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Warning on 'Free Super Reviews' · The Money Puzzle

0:12
Speaker 1: Hello and welcome to The Australian's Money Puzzle podcast. I'm
0:16
Speaker 1: James Kirby. Welcome aboard everybody. If you're trying to figure
0:19
Speaker 1: out if or when the new supertax may affect you, well,
0:23
Speaker 1: the first thing to tell you is this, this completely
0:27
Speaker 1: daft new tax. Most likely it's going to be delayed.
0:31
Speaker 1: More than that, it's unlikely to work as the government planned,
0:34
Speaker 1: and we'll tell you how that is in a moment.
0:37
Speaker 1: We also need to warn you about three super reviews.
0:42
Speaker 1: You may not have heard of them, but you may
0:44
Speaker 1: have heard of the first Guardian scandal, which is breaking
0:47
Speaker 1: literally and unfolding as we speak. I also have an
0:50
Speaker 1: exceptionally good batch of questions from listeners this week, and
0:53
Speaker 1: to help me with all this is an exceptionally good
0:56
Speaker 1: financial advisor. It's Liam Short of the Saunas Wealth Group.
1:02
Speaker 1: How are you Liam?
1:03
Speaker 2: Fine? Thank you, James. Great to be richer again.
1:05
Speaker 1: Our listeners are familiar with the basics. Here right, there's
1:08
Speaker 1: a new super tax. It's supposed to be coming in.
1:10
Speaker 1: Here's the thing. Here's the first thing to tell you, folks.
1:12
Speaker 1: It's supposed to come in and be started basically, be
1:15
Speaker 1: effective from July one this year. Here we are, it's
1:19
Speaker 1: mid August. No sign of it, by the way, no
1:22
Speaker 1: sign of it even on the lists in Parliament. There
1:25
Speaker 1: is no deal done on this yet. There is no
1:27
Speaker 1: detail on this yet. So there's a lot basically to
1:30
Speaker 1: get a handle on. But I think Liam, there's a
1:33
Speaker 1: couple of things that you wanted to clarify with people.
1:36
Speaker 1: I'll explain to listeners why legislative Lee it's delayed, and
1:41
Speaker 1: you might tell us the realities of being an advisor,
1:44
Speaker 1: of being an investor in this area. So, folks, in
1:46
Speaker 1: terms of Parliament, there's no sign of it yet. It's
1:49
Speaker 1: not listed. As you know, the Economic Summit is on
1:52
Speaker 1: next week on the nineteenth of August, so it's unlikely
1:55
Speaker 1: to be dropped, you know, through that or before that.
1:58
Speaker 1: So it's a question of when they actually get the
2:01
Speaker 1: legislation through. If they do, there's going to be a
2:03
Speaker 1: fair bit of backdating about it. But we have to
2:06
Speaker 1: work on the basis that it is going to happen
2:08
Speaker 1: because they've got they've got the election mandate to do so.
2:12
Speaker 1: So Lim is just going to explain now, assuming it's
2:16
Speaker 1: coming in later than we think. There's also some aspects
2:18
Speaker 1: Lim you were telling me during the week, which is
2:21
Speaker 1: that SMSFS, which is the main target of this new tax,
2:25
Speaker 1: they don't file returns in the day on file. It's
2:29
Speaker 1: not like Australian super comes out in August and says
2:32
Speaker 1: here's our results to the year end of July, a
2:34
Speaker 1: week or two afterwards. I mean roughly when do SMSF
2:39
Speaker 1: results come in? How many months after the close of
2:42
Speaker 1: financial year do they come in?
2:45
Speaker 2: Usually nine to eleven months. Eleven months is a maximum.
2:48
Speaker 2: They must be in by May of the following tax year.
2:51
Speaker 2: But because with SMSFS and like your personal taxes, a
2:55
Speaker 2: lot of deductions, there's a lot of rental statements, you've
2:58
Speaker 2: got to get valuations on proper and things like that,
3:01
Speaker 2: it's often, you know, March April May of the next
3:04
Speaker 2: year that the financials are available. You know. So, for example,
3:07
Speaker 2: if we're trying to plan for this division two ninety six,
3:10
Speaker 2: if it's coming in on first of July twenty five,
3:12
Speaker 2: in a lot of cases we may not have the
3:14
Speaker 2: figures we need to work with until March or April
3:17
Speaker 2: next year, and that leaves us two months to the
3:20
Speaker 2: end of the year. Because thirty June twenty twenty six
3:22
Speaker 2: is the crucial date on when that three million cap.
