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Inheritance tax: Has something changed? · The Money Puzzle

0:11
Speaker 1: Hello and welcome to The Australian's Money Puzzled podcast. I'm
0:14
Speaker 1: James Kirby. Welcome aboard everybody. Now you've probably seen a
0:18
Speaker 1: lot of coverage across media, across social media on inheritance
0:23
Speaker 1: issues and death taxes in super It's time, I think
0:27
Speaker 1: importantly to clear the air on this. Okay, what's going on?
0:31
Speaker 1: Has something actually changed in relation to inheritance and do
0:34
Speaker 1: you actually understand about inheritance and your money in Australia.
0:38
Speaker 1: So officially you know we have no inheritance tax, but
0:41
Speaker 1: in reality there are things you should know. I also
0:45
Speaker 1: want to talk about this year, bring you up to
0:50
Speaker 1: date on changes to super and super caps and limits
0:54
Speaker 1: which you should need to get on top of. Now
0:57
Speaker 1: it's February, okay. See, this is all about what you
1:00
Speaker 1: can do and what's different this year being the financial
1:03
Speaker 1: year to the end of June. My guest today is
1:05
Speaker 1: Hugh Robertson of center Or Financial Services. He's a veteran
1:09
Speaker 1: of the Baron's Top Advisor's List Our Baron's List.
1:13
Speaker 2: How are you, Hugh, I'm good, James, Happy New Year?
1:17
Speaker 1: Happy are you saying Happy New Year to people in February?
1:20
Speaker 1: You have to stop now January thirty. January thirty is
1:24
Speaker 1: a cutoff. It's a cut off point. But thank you.
1:27
Speaker 1: I do appreciate the sentiment. I should have called you.
1:29
Speaker 1: I should have called you a stalwart maybe of the
1:32
Speaker 1: of the list. A veteran. I always WinCE, you know
1:34
Speaker 1: when people call me a veteran of anything, But it's
1:36
Speaker 1: normally mention a laudatory fashion, and I mean it in
1:39
Speaker 1: a loadatory fashion, just so we don't get off on
1:42
Speaker 1: the wrong foot at the start. Okay, now, thank you.
1:48
Speaker 1: Let's just clear the air first of all about inheritance tax.
1:52
Speaker 1: There is officially no inheritance tax in Australia, but there
1:57
Speaker 1: has been a lot of token headlines about it because
2:02
Speaker 1: I think people starting to realize there is inheritance tax
2:05
Speaker 1: for practical purposes and super And then on top of that,
2:08
Speaker 1: something changed in relation to death taxes in the new
2:12
Speaker 1: super tax, and that's sort of basically put cat among
2:15
Speaker 1: the pigeons. Could you explain first of all to everybody
2:20
Speaker 1: about inheritance tax and super So most people have two
2:25
Speaker 1: if they have their house and they have their super
2:27
Speaker 1: that's where most of the money is. And long ago
2:29
Speaker 1: there was people had nothing in Super. Most people had
2:31
Speaker 1: nothing in super, so it didn't matter. But it turns
2:33
Speaker 1: out of you inherit. If you inherit super as an
2:35
Speaker 1: adult dependent, which most people are when they inherit SUPER
2:38
Speaker 1: from their parents, you actually pay tax on it. So
2:42
Speaker 1: what's the tax? How much is it and is there
2:45
Speaker 1: any way around paying it?
2:48
Speaker 3: Yeah? I think this is a really good conversation point
2:51
Speaker 3: for everyone because it's probably one of the issues we
2:53
Speaker 3: see most within our own clients. And what we're really
2:58
Speaker 3: trying to ascertain he is, you've got a taxable component,
3:02
Speaker 3: which is the amount in your superannuation that has gone
3:05
Speaker 3: in and you've got a tax benefit for or your
3:08
Speaker 3: your employee, your employer has put that contribution in for you.
3:11
Speaker 1: So, Hugh, that's the two ways you put money into super. Right,
3:14
Speaker 1: There's a compulsory way, whether you like it or not,
3:16
Speaker 1: and there's a voluntary way, okay, and explain. Then if
3:21
Speaker 1: you put it in the the if you put it
3:23
Speaker 1: in in ANYA, either of those two ways, that's a
3:27
Speaker 1: taxable component, right, So that's going to be have inheritance
3:30
Speaker 1: tax at the far end.
3:31
Speaker 3: If you if you put in a voluntary and claim
3:34
Speaker 3: a tax reduction for it, whether that be via you've
3:36
Speaker 3: done it as salary sacrifice or you've claimed it after
3:39
Speaker 3: the fact, that will sit as what's called taxable component
3:42
Speaker 3: inside your superannuation.
3:43
Speaker 1: And telling me the SGC the part of the twelve
3:46
Speaker 1: percent you must put in is that also treated the
3:48
Speaker 1: same fashion.
3:49
Speaker 2: That's also treated as a taxable component.
