July 24, 2025 • 33 mins
The markets are overheating : Records are being made on the ASX while profits are actually falling. As we inch towards the most dangerous time of the year for the share market, you should be rebalancing your investment portfolio.
Adviser and family office chair, Dr Doug Turek joins Associate Editor - Wealth, James Kirby, in this episode.
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In today's show, we cover:
- Rebalancing time - whether you like it or not
- The alternatives to shares...especially gold
- A very obvious way to avoid the new super tax
- Could the AI boom throw up a new Enron?
See omnystudio.com/listener for privacy information.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:10):
Hello, and welcome to The Australian's Money Puzzle podcast. I'm
James Kirby. Welcome aboard everybody. I don't know about you,
but this share market to me is looking very toppy. Indeed,
we've got records breaking on Wall Street and on the ASEX.
And you wonder why in Australia's major listed companies are
(00:30):
actually going to have lower earnings It is expected this
year than last year. And as for the sort of
headwinds against the international markets, particularly Wall Street, well we
don't really have to reiterate those except to say that
there's an extremely volatile administration in the US presiding if
(00:52):
you like, over Wall Street and really trying to preside
over trying to preside over everything, including the Federal Reserve.
So here we are, it's August. You know, we're going
into the most dangerous season of the year historically for
share markets, the northern winter. All the great crashes were
in September and October. Don't forget that. So the point
(01:12):
I'm making is what do we do as investors, as
active investors having just had a very good year, No doubt.
If you've got a self managed super fund, it's probably
done thirteen fourteen percent. If you've got it your savings
in a major fund, a big fund, it's probably done
ten and a half percent. That's the media in return.
So it's time to recalibrate, rebalance. Perhaps it's time to
(01:36):
sell when you might feel like buying. My guest today
is one of the oldest friends of the show. It's
doctor Doug Turek, financial advisor and family office chair of
a family office that we can't name unfortunately still under wraps.
Oh you Doug.
Speaker 2 (01:51):
I'm terrific, James.
Speaker 1 (01:53):
Lovely to have you on board in your world advising
wealthy investors and specifically advising a family office. Is there
that sense that we are looking at overheated markets?
Speaker 2 (02:09):
I think people have been worried for a while. And
I heard a wonderful phrase, which is, you know, are
we in a bubble that's just in search of a pin?
Speaker 1 (02:19):
Oh? I think we are, by the way, Yes.
Speaker 2 (02:22):
For sure. Yeah. Look, there is a nuance to some
of these very high valuations in the share market, and
we should remember that the market is not uniformly overvalued.
That there is a very large spread between the cheapest
companies in the market and the most expensive and a
lot of the excess are in what we can call
large growth companies, and there is a kind of growing
(02:45):
suspicion that it could be the fault of the popularity
of indexing that every American employees dollar goes into a
four toh one k which then puts you know, now
eight percent in Nvidia, and these are price sensitive buyers,
not price in sensitive buyers, and that if Invidia goes
(03:05):
up three times in price, the index will buy three
times more of it. So just a reminder that they're
One way of kind of dealing with this concern about
excess of prices in the share market is to diversify
within the share market. There are value strategies. There are
also small companies, both of which have underperformed, but they
(03:26):
are at least attractive on a value for money basis.
Speaker 1 (03:29):
We have a bit of that in the Australian market,
don't we, with common Work Bank exactly.
Speaker 2 (03:33):
Commonwealth Bank is our Nvidia, and we could say we've
had just fantastic conditions as we've had interest rates falling
from very big highs of twenty years ago down to lows,
and it looks that they're not going to hopefully get
back to zero and we have inflation is back. People
know that when they go to the supermarket, and that's
perhaps a dampen error on seeing interest rates go too
(03:55):
low for too long. So it is quite possible that
we have tough conditions ahead. So the hence your question,
you know, do we do something about it? And that
brings us back to rebalancing, which is really a risk
management strategy. It's the risk of having too much equities
in your portfolio and being vulnerable to a large transition.
(04:16):
And I think in America the statistics that the US
investor has never been so exposed to the share market,
and it's kind of been a good strategy, a lucky
strategy not to have been a disciplined rebalancer in the
last few years, because you're rebalancing is taking profits off
the table and parking them in the underperforming assets or
the less performing assets and just riding up this return
(04:39):
would have done well, but when you have a downturn,
you'll be very grateful that you listened to this podcast
and you took some profits and put them elsewhere.
Speaker 1 (04:48):
Is it harder to sell? Do you reckon? And this
is not a scientific question to bias question, but is
it harder to sell winners when you know when the
market's strong than to buy shares when you know the
market's deep doodoo.
Speaker 2 (05:06):
It is, but look, institutions, professional investors and smart investors
should manage their portfolio to targets, and those aren't dollar
targets or percentage targets. And if you have you know,
if you say I want to have seventy percent in
equities and now you have seventy five, then the math
should override your your optimism of continued profiteering, and you
(05:27):
should sell five percent of your equities and put those
Let's say, if it's just a simple two part portfolio,
put five percent back into bonds, which fortunately at the
moment are giving you good returns. And the opposite happens.
If there was a twenty percent fall in the share market,
your you know, seventy five percent in shares might fall
to sixty five percent, and then the math will tell
(05:50):
you buy shares because you now have a risk of
not having enough shares. So rebalancing work terrifically during the
global financial crisis era of two thousand and seven, because
the downturn was prolonged and people had time, you know,
they would have sold before the crash, before the peak,
and then the down was long enough unfortunately that people
(06:11):
would be buying into the market at the dips. But
lately the behavior of the market has been very quick recoveries,
and there is a kind of behavior about buy the
dip being practiced, which means, you know, a typical rebalancing strategy,
which can often be calendar based. It might be six monthly.
You can miss that opportunity and you're not being able
(06:34):
to buy on the cheap because the cheap sales only
last a few weeks and the market bounces back so quickly.
So yeah, in short, rebalancing is a very sensible strategy.
It wouldn't have worked in the last few years, but
you can't predict the future. And if you're right, James,
that the market is a bubble in search of a pin,
and a pin is found, then you would have been
very wise to take some of those profits off the table.
(06:56):
They can be of the entire equity part of your portfolio,
but you can also have some internal controls. You might say,
I don't want ten percent of my retirement to be
based on any one company, so you don't want to
have ten percent in CBA so you'll have to trim
that or you don't want to have ten percent in Nvidia,
because you know, history reminds us that these companies never
stay at the top. If you look at the top
(07:18):
ten stocks in the world every ten years, they're very
often not the same.
Speaker 1 (07:23):
It's really hard. Course, we'll take it on board that
it's very hard to sell a winner. But let's assume
that we all have the gumption to do that and
the sort of scientific rationale to do that, because we
know history proves it's the correct thing to do. You
mentioned bonds as a whatever you buy in the rebalancing,
it must not be shares. It would it be the
(07:45):
case that it must not be listed securities. What I'm
driving at here is, perhaps people the easy way in
for most of our listeners to bonds is bond dtfs.
You know they're going buy these bond ETFs. Are they
what you're thinking of? Do they fit the bill? Well?
Speaker 2 (08:00):
I was just describing this in the general kind of
barbell of equity at one end, bond at the other.
