May 22, 2025 • 31 mins
Investors at all levels are up in arms over the new super tax largely because it is based on 'paper gains' and it will not be indexed for inflation.
Don't miss this special edition...
In today's show, we cover...
* The essential problems with the new super tax
- Why it will affect you faster than you may realise
- Alternative options to keeping money in super
- What is likely to happen next with so-called 'Division 296'?
Hugh Robertson of the Centaur Financial Services group joins Associate Editor- Wealth James Kirby in this episode
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 Kirkby. Welcome aboard, everybody, Welcome aboard to a special
edition of the show. We have had so many questions
and so much correspondence on the new Supertax that what
we're going to do today is an episode and it's
going to be based on your questions that have come
(00:31):
in in recent weeks about what is this act, how
is it going to work? And to help me answer
those questions, I'm joined boy Hugh Robertson of the Center
Financial Services Group. Hugh's a Baron's top one point fifty
advisor regular on the show, and Hugh I will kick
straight over to you For the person who's just arrived
(00:55):
in Australia and has no idea how our super system
works and hasn't done the six week course to understand
the basics, could you explain what's changed? What is this
new super tax? Why is everyone so worried about it?
Speaker 2 (01:08):
Hi?
Speaker 3 (01:08):
James, Hi, everyone listening.
Speaker 4 (01:11):
It's a really good question and it's I'm glad we're
doing an episode on.
Speaker 2 (01:15):
This because we've really really got to raise.
Speaker 4 (01:17):
The awareness as just so we can get that understanding.
So what is this give to nine to six tax.
It's going to be an additional a new tax for
balances over three million dollars. The tax itself is going
to be fifteen percent, so a lot of the stuff
that I've read, So if you're in accumulation phase, it's
(01:38):
going to mean that you know, it's an additional fifteen
percent on top of the fifteen percent on the first
three million if you're an accumulation phase. But remembering when
you're in pension phase, that first three million is going
to be still in the zero percent tax.
Speaker 1 (01:53):
So just make it very easy for people at the
moment in super up to we see we make it
from July one you pay no tax in your super
up to two million, yes, and then over two million
you pay fifteen percent. And the government have said we've
got a new one now which is over three million,
there is another fifteen percent, and that means the effective
(02:15):
thirty percent top tax rasions super where it used to
be tax free. Okay, that's a big change, but it's
not People are not going bananas about this aspect that
it's three million. That's not really what they're going crazy about.
It's the nature of the new tax, which is on
realized gains. Can you explain to what that means?
Speaker 3 (02:39):
A tax on unrealized gains.
Speaker 4 (02:43):
Is a violation of the basic principles of tax that
we've always had. So if you, for example, the value
owned some shares in come Wealth Bank of Australia, which
a lot of the listeners here would own, comme Wealth
Bank shares, it's gone up from one hundred dollars to
one hundred and sixty dollars, and say within your portfolio,
that means that you've gone from you know, three million
(03:05):
to three and a half million within your super fund.
But you haven't sold any of these shares. You're now
going to pay at tax on that unrealized gain. So
even though you haven't sold the shares, that's still going
to form part.
Speaker 2 (03:19):
Of a tax effectively a taxable.
Speaker 4 (03:21):
Component and earnings, and that that's going to be a
purport I think interesting to point out also that it's
a proportion, so not to get too technical, but you
know the portion of the gain is three and a
half million divided by three million. That above as a
(03:42):
percentage is going to be the taxable multiplied by fifteen percent.
Speaker 3 (03:47):
Even though you haven't sold anything.
Speaker 1 (03:49):
So you're going to get a bill for the improvement
in value, paper improvement theoretical to some extent, hypothetical to
some extent improvement in value, and you're going to have
to pay that bill straight up.
Speaker 2 (04:01):
You've got to pay it up, Yes, every year?
Speaker 1 (04:03):
Okay. So so and then obviously the big concern then
across the market and among our listeners is it going
to affect me? And you might say, oh, well, it's
unlikely three million. I'm never going to have three million
in super But here's the thing, folks, it's unindexed and
what that means is that it never changes and three
(04:27):
million or a lower figure of which it could be
lowered of course in parliament because the new government has
a lot of power now, the Greens want it lowered.
They want it lower to two million. But the issue
is that two million today might sound a lot. Two
million when you retire in ten years time or twenty
years time will not be as much as you think.
I mean a million dollar house, Hey, one in three
(04:48):
houses in Australia, what's the million dollars? The point I'm
making is because this new tax is very controversial in
its nature. And then it's not index for inflation, and
the treasure keeps holding out on this. He has no
intention of changing it. He said, this is I think
what is really making people uneasy, and that this nature,
this technique of taxing paper gains could start to become
(05:13):
common in the system. Okay, so what don't you?
Speaker 2 (05:16):
I thought.
Speaker 1 (05:16):
What I tried to do was to put together some questions.
The first question is from Ross, is there any logical
economic reason to have tax breaks in super anyway? Reasonable question?
Why is there tax breaks for a super anyway?
Speaker 4 (05:34):
We've got it, we used to have a three pillar
or we've got a three pillar sort of retirement saving system,
you know, your your own savings, your superannuation, and government support.
So the idea of superannuation when it was introduced, you know,
back in ninety two, was that people are going to
be able to be self funded to some extent. How
do you incentivize people to be self funded? You've effectively
(05:56):
got to give them tax benefits, so otherwise what would
be the benefit in them doing so? So I think
it's a very good question from Ross, and I get
from a budget deficit point of view, there's an argument
there that it should be taxable. But individually, I think
if the government's been able to get their fifteen percent
(06:17):
tax on earnings throughout their working life, you know, when
it goes into the draw down phase of pension and
they get it at nil. That's and again we're not
talking about one hundred million dollar super funds. We're talking
about mainstream, every day austraints that might have one to
two million. I think it's entirely appropriate to give them
the tax break. I suppose in you once there where
(06:41):
the government's been clever is when you are in that
drawdown phase, the government does make you draw the money out.
You know, there's the four percent, then it goes to
five percent, and once you get to ninety five it's
like fourteen percent. So you do get the tax benefit,
but that money is going to come out of the
system ultimately.
Speaker 1 (06:58):
And I suppose an argument that I think the strongest
argument of all is that this is these tax breaks
in super are not a cost very simply because even
though Australia is going to have a very large portion
of the population that are older in the future and
we were heading towards big trouble if on that basis,
(07:19):
But believe it or not, pension as a portion of
the national budget is actually going to decrease in the future,
and that is because there is that system which allows
individuals incentivizes them to have their own super goes all
the way back to Paul Keating and incentives who are
in there at the very start, and they make as
(07:40):
much sense as ever I think. In answer to your
question Ross, the other part of your question is he says,
I don't think taxing unrealized gains is justifiable or manageable.