3:52
Speaker 3: So if you think about it that you get the benefit,
3:54
Speaker 3: you get the tax benefit for it going in, it's
3:57
Speaker 3: going to sit as taxable component.
3:59
Speaker 1: When I'm sorry to jump in on you here, but
4:02
Speaker 1: I'm trying to keep it really clear for the for
4:04
Speaker 1: the everyday listener who isn't an expert. So, folks, for
4:08
Speaker 1: most people, most of the time you're super, you put
4:12
Speaker 1: it in whether you wanted to or not, compulsory twenty
4:14
Speaker 1: percent of your salary or maybe you did some voluntary
4:17
Speaker 1: top ups under the concessional scheme, pre tax scheme, voluntary sacrifice.
4:22
Speaker 1: All that money that ever went into your super. When
4:26
Speaker 1: that comes out the other end and it's in your
4:29
Speaker 1: estate and an adult child dependent is going to inherit it,
4:33
Speaker 1: they're going to pay tax on it. Most people don't
4:35
Speaker 1: know that. What's roughly most of the time, what's the
4:38
Speaker 1: tax on it?
4:39
Speaker 3: You ends up being an If you look at the
4:42
Speaker 3: majority of superannuation balances, it's usually about eighty to eighty
4:45
Speaker 3: five percent is the taxable component. When someone you know,
4:49
Speaker 3: sort of passes from our client experience that that number,
4:52
Speaker 3: and from there they can be up to about a
4:54
Speaker 3: seventy up to seventeen percent death tax, fifteen percent plus
4:57
Speaker 3: medicare and going to adult non dependent children. So we
5:02
Speaker 3: call it a de facto death tax because unless the
5:05
Speaker 3: client can make the moves around it, that's what it
5:08
Speaker 3: looks like they'll be up for.
5:09
Speaker 2: Plus the.
5:11
Speaker 3: Probably to add to your point before James as well,
5:13
Speaker 3: the earnings also within the fund set is taxable.
5:16
Speaker 1: Okay, so really most money.
5:19
Speaker 3: So it's a really important, really important to understand your
5:21
Speaker 3: superannuation statements and what are the strategies are that we
5:25
Speaker 3: can do to reduce four clients?
5:27
Speaker 1: Okay, so it just two generations, I suppose listen and
5:31
Speaker 1: to whom it's relevant when you contribute to super that
5:36
Speaker 1: money most of the time for most people, when it
5:38
Speaker 1: comes out to the other end and someone's going to
5:40
Speaker 1: inherit it, they're going to pay fifteen plus Madickey, they
5:43
Speaker 1: gonna pay seventeen percent or so on the super they inherit,
5:47
Speaker 1: which is a surprise perhaps to many people, because everything
5:50
Speaker 1: as you inherit it is tax free. That's part one.
5:53
Speaker 1: We'll talk about how you might avoid that in a second. Now,
5:57
Speaker 1: on top of that the confusion and consternation in various
6:01
Speaker 1: quarters about us a change in the new supertax in
6:05
Speaker 1: relation to inheritance and death tax again, which as I say,
6:10
Speaker 1: has sparked all sorts of interest, but very simply got
6:13
Speaker 1: I'll try and explain to listeners what happened, and then
6:15
Speaker 1: maybe you might put it into context. You in the
6:18
Speaker 1: new supertax very simply. In the original version pre Christmas,
6:23
Speaker 1: when as someone died and they had super tax obligations,
6:27
Speaker 1: the tax man only wanted the taxable bill they wanted.
6:33
Speaker 1: They wanted it, they compiled it at the end of
6:35
Speaker 1: the financial year over Christmas. In the new version that's
6:39
Speaker 1: now before Parliament, there was a thing called an integrity
6:41
Speaker 1: measure and they changed it and they said on an
6:43
Speaker 1: ongoing basis it will be based the tax bill will
6:47
Speaker 1: be based on whichever is highest the start of the
6:50
Speaker 1: year or the end of the year. Hence, if you
6:53
Speaker 1: die at the wrong time of the year, basically your
6:55
Speaker 1: bill will be bigger. People didn't see this one coming.
6:58
Speaker 1: It's like it's like it's technical, it doesn't affect millions
7:02
Speaker 1: of people, but people did not like it. Could you
7:05
Speaker 1: explain just why it roughered a lot of feathers.
7:11
Speaker 3: I'm a big believer that we have sort of you know,
7:14
Speaker 3: that we've got to stick by our handshake deals that
7:16
Speaker 3: we make, you know, within Australia. And if we've kind
7:19
Speaker 3: of enticed people to you know, self fund for their
7:22
Speaker 3: own retirement, we really shouldn't be changing the rules for.
7:27
Speaker 2: The people that have contributed to it.
7:28
Speaker 3: Because the one thing we want all the strains to
7:30
Speaker 3: do is have confidence in the retirement system, you know,
7:33
Speaker 3: so that they can self fund. We want to provide
7:36
Speaker 3: incentive for people to do that. And I know, even
7:39
Speaker 3: just among our clients now as we're talking, they really
7:42
Speaker 3: lack that confidence in the retirement system above those high amounts.