But most portfolios are more sophisticated. They might have a
ten percent allocation to reads, they might have a ten
percent allocation to infrastructure, they might have a ten percent
allocation to floating rate cash like securities. They might have
a ten percent allocation to fix rate government bonds. They
(08:23):
might have a ten percent allocation to hybrids. So, you know,
periodically or perhaps at events where you have cash flow
coming in or out of the portfolio, you can reset
everything by buying a little bit of everything in a
differential bait way to get back to those ten percent
targets of your ten asset classes. And likewise, if you're
(08:44):
in pension phase, you can fund your pension for the
next six or twelve months by you know, maybe taking
a little bit more out of the equities and a
little bit less out of your money market fund or
property trusts and some things you might Yeah, so you
either top up differently or you take out differently. And
if you're for some reason your portfolio is completely steady state,
(09:05):
then yes, you would sell your winners by your losers.
And it really depends on how you Generally, the opposite
we often consider the opposite of an equity is a bond,
But you know, lately some people have found that gold
is the opposite of an equity.
Speaker 1 (09:21):
Yes, I was going to say to you when you
listed out. It's interesting, isn't it this whole thing about
sixty forty or whatever? And then you know one side
of the book was shares and the other side was bonds.
But really what constitutes the other side of the book
that isn't shares? Has really changed, hasn't it? Of late?
And people are I mean, goal is included now regularly,
(09:41):
Private equities included, private credit is included, so all those
categories they would come into that that they do.
Speaker 2 (09:48):
The rebalancing works well, but it runs into problems if
you have substantial allocations to private assets. And at the moment,
we're aware that some of the very famous endowment funds
like Harvard are suffering from this problem that private equity
is not listing, isn't giving money back to investors, and
they can't fund their spending needs. So they've actually had
(10:11):
to go to the bond market and borrow several billion
dollars because they.
Speaker 1 (10:16):
Can't can't get they can't send this.
Speaker 2 (10:18):
Yeah, and we had this problem back in the GFC
with austriand industry superfunds that also have a large allocation
to private assets. Because you know, the valuers right wrongly
or rightly say these assets haven't fallen in value, so
the rebalancing thing is, oh, well, we've got to buy
some more BHP and CBA because it's just fallen forty percent,
(10:39):
but our private equity has only gone down four percent.
So I want to sell some private equity and buy
some public equity, but I can't get my money out
of private equity. So you know, rebalancing doesn't work terribly
easily when private market assets are a big part of
your portfolio, and when private markets aren't working, and they
often free in difficult times. I think this week we
(11:02):
saw a private credit fund suspend redemption, so that one
that might contribute to your fear, James of things the
economy softening.
Speaker 1 (11:10):
Absolutely well, it confirms my skepticism. I think, tell me
you mentioned gold, right, Gold is liquid, Right, it's always liquid.
Got to say that whatever is it is, it's got
lots of.
Speaker 2 (11:18):
There does seem to be lots of buyers. And in
a crisis. Ironically, when you think gold is a safe have,
and sometimes gold does dip because it's the only thing,
some investors can sell.
Speaker 1 (11:29):
That.
Speaker 2 (11:29):
Yeah, they're well they've got to. Maybe it's a margin call.
There's incredible indebtedness behind the market at the moment, and
if you if you're in a crisis, you can't sell
your beaten up small cap that there's no buyers for,
so you only sell the good stuff. And yeah, so
generally speaking, especially paper gold or electronic gold sold as
ETFs is very popular where you're really tray selling the
(11:51):
gold price not gold that is very liquid.
Speaker 1 (11:56):
That thing about people will sell anything in a crisis,
and they'll sell their gold because they want cash. Okay,
we take it that dimension, But that isn't it that
I imagine that doesn't undermine your notion that gold is
a good feasible diversifier.
Speaker 2 (12:11):
Yeah, diversifier. Yeah, that's right. Absolutely, No, I think it's
just one of the nuanced behaviors of gold. No assets
work perfectly, and you could actually say it just proves
you the fact that gold is available is working, that
it can be sold in a crisis.
Speaker 1 (12:28):
People want it.
Speaker 2 (12:29):
You know, We'll be interesting to see what happens during
the next crisis because the nature of the crises are
always evolving, and the current fears are around government solvency
and debasement of currency. So I'd be surprised if gold
is sold off quickly this time. But you know, as
much as it was back in two thousand and seven,
which was only a sort of a few back in COVID,
(12:50):
I think it's sold off very quickly, but it recovered
very quickly. Yeah, so I wouldn't. I wouldn't abandon gold
is proven. It has come back as a viable defensive asset.
Speaker 1 (13:02):
Even in the GFC it didn't. It didn't pop straight away,
probably because just what you're saying, people were using it
to sell to get some cash because they well.
Speaker 2 (13:12):
They probably didn't take the treasuries. You know, they might
sell a treasury. But we did see some government bond
malfunction during COVID twenty twenty, which was unusual. The bond
market wasn't working very well, and you might require that's
why the US and the Australian and many other central
banks of the world bought government bonds with printed money.
(13:33):
So that's they didn't print gold. So as a reminder
to be maybe some of the assumptions we have around
government treasuries being the safest security need to be challenged.
Speaker 1 (13:44):
Yes, we put that, Just put that to one side
for the moment because that's another show. Just finally, look
on yes on gold and the notion of the alternative
two shares, the non correlated asset. We have to put
it to you a crypto and bitcoin. I've had Chane Oliver,
(14:04):
chief economists at A and P on the show. A
and P have actually both bitcoin. What's your view as
on bitcoin as a alternative in the manner that gold is.
Speaker 2 (14:21):
I struggle with an asset that we don't know who
invented it. It hasn't been around for four thousand years.
For much of its life, it's behaved like an equity,
not a bond. And I've heard one commentator said, if
you know gold and crypto are different, and if you
want them, you know, put ten percent gold in your
(14:43):
defensive portfolio and put ten percent crypto into your equity portfolio.
Speaker 1 (14:47):
So based on that logic, that's making the assumption that
bitcoin is correlated.
Speaker 2 (14:52):
Yeah, that's right.
Speaker 1 (14:53):
Yeah, are you of the view that it is? And
so it's not an un correlated asset. So it's not
a gold.
Speaker 2 (14:59):
Oh, it's quite different to gold in my opinion. It's
not a central bank held asset. Banks commercial banks who
hold it don't get credit for it.
Speaker 1 (15:08):
It.
Speaker 2 (15:08):
Look, it's an incredibly clever system and there are some
appeals to its logic, but there's also enough question marks
to make me worry about using it in a portfolio.
But that's not a universal held view. And maybe i'm
because I'm turning sixty this year. I'm just an old
fart James, and you need to ask that question of
someone younger.
Speaker 1 (15:26):
But I don't know what were the reasons. One of
the reasons I asked Shane to come on was because
he was definitionively the chief economist at AMP, which is
one of the oldest institutions in Australia. The Australian ritual
problem will fond of whatever it was. I thought that
was really interesting that their economics, their investment portfolio committee
had a meeting and they passed it off, they signed
(15:47):
it off, and they put twenty seven million into it.
So I think we're moving beyond that actually to a
sort of more nuanced view of Okay, this is an asset.
This would appear to be an old term of assets.
