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Is your home the worst investment you’ll ever make? · The Money Puzzle

0:09
Speaker 1: Hello and welcome to The Australian's Money Puzzle podcast. I'm
0:12
Speaker 1: James Kurbly. Welcome aboard everybody. Now here's the thought your
0:16
Speaker 1: home is the worst investment that you're going to make.
0:20
Speaker 1: About that your million dollar house, your mortgage will cost
0:25
Speaker 1: you up to three million in the course of your
0:31
Speaker 1: lifetime before you pay it off. So you haven't been investing. Really,
0:36
Speaker 1: you've been taken for a ride. That's a provocative notion
0:40
Speaker 1: and it challenges a lot of what we've been told
0:43
Speaker 1: makes good sense, like paying off the mortgage as fast
0:46
Speaker 1: as you can. I didn't get the idea from nowhere.
0:50
Speaker 1: It comes from Jack Tossil of Partners Wealth Group. He's
0:53
Speaker 1: an advisor. He's been on the show before. He's got
0:56
Speaker 1: some very distinct ideas.
0:58
Speaker 2: How are you Jack? Thanks you have me on again, James.
1:01
Speaker 1: Great to have you on again. It's a very fresh
1:04
Speaker 1: thought in property and property investing. But lay it out
1:09
Speaker 1: first of all, because if I say to you, I
1:11
Speaker 1: don't know about that, Jack. I like my house. It's
1:14
Speaker 1: very comfortable. Apparently I've been told that it's a tax
1:17
Speaker 1: shelter forever under any government. So what am I doing wrong?
1:22
Speaker 2: Look, I'll just preface this and say that there's absolutely
1:26
Speaker 2: nothing wrong with owning your home. There are so many
1:28
Speaker 2: benefits to it. It can provide emotional security, there's lifestyle
1:32
Speaker 2: benefits to it. What I'm saying is when you look
1:35
Speaker 2: at it purely through the lens of an investment, that's
1:39
Speaker 2: when the numbers don't stack up so much. And there's
1:41
Speaker 2: a number of reasons for that. Number One is it
1:44
Speaker 2: nothing is taxed it up, or you're paying for it
1:46
Speaker 2: with your after tax income. Now, traditionally speaking, your bit
1:50
Speaker 2: emotional when you buy your home, so you overpay for it. Arguably,
1:54
Speaker 2: you're going to live in an area you want to
1:55
Speaker 2: live in, not where you're going to get the best
1:57
Speaker 2: investment return. And look, you touched on it before. Over
2:00
Speaker 2: the duration of a thirty loan, you're probably going to
2:03
Speaker 2: pay two x three x what the actual headline value
2:09
Speaker 2: of these.
2:09
Speaker 1: And you're going to pay that after tax. You're going
2:11
Speaker 1: to pay that out of your pocket. Basically, there's no exactly,
2:15
Speaker 1: there's no advantage, there's no incentives. Okay, So this is
2:19
Speaker 1: what I suppose goes without saying that we have an
2:21
Speaker 1: exceptionally expensive property market, and so this point is probably
2:26
Speaker 1: is I have no problem with saying that this point
2:29
Speaker 1: you're making is more true than it would have been
2:32
Speaker 1: ten twenty years ago, because in real terms of our property,
2:36
Speaker 1: our homes have become so so expensive on every measure.
2:40
Speaker 1: So tell me if you're looking at the price of
2:43
Speaker 1: a house then and someone so let's say someone takes
2:46
Speaker 1: what you have to say there, and you make that
2:48
Speaker 1: point that your home is a very poor investment, probably
2:51
Speaker 1: the worst investment you'll make, because you don't normally sign
2:54
Speaker 1: up for a million dollar loan in the course of
2:56
Speaker 1: your life, and you don't normally actually pay it out
2:58
Speaker 1: of post tax. Before we get into how you could
3:02
Speaker 1: actually deal with that, just explain a little bit of
3:05
Speaker 1: explain what you meant by that, how it's a poor investment,
3:09
Speaker 1: and how are there better investments.
3:12
Speaker 2: Well, again, generally speaking, when people get those times you
3:15
Speaker 2: want the flashy swine possible, you overpay for it, you
3:18
Speaker 2: get a lot more room that you need, and arguably
3:22
Speaker 2: you've got a hell of a lot of leverage there
3:24
Speaker 2: in paining it with your after taped doors so effectively,
3:27
Speaker 2: for really ten to fifteen years, all of your personal
3:31
Speaker 2: cash flows, pretty much your excess is going strictly to
3:34
Speaker 2: paying that off. There's no investing outside of that, whether
3:38
Speaker 2: it's topping up your super, looking at shares that traditionally
3:41
Speaker 2: used primarily where all of it's going into that one
3:44
Speaker 2: singular asset.
