August 14, 2025 • 25 mins
The new super tax may dominate the headlines, but for most investors with less than $3m in super, a bigger headache is navigating increasingly risky marketing promotions in finance.Off the back of the recent First Guardian scandal - where some investors were offered 'free super reviews' - today we take a hard look at booming business of luring people into switching super funds.
Liam Shorte of the Sonas Wealth Group joins Associate Editor - Wealth James Kirby in today's episode.
In today's episode, we cover:
- New super tax facing delays
- ‘Free Super Reviews’ could turn out expensive
- An easy way to check if your fund is doing well
- Optimising tax-free income outside super
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 (00:12):
Hello and welcome to The Australian's Money Puzzle podcast. I'm
James Kirby. Welcome aboard everybody. If you're trying to figure
out if or when the new supertax may affect you, well,
the first thing to tell you is this, this completely
daft new tax. Most likely it's going to be delayed.
More than that, it's unlikely to work as the government planned,
(00:34):
and we'll tell you how that is in a moment.
We also need to warn you about three super reviews.
You may not have heard of them, but you may
have heard of the first Guardian scandal, which is breaking
literally and unfolding as we speak. I also have an
exceptionally good batch of questions from listeners this week, and
to help me with all this is an exceptionally good
(00:56):
financial advisor. It's Liam Short of the Saunas Wealth Group.
How are you Liam?
Speaker 2 (01:03):
Fine? Thank you, James. Great to be richer again.
Speaker 1 (01:05):
Our listeners are familiar with the basics. Here right, there's
a new super tax. It's supposed to be coming in.
Here's the thing. Here's the first thing to tell you, folks.
It's supposed to come in and be started basically, be
effective from July one this year. Here we are, it's
mid August. No sign of it, by the way, no
sign of it even on the lists in Parliament. There
is no deal done on this yet. There is no
(01:27):
detail on this yet. So there's a lot basically to
get a handle on. But I think Liam, there's a
couple of things that you wanted to clarify with people.
I'll explain to listeners why legislative Lee it's delayed, and
you might tell us the realities of being an advisor,
of being an investor in this area. So, folks, in
terms of Parliament, there's no sign of it yet. It's
(01:49):
not listed. As you know, the Economic Summit is on
next week on the nineteenth of August, so it's unlikely
to be dropped, you know, through that or before that.
So it's a question of when they actually get the
legislation through. If they do, there's going to be a
fair bit of backdating about it. But we have to
work on the basis that it is going to happen
because they've got they've got the election mandate to do so.
(02:12):
So Lim is just going to explain now, assuming it's
coming in later than we think. There's also some aspects
Lim you were telling me during the week, which is
that SMSFS, which is the main target of this new tax,
they don't file returns in the day on file. It's
not like Australian super comes out in August and says
here's our results to the year end of July, a
(02:34):
week or two afterwards. I mean roughly when do SMSF
results come in? How many months after the close of
financial year do they come in?
Speaker 2 (02:45):
Usually nine to eleven months. Eleven months is a maximum.
They must be in by May of the following tax year.
But because with SMSFS and like your personal taxes, a
lot of deductions, there's a lot of rental statements, you've
got to get valuations on proper and things like that,
it's often, you know, March April May of the next
year that the financials are available. You know. So, for example,
(03:07):
if we're trying to plan for this division two ninety six,
if it's coming in on first of July twenty five,
in a lot of cases we may not have the
figures we need to work with until March or April
next year, and that leaves us two months to the
end of the year. Because thirty June twenty twenty six
is the crucial date on when that three million cap.
Speaker 1 (03:26):
They're going to start collecting. Basically from July one, twenty
twenty six, they're going to start collecting the revenue from
this tax for the previous twelve months, being the twelve
months we're in. Here's the problem, six weeks of it
or have already passed as the legislative delay problem. And
then on top of that is liam Is saying SMSF
don't file their returns generally for a long time after
(03:50):
the end of the financial year. Look, you're looking roughly
at next May when they're coming in. I got to
tell you there I see no chance on earth that
this news will operate as planned by the government knowing
what we know just now. That's a logjam. Is that
a fair description of what's coming down on this one?
Speaker 2 (04:10):
Look, it will be a logjam. But my fear is
that they they want to put it in on first
of July twenty twenty five. That keep saying we told
you about this in twenty twenty three, But you can't
expect people to make decisions about their finances until they
see the legislation. As you said that they've not agreed
it totally yet, but if they need to change it
from one twenty five to one twenty six, that may
(04:32):
require them to go back and redo the legislation, which
they don't want to do. So I think they're going
to be really stubborn and try and push it through
on one July twenty five, and it's looking that that
won't be until the October sitting of Parliament, so you're
talking five months into the text here.
Speaker 1 (04:50):
Wow, we really are looking at trouble here. But for
most listeners, Liam, I think the important thing is not
everyone's gonna be in this catchment, right, So fair enough,
not everyone has three million super. In fact, only a
minority of people have three million super. But I think
what's really interesting that needs to be understood that a
lot of people are worried about it, and they're worried
that they'll be affected by it, or they're worried that
(05:11):
in twenty years they'll be affected by it, et cetera,
and that they are entirely reasonable fears because it's not indexed,
because it's poorly understood, because it's poorly legislated, it is
poorly designed, and now it's poorly executed before it even
gets going but the point you've really been keen to
make to your own people and your clients who come
(05:33):
in because they are in that frustrated position like everyone
that's saying, how does it all work? Just reiterate, would
you for our listeners about this, that it's wrong to
say it's and it's a thirty percent that fifteen percent
tax suddenly doubles thirty percent. We've got all sorts of
misapprehensions about it. It's a completely new tax done in
(05:55):
a completely new way that sits on top of the
entire tax structure that exists. Have I got that part right?