7:47
Speaker 3: So what the consequence there? I see, We've got, you know,
7:51
Speaker 3: there's some consequential errors there in that. Instead of people
7:54
Speaker 3: now contributing to super to really grow that balance, which
7:57
Speaker 3: is absolutely you know a top priority in everybody should
8:00
Speaker 3: be doing that, that's era number one, they might then
8:03
Speaker 3: be you know more needy on the welfare system in retirement.
8:07
Speaker 3: The problem number two is if they want tax reeductions
8:09
Speaker 3: instead of utilizing superannuation contributions to get your tax reduction,
8:13
Speaker 3: where else can you get tax reductions, James, I could
8:16
Speaker 3: go buy an investment property and get negative gearing. So
8:20
Speaker 3: now we've got an issue that we have people not
8:22
Speaker 3: utilizing superannuation, which we really want them to do, but
8:25
Speaker 3: they are now going to buying investment properties to get
8:28
Speaker 3: the tax you know, the tax reduction, which is probably
8:31
Speaker 3: not the intent of you know why we want people
8:34
Speaker 3: buying investment properties.
8:35
Speaker 1: Yeah, okay, So they are the rules, if you like,
8:39
Speaker 1: of the confidence in the in the confidence of the
8:42
Speaker 1: headline that we don't have an inheritance tax. Okay. Just
8:45
Speaker 1: to explain to then people who say, apparently there's a
8:51
Speaker 1: way that they can reduce that tax bill on my
8:57
Speaker 1: stage in the future, how would I do? How would
9:00
Speaker 1: I do it? Let's say I have let's say I
9:02
Speaker 1: have myself as super fund and there's an X amount
9:05
Speaker 1: in it, and I'm saying, damn it, I don't want
9:07
Speaker 1: my two kids to pay seventeen percent tax on this.
9:10
Speaker 1: Because I've put a lot of time and effort into it,
9:13
Speaker 1: and I hope at least by the time I pass
9:16
Speaker 1: on it would be a handsome amount. How can I
9:19
Speaker 1: do to reduce that seventeen percent tax but that they're
9:21
Speaker 1: going to face in the future.
9:23
Speaker 2: That's a great question.
9:24
Speaker 3: There's two sort of dominant strategy if we can do.
9:29
Speaker 3: The first is you tell us the day before you die,
9:32
Speaker 3: and we can we can take.
9:33
Speaker 1: Tricky tricky when I mightn't be in a position to
9:35
Speaker 1: call you, Hugh, I might be feeling great.
9:38
Speaker 3: Yeah, it does seem to be, you know, quite quite
9:41
Speaker 3: difficult that one to get the exact the exact date
9:44
Speaker 3: right on that. So, failing that and all jokes, decide
9:47
Speaker 3: if someone knew that they were in terminal, you know,
9:50
Speaker 3: sort a phase of life, that they could look to
9:52
Speaker 3: do that they get it out of the superannuation. It's
9:55
Speaker 3: a one hundred percent tax free withdrawal and then it
9:57
Speaker 3: would go as per their estate, or they could gift
10:00
Speaker 3: it while they were still alive.
10:03
Speaker 1: Yeah, I mean, this is serious stuff. But you're asking
10:05
Speaker 1: you, a living person b City, to see take the chance
10:08
Speaker 1: that you never need any money again. And the d
10:11
Speaker 1: that that happens is I imagine that's from most peeper most
10:15
Speaker 1: of the time, what's what's the other option?
10:18
Speaker 2: The other one?
10:19
Speaker 3: And it's probably because the superhneration rules have changed so
10:22
Speaker 3: often a lot of people sort of aren't current with
10:25
Speaker 3: what the age based eligibility is to think. So, if
10:28
Speaker 3: you were retired from age sixty, you can go into
10:30
Speaker 3: the pension phase, so your money is now one hundred
10:33
Speaker 3: percent accessible, and from there you can actually take out
10:37
Speaker 3: your money and recontribute it back. So if you take
10:40
Speaker 3: it out and if you imagine if eighty five percent
10:42
Speaker 3: of my money you had a million dollars and so
10:45
Speaker 3: eighty five percent of it was taxable component, so eight
10:48
Speaker 3: hundred and fifty is taxable component, I could take out
10:52
Speaker 3: up to three hundred and sixty thousand dollars. I could
10:55
Speaker 3: take that out and recontribute that. So we're now talk
11:00
Speaker 3: about the non concessional contributions. You've got the one year
11:02
Speaker 3: cap of one hundred and twenty thousand dollars, and we
11:05
Speaker 3: can bring forward the next two financial years so that
11:08
Speaker 3: can be that's how we get the three hundred and
11:10
Speaker 3: sixty thousand dollars when that then, and you can recontribute
11:14
Speaker 3: that back into superannuation when it goes back into superannuation
11:17
Speaker 3: that now comes in because it's a non concessional contribution,
11:21
Speaker 3: that now sits as tax free component. So I've been
11:25
Speaker 3: able to, if you think about it, wash that taxable
11:28
Speaker 3: component and increase decrease the taxable component, increase the tax
11:33
Speaker 3: free component. Because I'm retired, I can still have that
11:36
Speaker 3: three hundred and sixty thousand in another superannuation fund, roll
11:40
Speaker 3: that into the pension phase and now that is one
11:42
Speaker 3: hundred percent tax free. Then the strategy benefit there is
11:47
Speaker 3: you might say, well, I really don't want to touch that.
