August 12, 2025 • 26 mins
If it wasn’t said by a top financial adviser, you might dismiss it as a quote out of context, but Partners Wealth Group Jack Tossol is not kidding: He says a generation that has ‘sunk everything’ into the family home will miss the chance to have a successful tax-deductible investment plan.
It’s a provocative notion, challenging die-hard principles of money management, but with house prices moving higher again...you have to listen.
Financial adviser Jack Tossol of Partners Wealth Group joins Associate Editor - Wealth, James Kirby, in this episode.
In today’s show, we cover
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No tax deduction, no income…Is home ownership overrated?
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Why ‘Rentvesting’ is worth revisiting
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Are you facing decades of ‘dead money' in your home mortgage?
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Challenging the ‘retirement sweet spot’
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 (00:09):
Hello and welcome to The Australian's Money Puzzle podcast. I'm
James Kurbly. Welcome aboard everybody. Now here's the thought your
home is the worst investment that you're going to make.
About that your million dollar house, your mortgage will cost
you up to three million in the course of your
(00:31):
lifetime before you pay it off. So you haven't been investing. Really,
you've been taken for a ride. That's a provocative notion
and it challenges a lot of what we've been told
makes good sense, like paying off the mortgage as fast
as you can. I didn't get the idea from nowhere.
It comes from Jack Tossil of Partners Wealth Group. He's
(00:53):
an advisor. He's been on the show before. He's got
some very distinct ideas.
Speaker 2 (00:58):
How are you Jack? Thanks you have me on again, James.
Speaker 1 (01:01):
Great to have you on again. It's a very fresh
thought in property and property investing. But lay it out
first of all, because if I say to you, I
don't know about that, Jack. I like my house. It's
very comfortable. Apparently I've been told that it's a tax
shelter forever under any government. So what am I doing wrong?
Speaker 2 (01:22):
Look, I'll just preface this and say that there's absolutely
nothing wrong with owning your home. There are so many
benefits to it. It can provide emotional security, there's lifestyle
benefits to it. What I'm saying is when you look
at it purely through the lens of an investment, that's
when the numbers don't stack up so much. And there's
a number of reasons for that. Number One is it
(01:44):
nothing is taxed it up, or you're paying for it
with your after tax income. Now, traditionally speaking, your bit
emotional when you buy your home, so you overpay for it. Arguably,
you're going to live in an area you want to
live in, not where you're going to get the best
investment return. And look, you touched on it before. Over
the duration of a thirty loan, you're probably going to
pay two x three x what the actual headline value
(02:09):
of these.
Speaker 1 (02:09):
And you're going to pay that after tax. You're going
to pay that out of your pocket. Basically, there's no exactly,
there's no advantage, there's no incentives. Okay, So this is
what I suppose goes without saying that we have an
exceptionally expensive property market, and so this point is probably
is I have no problem with saying that this point
you're making is more true than it would have been
(02:32):
ten twenty years ago, because in real terms of our property,
our homes have become so so expensive on every measure.
So tell me if you're looking at the price of
a house then and someone so let's say someone takes
what you have to say there, and you make that
point that your home is a very poor investment, probably
the worst investment you'll make, because you don't normally sign
(02:54):
up for a million dollar loan in the course of
your life, and you don't normally actually pay it out
of post tax. Before we get into how you could
actually deal with that, just explain a little bit of
explain what you meant by that, how it's a poor investment,
and how are there better investments.
Speaker 2 (03:12):
Well, again, generally speaking, when people get those times you
want the flashy swine possible, you overpay for it, you
get a lot more room that you need, and arguably
you've got a hell of a lot of leverage there
in paining it with your after taped doors so effectively,
for really ten to fifteen years, all of your personal
cash flows, pretty much your excess is going strictly to
(03:34):
paying that off. There's no investing outside of that, whether
it's topping up your super, looking at shares that traditionally
used primarily where all of it's going into that one
singular asset.
Speaker 1 (03:46):
And this is the patch. I'm sure if you saw
a demographic study, you'd see that people are active investors
until their thirty ish, they buy their home, they're not
investors anymore. They peep up in their late forties maybe fifties,
and they start investing again. I'm only guessing about this,
but imagine it's a pattern, is it?
Speaker 2 (04:04):
Yeah? Exactly, And that's what we say across the board
very commonly, is that once you get a mortgage, you
put all your excess cash flows into that and you
don't look at any investments really until you pay that off.
And you think, look, if you get your homeline at
twenty five or thirty thirty years, you're not looking at
getting back into the market really until you're fifty and
then not knock retirements on the doorsteps.
Speaker 1 (04:25):
That's right, the compounding compounding opportunities have passed. But okay,
so then natural next question for you would be, if
what you see is the case, then paying down the
mortgage being that sort of old chestnut for in terms
of present of finance, you must by definition be challenging that.
Speaker 2 (04:44):
Yeah, challenging that. You got to look at the numbers.
I don't know everyone's situation specifically, but you should be
looking at the opportunity cost of deploying that capital elsewhere.
And that's what I'm saying. There's absolutely nothing wrong with
paying down your homeline home as a consumption asset, a
lifestyle asset, but you do need to look at it
objectively and go, well, if I put my money elsewhere,
(05:06):
what returns could I be getting and what would the
long term impacts would that be?
Speaker 1 (05:10):
So give us an example. I'm presum you're alluding to
the fact that, for instance, you can make ten to
eleven thirteen percent on share markets, and if you did
with one hundred dollars, then you could be paying down
your mortgage.
Speaker 2 (05:23):
It's still be ahead, well exactly. You know. One of
the other areas that often gets spoken about is rent
vest and a big part of that is because for
the same house, it costs you a lot less to
rent it than what your mortgage expenses would be. Now,
a lot of people out there say, oh, rent money
is dead money. But interest money is also dead money.
(05:43):
So it's what are you doing with that excess capital?
