Speaker 4: even though you haven't sold the shares, that's still going
• 3:18
  Speaker 4: to form part.
• 3:19
  Speaker 2: Of a tax effectively a taxable.
• 3:21
  Speaker 4: Component and earnings, and that that's going to be a
• 3:26
  Speaker 4: purport I think interesting to point out also that it's
• 3:28
  Speaker 4: a proportion, so not to get too technical, but you
• 3:33
  Speaker 4: know the portion of the gain is three and a
• 3:38
  Speaker 4: half million divided by three million. That above as a
• 3:42
  Speaker 4: percentage is going to be the taxable multiplied by fifteen percent.
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  Speaker 3: Even though you haven't sold anything.
• 3:49
  Speaker 1: So you're going to get a bill for the improvement
• 3:51
  Speaker 1: in value, paper improvement theoretical to some extent, hypothetical to
• 3:55
  Speaker 1: some extent improvement in value, and you're going to have
• 3:59
  Speaker 1: to pay that bill straight up.
• 4:01
  Speaker 2: You've got to pay it up, Yes, every year?
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  Speaker 1: Okay. So so and then obviously the big concern then
• 4:08
  Speaker 1: across the market and among our listeners is it going
• 4:11
  Speaker 1: to affect me? And you might say, oh, well, it's
• 4:13
  Speaker 1: unlikely three million. I'm never going to have three million
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  Speaker 1: in super But here's the thing, folks, it's unindexed and
• 4:21
  Speaker 1: what that means is that it never changes and three
• 4:27
  Speaker 1: million or a lower figure of which it could be
• 4:30
  Speaker 1: lowered of course in parliament because the new government has
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  Speaker 1: a lot of power now, the Greens want it lowered.
• 4:35
  Speaker 1: They want it lower to two million. But the issue
• 4:37
  Speaker 1: is that two million today might sound a lot. Two
• 4:40
  Speaker 1: million when you retire in ten years time or twenty
• 4:42
  Speaker 1: years time will not be as much as you think.
• 4:45
  Speaker 1: I mean a million dollar house, Hey, one in three
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  Speaker 1: houses in Australia, what's the million dollars? The point I'm
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  Speaker 1: making is because this new tax is very controversial in
• 4:54
  Speaker 1: its nature. And then it's not index for inflation, and
• 4:56
  Speaker 1: the treasure keeps holding out on this. He has no
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  Speaker 1: intention of changing it. He said, this is I think
• 5:01
  Speaker 1: what is really making people uneasy, and that this nature,
• 5:06
  Speaker 1: this technique of taxing paper gains could start to become
• 5:13
  Speaker 1: common in the system. Okay, so what don't you?
• 5:16
  Speaker 2: I thought.
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  Speaker 1: What I tried to do was to put together some questions.
• 5:20
  Speaker 1: The first question is from Ross, is there any logical
• 5:25
  Speaker 1: economic reason to have tax breaks in super anyway? Reasonable question?
• 5:32
  Speaker 1: Why is there tax breaks for a super anyway?
• 5:34
  Speaker 4: We've got it, we used to have a three pillar
• 5:36
  Speaker 4: or we've got a three pillar sort of retirement saving system,
• 5:39
  Speaker 4: you know, your your own savings, your superannuation, and government support.
• 5:43
  Speaker 4: So the idea of superannuation when it was introduced, you know,
• 5:47
  Speaker 4: back in ninety two, was that people are going to
• 5:50
  Speaker 4: be able to be self funded to some extent. How
• 5:53
  Speaker 4: do you incentivize people to be self funded? You've effectively
• 5:56
  Speaker 4: got to give them tax benefits, so otherwise what would
• 6:00
  Speaker 4: be the benefit in them doing so? So I think
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  Speaker 4: it's a very good question from Ross, and I get
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  Speaker 4: from a budget deficit point of view, there's an argument
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  Speaker 4: there that it should be taxable. But individually, I think
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  Speaker 4: if the government's been able to get their fifteen percent
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  Speaker 4: tax on earnings throughout their working life, you know, when
• 6:21
  Speaker 4: it goes into the draw down phase of pension and
• 6:24
  Speaker 4: they get it at nil. That's and again we're not
• 6:28
  Speaker 4: talking about one hundred million dollar super funds. We're talking
• 6:30
  Speaker 4: about mainstream, every day austraints that might have one to
• 6:33
  Speaker 4: two million. I think it's entirely appropriate to give them
• 6:37
  Speaker 4: the tax break. I suppose in you once there where
• 6:41
  Speaker 4: the government's been clever is when you are in that
• 6:43
  Speaker 4: drawdown phase, the government does make you draw the money out.
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  Speaker 4: You know, there's the four percent, then it goes to
• 6:48
  Speaker 4: five percent, and once you get to ninety five it's
• 6:50
  Speaker 4: like fourteen percent. So you do get the tax benefit,
• 6:54
  Speaker 4: but that money is going to come out of the
• 6:56
  Speaker 4: system ultimately.