Speaker 2 (06:02):
Yeah? So basically, you have your normal income tax in
your SMSF, so in your accumulation you pay up to
fifteen percent. In pension phase you pay nil, and you
actually get a refund of franking credits. So it's really nice.
So somebody could have three million in their superfund. They
can have up to two million at the moment in
pension phase transferred to pension phase, and that can grow.
(06:25):
So you could have that portion two thirds of your
current balance paying no tax whatsoever if income tax, and
maybe you know, one third of it paying fifteen percent.
So that's the income tax in the superfund, the new
division two ninety six. It's a personal tax. It's not
a tax on the superfund. It's a tax on your
personal balance in the superfund, and it applies to the
(06:47):
growth in earnings on the balance over three million. So
and the portion of that growth that applies of the
earnings that apply to the amount that's over the three million.
So if you've got three million in year account at
started a year, four million, at the end of the year,
you've had one million, using simply say one million growth.
So then your tax to fifteen percent on twenty five
(07:10):
percent of that one million.
Speaker 1 (07:12):
Let me see, I assume I'm a listener, right, and
I've been hanging on there really trying to understand it.
In super once you retire, et cetera, you don't pay
tax on your earnings until you get to two million.
Once it's over two million, you pay fifteen percent on
those earnings.
Speaker 2 (07:30):
No, you can move two million to pension phase and
your pension can grow, so it's you only pay You
pay no tax on the two million plus any growth
in that portion of it.
Speaker 1 (07:43):
Okay, so once you up to two million, you don't
pay tax. By the way, once the two million is in.
It can keep growing. This is just trying to keep
it simple. Now the government have come in and said,
hang on a second, we're going to we're going to
raft up the tax higher on super and up to
two million that is the transfer balance, that is the
amount you start to pension on. And it can keep growing, right,
(08:04):
But just for to keep some sense of logic here,
up to two million, it's tax free. Over two million,
the earnings become fifteen percent and new rule is coming in,
which is once it's over three million, another fifty to
fifteen percent tax has arrived. But it's a bit more
(08:25):
than two Fifteen's make thirty because the new tax division
two nine six is a completely new tax. It's also
based on on realized gains, which is the movement in
your balance over the year. But the tax as such
only applies to the earnings of the little bits that
are over three the earnings on the amounts over three. My,
(08:49):
oh my, how do they come up with this? I mean,
it's already a very complicated system. It must be marvelous
for people like you. You've got work for the rest
of your life. You could get harder fifty people.
Speaker 2 (08:58):
Tomorrow's looking like that. At the moment, it is very complicated,
but look, we are coming out with calculators there are
We are trying to show people what the effects are.
And my main thing to people to say, plan, but
don't move at the moment. Don't do any rush movements.
Let's get the legislation in place. We can show you
(09:18):
roughly at the moment some of the outcomes in different scenarios.
If you're funded really well and had major growth or
had you're just small bro, we can give you an
idea of what the tax is going to be so
that you don't need to panic.
Speaker 1 (09:30):
I understand what you say, don't panic, and you should
never panic anyway as an investor. But why do you
say don't do anything because it's going to happen, right
They've been re elected. It's in front of parliament. It's
only a question of the details.
Speaker 2 (09:42):
The main thing to understand is that it's the thirty
to June twenty twenty six balance that desides whether you're
going to be affected by this tax. If you can
do something before thirty of June twenty twenty six to
get your balance below three million on that date, you
forget about the tax completely.
Speaker 1 (10:01):
Yeah, okay, and justice only on one other thing, Leon,
which is so important. As you pointed out, this is
a new tax. It's based on on realized gains, and
it's a personal tax. The way to understand it, I
think if anyone is already paying Division two ninety three,
where you get basically penalized for a high income if
(10:21):
you contribute to super. The way those bills come in
is you get a bill as a person and you
can pay it as a person, or you can pay
it out of your super fund. And this new one,
this three million tax, will be the same. You can
pay it as a person or you can pay it
out of your super fund. But you got to pay
it as first thing, and you can carry it forward,
(10:42):
for instance, if you have losses, you can carry the
losses forward like just like CGT for instance. So that's
another parallel. I think that's there's some logical elements to this,
but it is as I say, it's staffed. There was
easier ways to bring in a new tax for people
who have a lot of money and super Why they
went to such extraordinary lengths to make it complicated, I
(11:04):
don't know, Liam, and I think we understand it. We
did our best in that segment. I hope it was
useful to you. Something much easier to understand coming up
in our second segment, which is free reviews of Super?
Have you been offered a free review of Super? Have
you seen adverts? Have you seen promotions on the internet?
What are they? Should you go near them? Back in
a moment, Hello and welcome back to the Australians Money
(11:35):
Puzzle podcast. Only someone like Liam Short could even have
walked the title we just walked explaining the new supertext
there in segment one. Much easier to understand the dangers
of the second segment theme, which is free Super reviews.
Nothing in life is free, Liam, tell us about these
free Super reviews? What have you got to say?
