Hello, and welcome to The Australian's Money Puzzle podcast. I'm James Kirby. Welcome aboard everybody. We've been concentrating a lot on the share market and there is just now perhaps something of a brief calm at these last few days on US markets. Maybe this is a chance for everyone listening to take stock think about if they're properly set, are they fully up to date on the threats and the opportunities of what's been going on, which we've been covering fairly intensity, And we will get back to it pretty quickly. But meanwhile there's a lot of news to catch up with for anyone interested in property, in the value of their home, in investment property of any type, or helping other people perhaps to get into the market, because the federal election which we are in the thick of, has suddenly become we'd seen in terms of handouts at least all about home buyers first home buyers, and we will give you a quick catch up on what's happening there at the start of the show. Also, I want to bring up the point and discuss the concept historical concept really well proven that when there is a share market shakeout, there is a shift towards property by investors, and the evidence is there that investors are coming back into the market. But we will talk and we will basically interrogate that as well. My guest today is Stuart Wems of the pro Solution Private Client Group.

Hello, and welcome to The Australian's Money Puzzle podcast. I'm James Kirby. Welcome aboard everybody. We've been concentrating a lot on the share market and there is just now perhaps something of a brief calm at these last few days on US markets. Maybe this is a chance for everyone listening to take stock think about if they're properly set, are they fully up to date on the threats and the opportunities of what's been going on, which we've been covering fairly intensity, And we will get back to it pretty quickly. But meanwhile there's a lot of news to catch up with for anyone interested in property, in the value of their home, in investment property of any type, or helping other people perhaps to get into the market, because the federal election which we are in the thick of, has suddenly become we'd seen in terms of handouts at least all about home buyers first home buyers, and we will give you a quick catch up on what's happening there at the start of the show. Also, I want to bring up the point and discuss the concept historical concept really well proven that when there is a share market shakeout, there is a shift towards property by investors, and the evidence is there that investors are coming back into the market. But we will talk and we will basically interrogate that as well. My guest today is Stuart Wems of the pro Solution Private Client Group.

How are you, Stuart, I'm really well, James plenty going on, so thanks for having me on.

How are you, Stuart, I'm really well, James plenty going on, so thanks for having me on.

Isn't it just for the broader audience that theme that people move back into property when there is a share market shakeout? We saw it after COVID's that was beyond now, that was extraordinary, thirty percent phone the stop market and people went straight into property and there was double digital lifts across the board. Off the back of that. We've seen even before this share market drop. And remember that at one point the US share market and in what might be the frustrating we don't know what has happened off Tarrafs was nearly down to twenty percent from the top. But we have seen investors coming back into property in any event before this. Some people say, oh, they couldn't possibly you know, properties, so dear, the yields are so low, what do you think?

Isn't it just for the broader audience that theme that people move back into property when there is a share market shakeout? We saw it after COVID's that was beyond now, that was extraordinary, thirty percent phone the stop market and people went straight into property and there was double digital lifts across the board. Off the back of that. We've seen even before this share market drop. And remember that at one point the US share market and in what might be the frustrating we don't know what has happened off Tarrafs was nearly down to twenty percent from the top. But we have seen investors coming back into property in any event before this. Some people say, oh, they couldn't possibly you know, properties, so dear, the yields are so low, what do you think?

It definitely has an impact volatility, because that's One of the things with property is that has much lower volatility, about half the rate of volatility of the share market, and I guess we have a sense of that anyway, a property feels secure. It's not traded every day, so you don't get the same sort of price fluctuations, and that makes investors feel a little bit more comfortable. So it's always a good reminder for property investors that shure the share market is volatile, and that's normal, that should be expected. This nothing's going to change there. The returns still in the long run are good, but it is more volatile. But when we get a reminder of that, of course, it tends to push people in the property direction, and then future expected returns another consideration. The share markets had a great run over last well, the US market over the last thirteen years, and just generally in markets maybe over the last ten. But if we don't expect the next ten to be as good as the last decade, well then maybe investor start looking to other asset classes. And then finally, the backdrop of falling interest rates or potentially falling interest rates, which is exactly what happened during COVID, of course, and which really stimulated property. But that has a big impact on demand for lending and then of course more money flowing into the property market. So it's almost a perfect storm really for the property market in a positive sense.

It definitely has an impact volatility, because that's One of the things with property is that has much lower volatility, about half the rate of volatility of the share market, and I guess we have a sense of that anyway, a property feels secure. It's not traded every day, so you don't get the same sort of price fluctuations, and that makes investors feel a little bit more comfortable. So it's always a good reminder for property investors that shure the share market is volatile, and that's normal, that should be expected. This nothing's going to change there. The returns still in the long run are good, but it is more volatile. But when we get a reminder of that, of course, it tends to push people in the property direction, and then future expected returns another consideration. The share markets had a great run over last well, the US market over the last thirteen years, and just generally in markets maybe over the last ten. But if we don't expect the next ten to be as good as the last decade, well then maybe investor start looking to other asset classes. And then finally, the backdrop of falling interest rates or potentially falling interest rates, which is exactly what happened during COVID, of course, and which really stimulated property. But that has a big impact on demand for lending and then of course more money flowing into the property market. So it's almost a perfect storm really for the property market in a positive sense.

