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Australia’s Budget Bombshell - Your Investment Strategy May Need To Change · TFS WealthCast

• 0:00
  SPEAKER_03: Hi guys, and welcome to another episode of the TFS Wealthcast.
• 0:05
  SPEAKER_03: And today's episode, we are going to be focusing on the new budget, which was just released a few days ago.
• 0:12
  SPEAKER_03: And we're going to talk about why this budget matters.
• 0:16
  SPEAKER_03: What changed.
• 0:17
  SPEAKER_03: The three big tax changes, which are negative gearing, your CGT, and of course trust.
• 0:25
  SPEAKER_03: And we're going to talk about the winners and the losers, the ones who benefit, and the ones who are going to be paying more.
• 0:33
  SPEAKER_03: And to go through all this, joining me today is none other than uh one of our founders and Cou O, Miss Sunali.
• 0:41
  SPEAKER_03: Mrs.
• 0:42
  SPEAKER_03: Sonali.
• 0:44
  SPEAKER_03: Hi Sunali.
• 0:45
  SPEAKER_03: How are you?
• 0:46
  SPEAKER_00: Hi, good, good.
• 0:47
  SPEAKER_03: It's an exciting topic, Sonali.
• 0:49
  SPEAKER_00: Very interesting.
• 0:50
  SPEAKER_00: Yes, okay.
• 0:52
  SPEAKER_00: Dry yes, but let's get into it.
• 0:54
  SPEAKER_03: So before we begin, you know, every I'm pretty sure a lot of people are doing podcasts and videos about this and content based on this.
• 1:01
  SPEAKER_03: But before this budget came out, what were your expectations?
• 1:04
  SPEAKER_03: Were you expecting it to turn out the way it did?
• 1:07
  SPEAKER_03: Or did it surprise you?
• 1:09
  SPEAKER_00: No, it was a bit surprising because one of the things that Labor had promised was they wouldn't touch negative gearing.
• 1:14
  SPEAKER_00: So it was completely yeah, it was a complete backflip.
• 1:19
  SPEAKER_00: So that was a bit surprising.
• 1:20
  SPEAKER_00: But uh a couple of days before the budget, obviously you hear whispers.
• 1:24
  SPEAKER_00: So yeah, we got to know and yeah, still surprised at some of that.
• 1:29
  SPEAKER_03: I mean, there was a lot of speculation around the whole negative gearing and CG.
• 1:33
  SPEAKER_00: Yeah, yeah.
• 1:34
  SPEAKER_00: But um, yeah, it's a massive overhaul.
• 1:36
  SPEAKER_00: And uh yeah, I'm interested to see how this turns out.
• 1:39
  SPEAKER_00: Yeah.
• 1:40
  SPEAKER_03: I think one of the biggest surprises was that they okay, they got rid of the of negative gearing and then the CTG uh tax discount, right?
• 1:50
  SPEAKER_03: But they also started taxing shares and other investments.
• 1:54
  SPEAKER_00: Yeah, I think it was more yeah, you're right.
• 1:57
  SPEAKER_00: So if they were trying to really sort of um manipulate the property market, um they could have isolated that and left the other ones out, the other asset classes out, but no, they did a blanket um approach to it.
• 2:13
  SPEAKER_00: So um looks a bit of a tax gouge as far to me, but government just trying to cover their losses, yeah.
• 2:21
  SPEAKER_00: So and yeah, spend more in other areas basically.
• 2:24
  SPEAKER_00: Yeah.
• 2:24
  SPEAKER_03: Alright, sonari.
• 2:25
  SPEAKER_03: So let's dive straight into uh into it, right?
• 2:27
  SPEAKER_03: Uh let's talk about the three big tax changes, and like you mentioned, negative gearing was one of the biggest.
• 2:34
  SPEAKER_03: So uh what is negative gearing, Sonari, in simple terms?
• 2:38
  SPEAKER_00: So, negative gearing, obviously, you will hear this term thrown about quite a bit when we talk about property investment.
• 2:44
  SPEAKER_00: Simply put, um, when you have a rental property, you get rental income, and there are expenses associated with it.
• 2:52
  SPEAKER_00: So, expenses such as interest expenses, insurance, you pay a property manager uh a management fee to manage the property for you.
• 3:00
  SPEAKER_00: There might be rates, council rates, there might be water rates, things like that, right?
• 3:05
  SPEAKER_00: So when you look at the overall picture, how much income is coming in, how much expenses are going out, if you're making a loss that is called a property is negatively geared, basically.
• 3:15
  SPEAKER_00: Now, under the old rules, um, that loss you could offset it against your salary income, or if or if if you were self-employed, your self-employed income, thereby reducing your overall taxable income.
• 3:28
  SPEAKER_00: But um moving forward, they have scrapped that, so you're not no longer able to negatively gear or use that loss to offset against uh your salary or um self-employed income if it the loss is created by an established property.
• 3:43
  SPEAKER_00: You can still do it for newly built properties, but you just can't do it if it was an established property.
• 3:50
  SPEAKER_00: Um now the date on which well the the actual date that matters is obviously 12th of May, 7:30, they say.
• 3:57
  SPEAKER_00: Um I don't know the uh significance of the time.
• 4:01
  SPEAKER_00: Maybe they check the time that you sign your contract, which in this day and age you can.
• 4:06
  SPEAKER_00: So you could probably argue that if you signed at five o'clock uh before it was announced, you qualify as an established.
• 4:12
  SPEAKER_03: But then in that case, the contracts have to be signed by both parties, right?