3:26
Speaker 1: They're going to start collecting. Basically from July one, twenty
3:30
Speaker 1: twenty six, they're going to start collecting the revenue from
3:33
Speaker 1: this tax for the previous twelve months, being the twelve
3:35
Speaker 1: months we're in. Here's the problem, six weeks of it
3:38
Speaker 1: or have already passed as the legislative delay problem. And
3:42
Speaker 1: then on top of that is liam Is saying SMSF
3:46
Speaker 1: don't file their returns generally for a long time after
3:50
Speaker 1: the end of the financial year. Look, you're looking roughly
3:53
Speaker 1: at next May when they're coming in. I got to
3:56
Speaker 1: tell you there I see no chance on earth that
3:59
Speaker 1: this news will operate as planned by the government knowing
4:04
Speaker 1: what we know just now. That's a logjam. Is that
4:07
Speaker 1: a fair description of what's coming down on this one?
4:10
Speaker 2: Look, it will be a logjam. But my fear is
4:12
Speaker 2: that they they want to put it in on first
4:15
Speaker 2: of July twenty twenty five. That keep saying we told
4:18
Speaker 2: you about this in twenty twenty three, But you can't
4:21
Speaker 2: expect people to make decisions about their finances until they
4:24
Speaker 2: see the legislation. As you said that they've not agreed
4:26
Speaker 2: it totally yet, but if they need to change it
4:29
Speaker 2: from one twenty five to one twenty six, that may
4:32
Speaker 2: require them to go back and redo the legislation, which
4:36
Speaker 2: they don't want to do. So I think they're going
4:38
Speaker 2: to be really stubborn and try and push it through
4:40
Speaker 2: on one July twenty five, and it's looking that that
4:43
Speaker 2: won't be until the October sitting of Parliament, so you're
4:48
Speaker 2: talking five months into the text here.
4:50
Speaker 1: Wow, we really are looking at trouble here. But for
4:53
Speaker 1: most listeners, Liam, I think the important thing is not
4:57
Speaker 1: everyone's gonna be in this catchment, right, So fair enough,
5:01
Speaker 1: not everyone has three million super. In fact, only a
5:03
Speaker 1: minority of people have three million super. But I think
5:05
Speaker 1: what's really interesting that needs to be understood that a
5:07
Speaker 1: lot of people are worried about it, and they're worried
5:09
Speaker 1: that they'll be affected by it, or they're worried that
5:11
Speaker 1: in twenty years they'll be affected by it, et cetera,
5:13
Speaker 1: and that they are entirely reasonable fears because it's not indexed,
5:17
Speaker 1: because it's poorly understood, because it's poorly legislated, it is
5:21
Speaker 1: poorly designed, and now it's poorly executed before it even
5:25
Speaker 1: gets going but the point you've really been keen to
5:29
Speaker 1: make to your own people and your clients who come
5:33
Speaker 1: in because they are in that frustrated position like everyone
5:36
Speaker 1: that's saying, how does it all work? Just reiterate, would
5:40
Speaker 1: you for our listeners about this, that it's wrong to
5:43
Speaker 1: say it's and it's a thirty percent that fifteen percent
5:47
Speaker 1: tax suddenly doubles thirty percent. We've got all sorts of
5:51
Speaker 1: misapprehensions about it. It's a completely new tax done in
5:55
Speaker 1: a completely new way that sits on top of the
5:58
Speaker 1: entire tax structure that exists. Have I got that part right?
6:02
Speaker 2: Yeah? So basically, you have your normal income tax in
6:06
Speaker 2: your SMSF, so in your accumulation you pay up to
6:09
Speaker 2: fifteen percent. In pension phase you pay nil, and you
6:12
Speaker 2: actually get a refund of franking credits. So it's really nice.