And if you run the numbers on it, if you
saving the significant amount of those mortgages, and you directed
to say to investment properties which are fully taxed, auctible,
not anti property properties, a great investment where you can
leverage returns for optimizing it for tax reasons and getting
the best ali for where you invest. Now, if you
straple out that over ten twenty thirty years, the actual
(06:05):
growth ends up being far more than if you were
to just live in your own home and pay the
mortgage off. And there's a lot of individuals out there
with property portfolios worth tens of millions of dollars, hundreds
of millions. And the one thing I found in common
listening to them in podcasts, it's the YouTube channels on
the radio. Most of them don't actually own their own homes.
(06:27):
They all rent invest They've got a twenty million plus
property portfolio and they don't even own their own home.
Speaker 1 (06:33):
Do you worry at all that it turns heavily on
negative gearing, and negative gearing might someday nupp be as
good as it is now?
Speaker 2 (06:41):
Yes, potentially, you know, that could have an impact as well.
I don't think you should just look at it through.
Negative gearing can be a good aspect to property investment,
but you shouldn't just look at getting into a property
purely for negative gearing to make the tax loss, because
otherwise than you just buy the worst property possible if
you could make them biggest loss available.
Speaker 1 (07:01):
You're zoning in on the tax and deductibility of the debt.
That this is basically the attractive part, that simple delineation
between if you have if you're paying off your home,
the mortgage bill comes in, you pay out of your
salary basically post tax. But if you have an investment
properly you can pay and get you're actually getting the
expenses deductible.
Speaker 2 (07:21):
Yeah, you upset what the income is, the rent you're paying,
So naturally it's something to impact your cash flows as hard.
And if you invest it sounds like you are a
keen supporter of it. Re Investing aren't everyone's options. Again,
I'm not going to recommend properly specifically for the individuals,
but it can be a great strategy and you should
look into it and nessess whether it's best for you
or speak to an advise.
Speaker 1 (07:42):
Or that more generally, would you give it when we
think about for every one hundred dollars that you don't
pay down the mortgage with and you use elsewhere, are
you thinking diversified portfolio? Are you thinking of growth? Are
you thinking of growth in listed equities? What are you
thinking of when someone When you're putting that forward to
someone as a concept.
Speaker 2 (08:01):
There's a number of different options. For example, you think
you could put in the superannuation where it's highly tax effective.
You gain taxes when you work in a top one
rate of fifteen percent compared to you in your own
personal name, where it could be up to forty seven percent.
And again you look at share markets which lineball figure
average ten percent of you or slightly under that conversion
(08:24):
as well, if you directed it to a propertly in
a growth sign where it's where you're going to get
more bank for back, rather than say just investment strictly
where you want to live in which may not have
the same growth opportunities. Right.
Speaker 1 (08:37):
And then on the wider picture, you've met the point
that this sort of thinking, which is pay down the mortgage,
give everything to the mortgage, get your home, focus on that.
It's when you've got to paid off to other things.
You've been pointing out, that's actually given us an economy
where property, this sort of property has become the dominant asset.
It's become what the economy is substantially about. And that's
(09:01):
not a good thing, really, is it.
Speaker 2 (09:03):
Yeah. I'm very much against that, mainly for what it
does the country in the long term. It's very interesting.
My partner comes from Palo Alto in the US, which
is also known as Silicon Valley, very entrepreneurial part of
the world, and every time I go over there, you
expect everyone they're in a startup. You know, they're involved
in business, growing things. They're all entrepreneurs, innovators, and it's
(09:24):
really amazing to see. And then I look at the
Australian landscape and every time I speak to someone about
getting wealthy or getting rich, no one's talking about investing
in the business, creating a company which employs people, adds
high paying wages for the individuals out there. It's all
how can I put as much money possible into property,
you know, very tunnel vision waves saying that is the
(09:46):
only way in this country you can get rich and
digging holes and building houses. Is that all we do.
Speaker 1 (09:52):
It's pretty helpless for a productivity you'd imagine in releation
to this economic summit that's coming up. But just on
that then, in terms of going back to your core
notion that the home is a poor investment because it's
not tax deductible, because it's an inert asset compared to
an innovative asset, so.
Speaker 2 (10:12):
That you might do.
Speaker 1 (10:15):
Predictably okay, but you're never going to shoot out the
light's like someone in Palo Alto who gets into the
right start up. Are you also concerned as part of
what you're saying involved that maybe property is not as
good going forward as it has been. This whole thing
that you used to double every ten years, I think
that has faded to some degree.
Speaker 2 (10:34):
If you can generally speaking right, you'll get the law
of averages. And realistically, I can't tell you what's going
to happen next year, in the next ten years to
twenty years, but if you look back at the last
twenty years, we've had above average returns, far above what
you expect for the last one hundred years. You've got
to ask the question, really, if it does increase at
the same right, which it has the last ten years,
(10:56):
last twenty years, who'll be able to afford it? I
think I did some numbers right. SEENEWA to continue growing
at the same growth rate which it has the last
twenty five years, in something like twenty forty five twenty fifty,
the average price behind we'd be about four million dollars
when we've seen also no real material changing incomes as well.
Speaker 1 (11:16):
Okay, just to challenge the re investing idea, which are
I can see the merit of because it sidesteps that
issue of you are still in property or in fact
you have loose cash to do anything you like with
diversified investing and you are renting. The only thing Jack,
is that sooner or later you probably do have to
buy a home. And unless that strategy is very successful,
(11:37):
is there a risk that the homes fly up faster
basically than the investments investments that you were preoccupied with.
Speaker 2 (11:46):
Yeah, potentially. No, that is always a risk out there
that's attached, and it really depends on what you're doing
with your excess capital as well.
Speaker 1 (11:55):
If people are leveraging. You mentioned that the very star
people leaverage, right, so they take no risks, right, don't
They're very slowed to start startup, or to invest in
alternative assets, or to try something different. But they'll take
a million dollar loan. They've never taken a loan in
their lives. They take a million dollar loan to buy
residential property. As you say, it may not be optimal
and its future price trajectory is unclear, may not be
(12:19):
as good as it was in the past. So people
are willing to do that, but they're not willing to
do it in any other area. When you say that
you should think about investing outside the home, does it
include leverage investing?
Speaker 2 (12:31):
Does it include gearing up potentially? Again, this is a
hard one. Don't know an individual situation, what their risk
ap its heid is like, and what they capacity for
growth fee, so it's a bit hard to answer that.