• 4:16
  SPEAKER_03: That's right.
• 4:16
  SPEAKER_00: Yeah, to be executed.
• 4:17
  SPEAKER_03: So just because the customer signs and then No, yeah.
• 4:20
  SPEAKER_00: No, so you know, I'm sure there must be some significance like that.
• 4:23
  SPEAKER_00: Um, yeah, maybe Aloy can shed some light on that.
• 4:26
  SPEAKER_00: Um, but yeah, so if you owned a property, um, an established property, you're fine.
• 4:32
  SPEAKER_00: You go, it goes as an a property that you already own, and thereby you are protected under the grandfathering rules.
• 4:39
  SPEAKER_00: But if you buy a property, an established property after the 12th of May, you will no longer be able to use those negative losses against um to offset your taxable income, basically.
• 4:50
  SPEAKER_03: Uh on that sonal, you mentioned grandfathering, the grandfathering rule, right?
• 4:55
  SPEAKER_03: Can you uh elaborate a bit more on what this term is?
• 4:58
  SPEAKER_00: So simply put, say for myself, now I had a couple of established properties that I owned before 12th of May.
• 5:04
  SPEAKER_00: I had already exchanged contracts, and you know, uh, even if it's not settled, they go by the date that you exchange the contracts.
• 5:12
  SPEAKER_00: So you might settle, say, in June, July.
• 5:14
  SPEAKER_00: That's still fine, it's the contract date.
• 5:17
  SPEAKER_00: Um, so if you already owned a property on that date, you are fine.
• 5:21
  SPEAKER_00: You have you can use the existing rules, which are to be able to offset the negative gearing losses against your taxable income.
• 5:28
  SPEAKER_00: But um, yeah, so grandfathering essentially means you can make use of the existing rules, uh, even though the rules change moving forward, you're protected until you sell that property, basically.
• 5:40
  SPEAKER_03: Okay, so basically, customers, invest investment uh investors who purchased property before this, they're safe.
• 5:46
  SPEAKER_03: That's safe.
• 5:47
  SPEAKER_00: Anyone who else who's thinking of buying established investment properties now that has to really that has to really think about, um, especially there are some of our clients as well who are in like a like a really uh tricky period where they've got approval from the bank for a certain amount, but they're out there looking for established investment properties.
• 6:07
  SPEAKER_00: Now, we've spoken to all our clients who are in that position because moving forward, we don't really know what the banks are going to look at.
• 6:15
  SPEAKER_00: None of this is set in stone yet, it's not legislated yet.
• 6:18
  SPEAKER_00: Um, so therefore, it's a tricky period where no one is really sure if the banks are going to turn around and be like, okay, you no longer qualify for negative gearing.
• 6:26
  SPEAKER_00: We have taken negative gearing in your borrowing capacity calculations and approved you for this loan, we can no longer give you that loan.
• 6:34
  SPEAKER_00: So you gotta be very careful if you are signing something to sign it subject to finance so that we can then go to the bank and get formal approval so that you know that you're in the clear.
• 6:44
  SPEAKER_00: So if anyone's out there buying established investment properties, please make sure you yeah, sign your contract subject to finance.
• 6:51
  SPEAKER_03: So, in that case, since they've taken off negative gearing on established properties, how does this affect the or potentially affect the borrowing?
• 6:59
  SPEAKER_00: Like, yeah, it can it it goes down.
• 7:02
  SPEAKER_00: So, yes.
• 7:02
  SPEAKER_00: So all of the banks, when they look at your servicing capacity, they uh take into account the benefit of this negative gearing, yeah, reducing your taxable income.
• 7:14
  SPEAKER_00: Thereby, you pay less tax, thereby having more discretionary spending to spend towards the loan repayment.
• 7:20
  SPEAKER_00: That's how they look at it.
• 7:22
  SPEAKER_00: So when negative gearing is taken off, your discretionary income that you have towards um loan repayments will reduce, therefore, they will give you a lower loan.
• 7:33
  SPEAKER_00: So, yeah.
• 7:34
  SPEAKER_03: And and this is only for investment loans or own occupied as well?
• 7:38
  SPEAKER_00: No, own occupies are they're fine because that you're gonna live in it.
• 7:41
  SPEAKER_00: So there wasn't any tax benefit taken into account in those calculations.
• 7:45
  SPEAKER_00: It's only for the investment uh clients, also only for the investment clients buying an established property.
• 7:52
  SPEAKER_00: So if you're thinking of buying a brand new property, a house and land, no impact on you, you still have negative gearing benefits available.
• 7:59
  SPEAKER_00: Um, we still don't have direction from the banks exactly how they're gonna look at this servicing.
• 8:04
  SPEAKER_00: They'll probably release new serviceability calculators with all of this incorporated once it's legislated.
• 8:10
  SPEAKER_00: But yeah, we're still in that tricky period where it was announced, but not a lot of the nitty-gritty is known yet, basically.
• 8:17
  SPEAKER_03: Yeah.
• 8:17
  SPEAKER_03: So we we won't know for sure until the banks come out with the updated policies, right?
• 8:21
  SPEAKER_00: Yes, correct.
• 8:22
  SPEAKER_00: But the banks can't come out with it because you know it's not legislated and it maybe things can change.
• 8:28
  SPEAKER_00: Yeah, so this is as at what was announced on the 12th, basically.
• 8:31
  SPEAKER_03: Judging by the people uh the public's reaction, I think this government is definitely gonna change.
• 8:36
  SPEAKER_00: Yeah.