Perfect conditions you mean, yeah, correct, that's what I meant.

Perfect conditions you mean, yeah, correct, that's what I meant.

Yet wrong word.

Yet wrong word.

I wouldn't discree with you at all. The banks would seem to be ready to lend, the yields are stable, the prices were expected to go let's say five percent or so. Nation might in any event if they did that, with their yields of two and three percent being realistic for people from many people, that would be persuasive. I'm really talking about metropolitan properties there there are better years, of course, and every property is local, so there's that to consider. And the rates some of the banks starting to move already. I see on the fixed side they are dropping, and of course they're dropping their cash rates as well, ever so quietly, but they're all doing it systematically. So we have that. So you have that, you have good conditions. You might think, on paper, what might be the bare case here? What might stop property lifting?

I wouldn't discree with you at all. The banks would seem to be ready to lend, the yields are stable, the prices were expected to go let's say five percent or so. Nation might in any event if they did that, with their yields of two and three percent being realistic for people from many people, that would be persuasive. I'm really talking about metropolitan properties there there are better years, of course, and every property is local, so there's that to consider. And the rates some of the banks starting to move already. I see on the fixed side they are dropping, and of course they're dropping their cash rates as well, ever so quietly, but they're all doing it systematically. So we have that. So you have that, you have good conditions. You might think, on paper, what might be the bare case here? What might stop property lifting?

Global recession and therefore an economic slow down in Australia as well. I mean that could have an impact particularly if we then see rising unemployment. Rising unemployment is not good for the property market, of course, so that could be a potential downside. And I know there's been a bunch of economists called the probability of a recession in the US sixty seventy percent or something like that. But it's just retrick, isn't it. No one really knows.

Global recession and therefore an economic slow down in Australia as well. I mean that could have an impact particularly if we then see rising unemployment. Rising unemployment is not good for the property market, of course, so that could be a potential downside. And I know there's been a bunch of economists called the probability of a recession in the US sixty seventy percent or something like that. But it's just retrick, isn't it. No one really knows.

I saw her gold that Sachs literally moves the last few days. They move their probability of recession from just over fifty to just under fifty. It's really borderline, but it's obviously a borderline risk.

I saw her gold that Sachs literally moves the last few days. They move their probability of recession from just over fifty to just under fifty. It's really borderline, but it's obviously a borderline risk.

Yeah it is. And I think look, Australia is somewhat not completely insulated, of course to a global slowdown, not by any stretch of the imagination. But Australia's in a pretty good position economically. So I think that's a potential downside, but I don't think it's a real material risk that I'd be thinking about today. It's a possibility, but I don't think it's likely.

Yeah it is. And I think look, Australia is somewhat not completely insulated, of course to a global slowdown, not by any stretch of the imagination. But Australia's in a pretty good position economically. So I think that's a potential downside, but I don't think it's a real material risk that I'd be thinking about today. It's a possibility, but I don't think it's likely.

So you heard it here. For US folks, the conditions aren't ideal for a probably what you might call it better than expected return from residential property this year calendar twenty twenty five. Certainly, I certainly think that is the case. Or property as local as I say so, you'll probably find that the numbers will be better, say in Victoria than Perth, where Perth has been flying for so long and Victoria has been so subdued for so long. One other thing, just on that sort of big picture of view for everybody. We were talking about first home buyers. So there is now so many grants. I actually have a list. I have a list of all the different grants and I try to keep up, and now there are two that sort of lock everything else to the sides. Really, and we might just explain to listeners. The Labor alp the government, their big ticket first home buyer package was announced virtually on the same day as Peter Dutton. Now Labor already had a shared Equity plan which we've had a look at, that's going to be pushed to the sidelines. I think for the simple reason that the First Home Guarantee, which was already the most popular scheme of the country whereby you can buy a property for five percent, that used to be a small, smallish, restricted, totally regulated program. It now goes universal. Basically anyone in Australia buys a house for the first time, can do it a five percent now, Stuart, I think that means everyone in Australia from now on, assuming they get re elected, would be on a five percent posit unless they happen to have a rich mom and dad or something or there around five hundred a year or something. So what does it mean for the wider market if the first home buyer market moves to a standard where most people have only a five percent deposit?

So you heard it here. For US folks, the conditions aren't ideal for a probably what you might call it better than expected return from residential property this year calendar twenty twenty five. Certainly, I certainly think that is the case. Or property as local as I say so, you'll probably find that the numbers will be better, say in Victoria than Perth, where Perth has been flying for so long and Victoria has been so subdued for so long. One other thing, just on that sort of big picture of view for everybody. We were talking about first home buyers. So there is now so many grants. I actually have a list. I have a list of all the different grants and I try to keep up, and now there are two that sort of lock everything else to the sides. Really, and we might just explain to listeners. The Labor alp the government, their big ticket first home buyer package was announced virtually on the same day as Peter Dutton. Now Labor already had a shared Equity plan which we've had a look at, that's going to be pushed to the sidelines. I think for the simple reason that the First Home Guarantee, which was already the most popular scheme of the country whereby you can buy a property for five percent, that used to be a small, smallish, restricted, totally regulated program. It now goes universal. Basically anyone in Australia buys a house for the first time, can do it a five percent now, Stuart, I think that means everyone in Australia from now on, assuming they get re elected, would be on a five percent posit unless they happen to have a rich mom and dad or something or there around five hundred a year or something. So what does it mean for the wider market if the first home buyer market moves to a standard where most people have only a five percent deposit?