3:46
Speaker 1: And this is the patch. I'm sure if you saw
3:48
Speaker 1: a demographic study, you'd see that people are active investors
3:50
Speaker 1: until their thirty ish, they buy their home, they're not
3:54
Speaker 1: investors anymore. They peep up in their late forties maybe fifties,
3:59
Speaker 1: and they start investing again. I'm only guessing about this,
4:01
Speaker 1: but imagine it's a pattern, is it?
4:04
Speaker 2: Yeah? Exactly, And that's what we say across the board
4:07
Speaker 2: very commonly, is that once you get a mortgage, you
4:10
Speaker 2: put all your excess cash flows into that and you
4:12
Speaker 2: don't look at any investments really until you pay that off.
4:15
Speaker 2: And you think, look, if you get your homeline at
4:18
Speaker 2: twenty five or thirty thirty years, you're not looking at
4:20
Speaker 2: getting back into the market really until you're fifty and
4:23
Speaker 2: then not knock retirements on the doorsteps.
4:25
Speaker 1: That's right, the compounding compounding opportunities have passed. But okay,
4:29
Speaker 1: so then natural next question for you would be, if
4:33
Speaker 1: what you see is the case, then paying down the
4:37
Speaker 1: mortgage being that sort of old chestnut for in terms
4:40
Speaker 1: of present of finance, you must by definition be challenging that.
4:44
Speaker 2: Yeah, challenging that. You got to look at the numbers.
4:48
Speaker 2: I don't know everyone's situation specifically, but you should be
4:51
Speaker 2: looking at the opportunity cost of deploying that capital elsewhere.
4:55
Speaker 2: And that's what I'm saying. There's absolutely nothing wrong with
4:58
Speaker 2: paying down your homeline home as a consumption asset, a
5:01
Speaker 2: lifestyle asset, but you do need to look at it
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Speaker 2: objectively and go, well, if I put my money elsewhere,
5:06
Speaker 2: what returns could I be getting and what would the
5:08
Speaker 2: long term impacts would that be?
5:10
Speaker 1: So give us an example. I'm presum you're alluding to
5:13
Speaker 1: the fact that, for instance, you can make ten to
5:14
Speaker 1: eleven thirteen percent on share markets, and if you did
5:19
Speaker 1: with one hundred dollars, then you could be paying down
5:22
Speaker 1: your mortgage.
5:23
Speaker 2: It's still be ahead, well exactly. You know. One of
5:26
Speaker 2: the other areas that often gets spoken about is rent
5:29
Speaker 2: vest and a big part of that is because for
5:33
Speaker 2: the same house, it costs you a lot less to
5:34
Speaker 2: rent it than what your mortgage expenses would be. Now,
5:37
Speaker 2: a lot of people out there say, oh, rent money
5:39
Speaker 2: is dead money. But interest money is also dead money.
5:43
Speaker 2: So it's what are you doing with that excess capital?
5:45
Speaker 2: And if you run the numbers on it, if you
5:47
Speaker 2: saving the significant amount of those mortgages, and you directed
5:50
Speaker 2: to say to investment properties which are fully taxed, auctible,
5:53
Speaker 2: not anti property properties, a great investment where you can
5:55
Speaker 2: leverage returns for optimizing it for tax reasons and getting
5:59
Speaker 2: the best ali for where you invest. Now, if you
6:02
Speaker 2: straple out that over ten twenty thirty years, the actual
6:05
Speaker 2: growth ends up being far more than if you were
6:08
Speaker 2: to just live in your own home and pay the
6:09
Speaker 2: mortgage off. And there's a lot of individuals out there
6:15
Speaker 2: with property portfolios worth tens of millions of dollars, hundreds
6:18
Speaker 2: of millions. And the one thing I found in common
6:20
Speaker 2: listening to them in podcasts, it's the YouTube channels on
6:23
Speaker 2: the radio. Most of them don't actually own their own homes.
6:27
Speaker 2: They all rent invest They've got a twenty million plus
6:30
Speaker 2: property portfolio and they don't even own their own home.
6:33
Speaker 1: Do you worry at all that it turns heavily on
6:35
Speaker 1: negative gearing, and negative gearing might someday nupp be as
6:39
Speaker 1: good as it is now?