11:50
Speaker 3: You know that new superfund very much, but I need
11:53
Speaker 3: I need X amount of money per year.
11:55
Speaker 2: Or you could draw more out of the.
11:58
Speaker 3: First superannuation fund that has that higher component of tax
12:01
Speaker 3: bil tax free, and then after three years again I
12:04
Speaker 3: could do the same thing. I could withdraw more money
12:06
Speaker 3: out of my super do that, and I'm allowed to
12:09
Speaker 3: do that up until age seventy five.
12:11
Speaker 1: Folks do a Google on this or searching the Australian.
12:14
Speaker 1: We've laid this out many times very carefully. But put simply,
12:19
Speaker 1: you can cut that tax bill by recontributing to super
12:24
Speaker 1: by that it is the ridiculous circular business of taking
12:29
Speaker 1: your super out as if you wanted it, and then
12:32
Speaker 1: putting it back in, and when you put it back in,
12:35
Speaker 1: it's tax free. And each lump that you do, basically,
12:38
Speaker 1: each portion you do, reduces their portion of the tax
12:42
Speaker 1: bill for your inheritance in the future. Have I got
12:45
Speaker 1: that right here?
12:46
Speaker 2: One hundred percent?
12:47
Speaker 1: Okay? And what's the age range I can do that.
12:50
Speaker 1: There's you've got to stop at seventy five.
12:53
Speaker 3: Sixty and retired or sixty five and still working up
12:57
Speaker 3: until you turn seventy five.
12:58
Speaker 2: You've got to do it before.
12:59
Speaker 1: You okay, ten year window basically. Okay, very interesting. I mean,
13:05
Speaker 1: it's one of those things that is a classic example
13:07
Speaker 1: I think of where people if they actively examine the
13:12
Speaker 1: system and are helped to do so by people like yourself,
13:15
Speaker 1: you can really make a difference to their money situation
13:20
Speaker 1: or their family's money situation. Okay, So that's inheritance tax books.
13:23
Speaker 1: One last thing, because I've done this show a couple
13:26
Speaker 1: of times of this issue, and I've written on a
13:28
Speaker 1: couple of times Treasury, that is, voices from Treasury have
13:31
Speaker 1: been in touch with me to say you're not wrong
13:34
Speaker 1: on any of this stuff, James, but don't go any
13:36
Speaker 1: further making predictions that it's the start of a move
13:41
Speaker 1: towards inheritance tax in Australia. The the the Office of
13:45
Speaker 1: the Treasure says to me that there's no way that
13:49
Speaker 1: they would touch inheritance with the barge poll. That's what
13:52
Speaker 1: they say. Will take them. Will take them at their word.
13:56
Speaker 1: But we'll also tell you that things have been happening,
13:59
Speaker 1: which road the notion that we have and in No.
14:02
Speaker 1: One Harrison's tax in Australia, those two things sort of
14:04
Speaker 1: sit side by side.
14:05
Speaker 2: Yeah, sorry, Janth.
14:06
Speaker 3: Can we just add one thing for the audience as well?
14:09
Speaker 3: The downsizer contributions about three hundred thousand h that also
14:13
Speaker 3: goes in as non concessional contribution.
14:16
Speaker 1: Oh that's sweet.
14:17
Speaker 2: Yeah.
14:17
Speaker 1: Okay, So if you do a downsizer, if you do
14:20
Speaker 1: a downsizer, that is, if you sell your family home
14:23
Speaker 1: to move and put the money in the into your
14:27
Speaker 1: super regardless of all rules around Super, you get to
14:32
Speaker 1: put that money into Super first of all, and secondly
14:35
Speaker 1: you cut the bill for your Okay, okay, check what's
14:39
Speaker 1: checking out? Okay. That was pretty tricky stuff and you
14:43
Speaker 1: did very well, I think to get through the obstacle
14:46
Speaker 1: course that I put him through there and YouTube listeners,
14:49
Speaker 1: but I think it was important to do. So, Okay,
14:51
Speaker 1: we will be back in a moment and we're going
14:52
Speaker 1: to tell you some stuff you can do much faster
14:55
Speaker 1: and much quicker in terms of improving your financial wealth.
