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Rentvesting - A better way to make it work · The Money Puzzle

0:10
Speaker 1: Hello, and welcome to The Australian's Money Puzzle podcast.
0:12
Speaker 2: I'm James Kirkby. Welcome aboard everybody.
0:14
Speaker 1: Some fascinating materials for you today, the property investor.
0:18
Speaker 2: What is happening with CGT.
0:21
Speaker 1: We have a report in The Australian today that CGT
0:23
Speaker 1: discount could be rejected entirely in the budget, but I
0:27
Speaker 1: think most likely is a cut in the discount from
0:29
Speaker 1: fifty percent twenty five percent. And interestingly, folks, the nation's
0:33
Speaker 1: biggest lender, Commonwealth Bank, has modeled what that would do
0:36
Speaker 1: property prices and it will probably cut baseline prices by
0:39
Speaker 1: about four percent according to the Bank. That's really interesting.
0:42
Speaker 1: We're going to talk about that today. We're also going
0:44
Speaker 1: to talk about intergenerational property and how changes to CGT
0:48
Speaker 1: will have all sorts of knock on effects, including, I
0:50
Speaker 1: think very interestingly, the issue of rent festing. Most people
0:54
Speaker 1: think of rent festing as just buying a rental property
0:58
Speaker 1: and renting their own property, but you can do much
1:00
Speaker 1: more than that. You could rent a property and then
1:02
Speaker 1: you could invest in both a rental property for yourself
1:06
Speaker 1: negatively geared perhaps and also shares. With that in mind,
1:10
Speaker 1: my guess is Jackie Clark, who is the author, of course,
1:13
Speaker 1: of How to Stop Worrying About Money and an advisor.
1:16
Speaker 1: How are you, Jackie?
1:17
Speaker 3: I'm fabulous, but when I think about it, I'm a
1:20
Speaker 3: little concerned too. Looking at the market today.
1:24
Speaker 2: We're talking about the share market.
1:27
Speaker 1: I suppose particularly all market's really been tested now with
1:29
Speaker 1: the Iran strikes by the US, and of course I
1:33
Speaker 1: rans response by attacking more than I think it's nine
1:36
Speaker 1: countries so far. Extraordinary annoid prices tipping at well. I
1:40
Speaker 1: went to the petro station last night. This is what
1:42
Speaker 1: everyone thousand prices, what everyone thinks about right, two twenty
1:47
Speaker 1: up from one seventy, I can daze and the price
1:50
Speaker 1: per barer obviously touching one hundred and twenty per barer
1:53
Speaker 1: there in recent nights.
1:55
Speaker 3: Interesting straight off, pretty scary actually, James as well. I
1:59
Speaker 3: saw Quantus quoting almost forty thousand dollars for return flights
2:04
Speaker 3: to London in April, and I wasn't sure if that
2:08
Speaker 3: was the cost of aviation fuel or what was actually
2:11
Speaker 3: being in factored in there, but pretty frightening impacts.
2:13
Speaker 1: I thought you could have got on a private jet
2:16
Speaker 1: for forty thousand. Yes, it is a demanding time for everyone.
2:22
Speaker 1: I think folks to cut to the chase for our
2:24
Speaker 1: show today. In terms on Tuesday, we do like to
2:26
Speaker 1: look at property. Have a listened to my session with
2:29
Speaker 1: Will Hamilton just a few days ago on the broader
2:32
Speaker 1: listed markets, but on property couple of things immediately a
2:37
Speaker 1: interest rates upward pressure all around the world, and here
2:40
Speaker 1: b we have to think about the impact of a
2:43
Speaker 1: CGT change right now on a market that is pretty
2:47
Speaker 1: soft and isn't anything like last year, and there's come well,
2:50
Speaker 1: thank if you like seeing that we could have prices
2:52
Speaker 1: forward on the CGT one Jackie, like you and your circle,
2:56
Speaker 1: what are they thinking?
2:57
Speaker 2: What's their assumption?
2:58
Speaker 1: I mean, and there's a consensus that it will happen,
3:00
Speaker 1: that it'll be that the discount would because in half
3:03
Speaker 1: what do you think?
3:05
Speaker 3: Well, I mean, principally, the increase in the capital gain
3:08
Speaker 3: tax will reduce the effectiveness of borrowing. So when you've
3:12
Speaker 3: got that cut in negative the benefit of negative gearing.