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  Speaker 1: And I suppose an argument that I think the strongest
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  Speaker 1: argument of all is that this is these tax breaks
• 7:04
  Speaker 1: in super are not a cost very simply because even
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  Speaker 1: though Australia is going to have a very large portion
• 7:11
  Speaker 1: of the population that are older in the future and
• 7:15
  Speaker 1: we were heading towards big trouble if on that basis,
• 7:19
  Speaker 1: But believe it or not, pension as a portion of
• 7:24
  Speaker 1: the national budget is actually going to decrease in the future,
• 7:27
  Speaker 1: and that is because there is that system which allows
• 7:31
  Speaker 1: individuals incentivizes them to have their own super goes all
• 7:36
  Speaker 1: the way back to Paul Keating and incentives who are
• 7:38
  Speaker 1: in there at the very start, and they make as
• 7:40
  Speaker 1: much sense as ever I think. In answer to your
• 7:43
  Speaker 1: question Ross, the other part of your question is he says,
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  Speaker 1: I don't think taxing unrealized gains is justifiable or manageable.
• 7:51
  Speaker 1: Why don't they just tax the realized gains when they occur?
• 7:54
  Speaker 1: Why don't they just tax the realized gains? That's why
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  Speaker 1: they always do what's this idea of paper game? Why
• 8:00
  Speaker 1: they do that?
• 8:01
  Speaker 4: When you go through the inquiries that happened a year
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  Speaker 4: or two ago when they were talking about putting Div
• 8:10
  Speaker 4: two ninety six in, it was actually that the systems
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  Speaker 4: couldn't handle the administration of it, in particular things like
• 8:16
  Speaker 4: industry funds and the like. So the self made super
• 8:18
  Speaker 4: fund Association kind of said, well, hang on, we can
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  Speaker 4: directly break down our components, so let's do it that way.
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  Speaker 4: But the government was pretty clear they want just one
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  Speaker 4: one system and the administration cost to get it to
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  Speaker 4: be able to do the realized versus unrealized was just
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  Speaker 4: too expensive to do.
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  Speaker 1: Unfortunately, that's their explanation. Okay, we can kick that around
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  Speaker 1: as much as we want, but that's their explanation.
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  Speaker 2: All too hard, and we agree it makes no sense.
• 8:47
  Speaker 1: We agree it makes no sense for us. We are
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  Speaker 1: in furious agreement on that. Can you see the next
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  Speaker 1: question from Ryan. I'm just interested in the second part
• 8:57
  Speaker 1: here where he talks about what he has to pee.
• 9:00
  Speaker 4: Yeah, So here we've got Ryan saying I've got to
• 9:05
  Speaker 4: pay land tax and council rates in South Australia and Queensland.
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  Speaker 4: And this is based on the estimated value of the land.
• 9:11
  Speaker 4: These are a mixture of investments and owner occupier. The
• 9:14
  Speaker 4: land value has gone up, but also in the meantime,
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  Speaker 4: my taxes on this land keep going up. Does this
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  Speaker 4: qualify as paying tax for in brackets unrealized gains?
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  Speaker 1: Yeah, well what do you think.
• 9:25
  Speaker 4: One hundred percent? You know, we typically don't see them
• 9:28
  Speaker 4: going down. And James, you and I had a conversation
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  Speaker 4: on this the other day, saying this is.
• 9:33
  Speaker 2: Exactly where they got it from.
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  Speaker 4: It feels like with the land, everyone feels good the
• 9:38
  Speaker 4: land's going up, so people are happy to pay you know, higher.
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  Speaker 3: Rates, more land tax. But again it's there's a really.
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  Speaker 4: Good argument that it doesn't cost the government a lot
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  Speaker 4: more just because your value has gone up. There's a
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  Speaker 4: lot of these taxes that come in, but this is
• 9:55
  Speaker 4: this is definitely a case of an unrealized gains tax.