6:15
Speaker 2: So somebody could have three million in their superfund. They
6:19
Speaker 2: can have up to two million at the moment in
6:21
Speaker 2: pension phase transferred to pension phase, and that can grow.
6:25
Speaker 2: So you could have that portion two thirds of your
6:27
Speaker 2: current balance paying no tax whatsoever if income tax, and
6:31
Speaker 2: maybe you know, one third of it paying fifteen percent.
6:35
Speaker 2: So that's the income tax in the superfund, the new
6:37
Speaker 2: division two ninety six. It's a personal tax. It's not
6:40
Speaker 2: a tax on the superfund. It's a tax on your
6:43
Speaker 2: personal balance in the superfund, and it applies to the
6:47
Speaker 2: growth in earnings on the balance over three million. So
6:51
Speaker 2: and the portion of that growth that applies of the
6:54
Speaker 2: earnings that apply to the amount that's over the three million.
6:56
Speaker 2: So if you've got three million in year account at
6:59
Speaker 2: started a year, four million, at the end of the year,
7:02
Speaker 2: you've had one million, using simply say one million growth.
7:06
Speaker 2: So then your tax to fifteen percent on twenty five
7:10
Speaker 2: percent of that one million.
7:12
Speaker 1: Let me see, I assume I'm a listener, right, and
7:14
Speaker 1: I've been hanging on there really trying to understand it.
7:17
Speaker 1: In super once you retire, et cetera, you don't pay
7:21
Speaker 1: tax on your earnings until you get to two million.
7:25
Speaker 1: Once it's over two million, you pay fifteen percent on
7:28
Speaker 1: those earnings.
7:30
Speaker 2: No, you can move two million to pension phase and
7:33
Speaker 2: your pension can grow, so it's you only pay You
7:37
Speaker 2: pay no tax on the two million plus any growth
7:40
Speaker 2: in that portion of it.
7:43
Speaker 1: Okay, so once you up to two million, you don't
7:46
Speaker 1: pay tax. By the way, once the two million is in.
7:49
Speaker 1: It can keep growing. This is just trying to keep
7:51
Speaker 1: it simple. Now the government have come in and said,
7:54
Speaker 1: hang on a second, we're going to we're going to
7:55
Speaker 1: raft up the tax higher on super and up to
7:59
Speaker 1: two million that is the transfer balance, that is the
8:02
Speaker 1: amount you start to pension on. And it can keep growing, right,
8:04
Speaker 1: But just for to keep some sense of logic here,
8:07
Speaker 1: up to two million, it's tax free. Over two million,
8:12
Speaker 1: the earnings become fifteen percent and new rule is coming in,
8:16
Speaker 1: which is once it's over three million, another fifty to
8:20
Speaker 1: fifteen percent tax has arrived. But it's a bit more
8:25
Speaker 1: than two Fifteen's make thirty because the new tax division
8:28
Speaker 1: two nine six is a completely new tax. It's also
8:31
Speaker 1: based on on realized gains, which is the movement in
8:35
Speaker 1: your balance over the year. But the tax as such
8:39
Speaker 1: only applies to the earnings of the little bits that
8:45
Speaker 1: are over three the earnings on the amounts over three. My,
8:49
Speaker 1: oh my, how do they come up with this? I mean,
8:50
Speaker 1: it's already a very complicated system. It must be marvelous
8:54
Speaker 1: for people like you. You've got work for the rest
8:56
Speaker 1: of your life. You could get harder fifty people.
8:58
Speaker 2: Tomorrow's looking like that. At the moment, it is very complicated,
9:02
Speaker 2: but look, we are coming out with calculators there are
9:05
Speaker 2: We are trying to show people what the effects are.
9:07
Speaker 2: And my main thing to people to say, plan, but
9:12
Speaker 2: don't move at the moment. Don't do any rush movements.
9:15
Speaker 2: Let's get the legislation in place. We can show you
9:18
Speaker 2: roughly at the moment some of the outcomes in different scenarios.
9:21
Speaker 2: If you're funded really well and had major growth or
9:24
Speaker 2: had you're just small bro, we can give you an
9:26
Speaker 2: idea of what the tax is going to be so
9:28
Speaker 2: that you don't need to panic.