Some say it is soon to be included in US
strategic reserves. If you don't mind, it's not going to
go away. So then the question is what is it
(16:08):
and is it correlated or not? And yes, it's interesting
that you say that you're ob view that history suggests
it's correlated. By that, folks, we mean when shares go
it goes up. When shares go down, it goes down.
And if that's the case, it's not a match for gold.
Is that a fair summary of Yeah.
Speaker 2 (16:29):
It might be more a substitute for equity, James. Yeah,
it certainly is a speculative asset and some people have
become very rich on it, and we're thrilled for them.
Speaker 1 (16:42):
That's a speculative assid you might as well just go
and by a speculative share. All right, We leave it
there for the moment. We have some very I know
that we have enormous interest of course in the super tax,
but we dealt with it quite a bit on the show.
We've left it alone for a while. There has been
various developments and people are really starting to think about
it for the simple reason that, folks, it's going to happen.
(17:04):
It's going to go through. It's going to go through
as planned. I don't believe there's going to be any
deviation or concessions on this from our sources in the
Australian through Canberra. We will be back to you in
a moment. Hello, Welcome back to The Australian's Money Puzzle podcast.
(17:25):
James Kerby here talking to doctor Douc Turek, regular on
the show, one of my oldest and most favorite guests
on the show who goes way back and has always
featured regularly with his very distinct views on investment. For
you now on the new supertax, just through recap. It
is a tax which comes in above three million on
(17:47):
earnings above three million in Super. It is a news tax.
It is a fifteen percent tax. There is already a
fifteen percent tax on amounts above two millions, so it
becomes effectively thirty percent tax. That's the simple part. The
bigger issue is that it's a completely new tax that
we've never seen before in Super and it's based on
(18:09):
realized gains paper gains. So whatever the value of the
stated value paper value of your portfolio is at the
end of the year compared to the start of the year,
the taxes imposed on the alleged paper profit made through
that period very controversial and everything the Treasurer says suggests
(18:29):
it's going to put it in exactly as planned. Also,
it's not index for inflation, which means more people will
be caught in it every year. In your world, Doug,
are they now making the assumption along the lines of
what I've just said that it's going to happen, and
it's going to happen as they have framed it.
Speaker 2 (18:50):
In my world? No, I'm not. I'm maybe naively hopeful
that the Frankenstein nature of this tax is being worked,
being understood, and maybe there'll be some modifications. And you know,
we really can't because there is no penalty, there's no
urgency to act now. It really is wait and see
(19:11):
in our professional world. But it doesn't stop us thinking
what are some of the strategies we may implement, But
we don't. You know, if this is going to be implemented,
it's going to have to be. It may not be retrospective.
We're already you know, time is flying or almost through July.
So are we going to you know, go backwards in
time with this tax or will it start eleven months
from now?
Speaker 1 (19:31):
It will be retrospective because it's when it's legislated. It's
it's legislated for July one, twenty twenty six, which would
refer to the previous financial year, which is already upon us.
Speaker 2 (19:45):
Well, it's one argument. The other one is you're looking
backwards in time at a balance before the legislation even started.
So anyway, I live in Hope, James, you are You're
not optimist that guy. I live in Hope, and in
terms there is no I'm not a aware of any
penalty for urgent action, and I guess I live more
(20:05):
in fear than hope to be frank, and that is
the insatiable demand of government to keep spending simply means
there'll be more and more tax and so I worry
more the bigger picture of what are the other taxes coming?
Are they coming for franking credits? Are they coming for
capital gains tax? Are they coming to introduce a wealth tax?
That this tax can very be easily extended to be So, do.
Speaker 1 (20:28):
You mean this tax, this unrealized gains tax, could be
easily extended. Is that what you mean?
Speaker 2 (20:34):
Yeah, that's right. Well let's just call it a I
like to think of it as a balance difference tax,
because you actually use the phrase thirty percent on earnings. Well,
as you pointed out, it's not earnings, it's just on
the difference of the balance. You may not have earned
that money. Earnings to me are money that's been paid
to you. This is just the fact that you're imagine
(20:55):
if a Commonwealth bank goes back two hundred dollars a
share and stops being the most expensive bank in the
world world. But along the way, if it just happened
to be two hundred dollars a share on thirty June
twenty twenty six, you'll have been paid tax on that
you never earned it. You to me, a dividends an earning,
or a sale, a crystallized gain is an earning. So
(21:15):
I consider just a balanced differential tax. And all we're
doing is counting your super based on inputs given to
the ATO. Well, maybe the ATO wants to know the
value of your company, your value of your share portfolio
outside super, maybe it wants to know the value of
your home. And then we have a wealth tax, which
you know is alive and working in Europe as we speak.
(21:37):
It's just a active annual version of a state tax.
So maybe just skip bringing back a state taxes and
gift taxes just goes straight to the annual wealth tax.
Get them while you're alive. So anyway, that's where my
naivety says, there's no urgency to act, and the rules
may change because it is such an obviously badly designed
(22:00):
tax for and designed understandably for administrative reasons. But we're
turning superannuation into Frankenstein. You know, three different taxation regimes
of income, three different taxation reams of money you take
out of Super.
Speaker 1 (22:13):
It's oh, it's so complicated. Only that I create every day.
The only reason I can remember how it all works.
Just one thing. People are doing the opposite of what
you say. They're dashing to do things, set up family trusts,
put money into education boonds, anything they can find that
they feel is an alternative tax shelter. Do you think
(22:37):
what do you think of people who are doing that?
I mean, my gut feeling is they should be careful
because I imagine the treasure is quite aware of what
the alternatives are and could easily chase them down those
paths as well well.
Speaker 2 (22:50):
And that's one of the reasons we want to wait
and see, because maybe rushing the money out of Super
isn't a good idea. So, and it's interesting, it's a
very individual circumstance ridden solution to what you do if
the tax comes out as proposed. So if you've got
a for instance, if you've got a couple who you know,
have four million in SUPER and nothing else because they've
(23:10):
been so diligent putting it into a tax free regime,
well they just they'll be reminded that they pay zero
tax on the first twenty five thousand each of income.
That's fifty thousand of taxable income. So they should just
pull a million dollars out of SUPER and invest it
tax free, Which you know, is why these ideas that
we should just have a uniform percentage tax rate and
(23:32):
SUPER makes no sense to me, because we have What
we're going to do is empty the SUPER of a
whole bunch of people who can invest tax free using
the very generous tax free thresholds we have in Australia.
Speaker 1 (23:42):
To clarify for listeners, and just to ensure that I
understand what you're saying, and I imagine that the listeners too.
What you're saying is, don't forget folks, that all income,
regardless of your age, you don't pay tax upen to
a certain point. Yeah, so you can have the investment
income outside of SUPER. It doesn't matter that it's investment income,
it's just income. And you don't pay tax on Did
(24:04):
you say, what was the number you used with that?
For a couple.
Speaker 2 (24:07):
Yeah, for a senior retired couple, they can generally earn
around twenty five thousand dollars each tax free. So if
you have a million dollars, you pull out of SUPER,
put it in a joint term deposit, and say you
get fifty thousand dollars of income, split it twenty five
thousand each. There's zero tax to pay. So if someone
comes up with the idea and I've read it that
(24:27):
we should, I think it was can't one of Ken
Henry's suggestions you make a uniform single tax rate and Super, Well,
that'll just lead to the perverse emptying of of people
holding a million dollars out of SUPER. So that look,
one regime is take it out, invest in your other name.