14:59
Speaker 1: Back in a moment. Hello, Welcome back to The Australian's
15:10
Speaker 1: Money Puzzlant podcast. I'm James Kirby and I'm talking to
15:13
Speaker 1: Hugh Robertson of the Center Financial Group, who is sitting
15:17
Speaker 1: in some splendor looking out. I'm looking out at lovely
15:22
Speaker 1: green rolling hills and obviously, being here in Melbourne, there
15:25
Speaker 1: are no green rolling hills at the moment. They are
15:27
Speaker 1: kind of yellow and white at the moment. But tell
15:29
Speaker 1: me what are we looking at there, Hugh? What's the landscape?
15:32
Speaker 2: That's the hinter lane, So we.
15:34
Speaker 1: The hinterland of hinterland.
15:38
Speaker 2: Lovely.
15:39
Speaker 3: It seems to be every time we do a podcast
15:40
Speaker 3: we get one of these perfect days and we sort
15:42
Speaker 3: of lament on our you know how, our living decisions.
15:45
Speaker 2: But this one's not bad.
15:48
Speaker 1: That's lamenting on your living decision. That's marvelous.
15:51
Speaker 3: Yeah.
15:52
Speaker 1: Not everybody has a has a pastoral scene, a real
15:55
Speaker 1: life pastoral scene, not a screen shot out there window
15:58
Speaker 1: like that. It looks really good. Okay, now, folks, we're
16:00
Speaker 1: in the middle of the financial year. In fact, work
16:02
Speaker 1: we'll pass the middle. It's February, and what you're going
16:05
Speaker 1: to do in terms of super contributions or anything else
16:07
Speaker 1: you want to do by June. Quite a few things
16:10
Speaker 1: have changed this year, and he was just going to
16:12
Speaker 1: give us a quick rundown. It's worth hearing what you
16:14
Speaker 1: need to do or what you should be doing to
16:16
Speaker 1: optimize things. For instance, I talked about the amount in
16:19
Speaker 1: the first segment, but you must contribute to SUPER on
16:22
Speaker 1: a compository basis. That's now twelve percent. It's creeping up
16:26
Speaker 1: all the time. People don't realize. I mean, it's a
16:28
Speaker 1: pretty chunky part of your salary. Twelve percent must go
16:31
Speaker 1: into SUPER by law, this superannuation guarantee as they call it,
16:35
Speaker 1: that actually means some changes to how much you can
16:39
Speaker 1: voluntarily contribute. Could you just give us a quick run
16:41
Speaker 1: through on that one, Hugh.
16:43
Speaker 3: Yeah, So the you know, the maximum you're allowed to
16:46
Speaker 3: contribute year by year is thirty thousand dollars. Is a
16:50
Speaker 3: concessional contribution less what your superannuation guarantee man is, So
16:55
Speaker 3: if you think a person's on one hundred thousand dollars,
16:57
Speaker 3: they're going to get twelve thousands.
16:59
Speaker 2: Their SG, they're allowed thirty.
17:01
Speaker 3: So you've got eighteen thousand dollars that you can contribute.
17:04
Speaker 3: So you've also got to be very careful if you've
17:06
Speaker 3: got insurances through your super, so you're paying your premiums
17:10
Speaker 3: through that and you're contributing extra to cover that, you know,
17:13
Speaker 3: what's that trade off versus growing your balance. And you've
17:18
Speaker 3: also got if you've got under five hundred thousand dollars,
17:20
Speaker 3: remember you can go and catch up on the previous
17:24
Speaker 3: year's contributions. If you have got less than five hundred
17:26
Speaker 3: thousand and you haven't been contributed to your super on
17:29
Speaker 3: a regular basis, you can go back up to five
17:31
Speaker 3: years and kind of find the difference that you're allowed to.
17:35
Speaker 1: So, just to clarify for listeners, you can put in
17:38
Speaker 1: thirty thousand a year into your super pretax bisis. However,
17:44
Speaker 1: whatever twelve percent of your salary works out as you've
17:48
Speaker 1: got to subtract that because the thirty must include your
17:51
Speaker 1: superinnuation guarantee. And if you have less than five hundred
17:56
Speaker 1: thousand and your superfund. If you're in the fortunate position
17:59
Speaker 1: that you can take a bigger slice, if you can
18:01
Speaker 1: make your contributions bigger, you can actually do catch up.
18:03
Speaker 1: You can actually the thirty thousand, you can multiply it
18:08
Speaker 1: by how many years?
18:11
Speaker 2: Yep?
18:11
Speaker 3: So remember there's been a couple that I was twenty
18:13
Speaker 3: seven and a half and twenty five thousand. But you
18:15
Speaker 3: can kind of go back in time, especially if someone's
18:18
Speaker 3: sold an investment property this year, for example.
18:21
Speaker 2: That's probably the typical strategy.
18:23
Speaker 3: And you can go in my gov to see what
18:25
Speaker 3: your cap space is as well.
18:27
Speaker 1: Oh can you I see, and they'll actually calculate it
18:30
Speaker 1: for you.
18:31
Speaker 2: Yeah, are very good.
