Latest / The Money Puzzle / Electric incentives! : How you can optimise the financial incentives for clean energy from the new government

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Electric incentives! : How you can optimise the financial incentives for clean energy from the new government · The Money Puzzle

0:06
Speaker 1: Hello, and welcome to The Australian's Money Puzzle podcast. I'm
0:09
Speaker 1: James Kirkby, Welcome aboard everybody. I'm going to try something
0:19
Speaker 1: quite different today. If you're a homeowner, if you are
0:23
Speaker 1: an investment property owner, if you drive a car, there
0:27
Speaker 1: is now, by now, I mean after the election, there
0:31
Speaker 1: is suddenly a smorgas board of incentives and discounts to
0:36
Speaker 1: go green in your home or indeed in your transport.
0:42
Speaker 1: So solar rooftops have been around for a while, one
0:45
Speaker 1: in three of the Australian public help solar panels, and
0:48
Speaker 1: I expect that proportion would be considerably higher among our
0:52
Speaker 1: listeners now with the new government, they are outlying quite
0:57
Speaker 1: a significant federal national scheme about how to improve the
1:03
Speaker 1: economic attraction of going solar through batteries with the ultimate
1:09
Speaker 1: sort of power arrangement in your home. And also, if
1:12
Speaker 1: you didn't know, electric cars are favored over petrol cars
1:17
Speaker 1: in the financial system, we will explain all this to
1:19
Speaker 1: you in a moment, because seriously interested in this area
1:23
Speaker 1: is James Gerard, financial advisor, who is not just a
1:26
Speaker 1: financial advisor and a contributor to the Australian, but I
1:30
Speaker 1: think I could almost called you a geek on all
1:33
Speaker 1: this stuff because you're writing about it for years.
1:35
Speaker 2: How are you, James, I'm doing well, James, go easy.
1:38
Speaker 2: It's still early on in the show, but I am
1:40
Speaker 2: very pro electric electric cars, solid pedals. I've got it all.
1:44
Speaker 1: Yeah, it's not that i'm not. It's just that I'm inert.
1:48
Speaker 1: I just haven't got around to doing it. It's all
1:50
Speaker 1: I want to do it. It's all there. Apparently the roof
1:53
Speaker 1: is wired for all this. So we're going to do it,
1:57
Speaker 1: and maybe we we'll do it having done this show,
2:00
Speaker 1: and I'll finally kind of grasp it all, just like
2:02
Speaker 1: the listeners hopefully. So, folks, we've said the first thing
2:06
Speaker 1: is that one in three homes have solar panels, and
2:10
Speaker 1: you may have them or you may not have them,
2:13
Speaker 1: but the government, let's call them the The second that
2:16
Speaker 1: Albanesi government part of the election promise was a big
2:23
Speaker 1: new scheme to get people to subsidize and discount batteries.
2:27
Speaker 1: So James, just, first of all, will you explain about,
2:30
Speaker 1: for anyone who has owns their home or owns an
2:33
Speaker 1: investment properly how it works. In terms of so far,
2:36
Speaker 1: there was a lot of incentive to get solar panels.
2:39
Speaker 1: That was the sort of a mark one, and it
2:41
Speaker 1: obviously went very well. One in three homes have it
2:44
Speaker 1: now and as I understand, the incentives for them and
2:48
Speaker 1: them alone have sort of faded, have they in the
2:51
Speaker 1: system as more people took them up?
2:53
Speaker 2: Correct, solar panels have only been around for twenty to
2:57
Speaker 2: twenty five years. If you go back to two thousand
2:59
Speaker 2: and one, only one hundred and eighteen households in the
3:02
Speaker 2: whole country had solar panels on their roof, the sunniest
3:04
Speaker 2: continent on Earth. Yeah, right, yeah, and now there's four
3:07
Speaker 2: point one million, as you say, one in three now,
3:10
Speaker 2: going back ten fifteen years ago, there were very large
3:14
Speaker 2: rebates for electricity that you export back to the grid
3:18
Speaker 2: that you've generated from your solar panels. So that made
3:21
Speaker 2: it quite profitable to put solar panels in because you
3:24
Speaker 2: would not need to consume energy from the grid, but
3:27
Speaker 2: you'd actually send energy back and get a decent subsidy
3:31
Speaker 2: for that. But these days I've dropped it to almost nothing.
3:34
Speaker 2: So the excess power that you're generating from your solar panels,
3:37
Speaker 2: it's pretty much wasted sending it back to the grid.
3:39
Speaker 2: Could you get in a few cents maybe five or
3:41
Speaker 2: ten cents per killer what hour. So that makes batteries
3:45
Speaker 2: an interesting proposition where rather than export your excess solar
3:50
Speaker 2: electricity that you're generating back to the grid and get
3:52
Speaker 2: almost nothing, you can store it and then at nighttime,
3:54
Speaker 2: when there's no sun, you can then use that stored
3:57
Speaker 2: up energy in the battery and save that. So that's
4:00
Speaker 2: been more popular in the past five years. But the
4:03
Speaker 2: biggest problem has been the cost of the batteries. They're
4:06
Speaker 2: not cheap James yees.
4:08
Speaker 1: So very few people have the batteries because up to
4:11
Speaker 1: now it's been like you need to be really kind
4:13
Speaker 1: of devlot on alternative energy or green energy to have
4:17
Speaker 1: on in your home, so most people don't because they
4:19
Speaker 1: cost ten to fifteen grand. So explain what the new
4:23
Speaker 1: dealer is from the government federally, and it is for
4:26
Speaker 1: anyone as they understand what's the offer.
4:28
Speaker 2: It is. There's no asset threshold, no income threshold, and
4:32
Speaker 2: just jumping back one step slightly on the solar panels. Now,
4:36
Speaker 2: from a financial perspective, the payback period is usually sort
4:39
Speaker 2: of between five ish years, maybe give or take a
4:41
Speaker 2: couple of years, but The problem with batteries that the
4:43
Speaker 2: payback period is eight to twelve years on average, and
4:47
Speaker 2: that's dissuaded a lot of people from getting those batteries.