Why don't they just tax the realized gains when they occur?
Why don't they just tax the realized gains? That's why
they always do what's this idea of paper game? Why
they do that?
Speaker 4 (08:01):
When you go through the inquiries that happened a year
or two ago when they were talking about putting Div
two ninety six in, it was actually that the systems
couldn't handle the administration of it, in particular things like
industry funds and the like. So the self made super
fund Association kind of said, well, hang on, we can
(08:23):
directly break down our components, so let's do it that way.
But the government was pretty clear they want just one
one system and the administration cost to get it to
be able to do the realized versus unrealized was just
too expensive to do.
Speaker 1 (08:40):
Unfortunately, that's their explanation. Okay, we can kick that around
as much as we want, but that's their explanation.
Speaker 2 (08:45):
All too hard, and we agree it makes no sense.
Speaker 1 (08:47):
We agree it makes no sense for us. We are
in furious agreement on that. Can you see the next
question from Ryan. I'm just interested in the second part
here where he talks about what he has to pee.
Speaker 4 (09:00):
Yeah, So here we've got Ryan saying I've got to
pay land tax and council rates in South Australia and Queensland.
And this is based on the estimated value of the land.
These are a mixture of investments and owner occupier. The
land value has gone up, but also in the meantime,
my taxes on this land keep going up. Does this
qualify as paying tax for in brackets unrealized gains?
Speaker 1 (09:24):
Yeah, well what do you think.
Speaker 4 (09:25):
One hundred percent? You know, we typically don't see them
going down. And James, you and I had a conversation
on this the other day, saying this is.
Speaker 2 (09:33):
Exactly where they got it from.
Speaker 4 (09:35):
It feels like with the land, everyone feels good the
land's going up, so people are happy to pay you know, higher.
Speaker 3 (09:42):
Rates, more land tax. But again it's there's a really.
Speaker 4 (09:47):
Good argument that it doesn't cost the government a lot
more just because your value has gone up. There's a
lot of these taxes that come in, but this is
this is definitely a case of an unrealized gains tax.
Speaker 1 (09:58):
So it's like so like land tax issues written in
large really in that at least often with land tax,
it's land right to sitting on a farm, and it
might be furious and infuriating to know that the land
tax has gone up if your income went down, for instance,
in a year. However it is it is. It is
(10:19):
a tangible acid. But if it was something much more volatile,
like a share which you mentioned at the start. You
mentioned a great year collin well Bank, but it might
become well Bank. It might be at my gold mining
company that just goes up one hundred percent one year
in falls ninety percent the next. That's where there's real
problems I think coming down the line. Okay, Russell says,
(10:39):
there's a lot of talk recently after the election about
the unrealized gainst tax on super for over three million
or maybe even two million. The reason Russell says it
might be two million is because the Greens have the
balance of power in the Senate, and the Greens have
said they will support this new tax on unrealized gains,
(11:00):
but only if the government drop it from three million
to two million. So you can see this is a
movable feast to some extent. Now, Russell says, I wonder
whether the three million amount applies to each individual fund
a person holds. Could someone holds, say two million in
each of three separate funds and avoid the tax, or
(11:21):
does the total mean the tax will apply? So how
is it applied? Is it? Is it per fund? Is
it per individual?
Speaker 3 (11:28):
Is it it?
Speaker 1 (11:29):
Does it try to capture everything the individual has in
the supersystem.
Speaker 4 (11:33):
It's you're the total super that you've got in the system, okay,
attributable to you.
Speaker 1 (11:38):
It doesn't matter whether if you've got some in an
industry fund and some in AMP or a bank and
something else in your SMSF. They count the entirety you
have in all your super accounts and the degree to
which that combined number moves higher.
Speaker 4 (11:55):
Yes, But if you have a spouse, they've got a
different number to you. So so a husband and wife can
effectively have six million dollars in total superannuation. An individual
can have three. And I think where this kind of
question and a little bit of confusion comes from is,
you know, with the bank sales the government two hundred
and fifty thousand dollars bank guarantee, but then you could
(12:16):
have a million dollars split across four and you've got
the guarantee for a million. So there's been some inconsistency
in government policy that leads, you know, the poor listeners
to kind of wonder had the best play it in
the best possible way.
Speaker 1 (12:30):
So a lot and clear Russell, the tax is applied
on an individual basis on the total amounts you have
in super so. Again, you see that headline number sounds big,
and it is big, and the amount of argument that
anyone can live very comfortably on those numbers in super so.
It's not the headline number that really matters that everyone
is worried about, concerned about. It's the nature of the
(12:53):
tax that it's paper gains or on regalized gains. This
is the core of the issue. Okay, Now, hopefully I've
met a fairly good fist of explaining the basics. We've
got some really good questions now coming up about how
it all works. Maybe back in a moment, Hello, and
(13:13):
welcome back to The Australian's Money Puzzle. James Kirby here
talking to Hugh Robertson of Centaur Financial Services, and we
are talking about the new supertax and what I'm trying
to do today, folks, is to allow you to understand
the nature of the tax, the design of the tax,
how it's actually going to work. I've had so many
questions and I've collected your questions into a special episode
(13:36):
of the show. We are not in the business of
winding up how it might or might not happen. I'm
not really interested in the political dimension of this is
it's entirely from an investor point of view. What's happening,
how will it come to pass? What will it mean? Okay,
sticking to your questions, this question is from Lil She says,
(13:56):
with looming changes to the tax treatment of superannuation, it's
time to seriously look at tax efficient structures outside of super.
And now I'd love if you would provide an episode
on investment bonds also known as insurance bonds or indeed
education bonds. An increasing number of financial planets are highlighting
this as an alternative outside of super Yes they are,
(14:20):
and we have covered this area. And I will say
to you, Lil that most people, most on the time
on the show have not been particularly supportive of them.
And generally the advisors I have on the show, who
tend to be top advisors in their field, will say
(14:40):
that there's better deals elsewhere. Basically, Hugh, you might answer
that one and maybe perhaps this time around give you
give a wider lens on it for Lil that to
some people it probably doesn't make sense, but there there
is a layer where it might make sense.
Speaker 4 (14:58):
So an investment bond is an internally taxed product. It
originally came out of insurance law, so it had different
rules and regulations to the normal investment trusts that we had.
So it's internally taxed up to thirty percent, and then
there's some really good rules there. If you hold the
bond itself for ten years, it's actually CGT.
Speaker 3 (15:21):
Three and then it's pro routed over the year's eight.
Speaker 2 (15:26):
To nine as well.
Speaker 4 (15:28):
The benefits of it are within the actual bond itself.
Speaker 2 (15:31):
You could get if you had a.
Speaker 4 (15:33):
You know, one hundred percent fully franked share fund in
there for a strange share fund, for example, you would
pay less than the thirty percent tax. And there's another
really good benefit of the insurance bonds that you can
switch switch them out CGT three.