18:32
Speaker 1: Okay, so if you can remember your password. I can
18:37
Speaker 1: remember my password, I really can. Seriously, I haven't written
18:39
Speaker 1: on my phone. No I haven't. I have it in
18:41
Speaker 1: my mind. Okay, those catchups, the superannuation contribution must always
18:50
Speaker 1: be subtracted each time. So you're just talking about the
18:52
Speaker 1: gap between the SGC and the contribution cap each year
18:55
Speaker 1: and the catchup years, are you?
18:57
Speaker 2: Yes?
18:57
Speaker 3: And I think the with the being trops of people's
19:00
Speaker 3: you know, wage, people have really got to start paying
19:03
Speaker 3: better attention of where it's invested, you know, and if
19:06
Speaker 3: you've got time frame to retirement, you're volatility is okay.
19:10
Speaker 2: We know with the current you know, the current.
19:12
Speaker 3: State of the world, there's a bit of you know,
19:15
Speaker 3: there's a bit of drama, should we say. And you know,
19:18
Speaker 3: long term though, shen market always goes up, so you know,
19:21
Speaker 3: you can be confident if you've got a big chunk
19:23
Speaker 3: of you know, one hundred dollars twelve thousand dollars a
19:26
Speaker 3: year going into superannuation, you know that that's a really
19:29
Speaker 3: big investment. If you consider the majority of people who
19:31
Speaker 3: are still working have a mortgage, they might not be
19:34
Speaker 3: able to put in additional money into SUPER. So with
19:38
Speaker 3: that in mind, paying off your mortgage makes sense. But
19:40
Speaker 3: then at least make sure your supers invested, you know,
19:43
Speaker 3: with a risk profile that you can understand.
19:46
Speaker 2: You know, we don't want to have a.
19:47
Speaker 3: Whole heap of clients sit in their money, you know,
19:49
Speaker 3: in cash and fixed interest and they got you know,
19:51
Speaker 3: ten to fifteen years left of that.
19:54
Speaker 2: That's just missing out on compound interest.
19:56
Speaker 3: So hopefully with more money going into SUPER, people start
20:00
Speaker 3: taking it you know a little bit more serious as
20:02
Speaker 3: it easiest set outside of the value of your home too.
20:05
Speaker 1: Absolutely, and even if you're in big SUPER, just be
20:08
Speaker 1: very careful on which boxy tick in terms of balanced
20:11
Speaker 1: or conservative or growth and what does that mean and
20:15
Speaker 1: is it still relevant now? And broadly, as we've had
20:18
Speaker 1: some shows on this recently, very broadly, there is a
20:21
Speaker 1: there is new thinking which I completely support, I think,
20:24
Speaker 1: which is we're all living longer, and the notion that
20:28
Speaker 1: you should shift towards more conservative sort of like you
20:31
Speaker 1: know in middle age is not really appropriate anymore because
20:35
Speaker 1: middle age used to be forty and now it might
20:37
Speaker 1: be sixty. If you're going to live to ninety. Okay,
20:40
Speaker 1: just put that on the table. Ah yeah, I'm thinking Actually,
20:43
Speaker 1: just Hugh, I think that the thirty thousand we've been
20:46
Speaker 1: talking about all the time, the amount you can put
20:48
Speaker 1: in pre tax each year to SUPER, that is salary
20:52
Speaker 1: sacrifice into Super. That is the amount you can put
20:55
Speaker 1: in minus your SGC thirty thousand. I think that's going
20:59
Speaker 1: to go up on July one, or certainly that that's
21:03
Speaker 1: that's that's that's the consensus. What do you know and
21:07
Speaker 1: what might move up to.
21:09
Speaker 3: It's going to go up to thirty two and a
21:11
Speaker 3: half thousand dollars from July one, and that means that
21:15
Speaker 3: the non concessional cap will go up four times at amount,
21:18
Speaker 3: So that'll go up to one hundred and thirty thousand dollars.
21:20
Speaker 1: Okay, what's knowing, folks, So from July one you can
21:23
Speaker 1: put thirty two and a half thousand into super pre
21:26
Speaker 1: tax and what was the number for post sax.
21:29
Speaker 2: Q one hundred and thirty thousand dollars one.
21:31
Speaker 1: Hundred and thirty thousand dollars been four times. That's the ratio.
21:34
Speaker 1: That's how it works. Okay, we'll take a break. We'll
21:36
Speaker 1: be back in a moment with some really good questions. Hello,
21:48
Speaker 1: Welcome back to The Australian's Money Positive podcast. I'm James Kirby.
21:51
Speaker 1: Welcome aboard everybody. Now, I have a lot of questions.
21:55
Speaker 1: I had a couple on inheritance which I sort of
21:57
Speaker 1: bundled in and didn't read out there, but I covered
21:59
Speaker 1: them my hope in the first segment of what exactly
22:03
Speaker 1: is going on? So let's have a look at some
22:05
Speaker 1: questions that have come in. Or Hugh, who is one
22:08
Speaker 1: of the sort of people I want on the show
22:10
Speaker 1: to be able to answer this broad range that we
22:12
Speaker 1: get all right, Danielle with the I E.