Another thing for ultra wealthy, which this tax will hit
is probably buy a bigger principal place of residence, enjoy
(24:50):
its tax free land tax. The next thing is to say, look,
eventually we're not going to spend this money, so let's
help the kids. So the bank of mom and dad
becomes bigger, and that we get your kids, our kids
into houses bigger houses than they might have before we
pay off their mortgages. We do things like that. I'd
like to propose a you've heard a bank of mum
(25:10):
and dad BOMAD, Well, I wouldn't be surprised if we
will make people so mad. And we'll talk about SOMAD,
which is super annuation on mum and dad. And you
might recall a self managed super fund can now have
up to six members. So a family can take out
one hundred thousand dollars per child, their grandchild and put
(25:31):
it right back into their self mad superfund in the
names of their children or grandchildren and top up the
kids super and yet still manage it in the self
mad superfund. And even worse, and this will hurt the
government's revenue. They can even help the kids claim a
tax deduction for some of that contribution. So if you
know a child was making one hundred thousand dollars a
(25:53):
year very successfully and their employer put ten thousand into super, well,
mum and dad could help the children put another twenty
thousand dollars and the child could claim a tax deduction
on that, and the government's going to be out of pocket.
You know, a few the childre are gonna get about
a six thousand dollar tax return.
Speaker 1 (26:10):
So there's plenty you can do. I think in some
way there are.
Speaker 2 (26:14):
And they're very personal. They'll depend on your tax rate,
They'll depend on your asset position. Do you have another pension,
do you have other taxable income. They'll depend on your
family circumstances and your right family trusts and beneficiary companies
are you know, quite a possible alternate structure. I prefer
them more than insurance bonds slash investment bonds, which really
have the same tax structure but have some inflexibilities and
(26:35):
fees associated with them. And of course it's a dynamic
situation because the government will just come up with another tax,
so one should be careful pulling money out of super
just to put it into another frying pan.
Speaker 1 (26:47):
Okay, all right, keep that in mindful, so be back
in a moment. We have some really interesting questions. Us
it back in a moment. Hello, Welcome back to The
Australian's money Plussing podcast. James Crave here with Doug Trurek.
We're going to have a look at some pretty interesting
(27:09):
questions I've had put aside for Doug on all sorts
of things. I suppose, Doug, we might start with the
first one because it was about two nine three. We've
just been talking about that. The new supertax is from Susie.
Interested in your views on the division to nine three tax? Okay? Now,
two nine three tax, folks, is the existing high income
earner super tax. It kicks in when you make two
(27:31):
one hundred and fifty thousand a year or more. If
you're in that category or make more than that, you paid. Basically,
you want to contribute to super you pay thirty percent. Okay. Now,
Susie says, it seems to be another tax that hasn't
been indexed, but I have personal discussion about it when
tax reform is mentioned. Just quickly, Susie, you're absolutely right,
(27:52):
and it is not indexed. And let me tell you something.
It was introduced from two twelve and it's never been inxed.
That's thirteen years ago. So when people say, oh, look,
don't worry about this new supertax not being indexed, of
course it'll be indexed. Don't wait for it to be indexed.
(28:14):
The existing high ironer supertax has never been indexed after
twelve years, so there's no reason historically to believe that
the new supertax will be indexed either. Just put that
one out there, okay.
Speaker 2 (28:24):
And also, Susie, remember in twenty nineteen Federal Labor took
to the election that threatshold was supposed to be two
hundred thousand, so it was the opposite of indexed. They
wanted to tinker with it and make it even more punitive,
and some suggested it should be linked to the top
marginal rate of one hundred and eighty thousand, which is
now about up to ninety. And a reminder, the most
(28:46):
important thresholds are not indexed, and that's your income tax.
Speaker 1 (28:51):
That's right, That's why you have bracket creep. And in
a way, this is bracket creep too, isn't it every
year because it's not indexed.
Speaker 2 (28:57):
And it's just another example of how we've muddied Super
that your money in Super is tack going in it's
taxed at zero, fifteen or thirty. And unfortunately, an average
intelligent Australia Australian cannot manage their affairs to an optal
position without getting professional advice. There's so many tinkerings with
(29:18):
the system.
Speaker 1 (29:19):
Yeah, okay, if one final question, it's from Joshua, would
you like to read that question about Enron.
Speaker 2 (29:23):
I've been reading about Enron, which is really fascinating. The
blurb on the affair doesn't do it justice. It is
a winding path of greed, deception, ambition, among other things.
Amazing story. I understand there are more safeguards in place
nowadays to prevent something like this happen at the scale
that Enron achieved. I'm wondering though, could it happen again?
(29:44):
And a suggestion could be an ao AI crypto pe
Interested in your thoughts?
Speaker 1 (29:51):
Yes, okay, well, just in case Auel doesn't remember Enron.
It was the most spectacular corporate collapse. I think it
was a this collapse ever. Actually in the US it
was an energy company, but it became synonymous with corporate fraud,
and it had some extraordinary dimensions. But essentially it was
(30:13):
put forward as a stunningly innovative company run by some
of the allegedly most sophisticated financial brains in the world,
the smartest guys in the room. Wasn't that the phrase
they used, And of course it turned out to be
an enormous fraud. Now we're not saying anything else is
an enormous fraud here, and I'm sure Josh isn't implying that. However,
(30:37):
could it happen again? Could it happen in the world
of crypto? Could it ever? I mean, my short answer
is to to that, Josh is you bet it could.
We've had small versions and I'm sure we're going to
have big versions in the future. What do you think, Hug.
Speaker 2 (30:53):
I'm fraid it's just human nature and there are some
bad apples in society, and they can be individuals and
just see that with a failure of super Fund in
the last few weeks, or it can be giant corporates.
And Ron was an accounting scandal where they did a
lot of off the books accounting. It is disappointing that
the federal government now does off the books accounting. So
(31:15):
the NBN is off the books and some of the
other things. And I have a feeling that we're actually
in a worse place than better place. I think I've
heard it said we're living in the age of grift,
and some politicians even overseas, you know, are it's paid
to play or pay for patronage involving crypto is a
(31:35):
payment mechanism. So I am not optimistic that there won't
be more of this happening. So we come back to,
you know, dealing with reputable organizations being very under careful
about who who has custody of your assets, spreading your assets.
I in fact listen to one of the fathers of
AI recommending you should have multiple banks because he thinks
(31:57):
there'll be a crypto a I bank cyber attack on
a major bank. So yeah, I don't see things getting better.
And you know magice AI is allowing voices and images
to be impersonated. So yes, so not to be too pessimistic,
but I don't think things will get better.
Speaker 1 (32:18):
Not to be too pessimistic, Josh. But yes, of course
it could happen again. It may not happen in duplicate
fashion to end on, but the notion of a very
large operator in the center of the financial system, possibly
in the.
Speaker 2 (32:30):
US, well even I've heard it said in video's accounts
are a bit creative in how they book sales, and
they're selling to themselves chips and how do we It's
beyond some of my understanding.
Speaker 1 (32:43):
Could be anything anywhere except to say that it will
happen again, just like there is a sense of history
repeating very good. Okay, none of that was advice, of course,
it's information only terrific to TOLTI, don't you rech love
you to have you on the show again. We must
talk again soon.