4:50
Speaker 2: But what the Albanesi Labor government have proposed is that
4:54
Speaker 2: they'll rebate you thirty percent of the cost of the
4:57
Speaker 2: battery system that you put in at home cost between
5:00
Speaker 2: ten and fifteen thousand dollars. Your installation costs will drop
5:03
Speaker 2: between three thousand to four thousand, five hundred. But it
5:07
Speaker 2: gets better because you can stack depending on which state
5:10
Speaker 2: or territory that you live in, the state based incentives
5:13
Speaker 2: to get batteries as well. So I know that in
5:15
Speaker 2: Western Australia they're offering thousands of dollars if you put
5:18
Speaker 2: batteries in, and most states offer something there. So it's
5:22
Speaker 2: actually two different incentives. You got the state in the
5:24
Speaker 2: federal which means that if your battery system costs fifteen thousand,
5:28
Speaker 2: after you stack those rebates depending where you live, but
5:31
Speaker 2: it's probably going to be about half that actual cost,
5:33
Speaker 2: about seven and a half thousand.
5:35
Speaker 1: Okay, So the essence of the deal is combined with
5:38
Speaker 1: whatever your state deal is. The batteries folks that used
5:42
Speaker 1: to cost ten to fifteen thousand, which is a fair
5:45
Speaker 1: bit to pay. That is cut in half effectively, at
5:50
Speaker 1: least's cut thirty percent by the federal deal And then
5:53
Speaker 1: as you see, if you put in the whatever your
5:56
Speaker 1: state dealer as well, then you could find that it
6:00
Speaker 1: is actually cut in half. Yeah, okay, so that sounds
6:02
Speaker 1: pretty good. Now. When you did this exercise, and it
6:06
Speaker 1: was very well done, and you did this piece in
6:08
Speaker 1: the Australian and it was quite obvious that you knew
6:10
Speaker 1: your stuff thoroughly. You were saying various things like, the
6:13
Speaker 1: average household uses twenty killer what hours of electricity per
6:17
Speaker 1: day and pays two five hundred per year based on
6:21
Speaker 1: the average price of electricity. But if you opted for
6:26
Speaker 1: time abuse billing rates that can exceed fifty cents per
6:30
Speaker 1: killer what hour and peak times. Okay, but if you
6:32
Speaker 1: put a battery in, then you say, and you reduce
6:35
Speaker 1: the reliance on your grid by fifty percent, then the
6:39
Speaker 1: ten kilo what hours or that basically the hours attributed
6:43
Speaker 1: to the battery, that you'll save one thousand to fifteen
6:47
Speaker 1: hundred a year for the average household. So people say
6:50
Speaker 1: to themselves, okay, I'm looking at this battery and now
6:53
Speaker 1: cost half. I'm hoping it's going to cost me half
6:55
Speaker 1: of what it used to cost that I thought it
6:57
Speaker 1: was going to cost if by going to the federal scheme.
7:00
Speaker 1: Do you know when it starts and what's the mechanics
7:02
Speaker 1: of it.
7:03
Speaker 2: I don't know when it starts, but I feel the
7:05
Speaker 2: mechanics of it will be that the battery installer will
7:10
Speaker 2: take it off the price, so you won't have to
7:11
Speaker 2: pay the full ten to fifteen. You'll pay the discounted
7:14
Speaker 2: amount and installer will go seek the reimbursement from the
7:18
Speaker 2: federal government.
7:19
Speaker 1: Oh I see, So you don't even have to get
7:21
Speaker 1: into that. The price in the shop will reflect this scheme. Okay,
7:24
Speaker 1: and we'll come back on when it starts as soon
7:26
Speaker 1: as we can, all right now, Looking at the response
7:30
Speaker 1: to this piece and this piece of information in the Australian,
7:34
Speaker 1: at least, I think we must have an awful lot
7:36
Speaker 1: of engineers. That's all I can say on the books
7:38
Speaker 1: as subscribers in the Australian, because when you do these pieces,
7:41
Speaker 1: boy oh boy, did they get in deep and talk
7:44
Speaker 1: about what you're talking about, and clearly they have real
7:48
Speaker 1: world experience of these both this technology, green technology and
7:53
Speaker 1: the economics of them. So you met out basically here
7:59
Speaker 1: that all things considered under this new scheme, if you
8:04
Speaker 1: have solar panels and you get a battery discounted from
8:07
Speaker 1: the government, etc. That it should end up basically line ball.
8:11
Speaker 1: You won't loser and make much money on it. Is
8:13
Speaker 1: that a fair assessment to fight your conclusion was it
8:17
Speaker 1: is when you.
8:18
Speaker 2: Take everything into consideration. On the surface, it looks good that, okay,
8:23
Speaker 2: you use the solar panels during the day for electricity,
8:27
Speaker 2: you use the battery at night with the stored energy,
8:30
Speaker 2: where electricity costs can be quite high, being the peak
8:32
Speaker 2: period at nighttime. But when you have a think about everything,
8:35
Speaker 2: so one thing to notice that the useful life of
8:37
Speaker 2: a battery is the guarantee period about ten years on
8:40
Speaker 2: most battery manufacturers, and at that point they say that
8:44
Speaker 2: you still should have about seventy percent capacity, and then
8:47
Speaker 2: researching the battery should last about fifteen years, maybe a
8:50
Speaker 2: little bit longer than that. So if you're getting one
8:53
Speaker 2: thousand to fifteen hundred dollars a year benefit, and if
8:55
Speaker 2: you just work off that ten year period, you're going
8:58
Speaker 2: to pay back the battery after like five for six years,
9:00
Speaker 2: and then you'll get a couple of years of net
9:02
Speaker 2: benefit until the battery dies basically. But the other thing
9:06
Speaker 2: you need to consider is the opportunity costs that seven
9:09
Speaker 2: and a half thousand dollars that you spent on your
9:11
Speaker 2: home battery. You could have put that into an ETIR
9:13
Speaker 2: for you could have paid down your mortgage.