3:16
Speaker 3: So whilst it makes it less appealing, it's always been
3:19
Speaker 3: a pretty good deal, so there's a limited impact of it.
3:24
Speaker 3: I think it will be a relatively short term impact
3:27
Speaker 3: that the Australian Ways to continue to own property. It's
3:30
Speaker 3: still considered a safe investment in Australia. So my sense
3:34
Speaker 3: is that there will be a short term impact of
3:36
Speaker 3: that reduction and then people will resume normal investment behavior.
3:40
Speaker 3: But perhaps it might cause people to contemplate how to
3:44
Speaker 3: structure their investments differently as well.
3:47
Speaker 2: Do you think it should trigger people to do that?
3:50
Speaker 3: Look, we've been very fortunate with our capital gains tax discount,
3:55
Speaker 3: so it's worthwhile reflecting on your overall strategy and your
3:59
Speaker 3: tax rates, pay the entities that you structure your investments in.
4:03
Speaker 3: It might make things like superannuation more appealing and people
4:07
Speaker 3: transitioning into things like pension mode or obviously that those
4:10
Speaker 3: things will still be much more appealing.
4:12
Speaker 2: Would you be property that's appearing visibly other.
4:15
Speaker 3: Investments marginally, I'd say okay, yeah, I mean I think
4:20
Speaker 3: property is still a challenging investment in Australia because it's
4:23
Speaker 3: expensive to hold. We know that transacting in it is
4:26
Speaker 3: expensive with things like stamp duty and maintenance and upkeep
4:30
Speaker 3: costs which I've forever talking about. So you know, there
4:33
Speaker 3: may certainly be a shift, but I don't think that
4:36
Speaker 3: our hard headed Australians around property will shift significantly as
4:40
Speaker 3: a result.
4:41
Speaker 1: It's interesting at the comment Bank report, which did actually
4:44
Speaker 1: assess specify how much they thought property prices would fall
4:48
Speaker 1: is broadly you know, I won't say it's supportive, but
4:51
Speaker 1: its conclusions aren't that the market response would be modest.
4:55
Speaker 3: Well, that's right, and if you couple that with a
4:58
Speaker 3: potential rate rise. Initially I was thinking of what are
5:01
Speaker 3: the benefits for first home buyers or people trying to
5:04
Speaker 3: access the market. So you think there might be some
5:06
Speaker 3: initial liquidity in the market with people perhaps it's time
5:09
Speaker 3: to offload property that you have kept for a while
5:13
Speaker 3: and offload it. We can take advantage of the current
5:15
Speaker 3: capital gain SAX discount, so that there might be some
5:18
Speaker 3: short term maneuvering around that, depending on again what they
5:22
Speaker 3: decide in the budget. But then with an interest rate increase,
5:25
Speaker 3: I think between a potential you know, more liquidity in
5:29
Speaker 3: the market, but the interest rate's going up, it continues
5:32
Speaker 3: to keep pressure on the access to the property market
5:35
Speaker 3: for younger Australians, which is I had certainly initially it
5:39
Speaker 3: was something to drive more activity people.
5:42
Speaker 1: Yes, I had thought, I must say I had assumed
5:46
Speaker 1: that it brings in they're grand further and fos Just
5:49
Speaker 1: in case you're not across what that means. It means
5:50
Speaker 1: that anyone's already doing the CGT would be able to
5:53
Speaker 1: do it basically for as long as they want, but
5:55
Speaker 1: they couldn't do new stuff under CGT. Under the CGT
5:58
Speaker 1: a engements that exists today and because because most governments
6:01
Speaker 1: most big changes now they've grandfather them so sort of
6:04
Speaker 1: smooth out the introduction of it. But pretty partful people
6:07
Speaker 1: are saying to the government, you can't grandfather it. If
6:10
Speaker 1: your grandfather it, you actually institutionalize the gap, the generation
6:14
Speaker 1: and gap the generation of favor. If you like that
6:16
Speaker 1: older Australians had against younger ones, what do you think
6:20
Speaker 1: check it?
6:21
Speaker 3: Well, let's no, I don't agree with that at all.
6:24
Speaker 3: And you think in the context of intergenerational wealth transition
6:29
Speaker 3: as well, that families have benefited from capital gains, tax
6:33
Speaker 3: discounts at the level they are and property and wealth,
6:36
Speaker 3: which is largely where wealth is held in Australia, will
6:38
Speaker 3: transfer to generations with if you like that grandfather's CGT position,
6:43
Speaker 3: that would be lovely. So if that all goes out,
6:46
Speaker 3: I think that does affect all generations of Australia.