Speaker 1 (12:45):
Yeah, but if someone gears up to buy a home,
I mean they're gearing up three, four or five times
their salary to buy a home, then it wouldn't be
unreasonable to do some element of gearing in the investing
outside the home.
Speaker 2 (12:59):
Yes, No, with the homies as well. Tradtionally speaking, it
has been good in the way that consistent raturns and
destroying the value. If you did leverage up for other areas,
for example, shares for example, and number one, no one's
gonna let you take out a million dollar margin loan
on shares really to do that. Look over the long run, yes,
(13:22):
the numbers absolutely do stack up. Shares over the last
one hundred years have performed better than property. But the
issue with that strategy, right is it shares are also
a lot more volatile. That's why you get the greater returns.
So what happens if you have a JFC like event
or Trump tariffs and you have a margin call and
you don't have the assets outside to be able to
(13:44):
pay for that.
Speaker 1 (13:45):
Okay, well take a break. I think that's a very
interesting point about the tax folks. It's something that you know,
maybe we're a little bit preoccupied with the alleged tax
benefits of home ownership, capital gains, tax exemption, other exemptions
down the track, but we'd never think about the opportunity cost,
if you like, of that, which is what I think
was really interesting that Jack has brought up with this
notion that your home is a very poor investment. In fact,
(14:08):
he said it was the worst investment you'll make, and
most likely undercurrent conditions we'll be back in a moment. Hello,
welcome back to the Australians Money Puzzle podcast. I'm James
Kirby and we're talking to Jack Tussl of the Partners
Wealth Group, which is a very large financial advisory operation
(14:32):
which is nitionwide. Now, Jack, one of the things also,
I know that you are something of an influencer, and
I use it in the best possible way because it's
it's got a mixed reputation, this notion of influencer. But
I actually have no problem with finn influencers as long
as they're influencing, as long as it's convincing and it's
well researched and documented, et cetera. But of course there's
(14:54):
basically no gatekeepers or editors in that field, and so
you know, some absolute rubbish gets through. You've had a
look at that area as well, And I just want
to concentrate on property because I know, even on the
show people say social media, even on really basics, they
can selling a property these days, you should have a
social media campaign. Property investors are very tuned into social
(15:15):
media in terms of trends and data, which is all fine.
What have you seen in terms of the influencers in
the property investment market, residential property investment market sort of
what's cut your eye.
Speaker 2 (15:28):
It's interesting. I don't know if this is just my
algorithm specifically, but recently, of the last twelve minds, I
have seen an explosion of the amount of property gurus,
property investment and analy analysis the buyers agents out there,
and interesting, like a lot of them probably don't look
old enough to shave they were twenty one and twenty es.
(15:51):
I have some queries about that sphere, what the qualifications
are behind them, whether they actually do have any backing
or not. I'm not actually sure how ACID regulates proper
advisors in the same way they do financial advisors like myself,
But there has been an explosion in social media of
those types of individuals.
Speaker 1 (16:10):
And what do you think of the quality of what's
the quality of information and for one of a better word,
advice that's going through those with that big lift in activity.
Speaker 2 (16:20):
I'm very skeptical of this. It's a bit of a
canary in the coal mine sort of situation for me,
especially talking with other advisors as a touched and I've
seen a lot of these proper gurus so to speak,
to look very young and don't look like they've got
any qualifications. Often talking about all these new builds and
the opportunities, I'm a bit skeptical. I'd like to know,
are you actually getting any kickbacks from that? Do you
(16:43):
have a vested interest from the developers regarding that? And
then just some information as well, which is just unreally sick.
So the other day I saw one talking about how
could easily get one of their clients to purchase a
home for six hundred thousand dollars and then make a
one hundred grand return in twelve months. Yes, that's absolutely possible.
But the way to sprook it is guaranteed it's a
(17:06):
very decent return, right.
Speaker 1 (17:09):
It's an exceptional return. Yeah, and this is put forward
as probable exactly. Well, the way I saw it was
put forward is more than probable.
Speaker 2 (17:20):
Is expected to be honest, And if you didn't get that,
well that's the unexpected return. So it's I find it
quite an army to be honest again, working in that space.
Speaker 1 (17:32):
Yes, because you've gone and done all the exams and
you've gone through everything to become an advisor.
Speaker 2 (17:37):
Yeah, exactly. I don't know if the property industries are
always gone through that. That's soul searching and looking for
professionalism that the financial advice industry has had to go through.
Speaker 1 (17:47):
Yes, went through in fairly brutal fashion, didn't it, And literally,
quite literally every second advisor left the scene. There was
thirty ten years ago and now there's fifteen.
Speaker 2 (17:56):
Yeah, about forty to fifty percent decline in advice since
the Royal Commission.
Speaker 1 (18:02):
So to our listeners who would listen, You know, one
podcast is as good as the other basically when it's
put in front of you, un should you give it
a try? We don't know what the selection mechanism that
puts a podcast in front of you or a YouTube
video in front of you. As you say, there are algorithms,
but what do you think our listeners should just what
should they watch out for? This is an area that
(18:23):
we just don't look at enough, We don't get advice
enough on because properly, it's strange in some ways, it
sort of falls slightly outside the jurisdiction if you like,
traditional jurisdiction of financial advice and mortgage brokeus for instance,
are in a world of their own to some degree
from a regulatory point of view. So what should people
look out for what should they watch out for from
social media education and advice.
Speaker 2 (18:47):
Well, this is just the hardest thing, and I've raised
this a number of times. The issue with social media is,
generally speaking, those who are the best of it and
highly engaging and putting content in front of you which
you want to watch. Recently speaking, aren't the ones who
have the best level of knowledge, the education you can
actually get it out there. And that's a significant issue
(19:08):
with the industries are dealing with. And partly I'm helping
a bridge as well.
Speaker 1 (19:12):
Yes, and I take your point that the ability to
catch surprise privolk have a dazzlingly effective video is not
actually the same as offering good advice.
Speaker 2 (19:26):
But the way the algorithms work is it's all about
keeping attention. So if you say something engaging and people
watching it, it's going to push to more and more people.