Speaker 2 (11:56):
Yeah? Look, Super innuation is a big honeypop. There's a
lot of people looking to make some money out of it. Okay,
so what's But what's happening now is the drive of
social media and call calls. There are now marketing firms
running these systems. Okay, what they do is they're offering
you a free review. They're offering you know, telling you
that you know you should compare your Super. It's a
(12:16):
responsible thing to do. But what they do then is
they funnel you They sell you to another advisor, to
an advisor, okay. In often in these cases it's actually
a marketing firm that's actually connected specifically to an advice group,
and that's what happened with First Guardian. So basically they
pre sell you that you must do the review, and
(12:37):
they tell you that they've done the review and you
can do much better. Let us put you in touch
with an advisor. And then suddenly put in touch with
an advisor, and they will be charging you a fee
for what for to actually move you to a better fund. Now,
in a lot of cases when they're connected like these,
they're recommending you're going to funder a platform where they're
managing the investments, and they're saying that they can do
(13:00):
better than you've done in your industry fund or your
retail fund. What they're doing is they're basically, you know,
they're clipping the ticket along the way on everything. Okay,
And then often with the investments that they're recommending, they
don't have a major track record. So I'm saying that
people look at the five, seven, and ten year track
record of your superfund before you start considering going to
(13:20):
anybody who's promising you anything, because in truth, we're advisors,
we're you know, we can't determine how the market's going
to perform. But if you've been in an industry fund
or a retail fund that's delivered more than seven and
a half r eight and a half percent per year
for the last five or seven years, yeah, your first
question is why why should I move? Why would I move?
(13:42):
And the problem is we've seen a lot of these
have moved to scams.
Speaker 1 (13:47):
It's terrible, isn't it. I mean, you've got to say that.
The first thing is there's nothing free, right, So if
someone approaches you, or more typically a promotion is put
in front of you, possibly on social media, on the
internet and a free superview, you first question, why am
I being offered something for free? Nothing's free in financial services.
(14:07):
Number two, let's even assume that they review, and let's
even assume that the fund is below average, Well where
are they going to send you? Are you making the
decision or are they making the decision? Why did they
do it in the first place. There's no way they're
doing it out the goodness of their hearts.
Speaker 2 (14:26):
Liam not what the amount of compliance that we have
to do nowadays, the amount of work we have to
do to on board a client. Nothing's for free.
Speaker 1 (14:34):
They're doing it because they want to send you to
something else. This is as soft as we can be
on this because we don't want to be sued by anyone.
But they are doing it to get you to change
your ways. They're not asking you to review your super.
They're asking you to move your super and find justification
for it. And the big question is where are they
asking you to move to? And we have evidence of
late in the first guard in super collapse, which is
(14:57):
the worst collapse we've seen this century in Australian financial services,
still unfolding, and this was going on in the middle
of that collapse, was it Yep?
Speaker 2 (15:06):
And so they were not just targeting people in retail
funds or they were targeting everybody. They had a solution
for everybody, and that solution was funneling it into their funds.
Speaker 1 (15:18):
I bet they never said we've reviewed your super and
everything's fine. That's it, say where you are.
Speaker 2 (15:24):
So one of the tips I would say to people is,
if you go with one of these people, give somebody
else a third party you call, even if it's just
your super fund or go to chant West and run
a comparison of your superfund with some other ones, just
to see how it's been performing over the years. You
can do these for free.
Speaker 1 (15:42):
Yes, for free. Oh look, folks, even easier. I mean
just go on to your pet AI, sit or Google
and say what was the median return of the average
Australian super fund last year? And if your number is
anywhere near that then I'd be really slow to move.
That's not hard, it doesn't cost anything, it's free. We'll
(16:02):
take a break. We've got some great questions back in
a moment. Hello, Welcome back to the Australians Money Puzzle Podcast.
James Kirby here with Liam short sho Orte of the
(16:23):
Sounas Wealth Group. Now, in the first segment we were
talking about the new supertax. The main point I wanted
to make to you there, folks, I want to make
to you is that this is going to be delayed.
It's going to run much later than people realized. We're
already well into the first year in which it's supposed
to be effectively operating, and that the legislation hasn't even
been put through parliament. Part one, Part two was that
(16:45):
Liam makes the point which probably hasn't been med enough.
It isn't that the high wealth end of super the
taxes go from fifteen to thirty percent. That's not the
way to think about it. The way to think about
it is, there is an existing tax of fifteen percent
up to two million. They are introducing a new one
where over three there's an existing tax of fifteen percent.
(17:09):
Over two million, they're introducing a new one where over
three million, a whole new tax comes in. It happens
to be at fifteen percent, but it's based on unrealized gains.
It comes in a different way. You literally get a statement.
You're going to get a statement in the post or
through the email which says you've got a Division two
nine six tax bill. This is what it is because
(17:31):
you had these earnings on these amounts of over three million,
and we want it now. It's a personal tax paid
by you. If you can't get it from your cassion,
the bank, you've got to take it out of your
super fund. That's how it's going to work. This is
why people are so upset about this fund. This is
super change to super funds because it's in a whole
(17:52):
new tax methodology basically being applied to super which was
never seen before, unrealized gains. That's what you want from
Jeff Wilson across to Liam, who's with me today is
annoyed about all right? Questions, Evan, can you explain the
types of trust briefly and what they're used for, Unit trust,
investment trust, and discretionary trust in particular, could you briefly
(18:16):
explain the difference between those key trusts, because people do
talk about trusts loosely, Liam.
Speaker 2 (18:22):
So a unit trust probably a good example of that
is a managed fund like a Platinum or a Magellan,
where you buy units in the trust and you get
a share of profits for that year based on your
units in the trust. On a smaller scale, it might
be something like three business partners open a trust to
own their business and each owned thirty three percent. So
(18:43):
it's a fixed demand and profits are divided that way,
so it's fixed. If they want to bring a new capital,
new units are issued to the person that brings in
the new capital. Okay, So that's the basic fixed trust.