• 8:37
  SPEAKER_00: I get to vote in the next election, so uh I'll go cast my word.
• 8:42
  SPEAKER_03: So uh so that's negative gearing.
• 8:45
  SPEAKER_03: Now, let's go to the other big bad capital gains tax.
• 8:50
  SPEAKER_00: Oh, I I I'm still very interested to see how they're going to administer this because uh it's it's very complicated, and they've also taken into account pre-85 assets which you know largely were exempt for a long period of time.
• 9:08
  SPEAKER_00: Um, so yeah, people most people can't find paperwork from things that happened last week.
• 9:13
  SPEAKER_00: So try finding paperwork from things that happened 40 years ago.
• 9:17
  SPEAKER_00: Good luck with that.
• 9:18
  SPEAKER_03: So um and that's why you need uh you know a financial planner.
• 9:21
  SPEAKER_00: Well, personally, I'm not great with paperwork either.
• 9:25
  SPEAKER_00: You know, I don't keep the I keep things for about seven, eight years, but that's it.
• 9:29
  SPEAKER_00: Like 40, 20 years even it's yeah, yeah, anyway.
• 9:33
  SPEAKER_03: So now how does CGT work now?
• 9:36
  SPEAKER_00: So at the moment, if you have an asset and you own that asset for more than 12 months and you sell it after 12 months or have owned it for 12 months, any gain that you make on that, it's you get a in an immediate 50% discount on that gain, and that gain is then added to your taxable income, and you're taxed at your marginal tax rate, so no, your normal tax rates.
• 10:01
  SPEAKER_00: Um, so let's say you um made a gain of$100,000, you have had that asset for more than 12 months, only$50,000 of that will be added towards your taxable income, and you would be taxed as normal.
• 10:15
  SPEAKER_01: Okay.
• 10:16
  SPEAKER_00: So typically we do quite a bit of tax planning around this because it gets added to your taxable income most of the time, with like you know, with planning and all of that, we kind of tell clients, okay, maybe we should get rid of this asset in a year where you don't have a lot of taxable income so that you know, in a year that you have a lot of taxable income, you don't want to add more into it and pay more tax.
• 10:39
  SPEAKER_00: So maybe let's time it so that you know you get rid of this asset in a year where you know that you're not going to have as much, thereby paying less tax.
• 10:48
  SPEAKER_00: So there was a lot of planning opportunities around that when we could do that.
• 10:52
  SPEAKER_00: But now with the new rules, they have scrapped the 50% discount.
• 10:56
  SPEAKER_00: They've brought in an indexation uh option.
• 11:00
  SPEAKER_00: Again, not a lot of information is there around indexation.
• 11:04
  SPEAKER_00: Um, all we know is that they'll take the cost base and index it.
• 11:08
  SPEAKER_00: I don't know by how much, I don't know the mechanism behind it because it's not very clear yet.
• 11:12
  SPEAKER_00: Um, and then you pay uh uh tax on the gain.
• 11:18
  SPEAKER_00: However, they also have introduced a minimum 30% tax rate on that.
• 11:22
  SPEAKER_00: Okay.
• 11:23
  SPEAKER_00: Which sucks really.
• 11:25
  SPEAKER_00: So um for want of a better word, because um that there's then the planning stuff that we have already done, we now have to go and revisit all of that um as well.
• 11:37
  SPEAKER_00: And then moving forward, it's going to be very difficult to sort of, you know, um how to get rid of certain assets, when do we dispose of them?
• 11:46
  SPEAKER_00: Because, you know, it's one of those things where with especially with investment properties, we talk about accumulating, but we also talk about how do we then divest and um get rid of them when we are retiring so that they can then fund our retirement.
• 12:01
  SPEAKER_00: That was that's usually the plan, right?
• 12:03
  SPEAKER_00: So all of this will mean that we now need to go and revisit all of that and see how best to sort of structure them.
• 12:10
  SPEAKER_00: Um, but again, look, if someone's you know smart about these things, there's always ways to do things and still achieve your goals, but there's a lot of work that needs to be done then.
• 12:23
  SPEAKER_03: Yeah, and then and then also people need to educate themselves as well.
• 12:26
  SPEAKER_03: That's right.
• 12:26
  SPEAKER_03: More than that, yeah.
• 12:27
  SPEAKER_00: So um, as opposed to making things easier at tax time, this would add another layer of complexity um for the client.
• 12:36
  SPEAKER_00: So there's no way now that a lot of people can do their own taxes, they'll have to have an accountant.
• 12:41
  SPEAKER_03: And and and that to uh an experienced accountant, right?
• 12:45
  SPEAKER_00: Yes, because there's so many things, and with the CGT, the funny thing is like with negative gearing, existing clients were exempt, grandfathered, so they were fine.
• 12:55
  SPEAKER_00: But then with C uh the CGT changes, they've got a cutoff date, and then from that date, 1st of July 2027, up until then, you have the 50% discount, but any gains from that day onwards is treated with with the new treatment.
• 13:12
  SPEAKER_00: So you have a mix of treatments then for one asset then, and then on the first of July, you need to know what the value of your asset is as well.
• 13:20
  SPEAKER_00: So there are a lot of layers then that you'll have to you know go through and be mindful of as well if you are then you know holding assets.
• 13:28
  SPEAKER_00: Um, if you do something before that or sell before that, then you still have the old rules basically.
• 13:33
  SPEAKER_00: But if you go past that first of July 2027 date, then you'll have essentially two treatments for the same asset.