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  Speaker 1: So it's like so like land tax issues written in
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  Speaker 1: large really in that at least often with land tax,
• 10:05
  Speaker 1: it's land right to sitting on a farm, and it
• 10:09
  Speaker 1: might be furious and infuriating to know that the land
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  Speaker 1: tax has gone up if your income went down, for instance,
• 10:15
  Speaker 1: in a year. However it is it is. It is
• 10:19
  Speaker 1: a tangible acid. But if it was something much more volatile,
• 10:23
  Speaker 1: like a share which you mentioned at the start. You
• 10:25
  Speaker 1: mentioned a great year collin well Bank, but it might
• 10:27
  Speaker 1: become well Bank. It might be at my gold mining
• 10:30
  Speaker 1: company that just goes up one hundred percent one year
• 10:32
  Speaker 1: in falls ninety percent the next. That's where there's real
• 10:35
  Speaker 1: problems I think coming down the line. Okay, Russell says,
• 10:39
  Speaker 1: there's a lot of talk recently after the election about
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  Speaker 1: the unrealized gainst tax on super for over three million
• 10:48
  Speaker 1: or maybe even two million. The reason Russell says it
• 10:51
  Speaker 1: might be two million is because the Greens have the
• 10:54
  Speaker 1: balance of power in the Senate, and the Greens have
• 10:56
  Speaker 1: said they will support this new tax on unrealized gains,
• 11:00
  Speaker 1: but only if the government drop it from three million
• 11:04
  Speaker 1: to two million. So you can see this is a
• 11:06
  Speaker 1: movable feast to some extent. Now, Russell says, I wonder
• 11:09
  Speaker 1: whether the three million amount applies to each individual fund
• 11:14
  Speaker 1: a person holds. Could someone holds, say two million in
• 11:18
  Speaker 1: each of three separate funds and avoid the tax, or
• 11:21
  Speaker 1: does the total mean the tax will apply? So how
• 11:24
  Speaker 1: is it applied? Is it? Is it per fund? Is
• 11:27
  Speaker 1: it per individual?
• 11:28
  Speaker 3: Is it it?
• 11:29
  Speaker 1: Does it try to capture everything the individual has in
• 11:32
  Speaker 1: the supersystem.
• 11:33
  Speaker 4: It's you're the total super that you've got in the system, okay,
• 11:37
  Speaker 4: attributable to you.
• 11:38
  Speaker 1: It doesn't matter whether if you've got some in an
• 11:40
  Speaker 1: industry fund and some in AMP or a bank and
• 11:43
  Speaker 1: something else in your SMSF. They count the entirety you
• 11:48
  Speaker 1: have in all your super accounts and the degree to
• 11:52
  Speaker 1: which that combined number moves higher.
• 11:55
  Speaker 4: Yes, But if you have a spouse, they've got a
• 11:57
  Speaker 4: different number to you. So so a husband and wife can
• 12:01
  Speaker 4: effectively have six million dollars in total superannuation. An individual
• 12:06
  Speaker 4: can have three. And I think where this kind of
• 12:09
  Speaker 4: question and a little bit of confusion comes from is,
• 12:11
  Speaker 4: you know, with the bank sales the government two hundred
• 12:13
  Speaker 4: and fifty thousand dollars bank guarantee, but then you could
• 12:16
  Speaker 4: have a million dollars split across four and you've got
• 12:19
  Speaker 4: the guarantee for a million. So there's been some inconsistency
• 12:22
  Speaker 4: in government policy that leads, you know, the poor listeners
• 12:26
  Speaker 4: to kind of wonder had the best play it in
• 12:29
  Speaker 4: the best possible way.
• 12:30
  Speaker 1: So a lot and clear Russell, the tax is applied
• 12:33
  Speaker 1: on an individual basis on the total amounts you have
• 12:35
  Speaker 1: in super so. Again, you see that headline number sounds big,
• 12:40
  Speaker 1: and it is big, and the amount of argument that
• 12:43
  Speaker 1: anyone can live very comfortably on those numbers in super so.
• 12:46
  Speaker 1: It's not the headline number that really matters that everyone
• 12:49
  Speaker 1: is worried about, concerned about. It's the nature of the
• 12:53
  Speaker 1: tax that it's paper gains or on regalized gains. This
• 12:56
  Speaker 1: is the core of the issue. Okay, Now, hopefully I've
• 13:00
  Speaker 1: met a fairly good fist of explaining the basics. We've
• 13:03
  Speaker 1: got some really good questions now coming up about how
• 13:06
  Speaker 1: it all works. Maybe back in a moment, Hello, and
• 13:13
  Speaker 1: welcome back to The Australian's Money Puzzle. James Kirby here
• 13:17
  Speaker 1: talking to Hugh Robertson of Centaur Financial Services, and we
• 13:20
  Speaker 1: are talking about the new supertax and what I'm trying
• 13:22
  Speaker 1: to do today, folks, is to allow you to understand
• 13:27
  Speaker 1: the nature of the tax, the design of the tax,
• 13:30
  Speaker 1: how it's actually going to work. I've had so many
• 13:33
  Speaker 1: questions and I've collected your questions into a special episode
• 13:36
  Speaker 1: of the show. We are not in the business of
• 13:39
  Speaker 1: winding up how it might or might not happen. I'm
• 13:42
  Speaker 1: not really interested in the political dimension of this is
• 13:45
  Speaker 1: it's entirely from an investor point of view. What's happening,
• 13:50
  Speaker 1: how will it come to pass? What will it mean? Okay,
• 13:53
  Speaker 1: sticking to your questions, this question is from Lil She says,
• 13:56
  Speaker 1: with looming changes to the tax treatment of superannuation, it's
• 14:01
  Speaker 1: time to seriously look at tax efficient structures outside of super.