What we see more often used nowadays is called discretionary
trusts or family trusts, and that's where the trustee each
(19:04):
year chooses who the beneficiaries will be to receive the
trust income and any capital distributions, and they do that
on an annual basis, so it's at the full discretion
of the trustee to decide who to do it. So
if there's mom and dad and say an eighteen year
old in university and a thirty year old who's a
lawyer on big income, the parents might go, okay, well,
(19:24):
we'll allocate a certain amount to mom and dad up
to say the limit of the thirty thirty percent tax
bracket at one hundred and thirty five. Then they will
allocate to the eighteen year old because they've they're earning
very little or you know, and they allocates of money
to them, and they'll decide not to allocate anything to
the thirty year old because they're already on a big
taxable income. So the idea is you've got that discretion
(19:48):
to be able to push the income where you want to.
Speaker 1 (19:51):
And most family trusts are run like that. I think
is that basically the.
Speaker 2 (19:56):
ATO again has been clamping down on them. So if
you are going to allo cape money to an eighteen
year old or a nineteen year old, you want to
make sure that you're saying, what that you've spent money
on you that money's gone to those people. So I
get clients to keep a track record of paying for
their car insurance, paying for the car, paying for their
phone bills, things like that, showing that the money actually
(20:18):
has been used for that.
Speaker 1 (20:19):
Person's This will as the new supertax comes in, or
whatever final details it comes in, it will sure as
hell come in. We'll find that trust become more popular
and we'll probably come back to them a retty soon.
All right, there's one other question I wanted to just
zone in on. Liam was from Mark. He says financial
advisor Doug Turek, or at least advisor Doug Churek mentioned
(20:39):
in last week's podcast you can earn up the twenty
five thousand before paying tax. But he then, Mark, reasonably
enough says, I looked at the ATO tax scales and
the first eighteen thousand, two hundred is all you can
earn as an individual in Australia at any age tax free.
(21:02):
How what's the explanation of the gap between the eighteen
and the twenty five? Liam's It's true, I imagine, first
of all, but could you explain yep.
Speaker 2 (21:11):
So the eighteen thousand, two hundred. That's everybody's tax free threshold.
But on top of that, the government have some other benefits.
One's called the Low Income Tax Officets for people who
are on the low income. When you combine that with
the eighteen thousand, two hundred, you can earn up to
go twenty two eight hundred and sixty six each year
without paying any tax. Okay, that's if you're under six.
(21:33):
That's for everybody. Okay, So if somebody was earning twenty
five thousand, they would the first twenty two eight hundred
and eighty six would pay no tax on it.
Speaker 1 (21:41):
So if I've got three million in Super, just to
make it really just make it really juicy. If I've
got the three million in Super, I've got some but
outside I've money outside Super, nothing to do with my
super funds, just sitting there in my bank. Can I
earn twenty two thousand a year tax free?
Speaker 2 (22:01):
Yes you can?
Speaker 1 (22:02):
Can I be classified as low income offset though I've
got three million Super?
Speaker 2 (22:06):
And even better than that, James, if you're over sixty seven,
you get also on top of the low income tax
off set, there's also the Senior Australian Pensions and tax
off set, which if you for a couple, you can
basically earn about thirty eight hundred and eighty eight without
paying any tax. So imagine somebody who's got You've got
a couple, they've got two million in SUPER each, they
(22:27):
have to take five percent pension, there's one hundred thousand
tax free out each during the year, and they might
have an investment property outside that's bringing in sixty thousand
of rental income. All of that can be completely tax free.
So you're talking two hundred and sixty thousand dollars a
year tax free because of that system.
Speaker 1 (22:46):
So just to clarify, my money in Super is a
separate issue. Outside of Super, as an individual, up to
sixty seven, I can have twenty two thousand a year
tax free, and over sixty seven, as an individual I
can have I can earn thirty five thousand a year
tax free, even if I had to say three million
in Super. Well, you do wonder whether money is going
(23:10):
to slide out of Super. You do wonder whether people
are going to let money slide out of Super and
optimize these perhaps under used tax scales that were never
intended of course for multi millionaires.
Speaker 2 (23:25):
But hey, but More importantly, it's important that people understand
that they should try and get as much into Super
as possible to basically have that in tax free, so
they pay as little as possible outside on what they
have outside. Because being Australians, most people, you know, they
try to have an investment property or they have assets
outside of Super as well. They don't totally trust the
(23:46):
government for bringing in taxes like this. So the whole
important thing is to try as an individual to have
two pots of money your Super pension plus your money outside.
As a couple to have four pots and to be
delivering as much of your income tax free as possible
over the years.
Speaker 1 (24:03):
So you wonder, really it's interesting about that. Of course
the money and Super can't get back out until your tire,
but it's really worth knowing that you can earn as
a single person. I'll just repeat the numbers because they're
just extraordinary. You can earn twenty two thousand to year
tax free as an individual outside Super, and thirty five
thousand once you're over sixty seven. That's the earnings tax free. Okay,
(24:26):
keep that in mind, folks. I think that's one of
the most interesting things that have popped up all year, okay, Liam,
short of Sonaus. What does it mean again? Knowledge? Wealth?
Speaker 2 (24:35):
It's the Irish for good, prosperity, wealth and happiness.