• 13:41
  SPEAKER_00: So it's a bit complicated to be honest.
• 13:43
  SPEAKER_03: So, as an investor, uh, are you planning on selling any properties in your portfolio?
• 13:48
  SPEAKER_00: I might sell, yeah, we we might sell one or two, but again, you don't want to sell a lot during one year as well, because then we will increase your taxable income.
• 13:58
  SPEAKER_00: So you had to be smart about how you do it.
• 14:00
  SPEAKER_00: Um, and then also uh because we've got in certain structures, I need to then revisit all of that and see what's the best option.
• 14:09
  SPEAKER_00: So there's going to be quite a bit of planning needed for a lot of people.
• 14:12
  SPEAKER_03: Yeah, yeah.
• 14:13
  SPEAKER_03: So as an as an investor, as a property investor yourself, do you look at yourself investing more in brand new builds now?
• 14:21
  SPEAKER_00: Or are you gonna I have always um invested more in brand new builds.
• 14:25
  SPEAKER_00: Obviously, it comes with the territory, we get access to quite a bit of that.
• 14:28
  SPEAKER_00: So um we've invested uh quite a bit in brand new builds.
• 14:33
  SPEAKER_00: So I don't think that will change anyway.
• 14:35
  SPEAKER_03: Um so then I don't think but even with all these new changes, your view on brand new builds remains stays the same.
• 14:41
  SPEAKER_00: Um it's yeah, because um that just suited us uh for a variety of reasons.
• 14:46
  SPEAKER_00: Um we like building as well, so um that wouldn't change personally for us.
• 14:52
  SPEAKER_00: Yeah, yeah.
• 14:55
  SPEAKER_03: Um so now one thing that I've seen uh with most of the builders we work with, they've amped up their marketing on new builds of the plan, right?
• 15:07
  SPEAKER_03: Uh so what do you see for the future demand of brand new builds?
• 15:13
  SPEAKER_03: Of course, given the current context, I see demand going up.
• 15:19
  SPEAKER_03: So, how would this affect uh the market now?
• 15:22
  SPEAKER_03: Because one of the whole points of this um new budget was to make it easier for first home buyers to get into the market.
• 15:30
  SPEAKER_00: Um look, obviously, when demand goes up, the prices will end up going up.
• 15:37
  SPEAKER_00: So um most likely the developers would put the prices up quite quickly.
• 15:42
  SPEAKER_00: Yeah.
• 15:42
  SPEAKER_00: Um, so affordability will then become a problem.
• 15:45
  SPEAKER_03: So we're not making it easier, though.
• 15:49
  SPEAKER_00: Yeah.
• 15:50
  SPEAKER_00: Um, but then look, what what I think the government was trying to do was modify investor behavior with this, right?
• 15:56
  SPEAKER_00: So to try and reduce the competition in the established market by um making it less attractive for investors to be in that space, thereby reducing competition there and demand there, so that hopefully the first home buyers could get in and buy an established property.
• 16:13
  SPEAKER_00: With the new bills, their thing is okay, if it increases the housing supply, then again, yeah, that helps with the pricing.
• 16:21
  SPEAKER_00: So that's where they were going with it.
• 16:24
  SPEAKER_00: Um, but yeah, it remains to be seen whether that'll fix what they thought would fix, or whether you know, we see less um investors having less houses available for rent and therefore having an unintended impact on the rental market.
• 16:44
  SPEAKER_01: Yeah.
• 16:44
  SPEAKER_00: Um, because now all of a sudden, investors can't be bothered to put properties out for rent, and therefore there's more demand for the existing properties, thereby driving the rents up.
• 16:54
  SPEAKER_00: So while helping the first-term buyers, the government may have unintendedly kind of, you know, just shot a whole other demographic people in the people.
• 17:04
  SPEAKER_00: But then also there's probably a lot more renters than there are people looking to buy.
• 17:08
  SPEAKER_00: So yeah, let's see how this goes.
• 17:12
  SPEAKER_03: And with another uh rate announcement in June, most likely to go up.
• 17:17
  SPEAKER_00: Yeah, so you've got you're getting hit on all fronts, really.
• 17:21
  SPEAKER_00: So yeah.
• 17:22
  SPEAKER_03: Alright, Solari.
• 17:24
  SPEAKER_03: So uh the third uh element we're gonna talk about on the three big tax changes, right?
• 17:32
  SPEAKER_03: Is the change to trusts.
• 17:35
  SPEAKER_03: Right?
• 17:36
  SPEAKER_00: Not a lot of people are talking about it.
• 17:38
  SPEAKER_00: I think everywhere I've seen all the property gurus and all the negative gearing and capital gaining.
• 17:43
  SPEAKER_00: That's all people are screaming about on social media.
• 17:47
  SPEAKER_00: Um, so this trust, um, so discretion.
• 17:50
  SPEAKER_00: There I think there's about a million discretionary trusts in Australia at the moment.
• 17:55
  SPEAKER_00: It's almost like the favorite vehicle for small business owners.
• 17:59
  SPEAKER_00: You go to an accountant, you operate as a sole trader, and then when you're doing reasonably well, you get told to do a trust, basically.
• 18:06
  SPEAKER_00: The reason is because you have the discretion on how to distribute the income.
• 18:11
  SPEAKER_00: Um, so that if you know you you earn a reasonable profit in the trust, and then you have family groups or whatever, you can distribute to the family members yourself and all of that, and do a bit of tax planning around it.
• 18:24
  SPEAKER_00: You had the discretion.
