Chapter 1: What is the main topic discussed in this episode?
Hello and welcome to the Australian's Money Puzzle podcast. I'm James Kirby. Welcome aboard, everybody. Do you know most years I do a budget special show? One show. That's it. But this extraordinary landmark budget, it continues to throw up questions and revelations, I think. And we need to do one more show on this. And we'll do it today. There's a lot I want to tell you about beyond property.
OK, so we did the special property show on Tuesday with Stuart Weems. Don't miss that. It was very good. And what I want to do today is to cover the broader issues for you, the general investor on all things. And what we know now in the second week after the budget, the smoke is clear to a considerable degree. There's a lot more we know now than we did yesterday. a few days ago.
My guest is Liam Shaw from the Sonus Wealth Group. How are you, Liam? Hi, James. Doing fine. Thank you. Good to have you on the show as always. It's a hell of a budget and I've been looking at all the various notes that people have put out and I looked at the notes you put out, of course.
And I suppose we need to stand back for a moment from the sort of headlines and the surprises, you know, what is real in here, what's concealed in here, but also what matters most. Stand back for a moment and say what really matters. And I think... is capital gains tax is what really matters. In that it affects everybody, every investor, whatever they do, almost. It's inescapable.
And it's about to become a higher tax for everybody. I think that's really the big one. What's your view on that one, Liam, on CGT and what investors should know?
Yeah, so basically the CGT changes nearly touch every asset. So basically people need to understand the 50% CGT discount that they're used to having is now being replaced with the base indexation model that we had pre-1999. But also it's sticking in there a 30% minimum tax on the net capital gains. And this changes the strategies for so many people. because of that.
So it's not just property that you've already dealt with. It's shares, commercial properties, business assets, ETFs, managed funds, gold, bullion, crypto, whatever you're looking at, everything's affected by it. And this is one of the real weird things about this because they said this CGT move was to try and encourage people to get out of property so that young people could get in.
But most young people are using those other assets to build up their deposits. And now they're going to get hit.
I don't want to roll down the political line too much, but there is an irony that the grandfathering of the negative gearing, for instance, creates a privileged class of older investors who can negatively gear forever, which I would have thought was the exact opposite of what they were trying to achieve.
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Chapter 2: What are the implications of the recent capital gains tax changes?
Press, press, never to mention that, folks. Really good insight there, which is what this show is all about. Okay. There's a couple of other things we're going to talk about, but one quick thing I want to put to you is similar in terms of insights and observations.
If the CGT rate for most people, most of the time on most assets has become higher, effectively higher because the discount isn't as good as it used to be, But in self-managed super funds, it remains unchanged. Then is this a win for self-managed super funds? And does it actually really add to their attractions? I mean, I think it does. But can you kind of challenge that view or take it on?
I'm keeping quiet about it, James, because I don't want to raise the flag. It does mean that super is now still the most attractive place to hold your assets.
It was more attractive. I would have thought it was more attractive.
Yes, but this is still to get through parliament.
And I'm looking at things like... You're worried that they've forgotten this. Do you really think that they didn't think about this? I mean, we have to believe that they think about everything.
Yeah, but what I'm worried about is if they need green support... to get the budget through that they're going to ask for things like the LRBAs, the borrowing through super to be, they've been trying to get rid of that for years.
So I'm saying play the little story at the moment, but it really is a case of people need to, with their super, get their contributions in, get the spouse contribution in, get the super splitting done, top up to your 30,000, Next year, that goes up to 32,500, James. So there's a lot of space. Look at your unused for the last five years.
And really, if you're anywhere 55 plus, you should be really looking at pumping that super up. And one of the main things you need to understand now, do your research before you get to 60. It's so important to try and get into pension phase as early after 60 as possible. And that means meeting a condition of release. So I keep on telling this one to people, but it's
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Chapter 3: What makes the family home more attractive in the new budget?