Firstly from a housing affordability perspective, making houses more affordable for first home buyers, I would say both sides of politics, their policies are moronic, stupid, dumb, ineffective. I don't know what other words I can strive it. Okay, So it's not going to do anything really, it's not really going to help. It's going to be inflationary for prices. And I think the only thing, the only people it's going to serve people that already own property. And we're seen at time and time again with these sorts of policies. So unfortunately they need to be looking at the supply side, not to demand side. But if we look at first home buyers deposities tends to be their element that restricts them in terms of their capacity to be able to afford to pay more or spend more on a property, because obviously you've got with borrowing capacity. There's two elements. There's serviceability, which is really about your income and expenses, and then security, which is can you do you have enough money to secure the loan? Do you have enough assets to secure the loan? And I find first time buyers tend to be weak on security but stronger on serviceability. And if you look at the default rates in Australia, they're very low and even claims on mortgage insurance. So when people do actually borrow more than eighty percent and they have to sell that property because they're in financial strife, the chances of making a loss are pretty low. So I like this game. I think it's good in terms of really helping first time buyers get into the market because, as I said, that saving that deposit, whether it's a twenty percent deposit or even something smaller than that, and then having to pay mortgage insurance, which costs about three or four percent of a loan, really does hamper housing affordability.

Firstly from a housing affordability perspective, making houses more affordable for first home buyers, I would say both sides of politics, their policies are moronic, stupid, dumb, ineffective. I don't know what other words I can strive it. Okay, So it's not going to do anything really, it's not really going to help. It's going to be inflationary for prices. And I think the only thing, the only people it's going to serve people that already own property. And we're seen at time and time again with these sorts of policies. So unfortunately they need to be looking at the supply side, not to demand side. But if we look at first home buyers deposities tends to be their element that restricts them in terms of their capacity to be able to afford to pay more or spend more on a property, because obviously you've got with borrowing capacity. There's two elements. There's serviceability, which is really about your income and expenses, and then security, which is can you do you have enough money to secure the loan? Do you have enough assets to secure the loan? And I find first time buyers tend to be weak on security but stronger on serviceability. And if you look at the default rates in Australia, they're very low and even claims on mortgage insurance. So when people do actually borrow more than eighty percent and they have to sell that property because they're in financial strife, the chances of making a loss are pretty low. So I like this game. I think it's good in terms of really helping first time buyers get into the market because, as I said, that saving that deposit, whether it's a twenty percent deposit or even something smaller than that, and then having to pay mortgage insurance, which costs about three or four percent of a loan, really does hamper housing affordability.

Importantly, folks, if you haven't read the detail level. What's really interesting, but this ALP offer is that it's five percent, and even buying a house for the first time can buy that house at five percent, and it can be old house or a new house. That's so important from a macro perspective. That means forget it. It's not even attempt at getting more people or more supply into the market, but it's sure as how opens it up because people will say, oh, I can buy any house I like for five percent. So that's the ALP offera. I just want to try to whizz through this. That's to give away from the ALP coalition to be fair, is considerably more targeted and whatever else. It isn't allowed on existing properties. It is strictly on new properties, isn't it. And basically the first time buyer can slam their interest expense as a tax deduction. Isn't that it up to twelve hundred dollars per annum for five years in a rule, and they get it the treatment like many other people get our negative gearing in that they actually can get a tax break on their home, which is quite a new thing. What do you think of that policy that was Stutton's offering the weekend.

Importantly, folks, if you haven't read the detail level. What's really interesting, but this ALP offer is that it's five percent, and even buying a house for the first time can buy that house at five percent, and it can be old house or a new house. That's so important from a macro perspective. That means forget it. It's not even attempt at getting more people or more supply into the market, but it's sure as how opens it up because people will say, oh, I can buy any house I like for five percent. So that's the ALP offera. I just want to try to whizz through this. That's to give away from the ALP coalition to be fair, is considerably more targeted and whatever else. It isn't allowed on existing properties. It is strictly on new properties, isn't it. And basically the first time buyer can slam their interest expense as a tax deduction. Isn't that it up to twelve hundred dollars per annum for five years in a rule, and they get it the treatment like many other people get our negative gearing in that they actually can get a tax break on their home, which is quite a new thing. What do you think of that policy that was Stutton's offering the weekend.

I mean, it's good that it's limited to new build houses only new build properties dwellings, I should say, only because it will hopefully increase supply, and particularly for developers that trying to build apartments post COVID with the cost of constructing those apartments and then therefore the need to charge more because it just costs them more. Of course, that will help affordability from that perspective, but as I said, first time buyers tend to struggle on the deposit the security side, rather than the serviceability side, so it certainly helps us serve stability, but I'm not really sure that's for them getting into the market.