9:30
Speaker 1: I understand what you say, don't panic, and you should
9:31
Speaker 1: never panic anyway as an investor. But why do you
9:35
Speaker 1: say don't do anything because it's going to happen, right
9:38
Speaker 1: They've been re elected. It's in front of parliament. It's
9:41
Speaker 1: only a question of the details.
9:42
Speaker 2: The main thing to understand is that it's the thirty
9:45
Speaker 2: to June twenty twenty six balance that desides whether you're
9:49
Speaker 2: going to be affected by this tax. If you can
9:52
Speaker 2: do something before thirty of June twenty twenty six to
9:55
Speaker 2: get your balance below three million on that date, you
9:58
Speaker 2: forget about the tax completely.
10:01
Speaker 1: Yeah, okay, and justice only on one other thing, Leon,
10:04
Speaker 1: which is so important. As you pointed out, this is
10:06
Speaker 1: a new tax. It's based on on realized gains, and
10:10
Speaker 1: it's a personal tax. The way to understand it, I
10:12
Speaker 1: think if anyone is already paying Division two ninety three,
10:16
Speaker 1: where you get basically penalized for a high income if
10:21
Speaker 1: you contribute to super. The way those bills come in
10:24
Speaker 1: is you get a bill as a person and you
10:26
Speaker 1: can pay it as a person, or you can pay
10:28
Speaker 1: it out of your super fund. And this new one,
10:31
Speaker 1: this three million tax, will be the same. You can
10:34
Speaker 1: pay it as a person or you can pay it
10:36
Speaker 1: out of your super fund. But you got to pay
10:38
Speaker 1: it as first thing, and you can carry it forward,
10:42
Speaker 1: for instance, if you have losses, you can carry the
10:44
Speaker 1: losses forward like just like CGT for instance. So that's
10:49
Speaker 1: another parallel. I think that's there's some logical elements to this,
10:52
Speaker 1: but it is as I say, it's staffed. There was
10:56
Speaker 1: easier ways to bring in a new tax for people
10:58
Speaker 1: who have a lot of money and super Why they
11:00
Speaker 1: went to such extraordinary lengths to make it complicated, I
11:04
Speaker 1: don't know, Liam, and I think we understand it. We
11:08
Speaker 1: did our best in that segment. I hope it was
11:09
Speaker 1: useful to you. Something much easier to understand coming up
11:12
Speaker 1: in our second segment, which is free reviews of Super?
11:16
Speaker 1: Have you been offered a free review of Super? Have
11:18
Speaker 1: you seen adverts? Have you seen promotions on the internet?
11:21
Speaker 1: What are they? Should you go near them? Back in
11:24
Speaker 1: a moment, Hello and welcome back to the Australians Money
11:35
Speaker 1: Puzzle podcast. Only someone like Liam Short could even have
11:38
Speaker 1: walked the title we just walked explaining the new supertext
11:42
Speaker 1: there in segment one. Much easier to understand the dangers
11:46
Speaker 1: of the second segment theme, which is free Super reviews.
11:51
Speaker 1: Nothing in life is free, Liam, tell us about these
11:54
Speaker 1: free Super reviews? What have you got to say?