The algorithm could not care less whether what you're saying
is right or wrong or downright dangerous.
Speaker 1 (19:41):
Right, it's alarming, It is alarming. Often it's the investments
with at least knowledge and experience that.
Speaker 2 (19:47):
I was just going to touch on it. I think
looking at from a financial advisors perspective, with the average
financial advisors Add's fifty two in a male. Now, I
don't imagine many of those guys are posting the hit
talk Instagram, reo so or even writing engaging content on LinkedIn. Yes,
but you are.
Speaker 1 (20:07):
So you're aware of the world. That's a different milieu
that you're in, and you're aware of that, and then
you see Then you see the gaps basically in terms
of qualifications that perhaps others don't see. Okay, we'll be
back at the moment. Hello, Welcome back to The Australian's
(20:33):
Money Puzzle podcast. I'm James Kirby and I'm talking to
Jack Tussl from the Partner's Wealth Group and we've been
covering some very interesting material. Jack's point that you're you know,
the investment that you're home is probably one of the
worst investments you will make is really interesting. It sounds
unconvincing at first glance what he's saying is compared to
other investments from a tax perspective. Then you start to
(20:53):
see the weakness, this share of the distinct weakness in
home ownership against successful investing that is tax deductible, something
we should look more at. Also, the social media influencers.
I was asked to speak at an ACT conference on
where there was a segment on fin influencers recently, and
I think the regulators are at sea really about what
(21:16):
to do about that, because you can have someone who's
highly qualified on social media, like you, Jack, and then
you can have someone who has zilsh qualifications and the
algorithm will trade both of you the same. So it's
a very tricky area to regulate. That's not to say
that it shouldn't be regulated, because it's going to cause
problems very soon, if not already. Okay, if you questions, David,
(21:40):
your recent episode on the Retirement Suite spot was great,
but did have one misleading statement. Your guest said you
need about a million of your own money to gain
an equivalent income to the pension. This is wrong since
the starting bands would leave you with about a million
in the bank when you die, but the pension doesn't
leave you anything. Yeah, absolutely, David, you're correct. The point
I suppose that Hugh Robertson was making is that you
(22:03):
can have someone who has the government pension getting say
a couple getting forty something thousand a year in income,
another couple who doesn't have a government pension has to
have a million dollars to bank roll an income of
forty something thousand a year, and if they both live
for forty more years, they both have that same dynamic.
(22:23):
That's the issue, Nathan a question. I understand the logic
of not including the value of the home in pension calculations.
No one wants to see Betty kicked out of her
family at ninety. But when Betty passes away with a
five million dollar home, should the taxpayer not get some
of that pension back from the sale of her house.
I wonder Jack, going back to the original thoughts at
(22:45):
the start of the show about how the home is
such a poor investment, there's a lot of things in
the tax system that help it along, isn't there. The
home isn't included in pension asset test, the home isn't
included in capital gains. Do you think if we flattened
out those taxes what you're saying become much more obvious.
Speaker 2 (23:02):
Yeah, and it's interesting you look at that. The ability
to have a five million dollar house and still able
to get a full government pension. The millennials out there
would be seen in in the minute.
Speaker 1 (23:12):
It would, Yes, they would, And you can make that
a ten million dollar house if you want. It is
really quite remarkable that it's come to that. I don't
think when they excluded the value of the family home,
they weren't thinking of fourteen million dollar houses on Sydney
Harbor being excluded.
Speaker 2 (23:27):
No. I think the smartest thing to do would be,
say you just capture two million dollars or three million,
which is going to be probably eighty percent of the
population really, and then you're going to pay tax on
the level above. That would be a more equable Thinger.
You just got to ask the question, right, given how
much debt is expanding, right, can younger generation, say millennials, example,
(23:50):
we were paying forty seven percent tax on income above
one hundred and ninety thousand dollars. How long can they
subsidize someone who's living in a five million dollar property
to get paid for government pension? And do we say
that is equitable in the long run? Yeah?
Speaker 1 (24:03):
Yeah, I think that's something that will come up in
the Economic Summit actually next week, which we will have
special on this starting on the nineteenth. The Economic Summit,
which has quickly been repackaged in some parts as the
Tax Summit or even the Wealth Tax summit. Perhaps okay,
final question from Peter. It's very specific. We'll have a go.
This has never advised information only, he says. He gets
(24:25):
a question regarding the cost space of his ETF distributions.
He gets his cast distributions during the year from his
Vanguard ETF. At the end of the tax year, I
get the tax profile with the breakdown of the components
of the distribution. One particular line has him puzzled. A
mighty cost base net amount dash shortfall increase in the
cost space, which for twenty twenty five tax year, Peter says,
(24:48):
was two hundred and fifty dollars, and he wants to
know does this mean he should go through in a
portion the amount across each of his shares and ETFs
and increase the cost space for each process. So at
the time I sell, I will decrease my capital gain fitling.
It kind of gets automated and he doesn't have to
do all that. Have you any observation on that one
(25:09):
Jack I blame?
Speaker 2 (25:11):
Isn't that because he's technically paid more income tax now
than what he should. So effectively, what it's doing is
increasing the cost basis so that when it does get solved,
and he doesn't pay as much tax, which offsets that
initial or that in terms of applying. That's a sort
of accountant job. I think I would.
Speaker 1 (25:30):
Just yes, okay, and I tend to let the accountants
do all that. I mean sometimes I do sit back
and I say, when you get your annual returns, you say, okay,
So let's say you bought some more shares in something
you had already, Like.
Speaker 2 (25:41):
How exactly is that treated?
Speaker 1 (25:43):
If I went in and drilled down, I could, I suppose,
spend days and days finding out whether the accountant did
that right. At a certain point you have to trust
the accountant and the order did is right. But you
could drill down forever, I suppose, if you had the time.
And that don't mean to be flippant. I just mean
that it's probably extremely difficult to track each in the
you will item sometimes that when they are routine, these
sort of covered by accountants and orders. But you could
(26:05):
always ask your accountant or orders or how did they
deal with that last year? For instance? That might be useful.
All right, terrific, Jack, Tossil Partners, Wealth Group, thanks for
coming on the show.