I mean, it's good that it's limited to new build houses only new build properties dwellings, I should say, only because it will hopefully increase supply, and particularly for developers that trying to build apartments post COVID with the cost of constructing those apartments and then therefore the need to charge more because it just costs them more. Of course, that will help affordability from that perspective, but as I said, first time buyers tend to struggle on the deposit the security side, rather than the serviceability side, so it certainly helps us serve stability, but I'm not really sure that's for them getting into the market.

The people is actually getting to the heart of it, which is the deposit.

The people is actually getting to the heart of it, which is the deposit.

Yeah, it is, but it's broad based, right as you just said it's and we're spoken in these podcast on many occasions, James over the last couple of years about apartments versus houses, and they've started to catch up gues apartments, but we've said the gap between house prices and apartment prices are pretty wide, especially in Melbourne. Well, the ALP policy will help that, won't it. You should see a resurgence I think in the apartment market because that's really where the more affordable dwellings, that's where you can start.

Yeah, it is, but it's broad based, right as you just said it's and we're spoken in these podcast on many occasions, James over the last couple of years about apartments versus houses, and they've started to catch up gues apartments, but we've said the gap between house prices and apartment prices are pretty wide, especially in Melbourne. Well, the ALP policy will help that, won't it. You should see a resurgence I think in the apartment market because that's really where the more affordable dwellings, that's where you can start.

Very interesting Okay, yeah, take that on board, folks. It's very interesting times in property. Everything that we've talked about is about the potential of the potential to stimulate the market. Basically, whatever else you think about the market, that is what these issues are throwing money at for us to on buyers, which allows them to borrow more, which allows them to pay more. And similarly, the psycle suggests repeatedly that people move towards property if they get scared in the share market, and there's plenty to be scared about at the moment. Okay, short, break back in a moment. Hello, and welcome back to The Australian's Money Puzzled podcast. I'm James Kirby. I'm talking to Stuart Wems pro Solution Private Clients Group, who regularly writes a course on property and wider issues for The Australian and is qualified on a variety of different qualifications to talk to us in this area. Now, Stewart, you wanted to talk to me and to our listeners about what the tax office is up to at the moment. In relation to property that they should know about that isn't necessarily advertised or written about.

Very interesting Okay, yeah, take that on board, folks. It's very interesting times in property. Everything that we've talked about is about the potential of the potential to stimulate the market. Basically, whatever else you think about the market, that is what these issues are throwing money at for us to on buyers, which allows them to borrow more, which allows them to pay more. And similarly, the psycle suggests repeatedly that people move towards property if they get scared in the share market, and there's plenty to be scared about at the moment. Okay, short, break back in a moment. Hello, and welcome back to The Australian's Money Puzzled podcast. I'm James Kirby. I'm talking to Stuart Wems pro Solution Private Clients Group, who regularly writes a course on property and wider issues for The Australian and is qualified on a variety of different qualifications to talk to us in this area. Now, Stewart, you wanted to talk to me and to our listeners about what the tax office is up to at the moment. In relation to property that they should know about that isn't necessarily advertised or written about.

Yet that's right, they're on the warpath. James. We've had more audits of clients tax returns for obviously been lodging for the twenty four financial year over the last few months, and we've had over the last two decades, so there's certainly more activity there. And we saw in the budget that there was an allocation of seventy five million towards a personal income tax compliance program, so they're obviously throwing more resources at it. But the challenge for taxpayers is that the ATO doesn't really need a lot more resources because they're getting data feeds from everywhere. They're getting data feeds from the banks, from the titles office, so they know when you buy and sell, from rental bond authorities so they know when you're going to rent out of property, and then lately they've been getting data even going back to twenty eighteen from property management software, so they'll know what sort of income and expenses you've been paying as well, and they can use all that data data match and find what they would regard as higher risk taxpayers, so you know where there's discrepancies from what they might think is the normal, and then send you out a letter and say please explain. And of course it's a that the burden of proof rests on the taxpayers, so that ATO doesn't have to prove that the deduction is wrong or the income is wrong. It's you You've got to prove it.

Yet that's right, they're on the warpath. James. We've had more audits of clients tax returns for obviously been lodging for the twenty four financial year over the last few months, and we've had over the last two decades, so there's certainly more activity there. And we saw in the budget that there was an allocation of seventy five million towards a personal income tax compliance program, so they're obviously throwing more resources at it. But the challenge for taxpayers is that the ATO doesn't really need a lot more resources because they're getting data feeds from everywhere. They're getting data feeds from the banks, from the titles office, so they know when you buy and sell, from rental bond authorities so they know when you're going to rent out of property, and then lately they've been getting data even going back to twenty eighteen from property management software, so they'll know what sort of income and expenses you've been paying as well, and they can use all that data data match and find what they would regard as higher risk taxpayers, so you know where there's discrepancies from what they might think is the normal, and then send you out a letter and say please explain. And of course it's a that the burden of proof rests on the taxpayers, so that ATO doesn't have to prove that the deduction is wrong or the income is wrong. It's you You've got to prove it.

It's a tough arrangement. Yeah, absolutely, And what would be the for listeners? What would be the areas in which they are phishing? Do you think?