• 14:05
  Speaker 1: And now I'd love if you would provide an episode
• 14:08
  Speaker 1: on investment bonds also known as insurance bonds or indeed
• 14:12
  Speaker 1: education bonds. An increasing number of financial planets are highlighting
• 14:16
  Speaker 1: this as an alternative outside of super Yes they are,
• 14:20
  Speaker 1: and we have covered this area. And I will say
• 14:25
  Speaker 1: to you, Lil that most people, most on the time
• 14:28
  Speaker 1: on the show have not been particularly supportive of them.
• 14:33
  Speaker 1: And generally the advisors I have on the show, who
• 14:36
  Speaker 1: tend to be top advisors in their field, will say
• 14:40
  Speaker 1: that there's better deals elsewhere. Basically, Hugh, you might answer
• 14:45
  Speaker 1: that one and maybe perhaps this time around give you
• 14:49
  Speaker 1: give a wider lens on it for Lil that to
• 14:53
  Speaker 1: some people it probably doesn't make sense, but there there
• 14:56
  Speaker 1: is a layer where it might make sense.
• 14:58
  Speaker 4: So an investment bond is an internally taxed product. It
• 15:03
  Speaker 4: originally came out of insurance law, so it had different
• 15:07
  Speaker 4: rules and regulations to the normal investment trusts that we had.
• 15:10
  Speaker 4: So it's internally taxed up to thirty percent, and then
• 15:15
  Speaker 4: there's some really good rules there. If you hold the
• 15:18
  Speaker 4: bond itself for ten years, it's actually CGT.
• 15:21
  Speaker 3: Three and then it's pro routed over the year's eight.
• 15:26
  Speaker 2: To nine as well.
• 15:28
  Speaker 4: The benefits of it are within the actual bond itself.
• 15:31
  Speaker 2: You could get if you had a.
• 15:33
  Speaker 4: You know, one hundred percent fully franked share fund in
• 15:37
  Speaker 4: there for a strange share fund, for example, you would
• 15:40
  Speaker 4: pay less than the thirty percent tax. And there's another
• 15:43
  Speaker 4: really good benefit of the insurance bonds that you can
• 15:46
  Speaker 4: switch switch them out CGT three.
• 15:49
  Speaker 2: So if I've had really.
• 15:50
  Speaker 4: Good gains in an international share within the insurance bond product,
• 15:54
  Speaker 4: I could then transfer that And I had a call
• 15:55
  Speaker 4: that with Trump, you know, Presidency, maybe I want to
• 15:59
  Speaker 4: go back to Australian share. I could switch that investment
• 16:01
  Speaker 4: out and not pay capital gains tax, which.
• 16:04
  Speaker 2: Is really good.
• 16:05
  Speaker 4: There's some advantages on when you draw money out of
• 16:08
  Speaker 4: thirty percent credit.
• 16:10
  Speaker 3: But when you look at who's.
• 16:11
  Speaker 4: Going to use them, typically it would be if you
• 16:15
  Speaker 4: traditional let's say traditionally it's been used with grandparents typically
• 16:20
  Speaker 4: helping out grandchildren is a bit of a savings account
• 16:23
  Speaker 4: for them that they're going to access when they're eighteen
• 16:25
  Speaker 4: or twenty one or twenty.
• 16:26
  Speaker 1: Five, don't. They often promote them as education bonds, though
• 16:30
  Speaker 1: that there's no thing really they are investment bonds. Yes,
• 16:33
  Speaker 1: could you explain how they sell them or traditionally said
• 16:36
  Speaker 1: to people their education bonds and people I think part
• 16:40
  Speaker 1: of the problem was they misled people thinking they were
• 16:43
  Speaker 1: specially for education. They're not. They just happened to be
• 16:47
  Speaker 1: tax effective. Long term investment fear because that if you
• 16:50
  Speaker 1: were able and committed to saving for ten years, even
• 16:53
  Speaker 1: with a straight salary, no tricks, no companies on the side,
• 16:57
  Speaker 1: you actually get as substantial tax been. Is it better
• 17:01
  Speaker 1: than Super?
• 17:03
  Speaker 4: No, it's a tax but charge where you say, if
• 17:06
  Speaker 4: you're a high income earner and you can make sure
• 17:08
  Speaker 4: the tax you pay is thirty percent versus your marginal
• 17:11
  Speaker 4: tax rate, it's that's better. So if you're on forty
• 17:14
  Speaker 4: five cents in the dollar, thirty cents is obviously better,
• 17:17
  Speaker 4: but Super is better because it's fifteen. The challenge that
• 17:21
  Speaker 4: you've got is with Super, it's you know, you're not
• 17:24
  Speaker 4: able to access it until you meet a condition of release,
• 17:27
  Speaker 4: which is usually sixty and retired is probably the most
• 17:29
  Speaker 4: common one where and the bonds. The bonds kind of
• 17:34
  Speaker 4: are having a bit of a revival right now with
• 17:37
  Speaker 4: the two nine six. There is opportunity definitely something worth
• 17:40
  Speaker 4: looking at. What you really want to see, though, is
• 17:43
  Speaker 4: what are the fees and charges involved.