Speaker 2 (32:57):
Always enjoy it and safe investing.
Speaker 1 (33:00):
Thank you Doug, and thank you everyone, and keep those
emails rolling. The money puzzle at the Australian dot com
dot au dot you soon
Hello, and welcome to The Australian's Money Puzzle podcast. I'm
James Kirby. Welcome aboard everybody. I don't know about you,
but this share market to me is looking very toppy. Indeed,
we've got records breaking on Wall Street and on the ASEX.
And you wonder why in Australia's major listed companies are
(00:30):
actually going to have lower earnings It is expected this
year than last year. And as for the sort of
headwinds against the international markets, particularly Wall Street, well we
don't really have to reiterate those except to say that
there's an extremely volatile administration in the US presiding if
(00:52):
you like, over Wall Street and really trying to preside
over trying to preside over everything, including the Federal Reserve.
So here we are, it's August. You know, we're going
into the most dangerous season of the year historically for
share markets, the northern winter. All the great crashes were
in September and October. Don't forget that. So the point
(01:12):
I'm making is what do we do as investors, as
active investors having just had a very good year, No doubt.
If you've got a self managed super fund, it's probably
done thirteen fourteen percent. If you've got it your savings
in a major fund, a big fund, it's probably done
ten and a half percent. That's the media in return.
So it's time to recalibrate, rebalance. Perhaps it's time to
(01:36):
sell when you might feel like buying. My guest today
is one of the oldest friends of the show. It's
doctor Doug Turek, financial advisor and family office chair of
a family office that we can't name unfortunately still under wraps.
Oh you Doug.
Speaker 2 (01:51):
I'm terrific, James.
Speaker 1 (01:53):
Lovely to have you on board in your world advising
wealthy investors and specifically advising a family office. Is there
that sense that we are looking at overheated markets?
Speaker 2 (02:09):
I think people have been worried for a while. And
I heard a wonderful phrase, which is, you know, are
we in a bubble that's just in search of a pin?
Speaker 1 (02:19):
Oh? I think we are, by the way, Yes.
Speaker 2 (02:22):
For sure. Yeah. Look, there is a nuance to some
of these very high valuations in the share market, and
we should remember that the market is not uniformly overvalued.
That there is a very large spread between the cheapest
companies in the market and the most expensive and a
lot of the excess are in what we can call
large growth companies, and there is a kind of growing
(02:45):
suspicion that it could be the fault of the popularity
of indexing that every American employees dollar goes into a
four toh one k which then puts you know, now
eight percent in Nvidia, and these are price sensitive buyers,
not price in sensitive buyers, and that if Invidia goes
(03:05):
up three times in price, the index will buy three
times more of it. So just a reminder that they're
One way of kind of dealing with this concern about
excess of prices in the share market is to diversify
within the share market. There are value strategies. There are
also small companies, both of which have underperformed, but they
(03:26):
are at least attractive on a value for money basis.
Speaker 1 (03:29):
We have a bit of that in the Australian market,
don't we, with common Work Bank exactly.
Speaker 2 (03:33):
Commonwealth Bank is our Nvidia, and we could say we've
had just fantastic conditions as we've had interest rates falling
from very big highs of twenty years ago down to lows,
and it looks that they're not going to hopefully get
back to zero and we have inflation is back. People
know that when they go to the supermarket, and that's
perhaps a dampen error on seeing interest rates go too
(03:55):
low for too long. So it is quite possible that
we have tough conditions ahead. So the hence your question,
you know, do we do something about it? And that
brings us back to rebalancing, which is really a risk
management strategy. It's the risk of having too much equities
in your portfolio and being vulnerable to a large transition.
(04:16):
And I think in America the statistics that the US
investor has never been so exposed to the share market,
and it's kind of been a good strategy, a lucky
strategy not to have been a disciplined rebalancer in the
last few years, because you're rebalancing is taking profits off
the table and parking them in the underperforming assets or
the less performing assets and just riding up this return
(04:39):
would have done well, but when you have a downturn,
you'll be very grateful that you listened to this podcast
and you took some profits and put them elsewhere.
Speaker 1 (04:48):
Is it harder to sell? Do you reckon? And this
is not a scientific question to bias question, but is
it harder to sell winners when you know when the
market's strong than to buy shares when you know the
market's deep doodoo.
Speaker 2 (05:06):
It is, but look, institutions, professional investors and smart investors
should manage their portfolio to targets, and those aren't dollar
targets or percentage targets. And if you have you know,
if you say I want to have seventy percent in
equities and now you have seventy five, then the math
should override your your optimism of continued profiteering, and you
(05:27):
should sell five percent of your equities and put those
Let's say, if it's just a simple two part portfolio,
put five percent back into bonds, which fortunately at the
moment are giving you good returns. And the opposite happens.
If there was a twenty percent fall in the share market,
your you know, seventy five percent in shares might fall
to sixty five percent, and then the math will tell
(05:50):
you buy shares because you now have a risk of
not having enough shares. So rebalancing work terrifically during the
global financial crisis era of two thousand and seven, because
the downturn was prolonged and people had time, you know,
they would have sold before the crash, before the peak,
and then the down was long enough unfortunately that people
(06:11):
would be buying into the market at the dips. But
lately the behavior of the market has been very quick recoveries,
and there is a kind of behavior about buy the
dip being practiced, which means, you know, a typical rebalancing strategy,
which can often be calendar based. It might be six monthly.
You can miss that opportunity and you're not being able
(06:34):
to buy on the cheap because the cheap sales only
last a few weeks and the market bounces back so quickly.
So yeah, in short, rebalancing is a very sensible strategy.
It wouldn't have worked in the last few years, but
you can't predict the future. And if you're right, James,
that the market is a bubble in search of a pin,
and a pin is found, then you would have been
very wise to take some of those profits off the table.
(06:56):
They can be of the entire equity part of your portfolio,
but you can also have some internal controls. You might say,
I don't want ten percent of my retirement to be
based on any one company, so you don't want to
have ten percent in CBA so you'll have to trim
that or you don't want to have ten percent in Nvidia,
because you know, history reminds us that these companies never
stay at the top. If you look at the top
(07:18):
ten stocks in the world every ten years, they're very
often not the same.
Speaker 1 (07:23):
It's really hard. Course, we'll take it on board that
it's very hard to sell a winner. But let's assume
that we all have the gumption to do that and
the sort of scientific rationale to do that, because we
know history proves it's the correct thing to do. You
mentioned bonds as a whatever you buy in the rebalancing,
it must not be shares. It would it be the
(07:45):
case that it must not be listed securities. What I'm
driving at here is, perhaps people the easy way in
for most of our listeners to bonds is bond dtfs.
You know they're going buy these bond ETFs. Are they
what you're thinking of? Do they fit the bill? Well?
Speaker 2 (08:00):
I was just describing this in the general kind of
barbell of equity at one end, bond at the other.