So you can have your main job, start up a second sideline job, a sideline hustle, do Uber or work at the election booths. I have people who invigilated exams at the schools and universities.
Become a gold trader.
Yeah. Once you finish that job, you've met a condition of release. So you could still be doing your main job. That means you're getting your super into pension phase five to seven years earlier than you normally would. All of these are going to become so much more important because of these changes to tax.
Yeah. And, you know, I mean, I'm thinking out loud here, but in a way, it's a bit disheartening that rushing into a pension is the answer here. But it just shows the lack of incentive that was in the budget. There's so much sort of smothering of incentive. And it's understandable the clampdown in some ways, particularly negative gearing. But the lack of incentive is very disappointing.
One thing you said there, Liam, about the superannuation, the amount you can put into super pre-tax, that is a concession basis. Every year, when Liam said it goes up to $32,500 next year, you mean next financial year, right? From July?
Yeah, from the 1st of July. From the 1st of July.
Yeah. That's also something really worth talking about and thinking about, folks. Okay, we'll be back in one second. Lots more to talk about. Hello, welcome back to the Australian's Money Puzzle podcast. James Kirby here with Liam Short of the Sonas Wealth Group, S-O-N-A-S. Now, folks, I think I'm going to give Liam the opportunity here as a sensible person
rational advisor to say what many advisors have been saying. And it's important, I think, to hear him out on the mechanics and logistics of this. This is a budget that is quite dramatic and quite wide ranging. But at this stage, it's a piece of paper. It has not been through Parliament.
And as we know, as us seasoned investors know, by the time stuff gets through Parliament, it can look very different. If you think about the super tax, it was supposed to be on unrealized gains. We had a lot of argy-bargy around that. And in the end, it wasn't an unrealized gain. So things can really change. So Liam, what are you telling your clients?
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Chapter 4: How will the budget changes affect gold investors?
The testamentary discretionary trust, for instance. Do you think there's any chance that they might repeal that idea and leave them alone in the end?
I think they may seriously consider it because it's not only the fact that they may need to work hard to get it through Parliament. but now you've got the whole legal fraternity turning on them. And I'm sure there's going to be court cases, there's going to be challenges, so that the fine print is going to be absolutely ripped apart.
So this is one, it's probably one easy one for the government to back off and say, Look, we hadn't realized how much it would affect people that benefit from testamentary trusts. Family trusts are slightly different because that's when you're alive. And that's seen as sort of being unfair to people earning normal money. But testamentary trusts were designed to protect people.
beneficiaries in the long term. It's a totally different.
It's a wills and estates issue and it shouldn't be put in the category of family trusts, which are for those lucky enough to be alive and making plans. Okay. That's one thing. Capital gains tax. There's a little throwaway line in the budget that says that some aspects in relation to startup companies are will get further consideration?
I think there might be some room, wriggle room there for some exemptions perhaps?
Yeah, I think there has to be because basically, you know, you think in terms of they're saying they want people to be treated who earn money the same as people who have assets. But when you're talking in terms of a small business owner,
You might buy a property for a million dollars as an individual investor, but for a small business owner, they may start a company and start a business with $100. the inflation adjustment, it makes no change to that. After 10 years, even if they've grown the business, you add inflation to $100 and you're probably talking $200 as your cost place. And you may have built a big business.
You've done your blood, sweat and tears. You've sacrificed everything, low salaries, probably no salary for the first five or six years. And so you end up with a huge capital gain when you go to sell the business.
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Chapter 5: Which budget measures are negotiable and may change?
I have to hold it there. We have lots more to talk about, of course. We will take a look at some other issues going forward. I have never done so much on the budget, but then I've never seen a budget quite like it. Great to have you on the show today, Liam. Thank you very much, James. Always love it. That was Liam Short from the Sonos Wealth Group. OK, some more correspondence.
Love to hear your views, your questions, your complaints, your observations. The Money Puzzle at theaustralian.com.au. Today's show was produced by Leah Samuel. Talk to you soon.