6:48
Speaker 2: Do you think they've grand fathered or not.
6:51
Speaker 3: Well, it'd bit highly unusual not to. Yeah, behind on
6:55
Speaker 3: incredibly unfavorably from it will operate unfavorably for a police
7:00
Speaker 3: equal steppoint, that's for sure. Pretty aggressive, that's right.
7:04
Speaker 1: And I suppose if they give anything away there'll be
7:06
Speaker 1: a rush to sell, won't there prior to May nine
7:08
Speaker 1: when the budget is too inter come into effect. Okay,
7:11
Speaker 1: really interesting. We will hold it right there, folks, will
7:14
Speaker 1: take short break with back in the moment. Hello, welcome
7:24
Speaker 1: back to the Australians Money Puzzle podcast.
7:26
Speaker 2: I'm James Kerby. Welcome aboard again everybody.
7:28
Speaker 1: Well, one of the things that came up there, Jackie
7:30
Speaker 1: was we were just talking if the CGT does change
7:33
Speaker 1: how it affects structures.
7:35
Speaker 2: This is really.
7:35
Speaker 1: Interesting in the concept of what we might call intergenerational
7:38
Speaker 1: property and how young people are buying property for instance,
7:41
Speaker 1: obviously backed up with government grants these days, but more
7:44
Speaker 1: particularly say something like rentfesting, where people are not choosing
7:51
Speaker 1: not to live where they first time they buy and
7:54
Speaker 1: they rented out for various reasons. Similarly, on this sort
7:58
Speaker 1: of generational issue, this whole thing about intergenerational property where
8:02
Speaker 1: people are building or developing property for them and their families.
8:06
Speaker 1: I think it can be clever in some ways. I'd
8:07
Speaker 1: like to talk about that just on renfesting. First of all,
8:11
Speaker 1: so we know this is popular, we know people are
8:13
Speaker 1: doing it. Their idea obviously is that forever home is
8:16
Speaker 1: they can, they will be better able to afford it.
8:20
Speaker 1: Will something like renvesting be affected if CGT changes come.
8:25
Speaker 3: In Absolutely so in multiple ways, James. So, I'm quite
8:30
Speaker 3: a fan of rent vesting, and possibly because of my age,
8:34
Speaker 3: so generationally I think rent vesting is giving a lot
8:37
Speaker 3: more flexibility to people. And you know I've spoken before
8:41
Speaker 3: on your show about the impact of death or divorce
8:44
Speaker 3: on relationships and where people live. So renfesting is a
8:48
Speaker 3: bit like a holding pattern where it's an option to
8:52
Speaker 3: either rent out the place that you were living in
8:54
Speaker 3: or sell it in d but actually rent where you'd
8:57
Speaker 3: like to live, try something out, and again talking about
8:59
Speaker 3: transaction and cost in Australia, that actually makes sense to
9:03
Speaker 3: try something before you buy as well. I think it
9:06
Speaker 3: has appeal because it provides flexibility. The thing you have
9:10
Speaker 3: to be mindful of is something as simple as the
9:12
Speaker 3: main residence exemption for capital gains tax purposes may not
9:16
Speaker 3: be available to you in that scenario, so you have
9:18
Speaker 3: to be a little bit careful about what you're claiming
9:21
Speaker 3: in that regard. But the other thing is just again
9:25
Speaker 3: enabling people to move about. I think there's a lot
9:29
Speaker 3: of appeal for re investing, but the end of the day,
9:31
Speaker 3: we're still talking about.
9:32
Speaker 1: Is investing better or worse. If they change CDT on
9:35
Speaker 1: property only.
9:36
Speaker 3: It's still worse, it's still negative. The only difference is,
9:41
Speaker 3: and where I work with a lot of people, is
9:43
Speaker 3: actually moving cash into like ETFs or the market, so
9:47
Speaker 3: moving away from property, still having property in your portfolio,
9:52
Speaker 3: but freeing up some cash to actually invest in the market.
9:55
Speaker 3: So you've really got multiple strategies working together at once,
9:59
Speaker 3: not just proper.
10:00
Speaker 1: So renvesting for you is not just renting where you
10:04
Speaker 1: live and buying a property. It's renting where you live
10:08
Speaker 1: and then the capital let's freed up, diversified investment.