Speaker 2 (15:49):
So if I've had really.
Speaker 4 (15:50):
Good gains in an international share within the insurance bond product,
I could then transfer that And I had a call
that with Trump, you know, Presidency, maybe I want to
go back to Australian share. I could switch that investment
out and not pay capital gains tax, which.
Speaker 2 (16:04):
Is really good.
Speaker 4 (16:05):
There's some advantages on when you draw money out of
thirty percent credit.
Speaker 3 (16:10):
But when you look at who's.
Speaker 4 (16:11):
Going to use them, typically it would be if you
traditional let's say traditionally it's been used with grandparents typically
helping out grandchildren is a bit of a savings account
for them that they're going to access when they're eighteen
or twenty one or twenty.
Speaker 1 (16:26):
Five, don't. They often promote them as education bonds, though
that there's no thing really they are investment bonds. Yes,
could you explain how they sell them or traditionally said
to people their education bonds and people I think part
of the problem was they misled people thinking they were
specially for education. They're not. They just happened to be
(16:47):
tax effective. Long term investment fear because that if you
were able and committed to saving for ten years, even
with a straight salary, no tricks, no companies on the side,
you actually get as substantial tax been. Is it better
than Super?
Speaker 4 (17:03):
No, it's a tax but charge where you say, if
you're a high income earner and you can make sure
the tax you pay is thirty percent versus your marginal
tax rate, it's that's better. So if you're on forty
five cents in the dollar, thirty cents is obviously better,
but Super is better because it's fifteen. The challenge that
you've got is with Super, it's you know, you're not
(17:24):
able to access it until you meet a condition of release,
which is usually sixty and retired is probably the most
common one where and the bonds. The bonds kind of
are having a bit of a revival right now with
the two nine six. There is opportunity definitely something worth
looking at. What you really want to see, though, is
what are the fees and charges involved.
Speaker 3 (17:45):
You want to see what.
Speaker 2 (17:45):
The product choices are.
Speaker 4 (17:48):
The conversations that you and I James have had you
know in prior podcast, would be that if you're a
high net Wells investor, you could instead of utilizing the
insurance bond product, probably just go and start up and
own sort of your own company, you know, which costs
a couple hundred bucks to set up.
Speaker 1 (18:06):
Which is which is thirty percent, which is the same
as the tax applied on the bond.
Speaker 4 (18:11):
Yes, and then you can have the product choice that
you want as opposed to a limited range of investment bonds. Okay,
but I do note that all the investment bond companies
are heavily invested in their products now to try and
take advantage of this opportunity with the DIP two ninety six.
Speaker 1 (18:27):
Yes, golden moment for them, because they're saying, hey, there
is another tax break for the for the average earner
that you may not have known about. Us ade of
super we're here all the time. There is some advantages
to those to some people in some situations. I think
he was saying, but as an alternative to super, it's true,
doesn't beat it. And as you say, as an alternative
(18:48):
to high income super or wealth super affected by this
forthcoming tax division two ninety six, this new super tax.
It's it doesn't it. It doesn't give you anything like
the options you had if you had a company, for instance,
or Super itself, where you can you know whatever, it's
failings and it's restrictions. You can buy anything you want
more or less. While the investment found the you must
(19:10):
buy what's on the menu.
Speaker 3 (19:11):
That's a good summary.
Speaker 1 (19:12):
Oh okay, yeah, all right, say but I suppose to
the wider issue than Lil's question, whereas whereas can you
go if you don't like Super and you don't like
what's happening. Another thing I suppose that's worth mentioning that
people shouldn't forget is that, in fact, outside of Super,
say you're retired, you don't pay tax anyway. No one
(19:36):
pays tax up to what nineteen now is it nineteen
thousand dollars. Your first nineteen thousand is tax free. So
keep that in mind.
Speaker 4 (19:42):
You and I think they're saying because I went onto
a tax calculated before and thought, well, what if we
had retirees only sixty thousand dollars a year, just individual
retire if they owned sixty thousand dollars a year without
any of the you know, any deductions to Super or
anything that pay around.
Speaker 3 (20:01):
It was around seven thousand dollars in tax.
Speaker 4 (20:04):
Yeah, so sixty thousand dollars sorry, and it was Yeah,
the numbers there told me they'd get a low income
tax off set, they'd get Medicare, yes, and on sixty
thousand dollars they'd pay nine eight hundred and eighty eight
in tax, which is about sixteen and a half percent. Yes,
so he kind of go, so it's not Yeah, you
had a husband and wife earned sixty thousand each from
an investment. They're paying about the super rate and that's
(20:28):
better than a thirty percent rates you would pay inside
a bond. So don't forget our personal tax rates matter.
Speaker 1 (20:35):
On the street. Simple income tax rates from the ETL.
Your first individually, your first nineteen thousand, isn't it?
Speaker 3 (20:42):
It was eighteen thousand, two hundred.
Speaker 1 (20:45):
Course with a cigar, eighteen thousand, two hundred. Okay, thank you?
All right, now can you read the question from Paul?
Speaker 3 (20:53):
So this is from Paul.
Speaker 4 (20:54):
He's asked it may be unfair, but couldn't those who
were worried about the unfair taxation of unrealized gains just
remove their farms, businesses other well from super Paul. To
do that, you've got to be able to meet the
condition of release first, you know, and typically we just
sort of commented on that before that you've got to
be aged over sixty and retired or age sixty five,
(21:17):
and in which case then then you could without penalties.
Speaker 3 (21:23):
So from that perspective you could.
Speaker 4 (21:25):
But the people that are in that a big farmer,
you know, they might not be able to do that
right now because they're not of age or a condition
of release to get the money out.
Speaker 1 (21:37):
So that was always the problem, wasn't it. With Silper
It's a lobster pot. You can put your money in,
you can't get it out to retire. And there was
always that fear that because it was trapped as such
a locked the government could change the rules while it
was locked in side, which is exactly what's happening right.
Speaker 4 (21:54):
I suppose there's an even greater part of this is
that we want all the strains to have confidence in
the supernuation system, so they do that so that they
can become self funded to the best extent possible. And
I know the comments from our clients have been really
around that, well, it feels like they're just going to
keep changing the rules and.
Speaker 2 (22:13):
It breeds that uncertainty.
Speaker 4 (22:15):
But what we can take sort of from that is
from Paul's question, is that we are going to come
up with strategies for clients so that we're not going
to put them in that disadvantageous position. And really it's
the unrealized gains that's causing the biggest issue. And something
that I've said to you know, James previously as well,
is that there's about eighty thousand people that are going
(22:37):
to be impacted by this, and that's going to grow
about five six times over the next twenty thirty years.
