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Chapter 1: What major tax changes are introduced in the 2026 Budget?
Hello and welcome to the Australian's Money Puzzle podcast. I'm James Kirby. Welcome aboard, everybody. Well, it's our budget special and this was the most important budget for years, folks. If you're an investor of any description, there are significant, and I mean significant, Right, I mean sweeping tax changes across the board that will affect every area of investment.
Specifically, property obviously comes to mind straight away, but capital gains tax is applicable on any gain, on anything. So we've got big changes in how you're taxed on profits you make, basically from investments in property, in family trusts, how things are structured. Many of these... changes. They've been threatened repeatedly. I mean, to be honest, they've been on the agenda a long time.
In 2016, the shortened Labour government tried 90% of these changes and they had no chance, basically, of getting them through. Here we are 10 years later and the budget has brought them upon us. My guest today is Will Hamilton of Hamilton Wealth Management. He has yet again volunteered to take the hot seat on the budget special. How are you, Will?
Very well, James. Thanks for having me.
It's great to have you. You know, some years, folks, we talk before the show and we're basically trying to find what's the most interesting parts of the budget. This year, we talk before the show and we say, how much can we get in? Like, what will we prioritize? Because there's so much around.
I want to cut to the chase straight away and let's look at CGT because that's the big one, isn't it, Will, really? Because it cuts across everything.
It is. It is the really big one. And look, it materially increases the effect of tax paid on long-term investments for Australians, particularly where returns are driven by capital growth rather than income. I think the other thing that was surprising was pre-1985 assets are now going to be taxable for gains accrued from July 27 onwards as well.
So these are big changes and there's other implications in there as well.
They are. And as you mentioned, thanks for mentioning that, this pre-1985 issue. We'll talk about that in a minute, folks. And it's applicable, obviously, largely to older people or someone who was lucky enough to be involved with assets for a long time. But that one wasn't leaked, for instance. Just about most of this budget was leaked in various ways. through the media.
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Chapter 2: How will the Capital Gains Tax changes affect investors?
Really interesting, your point about changing the shape of the market and that individual investors could find themselves actually competing with the blackstone and black rocks of this world. I mean, it's entirely possible, as you say, because that's what's happened in the US when the private investors withdrew from the market. OK, that's property. You can see how wide ranging this is, folks.
There's so much to cut through. I just want to make one more point about negative gearing in property is grandfathered. So if you're lucky enough to be doing it already, you'll be fine. OK, we're talking about it from July 1, 2027 onwards. CGT, however, just to make things a little bit more complicated, is only partially grandfathered. Okay, so watch out for that.
CGT, the capital gains tax change that I mentioned at the start of the show, where it goes inflation indexing every year, how that will occur in relation to a property. Let's say you own one five years before the changeover and five years after. Your first five years will be assessed on the old system, 50% discount. after holding it for 12 months.
And the second five years will be assessed on an annual basis on inflation, which is running pretty low at the moment, 3% or 4%. Have I got that right?
That's my understanding. Absolutely. Yes.
Yeah. Yeah. So that's it, folks. That's as far as we know. So try and digest that if you can in relation to property. And now we will swing to broader investment issues, which involves shares and businesses. We'll take a short break and we will be back to you in a moment. Hello, welcome back to the Australian's Money Puzzle podcast.
I'm James Kirby, talking to Will Hamilton of Hamilton Wealth Management, regular on the show and my regular guest on the Budget Special. We are talking about what we know so far and what you may or may not do. in relation to your investments that have been affected by the budget and they will be affected, that's for sure. Let's pan it out a bit wider beyond property, Will.
Now, negative gearing changes actually were restricted to residential, so keep that in mind, folks. So from here on, we talk about the wider market, we're talking about the capital gains tax changes. The really big one, obviously, is for shares. When I buy a share of any company, when I sell it after a year, I expect to get a 50% discount on my marginal tax rate.
So it could be 47% and I expect it to come down to about 25%. But that's really going to change with this new arrangement where the tax rate's going to be much higher, isn't it, for the gain part of listed investments, for the gain part. So if I have two shares to choose from, I have one where I know it's all about gain. Let's just take, say, WiseTech, the tech company.
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Chapter 3: What impact does the new negative gearing policy have on property investments?
Talk to you soon. Hello, welcome back to the Australian's Money Puzzle podcast, special budget episode with myself, James Kirby and Will Hamilton. OK, now, folks, we've given you a whistle stop tour so far of what we see as the main items emerging from this year's budget, dramatic budget. We've talked about CGT and the change there. We've talked about negative gearing.
And in case we didn't completely spell it out, existing properties basically will no longer be allowed to be negatively geared. Only new properties will. And the reality is that 80% by the government's own admission folks in the budget papers, 80% of properties that are negatively geared. are not new properties. They're existing properties.
And there's probably a very good reason for that in that they are not as reliable price-wise. Have we any evidence on that, Will? I mean, if I came in to you as an advisor and I said to you, I want to buy five new houses and gear them rather than five existing houses, is there some sort of innate superior asset quality to the existing houses?
Well, I think it's on that availability to rent and that return and where is the rental market? And unfortunately, the rental market that people are wanting to rent is generally in a city with very few houses or built in a city because the land is available in the outer parts of the cities. So it's a mismatch of where the demand supply is. Yeah.
Okay, yeah. So there is that, folks. And then we had the issue around family trusts. I think more broadly, Will, there's a couple of other things I think we might mention. One thing in terms of exceptions, loopholes yet to be clarified. The government, apart from these changes... What's the real sting in the tail, folks, as I mentioned, is this introduction of minimums.
So the minimum CGT tax rate of 30%, a minimum family trust tax rate of 30%. Games will continue. Financial engineering will continue. But boy, oh boy, I tell you what, you're going to wipe out a lot of it or you're going to make it terribly complex and arcane to get around that. Testamentary trust will, just to make the point, wills and estates, trust relating to wills and estates,
In the budget papers, they are expressly excluded, along with charities, I might add, in this and primary income, which is farmers, of course, they've been excluded. Is there any sort of wriggle room here for the government to come back in and impose sanctions? a death tax style charge on the testamentary trust?
Or do you think they have, as the papers would clearly infer, been allowed exemption?
They've been allowed exemption. And yeah, the government was asked again today and they've confirmed that they're exempted. But I will say there's no more generous interpretation of what has happened is The government's broken its word on this. So let's just wait and see what's potentially down the track one day. And I mean one day.
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Chapter 4: What are the implications for corporate versus individual investors?
The property I want to go into thoroughly in Tuesday's show with Stuart Weems. And we will look at a lot of issues that are emerging. I didn't get into today, but I'll tell you what, there's a lot you need to know about investment property. and how, for instance, it's going to be valued and taxed and the different markets that are going to emerge as a result of these changes.
For now, we will say goodbye to Will. Thank you very much, Will. Great to have you on the show as always.
Thank you for having me, James. Really enjoyed it.
That was Will Hamilton, folks of Hamilton Wealth Partners. Great. Let's have some questions. Now, I can see the questions are starting to come in, which is great. Keep them rolling. I will devote next week to answering them. Okay. So as I say, Tuesday, we'll have Stuart Weems. We'll talk about property and all its dimensions.
And on Thursday next, we'll have Liam Short, financial advisor, and we will answer any questions. I will try to get any question that comes in answered. between those two shows. So you have plenty of time, plenty of notice. Okay. Today's show was produced, as always, by Leah Samaglou. Talk to you soon.
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