• 18:25
  SPEAKER_00: And there was no set rule where if you distributed a certain way one year, you had to do the same way the next year.
• 18:32
  SPEAKER_00: So depending on the individual's incomes, you can make changes.
• 18:35
  SPEAKER_00: So it had it you had a lot of flexibility with this structure, right?
• 18:39
  SPEAKER_00: But now they're looking to change that.
• 18:42
  SPEAKER_00: They are looking to introduce a flat 30% tax rate in the entity in itself.
• 18:47
  SPEAKER_01: Okay.
• 18:47
  SPEAKER_00: Which means it's almost like, you know, um, another option accountants would suggest is to open a company.
• 18:54
  SPEAKER_00: The reason why people don't open a company as opposed to a trust is because there's a flat tax rate in a company, right?
• 19:01
  SPEAKER_00: So then a lot of people would prefer to have the flexibility to sorry um to uh be able to distribute income.
• 19:08
  SPEAKER_00: So with this one, if they introduce a flat 30%, then it's almost like, okay, then do I do a company then?
• 19:15
  SPEAKER_00: Because that rate is probably less than that for smaller businesses.
• 19:18
  SPEAKER_00: So there's going to be a lot of questions asked around that, and a lot of small businesses are going to be impacted.
• 19:24
  SPEAKER_00: So um I think people would really need to have a look at their um structures, have a chat with their accountants.
• 19:32
  SPEAKER_00: Now, this is, I think, from what I read, getting into uh effect from 1st of July 2028.
• 19:39
  SPEAKER_00: So there's a little bit of time for you to do a bit of planning to see if you should change structures or what you should do, but um certainly something again that'll have quite a bit of an impact on the small business owners.
• 19:52
  SPEAKER_00: So um not entirely sure who that's meant to help, actually, but except the government.
• 19:59
  SPEAKER_00: But um, yeah.
• 20:01
  SPEAKER_03: So small business owners, I mean, you even though you have to 2028, you know, you need to speak to a financial planner.
• 20:09
  SPEAKER_00: Well, for this one, to be honest, mostly an accountant, because um it's related to how they run the business and you know um what plans they have for the business.
• 20:19
  SPEAKER_00: Should they move to a company structure, should they move to a fixed trust, or you know, I don't know.
• 20:24
  SPEAKER_00: So yeah, it's something that you definitely should look at.
• 20:29
  SPEAKER_03: Awesome.
• 20:30
  SPEAKER_03: So, guys, there you go.
• 20:31
  SPEAKER_03: Those are the three uh biggest tax changes that we're focusing on, and now we're gonna talk about the winners and the losers from this new budget.
• 20:41
  SPEAKER_03: Uh so some some winners, right?
• 20:45
  SPEAKER_03: Uh our workers because more than 13 million workers will receive a$250 working Australian tax offset from 2027 to 2028.
• 20:58
  SPEAKER_00: Uh, yeah,$250.
• 21:01
  SPEAKER_00: What do you think about that?
• 21:02
  SPEAKER_00: I think people would just go shopping with it and then they'll say, Oh, yeah, we've got inflation, and therefore we need to increase the rates.
• 21:10
  SPEAKER_00: So I don't know.
• 21:10
  SPEAKER_00: It's not it's neither here nor there.
• 21:12
  SPEAKER_00: What are you gonna do with it?
• 21:13
  SPEAKER_03: And the prime minister really emphasized a lot on the$250 of like what if you want to better deal refinance with us, and we have a better cashback offer.
• 21:25
  SPEAKER_00: I know, right?
• 21:26
  SPEAKER_00: And far and you could probably save far more than$250, you know, by yeah.
• 21:32
  SPEAKER_03: So also, yeah, so small plug.
• 21:34
  SPEAKER_03: If anyone is looking at refinancing and fixing their loan term for on a two-year fixed uh for two years, we have a$2,000 cashback offer that we're running.
• 21:44
  SPEAKER_03: So do contact us to find out more.
• 21:46
  SPEAKER_03: Now, the second winner, and this this was the winner that had uh most of the emphasis on our first home buyers because the government says housing tax changes are intended to support own occupiers and.
• 22:00
  SPEAKER_03: Could add around 75,000 additional homeowners over time.
• 22:04
  SPEAKER_03: Now we did uh discuss a bit on this uh previously about uh a few minutes ago.
• 22:12
  SPEAKER_03: But to speak on this again, because we do have a significant amount of first home buyer clients that we work with and help out.
• 22:20
  SPEAKER_03: How are these clients affected now, Sonali?
• 22:22
  SPEAKER_03: The ones who already got their pre-approvals.
• 22:26
  SPEAKER_00: The ones who've already got their pre-approvals for an unoccupied property, they won't have too much of an impact other than the fact that you know there might be some activity going on.
• 22:37
  SPEAKER_00: Uh right now, if they're looking for a new property, those prices might go up.
• 22:42
  SPEAKER_00: Developer stock, it's very easy to increase the price immediately, right?
• 22:46
  SPEAKER_00: So um they might you know find that that's gone up.
• 22:50
  SPEAKER_00: Um, but yeah, not too affected right now for the first home buyers or unoccupied uh lending.
• 22:56
  SPEAKER_00: Um, but it's the investors basically that really need to be mindful of the approval they have at hand before they go and buy something.
• 23:03
  SPEAKER_03: Yeah, but but like we spoke, you know, uh builders are definitely looking at increasing prices, right?
• 23:08
  SPEAKER_03: So first home buyers who are still thinking and you know, way they should probably um get in before the builders get their act together.