So we're going to have about half a million people
that are going to be impacted by this two ninety six.
Speaker 1 (22:48):
On its current settings and terms. Yeah, okay, Now what
we would do with the next part of the show
is we'll just happen look at some of the some
of the issues that are around, some of the speculation,
what might happen, where is it going to go, who
will it affect, how many will it affect in what way,
and what might go on in Parliament. There's really good
questions on that. Back in the moment, Hello and welcome
(23:16):
back to the Australian Special edition money puzzle on the
new supertax. Now, let me tell you something that something
that does infuriate people. Needless to say about this new
supertax is it's not applicable to some politicians who are
of course sitting there drafting it. That's one thing. And separately,
(23:39):
manny sor what would have been sior functionaries if you like,
in the government are undefined benefit funds that they're fading
away because they're not around much anymore. But all the
senior figures in the army and law and other public
service areas, including my add the ABC, are on defined
(24:02):
benefits and that means that they just get paid as
a promise of how much a certain amount every year
regardless of what happens. It doesn't matter if there's a
stock market crash. So it's a great number to be on.
Question from Stan is it possible for Labor and Greens
to include politicians over generous defined benefit scheme in their
(24:25):
proposed superinnuation tax to be fair to everyone. That's the
first part of stance question and the second And as
I say, folks, if you're sending you questions, send in
two or three. Anytime. I love to see multiple questions.
Stan also asks, is there a way to expose which
politicians have the highest superbalances from scamming taxpayers money, similar
(24:46):
to how the ATO publicizes who has the highest SMSF balances. Okay, Stan,
thank you for that. Now we just have to put
it on the table. The way it works, some politicians,
senior figures in parliament are a excluded under some laws.
So just take that on board. And the worse the
tax gets on super the better it must be to
(25:06):
be exempt's that's a numerically relatively small but hot issue.
More commonly defined benefit funds. So if you mentioned it,
if you recall I mentioned that there is the fine
benefit schemes and you get paid a certain amount per year.
It's a promise basically, and you get a certain whatever
(25:27):
your salary was, you get a portion of that. Just
pick a number thirty two percent of that salary forever,
regardless of what happens in the world. It must be lovely.
So stanzas, how are they going to include these people?
They don't know how they're going to include them, stand
is the short answer. They haven't fixed it yet. They
haven't sorted it out yet. But the notion is that
(25:51):
they will use existing what would you say, metrics that
are used, for instance, in divorce and that sort of
thing family law, where they've already had to deal with
defined benefits and how they're divided how much they're worth.
So they're reverse engineered these things and they say, well,
(26:12):
if you get, if you get you know, ninety thousand
a year, then that is worth so much because you
have to have so much to make ninety thousand a
year in the investment markets. How on earth are they
going to do it? Hugh, you know everything, what's the answer.
Speaker 4 (26:29):
I think there's going to be a great difficulty in
valuing a lot of these things.
Speaker 3 (26:34):
So I agree they if women live.
Speaker 4 (26:37):
Longer than men, which statistically they do, how do we
value their benefit versus you know, the husband's benefit.
Speaker 3 (26:46):
What do we do around that? The mechanisms that they're
going to need to be able to.
Speaker 4 (26:49):
Implement this are going to be very very difficult, very
very challenging. And it's very similar to also outside of
the defined benefit, But how do they how are they
going to value you antiques.
Speaker 2 (27:01):
Collectibles like cars, like.
Speaker 3 (27:04):
The whole implementation.
Speaker 1 (27:06):
Of it's this legislation night merriage.
Speaker 4 (27:09):
It's gonna be it's fraught with difficulty and quite this
is then, this is why all the listeners, this is
why all the all the industry bodies are advocating. Can
we at least kick it, kick the can down the
road to year and get some clarity on how we're
going to do this. You don't have to do anything
before you know, the end of this financial year or
even the start of next financial year. But as it
(27:30):
currently stands, we're going to have to do something before
the end of next financial year.
Speaker 1 (27:34):
As it currently stands, it's due to come into effect
on July one, with the first collection point. You'd be
like being July twenty twenty six, isn't that right? Yes,
so stand by. But as I say each day, there's
no clarification or any signal from the treasure that's on timing,
on the indexation, on the unrealized gains. Couldn't they just
(28:02):
do a deeming thing like they have for the pensions anyway,
So when the pension access to the pension, they don't
count how much everyone's got in investments. They just say
how much have you got there on the side, and
the presence says, I've got one hundred thousand dollars and
they say, okay, well we reckon that makes you know,
two point five percent a year, which is which is,
(28:22):
which is a very generous way of doing it. But
they just deem and amount is made. Couldn't they do that?
Speaker 3 (28:31):
Sometimes common sense isn't common James.
Speaker 4 (28:35):
The SMSF association, they went through looking at it, at
the difference between the unrealized the current method that they're
they're proposing, and the demon, and there wasn't much in
it in terms of tax revenue. So the ATO would
have got thereabouts the same amount, and it would have
been something that could have been administered. I think I
think there was some comments around, well what if you
(28:57):
have negative years? You know that the demon is disadvantageous
to the approach that they're that they're advocating for. But
I think a deeming approach would have been common sense.
Yeah right, and you know, the AHA would have won.
So that that one is a perplexing one. Why they
(29:17):
didn't do.
Speaker 1 (29:17):
That it is indeed, So we'll leave it there and
we'll see where they go. I hope that was useful
to you. I think anyone who who went, especially as
we took the listeners questions, there we've got a clear picture.
Now it's a new tax. There is no tax paid
up to about two million on super I say up
to about two million because it's one point nine now
(29:38):
goes to two million on July one. There is then
fifteen percent tax after that figure sort of sky is
the limit at the moment, and they're going to come
in and say hang on now when it goes after
three million, there's a new tax on top of the
fifteen that's already there, and that brings it to thirty
combined tax. The issue is not some the number there,
(30:00):
it's the way they're going to do it on unrealnized
gains paper games. I think you did a very good
example at the very start about how that is. It's
really unfair, it's a bad technique, it's messy, it's ridiculously
difficult to try and to try and compute accurately. And
what did you call it a violation of the tax system?
Was that it a violation of the tax system?
Speaker 3 (30:23):
There you are principle.
Speaker 1 (30:24):
It's also on indexed, which again you know, I mean
it's a retirement tax. The pension ist is not just
index The pension is indexed twice a year. So I
think there's a lot on the table here. It's hard
to believe it's going to start in July one, but
we have to work on the basis that it will.
We'll see in the weeks ahead if the government budge
(30:44):
on this. H. Robinson, thanks very much for for heroic
effort trying to explain it to us all.
Speaker 4 (30:52):
Thank you very much for having me. I hope it
provided some valuable insights to your listeners.
Speaker 2 (30:56):
I'm sure.