Speaker 2 (26:16):
Thanks for having me again. John. It's been absolute pleasure.
Speaker 1 (26:18):
Great to have you, Jack, and great to hear your
very distinct views on the market. They're very distinct views,
they're clear views, and they're often provocative. Okay, folks, let's
have some more correspondence the Money Puzzle at the Australian
dot com dot au. Talk to you soon.
Hello and welcome to The Australian's Money Puzzle podcast. I'm
James Kurbly. Welcome aboard everybody. Now here's the thought your
home is the worst investment that you're going to make.
About that your million dollar house, your mortgage will cost
you up to three million in the course of your
(00:31):
lifetime before you pay it off. So you haven't been investing. Really,
you've been taken for a ride. That's a provocative notion
and it challenges a lot of what we've been told
makes good sense, like paying off the mortgage as fast
as you can. I didn't get the idea from nowhere.
It comes from Jack Tossil of Partners Wealth Group. He's
(00:53):
an advisor. He's been on the show before. He's got
some very distinct ideas.
Speaker 2 (00:58):
How are you Jack? Thanks you have me on again, James.
Speaker 1 (01:01):
Great to have you on again. It's a very fresh
thought in property and property investing. But lay it out
first of all, because if I say to you, I
don't know about that, Jack. I like my house. It's
very comfortable. Apparently I've been told that it's a tax
shelter forever under any government. So what am I doing wrong?
Speaker 2 (01:22):
Look, I'll just preface this and say that there's absolutely
nothing wrong with owning your home. There are so many
benefits to it. It can provide emotional security, there's lifestyle
benefits to it. What I'm saying is when you look
at it purely through the lens of an investment, that's
when the numbers don't stack up so much. And there's
a number of reasons for that. Number One is it
(01:44):
nothing is taxed it up, or you're paying for it
with your after tax income. Now, traditionally speaking, your bit
emotional when you buy your home, so you overpay for it. Arguably,
you're going to live in an area you want to
live in, not where you're going to get the best
investment return. And look, you touched on it before. Over
the duration of a thirty loan, you're probably going to
pay two x three x what the actual headline value
(02:09):
of these.
Speaker 1 (02:09):
And you're going to pay that after tax. You're going
to pay that out of your pocket. Basically, there's no exactly,
there's no advantage, there's no incentives. Okay, So this is
what I suppose goes without saying that we have an
exceptionally expensive property market, and so this point is probably
is I have no problem with saying that this point
you're making is more true than it would have been
(02:32):
ten twenty years ago, because in real terms of our property,
our homes have become so so expensive on every measure.
So tell me if you're looking at the price of
a house then and someone so let's say someone takes
what you have to say there, and you make that
point that your home is a very poor investment, probably
the worst investment you'll make, because you don't normally sign
(02:54):
up for a million dollar loan in the course of
your life, and you don't normally actually pay it out
of post tax. Before we get into how you could
actually deal with that, just explain a little bit of
explain what you meant by that, how it's a poor investment,
and how are there better investments.
Speaker 2 (03:12):
Well, again, generally speaking, when people get those times you
want the flashy swine possible, you overpay for it, you
get a lot more room that you need, and arguably
you've got a hell of a lot of leverage there
in paining it with your after taped doors so effectively,
for really ten to fifteen years, all of your personal
cash flows, pretty much your excess is going strictly to
(03:34):
paying that off. There's no investing outside of that, whether
it's topping up your super, looking at shares that traditionally
used primarily where all of it's going into that one
singular asset.
Speaker 1 (03:46):
And this is the patch. I'm sure if you saw
a demographic study, you'd see that people are active investors
until their thirty ish, they buy their home, they're not
investors anymore. They peep up in their late forties maybe fifties,
and they start investing again. I'm only guessing about this,
but imagine it's a pattern, is it?
Speaker 2 (04:04):
Yeah? Exactly, And that's what we say across the board
very commonly, is that once you get a mortgage, you
put all your excess cash flows into that and you
don't look at any investments really until you pay that off.
And you think, look, if you get your homeline at
twenty five or thirty thirty years, you're not looking at
getting back into the market really until you're fifty and
then not knock retirements on the doorsteps.
Speaker 1 (04:25):
That's right, the compounding compounding opportunities have passed. But okay,
so then natural next question for you would be, if
what you see is the case, then paying down the
mortgage being that sort of old chestnut for in terms
of present of finance, you must by definition be challenging that.
Speaker 2 (04:44):
Yeah, challenging that. You got to look at the numbers.
I don't know everyone's situation specifically, but you should be
looking at the opportunity cost of deploying that capital elsewhere.
And that's what I'm saying. There's absolutely nothing wrong with
paying down your homeline home as a consumption asset, a
lifestyle asset, but you do need to look at it
objectively and go, well, if I put my money elsewhere,
(05:06):
what returns could I be getting and what would the
long term impacts would that be?
Speaker 1 (05:10):
So give us an example. I'm presum you're alluding to
the fact that, for instance, you can make ten to
eleven thirteen percent on share markets, and if you did
with one hundred dollars, then you could be paying down
your mortgage.
Speaker 2 (05:23):
It's still be ahead, well exactly. You know. One of
the other areas that often gets spoken about is rent
vest and a big part of that is because for
the same house, it costs you a lot less to
rent it than what your mortgage expenses would be. Now,
a lot of people out there say, oh, rent money
is dead money. But interest money is also dead money.
(05:43):
So it's what are you doing with that excess capital?
And if you run the numbers on it, if you
saving the significant amount of those mortgages, and you directed
to say to investment properties which are fully taxed, auctible,
not anti property properties, a great investment where you can
leverage returns for optimizing it for tax reasons and getting
the best ali for where you invest. Now, if you
straple out that over ten twenty thirty years, the actual
(06:05):
growth ends up being far more than if you were
to just live in your own home and pay the
mortgage off. And there's a lot of individuals out there
with property portfolios worth tens of millions of dollars, hundreds
of millions. And the one thing I found in common
listening to them in podcasts, it's the YouTube channels on
the radio. Most of them don't actually own their own homes.