6:41
Speaker 2: Yes, potentially, you know, that could have an impact as well.
6:45
Speaker 2: I don't think you should just look at it through.
6:47
Speaker 2: Negative gearing can be a good aspect to property investment,
6:52
Speaker 2: but you shouldn't just look at getting into a property
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Speaker 2: purely for negative gearing to make the tax loss, because
6:57
Speaker 2: otherwise than you just buy the worst property possible if
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Speaker 2: you could make them biggest loss available.
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Speaker 1: You're zoning in on the tax and deductibility of the debt.
7:05
Speaker 1: That this is basically the attractive part, that simple delineation
7:09
Speaker 1: between if you have if you're paying off your home,
7:11
Speaker 1: the mortgage bill comes in, you pay out of your
7:13
Speaker 1: salary basically post tax. But if you have an investment
7:16
Speaker 1: properly you can pay and get you're actually getting the
7:19
Speaker 1: expenses deductible.
7:21
Speaker 2: Yeah, you upset what the income is, the rent you're paying,
7:24
Speaker 2: So naturally it's something to impact your cash flows as hard.
7:27
Speaker 2: And if you invest it sounds like you are a
7:30
Speaker 2: keen supporter of it. Re Investing aren't everyone's options. Again,
7:33
Speaker 2: I'm not going to recommend properly specifically for the individuals,
7:36
Speaker 2: but it can be a great strategy and you should
7:39
Speaker 2: look into it and nessess whether it's best for you
7:41
Speaker 2: or speak to an advise.
7:42
Speaker 1: Or that more generally, would you give it when we
7:45
Speaker 1: think about for every one hundred dollars that you don't
7:47
Speaker 1: pay down the mortgage with and you use elsewhere, are
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Speaker 1: you thinking diversified portfolio? Are you thinking of growth? Are
7:55
Speaker 1: you thinking of growth in listed equities? What are you
7:57
Speaker 1: thinking of when someone When you're putting that forward to
7:59
Speaker 1: someone as a concept.
8:01
Speaker 2: There's a number of different options. For example, you think
8:04
Speaker 2: you could put in the superannuation where it's highly tax effective.
8:07
Speaker 2: You gain taxes when you work in a top one
8:10
Speaker 2: rate of fifteen percent compared to you in your own
8:13
Speaker 2: personal name, where it could be up to forty seven percent.
8:16
Speaker 2: And again you look at share markets which lineball figure
8:20
Speaker 2: average ten percent of you or slightly under that conversion
8:24
Speaker 2: as well, if you directed it to a propertly in
8:28
Speaker 2: a growth sign where it's where you're going to get
8:30
Speaker 2: more bank for back, rather than say just investment strictly
8:33
Speaker 2: where you want to live in which may not have
8:35
Speaker 2: the same growth opportunities. Right.
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Speaker 1: And then on the wider picture, you've met the point
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Speaker 1: that this sort of thinking, which is pay down the mortgage,
8:43
Speaker 1: give everything to the mortgage, get your home, focus on that.
8:47
Speaker 1: It's when you've got to paid off to other things.
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Speaker 1: You've been pointing out, that's actually given us an economy
8:53
Speaker 1: where property, this sort of property has become the dominant asset.
8:57
Speaker 1: It's become what the economy is substantially about. And that's
9:01
Speaker 1: not a good thing, really, is it.
9:03
Speaker 2: Yeah. I'm very much against that, mainly for what it
9:08
Speaker 2: does the country in the long term. It's very interesting.
9:10
Speaker 2: My partner comes from Palo Alto in the US, which
9:13
Speaker 2: is also known as Silicon Valley, very entrepreneurial part of
9:16
Speaker 2: the world, and every time I go over there, you
9:18
Speaker 2: expect everyone they're in a startup. You know, they're involved
9:21
Speaker 2: in business, growing things. They're all entrepreneurs, innovators, and it's
9:24
Speaker 2: really amazing to see. And then I look at the
9:26
Speaker 2: Australian landscape and every time I speak to someone about
9:30
Speaker 2: getting wealthy or getting rich, no one's talking about investing
9:33
Speaker 2: in the business, creating a company which employs people, adds
9:36
Speaker 2: high paying wages for the individuals out there. It's all
9:40
Speaker 2: how can I put as much money possible into property,
9:43
Speaker 2: you know, very tunnel vision waves saying that is the
9:46
Speaker 2: only way in this country you can get rich and
9:49
Speaker 2: digging holes and building houses. Is that all we do.