Speaker 1 (24:39):
There you go, prosperity, wealth and happiness. This is what
the show's all about. Thank you very much, Liam, great
to talk to you. We'll talk again soon. Thank you, James,
and thank you folks. Let's have some more emails and
do keep the I love the idea of putting several
questions into an email. I noticed it's happening all the
time now regularly keep that up. If you're going to
send in a question, send in a few. Why not.
You've taken the effort. The email mail is the money
(25:01):
puzzle at the Australian dot com dot au. Talk you soon.
Hello and welcome to The Australian's Money Puzzle podcast. I'm
James Kirby. Welcome aboard everybody. If you're trying to figure
out if or when the new supertax may affect you, well,
the first thing to tell you is this, this completely
daft new tax. Most likely it's going to be delayed.
More than that, it's unlikely to work as the government planned,
(00:34):
and we'll tell you how that is in a moment.
We also need to warn you about three super reviews.
You may not have heard of them, but you may
have heard of the first Guardian scandal, which is breaking
literally and unfolding as we speak. I also have an
exceptionally good batch of questions from listeners this week, and
to help me with all this is an exceptionally good
(00:56):
financial advisor. It's Liam Short of the Saunas Wealth Group.
How are you Liam?
Speaker 2 (01:03):
Fine? Thank you, James. Great to be richer again.
Speaker 1 (01:05):
Our listeners are familiar with the basics. Here right, there's
a new super tax. It's supposed to be coming in.
Here's the thing. Here's the first thing to tell you, folks.
It's supposed to come in and be started basically, be
effective from July one this year. Here we are, it's
mid August. No sign of it, by the way, no
sign of it even on the lists in Parliament. There
is no deal done on this yet. There is no
(01:27):
detail on this yet. So there's a lot basically to
get a handle on. But I think Liam, there's a
couple of things that you wanted to clarify with people.
I'll explain to listeners why legislative Lee it's delayed, and
you might tell us the realities of being an advisor,
of being an investor in this area. So, folks, in
terms of Parliament, there's no sign of it yet. It's
(01:49):
not listed. As you know, the Economic Summit is on
next week on the nineteenth of August, so it's unlikely
to be dropped, you know, through that or before that.
So it's a question of when they actually get the
legislation through. If they do, there's going to be a
fair bit of backdating about it. But we have to
work on the basis that it is going to happen
because they've got they've got the election mandate to do so.
(02:12):
So Lim is just going to explain now, assuming it's
coming in later than we think. There's also some aspects
Lim you were telling me during the week, which is
that SMSFS, which is the main target of this new tax,
they don't file returns in the day on file. It's
not like Australian super comes out in August and says
here's our results to the year end of July, a
(02:34):
week or two afterwards. I mean roughly when do SMSF
results come in? How many months after the close of
financial year do they come in?
Speaker 2 (02:45):
Usually nine to eleven months. Eleven months is a maximum.
They must be in by May of the following tax year.
But because with SMSFS and like your personal taxes, a
lot of deductions, there's a lot of rental statements, you've
got to get valuations on proper and things like that,
it's often, you know, March April May of the next
year that the financials are available. You know. So, for example,
(03:07):
if we're trying to plan for this division two ninety six,
if it's coming in on first of July twenty five,
in a lot of cases we may not have the
figures we need to work with until March or April
next year, and that leaves us two months to the
end of the year. Because thirty June twenty twenty six
is the crucial date on when that three million cap.
Speaker 1 (03:26):
They're going to start collecting. Basically from July one, twenty
twenty six, they're going to start collecting the revenue from
this tax for the previous twelve months, being the twelve
months we're in. Here's the problem, six weeks of it
or have already passed as the legislative delay problem. And
then on top of that is liam Is saying SMSF
don't file their returns generally for a long time after
(03:50):
the end of the financial year. Look, you're looking roughly
at next May when they're coming in. I got to
tell you there I see no chance on earth that
this news will operate as planned by the government knowing
what we know just now. That's a logjam. Is that
a fair description of what's coming down on this one?
Speaker 2 (04:10):
Look, it will be a logjam. But my fear is
that they they want to put it in on first
of July twenty twenty five. That keep saying we told
you about this in twenty twenty three, But you can't
expect people to make decisions about their finances until they
see the legislation. As you said that they've not agreed
it totally yet, but if they need to change it
from one twenty five to one twenty six, that may
(04:32):
require them to go back and redo the legislation, which
they don't want to do. So I think they're going
to be really stubborn and try and push it through
on one July twenty five, and it's looking that that
won't be until the October sitting of Parliament, so you're
talking five months into the text here.
Speaker 1 (04:50):
Wow, we really are looking at trouble here. But for
most listeners, Liam, I think the important thing is not
everyone's gonna be in this catchment, right, So fair enough,
not everyone has three million super. In fact, only a
minority of people have three million super. But I think
what's really interesting that needs to be understood that a
lot of people are worried about it, and they're worried
that they'll be affected by it, or they're worried that
(05:11):
in twenty years they'll be affected by it, et cetera,
and that they are entirely reasonable fears because it's not indexed,
because it's poorly understood, because it's poorly legislated, it is
poorly designed, and now it's poorly executed before it even
gets going but the point you've really been keen to
make to your own people and your clients who come
(05:33):
in because they are in that frustrated position like everyone
that's saying, how does it all work? Just reiterate, would
you for our listeners about this, that it's wrong to
say it's and it's a thirty percent that fifteen percent
tax suddenly doubles thirty percent. We've got all sorts of
misapprehensions about it. It's a completely new tax done in
(05:55):
a completely new way that sits on top of the
entire tax structure that exists. Have I got that part right?