• 23:17
  SPEAKER_03: Exactly.
• 23:20
  SPEAKER_03: And another winner, uh new build investors and developers, new builds retain the most favorable tax settings and undertake uh in get the most tax benefits from this new framework, right?
• 23:35
  SPEAKER_03: Uh so like we discussed, we we are seeing builders going to increase prices.
• 23:41
  SPEAKER_03: But but in terms of developments, now since uh you went from who you know, you guys are into your own developments as well.
• 23:47
  SPEAKER_03: Do you see this as an opportunity to there as well?
• 23:52
  SPEAKER_00: Vish the the guidance is not clear yet because I read in one um uh report new builds, you have to be careful what gets classified a new build.
• 24:02
  SPEAKER_00: So you would assume a knockdown and you build a new house would get classified a new build.
• 24:07
  SPEAKER_00: I did read somewhere that if you build one single house, then it's not classified a new build.
• 24:13
  SPEAKER_02: Okay.
• 24:14
  SPEAKER_00: Um you have to either have a duplex or an apartment or a set of apartments or a set of townhouses for it to be classified a new build if you do a knockdown rebuild.
• 24:24
  SPEAKER_00: So again, we need proper guidance before we really talk about it because it's not very clear yet.
• 24:31
  SPEAKER_00: So that um yeah, remains to be seen.
• 24:34
  SPEAKER_00: But obviously, straightforward new bills would be your house and land packages, um, you know, brand new stock.
• 24:40
  SPEAKER_00: Um and then I did also read if if you what gets classified a new bill.
• 24:46
  SPEAKER_00: If someone has lived in there for 12 months or more, obviously it's not a new bill, but if someone has lived in there for 12 months or less and then you sell it, the next person gets to classify it a new bill.
• 24:57
  SPEAKER_00: So who knows?
• 24:58
  SPEAKER_00: These might, you know, once it's legislated, we will get all of the nitty gritty.
• 25:02
  SPEAKER_00: So that's when we can really make a call on it.
• 25:05
  SPEAKER_00: But yeah, it's here and there still.
• 25:08
  SPEAKER_00: So but uh yeah, so straightforward new bills for investors.
• 25:13
  SPEAKER_00: Yes, you get to um still maintain your negative gearing on that.
• 25:17
  SPEAKER_03: So that's another winner, right?
• 25:21
  SPEAKER_03: Uh small businesses, the$20,000 instant asset write-off is being made permanent for eligible businesses.
• 25:29
  SPEAKER_03: Now, previously we discussed the trust tax change that will affect small businesses.
• 25:37
  SPEAKER_03: Uh, and then there is this incentive.
• 25:40
  SPEAKER_00: Make hey while the sun shines.
• 25:42
  SPEAKER_00: So now this is permanent.
• 25:43
  SPEAKER_00: So, anyway, now with the end of financial year coming up, um, this is something small businesses make use of quite a bit.
• 25:51
  SPEAKER_00: Um, it was meant to be wound down, but um they have decided to keep it and keep it as a permanent fixture.
• 25:58
  SPEAKER_00: So 20,000 if you buy a car or equipment or what have you that is used in the business, you get to claim an instant write-off on it, as opposed to depreciating it over the life of the asset.
• 26:11
  SPEAKER_00: You get to do it instantly in that year that you bought it.
• 26:14
  SPEAKER_00: So, um, yeah, lots of small businesses use that.
• 26:17
  SPEAKER_00: And so if you haven't used it this year, you could probably, you know, have a little under two months to go do that.
• 26:23
  SPEAKER_03: So are we buying are we buying a new vehicle for the company?
• 26:26
  SPEAKER_03: No, no, a nice Jeep Wrangler with the company logo.
• 26:32
  SPEAKER_03: All right, so those are your winners, ladies and gentlemen.
• 26:35
  SPEAKER_03: Now we're gonna talk about the losers.
• 26:37
  SPEAKER_03: Uh investors buying established residential property after the budget, they lose the traditional salary offset benefit for rental losses.
• 26:46
  SPEAKER_03: Yeah, right.
• 26:48
  SPEAKER_03: Uh, we also have in the losers list high-income families using discretionary trusts, trust taxation becomes less flexible from 2028, like you mentioned.
• 27:00
  SPEAKER_03: Uh now another loser in this category Sunali is uh EV buyers.
• 27:08
  SPEAKER_00: Well, I think that people flock to EVs because of the fuel crisis, so there were some uh fringe benefit tax concessions that they had, but those are being wound back.
• 27:20
  SPEAKER_00: So yeah, I think previously um now it's gonna be about 25% or something.
• 27:26
  SPEAKER_00: Um I didn't read the specifics around it, but yeah, they're gonna be worse off.
• 27:31
  SPEAKER_03: So it's crazy.
• 27:33
  SPEAKER_03: At one time the governments try to shove EV vehicles down.
• 27:36
  SPEAKER_00: And now they're incentivizing it, yeah.
• 27:40
  SPEAKER_03: And the last but not least, investors relying on old established property uh models, right?
• 27:47
  SPEAKER_03: Future deals become less tax effective than before.
• 27:51
  SPEAKER_00: Yeah, definitely.
• 27:52
  SPEAKER_00: So previously, when we looked at the numbers for any investment property, we looked at before tax how much it'll cost the cash flow, and then after tax because of the negative gearing benefits of it.
• 28:06
  SPEAKER_00: Um, whereas now we'll have to start looking at it a whole different way if people are buying established properties.