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Speaker 1: It's pretty helpless for a productivity you'd imagine in releation
9:56
Speaker 1: to this economic summit that's coming up. But just on
9:58
Speaker 1: that then, in terms of going back to your core
10:02
Speaker 1: notion that the home is a poor investment because it's
10:07
Speaker 1: not tax deductible, because it's an inert asset compared to
10:11
Speaker 1: an innovative asset, so.
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Speaker 2: That you might do.
10:15
Speaker 1: Predictably okay, but you're never going to shoot out the
10:17
Speaker 1: light's like someone in Palo Alto who gets into the
10:19
Speaker 1: right start up. Are you also concerned as part of
10:23
Speaker 1: what you're saying involved that maybe property is not as
10:28
Speaker 1: good going forward as it has been. This whole thing
10:30
Speaker 1: that you used to double every ten years, I think
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Speaker 1: that has faded to some degree.
10:34
Speaker 2: If you can generally speaking right, you'll get the law
10:37
Speaker 2: of averages. And realistically, I can't tell you what's going
10:39
Speaker 2: to happen next year, in the next ten years to
10:41
Speaker 2: twenty years, but if you look back at the last
10:43
Speaker 2: twenty years, we've had above average returns, far above what
10:48
Speaker 2: you expect for the last one hundred years. You've got
10:50
Speaker 2: to ask the question, really, if it does increase at
10:53
Speaker 2: the same right, which it has the last ten years,
10:56
Speaker 2: last twenty years, who'll be able to afford it? I
10:58
Speaker 2: think I did some numbers right. SEENEWA to continue growing
11:02
Speaker 2: at the same growth rate which it has the last
11:04
Speaker 2: twenty five years, in something like twenty forty five twenty fifty,
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Speaker 2: the average price behind we'd be about four million dollars
11:11
Speaker 2: when we've seen also no real material changing incomes as well.
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Speaker 1: Okay, just to challenge the re investing idea, which are
11:19
Speaker 1: I can see the merit of because it sidesteps that
11:22
Speaker 1: issue of you are still in property or in fact
11:25
Speaker 1: you have loose cash to do anything you like with
11:27
Speaker 1: diversified investing and you are renting. The only thing Jack,
11:32
Speaker 1: is that sooner or later you probably do have to
11:34
Speaker 1: buy a home. And unless that strategy is very successful,
11:37
Speaker 1: is there a risk that the homes fly up faster
11:40
Speaker 1: basically than the investments investments that you were preoccupied with.
11:46
Speaker 2: Yeah, potentially. No, that is always a risk out there
11:50
Speaker 2: that's attached, and it really depends on what you're doing
11:52
Speaker 2: with your excess capital as well.
11:55
Speaker 1: If people are leveraging. You mentioned that the very star
11:57
Speaker 1: people leaverage, right, so they take no risks, right, don't
12:00
Speaker 1: They're very slowed to start startup, or to invest in
12:03
Speaker 1: alternative assets, or to try something different. But they'll take
12:07
Speaker 1: a million dollar loan. They've never taken a loan in
12:09
Speaker 1: their lives. They take a million dollar loan to buy
12:11
Speaker 1: residential property. As you say, it may not be optimal
12:14
Speaker 1: and its future price trajectory is unclear, may not be
12:19
Speaker 1: as good as it was in the past. So people
12:22
Speaker 1: are willing to do that, but they're not willing to
12:24
Speaker 1: do it in any other area. When you say that
12:27
Speaker 1: you should think about investing outside the home, does it
12:30
Speaker 1: include leverage investing?
12:31
Speaker 2: Does it include gearing up potentially? Again, this is a
12:36
Speaker 2: hard one. Don't know an individual situation, what their risk
12:39
Speaker 2: ap its heid is like, and what they capacity for
12:41
Speaker 2: growth fee, so it's a bit hard to answer that.
12:45
Speaker 1: Yeah, but if someone gears up to buy a home,
12:49
Speaker 1: I mean they're gearing up three, four or five times
12:51
Speaker 1: their salary to buy a home, then it wouldn't be
12:53
Speaker 1: unreasonable to do some element of gearing in the investing
12:56
Speaker 1: outside the home.