9:16
Speaker 1: Yeah, you could have invested it as swear. Yeah, and
9:18
Speaker 1: you're allowing for that, are you in your calculation that
9:21
Speaker 1: it works out more or less line born idea?
9:23
Speaker 2: So when you take into account that what could I've
9:26
Speaker 2: used that seven and a half thousand dollars for to
9:28
Speaker 2: earn interests, dividends, reduce my mortgage repayments, then it becomes
9:33
Speaker 2: pretty much line bare in the numbers that I did
9:35
Speaker 2: for the average household. So still it wasn't financially fantastic
9:40
Speaker 2: in terms of the outcome if you were to install
9:42
Speaker 2: a battery. It's not as compelling as what SOLA is,
9:45
Speaker 2: even after the new incentive by the Labor government of
9:48
Speaker 2: the thirty percent discount.
9:50
Speaker 1: Just to clarify what you're saying is that if you
9:52
Speaker 1: put the money into batteries, you will get your money
9:55
Speaker 1: back basically cost neutral over a long period of time,
9:59
Speaker 1: and you're allowing for the fact in that calculation that
10:02
Speaker 1: allows the opportunity cost that you might have done what
10:05
Speaker 1: you might have done with the money if you'd put
10:07
Speaker 1: it in the market. Are ever so skeptical readers through
10:12
Speaker 1: a few more darts at you, James the correspondent who
10:16
Speaker 1: said the whole thing is a walk scam. We won't
10:18
Speaker 1: put them to one side, but let's talk about some
10:22
Speaker 1: of the sort of pragmatic critiques that were thrown at you.
10:27
Speaker 1: One was that you underestimated the decline of the batteries.
10:33
Speaker 1: Is there a fact that you allow for that? And
10:34
Speaker 1: is there any chance they'll get better?
10:37
Speaker 2: I did allow for that, But what I counted on
10:41
Speaker 2: was the fact that the manufacturers offer factory warranties that
10:44
Speaker 2: the battery is not performing after most of them have
10:46
Speaker 2: between seven and ten years, But say like Tesla, their
10:48
Speaker 2: power walls are ten year warranties that if it fails
10:51
Speaker 2: within that period you get a new battery. So you
10:54
Speaker 2: can expect seven to ten years of good working life
10:57
Speaker 2: of the battery. And if you get in one thousand
10:59
Speaker 2: dollars you benefit with simple mass and it costs you
11:02
Speaker 2: seven thousand If that battery lives beyond seven years. You're
11:06
Speaker 2: into positive territory before you take into account that opportunity
11:09
Speaker 2: cost of what you could have done with the money.
11:10
Speaker 1: So in a way, really the reward is that you've
11:13
Speaker 1: gone green. Number one. Number two, you have become more
11:18
Speaker 1: independent within the system. Is that true? Have you become
11:21
Speaker 1: more independent? If you have your own battery and panels.
11:25
Speaker 2: You are more independent because you have your own source
11:29
Speaker 2: of energy there, independent of what's happening with the grid.
11:32
Speaker 1: So if the energy prices shoot up and there's nothing
11:35
Speaker 1: to say, they won't. I mean, we see for Oracs
11:37
Speaker 1: talking about closing down a fertilizer factory in Queensland this
11:40
Speaker 1: week because the gas prices. So let's just say prices
11:43
Speaker 1: shoot up or there's a power cut for some reason
11:46
Speaker 1: and mega heat wave. Would you be able to power
11:48
Speaker 1: your house? Basically?
11:50
Speaker 2: Yeah, that's right, So you have that ability to to
11:52
Speaker 2: be able to do that. And just one thing which
11:55
Speaker 2: is as an extension which may happen in the future,
11:57
Speaker 2: is that you may be able to power your house
12:01
Speaker 2: from your electric vehicle because very interestingly, the batteries in
12:05
Speaker 2: electric vehicles between five to ten times bigger than the
12:09
Speaker 2: electric battery that you would stick in your garage or
12:11
Speaker 2: next to your house. Do you mean more capacity, the
12:15
Speaker 2: more capacity? Yeah, yeah, So my electric vehicle, for example,
12:19
Speaker 2: has a seventy killer what hour battery, whereas the average
12:24
Speaker 2: Tesla power will has something like a ten to thirteen
12:27
Speaker 2: killer what hour capacity.
12:28
Speaker 1: Right, one of the Chinese manufacturers has come up with
12:32
Speaker 1: the same. Is it like a charging can be done
12:35
Speaker 1: in a couple of hours rather than overnight. So this
12:38
Speaker 1: whole thing is changing very quickly. But this has always
12:39
Speaker 1: been a thing. If you buy, do you buy too
12:41
Speaker 1: early because the technology could be much better next year.
12:44
Speaker 1: We do with that in a moment. Just one last
12:45
Speaker 1: thing on the batteries. What about disposing them?
12:49
Speaker 2: Well, that's an issue, isn't it. Because you have this
12:51
Speaker 2: massive battery that is now not really doing anything as
12:54
Speaker 2: past its useful life, it needs to be disposed of.