22:15
Speaker 2: L E.
22:16
Speaker 1: Danielle, I've a question in relation to the medical levy surcharge.
22:20
Speaker 1: I completed my tax return and got stung. I've always
22:24
Speaker 1: had private health insurance, but was not aware that if
22:28
Speaker 1: the kids are not covered, I am liable. This looked
22:32
Speaker 1: initially crazy to me. I never heard anything about it.
22:36
Speaker 1: I'm writing to you as it would be good to
22:37
Speaker 1: share with the money pozzle community and have a brief
22:42
Speaker 1: explanation for a couple expecting a kid. In relation to this,
22:45
Speaker 1: I'm paying four and a half thousand for not having
22:48
Speaker 1: our kids covered. Makes me crazy. The tax office pretty
22:51
Speaker 1: much considered us as a family and even if one
22:54
Speaker 1: person is not covered, then all are liable for the
22:58
Speaker 1: medical level levy search charge. Seriously, guys, says Danielle. Okay,
23:05
Speaker 1: and of course we won't go into this, but private
23:07
Speaker 1: health insurance has just popped up by four percent, being
23:09
Speaker 1: its biggest rise in years. Did you look at that
23:12
Speaker 1: one human? Can you tell us? Can you enlighten Danielle
23:15
Speaker 1: Information only, folks, not advice as always.
23:18
Speaker 3: Yeah, it was a little bit of a surprise because
23:21
Speaker 3: most people kind of assume that you know, it would
23:24
Speaker 3: only be maybe adults for.
23:26
Speaker 2: The search charge, but not a child.
23:29
Speaker 3: A child counts, so you've got they've got to be
23:31
Speaker 3: covered by the private health as well.
23:34
Speaker 1: You had to be done. What I'm gonna say it
23:35
Speaker 1: is well, normally across the entire system where people have,
23:39
Speaker 1: you know, larger families tend to be catered for in
23:42
Speaker 1: some fashion or discounted or whatever, there is some sort
23:45
Speaker 1: of consideration meant for them, none whatsoever. Obviously in medicaire
23:49
Speaker 1: that wouldn't help the population to grow if you're listening ato.
23:54
Speaker 3: Yeah, and that's how I went on the ATR website,
23:57
Speaker 3: just because I thought that it seems on and it's
24:00
Speaker 3: pretty clear when you know, any member of the family
24:03
Speaker 3: did not have the appropriate level of private patients.
24:06
Speaker 1: I wonder when do they apply it? Like if a
24:08
Speaker 1: baby is born to they fucking in straight away? Do
24:10
Speaker 1: you register with the How does it all work?
24:13
Speaker 3: Yeah, well you're adding the as soon as you can.
24:17
Speaker 3: You're adding your child to your policy.
24:20
Speaker 1: Danielle, you have you have really found something that we
24:23
Speaker 1: never knew, either of us or I'm sure the vast
24:26
Speaker 1: majority of this.
24:27
Speaker 2: That's very good, very good to tell everyone, Danielle.
24:29
Speaker 1: Thank you, Danielle A correspondence of the week. All right,
24:32
Speaker 1: Carol c r h L. How much extra effort is
24:37
Speaker 1: involved in tax reporting if you have foreign shares compared
24:41
Speaker 1: to the streamline process of holding internationally tfs.
24:46
Speaker 4: Typically we're filling in that w you know, w BEN
24:50
Speaker 4: W BEN form all right, you know, and it's it's honestly,
24:57
Speaker 4: there's not a lot of information you know that the
25:00
Speaker 4: to go into that, but you do need to complete
25:01
Speaker 4: that form and then you know, provide the information to
25:04
Speaker 4: your account.
25:05
Speaker 2: I don't I don't say that as.
25:07
Speaker 1: But but I would say to Carol, if the ETF
25:10
Speaker 1: is local and the share is local, there's no form.
25:13
Speaker 1: And if the if the share is overseas, or you
25:17
Speaker 1: are buying ETFs that are overseas and people will because
25:21
Speaker 1: they may not be available here, then you have to
25:22
Speaker 1: do the form. Would that be basically how it works? Yeah, okay,
25:26
Speaker 1: W B E N form which which is a simple form,
25:29
Speaker 1: but an irritation even though the online brokes will swear
25:33
Speaker 1: blow in the face and it's no trouble, but it
25:35
Speaker 1: is okay number two from Carl, and thank you Carl. Folks.
25:39
Speaker 1: You know we're going to take the trouble of sending
25:41
Speaker 1: in a question send in a couple. People are doing
25:44
Speaker 1: it more and more and it's great, okay, and.
25:46
Speaker 3: I suppose James two, we are actually seeing clients by
25:50
Speaker 3: direct shares overseas more and more, you know, when they
25:52
Speaker 3: want that tech exposure and they might not want you know,
25:55
Speaker 3: they've kind of maybe advanced more from just the atfs
25:59
Speaker 3: and they don't want that whole basket anymore. They want
26:01
Speaker 3: that direct exposure to whether it be Apple, you know, Navidia.