• 28:12
  SPEAKER_00: So once it's all legislated and we know exactly what's going to happen, that's when we will start looking at you know um our longer-term clients and then see how it's going to work because the the next acquisitions that we had planned for them, how those will work and how we need to modify the plans basically.
• 28:31
  SPEAKER_00: Yeah.
• 28:31
  SPEAKER_03: Yeah.
• 28:32
  SPEAKER_03: So I guess one of the bigger policy goals, um, one of the biggest goals from this policy was to change future investment uh behavior, uh, not to let's say unwind the past because existing investors are not the main target if they already held property before uh budget night.
• 28:51
  SPEAKER_00: Yeah, so it's more like I said before to modify future investment behavior to help supposedly help the first home buyers.
• 29:00
  SPEAKER_00: But I also feel like then they don't get to benefit from the wealth creation strategies that we used, you know.
• 29:07
  SPEAKER_00: So as much as they get into their first home, then they don't get the benefits of you know all these things to build wealth for their future.
• 29:14
  SPEAKER_00: But um, you know, they need to start at least getting one property.
• 29:18
  SPEAKER_00: So I guess if this helps get them that, so and then we'll have to figure out ways to um yeah, get them the next ones.
• 29:25
  SPEAKER_03: And I guess it all comes down to kind of restrategizing as well, right?
• 29:29
  SPEAKER_03: In terms of uh finances, now even lending, like instead of just going to a bank or broker and just getting a home loan, there are so many other fundamentals that need to be considered.
• 29:40
  SPEAKER_00: Yeah, it's a lot more nuanced now because um, like even lending gets complicated because they will have to see, like I was thinking, okay, if an existing client, an investor client with an established property wants to go from one bank to another, usually we are still able to use the negative gearing benefit, but then it's an established property.
• 30:02
  SPEAKER_00: So then in the banks are gonna have to kind of figure out okay, how do we, you know, address each scenario?
• 30:07
  SPEAKER_00: Because there's gonna be lots of scenarios now.
• 30:10
  SPEAKER_00: People buying new property, people buying established property, older clients who had already bought established property, who wants to refinance, how do you service each of them?
• 30:20
  SPEAKER_00: So it's yeah, uh, it's a lot of work for everyone.
• 30:23
  SPEAKER_03: I mean, like banks need to invest a bit in their training as well.
• 30:26
  SPEAKER_00: Yeah, yeah, so they'll have to come up with all these new calculators and policies, and you know, we might see a lot going on in the banking space as well.
• 30:34
  SPEAKER_03: So what do you think will happen to like uh the lodgement turnaround times?
• 30:39
  SPEAKER_00: It's just gonna blow out.
• 30:40
  SPEAKER_00: So yes, it's gonna copy it off.
• 30:43
  SPEAKER_00: It's the front enders who speak to kind of so yeah.
• 30:46
  SPEAKER_03: Sorry, team, get ready.
• 30:48
  SPEAKER_00: Yeah, all right.
• 30:50
  SPEAKER_03: So so uh so now you know there were so many other changes um in this budget, right?
• 30:55
  SPEAKER_03: But in terms of investments, if we look beyond property investments, what what do you think about uh the changes to that's a funny one, actually.
• 31:05
  SPEAKER_00: So there are some clients who borrow to invest in shares, yeah.
• 31:09
  SPEAKER_00: And then you get to claim the interest on that.
• 31:12
  SPEAKER_00: You still get to claim the interest on that.
• 31:15
  SPEAKER_01: Okay.
• 31:16
  SPEAKER_00: So we might see a redistribution and uh diversion into other asset classes that previously went to property, I think.
• 31:25
  SPEAKER_00: So because you still get to claim um negative gear, not negative gearing, the the interest um and the costs associated with earning that income from shares um against that income.
• 31:37
  SPEAKER_00: So or your overall taxable income.
• 31:39
  SPEAKER_00: So yeah.
• 31:40
  SPEAKER_03: So what are some asset classes that look favorable to you now?
• 31:43
  SPEAKER_00: Like you Well, shares always has been one of the things.
• 31:47
  SPEAKER_00: Um because obviously it gives you capital growth as well as dividend income, so you get the benefit of both types um uh as a return.
• 31:58
  SPEAKER_00: So yeah, shares, direct shares, exchange traded funds, um, managed funds, probably a little bit less so, but um still there's a place for that as well.
• 32:09
  SPEAKER_00: So, yeah, there's there's a lot of other asset classes other than property that can you know really get you to where you want to be as well.
• 32:18
  SPEAKER_03: On on the topic of uh other asset classes, now in terms of property, most of these changes affect residential property, right?
• 32:28
  SPEAKER_03: But I didn't see anything about the commercials.
• 32:31
  SPEAKER_00: No, I didn't see that either.
• 32:33
  SPEAKER_00: But a lot of the time you'll see um mom and dad investors, they don't straight away get into commercial property, they just dip their toe buying their first home, then they buy their first investment property, and that's usually residential.
• 32:47
  SPEAKER_00: It's probably your third, fourth, or even maybe even later than that that you go to commercial.
• 32:52
  SPEAKER_00: Um but yeah, maybe we might see a shift to that as well, because who knows, you know, because that has more income anyway.
• 33:00
  SPEAKER_00: Now there's not much benefit being negatively geared anyway.
• 33:03
  SPEAKER_00: So, you know, yeah.
• 33:05
  SPEAKER_03: That's a that's that's a that's that's that's an interesting point.