12:58
Speaker 2: I didn't take that into account in terms of I
13:01
Speaker 2: don't think there'll be a large cost to it. I
13:02
Speaker 2: think if you get a new battery, the installer will
13:04
Speaker 2: remove it. But there is a cost to the environment
13:06
Speaker 2: there too. I'm not sure how much of the battery
13:08
Speaker 2: you can recycle, and the carbon emissions linked to that
13:11
Speaker 2: process as well. Yeah, so there's two arguments to go
13:14
Speaker 2: for batteries and solar. One is that the pure financials
13:17
Speaker 2: that you just do a spreadsheet, You go, Okay, it's
13:19
Speaker 2: going to cost me x it's going to take why
13:21
Speaker 2: number of years to get a net benefit that works
13:24
Speaker 2: for me. I'll put the solar in because I know
13:25
Speaker 2: that in four or five years I'll be in the
13:27
Speaker 2: black on that. With the battery, it's less compelling, but
13:31
Speaker 2: there is a slight benefit with it. The other reason
13:34
Speaker 2: why people put in battery in solar is that the
13:35
Speaker 2: feel good factor, that environmental factor, which is definitely there
13:39
Speaker 2: with the solar, but probably a little bit less so
13:41
Speaker 2: with the battery. Given that it's not something that can
13:44
Speaker 2: stay on your roof like the solars for twenty five
13:46
Speaker 2: thirty years, they have a much more limited life, about
13:48
Speaker 2: half the life of the solar.
13:49
Speaker 1: I see. So the panels last much longer, do they?
13:52
Speaker 2: They do? Yeah, they've lasted quite a long time, even
13:55
Speaker 2: in our rugged Australian conditions.
13:57
Speaker 1: Interesting. Okay, we've just covered the new deal if you like,
14:02
Speaker 1: on clean energy for your home. Next we will deal
14:06
Speaker 1: with the tax bias basically towards electric cars. That you
14:11
Speaker 1: may not be aware of back in the moment. Hello
14:22
Speaker 1: and welcome back to the Australians Money Puzzle podcast. I'm
14:25
Speaker 1: James Kirby with James Girard, financial Advisor dot com dot au,
14:30
Speaker 1: regular on the show and a keen clean energy devotee
14:36
Speaker 1: with an electric car. We won't say what brand. You've
14:39
Speaker 1: been fairly happy with it, though.
14:41
Speaker 2: Very very happy with it. I've always been a petro
14:44
Speaker 2: head by my whole life. You're a car guy, very
14:46
Speaker 2: much a car guy, and I stayed away from EV's
14:49
Speaker 2: for a very long time. I turned my nose at them, James,
14:51
Speaker 2: But in the past couple of years, I'm a convertee
14:55
Speaker 2: to electric vehicles.
14:56
Speaker 1: Yeah, okay, So we mentioned in the first part of
15:01
Speaker 1: the show, folks that on top of the inducements for
15:05
Speaker 1: both the solar panels and the battery that would be
15:09
Speaker 1: underneath that and getting that entire sort of enterprise going
15:12
Speaker 1: in your home, which is now available from the new government,
15:16
Speaker 1: there is also ideal on electric cars now. To be precise,
15:22
Speaker 1: the deal is that there is outstanding tax benefits if
15:27
Speaker 1: you lease the car. And before we actually get into it, James,
15:31
Speaker 1: I would have thought that an electric car is the
15:34
Speaker 1: best way to deal with them is to lease them
15:37
Speaker 1: because the technology is changing so fast. We mentioned about
15:39
Speaker 1: how one of the China based car companies announced recently
15:43
Speaker 1: that it could charge car in an hour or two
15:46
Speaker 1: compared to what is the standard eight to ten hours.
15:49
Speaker 1: And there's always this question about the secondhand value of
15:52
Speaker 1: electric cars. So what's your first response to that that
15:55
Speaker 1: it's better to lease one than buy one.
15:57
Speaker 2: Ten years ago, you buy a Tesla, it would cost
15:59
Speaker 2: you one hundred thousand dollars or more. It was more
16:02
Speaker 2: seen as like a flexis status symbol, whereas today the
16:05
Speaker 2: electric vehicles, there's a whole rafter, these Chinese electric vehicles
16:08
Speaker 2: that are coming in at comparable prices to the internal
16:11
Speaker 2: combustion engine equivalent, which means that even after ten years,
16:16
Speaker 2: when the battery dies or is dying, you can almost
16:19
Speaker 2: throw away the electric vehicle and just go buy another one,
16:22
Speaker 2: or you can replace the battery. It costs between ten
16:24
Speaker 2: and fifteen thousand for the average electric vehicle battery to
16:26
Speaker 2: be replaced. But it's a lot more compelling now to
16:29
Speaker 2: buy an electric vehicle because the technology has got better
16:32
Speaker 2: and the prices have come down substantially.
16:35
Speaker 1: And the big changes the charging time, is that right?
16:40
Speaker 2: That's correct. The charging time has come down quite a bit,
16:44
Speaker 2: so it will take hours to charge the electric vehicles
16:46
Speaker 2: going back five years, whereas now they've got these capacities there.
16:50
Speaker 2: But I would put a cavea there. It depends on
16:52
Speaker 2: the infrastructure on where you live, because I live in
16:55
Speaker 2: metropolitan Sydney and there's very few places where I can
16:58
Speaker 2: actually use the capabilit of my electric vehicle to maximize
17:02
Speaker 2: the charge in time. So if I go to the fastest,
17:05
Speaker 2: most powerful charger that I can find, I can charge
17:07
Speaker 2: my electric vehicle in thirty minutes. But there's only a handful,
17:11
Speaker 2: so we're talking like two or three of these and
17:12
Speaker 2: the whole of Sydney. And if you go there you
17:14
Speaker 2: have to wait a while as well, becau there's other
17:16
Speaker 2: people for the same idea to charge there. So even
17:19
Speaker 2: though you can charge them fast, in reality you can't
17:22
Speaker 2: because there's nowhere to go charge them really quickly.
17:25
Speaker 1: The infrastructure isn't there yet. And on the leasing, if
17:29
Speaker 1: you're thinking of electric you should lease not buy. Is
17:31
Speaker 1: that still the case, because it seems to be underminded
17:33
Speaker 1: a bit by what you said there.
17:35
Speaker 2: A second to go, it is still better to lease
17:38
Speaker 2: rather than to buy. There's this thing called an ovated lease.