10:11
Speaker 2: Is it not just one.
10:12
Speaker 3: Hundred percent one hundred percent? Yeah, and that and I
10:16
Speaker 3: think that for me it often I talk about flexibility,
10:19
Speaker 3: and it's not a holding pattern, but allowing you time,
10:22
Speaker 3: especially if you go if you've gone through any particular
10:24
Speaker 3: change or transition in life, allowing you time to think
10:27
Speaker 3: about where you might like to live, what type of
10:29
Speaker 3: debt you might like to take on board. So the
10:32
Speaker 3: renting part of it is, this feels like this could
10:34
Speaker 3: be right, but I'm not sure, or you need something simpler,
10:38
Speaker 3: but you'd like to invest in, you know, eastern suburbs
10:42
Speaker 3: of Sydney, for example, but you're not going to live there,
10:44
Speaker 3: so it just gives you, I think, greater flexibility. But
10:48
Speaker 3: I definitely look at it.
10:49
Speaker 1: As a you're going to see you look at as
10:50
Speaker 1: a diversified Is it a diversified opportunity?
10:54
Speaker 2: Tell me then, yeah, very broadly.
10:56
Speaker 1: If I came to you and we were talking about
10:57
Speaker 1: this and I said, okay, what's what did I think
11:00
Speaker 1: it's a good mix? If it isn't one hundred percent
11:03
Speaker 1: property for property, you know what I mean rentvesting, which
11:06
Speaker 1: is generally seen as is there a guideline? Do you
11:09
Speaker 1: think it should be a clock percentage of the money
11:12
Speaker 1: invested that the present gets to have because they're not
11:16
Speaker 1: paying a mortgage.
11:18
Speaker 2: What percentage might it be outside property?
11:22
Speaker 3: Well, well, so it could be zero. And you know
11:24
Speaker 3: I work with a number of buyers agents around Sydney
11:27
Speaker 3: who will have a whole portfolio of rent vesting essentially,
11:31
Speaker 3: so they're completely one way. That's their industry. They're all
11:34
Speaker 3: in property. But I've gone completely the other way, which
11:37
Speaker 3: is one hundred percent invested outside of property and simply
11:40
Speaker 3: renting where they'd like to live. Yep. And you know
11:44
Speaker 3: that works very well and whether it's good or not,
11:46
Speaker 3: good people take advantage of those different strategies. Again, there's
11:50
Speaker 3: more flexibility in the rent vesting space. The only difficult
11:54
Speaker 3: is when I've talked to people about that as an option,
11:57
Speaker 3: some people aren't prepared to move as regularly as they
12:00
Speaker 3: might be required to. The reality is these days, a
12:02
Speaker 3: lot of the landlord the rules are to protect the tenants,
12:05
Speaker 3: so you have a better chance of being able to
12:08
Speaker 3: stay longer term in a place that you're renting that
12:11
Speaker 3: you may otherwise have years ago.
12:13
Speaker 1: And the renfestors, I presume they're getting better returns on
12:15
Speaker 1: the markets than they are on the property.
12:17
Speaker 3: Market, und right, And that's another thing you do, that
12:20
Speaker 3: comparison of yield. And now with a proposed cut in
12:25
Speaker 3: the capital gaing sex, if it's solely relating to property,
12:28
Speaker 3: you can start to see perhaps a gap open up there,
12:32
Speaker 3: just an additional data point that might prove that the
12:35
Speaker 3: market might deliver something quite different or more beneficently yield
12:39
Speaker 3: wise better than property.
12:41
Speaker 1: You mean the share market basically listening investments deliver better
12:44
Speaker 1: both in terms of price again and yield.
12:47
Speaker 3: Yes, yeah, yeah, And of course, as you.
12:49
Speaker 2: Said, you can gear if you want to. Yes, so
12:51
Speaker 2: many people do.
12:52
Speaker 3: You can move, that's right anymore they used to? Yeah,
12:55
Speaker 3: that's right, those we've learned those lessons.
12:58
Speaker 1: Yeah, happy to gear off hugely under on property and
13:01
Speaker 1: not wanting to do a penny gearing on shares for
13:04
Speaker 1: some reason.
13:05
Speaker 3: No, And that's again I could consider that to be
13:07
Speaker 3: the Australian way. But perhaps the other thing is people
13:10
Speaker 3: don't if they're at a point in their life where
13:12
Speaker 3: they want to take less risk or their transitioning executive roles,
13:16
Speaker 3: for example, So how much they want to borrow might
13:19
Speaker 3: be something they need some time to think about. Again,
13:21
Speaker 3: rent vesting is just gives them that flexibility buy some time.