It's a tough arrangement. Yeah, absolutely, And what would be the for listeners? What would be the areas in which they are phishing? Do you think?

Yep? They're tacking two main areas, repairs and maintenance and interest deductions there tend to be the sort of two largest if you like. And with repairs and maintenance, they're trying to delineate between what is a genuine repair, so it's just returning it to its original condition when you bought the property, and what is actually an improvement. And we had a case the other day where a client changed switchbox, an electrical switchbox and the property and on the invoice electrician wrote that the previous wiring didn't comply with an outdated code, but it was a relatively new switchbox. But anyway, and so the ATO, because that was under an order, the ATO said well, the whole expense then is capital. It's not a it's not a repair, which clearly it was a repair most of it.

Yep? They're tacking two main areas, repairs and maintenance and interest deductions there tend to be the sort of two largest if you like. And with repairs and maintenance, they're trying to delineate between what is a genuine repair, so it's just returning it to its original condition when you bought the property, and what is actually an improvement. And we had a case the other day where a client changed switchbox, an electrical switchbox and the property and on the invoice electrician wrote that the previous wiring didn't comply with an outdated code, but it was a relatively new switchbox. But anyway, and so the ATO, because that was under an order, the ATO said well, the whole expense then is capital. It's not a it's not a repair, which clearly it was a repair most of it.

We thought it was definitively the mentenance. If it was you had to do it, you weren't going to do it anyway.

We thought it was definitively the mentenance. If it was you had to do it, you weren't going to do it anyway.

Yeah, yeah, okay, So they're pretty aggressive there. So it's about a record keeping make sure that you review the invoices that you're getting and there's not going to be any room for the ATO to argue that it is actually an improvement to the property.

Yeah, yeah, okay, So they're pretty aggressive there. So it's about a record keeping make sure that you review the invoices that you're getting and there's not going to be any room for the ATO to argue that it is actually an improvement to the property.

The description on the invoice is very important.

The description on the invoice is very important.

Very important. Yeah, yes, that's the thing that they're going to look for. And I would expect because of data matching AI technology, I would expect taxpayers to experience these type of ordits more often, particularly as property investors with rise interest rates. The cost of negative gearing to the ATO in terms of the tax break is a rising cost of course something they're going to look at. And with respect to interest, it's about making sure that there's a direct connection between the interest that you incurred and the asset that you're holding. So the key thing here is being very careful about making sure there's a clear audit trail between a new loan and a new asset, and I would say that investors absolutely must split out loans so that the debt just relates to that individual asset, and you can even if you have multiple loans for one asset. That's fine, but don't mix purposes. Certainly, don't mix private and investment purposes. But even don't mix purposes. Like you've got an investment loan, you use some for a deposit for an investment property, and then some to invest in the share market, for instance, you want to split those two loans out, which is relatively simple, and your mortgage broke or banker can do that for you, but you definitely want to make sure there's a very clear trail. And then the other two situations where people get into trouble is where they use redraw. So if they've repaid a loan and then they take money out again, be very careful about doing that. And then second, secondly, if you do a refinance during the year, and they will know that you've done a refinance during the year because I'll get that data. If you end up changing loan amounts and loan balances and restructuring, just make sure you've got good records surrounding that to demonstrate that the loan purpose hasn't changed and it relates to certain investments, but interest for investors, and it's our largest tax deduction, and so it's absolutely one that you shouldn't put at risk and only take advice from a registered tax agent too. By the way, James, I've heard some terrible stories from clients getting advice from a well meaning bank or or friend to say, oh, look, just structure a loan this way. Do this, it'll maximize your tax outcomes. But it's unfortunately in some situations completely wrong when actually harms the tax payer rather than helps them. So make sure if you're going to do anything, check it with a tax agent.

Very important. Yeah, yes, that's the thing that they're going to look for. And I would expect because of data matching AI technology, I would expect taxpayers to experience these type of ordits more often, particularly as property investors with rise interest rates. The cost of negative gearing to the ATO in terms of the tax break is a rising cost of course something they're going to look at. And with respect to interest, it's about making sure that there's a direct connection between the interest that you incurred and the asset that you're holding. So the key thing here is being very careful about making sure there's a clear audit trail between a new loan and a new asset, and I would say that investors absolutely must split out loans so that the debt just relates to that individual asset, and you can even if you have multiple loans for one asset. That's fine, but don't mix purposes. Certainly, don't mix private and investment purposes. But even don't mix purposes. Like you've got an investment loan, you use some for a deposit for an investment property, and then some to invest in the share market, for instance, you want to split those two loans out, which is relatively simple, and your mortgage broke or banker can do that for you, but you definitely want to make sure there's a very clear trail. And then the other two situations where people get into trouble is where they use redraw. So if they've repaid a loan and then they take money out again, be very careful about doing that. And then second, secondly, if you do a refinance during the year, and they will know that you've done a refinance during the year because I'll get that data. If you end up changing loan amounts and loan balances and restructuring, just make sure you've got good records surrounding that to demonstrate that the loan purpose hasn't changed and it relates to certain investments, but interest for investors, and it's our largest tax deduction, and so it's absolutely one that you shouldn't put at risk and only take advice from a registered tax agent too. By the way, James, I've heard some terrible stories from clients getting advice from a well meaning bank or or friend to say, oh, look, just structure a loan this way. Do this, it'll maximize your tax outcomes. But it's unfortunately in some situations completely wrong when actually harms the tax payer rather than helps them. So make sure if you're going to do anything, check it with a tax agent.