17:41
Speaker 2: It's been around for ages. It's where you can salary
17:43
Speaker 2: package a vehicle. And the way that most of the
17:47
Speaker 2: financing companies would do it is that part of your
17:49
Speaker 2: pre tax income goes towards the finance cost and the
17:52
Speaker 2: operating cost of the car, and then part of your
17:54
Speaker 2: post tax income goes towards it. So it was a
17:57
Speaker 2: somewhat beneficial arrangement. But then a few years ago the
18:01
Speaker 2: government said, all right, if you buy an electric vehicle
18:04
Speaker 2: and you buy it below the luxury car tax threshold,
18:07
Speaker 2: which is at the moment about ninety one thousand dollars,
18:09
Speaker 2: you don't need to worry about this part of your
18:11
Speaker 2: pre tax part of your post tax to pay for
18:13
Speaker 2: this thing.
18:13
Speaker 1: Every month.
18:14
Speaker 2: Doesn't matter what you earn. You can use all of
18:16
Speaker 2: your pre tax income to pay for the financing costs
18:19
Speaker 2: of the car, pay for the operate in tires, insurance.
18:22
Speaker 1: The entire costs is one hundred percent tax deductible, and
18:27
Speaker 1: it used to only be half deductible. Is that roughly right?
18:31
Speaker 2: Roughly like that? Today it works out to be one
18:34
Speaker 2: of the best tax brakes going around, particularly for people
18:37
Speaker 2: on that forty seven percent tax bracket to use that
18:40
Speaker 2: pre tax income because remembering that people on the forty
18:43
Speaker 2: seven percent tax bracket, every extra dollar they make in
18:46
Speaker 2: gross salary, they're only getting fifty three cents in their
18:49
Speaker 2: bank account. So the ability to use one dollar in
18:52
Speaker 2: every dollar for this vehicle is fantastic. And that's why
18:56
Speaker 2: the takeup of these novated leases to buy these electric
18:58
Speaker 2: vehicles has just gone through the roof and the government
19:00
Speaker 2: really underestimated how many people actually go for this.
19:03
Speaker 1: Well we do, didn't we, James, because we said it
19:05
Speaker 1: several times. We said that on this show. We said
19:07
Speaker 1: it regularly wherever we were, this is going to go
19:09
Speaker 1: like hotcakes, because it meant that we're always saying, you know,
19:14
Speaker 1: for in terms of the salary earner, you know, there's
19:17
Speaker 1: very little in the way tax breaks, like really, there's
19:19
Speaker 1: put your money into super are there's borrow to buy
19:23
Speaker 1: a house, investment property or perhaps investment package, but borrowed
19:27
Speaker 1: to do that. Not everybody wants to do those things,
19:30
Speaker 1: and after that it's slim pickings. But here was this
19:33
Speaker 1: sort of barely advertised change in leasing, where to lease
19:39
Speaker 1: an electric car became fully tax offset for the fat
19:41
Speaker 1: salary earner, and it previously on the Petrick cars was not.
19:46
Speaker 1: It was roughly half and half. So yes, it went
19:49
Speaker 1: like a rocketer. And the leasing companies have been having
19:51
Speaker 1: a bowl. And the electric car companies, a lot of
19:54
Speaker 1: them are selling like this, and even the electric uts,
19:56
Speaker 1: as I understand, that's what really drove them. So all
19:59
Speaker 1: the people going around in those BYD Shark electric utes,
20:05
Speaker 1: they would be most of them unnovated leases.
20:07
Speaker 2: You reckon, I would hazard a guess and say absolutely
20:10
Speaker 2: the majority would be on these novated leases. It costs
20:13
Speaker 2: the government about half a billion dollars a year in
20:16
Speaker 2: foregone taxes with these concessions on these electric vehicles by
20:19
Speaker 2: this salary packaging. One thing that is important to note, though,
20:22
Speaker 2: is that very recently the scheme stopped. If you buy
20:26
Speaker 2: one of those plug in hybrids like the BYD Shark,
20:29
Speaker 2: which is that electric ute, so no longer can that
20:32
Speaker 2: benefit from these rules. It needs to be a pure
20:35
Speaker 2: electric only, no more part electric part motor engine to
20:39
Speaker 2: qualify for this scheme.
20:40
Speaker 1: Now, okay, so I hope that's clear of folks. This
20:43
Speaker 1: whole thing about thenovated lease.
20:45
Speaker 2: The tax.
20:46
Speaker 1: Attraction of it is for a purely electric car. Plug
20:50
Speaker 1: in hybrids had been included, but they're no excluded. Is
20:53
Speaker 1: that it? And that's why there was an incredibly sharks
20:57
Speaker 1: spike and sales in all those hybrid plugin wasn't there
21:00
Speaker 1: but just before they cut it off.
21:02
Speaker 2: That's right. And leading up to the federal election, I
21:05
Speaker 2: felt that Liberals shot themselves in the foot a little
21:08
Speaker 2: bit because they proposed to get rid of this. They
21:10
Speaker 2: did half a billion dollars a year of tax breaks
21:12
Speaker 2: for electric vehicle owners, and one of the Liberal senates
21:15
Speaker 2: has also proposed a road user charge, which is a
21:17
Speaker 2: whole separate discussion around whether it's fair that electric vehicle
21:21
Speaker 2: users are not paying the fuel excise. Yes, but so
21:24
Speaker 2: really they're not contributing to road maintenance costs, and so
21:27
Speaker 2: is it fair to charge them something Victorian government tried
21:31
Speaker 2: to but then the High Court I think it was
21:33
Speaker 2: said states can't charge that, only the federal government. So
21:36
Speaker 2: it's actually sitting with Anthony Alberinezi to decide whether he's
21:38
Speaker 2: going to levy electric users on a road charge.
21:43
Speaker 1: Well, he will, of course, I reckon sooner or later.