• 17:45
  Speaker 3: You want to see what.
• 17:45
  Speaker 2: The product choices are.
• 17:48
  Speaker 4: The conversations that you and I James have had you
• 17:52
  Speaker 4: know in prior podcast, would be that if you're a
• 17:54
  Speaker 4: high net Wells investor, you could instead of utilizing the
• 17:57
  Speaker 4: insurance bond product, probably just go and start up and
• 18:02
  Speaker 4: own sort of your own company, you know, which costs
• 18:05
  Speaker 4: a couple hundred bucks to set up.
• 18:06
  Speaker 1: Which is which is thirty percent, which is the same
• 18:09
  Speaker 1: as the tax applied on the bond.
• 18:11
  Speaker 4: Yes, and then you can have the product choice that
• 18:14
  Speaker 4: you want as opposed to a limited range of investment bonds. Okay,
• 18:19
  Speaker 4: but I do note that all the investment bond companies
• 18:22
  Speaker 4: are heavily invested in their products now to try and
• 18:24
  Speaker 4: take advantage of this opportunity with the DIP two ninety six.
• 18:27
  Speaker 1: Yes, golden moment for them, because they're saying, hey, there
• 18:30
  Speaker 1: is another tax break for the for the average earner
• 18:35
  Speaker 1: that you may not have known about. Us ade of
• 18:36
  Speaker 1: super we're here all the time. There is some advantages
• 18:40
  Speaker 1: to those to some people in some situations. I think
• 18:42
  Speaker 1: he was saying, but as an alternative to super, it's true,
• 18:45
  Speaker 1: doesn't beat it. And as you say, as an alternative
• 18:48
  Speaker 1: to high income super or wealth super affected by this
• 18:53
  Speaker 1: forthcoming tax division two ninety six, this new super tax.
• 18:57
  Speaker 1: It's it doesn't it. It doesn't give you anything like
• 19:00
  Speaker 1: the options you had if you had a company, for instance,
• 19:02
  Speaker 1: or Super itself, where you can you know whatever, it's
• 19:04
  Speaker 1: failings and it's restrictions. You can buy anything you want
• 19:07
  Speaker 1: more or less. While the investment found the you must
• 19:10
  Speaker 1: buy what's on the menu.
• 19:11
  Speaker 3: That's a good summary.
• 19:12
  Speaker 1: Oh okay, yeah, all right, say but I suppose to
• 19:15
  Speaker 1: the wider issue than Lil's question, whereas whereas can you
• 19:19
  Speaker 1: go if you don't like Super and you don't like
• 19:24
  Speaker 1: what's happening. Another thing I suppose that's worth mentioning that
• 19:27
  Speaker 1: people shouldn't forget is that, in fact, outside of Super,
• 19:30
  Speaker 1: say you're retired, you don't pay tax anyway. No one
• 19:36
  Speaker 1: pays tax up to what nineteen now is it nineteen
• 19:38
  Speaker 1: thousand dollars. Your first nineteen thousand is tax free. So
• 19:41
  Speaker 1: keep that in mind.
• 19:42
  Speaker 4: You and I think they're saying because I went onto
• 19:45
  Speaker 4: a tax calculated before and thought, well, what if we
• 19:48
  Speaker 4: had retirees only sixty thousand dollars a year, just individual
• 19:51
  Speaker 4: retire if they owned sixty thousand dollars a year without
• 19:55
  Speaker 4: any of the you know, any deductions to Super or
• 19:58
  Speaker 4: anything that pay around.
• 20:01
  Speaker 3: It was around seven thousand dollars in tax.
• 20:04
  Speaker 4: Yeah, so sixty thousand dollars sorry, and it was Yeah,
• 20:07
  Speaker 4: the numbers there told me they'd get a low income
• 20:10
  Speaker 4: tax off set, they'd get Medicare, yes, and on sixty
• 20:14
  Speaker 4: thousand dollars they'd pay nine eight hundred and eighty eight
• 20:16
  Speaker 4: in tax, which is about sixteen and a half percent. Yes,
• 20:20
  Speaker 4: so he kind of go, so it's not Yeah, you
• 20:22
  Speaker 4: had a husband and wife earned sixty thousand each from
• 20:24
  Speaker 4: an investment. They're paying about the super rate and that's
• 20:28
  Speaker 4: better than a thirty percent rates you would pay inside
• 20:32
  Speaker 4: a bond. So don't forget our personal tax rates matter.
• 20:35
  Speaker 1: On the street. Simple income tax rates from the ETL.