13:25
Speaker 3: Perhaps the only thing I would discourage people from doing
13:29
Speaker 3: is being out of any of these markets for any
13:31
Speaker 3: extended period of time. So moving everything into cash is
13:35
Speaker 3: not the path I'd go down, if you know what
13:38
Speaker 3: I mean. But I don't like people selling in property
13:40
Speaker 3: and getting out and holding onto money. I'd rather say
13:43
Speaker 3: stick in the market. Stay in the market.
13:45
Speaker 1: Yes, right, if you're not and you can't win, that's
13:49
Speaker 1: true this week, all right. I did want to ask
13:51
Speaker 1: you one more question though, re investing. I saw a report,
13:54
Speaker 1: pretty good report on renvesting. You don't see much about us,
13:57
Speaker 1: I'm sure of folks and the nightly events. You don't
13:59
Speaker 1: know what we're talking about it, I'm sure you do.
14:01
Speaker 1: But it's where somebody says, Okay, instead of buying my
14:03
Speaker 1: first house, I'm going to the first property I buy
14:07
Speaker 1: is going to be a rental property. And then with
14:11
Speaker 1: the cash that's feed up from that, the person tries
14:15
Speaker 1: to basically build their investment portfolio with including this property,
14:19
Speaker 1: this rental property, and at the same time they rent
14:22
Speaker 1: wherever they want to rent, and that they can choose
14:24
Speaker 1: on that. But basically the idea is that you get
14:26
Speaker 1: ahead of the game. Seems to me all the investing well. Actually,
14:29
Speaker 1: this report showed that investing in Australia is alive and kicking,
14:31
Speaker 1: but mostly in Sydney, and I wonder is that because
14:35
Speaker 1: it is the higher the price of the properties involved,
14:40
Speaker 1: the better it works.
14:43
Speaker 3: I wouldn't say that's necessarily true, so I'd be surprised.
14:46
Speaker 3: I just think it's part of a strategy that you
14:49
Speaker 3: can have, and so I would have thought nationally reinvesting
14:53
Speaker 3: is alive and well, and in fact, I think at
14:56
Speaker 3: the lower end of the market, or certainly under a
14:59
Speaker 3: million dollars, so I think this can work quite well.
15:02
Speaker 3: The difficulty with that strategy is if you think that
15:05
Speaker 3: I'm going to get into the market and do it
15:07
Speaker 3: this way. The problem I've found is if this isn't
15:11
Speaker 3: a ten year strategy, then the reality is, again because
15:15
Speaker 3: of the cost of entering the market with transaction costs,
15:17
Speaker 3: you you might break even. You know that five to
15:21
Speaker 3: ten year horizon, and when people often say, you know,
15:24
Speaker 3: I've saved my money. This is how I'm going to
15:26
Speaker 3: the market. The challenge behind that is to get the
15:29
Speaker 3: next place that you're looking for. Have you actually got
15:32
Speaker 3: enough equity if you like the property you spend your
15:35
Speaker 3: money on.
15:35
Speaker 1: Oh, that's interesting, So what's a minimum infesting time fram.
15:40
Speaker 3: Oh it's not so much about re infesting. It's not
15:43
Speaker 3: so much about that. It's the trade off, So which
15:45
Speaker 3: decision are you making and when you're which market are
15:49
Speaker 3: you're entering into a what cost? So this I think
15:52
Speaker 3: re investing is providing more flexibility for people who are
15:55
Speaker 3: in the market.
15:56
Speaker 2: But while we're at it, is there. I mean, obviously
15:58
Speaker 2: you can't do it quickly.
16:00
Speaker 3: No you can't. But I think property in Australia is
16:03
Speaker 3: not a short term guy.
16:05
Speaker 2: So if you're thinking of investing, is there a minimum time.
16:07
Speaker 3: Frame, say five to ten years?
16:10
Speaker 2: Ye? Yeah, yeah, which is interesting.
16:12
Speaker 3: It's a long time with your strategic perspective. Yeah, it
16:15
Speaker 3: is a long time. And when you're younger things don't.
16:17
Speaker 4: Quite work out, especially when you're younger. Yeah, so if
16:21
Speaker 4: you're twenty five, you know you started, you're thinking thirty
16:23
Speaker 4: five and it falls into place, So sooner the better, folks.