(06:27):
They all rent invest They've got a twenty million plus
property portfolio and they don't even own their own home.
Speaker 1 (06:33):
Do you worry at all that it turns heavily on
negative gearing, and negative gearing might someday nupp be as
good as it is now?
Speaker 2 (06:41):
Yes, potentially, you know, that could have an impact as well.
I don't think you should just look at it through.
Negative gearing can be a good aspect to property investment,
but you shouldn't just look at getting into a property
purely for negative gearing to make the tax loss, because
otherwise than you just buy the worst property possible if
you could make them biggest loss available.
Speaker 1 (07:01):
You're zoning in on the tax and deductibility of the debt.
That this is basically the attractive part, that simple delineation
between if you have if you're paying off your home,
the mortgage bill comes in, you pay out of your
salary basically post tax. But if you have an investment
properly you can pay and get you're actually getting the
expenses deductible.
Speaker 2 (07:21):
Yeah, you upset what the income is, the rent you're paying,
So naturally it's something to impact your cash flows as hard.
And if you invest it sounds like you are a
keen supporter of it. Re Investing aren't everyone's options. Again,
I'm not going to recommend properly specifically for the individuals,
but it can be a great strategy and you should
look into it and nessess whether it's best for you
or speak to an advise.
Speaker 1 (07:42):
Or that more generally, would you give it when we
think about for every one hundred dollars that you don't
pay down the mortgage with and you use elsewhere, are
you thinking diversified portfolio? Are you thinking of growth? Are
you thinking of growth in listed equities? What are you
thinking of when someone When you're putting that forward to
someone as a concept.
Speaker 2 (08:01):
There's a number of different options. For example, you think
you could put in the superannuation where it's highly tax effective.
You gain taxes when you work in a top one
rate of fifteen percent compared to you in your own
personal name, where it could be up to forty seven percent.
And again you look at share markets which lineball figure
average ten percent of you or slightly under that conversion
(08:24):
as well, if you directed it to a propertly in
a growth sign where it's where you're going to get
more bank for back, rather than say just investment strictly
where you want to live in which may not have
the same growth opportunities. Right.
Speaker 1 (08:37):
And then on the wider picture, you've met the point
that this sort of thinking, which is pay down the mortgage,
give everything to the mortgage, get your home, focus on that.
It's when you've got to paid off to other things.
You've been pointing out, that's actually given us an economy
where property, this sort of property has become the dominant asset.
It's become what the economy is substantially about. And that's
(09:01):
not a good thing, really, is it.
Speaker 2 (09:03):
Yeah. I'm very much against that, mainly for what it
does the country in the long term. It's very interesting.
My partner comes from Palo Alto in the US, which
is also known as Silicon Valley, very entrepreneurial part of
the world, and every time I go over there, you
expect everyone they're in a startup. You know, they're involved
in business, growing things. They're all entrepreneurs, innovators, and it's
(09:24):
really amazing to see. And then I look at the
Australian landscape and every time I speak to someone about
getting wealthy or getting rich, no one's talking about investing
in the business, creating a company which employs people, adds
high paying wages for the individuals out there. It's all
how can I put as much money possible into property,
you know, very tunnel vision waves saying that is the
(09:46):
only way in this country you can get rich and
digging holes and building houses. Is that all we do.
Speaker 1 (09:52):
It's pretty helpless for a productivity you'd imagine in releation
to this economic summit that's coming up. But just on
that then, in terms of going back to your core
notion that the home is a poor investment because it's
not tax deductible, because it's an inert asset compared to
an innovative asset, so.
Speaker 2 (10:12):
That you might do.
Speaker 1 (10:15):
Predictably okay, but you're never going to shoot out the
light's like someone in Palo Alto who gets into the
right start up. Are you also concerned as part of
what you're saying involved that maybe property is not as
good going forward as it has been. This whole thing
that you used to double every ten years, I think
that has faded to some degree.
Speaker 2 (10:34):
If you can generally speaking right, you'll get the law
of averages. And realistically, I can't tell you what's going
to happen next year, in the next ten years to
twenty years, but if you look back at the last
twenty years, we've had above average returns, far above what
you expect for the last one hundred years. You've got
to ask the question, really, if it does increase at
the same right, which it has the last ten years,
(10:56):
last twenty years, who'll be able to afford it? I
think I did some numbers right. SEENEWA to continue growing
at the same growth rate which it has the last
twenty five years, in something like twenty forty five twenty fifty,
the average price behind we'd be about four million dollars
when we've seen also no real material changing incomes as well.
Speaker 1 (11:16):
Okay, just to challenge the re investing idea, which are
I can see the merit of because it sidesteps that
issue of you are still in property or in fact
you have loose cash to do anything you like with
diversified investing and you are renting. The only thing Jack,
is that sooner or later you probably do have to
buy a home. And unless that strategy is very successful,
(11:37):
is there a risk that the homes fly up faster
basically than the investments investments that you were preoccupied with.
Speaker 2 (11:46):
Yeah, potentially. No, that is always a risk out there
that's attached, and it really depends on what you're doing
with your excess capital as well.
Speaker 1 (11:55):
If people are leveraging. You mentioned that the very star
people leaverage, right, so they take no risks, right, don't
They're very slowed to start startup, or to invest in
alternative assets, or to try something different. But they'll take
a million dollar loan. They've never taken a loan in
their lives. They take a million dollar loan to buy
residential property. As you say, it may not be optimal
and its future price trajectory is unclear, may not be
(12:19):
as good as it was in the past. So people
are willing to do that, but they're not willing to
do it in any other area. When you say that
you should think about investing outside the home, does it
include leverage investing?
Speaker 2 (12:31):
Does it include gearing up potentially? Again, this is a
hard one. Don't know an individual situation, what their risk
ap its heid is like, and what they capacity for
growth fee, so it's a bit hard to answer that.
Speaker 1 (12:45):
Yeah, but if someone gears up to buy a home,
I mean they're gearing up three, four or five times
their salary to buy a home, then it wouldn't be
unreasonable to do some element of gearing in the investing
outside the home.