Speaker 2 (06:02):
Yeah? So basically, you have your normal income tax in
your SMSF, so in your accumulation you pay up to
fifteen percent. In pension phase you pay nil, and you
actually get a refund of franking credits. So it's really nice.
So somebody could have three million in their superfund. They
can have up to two million at the moment in
pension phase transferred to pension phase, and that can grow.
(06:25):
So you could have that portion two thirds of your
current balance paying no tax whatsoever if income tax, and
maybe you know, one third of it paying fifteen percent.
So that's the income tax in the superfund, the new
division two ninety six. It's a personal tax. It's not
a tax on the superfund. It's a tax on your
personal balance in the superfund, and it applies to the
(06:47):
growth in earnings on the balance over three million. So
and the portion of that growth that applies of the
earnings that apply to the amount that's over the three million.
So if you've got three million in year account at
started a year, four million, at the end of the year,
you've had one million, using simply say one million growth.
So then your tax to fifteen percent on twenty five
(07:10):
percent of that one million.
Speaker 1 (07:12):
Let me see, I assume I'm a listener, right, and
I've been hanging on there really trying to understand it.
In super once you retire, et cetera, you don't pay
tax on your earnings until you get to two million.
Once it's over two million, you pay fifteen percent on
those earnings.
Speaker 2 (07:30):
No, you can move two million to pension phase and
your pension can grow, so it's you only pay You
pay no tax on the two million plus any growth
in that portion of it.
Speaker 1 (07:43):
Okay, so once you up to two million, you don't
pay tax. By the way, once the two million is in.
It can keep growing. This is just trying to keep
it simple. Now the government have come in and said,
hang on a second, we're going to we're going to
raft up the tax higher on super and up to
two million that is the transfer balance, that is the
amount you start to pension on. And it can keep growing, right,
(08:04):
But just for to keep some sense of logic here,
up to two million, it's tax free. Over two million,
the earnings become fifteen percent and new rule is coming in,
which is once it's over three million, another fifty to
fifteen percent tax has arrived. But it's a bit more
(08:25):
than two Fifteen's make thirty because the new tax division
two nine six is a completely new tax. It's also
based on on realized gains, which is the movement in
your balance over the year. But the tax as such
only applies to the earnings of the little bits that
are over three the earnings on the amounts over three. My,
(08:49):
oh my, how do they come up with this? I mean,
it's already a very complicated system. It must be marvelous
for people like you. You've got work for the rest
of your life. You could get harder fifty people.
Speaker 2 (08:58):
Tomorrow's looking like that. At the moment, it is very complicated,
but look, we are coming out with calculators there are
We are trying to show people what the effects are.
And my main thing to people to say, plan, but
don't move at the moment. Don't do any rush movements.
Let's get the legislation in place. We can show you
(09:18):
roughly at the moment some of the outcomes in different scenarios.
If you're funded really well and had major growth or
had you're just small bro, we can give you an
idea of what the tax is going to be so
that you don't need to panic.
Speaker 1 (09:30):
I understand what you say, don't panic, and you should
never panic anyway as an investor. But why do you
say don't do anything because it's going to happen, right
They've been re elected. It's in front of parliament. It's
only a question of the details.
Speaker 2 (09:42):
The main thing to understand is that it's the thirty
to June twenty twenty six balance that desides whether you're
going to be affected by this tax. If you can
do something before thirty of June twenty twenty six to
get your balance below three million on that date, you
forget about the tax completely.
Speaker 1 (10:01):
Yeah, okay, and justice only on one other thing, Leon,
which is so important. As you pointed out, this is
a new tax. It's based on on realized gains, and
it's a personal tax. The way to understand it, I
think if anyone is already paying Division two ninety three,
where you get basically penalized for a high income if
(10:21):
you contribute to super. The way those bills come in
is you get a bill as a person and you
can pay it as a person, or you can pay
it out of your super fund. And this new one,
this three million tax, will be the same. You can
pay it as a person or you can pay it
out of your super fund. But you got to pay
it as first thing, and you can carry it forward,
(10:42):
for instance, if you have losses, you can carry the
losses forward like just like CGT for instance. So that's
another parallel. I think that's there's some logical elements to this,
but it is as I say, it's staffed. There was
easier ways to bring in a new tax for people
who have a lot of money and super Why they
went to such extraordinary lengths to make it complicated, I
(11:04):
don't know, Liam, and I think we understand it. We
did our best in that segment. I hope it was
useful to you. Something much easier to understand coming up
in our second segment, which is free reviews of Super?
Have you been offered a free review of Super? Have
you seen adverts? Have you seen promotions on the internet?
What are they? Should you go near them? Back in
a moment, Hello and welcome back to the Australians Money
(11:35):
Puzzle podcast. Only someone like Liam Short could even have
walked the title we just walked explaining the new supertext
there in segment one. Much easier to understand the dangers
of the second segment theme, which is free Super reviews.
Nothing in life is free, Liam, tell us about these
free Super reviews? What have you got to say?