12:59
Speaker 2: Yes, No, with the homies as well. Tradtionally speaking, it
13:03
Speaker 2: has been good in the way that consistent raturns and
13:07
Speaker 2: destroying the value. If you did leverage up for other areas,
13:10
Speaker 2: for example, shares for example, and number one, no one's
13:14
Speaker 2: gonna let you take out a million dollar margin loan
13:17
Speaker 2: on shares really to do that. Look over the long run, yes,
13:22
Speaker 2: the numbers absolutely do stack up. Shares over the last
13:26
Speaker 2: one hundred years have performed better than property. But the
13:29
Speaker 2: issue with that strategy, right is it shares are also
13:32
Speaker 2: a lot more volatile. That's why you get the greater returns.
13:35
Speaker 2: So what happens if you have a JFC like event
13:38
Speaker 2: or Trump tariffs and you have a margin call and
13:41
Speaker 2: you don't have the assets outside to be able to
13:44
Speaker 2: pay for that.
13:45
Speaker 1: Okay, well take a break. I think that's a very
13:47
Speaker 1: interesting point about the tax folks. It's something that you know,
13:50
Speaker 1: maybe we're a little bit preoccupied with the alleged tax
13:53
Speaker 1: benefits of home ownership, capital gains, tax exemption, other exemptions
13:58
Speaker 1: down the track, but we'd never think about the opportunity cost,
14:00
Speaker 1: if you like, of that, which is what I think
14:02
Speaker 1: was really interesting that Jack has brought up with this
14:05
Speaker 1: notion that your home is a very poor investment. In fact,
14:08
Speaker 1: he said it was the worst investment you'll make, and
14:10
Speaker 1: most likely undercurrent conditions we'll be back in a moment. Hello,
14:22
Speaker 1: welcome back to the Australians Money Puzzle podcast. I'm James
14:25
Speaker 1: Kirby and we're talking to Jack Tussl of the Partners
14:28
Speaker 1: Wealth Group, which is a very large financial advisory operation
14:32
Speaker 1: which is nitionwide. Now, Jack, one of the things also,
14:37
Speaker 1: I know that you are something of an influencer, and
14:39
Speaker 1: I use it in the best possible way because it's
14:42
Speaker 1: it's got a mixed reputation, this notion of influencer. But
14:45
Speaker 1: I actually have no problem with finn influencers as long
14:47
Speaker 1: as they're influencing, as long as it's convincing and it's
14:50
Speaker 1: well researched and documented, et cetera. But of course there's
14:54
Speaker 1: basically no gatekeepers or editors in that field, and so
14:57
Speaker 1: you know, some absolute rubbish gets through. You've had a
15:00
Speaker 1: look at that area as well, And I just want
15:03
Speaker 1: to concentrate on property because I know, even on the
15:06
Speaker 1: show people say social media, even on really basics, they
15:09
Speaker 1: can selling a property these days, you should have a
15:11
Speaker 1: social media campaign. Property investors are very tuned into social
15:15
Speaker 1: media in terms of trends and data, which is all fine.
15:19
Speaker 1: What have you seen in terms of the influencers in
15:22
Speaker 1: the property investment market, residential property investment market sort of
15:26
Speaker 1: what's cut your eye.
15:28
Speaker 2: It's interesting. I don't know if this is just my
15:31
Speaker 2: algorithm specifically, but recently, of the last twelve minds, I
15:35
Speaker 2: have seen an explosion of the amount of property gurus,
15:40
Speaker 2: property investment and analy analysis the buyers agents out there,
15:45
Speaker 2: and interesting, like a lot of them probably don't look
15:48
Speaker 2: old enough to shave they were twenty one and twenty es.
15:51
Speaker 2: I have some queries about that sphere, what the qualifications
15:56
Speaker 2: are behind them, whether they actually do have any backing
15:58
Speaker 2: or not. I'm not actually sure how ACID regulates proper
16:02
Speaker 2: advisors in the same way they do financial advisors like myself,
16:05
Speaker 2: But there has been an explosion in social media of
16:08
Speaker 2: those types of individuals.
16:10
Speaker 1: And what do you think of the quality of what's
16:12
Speaker 1: the quality of information and for one of a better word,
16:16
Speaker 1: advice that's going through those with that big lift in activity.
16:20
Speaker 2: I'm very skeptical of this. It's a bit of a
16:23
Speaker 2: canary in the coal mine sort of situation for me,
16:26
Speaker 2: especially talking with other advisors as a touched and I've
16:29
Speaker 2: seen a lot of these proper gurus so to speak,
16:32
Speaker 2: to look very young and don't look like they've got
16:33
Speaker 2: any qualifications. Often talking about all these new builds and
16:38
Speaker 2: the opportunities, I'm a bit skeptical. I'd like to know,
16:40
Speaker 2: are you actually getting any kickbacks from that? Do you
16:43
Speaker 2: have a vested interest from the developers regarding that? And
16:46
Speaker 2: then just some information as well, which is just unreally sick.