So keeping those lines clean, folks. Some people, despite their best efforts entirely earnest things can just someone will send something into the wrong account or whatever. So just keep those things clean, as Stuart says. And the key one is interest, which as we've had an investment property, your interest costs are three four times what all the other costs are often on a property. So really good information there. Keep it in mind or your property investors out there, particularly if you're thinking of reassessing the market. Now that we have the conditions which we outlead at the start of the show.

So keeping those lines clean, folks. Some people, despite their best efforts entirely earnest things can just someone will send something into the wrong account or whatever. So just keep those things clean, as Stuart says. And the key one is interest, which as we've had an investment property, your interest costs are three four times what all the other costs are often on a property. So really good information there. Keep it in mind or your property investors out there, particularly if you're thinking of reassessing the market. Now that we have the conditions which we outlead at the start of the show.

And use an offset, James like, that's one way to protect the tax deductible nature of a debt and not change its original nature. So if you do have spare cash and you want to reduce debt instead of paying down the loan, attach an offset account and then put it in the offset account. That way, you can always take money out of the offset, use it for personal purposes, whatever you want to do, but you're not impacting the original tax darchniture of the day exactly.

And use an offset, James like, that's one way to protect the tax deductible nature of a debt and not change its original nature. So if you do have spare cash and you want to reduce debt instead of paying down the loan, attach an offset account and then put it in the offset account. That way, you can always take money out of the offset, use it for personal purposes, whatever you want to do, but you're not impacting the original tax darchniture of the day exactly.

That's keeping it clean. As we're saying, yes, very good, Okay, hopefully that's very clear to everybody. I imagine it is very good. And you can hear the voice of experience there, folks. All right, we'll be back in a moment. We have some very interesting questions for you. Hello, welcome back to the Money Puzzle podcast. You know, Stuart, I wonder that notion of elasticity, how far can you push it? Like, I don't know how many budgets I've done, but I have probably done at least ten or twelve or fifteen in a row. And there's always more money for the tax office. Every year, the pore money on, the more money in the tax office, and I presume how it works is for every extra dollar they put in, they get so many dollars back. But there must be a point in time where diminishing returns sets in. You reckon or are we anywhere near it? You'd have to think that perhaps there are. You were just saying that they seem to have all the data they could possibly need.

That's keeping it clean. As we're saying, yes, very good, Okay, hopefully that's very clear to everybody. I imagine it is very good. And you can hear the voice of experience there, folks. All right, we'll be back in a moment. We have some very interesting questions for you. Hello, welcome back to the Money Puzzle podcast. You know, Stuart, I wonder that notion of elasticity, how far can you push it? Like, I don't know how many budgets I've done, but I have probably done at least ten or twelve or fifteen in a row. And there's always more money for the tax office. Every year, the pore money on, the more money in the tax office, and I presume how it works is for every extra dollar they put in, they get so many dollars back. But there must be a point in time where diminishing returns sets in. You reckon or are we anywhere near it? You'd have to think that perhaps there are. You were just saying that they seem to have all the data they could possibly need.

Yeah, it's a case of productivity though, James. Over the last five years, the amount of data they're getting and the currency of that data, like real time data, has increased one hundredfold.

Yeah, it's a case of productivity though, James. Over the last five years, the amount of data they're getting and the currency of that data, like real time data, has increased one hundredfold.

So the data is that what you mean?

So the data is that what you mean?

Thank giveness of the data. And so if you go back ten years ago, they would have to do a lot of manual work, have a lot of reporting, but a lot of it would be manual. But it's so easy now for them to identify you. There's ears ten thousand taxpayers. Let's just send out a letter, cost them no money because it's all electronic, goes through the tax agent portal, all that sort of stuff, and then they just create work for the rest of us. But it doesn't cost them very much money. So the return on investment for allocating because the total allocation to the ATO four compliance activities in the most recent budget was just under a billion dollars, so the return on that is significant. It's a good use of funds because they're definitely going to raise tax revenue as a result.

Thank giveness of the data. And so if you go back ten years ago, they would have to do a lot of manual work, have a lot of reporting, but a lot of it would be manual. But it's so easy now for them to identify you. There's ears ten thousand taxpayers. Let's just send out a letter, cost them no money because it's all electronic, goes through the tax agent portal, all that sort of stuff, and then they just create work for the rest of us. But it doesn't cost them very much money. So the return on investment for allocating because the total allocation to the ATO four compliance activities in the most recent budget was just under a billion dollars, so the return on that is significant. It's a good use of funds because they're definitely going to raise tax revenue as a result.