Speaker 2 (12:59):
Yes, No, with the homies as well. Tradtionally speaking, it
has been good in the way that consistent raturns and
destroying the value. If you did leverage up for other areas,
for example, shares for example, and number one, no one's
gonna let you take out a million dollar margin loan
on shares really to do that. Look over the long run, yes,
(13:22):
the numbers absolutely do stack up. Shares over the last
one hundred years have performed better than property. But the
issue with that strategy, right is it shares are also
a lot more volatile. That's why you get the greater returns.
So what happens if you have a JFC like event
or Trump tariffs and you have a margin call and
you don't have the assets outside to be able to
(13:44):
pay for that.
Speaker 1 (13:45):
Okay, well take a break. I think that's a very
interesting point about the tax folks. It's something that you know,
maybe we're a little bit preoccupied with the alleged tax
benefits of home ownership, capital gains, tax exemption, other exemptions
down the track, but we'd never think about the opportunity cost,
if you like, of that, which is what I think
was really interesting that Jack has brought up with this
notion that your home is a very poor investment. In fact,
(14:08):
he said it was the worst investment you'll make, and
most likely undercurrent conditions we'll be back in a moment. Hello,
welcome back to the Australians Money Puzzle podcast. I'm James
Kirby and we're talking to Jack Tussl of the Partners
Wealth Group, which is a very large financial advisory operation
(14:32):
which is nitionwide. Now, Jack, one of the things also,
I know that you are something of an influencer, and
I use it in the best possible way because it's
it's got a mixed reputation, this notion of influencer. But
I actually have no problem with finn influencers as long
as they're influencing, as long as it's convincing and it's
well researched and documented, et cetera. But of course there's
(14:54):
basically no gatekeepers or editors in that field, and so
you know, some absolute rubbish gets through. You've had a
look at that area as well, And I just want
to concentrate on property because I know, even on the
show people say social media, even on really basics, they
can selling a property these days, you should have a
social media campaign. Property investors are very tuned into social
(15:15):
media in terms of trends and data, which is all fine.
What have you seen in terms of the influencers in
the property investment market, residential property investment market sort of
what's cut your eye.
Speaker 2 (15:28):
It's interesting. I don't know if this is just my
algorithm specifically, but recently, of the last twelve minds, I
have seen an explosion of the amount of property gurus,
property investment and analy analysis the buyers agents out there,
and interesting, like a lot of them probably don't look
old enough to shave they were twenty one and twenty es.
(15:51):
I have some queries about that sphere, what the qualifications
are behind them, whether they actually do have any backing
or not. I'm not actually sure how ACID regulates proper
advisors in the same way they do financial advisors like myself,
But there has been an explosion in social media of
those types of individuals.
Speaker 1 (16:10):
And what do you think of the quality of what's
the quality of information and for one of a better word,
advice that's going through those with that big lift in activity.
Speaker 2 (16:20):
I'm very skeptical of this. It's a bit of a
canary in the coal mine sort of situation for me,
especially talking with other advisors as a touched and I've
seen a lot of these proper gurus so to speak,
to look very young and don't look like they've got
any qualifications. Often talking about all these new builds and
the opportunities, I'm a bit skeptical. I'd like to know,
are you actually getting any kickbacks from that? Do you
(16:43):
have a vested interest from the developers regarding that? And
then just some information as well, which is just unreally sick.
So the other day I saw one talking about how
could easily get one of their clients to purchase a
home for six hundred thousand dollars and then make a
one hundred grand return in twelve months. Yes, that's absolutely possible.
But the way to sprook it is guaranteed it's a
(17:06):
very decent return, right.
Speaker 1 (17:09):
It's an exceptional return. Yeah, and this is put forward
as probable exactly. Well, the way I saw it was
put forward is more than probable.
Speaker 2 (17:20):
Is expected to be honest, And if you didn't get that,
well that's the unexpected return. So it's I find it
quite an army to be honest again, working in that space.
Speaker 1 (17:32):
Yes, because you've gone and done all the exams and
you've gone through everything to become an advisor.
Speaker 2 (17:37):
Yeah, exactly. I don't know if the property industries are
always gone through that. That's soul searching and looking for
professionalism that the financial advice industry has had to go through.
Speaker 1 (17:47):
Yes, went through in fairly brutal fashion, didn't it, And literally,
quite literally every second advisor left the scene. There was
thirty ten years ago and now there's fifteen.
Speaker 2 (17:56):
Yeah, about forty to fifty percent decline in advice since
the Royal Commission.
Speaker 1 (18:02):
So to our listeners who would listen, You know, one
podcast is as good as the other basically when it's
put in front of you, un should you give it
a try? We don't know what the selection mechanism that
puts a podcast in front of you or a YouTube
video in front of you. As you say, there are algorithms,
but what do you think our listeners should just what
should they watch out for? This is an area that
(18:23):
we just don't look at enough, We don't get advice
enough on because properly, it's strange in some ways, it
sort of falls slightly outside the jurisdiction if you like,
traditional jurisdiction of financial advice and mortgage brokeus for instance,
are in a world of their own to some degree
from a regulatory point of view. So what should people
look out for what should they watch out for from
social media education and advice.
Speaker 2 (18:47):
Well, this is just the hardest thing, and I've raised
this a number of times. The issue with social media is,
generally speaking, those who are the best of it and
highly engaging and putting content in front of you which
you want to watch. Recently speaking, aren't the ones who
have the best level of knowledge, the education you can
actually get it out there. And that's a significant issue
(19:08):
with the industries are dealing with. And partly I'm helping
a bridge as well.
Speaker 1 (19:12):
Yes, and I take your point that the ability to
catch surprise privolk have a dazzlingly effective video is not
actually the same as offering good advice.
Speaker 2 (19:26):
But the way the algorithms work is it's all about
keeping attention. So if you say something engaging and people
watching it, it's going to push to more and more people.
The algorithm could not care less whether what you're saying
is right or wrong or downright dangerous.
Speaker 1 (19:41):
Right, it's alarming, It is alarming. Often it's the investments
with at least knowledge and experience that.
Speaker 2 (19:47):
I was just going to touch on it. I think
looking at from a financial advisors perspective, with the average
financial advisors Add's fifty two in a male. Now, I
don't imagine many of those guys are posting the hit
talk Instagram, reo so or even writing engaging content on LinkedIn. Yes,
but you are.