Speaker 2 (11:56):
Yeah? Look, Super innuation is a big honeypop. There's a
lot of people looking to make some money out of it. Okay,
so what's But what's happening now is the drive of
social media and call calls. There are now marketing firms
running these systems. Okay, what they do is they're offering
you a free review. They're offering you know, telling you
that you know you should compare your Super. It's a
(12:16):
responsible thing to do. But what they do then is
they funnel you They sell you to another advisor, to
an advisor, okay. In often in these cases it's actually
a marketing firm that's actually connected specifically to an advice group,
and that's what happened with First Guardian. So basically they
pre sell you that you must do the review, and
(12:37):
they tell you that they've done the review and you
can do much better. Let us put you in touch
with an advisor. And then suddenly put in touch with
an advisor, and they will be charging you a fee
for what for to actually move you to a better fund. Now,
in a lot of cases when they're connected like these,
they're recommending you're going to funder a platform where they're
managing the investments, and they're saying that they can do
(13:00):
better than you've done in your industry fund or your
retail fund. What they're doing is they're basically, you know,
they're clipping the ticket along the way on everything. Okay,
And then often with the investments that they're recommending, they
don't have a major track record. So I'm saying that
people look at the five, seven, and ten year track
record of your superfund before you start considering going to
(13:20):
anybody who's promising you anything, because in truth, we're advisors,
we're you know, we can't determine how the market's going
to perform. But if you've been in an industry fund
or a retail fund that's delivered more than seven and
a half r eight and a half percent per year
for the last five or seven years, yeah, your first
question is why why should I move? Why would I move?
(13:42):
And the problem is we've seen a lot of these
have moved to scams.
Speaker 1 (13:47):
It's terrible, isn't it. I mean, you've got to say that.
The first thing is there's nothing free, right, So if
someone approaches you, or more typically a promotion is put
in front of you, possibly on social media, on the
internet and a free superview, you first question, why am
I being offered something for free? Nothing's free in financial services.
(14:07):
Number two, let's even assume that they review, and let's
even assume that the fund is below average, Well where
are they going to send you? Are you making the
decision or are they making the decision? Why did they
do it in the first place. There's no way they're
doing it out the goodness of their hearts.
Speaker 2 (14:26):
Liam not what the amount of compliance that we have
to do nowadays, the amount of work we have to
do to on board a client. Nothing's for free.
Speaker 1 (14:34):
They're doing it because they want to send you to
something else. This is as soft as we can be
on this because we don't want to be sued by anyone.
But they are doing it to get you to change
your ways. They're not asking you to review your super.
They're asking you to move your super and find justification
for it. And the big question is where are they
asking you to move to? And we have evidence of
late in the first guard in super collapse, which is
(14:57):
the worst collapse we've seen this century in Australian financial services,
still unfolding, and this was going on in the middle
of that collapse, was it Yep?
Speaker 2 (15:06):
And so they were not just targeting people in retail
funds or they were targeting everybody. They had a solution
for everybody, and that solution was funneling it into their funds.
Speaker 1 (15:18):
I bet they never said we've reviewed your super and
everything's fine. That's it, say where you are.
Speaker 2 (15:24):
So one of the tips I would say to people is,
if you go with one of these people, give somebody
else a third party you call, even if it's just
your super fund or go to chant West and run
a comparison of your superfund with some other ones, just
to see how it's been performing over the years. You
can do these for free.
Speaker 1 (15:42):
Yes, for free. Oh look, folks, even easier. I mean
just go on to your pet AI, sit or Google
and say what was the median return of the average
Australian super fund last year? And if your number is
anywhere near that then I'd be really slow to move.
That's not hard, it doesn't cost anything, it's free. We'll
(16:02):
take a break. We've got some great questions back in
a moment. Hello, Welcome back to the Australians Money Puzzle Podcast.
James Kirby here with Liam short sho Orte of the
(16:23):
Sounas Wealth Group. Now, in the first segment we were
talking about the new supertax. The main point I wanted
to make to you there, folks, I want to make
to you is that this is going to be delayed.
It's going to run much later than people realized. We're
already well into the first year in which it's supposed
to be effectively operating, and that the legislation hasn't even
been put through parliament. Part one, Part two was that
(16:45):
Liam makes the point which probably hasn't been med enough.
It isn't that the high wealth end of super the
taxes go from fifteen to thirty percent. That's not the
way to think about it. The way to think about
it is, there is an existing tax of fifteen percent
up to two million. They are introducing a new one
where over three there's an existing tax of fifteen percent.
(17:09):
Over two million, they're introducing a new one where over
three million, a whole new tax comes in. It happens
to be at fifteen percent, but it's based on unrealized gains.
It comes in a different way. You literally get a statement.
You're going to get a statement in the post or
through the email which says you've got a Division two
nine six tax bill. This is what it is because
(17:31):
you had these earnings on these amounts of over three million,
and we want it now. It's a personal tax paid
by you. If you can't get it from your cassion,
the bank, you've got to take it out of your
super fund. That's how it's going to work. This is
why people are so upset about this fund. This is
super change to super funds because it's in a whole
(17:52):
new tax methodology basically being applied to super which was
never seen before, unrealized gains. That's what you want from
Jeff Wilson across to Liam, who's with me today is
annoyed about all right? Questions, Evan, can you explain the
types of trust briefly and what they're used for, Unit trust,
investment trust, and discretionary trust in particular, could you briefly
(18:16):
explain the difference between those key trusts, because people do
talk about trusts loosely, Liam.
Speaker 2 (18:22):
So a unit trust probably a good example of that
is a managed fund like a Platinum or a Magellan,
where you buy units in the trust and you get
a share of profits for that year based on your
units in the trust. On a smaller scale, it might
be something like three business partners open a trust to
own their business and each owned thirty three percent. So
(18:43):
it's a fixed demand and profits are divided that way,
so it's fixed. If they want to bring a new capital,
new units are issued to the person that brings in
the new capital. Okay, So that's the basic fixed trust.