But most portfolios are more sophisticated. They might have a
ten percent allocation to reads, they might have a ten
percent allocation to infrastructure, they might have a ten percent
allocation to floating rate cash like securities. They might have
a ten percent allocation to fix rate government bonds. They
(08:23):
might have a ten percent allocation to hybrids. So, you know,
periodically or perhaps at events where you have cash flow
coming in or out of the portfolio, you can reset
everything by buying a little bit of everything in a
differential bait way to get back to those ten percent
targets of your ten asset classes. And likewise, if you're
(08:44):
in pension phase, you can fund your pension for the
next six or twelve months by you know, maybe taking
a little bit more out of the equities and a
little bit less out of your money market fund or
property trusts and some things you might Yeah, so you
either top up differently or you take out differently. And
if you're for some reason your portfolio is completely steady state,
(09:05):
then yes, you would sell your winners by your losers.
And it really depends on how you Generally, the opposite
we often consider the opposite of an equity is a bond,
But you know, lately some people have found that gold
is the opposite of an equity.
Speaker 1 (09:21):
Yes, I was going to say to you when you
listed out. It's interesting, isn't it this whole thing about
sixty forty or whatever? And then you know one side
of the book was shares and the other side was bonds.
But really what constitutes the other side of the book
that isn't shares? Has really changed, hasn't it? Of late?
And people are I mean, goal is included now regularly,
(09:41):
Private equities included, private credit is included, so all those
categories they would come into that that they do.
Speaker 2 (09:48):
The rebalancing works well, but it runs into problems if
you have substantial allocations to private assets. And at the moment,
we're aware that some of the very famous endowment funds
like Harvard are suffering from this problem that private equity
is not listing, isn't giving money back to investors, and
they can't fund their spending needs. So they've actually had
(10:11):
to go to the bond market and borrow several billion
dollars because they.
Speaker 1 (10:16):
Can't can't get they can't send this.
Speaker 2 (10:18):
Yeah, and we had this problem back in the GFC
with austriand industry superfunds that also have a large allocation
to private assets. Because you know, the valuers right wrongly
or rightly say these assets haven't fallen in value, so
the rebalancing thing is, oh, well, we've got to buy
some more BHP and CBA because it's just fallen forty percent,
(10:39):
but our private equity has only gone down four percent.
So I want to sell some private equity and buy
some public equity, but I can't get my money out
of private equity. So you know, rebalancing doesn't work terribly
easily when private market assets are a big part of
your portfolio, and when private markets aren't working, and they
often free in difficult times. I think this week we
(11:02):
saw a private credit fund suspend redemption, so that one
that might contribute to your fear, James of things the
economy softening.
Speaker 1 (11:10):
Absolutely well, it confirms my skepticism. I think, tell me
you mentioned gold, right, Gold is liquid, Right, it's always liquid.
Got to say that whatever is it is, it's got
lots of.
Speaker 2 (11:18):
There does seem to be lots of buyers. And in
a crisis. Ironically, when you think gold is a safe have,
and sometimes gold does dip because it's the only thing,
some investors can sell.
Speaker 1 (11:29):
That.
Speaker 2 (11:29):
Yeah, they're well they've got to. Maybe it's a margin call.
There's incredible indebtedness behind the market at the moment, and
if you if you're in a crisis, you can't sell
your beaten up small cap that there's no buyers for,
so you only sell the good stuff. And yeah, so
generally speaking, especially paper gold or electronic gold sold as
ETFs is very popular where you're really tray selling the
(11:51):
gold price not gold that is very liquid.
Speaker 1 (11:56):
That thing about people will sell anything in a crisis,
and they'll sell their gold because they want cash. Okay,
we take it that dimension, But that isn't it that
I imagine that doesn't undermine your notion that gold is
a good feasible diversifier.
Speaker 2 (12:11):
Yeah, diversifier. Yeah, that's right. Absolutely, No, I think it's
just one of the nuanced behaviors of gold. No assets
work perfectly, and you could actually say it just proves
you the fact that gold is available is working, that
it can be sold in a crisis.
Speaker 1 (12:28):
People want it.
Speaker 2 (12:29):
You know, We'll be interesting to see what happens during
the next crisis because the nature of the crises are
always evolving, and the current fears are around government solvency
and debasement of currency. So I'd be surprised if gold
is sold off quickly this time. But you know, as
much as it was back in two thousand and seven,
which was only a sort of a few back in COVID,
(12:50):
I think it's sold off very quickly, but it recovered
very quickly. Yeah, so I wouldn't. I wouldn't abandon gold
is proven. It has come back as a viable defensive asset.
Speaker 1 (13:02):
Even in the GFC it didn't. It didn't pop straight away,
probably because just what you're saying, people were using it
to sell to get some cash because they well.
Speaker 2 (13:12):
They probably didn't take the treasuries. You know, they might
sell a treasury. But we did see some government bond
malfunction during COVID twenty twenty, which was unusual. The bond
market wasn't working very well, and you might require that's
why the US and the Australian and many other central
banks of the world bought government bonds with printed money.
(13:33):
So that's they didn't print gold. So as a reminder
to be maybe some of the assumptions we have around
government treasuries being the safest security need to be challenged.
Speaker 1 (13:44):
Yes, we put that, Just put that to one side
for the moment because that's another show. Just finally, look
on yes on gold and the notion of the alternative
two shares, the non correlated asset. We have to put
it to you a crypto and bitcoin. I've had Chane Oliver,
(14:04):
chief economists at A and P on the show. A
and P have actually both bitcoin. What's your view as
on bitcoin as a alternative in the manner that gold is.
Speaker 2 (14:21):
I struggle with an asset that we don't know who
invented it. It hasn't been around for four thousand years.
For much of its life, it's behaved like an equity,
not a bond. And I've heard one commentator said, if
you know gold and crypto are different, and if you
want them, you know, put ten percent gold in your
(14:43):
defensive portfolio and put ten percent crypto into your equity portfolio.
Speaker 1 (14:47):
So based on that logic, that's making the assumption that
bitcoin is correlated.
Speaker 2 (14:52):
Yeah, that's right.
Speaker 1 (14:53):
Yeah, are you of the view that it is? And
so it's not an un correlated asset. So it's not
a gold.
Speaker 2 (14:59):
Oh, it's quite different to gold in my opinion. It's
not a central bank held asset. Banks commercial banks who
hold it don't get credit for it.
Speaker 1 (15:08):
It.
Speaker 2 (15:08):
Look, it's an incredibly clever system and there are some
appeals to its logic, but there's also enough question marks
to make me worry about using it in a portfolio.
But that's not a universal held view. And maybe i'm
because I'm turning sixty this year. I'm just an old
fart James, and you need to ask that question of
someone younger.
Speaker 1 (15:26):
But I don't know what were the reasons. One of
the reasons I asked Shane to come on was because
he was definitionively the chief economist at AMP, which is
one of the oldest institutions in Australia. The Australian ritual
problem will fond of whatever it was. I thought that
was really interesting that their economics, their investment portfolio committee
had a meeting and they passed it off, they signed
(15:47):
it off, and they put twenty seven million into it.
So I think we're moving beyond that actually to a
sort of more nuanced view of Okay, this is an asset.
This would appear to be an old term of assets.
Some say it is soon to be included in US
strategic reserves. If you don't mind, it's not going to
go away. So then the question is what is it
(16:08):
and is it correlated or not? And yes, it's interesting
that you say that you're ob view that history suggests
it's correlated. By that, folks, we mean when shares go
it goes up. When shares go down, it goes down.
And if that's the case, it's not a match for gold.
Is that a fair summary of Yeah.