11:56
Speaker 2: Yeah? Look, Super innuation is a big honeypop. There's a
11:59
Speaker 2: lot of people looking to make some money out of it. Okay,
12:02
Speaker 2: so what's But what's happening now is the drive of
12:04
Speaker 2: social media and call calls. There are now marketing firms
12:09
Speaker 2: running these systems. Okay, what they do is they're offering
12:12
Speaker 2: you a free review. They're offering you know, telling you
12:14
Speaker 2: that you know you should compare your Super. It's a
12:16
Speaker 2: responsible thing to do. But what they do then is
12:19
Speaker 2: they funnel you They sell you to another advisor, to
12:23
Speaker 2: an advisor, okay. In often in these cases it's actually
12:26
Speaker 2: a marketing firm that's actually connected specifically to an advice group,
12:30
Speaker 2: and that's what happened with First Guardian. So basically they
12:34
Speaker 2: pre sell you that you must do the review, and
12:37
Speaker 2: they tell you that they've done the review and you
12:39
Speaker 2: can do much better. Let us put you in touch
12:41
Speaker 2: with an advisor. And then suddenly put in touch with
12:44
Speaker 2: an advisor, and they will be charging you a fee
12:46
Speaker 2: for what for to actually move you to a better fund. Now,
12:51
Speaker 2: in a lot of cases when they're connected like these,
12:54
Speaker 2: they're recommending you're going to funder a platform where they're
12:57
Speaker 2: managing the investments, and they're saying that they can do
13:00
Speaker 2: better than you've done in your industry fund or your
13:02
Speaker 2: retail fund. What they're doing is they're basically, you know,
13:05
Speaker 2: they're clipping the ticket along the way on everything. Okay,
13:08
Speaker 2: And then often with the investments that they're recommending, they
13:12
Speaker 2: don't have a major track record. So I'm saying that
13:15
Speaker 2: people look at the five, seven, and ten year track
13:17
Speaker 2: record of your superfund before you start considering going to
13:20
Speaker 2: anybody who's promising you anything, because in truth, we're advisors,
13:24
Speaker 2: we're you know, we can't determine how the market's going
13:28
Speaker 2: to perform. But if you've been in an industry fund
13:31
Speaker 2: or a retail fund that's delivered more than seven and
13:33
Speaker 2: a half r eight and a half percent per year
13:35
Speaker 2: for the last five or seven years, yeah, your first
13:38
Speaker 2: question is why why should I move? Why would I move?
13:42
Speaker 2: And the problem is we've seen a lot of these
13:44
Speaker 2: have moved to scams.
13:47
Speaker 1: It's terrible, isn't it. I mean, you've got to say that.
13:49
Speaker 1: The first thing is there's nothing free, right, So if
13:52
Speaker 1: someone approaches you, or more typically a promotion is put
13:56
Speaker 1: in front of you, possibly on social media, on the
13:58
Speaker 1: internet and a free superview, you first question, why am
14:04
Speaker 1: I being offered something for free? Nothing's free in financial services.
14:07
Speaker 1: Number two, let's even assume that they review, and let's
14:11
Speaker 1: even assume that the fund is below average, Well where
14:17
Speaker 1: are they going to send you? Are you making the
14:19
Speaker 1: decision or are they making the decision? Why did they
14:22
Speaker 1: do it in the first place. There's no way they're
14:24
Speaker 1: doing it out the goodness of their hearts.
14:26
Speaker 2: Liam not what the amount of compliance that we have
14:30
Speaker 2: to do nowadays, the amount of work we have to
14:31
Speaker 2: do to on board a client. Nothing's for free.
14:34
Speaker 1: They're doing it because they want to send you to
14:36
Speaker 1: something else. This is as soft as we can be
14:39
Speaker 1: on this because we don't want to be sued by anyone.
14:42
Speaker 1: But they are doing it to get you to change
14:44
Speaker 1: your ways. They're not asking you to review your super.
14:46
Speaker 1: They're asking you to move your super and find justification
14:49
Speaker 1: for it. And the big question is where are they
14:51
Speaker 1: asking you to move to? And we have evidence of
14:54
Speaker 1: late in the first guard in super collapse, which is
14:57
Speaker 1: the worst collapse we've seen this century in Australian financial services,
15:01
Speaker 1: still unfolding, and this was going on in the middle
15:04
Speaker 1: of that collapse, was it Yep?
15:06
Speaker 2: And so they were not just targeting people in retail
15:10
Speaker 2: funds or they were targeting everybody. They had a solution
15:14
Speaker 2: for everybody, and that solution was funneling it into their funds.
15:18
Speaker 1: I bet they never said we've reviewed your super and
15:20
Speaker 1: everything's fine. That's it, say where you are.
15:24
Speaker 2: So one of the tips I would say to people is,
15:27
Speaker 2: if you go with one of these people, give somebody
15:30
Speaker 2: else a third party you call, even if it's just
15:32
Speaker 2: your super fund or go to chant West and run
15:35
Speaker 2: a comparison of your superfund with some other ones, just
15:38
Speaker 2: to see how it's been performing over the years. You
15:40
Speaker 2: can do these for free.