What we see more often used nowadays is called discretionary
trusts or family trusts, and that's where the trustee each
(19:04):
year chooses who the beneficiaries will be to receive the
trust income and any capital distributions, and they do that
on an annual basis, so it's at the full discretion
of the trustee to decide who to do it. So
if there's mom and dad and say an eighteen year
old in university and a thirty year old who's a
lawyer on big income, the parents might go, okay, well,
(19:24):
we'll allocate a certain amount to mom and dad up
to say the limit of the thirty thirty percent tax
bracket at one hundred and thirty five. Then they will
allocate to the eighteen year old because they've they're earning
very little or you know, and they allocates of money
to them, and they'll decide not to allocate anything to
the thirty year old because they're already on a big
taxable income. So the idea is you've got that discretion
(19:48):
to be able to push the income where you want to.
Speaker 1 (19:51):
And most family trusts are run like that. I think
is that basically the.
Speaker 2 (19:56):
ATO again has been clamping down on them. So if
you are going to allo cape money to an eighteen
year old or a nineteen year old, you want to
make sure that you're saying, what that you've spent money
on you that money's gone to those people. So I
get clients to keep a track record of paying for
their car insurance, paying for the car, paying for their
phone bills, things like that, showing that the money actually
(20:18):
has been used for that.
Speaker 1 (20:19):
Person's This will as the new supertax comes in, or
whatever final details it comes in, it will sure as
hell come in. We'll find that trust become more popular
and we'll probably come back to them a retty soon.
All right, there's one other question I wanted to just
zone in on. Liam was from Mark. He says financial
advisor Doug Turek, or at least advisor Doug Churek mentioned
(20:39):
in last week's podcast you can earn up the twenty
five thousand before paying tax. But he then, Mark, reasonably
enough says, I looked at the ATO tax scales and
the first eighteen thousand, two hundred is all you can
earn as an individual in Australia at any age tax free.
(21:02):
How what's the explanation of the gap between the eighteen
and the twenty five? Liam's It's true, I imagine, first
of all, but could you explain yep.
Speaker 2 (21:11):
So the eighteen thousand, two hundred. That's everybody's tax free threshold.
But on top of that, the government have some other benefits.
One's called the Low Income Tax Officets for people who
are on the low income. When you combine that with
the eighteen thousand, two hundred, you can earn up to
go twenty two eight hundred and sixty six each year
without paying any tax. Okay, that's if you're under six.
(21:33):
That's for everybody. Okay, So if somebody was earning twenty
five thousand, they would the first twenty two eight hundred
and eighty six would pay no tax on it.
Speaker 1 (21:41):
So if I've got three million in Super, just to
make it really just make it really juicy. If I've
got the three million in Super, I've got some but
outside I've money outside Super, nothing to do with my
super funds, just sitting there in my bank. Can I
earn twenty two thousand a year tax free?
Speaker 2 (22:01):
Yes you can?
Speaker 1 (22:02):
Can I be classified as low income offset though I've
got three million Super?
Speaker 2 (22:06):
And even better than that, James, if you're over sixty seven,
you get also on top of the low income tax
off set, there's also the Senior Australian Pensions and tax
off set, which if you for a couple, you can
basically earn about thirty eight hundred and eighty eight without
paying any tax. So imagine somebody who's got You've got
a couple, they've got two million in SUPER each, they
(22:27):
have to take five percent pension, there's one hundred thousand
tax free out each during the year, and they might
have an investment property outside that's bringing in sixty thousand
of rental income. All of that can be completely tax free.
So you're talking two hundred and sixty thousand dollars a
year tax free because of that system.
Speaker 1 (22:46):
So just to clarify, my money in Super is a
separate issue. Outside of Super, as an individual, up to
sixty seven, I can have twenty two thousand a year
tax free, and over sixty seven, as an individual I
can have I can earn thirty five thousand a year
tax free, even if I had to say three million
in Super. Well, you do wonder whether money is going
(23:10):
to slide out of Super. You do wonder whether people
are going to let money slide out of Super and
optimize these perhaps under used tax scales that were never
intended of course for multi millionaires.
Speaker 2 (23:25):
But hey, but More importantly, it's important that people understand
that they should try and get as much into Super
as possible to basically have that in tax free, so
they pay as little as possible outside on what they
have outside. Because being Australians, most people, you know, they
try to have an investment property or they have assets
outside of Super as well. They don't totally trust the
(23:46):
government for bringing in taxes like this. So the whole
important thing is to try as an individual to have
two pots of money your Super pension plus your money outside.
As a couple to have four pots and to be
delivering as much of your income tax free as possible
over the years.
Speaker 1 (24:03):
So you wonder, really it's interesting about that. Of course
the money and Super can't get back out until your tire,
but it's really worth knowing that you can earn as
a single person. I'll just repeat the numbers because they're
just extraordinary. You can earn twenty two thousand to year
tax free as an individual outside Super, and thirty five
thousand once you're over sixty seven. That's the earnings tax free. Okay,
(24:26):
keep that in mind, folks. I think that's one of
the most interesting things that have popped up all year, okay, Liam,
short of Sonaus. What does it mean again? Knowledge? Wealth?
Speaker 2 (24:35):
It's the Irish for good, prosperity, wealth and happiness.
Speaker 1 (24:39):
There you go, prosperity, wealth and happiness. This is what
the show's all about. Thank you very much, Liam, great
to talk to you. We'll talk again soon. Thank you, James,
and thank you folks. Let's have some more emails and
do keep the I love the idea of putting several
questions into an email. I noticed it's happening all the
time now regularly keep that up. If you're going to
send in a question, send in a few. Why not.
You've taken the effort. The email mail is the money
(25:01):
puzzle at the Australian dot com dot au. Talk you soon.
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