Speaker 1 (30:57):
Thanks everyone for sending in your questions. I couldn't use
them all, of course, but I was able to I think,
capture the main issues from those questions that we had today.
Thanks a lot for listening. Keep your emails rolling 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 Kirkby. Welcome aboard, everybody, Welcome aboard to a special
edition of the show. We have had so many questions
and so much correspondence on the new Supertax that what
we're going to do today is an episode and it's
going to be based on your questions that have come
(00:31):
in in recent weeks about what is this act, how
is it going to work? And to help me answer
those questions, I'm joined boy Hugh Robertson of the Center
Financial Services Group. Hugh's a Baron's top one point fifty
advisor regular on the show, and Hugh I will kick
straight over to you For the person who's just arrived
(00:55):
in Australia and has no idea how our super system
works and hasn't done the six week course to understand
the basics, could you explain what's changed? What is this
new super tax? Why is everyone so worried about it?
Speaker 2 (01:08):
Hi?
Speaker 3 (01:08):
James, Hi, everyone listening.
Speaker 4 (01:11):
It's a really good question and it's I'm glad we're
doing an episode on.
Speaker 2 (01:15):
This because we've really really got to raise.
Speaker 4 (01:17):
The awareness as just so we can get that understanding.
So what is this give to nine to six tax.
It's going to be an additional a new tax for
balances over three million dollars. The tax itself is going
to be fifteen percent, so a lot of the stuff
that I've read, So if you're in accumulation phase, it's
(01:38):
going to mean that you know, it's an additional fifteen
percent on top of the fifteen percent on the first
three million if you're an accumulation phase. But remembering when
you're in pension phase, that first three million is going
to be still in the zero percent tax.
Speaker 1 (01:53):
So just make it very easy for people at the
moment in super up to we see we make it
from July one you pay no tax in your super
up to two million, yes, and then over two million
you pay fifteen percent. And the government have said we've
got a new one now which is over three million,
there is another fifteen percent, and that means the effective
(02:15):
thirty percent top tax rasions super where it used to
be tax free. Okay, that's a big change, but it's
not People are not going bananas about this aspect that
it's three million. That's not really what they're going crazy about.
It's the nature of the new tax, which is on
realized gains. Can you explain to what that means?
Speaker 3 (02:39):
A tax on unrealized gains.
Speaker 4 (02:43):
Is a violation of the basic principles of tax that
we've always had. So if you, for example, the value
owned some shares in come Wealth Bank of Australia, which
a lot of the listeners here would own, comme Wealth
Bank shares, it's gone up from one hundred dollars to
one hundred and sixty dollars, and say within your portfolio,
that means that you've gone from you know, three million
(03:05):
to three and a half million within your super fund.
But you haven't sold any of these shares. You're now
going to pay at tax on that unrealized gain. So
even though you haven't sold the shares, that's still going
to form part.
Speaker 2 (03:19):
Of a tax effectively a taxable.
Speaker 4 (03:21):
Component and earnings, and that that's going to be a
purport I think interesting to point out also that it's
a proportion, so not to get too technical, but you
know the portion of the gain is three and a
half million divided by three million. That above as a
(03:42):
percentage is going to be the taxable multiplied by fifteen percent.
Speaker 3 (03:47):
Even though you haven't sold anything.
Speaker 1 (03:49):
So you're going to get a bill for the improvement
in value, paper improvement theoretical to some extent, hypothetical to
some extent improvement in value, and you're going to have
to pay that bill straight up.
Speaker 2 (04:01):
You've got to pay it up, Yes, every year?
Speaker 1 (04:03):
Okay. So so and then obviously the big concern then
across the market and among our listeners is it going
to affect me? And you might say, oh, well, it's
unlikely three million. I'm never going to have three million
in super But here's the thing, folks, it's unindexed and
what that means is that it never changes and three
(04:27):
million or a lower figure of which it could be
lowered of course in parliament because the new government has
a lot of power now, the Greens want it lowered.
They want it lower to two million. But the issue
is that two million today might sound a lot. Two
million when you retire in ten years time or twenty
years time will not be as much as you think.
I mean a million dollar house, Hey, one in three
(04:48):
houses in Australia, what's the million dollars? The point I'm
making is because this new tax is very controversial in
its nature. And then it's not index for inflation, and
the treasure keeps holding out on this. He has no
intention of changing it. He said, this is I think
what is really making people uneasy, and that this nature,
this technique of taxing paper gains could start to become
(05:13):
common in the system. Okay, so what don't you?
Speaker 2 (05:16):
I thought.
Speaker 1 (05:16):
What I tried to do was to put together some questions.
The first question is from Ross, is there any logical
economic reason to have tax breaks in super anyway? Reasonable question?
Why is there tax breaks for a super anyway?
Speaker 4 (05:34):
We've got it, we used to have a three pillar
or we've got a three pillar sort of retirement saving system,
you know, your your own savings, your superannuation, and government support.
So the idea of superannuation when it was introduced, you know,
back in ninety two, was that people are going to
be able to be self funded to some extent. How
do you incentivize people to be self funded? You've effectively
(05:56):
got to give them tax benefits, so otherwise what would
be the benefit in them doing so? So I think
it's a very good question from Ross, and I get
from a budget deficit point of view, there's an argument
there that it should be taxable. But individually, I think
if the government's been able to get their fifteen percent
(06:17):
tax on earnings throughout their working life, you know, when
it goes into the draw down phase of pension and
they get it at nil. That's and again we're not
talking about one hundred million dollar super funds. We're talking
about mainstream, every day austraints that might have one to
two million. I think it's entirely appropriate to give them
the tax break. I suppose in you once there where
(06:41):
the government's been clever is when you are in that
drawdown phase, the government does make you draw the money out.
You know, there's the four percent, then it goes to
five percent, and once you get to ninety five it's
like fourteen percent. So you do get the tax benefit,
but that money is going to come out of the
system ultimately.
Speaker 1 (06:58):
And I suppose an argument that I think the strongest
argument of all is that this is these tax breaks
in super are not a cost very simply because even
though Australia is going to have a very large portion
of the population that are older in the future and
we were heading towards big trouble if on that basis,
(07:19):
But believe it or not, pension as a portion of
the national budget is actually going to decrease in the future,
and that is because there is that system which allows
individuals incentivizes them to have their own super goes all
the way back to Paul Keating and incentives who are
in there at the very start, and they make as
(07:40):
much sense as ever I think. In answer to your
question Ross, the other part of your question is he says,
I don't think taxing unrealized gains is justifiable or manageable.
Why don't they just tax the realized gains when they occur?
Why don't they just tax the realized gains? That's why
they always do what's this idea of paper game? Why
they do that?