• 20:39
  Speaker 1: Your first individually, your first nineteen thousand, isn't it?
• 20:42
  Speaker 3: It was eighteen thousand, two hundred.
• 20:45
  Speaker 1: Course with a cigar, eighteen thousand, two hundred. Okay, thank you?
• 20:49
  Speaker 1: All right, now can you read the question from Paul?
• 20:53
  Speaker 3: So this is from Paul.
• 20:54
  Speaker 4: He's asked it may be unfair, but couldn't those who
• 20:56
  Speaker 4: were worried about the unfair taxation of unrealized gains just
• 21:00
  Speaker 4: remove their farms, businesses other well from super Paul. To
• 21:05
  Speaker 4: do that, you've got to be able to meet the
• 21:07
  Speaker 4: condition of release first, you know, and typically we just
• 21:11
  Speaker 4: sort of commented on that before that you've got to
• 21:13
  Speaker 4: be aged over sixty and retired or age sixty five,
• 21:17
  Speaker 4: and in which case then then you could without penalties.
• 21:23
  Speaker 3: So from that perspective you could.
• 21:25
  Speaker 4: But the people that are in that a big farmer,
• 21:29
  Speaker 4: you know, they might not be able to do that
• 21:31
  Speaker 4: right now because they're not of age or a condition
• 21:35
  Speaker 4: of release to get the money out.
• 21:37
  Speaker 1: So that was always the problem, wasn't it. With Silper
• 21:39
  Speaker 1: It's a lobster pot. You can put your money in,
• 21:42
  Speaker 1: you can't get it out to retire. And there was
• 21:44
  Speaker 1: always that fear that because it was trapped as such
• 21:48
  Speaker 1: a locked the government could change the rules while it
• 21:52
  Speaker 1: was locked in side, which is exactly what's happening right.
• 21:54
  Speaker 4: I suppose there's an even greater part of this is
• 21:56
  Speaker 4: that we want all the strains to have confidence in
• 21:59
  Speaker 4: the supernuation system, so they do that so that they
• 22:02
  Speaker 4: can become self funded to the best extent possible. And
• 22:05
  Speaker 4: I know the comments from our clients have been really
• 22:09
  Speaker 4: around that, well, it feels like they're just going to
• 22:12
  Speaker 4: keep changing the rules and.
• 22:13
  Speaker 2: It breeds that uncertainty.
• 22:15
  Speaker 4: But what we can take sort of from that is
• 22:19
  Speaker 4: from Paul's question, is that we are going to come
• 22:21
  Speaker 4: up with strategies for clients so that we're not going
• 22:24
  Speaker 4: to put them in that disadvantageous position. And really it's
• 22:27
  Speaker 4: the unrealized gains that's causing the biggest issue. And something
• 22:32
  Speaker 4: that I've said to you know, James previously as well,
• 22:35
  Speaker 4: is that there's about eighty thousand people that are going
• 22:37
  Speaker 4: to be impacted by this, and that's going to grow
• 22:40
  Speaker 4: about five six times over the next twenty thirty years.
• 22:43
  Speaker 4: So we're going to have about half a million people
• 22:45
  Speaker 4: that are going to be impacted by this two ninety six.
• 22:48
  Speaker 1: On its current settings and terms. Yeah, okay, Now what
• 22:52
  Speaker 1: we would do with the next part of the show
• 22:54
  Speaker 1: is we'll just happen look at some of the some
• 22:56
  Speaker 1: of the issues that are around, some of the speculation,
• 22:58
  Speaker 1: what might happen, where is it going to go, who
• 23:01
  Speaker 1: will it affect, how many will it affect in what way,
• 23:04
  Speaker 1: and what might go on in Parliament. There's really good
• 23:06
  Speaker 1: questions on that. Back in the moment, Hello and welcome
• 23:16
  Speaker 1: back to the Australian Special edition money puzzle on the
• 23:19
  Speaker 1: new supertax. Now, let me tell you something that something
• 23:22
  Speaker 1: that does infuriate people. Needless to say about this new
• 23:26
  Speaker 1: supertax is it's not applicable to some politicians who are
• 23:33
  Speaker 1: of course sitting there drafting it. That's one thing. And separately,
• 23:39
  Speaker 1: manny sor what would have been sior functionaries if you like,
• 23:45
  Speaker 1: in the government are undefined benefit funds that they're fading
• 23:48
  Speaker 1: away because they're not around much anymore. But all the
• 23:52
  Speaker 1: senior figures in the army and law and other public
• 23:57
  Speaker 1: service areas, including my add the ABC, are on defined
• 24:02
  Speaker 1: benefits and that means that they just get paid as
• 24:06
  Speaker 1: a promise of how much a certain amount every year
• 24:09
  Speaker 1: regardless of what happens. It doesn't matter if there's a
• 24:11
  Speaker 1: stock market crash. So it's a great number to be on.