16:50
Speaker 2: So the other day I saw one talking about how
16:53
Speaker 2: could easily get one of their clients to purchase a
16:55
Speaker 2: home for six hundred thousand dollars and then make a
16:58
Speaker 2: one hundred grand return in twelve months. Yes, that's absolutely possible.
17:02
Speaker 2: But the way to sprook it is guaranteed it's a
17:06
Speaker 2: very decent return, right.
17:09
Speaker 1: It's an exceptional return. Yeah, and this is put forward
17:14
Speaker 1: as probable exactly. Well, the way I saw it was
17:19
Speaker 1: put forward is more than probable.
17:20
Speaker 2: Is expected to be honest, And if you didn't get that,
17:23
Speaker 2: well that's the unexpected return. So it's I find it
17:27
Speaker 2: quite an army to be honest again, working in that space.
17:32
Speaker 1: Yes, because you've gone and done all the exams and
17:34
Speaker 1: you've gone through everything to become an advisor.
17:37
Speaker 2: Yeah, exactly. I don't know if the property industries are
17:40
Speaker 2: always gone through that. That's soul searching and looking for
17:43
Speaker 2: professionalism that the financial advice industry has had to go through.
17:47
Speaker 1: Yes, went through in fairly brutal fashion, didn't it, And literally,
17:50
Speaker 1: quite literally every second advisor left the scene. There was
17:54
Speaker 1: thirty ten years ago and now there's fifteen.
17:56
Speaker 2: Yeah, about forty to fifty percent decline in advice since
18:00
Speaker 2: the Royal Commission.
18:02
Speaker 1: So to our listeners who would listen, You know, one
18:06
Speaker 1: podcast is as good as the other basically when it's
18:08
Speaker 1: put in front of you, un should you give it
18:10
Speaker 1: a try? We don't know what the selection mechanism that
18:13
Speaker 1: puts a podcast in front of you or a YouTube
18:15
Speaker 1: video in front of you. As you say, there are algorithms,
18:18
Speaker 1: but what do you think our listeners should just what
18:20
Speaker 1: should they watch out for? This is an area that
18:23
Speaker 1: we just don't look at enough, We don't get advice
18:25
Speaker 1: enough on because properly, it's strange in some ways, it
18:28
Speaker 1: sort of falls slightly outside the jurisdiction if you like,
18:32
Speaker 1: traditional jurisdiction of financial advice and mortgage brokeus for instance,
18:36
Speaker 1: are in a world of their own to some degree
18:38
Speaker 1: from a regulatory point of view. So what should people
18:40
Speaker 1: look out for what should they watch out for from
18:42
Speaker 1: social media education and advice.
18:47
Speaker 2: Well, this is just the hardest thing, and I've raised
18:49
Speaker 2: this a number of times. The issue with social media is,
18:53
Speaker 2: generally speaking, those who are the best of it and
18:55
Speaker 2: highly engaging and putting content in front of you which
18:59
Speaker 2: you want to watch. Recently speaking, aren't the ones who
19:02
Speaker 2: have the best level of knowledge, the education you can
19:04
Speaker 2: actually get it out there. And that's a significant issue
19:08
Speaker 2: with the industries are dealing with. And partly I'm helping
19:10
Speaker 2: a bridge as well.
19:12
Speaker 1: Yes, and I take your point that the ability to
19:16
Speaker 1: catch surprise privolk have a dazzlingly effective video is not
19:23
Speaker 1: actually the same as offering good advice.
19:26
Speaker 2: But the way the algorithms work is it's all about
19:28
Speaker 2: keeping attention. So if you say something engaging and people
19:31
Speaker 2: watching it, it's going to push to more and more people.
19:34
Speaker 2: The algorithm could not care less whether what you're saying
19:37
Speaker 2: is right or wrong or downright dangerous.
19:41
Speaker 1: Right, it's alarming, It is alarming. Often it's the investments
19:45
Speaker 1: with at least knowledge and experience that.
19:47
Speaker 2: I was just going to touch on it. I think
19:50
Speaker 2: looking at from a financial advisors perspective, with the average
19:53
Speaker 2: financial advisors Add's fifty two in a male. Now, I
19:56
Speaker 2: don't imagine many of those guys are posting the hit
20:00
Speaker 2: talk Instagram, reo so or even writing engaging content on LinkedIn. Yes,
20:07
Speaker 2: but you are.