15:42
Speaker 1: Yes, for free. Oh look, folks, even easier. I mean
15:45
Speaker 1: just go on to your pet AI, sit or Google
15:48
Speaker 1: and say what was the median return of the average
15:52
Speaker 1: Australian super fund last year? And if your number is
15:55
Speaker 1: anywhere near that then I'd be really slow to move.
16:00
Speaker 1: That's not hard, it doesn't cost anything, it's free. We'll
16:02
Speaker 1: take a break. We've got some great questions back in
16:04
Speaker 1: a moment. Hello, Welcome back to the Australians Money Puzzle Podcast.
16:18
Speaker 1: James Kirby here with Liam short sho Orte of the
16:23
Speaker 1: Sounas Wealth Group. Now, in the first segment we were
16:26
Speaker 1: talking about the new supertax. The main point I wanted
16:29
Speaker 1: to make to you there, folks, I want to make
16:31
Speaker 1: to you is that this is going to be delayed.
16:33
Speaker 1: It's going to run much later than people realized. We're
16:37
Speaker 1: already well into the first year in which it's supposed
16:39
Speaker 1: to be effectively operating, and that the legislation hasn't even
16:42
Speaker 1: been put through parliament. Part one, Part two was that
16:45
Speaker 1: Liam makes the point which probably hasn't been med enough.
16:49
Speaker 1: It isn't that the high wealth end of super the
16:52
Speaker 1: taxes go from fifteen to thirty percent. That's not the
16:56
Speaker 1: way to think about it. The way to think about
16:58
Speaker 1: it is, there is an existing tax of fifteen percent
17:01
Speaker 1: up to two million. They are introducing a new one
17:04
Speaker 1: where over three there's an existing tax of fifteen percent.
17:09
Speaker 1: Over two million, they're introducing a new one where over
17:11
Speaker 1: three million, a whole new tax comes in. It happens
17:15
Speaker 1: to be at fifteen percent, but it's based on unrealized gains.
17:19
Speaker 1: It comes in a different way. You literally get a statement.
17:22
Speaker 1: You're going to get a statement in the post or
17:24
Speaker 1: through the email which says you've got a Division two
17:28
Speaker 1: nine six tax bill. This is what it is because
17:31
Speaker 1: you had these earnings on these amounts of over three million,
17:34
Speaker 1: and we want it now. It's a personal tax paid
17:37
Speaker 1: by you. If you can't get it from your cassion,
17:40
Speaker 1: the bank, you've got to take it out of your
17:41
Speaker 1: super fund. That's how it's going to work. This is
17:44
Speaker 1: why people are so upset about this fund. This is
17:47
Speaker 1: super change to super funds because it's in a whole
17:52
Speaker 1: new tax methodology basically being applied to super which was
17:56
Speaker 1: never seen before, unrealized gains. That's what you want from
18:00
Speaker 1: Jeff Wilson across to Liam, who's with me today is
18:03
Speaker 1: annoyed about all right? Questions, Evan, can you explain the
18:07
Speaker 1: types of trust briefly and what they're used for, Unit trust,
18:11
Speaker 1: investment trust, and discretionary trust in particular, could you briefly
18:16
Speaker 1: explain the difference between those key trusts, because people do
18:19
Speaker 1: talk about trusts loosely, Liam.
18:22
Speaker 2: So a unit trust probably a good example of that
18:25
Speaker 2: is a managed fund like a Platinum or a Magellan,
18:29
Speaker 2: where you buy units in the trust and you get
18:32
Speaker 2: a share of profits for that year based on your
18:35
Speaker 2: units in the trust. On a smaller scale, it might
18:37
Speaker 2: be something like three business partners open a trust to
18:41
Speaker 2: own their business and each owned thirty three percent. So
18:43
Speaker 2: it's a fixed demand and profits are divided that way,
18:47
Speaker 2: so it's fixed. If they want to bring a new capital,
18:50
Speaker 2: new units are issued to the person that brings in
18:52
Speaker 2: the new capital. Okay, So that's the basic fixed trust.