16:26
Speaker 4: All right, I have some great questions which I've kept
16:29
Speaker 4: for Jackie. They are wide ranging.
16:30
Speaker 1: You will find them very interesting and they are all
16:32
Speaker 1: from you the listeners.
16:34
Speaker 2: Back in a moment.
16:42
Speaker 1: Hello, Welcome back to The Australian's Money Puzzled podcast. I'm
16:45
Speaker 1: James Kirby. I'm talking to Jackie Clark, regular on the show.
16:48
Speaker 1: She wrote the book How To stop worrying about money.
16:50
Speaker 1: She's also a regular contributor on sub stack, where she
16:54
Speaker 1: is known as your personal CFO. Okay, before we go
16:57
Speaker 1: to questions, listener, questions I should have made in the
17:00
Speaker 1: first part. Then the other thing I wanted to just
17:02
Speaker 1: quickly talk to you about was intergenerational property, where I
17:06
Speaker 1: see and I come across these fascinating examples of people
17:09
Speaker 1: buying properly but buying a either buying an old property
17:12
Speaker 1: that they divide into many parts to have, you know,
17:15
Speaker 1: different generations in there, or sometimes they're just building from
17:18
Speaker 1: the ground of plot of land and they're going to
17:20
Speaker 1: have you know, going to have granddad and grandmother and
17:22
Speaker 1: they're going to have.
17:23
Speaker 2: The kids there, et cetera. It's popular.
17:25
Speaker 1: I just wanted to know, have you in terms of
17:29
Speaker 1: your planet squeeze concept, which it sounds relevant here, is
17:33
Speaker 1: there anything people should know investors should know if they're
17:36
Speaker 1: going down that path.
17:38
Speaker 3: Oh, look, absolutely, James. I think one of the key
17:41
Speaker 3: considerations is asset protection. So if you're contemplating bringing multiple
17:46
Speaker 3: generations into one property, if you're the owner of that
17:50
Speaker 3: does make things complex in terms of the arrangements you
17:53
Speaker 3: have with each generation. And also with people who have
17:57
Speaker 3: married into the family, it's relevant how things are actually structured.
18:01
Speaker 3: So I mean it's a classic consideration for the Sandwich
18:04
Speaker 3: generation or what I call planet squeeze, and you think
18:07
Speaker 3: of the impact of people are getting married later, they're
18:10
Speaker 3: having children later. We've got this the neurogegenerative diseases are increasing,
18:15
Speaker 3: so we've got parents seeding care. People are contemplating bringing
18:19
Speaker 3: family into their homes, but recognizing this can be very
18:23
Speaker 3: complex and the costs are very high because as care accelerates,
18:28
Speaker 3: who bears the cost of that. And you can imagine
18:30
Speaker 3: in a state planning context how complicated that becomes. If
18:34
Speaker 3: you're the family member who takes on the parents, You've
18:37
Speaker 3: still got your mature adult kids at home. These things
18:40
Speaker 3: get more and more complicated over time. So I think
18:43
Speaker 3: the key message is around communication and structure. So when
18:47
Speaker 3: you go down the path of doing this thing, you
18:49
Speaker 3: really need to set some rules around how you're all
18:52
Speaker 3: going to live together and perhaps what the arrangements are,
18:56
Speaker 3: both financially and non financially. So that's the key thing
19:00
Speaker 3: for me, is really sharing the load with family if
19:02
Speaker 3: you can.
19:03
Speaker 1: Sounds like it is imperative on this occasion to seek advice.
19:08
Speaker 3: Absolutely mmmm yeah.
19:11
Speaker 1: I would expect so, because you come across these they
19:13
Speaker 1: do you know, they do look attractive and of course
19:15
Speaker 1: it can be very useful because you're optimizing land and
19:20
Speaker 1: the value of land, which is our biggest expense.
19:23
Speaker 2: From most people.
19:24
Speaker 3: You see this in a lot of regional families, James
19:27
Speaker 3: and I certainly see this in regional New South Wales
19:29
Speaker 3: where a big piece of land it's natural the easiest
19:32
Speaker 3: thing to do in the next generation build there, and
19:35
Speaker 3: the next generation gets married and has children, and that
19:38
Speaker 3: might be that one child who stayed in the regional area,
19:41
Speaker 3: but the other child's gone to the city. That you
19:44
Speaker 3: can see how very quickly that complicates the land ownership
19:47
Speaker 3: and the cost of the structure that they've built. They
19:50
Speaker 3: might have funded that themselves. Again, it makes it very
19:53
Speaker 3: unclear from a state perspective how that will break up
19:57
Speaker 3: in time.