26:05
Speaker 3: So I think it's a very you know, a common
26:07
Speaker 3: thing that people looking at, especially with the low brokerage
26:10
Speaker 3: trading accounts nowadays, and.
26:11
Speaker 1: What about ETFs. Do you find people are saying, I
26:13
Speaker 1: want the CDF it's not on the AX, I want
26:15
Speaker 1: this one on In the US.
26:18
Speaker 3: Increasingly, it's starting to increase, especially with you know, really
26:23
Speaker 3: people adopting this AI thematic.
26:26
Speaker 2: In their investment strategy.
26:28
Speaker 3: They're really starting to look and the investment world is
26:31
Speaker 3: just getting more and more global, which there's an element
26:34
Speaker 3: that makes sense. Australia is what two two and a
26:36
Speaker 3: half percent of the world market. You know, you're going
26:39
Speaker 3: to get banks and resources when you buy Australia.
26:41
Speaker 1: But also I find, you know, thetfs, you find the
26:43
Speaker 1: ETFs are created in the US, someone comes up with them,
26:45
Speaker 1: and like a two or three years later it arives here.
26:49
Speaker 1: And to some extent I will say, you know it's
26:51
Speaker 1: too late, but you might want it and you might
26:53
Speaker 1: be prepared to wit until someone looks sort of comes
26:56
Speaker 1: out with a copy.
26:57
Speaker 3: And I think all the clients now have to factor
26:59
Speaker 3: in as well, Like if you buy US shared. You
27:02
Speaker 3: know that that's something that we haven't talked about a
27:05
Speaker 3: lot lately, but it's.
27:07
Speaker 2: Definitely in the conversation now.
27:08
Speaker 3: When you're looking at the unhedged verse hedge returns over
27:11
Speaker 3: the past twelve months.
27:12
Speaker 1: Can I ask you one thing. I know the hedge
27:13
Speaker 1: returns are so much better than the unhedged ones, and
27:17
Speaker 1: it breaks your heart. And you thought you were going
27:19
Speaker 1: to get twenty percent on your US shares and you
27:21
Speaker 1: get eat or whatever. But aren't you kind of chasing
27:24
Speaker 1: your tail if you buy the hedge DTF and then
27:27
Speaker 1: four years later you forgot that it was hedged and
27:30
Speaker 1: it was better to be on hedged. I mean, it
27:32
Speaker 1: wouldn't it be better to just stick with the policy.
27:34
Speaker 1: And forever I've always been hedged or always been not.
27:38
Speaker 2: Edged great question.
27:39
Speaker 3: Yes, over time, it all ends to it all endsed
27:42
Speaker 3: about the same destination, you know, and that's you know,
27:46
Speaker 3: we I suppose it's our standard policy.
27:48
Speaker 2: We're typically two thirds.
27:50
Speaker 3: Unhedged, one third hedged in ours, but on your fixed
27:54
Speaker 3: income you probably always want to be hedged on that.
27:56
Speaker 1: Yeah, yeah, different stories, Yes.
27:57
Speaker 3: The currency impact there, candess smit your.
28:00
Speaker 1: Return yeah yeah, okay, interesting, I must come back to that.
28:03
Speaker 1: We will come back to that on another show. Okay.
28:06
Speaker 1: And just finally from Karl her second question, are there
28:08
Speaker 1: significant tax reporting differences for an Australian investor between owning
28:12
Speaker 1: individual European stocks versus individual US stocks? Ah, I don't
28:18
Speaker 1: know what the answer is.
28:21
Speaker 3: Would depend on country by country, Okay, in your and whatever.
28:25
Speaker 2: If there's tax treaties right with Australia.
28:29
Speaker 1: So European stocks could be a bit tricky, and that
28:31
Speaker 1: you could have a different rule for Germany or or
28:34
Speaker 1: the UK, which of course is no longer the you
28:37
Speaker 1: which I bet didn't help them in terms of people
28:40
Speaker 1: buying UK stocks which have been doing very well.
28:43
Speaker 2: Yeah, which have been Yeah, that's a contrarian trade.
28:46
Speaker 1: That's a contrarian trade. But there you are. They have
28:48
Speaker 1: all right, great to have you on the show again.
28:51
Speaker 1: Hugh Robertson, regular on the show. Thanks for talking to
28:54
Speaker 1: us today.
28:54
Speaker 2: Thank you very much for having me.
28:56
Speaker 1: You're welcome you. The Money Puzzle is presented by me
28:58
Speaker 1: James Kirby and it is produced by Leah Sammerglue. Let's
29:03
Speaker 1: have some more of those very interesting pieces of correspondence,
29:06
Speaker 1: including if you've spot something that most people don't know, well,
29:09
Speaker 1: we're really interested to find out, like Danielle did today
29:12
Speaker 1: The Money Puzzle at the Australian dot com dot au.
29:16
Speaker 1: Talk to you soon.