That's the figure. We'd love to see the return on the investment as such in every budget for the ATO, but it would seem, in fact, it would seem to be very clear that there is a hell of a return because they keep expanding and giving them. Now that's true for most regulators if the ACCIC has got more cash up lay too, but the ATEO specifically seems to be there every single time. Some really good questions coming up. I've just probably have time for two. One is from John. He says, as a first home buyer looking to take advantage of the liberal policy which we didn't mention Steorge, which is the fifty thousand that you can use from your own SUPER to buy a house, John says, I am wondering what investments strategy I should have in super, following the general advice to young people. I have had it in high growth, which has done well. Now I am in a dilemma, should I move to a more conservative strategy as I tend to use the funds in the next year, or stay in growth strategy and hope for a rebound. John, I think we get a version of that question almost every week. First of all, what you know because of the markets, the settings. The second thing I would say to you is, yes, it's true that the Liberal policy, which is a new policy which we didn't mention because it's as much about super as it is about housing. But in any event, the policy which will kick off if they win, is that you can use up to fifty thousand of your super to buy your first home. Crucially, the other part of that policy is that eventually you must return that money to your superfund on the basis of how much your home is worth when you sell it. So if you make one hundred percent and you put in fifty thousand, then you'd have to replace one hundred thousand back into your super And that is not so much a catch. That's very logical, but it is rarely mentioned in this So let's cut it into two parts. Stuart, they're super for home buying controversial policy. I think it would be popular if it gets through. I think it would be used. Not everybody wants to be with the government in shared equity or whatever. But I think to John and all the John's in the world out there, it's not advice, it's just information that is only your deliberates when John, it's not going to happen. It is absolutely not going to happen. The LPR in charge, they are absolutely set against that notion.

That's the figure. We'd love to see the return on the investment as such in every budget for the ATO, but it would seem, in fact, it would seem to be very clear that there is a hell of a return because they keep expanding and giving them. Now that's true for most regulators if the ACCIC has got more cash up lay too, but the ATEO specifically seems to be there every single time. Some really good questions coming up. I've just probably have time for two. One is from John. He says, as a first home buyer looking to take advantage of the liberal policy which we didn't mention Steorge, which is the fifty thousand that you can use from your own SUPER to buy a house, John says, I am wondering what investments strategy I should have in super, following the general advice to young people. I have had it in high growth, which has done well. Now I am in a dilemma, should I move to a more conservative strategy as I tend to use the funds in the next year, or stay in growth strategy and hope for a rebound. John, I think we get a version of that question almost every week. First of all, what you know because of the markets, the settings. The second thing I would say to you is, yes, it's true that the Liberal policy, which is a new policy which we didn't mention because it's as much about super as it is about housing. But in any event, the policy which will kick off if they win, is that you can use up to fifty thousand of your super to buy your first home. Crucially, the other part of that policy is that eventually you must return that money to your superfund on the basis of how much your home is worth when you sell it. So if you make one hundred percent and you put in fifty thousand, then you'd have to replace one hundred thousand back into your super And that is not so much a catch. That's very logical, but it is rarely mentioned in this So let's cut it into two parts. Stuart, they're super for home buying controversial policy. I think it would be popular if it gets through. I think it would be used. Not everybody wants to be with the government in shared equity or whatever. But I think to John and all the John's in the world out there, it's not advice, it's just information that is only your deliberates when John, it's not going to happen. It is absolutely not going to happen. The LPR in charge, they are absolutely set against that notion.

Yeah, I know you're a fan of it, James. I've heard you speak positively about it before. I'm neutral on it. I appreciate the fact that you've got to repay it, so that's the thing I really like about it. But my concern is if we start using super for housing deposits, is it a slippery slope? What else are we going to start using? Yes, before it really is just for retirement savings. But I like the fact that you got to pipe it back, so at least you're just borrowing from your super. If you like, that's not so bad.

Yeah, I know you're a fan of it, James. I've heard you speak positively about it before. I'm neutral on it. I appreciate the fact that you've got to repay it, so that's the thing I really like about it. But my concern is if we start using super for housing deposits, is it a slippery slope? What else are we going to start using? Yes, before it really is just for retirement savings. But I like the fact that you got to pipe it back, so at least you're just borrowing from your super. If you like, that's not so bad.

My enthusiasm is more pragmatic than anything. If you can pay for a Tommy Tuck surgery from your super, why can't you? Why can't you do this? That's really where I'm coming from. And also as I say, the whole tax system is completely biased towards the homeowner, so it is really just that pragmatic. It's a pragmatic support of it more than anything, all Right. The second part then was about moving from growth or it. Last week, two different people came up to me and we're asking about their super and whether they should change it or remove it. This was literally the day, the scary day. So we had the worst day since COVID on one session if you're acall on the share market, and then we had the best day since COVID. But everyone just remembers the worst day. And two people that day I was in the city, two different people who I don't know very well, both came up to me asking about it, and it struck me. So this must be really in people's minds. What do you see to people who'll ring you on it deep where the market force and say, listen, I'm really worried. I don't know about my settings at all. This seemed okay when everything was okay, but now I'm worried. It tests people, doesn't it?