18:55
Speaker 2: What we see more often used nowadays is called discretionary
18:59
Speaker 2: trusts or family trusts, and that's where the trustee each
19:04
Speaker 2: year chooses who the beneficiaries will be to receive the
19:06
Speaker 2: trust income and any capital distributions, and they do that
19:09
Speaker 2: on an annual basis, so it's at the full discretion
19:13
Speaker 2: of the trustee to decide who to do it. So
19:16
Speaker 2: if there's mom and dad and say an eighteen year
19:18
Speaker 2: old in university and a thirty year old who's a
19:21
Speaker 2: lawyer on big income, the parents might go, okay, well,
19:24
Speaker 2: we'll allocate a certain amount to mom and dad up
19:27
Speaker 2: to say the limit of the thirty thirty percent tax
19:30
Speaker 2: bracket at one hundred and thirty five. Then they will
19:33
Speaker 2: allocate to the eighteen year old because they've they're earning
19:36
Speaker 2: very little or you know, and they allocates of money
19:39
Speaker 2: to them, and they'll decide not to allocate anything to
19:42
Speaker 2: the thirty year old because they're already on a big
19:44
Speaker 2: taxable income. So the idea is you've got that discretion
19:48
Speaker 2: to be able to push the income where you want to.
19:51
Speaker 1: And most family trusts are run like that. I think
19:54
Speaker 1: is that basically the.
19:56
Speaker 2: ATO again has been clamping down on them. So if
19:59
Speaker 2: you are going to allo cape money to an eighteen
20:01
Speaker 2: year old or a nineteen year old, you want to
20:04
Speaker 2: make sure that you're saying, what that you've spent money
20:06
Speaker 2: on you that money's gone to those people. So I
20:09
Speaker 2: get clients to keep a track record of paying for
20:12
Speaker 2: their car insurance, paying for the car, paying for their
20:14
Speaker 2: phone bills, things like that, showing that the money actually
20:18
Speaker 2: has been used for that.
20:19
Speaker 1: Person's This will as the new supertax comes in, or
20:22
Speaker 1: whatever final details it comes in, it will sure as
20:24
Speaker 1: hell come in. We'll find that trust become more popular
20:28
Speaker 1: and we'll probably come back to them a retty soon.
20:30
Speaker 1: All right, there's one other question I wanted to just
20:32
Speaker 1: zone in on. Liam was from Mark. He says financial
20:36
Speaker 1: advisor Doug Turek, or at least advisor Doug Churek mentioned
20:39
Speaker 1: in last week's podcast you can earn up the twenty
20:44
Speaker 1: five thousand before paying tax. But he then, Mark, reasonably
20:49
Speaker 1: enough says, I looked at the ATO tax scales and
20:53
Speaker 1: the first eighteen thousand, two hundred is all you can
20:57
Speaker 1: earn as an individual in Australia at any age tax free.
21:02
Speaker 1: How what's the explanation of the gap between the eighteen
21:05
Speaker 1: and the twenty five? Liam's It's true, I imagine, first
21:09
Speaker 1: of all, but could you explain yep.
21:11
Speaker 2: So the eighteen thousand, two hundred. That's everybody's tax free threshold.
21:16
Speaker 2: But on top of that, the government have some other benefits.
21:18
Speaker 2: One's called the Low Income Tax Officets for people who
21:21
Speaker 2: are on the low income. When you combine that with
21:24
Speaker 2: the eighteen thousand, two hundred, you can earn up to
21:27
Speaker 2: go twenty two eight hundred and sixty six each year
21:30
Speaker 2: without paying any tax. Okay, that's if you're under six.
21:33
Speaker 2: That's for everybody. Okay, So if somebody was earning twenty
21:36
Speaker 2: five thousand, they would the first twenty two eight hundred
21:39
Speaker 2: and eighty six would pay no tax on it.
21:41
Speaker 1: So if I've got three million in Super, just to
21:43
Speaker 1: make it really just make it really juicy. If I've
21:48
Speaker 1: got the three million in Super, I've got some but
21:51
Speaker 1: outside I've money outside Super, nothing to do with my
21:53
Speaker 1: super funds, just sitting there in my bank. Can I
21:56
Speaker 1: earn twenty two thousand a year tax free?
22:01
Speaker 2: Yes you can?
22:02
Speaker 1: Can I be classified as low income offset though I've
22:05
Speaker 1: got three million Super?