Speaker 2 (16:29):
It might be more a substitute for equity, James. Yeah,
it certainly is a speculative asset and some people have
become very rich on it, and we're thrilled for them.
Speaker 1 (16:42):
That's a speculative assid you might as well just go
and by a speculative share. All right, We leave it
there for the moment. We have some very I know
that we have enormous interest of course in the super tax,
but we dealt with it quite a bit on the show.
We've left it alone for a while. There has been
various developments and people are really starting to think about
it for the simple reason that, folks, it's going to happen.
(17:04):
It's going to go through. It's going to go through
as planned. I don't believe there's going to be any
deviation or concessions on this from our sources in the
Australian through Canberra. We will be back to you in
a moment. Hello, Welcome back to The Australian's Money Puzzle podcast.
(17:25):
James Kerby here talking to doctor Douc Turek, regular on
the show, one of my oldest and most favorite guests
on the show who goes way back and has always
featured regularly with his very distinct views on investment. For
you now on the new supertax, just through recap. It
is a tax which comes in above three million on
(17:47):
earnings above three million in Super. It is a news tax.
It is a fifteen percent tax. There is already a
fifteen percent tax on amounts above two millions, so it
becomes effectively thirty percent tax. That's the simple part. The
bigger issue is that it's a completely new tax that
we've never seen before in Super and it's based on
(18:09):
realized gains paper gains. So whatever the value of the
stated value paper value of your portfolio is at the
end of the year compared to the start of the year,
the taxes imposed on the alleged paper profit made through
that period very controversial and everything the Treasurer says suggests
(18:29):
it's going to put it in exactly as planned. Also,
it's not index for inflation, which means more people will
be caught in it every year. In your world, Doug,
are they now making the assumption along the lines of
what I've just said that it's going to happen, and
it's going to happen as they have framed it.
Speaker 2 (18:50):
In my world? No, I'm not. I'm maybe naively hopeful
that the Frankenstein nature of this tax is being worked,
being understood, and maybe there'll be some modifications. And you know,
we really can't because there is no penalty, there's no
urgency to act now. It really is wait and see
(19:11):
in our professional world. But it doesn't stop us thinking
what are some of the strategies we may implement, But
we don't. You know, if this is going to be implemented,
it's going to have to be. It may not be retrospective.
We're already you know, time is flying or almost through July.
So are we going to you know, go backwards in
time with this tax or will it start eleven months
from now?
Speaker 1 (19:31):
It will be retrospective because it's when it's legislated. It's
it's legislated for July one, twenty twenty six, which would
refer to the previous financial year, which is already upon us.
Speaker 2 (19:45):
Well, it's one argument. The other one is you're looking
backwards in time at a balance before the legislation even started.
So anyway, I live in Hope, James, you are You're
not optimist that guy. I live in Hope, and in
terms there is no I'm not a aware of any
penalty for urgent action, and I guess I live more
(20:05):
in fear than hope to be frank, and that is
the insatiable demand of government to keep spending simply means
there'll be more and more tax and so I worry
more the bigger picture of what are the other taxes coming?
Are they coming for franking credits? Are they coming for
capital gains tax? Are they coming to introduce a wealth tax?
That this tax can very be easily extended to be So, do.
Speaker 1 (20:28):
You mean this tax, this unrealized gains tax, could be
easily extended. Is that what you mean?
Speaker 2 (20:34):
Yeah, that's right. Well let's just call it a I
like to think of it as a balance difference tax,
because you actually use the phrase thirty percent on earnings. Well,
as you pointed out, it's not earnings, it's just on
the difference of the balance. You may not have earned
that money. Earnings to me are money that's been paid
to you. This is just the fact that you're imagine
(20:55):
if a Commonwealth bank goes back two hundred dollars a
share and stops being the most expensive bank in the
world world. But along the way, if it just happened
to be two hundred dollars a share on thirty June
twenty twenty six, you'll have been paid tax on that
you never earned it. You to me, a dividends an earning,
or a sale, a crystallized gain is an earning. So
(21:15):
I consider just a balanced differential tax. And all we're
doing is counting your super based on inputs given to
the ATO. Well, maybe the ATO wants to know the
value of your company, your value of your share portfolio
outside super, maybe it wants to know the value of
your home. And then we have a wealth tax, which
you know is alive and working in Europe as we speak.
(21:37):
It's just a active annual version of a state tax.
So maybe just skip bringing back a state taxes and
gift taxes just goes straight to the annual wealth tax.
Get them while you're alive. So anyway, that's where my
naivety says, there's no urgency to act, and the rules
may change because it is such an obviously badly designed
(22:00):
tax for and designed understandably for administrative reasons. But we're
turning superannuation into Frankenstein. You know, three different taxation regimes
of income, three different taxation reams of money you take
out of Super.
Speaker 1 (22:13):
It's oh, it's so complicated. Only that I create every day.
The only reason I can remember how it all works.
Just one thing. People are doing the opposite of what
you say. They're dashing to do things, set up family trusts,
put money into education boonds, anything they can find that
they feel is an alternative tax shelter. Do you think
(22:37):
what do you think of people who are doing that?
I mean, my gut feeling is they should be careful
because I imagine the treasure is quite aware of what
the alternatives are and could easily chase them down those
paths as well well.
Speaker 2 (22:50):
And that's one of the reasons we want to wait
and see, because maybe rushing the money out of Super
isn't a good idea. So, and it's interesting, it's a
very individual circumstance ridden solution to what you do if
the tax comes out as proposed. So if you've got
a for instance, if you've got a couple who you know,
have four million in SUPER and nothing else because they've
(23:10):
been so diligent putting it into a tax free regime,
well they just they'll be reminded that they pay zero
tax on the first twenty five thousand each of income.
That's fifty thousand of taxable income. So they should just
pull a million dollars out of SUPER and invest it
tax free, Which you know, is why these ideas that
we should just have a uniform percentage tax rate and
(23:32):
SUPER makes no sense to me, because we have What
we're going to do is empty the SUPER of a
whole bunch of people who can invest tax free using
the very generous tax free thresholds we have in Australia.
Speaker 1 (23:42):
To clarify for listeners, and just to ensure that I
understand what you're saying, and I imagine that the listeners too.
What you're saying is, don't forget folks, that all income,
regardless of your age, you don't pay tax upen to
a certain point. Yeah, so you can have the investment
income outside of SUPER. It doesn't matter that it's investment income,
it's just income. And you don't pay tax on Did
(24:04):
you say, what was the number you used with that?
For a couple.
Speaker 2 (24:07):
Yeah, for a senior retired couple, they can generally earn
around twenty five thousand dollars each tax free. So if
you have a million dollars, you pull out of SUPER,
put it in a joint term deposit, and say you
get fifty thousand dollars of income, split it twenty five
thousand each. There's zero tax to pay. So if someone
comes up with the idea and I've read it that
(24:27):
we should, I think it was can't one of Ken
Henry's suggestions you make a uniform single tax rate and Super, Well,
that'll just lead to the perverse emptying of of people
holding a million dollars out of SUPER. So that look,
one regime is take it out, invest in your other name.