20:07
Speaker 1: So you're aware of the world. That's a different milieu
20:09
Speaker 1: that you're in, and you're aware of that, and then
20:11
Speaker 1: you see Then you see the gaps basically in terms
20:14
Speaker 1: of qualifications that perhaps others don't see. Okay, we'll be
20:18
Speaker 1: back at the moment. Hello, Welcome back to The Australian's
20:33
Speaker 1: Money Puzzle podcast. I'm James Kirby and I'm talking to
20:35
Speaker 1: Jack Tussl from the Partner's Wealth Group and we've been
20:37
Speaker 1: covering some very interesting material. Jack's point that you're you know,
20:41
Speaker 1: the investment that you're home is probably one of the
20:43
Speaker 1: worst investments you will make is really interesting. It sounds
20:46
Speaker 1: unconvincing at first glance what he's saying is compared to
20:50
Speaker 1: other investments from a tax perspective. Then you start to
20:53
Speaker 1: see the weakness, this share of the distinct weakness in
20:56
Speaker 1: home ownership against successful investing that is tax deductible, something
21:02
Speaker 1: we should look more at. Also, the social media influencers.
21:07
Speaker 1: I was asked to speak at an ACT conference on
21:09
Speaker 1: where there was a segment on fin influencers recently, and
21:13
Speaker 1: I think the regulators are at sea really about what
21:16
Speaker 1: to do about that, because you can have someone who's
21:19
Speaker 1: highly qualified on social media, like you, Jack, and then
21:22
Speaker 1: you can have someone who has zilsh qualifications and the
21:27
Speaker 1: algorithm will trade both of you the same. So it's
21:31
Speaker 1: a very tricky area to regulate. That's not to say
21:33
Speaker 1: that it shouldn't be regulated, because it's going to cause
21:36
Speaker 1: problems very soon, if not already. Okay, if you questions, David,
21:40
Speaker 1: your recent episode on the Retirement Suite spot was great,
21:43
Speaker 1: but did have one misleading statement. Your guest said you
21:46
Speaker 1: need about a million of your own money to gain
21:48
Speaker 1: an equivalent income to the pension. This is wrong since
21:51
Speaker 1: the starting bands would leave you with about a million
21:53
Speaker 1: in the bank when you die, but the pension doesn't
21:55
Speaker 1: leave you anything. Yeah, absolutely, David, you're correct. The point
22:00
Speaker 1: I suppose that Hugh Robertson was making is that you
22:03
Speaker 1: can have someone who has the government pension getting say
22:06
Speaker 1: a couple getting forty something thousand a year in income,
22:11
Speaker 1: another couple who doesn't have a government pension has to
22:13
Speaker 1: have a million dollars to bank roll an income of
22:17
Speaker 1: forty something thousand a year, and if they both live
22:20
Speaker 1: for forty more years, they both have that same dynamic.
22:23
Speaker 1: That's the issue, Nathan a question. I understand the logic
22:28
Speaker 1: of not including the value of the home in pension calculations.
22:31
Speaker 1: No one wants to see Betty kicked out of her
22:33
Speaker 1: family at ninety. But when Betty passes away with a
22:37
Speaker 1: five million dollar home, should the taxpayer not get some
22:39
Speaker 1: of that pension back from the sale of her house.
22:42
Speaker 1: I wonder Jack, going back to the original thoughts at
22:45
Speaker 1: the start of the show about how the home is
22:47
Speaker 1: such a poor investment, there's a lot of things in
22:50
Speaker 1: the tax system that help it along, isn't there. The
22:53
Speaker 1: home isn't included in pension asset test, the home isn't
22:56
Speaker 1: included in capital gains. Do you think if we flattened
22:58
Speaker 1: out those taxes what you're saying become much more obvious.
23:02
Speaker 2: Yeah, and it's interesting you look at that. The ability
23:04
Speaker 2: to have a five million dollar house and still able
23:07
Speaker 2: to get a full government pension. The millennials out there
23:09
Speaker 2: would be seen in in the minute.
23:12
Speaker 1: It would, Yes, they would, And you can make that
23:15
Speaker 1: a ten million dollar house if you want. It is
23:16
Speaker 1: really quite remarkable that it's come to that. I don't
23:19
Speaker 1: think when they excluded the value of the family home,
23:22
Speaker 1: they weren't thinking of fourteen million dollar houses on Sydney
23:26
Speaker 1: Harbor being excluded.