Speaker 4 (08:01):
When you go through the inquiries that happened a year
or two ago when they were talking about putting Div
two ninety six in, it was actually that the systems
couldn't handle the administration of it, in particular things like
industry funds and the like. So the self made super
fund Association kind of said, well, hang on, we can
(08:23):
directly break down our components, so let's do it that way.
But the government was pretty clear they want just one
one system and the administration cost to get it to
be able to do the realized versus unrealized was just
too expensive to do.
Speaker 1 (08:40):
Unfortunately, that's their explanation. Okay, we can kick that around
as much as we want, but that's their explanation.
Speaker 2 (08:45):
All too hard, and we agree it makes no sense.
Speaker 1 (08:47):
We agree it makes no sense for us. We are
in furious agreement on that. Can you see the next
question from Ryan. I'm just interested in the second part
here where he talks about what he has to pee.
Speaker 4 (09:00):
Yeah, So here we've got Ryan saying I've got to
pay land tax and council rates in South Australia and Queensland.
And this is based on the estimated value of the land.
These are a mixture of investments and owner occupier. The
land value has gone up, but also in the meantime,
my taxes on this land keep going up. Does this
qualify as paying tax for in brackets unrealized gains?
Speaker 1 (09:24):
Yeah, well what do you think.
Speaker 4 (09:25):
One hundred percent? You know, we typically don't see them
going down. And James, you and I had a conversation
on this the other day, saying this is.
Speaker 2 (09:33):
Exactly where they got it from.
Speaker 4 (09:35):
It feels like with the land, everyone feels good the
land's going up, so people are happy to pay you know, higher.
Speaker 3 (09:42):
Rates, more land tax. But again it's there's a really.
Speaker 4 (09:47):
Good argument that it doesn't cost the government a lot
more just because your value has gone up. There's a
lot of these taxes that come in, but this is
this is definitely a case of an unrealized gains tax.
Speaker 1 (09:58):
So it's like so like land tax issues written in
large really in that at least often with land tax,
it's land right to sitting on a farm, and it
might be furious and infuriating to know that the land
tax has gone up if your income went down, for instance,
in a year. However it is it is. It is
(10:19):
a tangible acid. But if it was something much more volatile,
like a share which you mentioned at the start. You
mentioned a great year collin well Bank, but it might
become well Bank. It might be at my gold mining
company that just goes up one hundred percent one year
in falls ninety percent the next. That's where there's real
problems I think coming down the line. Okay, Russell says,
(10:39):
there's a lot of talk recently after the election about
the unrealized gainst tax on super for over three million
or maybe even two million. The reason Russell says it
might be two million is because the Greens have the
balance of power in the Senate, and the Greens have
said they will support this new tax on unrealized gains,
(11:00):
but only if the government drop it from three million
to two million. So you can see this is a
movable feast to some extent. Now, Russell says, I wonder
whether the three million amount applies to each individual fund
a person holds. Could someone holds, say two million in
each of three separate funds and avoid the tax, or
(11:21):
does the total mean the tax will apply? So how
is it applied? Is it? Is it per fund? Is
it per individual?
Speaker 3 (11:28):
Is it it?
Speaker 1 (11:29):
Does it try to capture everything the individual has in
the supersystem.
Speaker 4 (11:33):
It's you're the total super that you've got in the system, okay,
attributable to you.
Speaker 1 (11:38):
It doesn't matter whether if you've got some in an
industry fund and some in AMP or a bank and
something else in your SMSF. They count the entirety you
have in all your super accounts and the degree to
which that combined number moves higher.
Speaker 4 (11:55):
Yes, But if you have a spouse, they've got a
different number to you. So so a husband and wife can
effectively have six million dollars in total superannuation. An individual
can have three. And I think where this kind of
question and a little bit of confusion comes from is,
you know, with the bank sales the government two hundred
and fifty thousand dollars bank guarantee, but then you could
(12:16):
have a million dollars split across four and you've got
the guarantee for a million. So there's been some inconsistency
in government policy that leads, you know, the poor listeners
to kind of wonder had the best play it in
the best possible way.
Speaker 1 (12:30):
So a lot and clear Russell, the tax is applied
on an individual basis on the total amounts you have
in super so. Again, you see that headline number sounds big,
and it is big, and the amount of argument that
anyone can live very comfortably on those numbers in super so.
It's not the headline number that really matters that everyone
is worried about, concerned about. It's the nature of the
(12:53):
tax that it's paper gains or on regalized gains. This
is the core of the issue. Okay, Now, hopefully I've
met a fairly good fist of explaining the basics. We've
got some really good questions now coming up about how
it all works. Maybe back in a moment, Hello, and
(13:13):
welcome back to The Australian's Money Puzzle. James Kirby here
talking to Hugh Robertson of Centaur Financial Services, and we
are talking about the new supertax and what I'm trying
to do today, folks, is to allow you to understand
the nature of the tax, the design of the tax,
how it's actually going to work. I've had so many
questions and I've collected your questions into a special episode
(13:36):
of the show. We are not in the business of
winding up how it might or might not happen. I'm
not really interested in the political dimension of this is
it's entirely from an investor point of view. What's happening,
how will it come to pass? What will it mean? Okay,
sticking to your questions, this question is from Lil She says,
(13:56):
with looming changes to the tax treatment of superannuation, it's
time to seriously look at tax efficient structures outside of super.
And now I'd love if you would provide an episode
on investment bonds also known as insurance bonds or indeed
education bonds. An increasing number of financial planets are highlighting
this as an alternative outside of super Yes they are,
(14:20):
and we have covered this area. And I will say
to you, Lil that most people, most on the time
on the show have not been particularly supportive of them.
And generally the advisors I have on the show, who
tend to be top advisors in their field, will say
(14:40):
that there's better deals elsewhere. Basically, Hugh, you might answer
that one and maybe perhaps this time around give you
give a wider lens on it for Lil that to
some people it probably doesn't make sense, but there there
is a layer where it might make sense.
Speaker 4 (14:58):
So an investment bond is an internally taxed product. It
originally came out of insurance law, so it had different
rules and regulations to the normal investment trusts that we had.
So it's internally taxed up to thirty percent, and then
there's some really good rules there. If you hold the
bond itself for ten years, it's actually CGT.
Speaker 3 (15:21):
Three and then it's pro routed over the year's eight.
Speaker 2 (15:26):
To nine as well.
Speaker 4 (15:28):
The benefits of it are within the actual bond itself.
Speaker 2 (15:31):
You could get if you had a.
Speaker 4 (15:33):
You know, one hundred percent fully franked share fund in
there for a strange share fund, for example, you would
pay less than the thirty percent tax. And there's another
really good benefit of the insurance bonds that you can
switch switch them out CGT three.
Speaker 2 (15:49):
So if I've had really.