Another thing for ultra wealthy, which this tax will hit
is probably buy a bigger principal place of residence, enjoy
(24:50):
its tax free land tax. The next thing is to say, look,
eventually we're not going to spend this money, so let's
help the kids. So the bank of mom and dad
becomes bigger, and that we get your kids, our kids
into houses bigger houses than they might have before we
pay off their mortgages. We do things like that. I'd
like to propose a you've heard a bank of mum
(25:10):
and dad BOMAD, Well, I wouldn't be surprised if we
will make people so mad. And we'll talk about SOMAD,
which is super annuation on mum and dad. And you
might recall a self managed super fund can now have
up to six members. So a family can take out
one hundred thousand dollars per child, their grandchild and put
(25:31):
it right back into their self mad superfund in the
names of their children or grandchildren and top up the
kids super and yet still manage it in the self
mad superfund. And even worse, and this will hurt the
government's revenue. They can even help the kids claim a
tax deduction for some of that contribution. So if you
know a child was making one hundred thousand dollars a
(25:53):
year very successfully and their employer put ten thousand into super, well,
mum and dad could help the children put another twenty
thousand dollars and the child could claim a tax deduction
on that, and the government's going to be out of pocket.
You know, a few the childre are gonna get about
a six thousand dollar tax return.
Speaker 1 (26:10):
So there's plenty you can do. I think in some
way there are.
Speaker 2 (26:14):
And they're very personal. They'll depend on your tax rate,
They'll depend on your asset position. Do you have another pension,
do you have other taxable income. They'll depend on your
family circumstances and your right family trusts and beneficiary companies
are you know, quite a possible alternate structure. I prefer
them more than insurance bonds slash investment bonds, which really
have the same tax structure but have some inflexibilities and
(26:35):
fees associated with them. And of course it's a dynamic
situation because the government will just come up with another tax,
so one should be careful pulling money out of super
just to put it into another frying pan.
Speaker 1 (26:47):
Okay, all right, keep that in mindful, so be back
in a moment. We have some really interesting questions. Us
it back in a moment. Hello, Welcome back to The
Australian's money Plussing podcast. James Crave here with Doug Trurek.
We're going to have a look at some pretty interesting
(27:09):
questions I've had put aside for Doug on all sorts
of things. I suppose, Doug, we might start with the
first one because it was about two nine three. We've
just been talking about that. The new supertax is from Susie.
Interested in your views on the division to nine three tax? Okay? Now,
two nine three tax, folks, is the existing high income
earner super tax. It kicks in when you make two
(27:31):
one hundred and fifty thousand a year or more. If
you're in that category or make more than that, you paid. Basically,
you want to contribute to super you pay thirty percent. Okay. Now,
Susie says, it seems to be another tax that hasn't
been indexed, but I have personal discussion about it when
tax reform is mentioned. Just quickly, Susie, you're absolutely right,
(27:52):
and it is not indexed. And let me tell you something.
It was introduced from two twelve and it's never been inxed.
That's thirteen years ago. So when people say, oh, look,
don't worry about this new supertax not being indexed, of
course it'll be indexed. Don't wait for it to be indexed.
(28:14):
The existing high ironer supertax has never been indexed after
twelve years, so there's no reason historically to believe that
the new supertax will be indexed either. Just put that
one out there, okay.
Speaker 2 (28:24):
And also, Susie, remember in twenty nineteen Federal Labor took
to the election that threatshold was supposed to be two
hundred thousand, so it was the opposite of indexed. They
wanted to tinker with it and make it even more punitive,
and some suggested it should be linked to the top
marginal rate of one hundred and eighty thousand, which is
now about up to ninety. And a reminder, the most
(28:46):
important thresholds are not indexed, and that's your income tax.
Speaker 1 (28:51):
That's right, That's why you have bracket creep. And in
a way, this is bracket creep too, isn't it every
year because it's not indexed.
Speaker 2 (28:57):
And it's just another example of how we've muddied Super
that your money in Super is tack going in it's
taxed at zero, fifteen or thirty. And unfortunately, an average
intelligent Australia Australian cannot manage their affairs to an optal
position without getting professional advice. There's so many tinkerings with
(29:18):
the system.
Speaker 1 (29:19):
Yeah, okay, if one final question, it's from Joshua, would
you like to read that question about Enron.
Speaker 2 (29:23):
I've been reading about Enron, which is really fascinating. The
blurb on the affair doesn't do it justice. It is
a winding path of greed, deception, ambition, among other things.
Amazing story. I understand there are more safeguards in place
nowadays to prevent something like this happen at the scale
that Enron achieved. I'm wondering though, could it happen again?
(29:44):
And a suggestion could be an ao AI crypto pe
Interested in your thoughts?
Speaker 1 (29:51):
Yes, okay, well, just in case Auel doesn't remember Enron.
It was the most spectacular corporate collapse. I think it
was a this collapse ever. Actually in the US it
was an energy company, but it became synonymous with corporate fraud,
and it had some extraordinary dimensions. But essentially it was
(30:13):
put forward as a stunningly innovative company run by some
of the allegedly most sophisticated financial brains in the world,
the smartest guys in the room. Wasn't that the phrase
they used, And of course it turned out to be
an enormous fraud. Now we're not saying anything else is
an enormous fraud here, and I'm sure Josh isn't implying that. However,
(30:37):
could it happen again? Could it happen in the world
of crypto? Could it ever? I mean, my short answer
is to to that, Josh is you bet it could.
We've had small versions and I'm sure we're going to
have big versions in the future. What do you think, Hug.
Speaker 2 (30:53):
I'm fraid it's just human nature and there are some
bad apples in society, and they can be individuals and
just see that with a failure of super Fund in
the last few weeks, or it can be giant corporates.
And Ron was an accounting scandal where they did a
lot of off the books accounting. It is disappointing that
the federal government now does off the books accounting. So
(31:15):
the NBN is off the books and some of the
other things. And I have a feeling that we're actually
in a worse place than better place. I think I've
heard it said we're living in the age of grift,
and some politicians even overseas, you know, are it's paid
to play or pay for patronage involving crypto is a
(31:35):
payment mechanism. So I am not optimistic that there won't
be more of this happening. So we come back to,
you know, dealing with reputable organizations being very under careful
about who who has custody of your assets, spreading your assets.
I in fact listen to one of the fathers of
AI recommending you should have multiple banks because he thinks
(31:57):
there'll be a crypto a I bank cyber attack on
a major bank. So yeah, I don't see things getting better.
And you know magice AI is allowing voices and images
to be impersonated. So yes, so not to be too pessimistic,
but I don't think things will get better.
Speaker 1 (32:18):
Not to be too pessimistic, Josh. But yes, of course
it could happen again. It may not happen in duplicate
fashion to end on, but the notion of a very
large operator in the center of the financial system, possibly
in the.
Speaker 2 (32:30):
US, well even I've heard it said in video's accounts
are a bit creative in how they book sales, and
they're selling to themselves chips and how do we It's
beyond some of my understanding.
Speaker 1 (32:43):
Could be anything anywhere except to say that it will
happen again, just like there is a sense of history
repeating very good. Okay, none of that was advice, of course,
it's information only terrific to TOLTI, don't you rech love
you to have you on the show again. We must
talk again soon.
Speaker 2 (32:57):
Always enjoy it and safe investing.
Speaker 1 (33:00):
Thank you Doug, and thank you everyone, and keep those
emails rolling. The money puzzle at the Australian dot com
dot au dot you soon
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