21:46
Speaker 1: He's probably just trying to get these initial schemes to
21:49
Speaker 1: work first, because you can't have the situation wherever you
21:52
Speaker 1: get to the future where half are on electric and
21:54
Speaker 1: half are on petrol, and the petrol are paying for
21:56
Speaker 1: one hundred percent of the road costs. So I mean
21:59
Speaker 1: that you would think that that isn't fair at debate
22:02
Speaker 1: perhaps for another show. Okay, I thought that was great, James,
22:07
Speaker 1: really really interesting informative. I hope for everybody that has,
22:11
Speaker 1: as I say, a property interest or a car interest,
22:14
Speaker 1: which I imagine is about ninety nine point nine percent
22:16
Speaker 1: of our listeners. We'll be back in a moment with
22:22
Speaker 1: some really good questions. Hello and welcome back to the
22:36
Speaker 1: Australians Money Puzzle podcast. James Kirby here with James Girard.
22:43
Speaker 1: We are discussing the new deals if you like, that
22:47
Speaker 1: are out there for you with the new government. We
22:49
Speaker 1: did mention the first part of the show about the
22:51
Speaker 1: new deal with the batteries and the big discounset will
22:54
Speaker 1: be available if you already have a solar panel and
22:57
Speaker 1: you want to get a battery in there. There is
23:00
Speaker 1: quite a generous and incentive and discount scheme coming down
23:04
Speaker 1: the line, which you can mix with your local state
23:06
Speaker 1: schemes and cut the price in half. Basically as to
23:09
Speaker 1: when it starts, the only reason we fudged on that
23:12
Speaker 1: was because there is no start date, so it has
23:14
Speaker 1: to go to Parliament obviously in a few weeks when
23:16
Speaker 1: parliament resumes. But if it's the case that the structure
23:20
Speaker 1: of the Parliament is basically that Labor has to negotiate
23:23
Speaker 1: with the Greens to get things through the Senate, then
23:26
Speaker 1: you would imagine even by the standards of the Greens
23:30
Speaker 1: holding up things to get a variation on a deal
23:34
Speaker 1: that one that one at least would go through relatively easily,
23:38
Speaker 1: it being absolute heartland stuff for the Greens. Okay, now, James,
23:43
Speaker 1: before we go to those questions, I should have asked you,
23:46
Speaker 1: number one, do you have solar panels on the roof
23:49
Speaker 1: of your house?
23:51
Speaker 2: I do you do? I put them in about five
23:53
Speaker 2: years ago. At that point in time, I had bought
23:56
Speaker 2: the family home with my wife that we intended to
23:58
Speaker 2: stay in for twenty years or so to raise our
24:01
Speaker 2: three children, and I thought, okay, after I'd done the spreadsheet,
24:05
Speaker 2: it made sense to put in the solar panels because
24:07
Speaker 2: post five years I'll be in the black.
24:10
Speaker 1: And how's that going great.
24:12
Speaker 2: The only thing I'd make as an observation is that
24:16
Speaker 2: this is gooden all scientific, but the tilt of the
24:19
Speaker 2: Earth relative to the Sun is either higher or lower
24:23
Speaker 2: in different parts of the year, which basically means that
24:26
Speaker 2: the solar panels generate less in the winter times and
24:30
Speaker 2: more in the summer times. And I didn't really factor
24:34
Speaker 2: that in. I wouldn't get as much power generated during
24:37
Speaker 2: winter from the solar panels. But outside of that, it's
24:39
Speaker 2: been fantastic. I've been very happy with it. You can
24:42
Speaker 2: be really nerdy if you want that. You have these
24:45
Speaker 2: apps where it shows you how much you're generating right now,
24:47
Speaker 2: and you go, oh, it's sunny, we're generating a lot.
24:49
Speaker 2: Quick turn on the washing machine, and then you can
24:51
Speaker 2: see throughout the week how much you've saved it as well.
24:53
Speaker 2: It's quite cool.
24:55
Speaker 1: My brother in law is a professor in Ireland and
24:59
Speaker 1: he is big thing is alternative energy. I mean, he's
25:02
Speaker 1: this is his area and he has solar panels. But
25:06
Speaker 1: boy or boy, because they have such a sun is solo.
25:11
Speaker 1: It's not on the roof of the house. It's he
25:13
Speaker 1: lives on a kind of a what you might call
25:14
Speaker 1: a small almost like a farm and he just has
25:17
Speaker 1: this extraordinary thing on solar panels, but they're separate to
25:21
Speaker 1: the house, like you go over to a part and
25:23
Speaker 1: it's in the field and it's just sitting there. The
25:25
Speaker 1: thing about the half the size botennis court very impressive
25:28
Speaker 1: and that works. But yes, as you say, it depends
25:31
Speaker 1: on where you are how much sun you get. Unfortunately,
25:34
Speaker 1: it's a consistent and I'm sure everybody understands that that's
25:38
Speaker 1: there's too much of it in summer and not enough
25:40
Speaker 1: of it in midwinter. Like now, how is that what
25:41
Speaker 1: you're saying.
25:43
Speaker 2: Yes, the weather, but also the tilt of the earth
25:46
Speaker 2: is different in summer in winter. That affects how much
25:49
Speaker 2: absorption or whatever the technical term is that the solar
25:51
Speaker 2: panels make from the sun, right, so they're less efficient
25:53
Speaker 2: in winter, is what I'm trying to articulate.
25:56
Speaker 1: Okay, do you have an electric car?
25:58
Speaker 2: I do. That was usually for financial reasons. I was
26:02
Speaker 2: one of the first to jump into that electric vehicle
26:05
Speaker 2: discount buildnovatedly seen scheme thing when it came into force
26:08
Speaker 2: a couple of years ago.
26:10
Speaker 1: Yes, I remember we were both excited about it, and
26:13
Speaker 1: you did it and I didn't. I tell me, but
26:17
Speaker 1: do you also have a Petroc carr in the house.