• 24:16
  Speaker 1: Question from Stan is it possible for Labor and Greens
• 24:19
  Speaker 1: to include politicians over generous defined benefit scheme in their
• 24:25
  Speaker 1: proposed superinnuation tax to be fair to everyone. That's the
• 24:28
  Speaker 1: first part of stance question and the second And as
• 24:31
  Speaker 1: I say, folks, if you're sending you questions, send in
• 24:33
  Speaker 1: two or three. Anytime. I love to see multiple questions.
• 24:36
  Speaker 1: Stan also asks, is there a way to expose which
• 24:40
  Speaker 1: politicians have the highest superbalances from scamming taxpayers money, similar
• 24:46
  Speaker 1: to how the ATO publicizes who has the highest SMSF balances. Okay, Stan,
• 24:52
  Speaker 1: thank you for that. Now we just have to put
• 24:55
  Speaker 1: it on the table. The way it works, some politicians,
• 24:58
  Speaker 1: senior figures in parliament are a excluded under some laws.
• 25:01
  Speaker 1: So just take that on board. And the worse the
• 25:04
  Speaker 1: tax gets on super the better it must be to
• 25:06
  Speaker 1: be exempt's that's a numerically relatively small but hot issue.
• 25:12
  Speaker 1: More commonly defined benefit funds. So if you mentioned it,
• 25:17
  Speaker 1: if you recall I mentioned that there is the fine
• 25:19
  Speaker 1: benefit schemes and you get paid a certain amount per year.
• 25:23
  Speaker 1: It's a promise basically, and you get a certain whatever
• 25:27
  Speaker 1: your salary was, you get a portion of that. Just
• 25:30
  Speaker 1: pick a number thirty two percent of that salary forever,
• 25:34
  Speaker 1: regardless of what happens in the world. It must be lovely.
• 25:38
  Speaker 1: So stanzas, how are they going to include these people?
• 25:41
  Speaker 1: They don't know how they're going to include them, stand
• 25:43
  Speaker 1: is the short answer. They haven't fixed it yet. They
• 25:47
  Speaker 1: haven't sorted it out yet. But the notion is that
• 25:51
  Speaker 1: they will use existing what would you say, metrics that
• 25:57
  Speaker 1: are used, for instance, in divorce and that sort of
• 26:02
  Speaker 1: thing family law, where they've already had to deal with
• 26:05
  Speaker 1: defined benefits and how they're divided how much they're worth.
• 26:09
  Speaker 1: So they're reverse engineered these things and they say, well,
• 26:12
  Speaker 1: if you get, if you get you know, ninety thousand
• 26:15
  Speaker 1: a year, then that is worth so much because you
• 26:19
  Speaker 1: have to have so much to make ninety thousand a
• 26:21
  Speaker 1: year in the investment markets. How on earth are they
• 26:25
  Speaker 1: going to do it? Hugh, you know everything, what's the answer.
• 26:29
  Speaker 4: I think there's going to be a great difficulty in
• 26:33
  Speaker 4: valuing a lot of these things.
• 26:34
  Speaker 3: So I agree they if women live.
• 26:37
  Speaker 4: Longer than men, which statistically they do, how do we
• 26:40
  Speaker 4: value their benefit versus you know, the husband's benefit.
• 26:46
  Speaker 3: What do we do around that? The mechanisms that they're
• 26:49
  Speaker 3: going to need to be able to.
• 26:49
  Speaker 4: Implement this are going to be very very difficult, very
• 26:51
  Speaker 4: very challenging. And it's very similar to also outside of
• 26:56
  Speaker 4: the defined benefit, But how do they how are they
• 26:58
  Speaker 4: going to value you antiques.
• 27:01
  Speaker 2: Collectibles like cars, like.
• 27:04
  Speaker 3: The whole implementation.
• 27:06
  Speaker 1: Of it's this legislation night merriage.
• 27:09
  Speaker 4: It's gonna be it's fraught with difficulty and quite this
• 27:13
  Speaker 4: is then, this is why all the listeners, this is
• 27:15
  Speaker 4: why all the all the industry bodies are advocating. Can
• 27:18
  Speaker 4: we at least kick it, kick the can down the
• 27:21
  Speaker 4: road to year and get some clarity on how we're
• 27:23
  Speaker 4: going to do this. You don't have to do anything
• 27:25
  Speaker 4: before you know, the end of this financial year or
• 27:27
  Speaker 4: even the start of next financial year. But as it
• 27:30
  Speaker 4: currently stands, we're going to have to do something before
• 27:33
  Speaker 4: the end of next financial year.