• 33:08
  SPEAKER_00: That is an interesting point, actually, because a lot of the time um even most of the expenses your tenant pay pays, right?
• 33:15
  SPEAKER_00: So yeah, that can be.
• 33:17
  SPEAKER_03: And also your uh lease agreements are much longer.
• 33:20
  SPEAKER_00: Much longer, that's right.
• 33:21
  SPEAKER_00: So you have more stability, yeah.
• 33:23
  SPEAKER_00: Other than rather than you know, you're not worried about looking for a new tenant.
• 33:26
  SPEAKER_03: That's right.
• 33:26
  SPEAKER_00: Yeah, yeah.
• 33:27
  SPEAKER_00: Tenants are gonna leave every three to six months, and it's a lot less like you know, nowadays with tenancy, the landlords don't get too much rights, whereas with commercial, yeah, the landlords pretty much still roll the roofs.
• 33:42
  SPEAKER_00: So, yeah.
• 33:43
  SPEAKER_03: Alright, so um, I guess those are some of the main touch points, right?
• 33:49
  SPEAKER_03: Uh, that we wanted to focus on, we focused on.
• 33:52
  SPEAKER_03: Uh, before we end this podcast, if we could look at uh touch a bit on like the future outlook uh from your perspective, Sonali.
• 34:04
  SPEAKER_03: What do you think about inflation, the current inflation rate?
• 34:07
  SPEAKER_03: What do you think?
• 34:08
  SPEAKER_03: Do you think this budget's gonna help um mitigate rising inflation?
• 34:14
  SPEAKER_00: Or no, the budget is not gonna, I don't think, do too much for the inflation.
• 34:18
  SPEAKER_00: I think it's mostly the interest rates that will um dictate that.
• 34:22
  SPEAKER_00: Um I think it's still higher than what they wanted it to be, so there might be another rate rise on the horizon.
• 34:30
  SPEAKER_00: Um, and then maybe after that we might see a bit of an easing um or up staying stable.
• 34:37
  SPEAKER_00: So um yeah, that's how I feel about it.
• 34:42
  SPEAKER_00: Yeah, because um, I don't think these changes would like even for first-term buyers, it's not gonna fix affordability overnight, right?
• 34:53
  SPEAKER_00: So um there's you're still going to have investors who want to buy property.
• 34:58
  SPEAKER_00: Because previously, like I've always said, tax benefits should not be the main driver of a decision to buy investment property, right?
• 35:07
  SPEAKER_00: It should be like almost like a side benefit.
• 35:11
  SPEAKER_00: You still need to look at capital growth, you still need to look at the rental income that's coming in.
• 35:16
  SPEAKER_00: So those drivers have haven't changed.
• 35:18
  SPEAKER_00: So I feel like people would still, investors, cashed-up investors, would still go for established properties regardless of you know these losses in negative.
• 35:28
  SPEAKER_00: So um, because of that, I don't think it's going to be an overnight shift and immediate possibility for stone buyers to just go out there and buy for lower, right?
• 35:37
  SPEAKER_00: But um, yeah, we'll remains to be seen if it can help like 75,000 people get in.
• 35:42
  SPEAKER_00: So yeah.
• 35:45
  SPEAKER_03: All right, Sonali, thank you so much for uh doing this podcast on such short notice, right?
• 35:52
  SPEAKER_00: Yeah, I didn't have too much time to get my head around all these ones, but yeah.
• 35:56
  SPEAKER_03: Did you even like uh were you able to finish uh reading the policy?
• 36:01
  SPEAKER_00: I didn't read the whole thing, I just read what I wanted to read and the summaries that we get given because um we get uh yeah, summaries for advisors where it the areas that really impact our clients.
• 36:14
  SPEAKER_00: So um, yeah, so and yeah.
• 36:17
  SPEAKER_03: So thank you guys so much for tuning in and thank you, Sunali.
• 36:21
  SPEAKER_03: Uh so yeah guys, overall message don't react to headlines, right?
• 36:26
  SPEAKER_03: You need to model the actual numbers that work for your specific situation.
• 36:32
  SPEAKER_00: So um I don't think that has changed actually, every time that's what I usually sign off with, right?
• 36:38
  SPEAKER_00: Don't don't panic about the headlines or what the markets are doing or what the outside noise is saying.
• 36:44
  SPEAKER_00: You just need to do what's right for you and your circumstances.
• 36:47
  SPEAKER_00: So, this is probably now more so than ever.
• 36:51
  SPEAKER_00: You need to really understand where you are, what you're planning to do, how you go about doing it.
• 36:56
  SPEAKER_00: You need to watch your, you know, um, cash buffers, improve cash flow where possible, don't take on unnecessary debt.
• 37:04
  SPEAKER_00: If you're buying established property, have a look at the numbers really well.
• 37:08
  SPEAKER_00: It really needs to stack up now because unlike previously, where in the second year you might get you know a bit of a tax refund or whatever, this time you might not.
• 37:18
  SPEAKER_00: So, therefore, it really needs the numbers, really need to work.
• 37:22
  SPEAKER_00: So, um, yeah, as long as you know your numbers, then yeah, it's all good.
• 37:27
  SPEAKER_03: And if you don't know your numbers and you want to speak to a team or group of individuals that know how to run the numbers for your specific situation, you need to speak to TFS, not anyone else, speak to TFS.
• 37:38
  SPEAKER_03: And with that being said, guys, thank you so much for tuning in, and we'll catch you guys on the next episode.
• 37:43
  SPEAKER_00: Thanks, Vishy.