19:58
Speaker 1: It would be terrible that so a high minded idea
20:01
Speaker 1: of intergenerational property. In fact, the end result of it
20:05
Speaker 1: is that everyone's fighting in court.
20:07
Speaker 3: And I bet that happens a loss of stories in
20:10
Speaker 3: the country about in every country.
20:11
Speaker 1: Don't worry about that, all right, we must do the
20:14
Speaker 1: questions Danielle asks, I love the money puzzle.
20:16
Speaker 2: Thank you so much, Thank you, Danielle.
20:18
Speaker 1: On the show in twenty to February, Danielle asked a
20:22
Speaker 1: question another Danielle asked a question about the surcharge in
20:26
Speaker 1: relation to private health.
20:27
Speaker 3: Cort Yes, okay, baby, actually job okay, so and we'll
20:33
Speaker 3: just read it.
20:33
Speaker 1: The tax office pretty much considered us as a family,
20:36
Speaker 1: and even if one person is not covered, they're all
20:39
Speaker 1: liable for the medical care levy searcharge. Okay, folks, this
20:42
Speaker 1: is when you don't have private health cover and you're
20:44
Speaker 1: prepared to pay the levee surcharge. Now hear this, Danielle says,
20:49
Speaker 1: I find this situation applies also to a couple. My
20:53
Speaker 1: husband has private health cover, but I've gopped mine. My
20:56
Speaker 1: accountant informs me that in relations to the surcharge, we
20:58
Speaker 1: are not assessed as individuals, but as a couple, and
21:01
Speaker 1: both of us needs to be covered, not just one
21:04
Speaker 1: of us. Ooh, that's the way I understand it. I
21:06
Speaker 1: got only have this wrong. Can you tell me?
21:09
Speaker 3: I'm afraid I'm afraid Danielle's accountant is one hundred percent
21:12
Speaker 3: spot on. So there's a specific rule around the medical
21:15
Speaker 3: levy surcharge and essentially the ATO treats couples as a
21:20
Speaker 3: family unit in respect of levying the medical levy charge.
21:23
Speaker 3: So everyone needs to have the private health cover otherwise
21:27
Speaker 3: you basically a hit with the surcharge.
21:29
Speaker 1: You can't you can't do you can't partially do it.
21:32
Speaker 2: Either you all don't have it or you will habit.
21:34
Speaker 2: Is that basically the unswer.
21:36
Speaker 3: It's one hundred percent right and the end. She's also
21:40
Speaker 3: writing her comment around the additional The increase in the
21:44
Speaker 3: threshold for couples was fifteen hundred dollars for one after
21:47
Speaker 3: the first child is tiny, so it's a very small threshold.
21:52
Speaker 2: Most people don't know that. I imagine sort of thing that's.
21:54
Speaker 3: No, it sounds like a hack, but clearly that gap
21:57
Speaker 3: has been closed.
21:59
Speaker 1: Okay, thank you very much, Danielle. Not a advice, always
22:03
Speaker 1: a course information only. Oh right now, next question, Hi, James.
22:07
Speaker 1: We had a split home loan for our principal place
22:10
Speaker 1: of residence, two year fixed loan for a certain amount
22:13
Speaker 1: and another amount variable. It was a condition of being
22:16
Speaker 1: able to get this loan with mcquarie. We had one
22:19
Speaker 1: year left on the fixed loan and I wanted to
22:21
Speaker 1: get out of it so we could have a variable loan.
22:24
Speaker 1: Loan documentation warns of significant costs for breaking the fixed
22:27
Speaker 1: loan early. I finally decided to contact McCartie to find
22:30
Speaker 1: out how much it would cost and calculate if it
22:33
Speaker 1: was worth it, and the final cost was dump.
22:36
Speaker 2: Are you ready? Actually the answer is zero.
22:38
Speaker 1: It's not a complaint. I was more than surprised. And
22:42
Speaker 1: given I have just sold an investment property, the offset
22:45
Speaker 1: accounts are full and McCary is missing out on a
22:47
Speaker 1: lot of interest payments. Did we just get lucky?
22:50
Speaker 2: Well?