Speaker 1 (20:07):
So you're aware of the world. That's a different milieu
that you're in, and you're aware of that, and then
you see Then you see the gaps basically in terms
of qualifications that perhaps others don't see. Okay, we'll be
back at the moment. Hello, Welcome back to The Australian's
(20:33):
Money Puzzle podcast. I'm James Kirby and I'm talking to
Jack Tussl from the Partner's Wealth Group and we've been
covering some very interesting material. Jack's point that you're you know,
the investment that you're home is probably one of the
worst investments you will make is really interesting. It sounds
unconvincing at first glance what he's saying is compared to
other investments from a tax perspective. Then you start to
(20:53):
see the weakness, this share of the distinct weakness in
home ownership against successful investing that is tax deductible, something
we should look more at. Also, the social media influencers.
I was asked to speak at an ACT conference on
where there was a segment on fin influencers recently, and
I think the regulators are at sea really about what
(21:16):
to do about that, because you can have someone who's
highly qualified on social media, like you, Jack, and then
you can have someone who has zilsh qualifications and the
algorithm will trade both of you the same. So it's
a very tricky area to regulate. That's not to say
that it shouldn't be regulated, because it's going to cause
problems very soon, if not already. Okay, if you questions, David,
(21:40):
your recent episode on the Retirement Suite spot was great,
but did have one misleading statement. Your guest said you
need about a million of your own money to gain
an equivalent income to the pension. This is wrong since
the starting bands would leave you with about a million
in the bank when you die, but the pension doesn't
leave you anything. Yeah, absolutely, David, you're correct. The point
I suppose that Hugh Robertson was making is that you
(22:03):
can have someone who has the government pension getting say
a couple getting forty something thousand a year in income,
another couple who doesn't have a government pension has to
have a million dollars to bank roll an income of
forty something thousand a year, and if they both live
for forty more years, they both have that same dynamic.
(22:23):
That's the issue, Nathan a question. I understand the logic
of not including the value of the home in pension calculations.
No one wants to see Betty kicked out of her
family at ninety. But when Betty passes away with a
five million dollar home, should the taxpayer not get some
of that pension back from the sale of her house.
I wonder Jack, going back to the original thoughts at
(22:45):
the start of the show about how the home is
such a poor investment, there's a lot of things in
the tax system that help it along, isn't there. The
home isn't included in pension asset test, the home isn't
included in capital gains. Do you think if we flattened
out those taxes what you're saying become much more obvious.
Speaker 2 (23:02):
Yeah, and it's interesting you look at that. The ability
to have a five million dollar house and still able
to get a full government pension. The millennials out there
would be seen in in the minute.
Speaker 1 (23:12):
It would, Yes, they would, And you can make that
a ten million dollar house if you want. It is
really quite remarkable that it's come to that. I don't
think when they excluded the value of the family home,
they weren't thinking of fourteen million dollar houses on Sydney
Harbor being excluded.
Speaker 2 (23:27):
No. I think the smartest thing to do would be,
say you just capture two million dollars or three million,
which is going to be probably eighty percent of the
population really, and then you're going to pay tax on
the level above. That would be a more equable Thinger.
You just got to ask the question, right, given how
much debt is expanding, right, can younger generation, say millennials, example,
(23:50):
we were paying forty seven percent tax on income above
one hundred and ninety thousand dollars. How long can they
subsidize someone who's living in a five million dollar property
to get paid for government pension? And do we say
that is equitable in the long run? Yeah?
Speaker 1 (24:03):
Yeah, I think that's something that will come up in
the Economic Summit actually next week, which we will have
special on this starting on the nineteenth. The Economic Summit,
which has quickly been repackaged in some parts as the
Tax Summit or even the Wealth Tax summit. Perhaps okay,
final question from Peter. It's very specific. We'll have a go.
This has never advised information only, he says. He gets
(24:25):
a question regarding the cost space of his ETF distributions.
He gets his cast distributions during the year from his
Vanguard ETF. At the end of the tax year, I
get the tax profile with the breakdown of the components
of the distribution. One particular line has him puzzled. A
mighty cost base net amount dash shortfall increase in the
cost space, which for twenty twenty five tax year, Peter says,
(24:48):
was two hundred and fifty dollars, and he wants to
know does this mean he should go through in a
portion the amount across each of his shares and ETFs
and increase the cost space for each process. So at
the time I sell, I will decrease my capital gain fitling.
It kind of gets automated and he doesn't have to
do all that. Have you any observation on that one
(25:09):
Jack I blame?
Speaker 2 (25:11):
Isn't that because he's technically paid more income tax now
than what he should. So effectively, what it's doing is
increasing the cost basis so that when it does get solved,
and he doesn't pay as much tax, which offsets that
initial or that in terms of applying. That's a sort
of accountant job. I think I would.
Speaker 1 (25:30):
Just yes, okay, and I tend to let the accountants
do all that. I mean sometimes I do sit back
and I say, when you get your annual returns, you say, okay,
So let's say you bought some more shares in something
you had already, Like.
Speaker 2 (25:41):
How exactly is that treated?
Speaker 1 (25:43):
If I went in and drilled down, I could, I suppose,
spend days and days finding out whether the accountant did
that right. At a certain point you have to trust
the accountant and the order did is right. But you
could drill down forever, I suppose, if you had the time.
And that don't mean to be flippant. I just mean
that it's probably extremely difficult to track each in the
you will item sometimes that when they are routine, these
sort of covered by accountants and orders. But you could
(26:05):
always ask your accountant or orders or how did they
deal with that last year? For instance? That might be useful.
All right, terrific, Jack, Tossil Partners, Wealth Group, thanks for
coming on the show.
Speaker 2 (26:16):
Thanks for having me again. John. It's been absolute pleasure.
Speaker 1 (26:18):
Great to have you, Jack, and great to hear your
very distinct views on the market. They're very distinct views,
they're clear views, and they're often provocative. Okay, folks, let's
have some more correspondence the Money Puzzle at the Australian
dot com dot au. Talk to you soon.
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