26:20
Speaker 2: I do. I think for the average Australian metropolitan family,
26:23
Speaker 2: so where average mom and dad, three kids, we find
26:28
Speaker 2: it necessary to have a hybrid or a petrol vehicle.
26:32
Speaker 2: We have a hybrid as the family vehicle. That the
26:35
Speaker 2: big seven seater that we can drive four hours from
26:38
Speaker 2: Sydney and not have to worry about charging. Right, that's
26:41
Speaker 2: the one that can go the longer distances. But it's
26:43
Speaker 2: been fantastic having this little zippy electric vehicle to drop
26:46
Speaker 2: the kids off, get me into the city. And the
26:49
Speaker 2: maintenance costs it are much lower than petrol and diesel
26:52
Speaker 2: engines because there's less fluids inside of the vehicle there.
26:56
Speaker 2: So it's really just changing tires and then changing brakes
26:59
Speaker 2: in frequent and that's it really with the electric vehicle
27:02
Speaker 2: to maintain.
27:03
Speaker 1: Yeah, and I'm all off for one of those very soon, okay.
27:06
Speaker 1: And what about the battery? Is the offering from the
27:08
Speaker 1: Albinezi administration sufficient to get you to put your hand
27:12
Speaker 1: in your pocket and buy a battery?
27:14
Speaker 2: I think it will get me over the line, even
27:17
Speaker 2: though my analysis was that it was quite marginal. There
27:20
Speaker 2: are forums where they teach you how to best manage
27:24
Speaker 2: the life of the battery, to not top it up
27:27
Speaker 2: a certain way, discharge it a certain way, so you
27:29
Speaker 2: can prolong the life of the battery if you look
27:32
Speaker 2: after it. And if I can get my battery fifteen
27:34
Speaker 2: years or a little bit more, there'll be a decent
27:36
Speaker 2: benefit there.
27:37
Speaker 1: Okay, okay. Questions folks, which are not on this issue,
27:40
Speaker 1: but perhaps we'd have some coming down the line. And also,
27:44
Speaker 1: by the way, before I got to questions, as I said,
27:46
Speaker 1: I encourage people, and I encourage them again. If you've
27:49
Speaker 1: got to send in a question, feel free to send
27:51
Speaker 1: in more than one. All the thing I ask you
27:53
Speaker 1: is keep them short.
27:54
Speaker 2: That's all.
27:55
Speaker 1: Okay. Now a question you can see the one from Anthony,
28:00
Speaker 1: can you?
28:01
Speaker 2: I can? Yes?
28:01
Speaker 1: Do you want to read that one?
28:03
Speaker 2: Wondering if you could address the question of whether demon
28:05
Speaker 2: rates will remain frozen or revert back to the higher
28:08
Speaker 2: rates that reflect current inflation slash interest rates?
28:11
Speaker 1: Okay, very good question, Anthony. Just for context here, folks,
28:14
Speaker 1: if you don't know what they are, then you probably
28:16
Speaker 1: don't care about them, And if you know what they are,
28:18
Speaker 1: you really care about them. A lot, a lot of
28:20
Speaker 1: things in finance like this, the deming rating. When you
28:23
Speaker 1: get pension, they don't track everything you do. What they
28:28
Speaker 1: do is they deem, right, they assume how much you make.
28:32
Speaker 1: So if you have one hundred thousand sitting on the
28:35
Speaker 1: side beyond your pension, they deem that you make a
28:39
Speaker 1: certain rate on that. And the rate at the moment
28:41
Speaker 1: is two point twenty five percent. Now it's important because
28:45
Speaker 1: that's a benchmark rate and could be used, for instance,
28:48
Speaker 1: with this new super tax. One of the alternative ideas,
28:51
Speaker 1: rather than the daft, silly, ridiculous idea of taxing on
28:56
Speaker 1: realized games, is to create a deming arrangement where they
29:01
Speaker 1: would deem or assume how much you make each year
29:04
Speaker 1: in your super As Jeff Wilson said on the show
29:06
Speaker 1: a few weeks ago, anything is better than what they're
29:10
Speaker 1: suggesting right now, And as we speak, that is what's
29:14
Speaker 1: coming down the line in any event, So that's deeming.
29:16
Speaker 1: So the thing about the deeming rate is that it's
29:20
Speaker 1: two point two five percent, and as we all know,
29:23
Speaker 1: that is really really low, and it's supposed to be
29:27
Speaker 1: benchmarked against the cash rate, to be precisely official cash
29:31
Speaker 1: rate as put through by the Reserve Bank. Now, what
29:33
Speaker 1: happened was a few years ago during the COVID emergency,
29:37
Speaker 1: the government of the day they left deeming very low
29:41
Speaker 1: and it didn't reflect inflation or the current rates. And
29:45
Speaker 1: then each regime successive regime have left it alone to
29:49
Speaker 1: the point that it hasn't been changed for years and years.
29:53
Speaker 1: So the academic answer to your question is, yes, they'll
29:57
Speaker 1: reflect rates pretty soon, and to do so, they'll have
29:59
Speaker 1: to go to match the RBA rate. But the realistic
30:04
Speaker 1: answer is that politically, I think they've now left it
30:07
Speaker 1: unchanged for so long that it's become a bit of
30:10
Speaker 1: a sacred cow. Really, I think they'd be afraid to
30:12
Speaker 1: touch it like faire to touch negative gearing affect, to
30:15
Speaker 1: touch capital against tax. What do you think?
30:18
Speaker 2: I agree. I think I will upset a lot of
30:20
Speaker 2: retirees who are getting in Centralink benefits if they change
30:23
Speaker 2: the deming rate, and I think it will be an
30:24
Speaker 2: issue that just fizzles out naturally because the Reserve Bank
30:28
Speaker 2: will likely reduce the cash rate by three quarters of
30:32
Speaker 2: a percent or one percent over the next twelve months,
30:34
Speaker 2: which moves the official cash rate closer to the higher
30:37
Speaker 2: end of the demon rate, which is two point twenty five.