Speaker 4 (15:50):
Good gains in an international share within the insurance bond product,
I could then transfer that And I had a call
that with Trump, you know, Presidency, maybe I want to
go back to Australian share. I could switch that investment
out and not pay capital gains tax, which.
Speaker 2 (16:04):
Is really good.
Speaker 4 (16:05):
There's some advantages on when you draw money out of
thirty percent credit.
Speaker 3 (16:10):
But when you look at who's.
Speaker 4 (16:11):
Going to use them, typically it would be if you
traditional let's say traditionally it's been used with grandparents typically
helping out grandchildren is a bit of a savings account
for them that they're going to access when they're eighteen
or twenty one or twenty.
Speaker 1 (16:26):
Five, don't. They often promote them as education bonds, though
that there's no thing really they are investment bonds. Yes,
could you explain how they sell them or traditionally said
to people their education bonds and people I think part
of the problem was they misled people thinking they were
specially for education. They're not. They just happened to be
(16:47):
tax effective. Long term investment fear because that if you
were able and committed to saving for ten years, even
with a straight salary, no tricks, no companies on the side,
you actually get as substantial tax been. Is it better
than Super?
Speaker 4 (17:03):
No, it's a tax but charge where you say, if
you're a high income earner and you can make sure
the tax you pay is thirty percent versus your marginal
tax rate, it's that's better. So if you're on forty
five cents in the dollar, thirty cents is obviously better,
but Super is better because it's fifteen. The challenge that
you've got is with Super, it's you know, you're not
(17:24):
able to access it until you meet a condition of release,
which is usually sixty and retired is probably the most
common one where and the bonds. The bonds kind of
are having a bit of a revival right now with
the two nine six. There is opportunity definitely something worth
looking at. What you really want to see, though, is
what are the fees and charges involved.
Speaker 3 (17:45):
You want to see what.
Speaker 2 (17:45):
The product choices are.
Speaker 4 (17:48):
The conversations that you and I James have had you
know in prior podcast, would be that if you're a
high net Wells investor, you could instead of utilizing the
insurance bond product, probably just go and start up and
own sort of your own company, you know, which costs
a couple hundred bucks to set up.
Speaker 1 (18:06):
Which is which is thirty percent, which is the same
as the tax applied on the bond.
Speaker 4 (18:11):
Yes, and then you can have the product choice that
you want as opposed to a limited range of investment bonds. Okay,
but I do note that all the investment bond companies
are heavily invested in their products now to try and
take advantage of this opportunity with the DIP two ninety six.
Speaker 1 (18:27):
Yes, golden moment for them, because they're saying, hey, there
is another tax break for the for the average earner
that you may not have known about. Us ade of
super we're here all the time. There is some advantages
to those to some people in some situations. I think
he was saying, but as an alternative to super, it's true,
doesn't beat it. And as you say, as an alternative
(18:48):
to high income super or wealth super affected by this
forthcoming tax division two ninety six, this new super tax.
It's it doesn't it. It doesn't give you anything like
the options you had if you had a company, for instance,
or Super itself, where you can you know whatever, it's
failings and it's restrictions. You can buy anything you want
more or less. While the investment found the you must
(19:10):
buy what's on the menu.
Speaker 3 (19:11):
That's a good summary.
Speaker 1 (19:12):
Oh okay, yeah, all right, say but I suppose to
the wider issue than Lil's question, whereas whereas can you
go if you don't like Super and you don't like
what's happening. Another thing I suppose that's worth mentioning that
people shouldn't forget is that, in fact, outside of Super,
say you're retired, you don't pay tax anyway. No one
(19:36):
pays tax up to what nineteen now is it nineteen
thousand dollars. Your first nineteen thousand is tax free. So
keep that in mind.
Speaker 4 (19:42):
You and I think they're saying because I went onto
a tax calculated before and thought, well, what if we
had retirees only sixty thousand dollars a year, just individual
retire if they owned sixty thousand dollars a year without
any of the you know, any deductions to Super or
anything that pay around.
Speaker 3 (20:01):
It was around seven thousand dollars in tax.
Speaker 4 (20:04):
Yeah, so sixty thousand dollars sorry, and it was Yeah,
the numbers there told me they'd get a low income
tax off set, they'd get Medicare, yes, and on sixty
thousand dollars they'd pay nine eight hundred and eighty eight
in tax, which is about sixteen and a half percent. Yes,
so he kind of go, so it's not Yeah, you
had a husband and wife earned sixty thousand each from
an investment. They're paying about the super rate and that's
(20:28):
better than a thirty percent rates you would pay inside
a bond. So don't forget our personal tax rates matter.
Speaker 1 (20:35):
On the street. Simple income tax rates from the ETL.
Your first individually, your first nineteen thousand, isn't it?
Speaker 3 (20:42):
It was eighteen thousand, two hundred.
Speaker 1 (20:45):
Course with a cigar, eighteen thousand, two hundred. Okay, thank you?
All right, now can you read the question from Paul?
Speaker 3 (20:53):
So this is from Paul.
Speaker 4 (20:54):
He's asked it may be unfair, but couldn't those who
were worried about the unfair taxation of unrealized gains just
remove their farms, businesses other well from super Paul. To
do that, you've got to be able to meet the
condition of release first, you know, and typically we just
sort of commented on that before that you've got to
be aged over sixty and retired or age sixty five,
(21:17):
and in which case then then you could without penalties.
Speaker 3 (21:23):
So from that perspective you could.
Speaker 4 (21:25):
But the people that are in that a big farmer,
you know, they might not be able to do that
right now because they're not of age or a condition
of release to get the money out.
Speaker 1 (21:37):
So that was always the problem, wasn't it. With Silper
It's a lobster pot. You can put your money in,
you can't get it out to retire. And there was
always that fear that because it was trapped as such
a locked the government could change the rules while it
was locked in side, which is exactly what's happening right.
Speaker 4 (21:54):
I suppose there's an even greater part of this is
that we want all the strains to have confidence in
the supernuation system, so they do that so that they
can become self funded to the best extent possible. And
I know the comments from our clients have been really
around that, well, it feels like they're just going to
keep changing the rules and.
Speaker 2 (22:13):
It breeds that uncertainty.
Speaker 4 (22:15):
But what we can take sort of from that is
from Paul's question, is that we are going to come
up with strategies for clients so that we're not going
to put them in that disadvantageous position. And really it's
the unrealized gains that's causing the biggest issue. And something
that I've said to you know, James previously as well,
is that there's about eighty thousand people that are going
(22:37):
to be impacted by this, and that's going to grow
about five six times over the next twenty thirty years.
So we're going to have about half a million people
that are going to be impacted by this two ninety six.