22:06
Speaker 2: And even better than that, James, if you're over sixty seven,
22:09
Speaker 2: you get also on top of the low income tax
22:11
Speaker 2: off set, there's also the Senior Australian Pensions and tax
22:14
Speaker 2: off set, which if you for a couple, you can
22:18
Speaker 2: basically earn about thirty eight hundred and eighty eight without
22:21
Speaker 2: paying any tax. So imagine somebody who's got You've got
22:24
Speaker 2: a couple, they've got two million in SUPER each, they
22:27
Speaker 2: have to take five percent pension, there's one hundred thousand
22:29
Speaker 2: tax free out each during the year, and they might
22:32
Speaker 2: have an investment property outside that's bringing in sixty thousand
22:35
Speaker 2: of rental income. All of that can be completely tax free.
22:39
Speaker 2: So you're talking two hundred and sixty thousand dollars a
22:42
Speaker 2: year tax free because of that system.
22:46
Speaker 1: So just to clarify, my money in Super is a
22:50
Speaker 1: separate issue. Outside of Super, as an individual, up to
22:53
Speaker 1: sixty seven, I can have twenty two thousand a year
22:57
Speaker 1: tax free, and over sixty seven, as an individual I
23:00
Speaker 1: can have I can earn thirty five thousand a year
23:03
Speaker 1: tax free, even if I had to say three million
23:05
Speaker 1: in Super. Well, you do wonder whether money is going
23:10
Speaker 1: to slide out of Super. You do wonder whether people
23:14
Speaker 1: are going to let money slide out of Super and
23:17
Speaker 1: optimize these perhaps under used tax scales that were never
23:23
Speaker 1: intended of course for multi millionaires.
23:25
Speaker 2: But hey, but More importantly, it's important that people understand
23:29
Speaker 2: that they should try and get as much into Super
23:31
Speaker 2: as possible to basically have that in tax free, so
23:34
Speaker 2: they pay as little as possible outside on what they
23:37
Speaker 2: have outside. Because being Australians, most people, you know, they
23:41
Speaker 2: try to have an investment property or they have assets
23:43
Speaker 2: outside of Super as well. They don't totally trust the
23:46
Speaker 2: government for bringing in taxes like this. So the whole
23:49
Speaker 2: important thing is to try as an individual to have
23:52
Speaker 2: two pots of money your Super pension plus your money outside.
23:56
Speaker 2: As a couple to have four pots and to be
23:58
Speaker 2: delivering as much of your income tax free as possible
24:01
Speaker 2: over the years.
24:03
Speaker 1: So you wonder, really it's interesting about that. Of course
24:07
Speaker 1: the money and Super can't get back out until your tire,
24:10
Speaker 1: but it's really worth knowing that you can earn as
24:13
Speaker 1: a single person. I'll just repeat the numbers because they're
24:15
Speaker 1: just extraordinary. You can earn twenty two thousand to year
24:18
Speaker 1: tax free as an individual outside Super, and thirty five
24:20
Speaker 1: thousand once you're over sixty seven. That's the earnings tax free. Okay,
24:26
Speaker 1: keep that in mind, folks. I think that's one of
24:28
Speaker 1: the most interesting things that have popped up all year, okay, Liam,
24:31
Speaker 1: short of Sonaus. What does it mean again? Knowledge? Wealth?
24:35
Speaker 2: It's the Irish for good, prosperity, wealth and happiness.
24:39
Speaker 1: There you go, prosperity, wealth and happiness. This is what
24:42
Speaker 1: the show's all about. Thank you very much, Liam, great
24:44
Speaker 1: to talk to you. We'll talk again soon. Thank you, James,
24:46
Speaker 1: and thank you folks. Let's have some more emails and
24:49
Speaker 1: do keep the I love the idea of putting several
24:52
Speaker 1: questions into an email. I noticed it's happening all the
24:54
Speaker 1: time now regularly keep that up. If you're going to
24:56
Speaker 1: send in a question, send in a few. Why not.
24:58
Speaker 1: You've taken the effort. The email mail is the money
25:01
Speaker 1: puzzle at the Australian dot com dot au. Talk you soon.