22:54
Speaker 3: I think this is great. First thing, First, if you
22:57
Speaker 3: enter into any fixed agreement, you want to be really
23:02
Speaker 3: sure about the terms and conditions for exiting that. We've
23:05
Speaker 3: all been stung once in our lives.
23:07
Speaker 2: I also had got easier, generally broader.
23:10
Speaker 3: They have, and I think, look, the big picture here
23:12
Speaker 3: is any and I both know mccruarie bank has been
23:14
Speaker 3: incredibly strategic with market share and wanting to take market
23:18
Speaker 3: share off the other big banks.
23:20
Speaker 2: It's crazy against the big four.
23:22
Speaker 3: This is just a marketing move in a good way
23:25
Speaker 3: and James has benefited from that. So look, I think
23:28
Speaker 3: this is a win. Take it. They may have got lucky. Yes,
23:32
Speaker 3: But the reality is mccruary's looking for brand advocacy in
23:36
Speaker 3: space and here it is definitely perfect example.
23:40
Speaker 1: Here it is also was going that come work bank
23:43
Speaker 1: mccommune CBE chief is actively openly complaining about Macquarie's well
23:51
Speaker 1: distinct status as an investment bank active in standard high
23:56
Speaker 1: street banking these days, whereas him and the other four
23:59
Speaker 1: banks are traditional banks, and he's kicking like to get
24:02
Speaker 1: Macquarie sort of reclassified. But Mcquarie for the moment are
24:05
Speaker 1: sort of enjoying the best of both words. There are competitive,
24:07
Speaker 1: They're competing on mortgages, they're competing on deposits if the
24:10
Speaker 1: damn good deposit rate, So I'm not surprise people are
24:12
Speaker 1: flowing into them. Bring on the competition, That's all we
24:14
Speaker 1: can say as usual. Okay, last question from Fuson f
24:17
Speaker 1: Usu N. When I started my first tax free income
24:22
Speaker 1: stream account, my transfer balance cap was one point six million.
24:27
Speaker 1: My current available cap space is sixty seven thousand. My
24:30
Speaker 1: total income stream account balance has grown to one point
24:33
Speaker 1: nine million. This asset growth of one point six to
24:36
Speaker 1: one point nine happened inside the income stream account. Okay,
24:40
Speaker 1: Now Fuson's question. My current superinuation provider is in the
24:44
Speaker 1: process of merging with Aware Super. We kind of guess
24:47
Speaker 1: who that is. After my tax free income stream account
24:50
Speaker 1: is transferred into Aware Super, how much will I have
24:53
Speaker 1: in the new tax three pension account one point six
24:56
Speaker 1: or one point nine I imagine there's a standard answer
24:58
Speaker 1: to that, Jackie, do you know well.
25:01
Speaker 3: The answer is yes, it should transfer. But the question remains,
25:05
Speaker 3: what is the value at the transfer date? Now? And
25:09
Speaker 3: I'm conscious of the way the market has been impacted,
25:13
Speaker 3: certainly in the last couple of days, so that's going
25:15
Speaker 3: to be quite significant impact to you for fusion, But
25:19
Speaker 3: the reality is that the account value will transfer that
25:21
Speaker 3: so it should be at one point nine million based
25:24
Speaker 3: on the information that Fuston's provided us with today.
25:27
Speaker 2: Okay, okay, that's all we can do.
25:29
Speaker 1: That's information only, but I think it's a clear answer,
25:31
Speaker 1: and that's what everybody loves. All right, Very good, very good,
25:34
Speaker 1: Thank you very much, Jackie Clark. Great to have you
25:37
Speaker 1: on board. We know all of your book How to
25:39
Speaker 1: Stop Worrying about Money, Jackie, Costs and Advisor to Family Offices,
25:42
Speaker 1: among other things, and your subsec your presios CFO. Thank you,
25:47
Speaker 1: very much Jackie.
25:48
Speaker 3: Thanks James. Has been lovely to be here today.
25:50
Speaker 1: Great to have you on the show as always, and
25:52
Speaker 1: folks still keep the emails coming. The money puzzle at
25:54
Speaker 1: the Australian dot com dot you let's have some reviews
25:57
Speaker 1: on the Apple iPod. Love to see some because the
25:59
Speaker 1: other ones are very old and we would like to
26:01
Speaker 1: have some fresh ones. Today's show was produced by Leah
26:04
Speaker 1: Samon Glue.
26:05
Speaker 2: Talk to you soon.