Speaker 1 (22:48):
On its current settings and terms. Yeah, okay, Now what
we would do with the next part of the show
is we'll just happen look at some of the some
of the issues that are around, some of the speculation,
what might happen, where is it going to go, who
will it affect, how many will it affect in what way,
and what might go on in Parliament. There's really good
questions on that. Back in the moment, Hello and welcome
(23:16):
back to the Australian Special edition money puzzle on the
new supertax. Now, let me tell you something that something
that does infuriate people. Needless to say about this new
supertax is it's not applicable to some politicians who are
of course sitting there drafting it. That's one thing. And separately,
(23:39):
manny sor what would have been sior functionaries if you like,
in the government are undefined benefit funds that they're fading
away because they're not around much anymore. But all the
senior figures in the army and law and other public
service areas, including my add the ABC, are on defined
(24:02):
benefits and that means that they just get paid as
a promise of how much a certain amount every year
regardless of what happens. It doesn't matter if there's a
stock market crash. So it's a great number to be on.
Question from Stan is it possible for Labor and Greens
to include politicians over generous defined benefit scheme in their
(24:25):
proposed superinnuation tax to be fair to everyone. That's the
first part of stance question and the second And as
I say, folks, if you're sending you questions, send in
two or three. Anytime. I love to see multiple questions.
Stan also asks, is there a way to expose which
politicians have the highest superbalances from scamming taxpayers money, similar
(24:46):
to how the ATO publicizes who has the highest SMSF balances. Okay, Stan,
thank you for that. Now we just have to put
it on the table. The way it works, some politicians,
senior figures in parliament are a excluded under some laws.
So just take that on board. And the worse the
tax gets on super the better it must be to
(25:06):
be exempt's that's a numerically relatively small but hot issue.
More commonly defined benefit funds. So if you mentioned it,
if you recall I mentioned that there is the fine
benefit schemes and you get paid a certain amount per year.
It's a promise basically, and you get a certain whatever
(25:27):
your salary was, you get a portion of that. Just
pick a number thirty two percent of that salary forever,
regardless of what happens in the world. It must be lovely.
So stanzas, how are they going to include these people?
They don't know how they're going to include them, stand
is the short answer. They haven't fixed it yet. They
haven't sorted it out yet. But the notion is that
(25:51):
they will use existing what would you say, metrics that
are used, for instance, in divorce and that sort of
thing family law, where they've already had to deal with
defined benefits and how they're divided how much they're worth.
So they're reverse engineered these things and they say, well,
(26:12):
if you get, if you get you know, ninety thousand
a year, then that is worth so much because you
have to have so much to make ninety thousand a
year in the investment markets. How on earth are they
going to do it? Hugh, you know everything, what's the answer.
Speaker 4 (26:29):
I think there's going to be a great difficulty in
valuing a lot of these things.
Speaker 3 (26:34):
So I agree they if women live.
Speaker 4 (26:37):
Longer than men, which statistically they do, how do we
value their benefit versus you know, the husband's benefit.
Speaker 3 (26:46):
What do we do around that? The mechanisms that they're
going to need to be able to.
Speaker 4 (26:49):
Implement this are going to be very very difficult, very
very challenging. And it's very similar to also outside of
the defined benefit, But how do they how are they
going to value you antiques.
Speaker 2 (27:01):
Collectibles like cars, like.
Speaker 3 (27:04):
The whole implementation.
Speaker 1 (27:06):
Of it's this legislation night merriage.
Speaker 4 (27:09):
It's gonna be it's fraught with difficulty and quite this
is then, this is why all the listeners, this is
why all the all the industry bodies are advocating. Can
we at least kick it, kick the can down the
road to year and get some clarity on how we're
going to do this. You don't have to do anything
before you know, the end of this financial year or
even the start of next financial year. But as it
(27:30):
currently stands, we're going to have to do something before
the end of next financial year.
Speaker 1 (27:34):
As it currently stands, it's due to come into effect
on July one, with the first collection point. You'd be
like being July twenty twenty six, isn't that right? Yes,
so stand by. But as I say each day, there's
no clarification or any signal from the treasure that's on timing,
on the indexation, on the unrealized gains. Couldn't they just
(28:02):
do a deeming thing like they have for the pensions anyway,
So when the pension access to the pension, they don't
count how much everyone's got in investments. They just say
how much have you got there on the side, and
the presence says, I've got one hundred thousand dollars and
they say, okay, well we reckon that makes you know,
two point five percent a year, which is which is,
(28:22):
which is a very generous way of doing it. But
they just deem and amount is made. Couldn't they do that?
Speaker 3 (28:31):
Sometimes common sense isn't common James.
Speaker 4 (28:35):
The SMSF association, they went through looking at it, at
the difference between the unrealized the current method that they're
they're proposing, and the demon, and there wasn't much in
it in terms of tax revenue. So the ATO would
have got thereabouts the same amount, and it would have
been something that could have been administered. I think I
think there was some comments around, well what if you
(28:57):
have negative years? You know that the demon is disadvantageous
to the approach that they're that they're advocating for. But
I think a deeming approach would have been common sense.
Yeah right, and you know, the AHA would have won.
So that that one is a perplexing one. Why they
(29:17):
didn't do.
Speaker 1 (29:17):
That it is indeed, So we'll leave it there and
we'll see where they go. I hope that was useful
to you. I think anyone who who went, especially as
we took the listeners questions, there we've got a clear picture.
Now it's a new tax. There is no tax paid
up to about two million on super I say up
to about two million because it's one point nine now
(29:38):
goes to two million on July one. There is then
fifteen percent tax after that figure sort of sky is
the limit at the moment, and they're going to come
in and say hang on now when it goes after
three million, there's a new tax on top of the
fifteen that's already there, and that brings it to thirty
combined tax. The issue is not some the number there,
(30:00):
it's the way they're going to do it on unrealnized
gains paper games. I think you did a very good
example at the very start about how that is. It's
really unfair, it's a bad technique, it's messy, it's ridiculously
difficult to try and to try and compute accurately. And
what did you call it a violation of the tax system?
Was that it a violation of the tax system?
Speaker 3 (30:23):
There you are principle.
Speaker 1 (30:24):
It's also on indexed, which again you know, I mean
it's a retirement tax. The pension ist is not just
index The pension is indexed twice a year. So I
think there's a lot on the table here. It's hard
to believe it's going to start in July one, but
we have to work on the basis that it will.
We'll see in the weeks ahead if the government budge
(30:44):
on this. H. Robinson, thanks very much for for heroic
effort trying to explain it to us all.
Speaker 4 (30:52):
Thank you very much for having me. I hope it
provided some valuable insights to your listeners.
Speaker 2 (30:56):
I'm sure.
Speaker 1 (30:57):
Thanks everyone for sending in your questions. I couldn't use
them all, of course, but I was able to I think,
capture the main issues from those questions that we had today.
Thanks a lot for listening. Keep your emails rolling the
money puzzle at the Australian dot com dot au. Talk
to you soon.
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