23:27
Speaker 2: No. I think the smartest thing to do would be,
23:30
Speaker 2: say you just capture two million dollars or three million,
23:33
Speaker 2: which is going to be probably eighty percent of the
23:35
Speaker 2: population really, and then you're going to pay tax on
23:37
Speaker 2: the level above. That would be a more equable Thinger.
23:41
Speaker 2: You just got to ask the question, right, given how
23:45
Speaker 2: much debt is expanding, right, can younger generation, say millennials, example,
23:50
Speaker 2: we were paying forty seven percent tax on income above
23:54
Speaker 2: one hundred and ninety thousand dollars. How long can they
23:56
Speaker 2: subsidize someone who's living in a five million dollar property
23:59
Speaker 2: to get paid for government pension? And do we say
24:01
Speaker 2: that is equitable in the long run? Yeah?
24:03
Speaker 1: Yeah, I think that's something that will come up in
24:05
Speaker 1: the Economic Summit actually next week, which we will have
24:08
Speaker 1: special on this starting on the nineteenth. The Economic Summit,
24:11
Speaker 1: which has quickly been repackaged in some parts as the
24:14
Speaker 1: Tax Summit or even the Wealth Tax summit. Perhaps okay,
24:18
Speaker 1: final question from Peter. It's very specific. We'll have a go.
24:22
Speaker 1: This has never advised information only, he says. He gets
24:25
Speaker 1: a question regarding the cost space of his ETF distributions.
24:28
Speaker 1: He gets his cast distributions during the year from his
24:31
Speaker 1: Vanguard ETF. At the end of the tax year, I
24:34
Speaker 1: get the tax profile with the breakdown of the components
24:37
Speaker 1: of the distribution. One particular line has him puzzled. A
24:41
Speaker 1: mighty cost base net amount dash shortfall increase in the
24:44
Speaker 1: cost space, which for twenty twenty five tax year, Peter says,
24:48
Speaker 1: was two hundred and fifty dollars, and he wants to
24:50
Speaker 1: know does this mean he should go through in a
24:53
Speaker 1: portion the amount across each of his shares and ETFs
24:56
Speaker 1: and increase the cost space for each process. So at
24:59
Speaker 1: the time I sell, I will decrease my capital gain fitling.
25:04
Speaker 1: It kind of gets automated and he doesn't have to
25:06
Speaker 1: do all that. Have you any observation on that one
25:09
Speaker 1: Jack I blame?
25:11
Speaker 2: Isn't that because he's technically paid more income tax now
25:15
Speaker 2: than what he should. So effectively, what it's doing is
25:18
Speaker 2: increasing the cost basis so that when it does get solved,
25:21
Speaker 2: and he doesn't pay as much tax, which offsets that
25:25
Speaker 2: initial or that in terms of applying. That's a sort
25:28
Speaker 2: of accountant job. I think I would.
25:30
Speaker 1: Just yes, okay, and I tend to let the accountants
25:32
Speaker 1: do all that. I mean sometimes I do sit back
25:34
Speaker 1: and I say, when you get your annual returns, you say, okay,
25:37
Speaker 1: So let's say you bought some more shares in something
25:39
Speaker 1: you had already, Like.
25:41
Speaker 2: How exactly is that treated?
25:43
Speaker 1: If I went in and drilled down, I could, I suppose,
25:45
Speaker 1: spend days and days finding out whether the accountant did
25:48
Speaker 1: that right. At a certain point you have to trust
25:50
Speaker 1: the accountant and the order did is right. But you
25:52
Speaker 1: could drill down forever, I suppose, if you had the time.
25:54
Speaker 1: And that don't mean to be flippant. I just mean
25:56
Speaker 1: that it's probably extremely difficult to track each in the
26:00
Speaker 1: you will item sometimes that when they are routine, these
26:03
Speaker 1: sort of covered by accountants and orders. But you could
26:05
Speaker 1: always ask your accountant or orders or how did they
26:09
Speaker 1: deal with that last year? For instance? That might be useful.
26:12
Speaker 1: All right, terrific, Jack, Tossil Partners, Wealth Group, thanks for
26:15
Speaker 1: coming on the show.
26:16
Speaker 2: Thanks for having me again. John. It's been absolute pleasure.
26:18
Speaker 1: Great to have you, Jack, and great to hear your
26:21
Speaker 1: very distinct views on the market. They're very distinct views,
26:24
Speaker 1: they're clear views, and they're often provocative. Okay, folks, let's
26:28
Speaker 1: have some more correspondence the Money Puzzle at the Australian
26:31
Speaker 1: dot com dot au. Talk to you soon.