30:40
Speaker 1: Yeah, mostly closer to three, and the deming rate is
30:42
Speaker 1: two point two five, so the sort of the gap
30:45
Speaker 1: narrows and so the issue becomes less important. Okay, Anthony,
30:50
Speaker 1: I assume that's useful for you. Thanks very much for
30:52
Speaker 1: the question. And the final question is from Andrew. I'm
30:57
Speaker 1: curious if the benefits of the place of residence still
31:02
Speaker 1: exist once you retire. For example, can someone who's retired
31:06
Speaker 1: in their seventies travel for a few years while renting
31:09
Speaker 1: out their principal place of residence? Okay, folks, that is
31:15
Speaker 1: obviously something you declare for tax being what you say
31:19
Speaker 1: is your home to the tax office. Will there be
31:22
Speaker 1: no impact on their future capital gains due to the
31:26
Speaker 1: six year rule? So he's saying, Andrew's asking, if I retire,
31:30
Speaker 1: can I roll around the world from one, you know,
31:33
Speaker 1: luxury resort to another renting out my home principal place
31:37
Speaker 1: of residence, and is there any impact on future capital gains?
31:41
Speaker 1: There's this thing called the six year rule. Could you
31:43
Speaker 1: explain what could you explain the whole thing? First of all,
31:45
Speaker 1: so what he's driving at and whether you can actually
31:49
Speaker 1: head off for six years rent out your house to
31:52
Speaker 1: someone and it doesn't affect your CGT. I reckon that's unlikely.
31:56
Speaker 2: It's one of the oddities of the Australian taxation system
31:59
Speaker 2: that you can move out of your home and as
32:02
Speaker 2: long as you don't live or call another place your
32:05
Speaker 2: home that you own, you can rent your former home
32:08
Speaker 2: for six years, move back into it, or sell it
32:10
Speaker 2: and there's no capital gains tax. I'm not really sure
32:12
Speaker 2: why that's the case, but anyway, it's there. Interestingly, there
32:17
Speaker 2: is no age or income requirement around it, so Andrew
32:21
Speaker 2: can be retired, he can rent out his home, go traveling,
32:25
Speaker 2: as you say, declare the rental income in a tax return,
32:28
Speaker 2: and as long as he resumes residency in that home
32:31
Speaker 2: or he sells it within that six year period, he
32:34
Speaker 2: has no capital gains tax implications. And I have seen
32:38
Speaker 2: cases where people have been out of the country for
32:41
Speaker 2: prolonged periods of time beyond six years, and they've come
32:45
Speaker 2: back to Australia saying year five and they've resumed residency
32:48
Speaker 2: because I thought, Okay, we're done with our overseas travels.
32:51
Speaker 2: But then six months or a year later, they sort
32:53
Speaker 2: of get itchy feet and they decide to go off
32:55
Speaker 2: overseas again, and they do, and that resets the principal
32:59
Speaker 2: place of residence six former residence exempua for another six years,
33:02
Speaker 2: so you can use it for more than once.
33:05
Speaker 1: Well that's a good tip, thank you very much. Okay,
33:08
Speaker 1: And what about just generally if you capitally you have
33:14
Speaker 1: a house for thirty years, but there was a short period,
33:17
Speaker 1: you know, three months, six months that you rented it out.
33:20
Speaker 1: Did they comment pretty hard and fast on.
33:22
Speaker 2: That they do. And the government with their interconnected data
33:27
Speaker 2: sharing between departments, they're more and more picking these up.
33:31
Speaker 2: The tax office is with various state government and federal
33:35
Speaker 2: government agencies. So what you need to do is declare
33:38
Speaker 2: it in your tax return if you will use this
33:41
Speaker 2: is a simple example. If you rented out your property
33:44
Speaker 2: for one year and you owned it for ten years
33:46
Speaker 2: in total, when you look at what you bought it
33:49
Speaker 2: for versus what it's worth when you sell it, ten
33:51
Speaker 2: percent of that increase in value will be an accessible
33:55
Speaker 2: capital gains event that you need to declare in your
33:58
Speaker 2: tax return.
33:59
Speaker 1: Right. Interesting, well worth knowing that. Thanks Andrew and Anthony
34:03
Speaker 1: and everybody else. I didn't get to cover many questions
34:05
Speaker 1: this week, but we will keep them coming send us.
34:08
Speaker 1: I say send two at a time if you want
34:09
Speaker 1: with three at a time. As long as they make
34:12
Speaker 1: sense and they're shortish, then they have a strong chance
34:16
Speaker 1: of being covered as well as they were covered today
34:19
Speaker 1: by James Gerard.
34:20
Speaker 2: Thanks a lot, James, my pleasure, Thanks as always, James,
34:23
Speaker 2: and no EV sponsorship from my side, but I'm a
34:27
Speaker 2: big fan of them, so over on go by yourself
34:28
Speaker 2: at an EV car.
34:30
Speaker 1: Yes, well, one thing, as you said in the show,
34:32
Speaker 1: around that time we were both talking of getting one, it
34:35
Speaker 1: was very little to choose from. There was Tesla's and
34:38
Speaker 1: I noticed like in the three or four years since
34:40
Speaker 1: the range has just flourished, which is great, Very good folks.
34:45
Speaker 1: On a Thursday, we will be talking to mister Gold.
34:49
Speaker 1: Mister Gold himself, Jordan Elizo, who is a specialist all
34:54
Speaker 1: his life in gold on gold knows everything you ever
34:57
Speaker 1: needed to know about gold. Gold being the hottest, the
35:00
Speaker 1: hardest investment pocket so far this year. So look forward
35:04
Speaker 1: to that. Keep those emails coming the money Puzzle at
35:09
Speaker 1: the Australian dot com dot au Talk to you soon.