• 27:34
  Speaker 1: As it currently stands, it's due to come into effect
• 27:37
  Speaker 1: on July one, with the first collection point. You'd be
• 27:41
  Speaker 1: like being July twenty twenty six, isn't that right? Yes,
• 27:46
  Speaker 1: so stand by. But as I say each day, there's
• 27:49
  Speaker 1: no clarification or any signal from the treasure that's on timing,
• 27:54
  Speaker 1: on the indexation, on the unrealized gains. Couldn't they just
• 28:02
  Speaker 1: do a deeming thing like they have for the pensions anyway,
• 28:06
  Speaker 1: So when the pension access to the pension, they don't
• 28:10
  Speaker 1: count how much everyone's got in investments. They just say
• 28:13
  Speaker 1: how much have you got there on the side, and
• 28:15
  Speaker 1: the presence says, I've got one hundred thousand dollars and
• 28:17
  Speaker 1: they say, okay, well we reckon that makes you know,
• 28:19
  Speaker 1: two point five percent a year, which is which is,
• 28:22
  Speaker 1: which is a very generous way of doing it. But
• 28:25
  Speaker 1: they just deem and amount is made. Couldn't they do that?
• 28:31
  Speaker 3: Sometimes common sense isn't common James.
• 28:35
  Speaker 4: The SMSF association, they went through looking at it, at
• 28:40
  Speaker 4: the difference between the unrealized the current method that they're
• 28:43
  Speaker 4: they're proposing, and the demon, and there wasn't much in
• 28:46
  Speaker 4: it in terms of tax revenue. So the ATO would
• 28:50
  Speaker 4: have got thereabouts the same amount, and it would have
• 28:52
  Speaker 4: been something that could have been administered. I think I
• 28:55
  Speaker 4: think there was some comments around, well what if you
• 28:57
  Speaker 4: have negative years? You know that the demon is disadvantageous
• 29:02
  Speaker 4: to the approach that they're that they're advocating for. But
• 29:07
  Speaker 4: I think a deeming approach would have been common sense.
• 29:11
  Speaker 4: Yeah right, and you know, the AHA would have won.
• 29:14
  Speaker 4: So that that one is a perplexing one. Why they
• 29:17
  Speaker 4: didn't do.
• 29:17
  Speaker 1: That it is indeed, So we'll leave it there and
• 29:21
  Speaker 1: we'll see where they go. I hope that was useful
• 29:23
  Speaker 1: to you. I think anyone who who went, especially as
• 29:27
  Speaker 1: we took the listeners questions, there we've got a clear picture.
• 29:30
  Speaker 1: Now it's a new tax. There is no tax paid
• 29:33
  Speaker 1: up to about two million on super I say up
• 29:36
  Speaker 1: to about two million because it's one point nine now
• 29:38
  Speaker 1: goes to two million on July one. There is then
• 29:42
  Speaker 1: fifteen percent tax after that figure sort of sky is
• 29:48
  Speaker 1: the limit at the moment, and they're going to come
• 29:49
  Speaker 1: in and say hang on now when it goes after
• 29:51
  Speaker 1: three million, there's a new tax on top of the
• 29:52
  Speaker 1: fifteen that's already there, and that brings it to thirty
• 29:56
  Speaker 1: combined tax. The issue is not some the number there,
• 30:00
  Speaker 1: it's the way they're going to do it on unrealnized
• 30:03
  Speaker 1: gains paper games. I think you did a very good
• 30:05
  Speaker 1: example at the very start about how that is. It's
• 30:08
  Speaker 1: really unfair, it's a bad technique, it's messy, it's ridiculously
• 30:13
  Speaker 1: difficult to try and to try and compute accurately. And
• 30:17
  Speaker 1: what did you call it a violation of the tax system?
• 30:20
  Speaker 1: Was that it a violation of the tax system?
• 30:23
  Speaker 3: There you are principle.
• 30:24
  Speaker 1: It's also on indexed, which again you know, I mean
• 30:27
  Speaker 1: it's a retirement tax. The pension ist is not just
• 30:30
  Speaker 1: index The pension is indexed twice a year. So I
• 30:33
  Speaker 1: think there's a lot on the table here. It's hard
• 30:36
  Speaker 1: to believe it's going to start in July one, but
• 30:38
  Speaker 1: we have to work on the basis that it will.
• 30:40
  Speaker 1: We'll see in the weeks ahead if the government budge
• 30:44
  Speaker 1: on this. H. Robinson, thanks very much for for heroic
• 30:48
  Speaker 1: effort trying to explain it to us all.
• 30:52
  Speaker 4: Thank you very much for having me. I hope it
• 30:53
  Speaker 4: provided some valuable insights to your listeners.
• 30:56
  Speaker 2: I'm sure.
• 30:57
  Speaker 1: Thanks everyone for sending in your questions. I couldn't use
• 30:59
  Speaker 1: them all, of course, but I was able to I think,
• 31:01
  Speaker 1: capture the main issues from those questions that we had today.
• 31:04
  Speaker 1: Thanks a lot for listening. Keep your emails rolling the
• 31:08
  Speaker 1: money puzzle at the Australian dot com dot au. Talk
• 31:13
  Speaker 1: to you soon.