My enthusiasm is more pragmatic than anything. If you can pay for a Tommy Tuck surgery from your super, why can't you? Why can't you do this? That's really where I'm coming from. And also as I say, the whole tax system is completely biased towards the homeowner, so it is really just that pragmatic. It's a pragmatic support of it more than anything, all Right. The second part then was about moving from growth or it. Last week, two different people came up to me and we're asking about their super and whether they should change it or remove it. This was literally the day, the scary day. So we had the worst day since COVID on one session if you're acall on the share market, and then we had the best day since COVID. But everyone just remembers the worst day. And two people that day I was in the city, two different people who I don't know very well, both came up to me asking about it, and it struck me. So this must be really in people's minds. What do you see to people who'll ring you on it deep where the market force and say, listen, I'm really worried. I don't know about my settings at all. This seemed okay when everything was okay, but now I'm worried. It tests people, doesn't it?

It tests people? And my typical response not maybe to John because you might need to use the money or want to use the money in a relatively short period of time. But if you're just a general investor in superannuation, my answer would be, if it's worrying you, stop looking at it because it's not really helping you. You're not going to change the outcomes. And sometimes we think as investors, just because something changes, like a return or the price of an asset, we should have some sort of response to that. Well, typically we shouldn't. We should just leave it well alone and let time do its thing, and we know in the long run will be much better off for it. So volatility is normal. You should expect it. We don't like it, But if you don't like it, just stop looking at it because otherwise you'll end up making a mistake in terms of selling out at the bottom and then missing the recovery.

It tests people? And my typical response not maybe to John because you might need to use the money or want to use the money in a relatively short period of time. But if you're just a general investor in superannuation, my answer would be, if it's worrying you, stop looking at it because it's not really helping you. You're not going to change the outcomes. And sometimes we think as investors, just because something changes, like a return or the price of an asset, we should have some sort of response to that. Well, typically we shouldn't. We should just leave it well alone and let time do its thing, and we know in the long run will be much better off for it. So volatility is normal. You should expect it. We don't like it, But if you don't like it, just stop looking at it because otherwise you'll end up making a mistake in terms of selling out at the bottom and then missing the recovery.

I'm sure what you're saying is stop looking at it obsessively. I suppose you're thinking about it strategically. Yeah. So, yes, the fact that you can look at it every day it's a mixed blessing. People used to just get reports maybe once a quarter and they say, oh, it's gone up. That's good, and they didn't have to pay attention. Now you can look at it every day, and I know that's great for transparency, But there's another side to it, isn't there about how anyone who is an active investor knows that you can overinvest. You can you know that there's a difference between investing and trading, and you don't want to have a trader's mindset with your super and I imagine that's pretty useful thoughts for anyone in that area. While we're at it, though, I think there's one other point I just want to make on that, John, which is that a lot of the big super funds the classification of these three things conservative, balanced, and growth. To the uninitiated, it seems like, well, they are what they say on the label, but actually there's a lot of evidence in our market that balanced is quite growth focused, and growth is terribly growth focused. There's no legal definitions on that, and there's a fair bit of rubber or rubbery definition on that area, which the super funds. It suits them and they don't want to talk about it, and they certainly don't want a debate about it because it suits them to have it that way. But it's a time where you do worry about the fact that people think they're super is more balanced or more conservative than it actually is, or I'll just leave that one sitting out there. The last is a question from ram who says, and this only came in recently, so that the budget was a couple of weeks ago. He says, I have a question regarding the federal budget. What's the point of a budget lock a lock in besides making a select few feel important. I understand it's market sensitive information. Why not release it publicly on market clothes experts have enough time to react. Yeah, well, it came from the whole thing of locking everybody in was on is on the understanding that they could they weren't locked in, and all their WiFi wasn't turned off and everything that they could believe it orough they could move the market right, so they could say, oh, look there's a change in banking legislation or whatever which is going to change the fortunes of A and Z banks, so I'll buy them now, I tell my friend to sell them now or whatever. It's extremely unlikely that would happen in the first place, but that's what it's all about. And if it was any consolation, it doesn't make you feel the slightest bit importance to be locked inside in the room for a long time half one to half seven, six solid hours. So but that's the I'm sure people wonder what on earth is it all about. That's what it's about. And there's there's two, isn't there, Stuart. There's a media one which is the one that gets all the attention, but there's another one for anyone who's interested. Isn't it right? If you work for an NGO, or you work for whatever, senior Citizens of Queensland or something, and you want it's important for you to be in there, you can register and go in and that's almost as big as There's a couple of hundred people in that one as well, and they're under the same thing. They go in from half one to half seven. And the tradition ram is that you can't unleash the information until the treasure begins his speech. The cynics in Canberra say it makes everyone listen to the treasure. That's what it's all about.

I'm sure what you're saying is stop looking at it obsessively. I suppose you're thinking about it strategically. Yeah. So, yes, the fact that you can look at it every day it's a mixed blessing. People used to just get reports maybe once a quarter and they say, oh, it's gone up. That's good, and they didn't have to pay attention. Now you can look at it every day, and I know that's great for transparency, But there's another side to it, isn't there about how anyone who is an active investor knows that you can overinvest. You can you know that there's a difference between investing and trading, and you don't want to have a trader's mindset with your super and I imagine that's pretty useful thoughts for anyone in that area. While we're at it, though, I think there's one other point I just want to make on that, John, which is that a lot of the big super funds the classification of these three things conservative, balanced, and growth. To the uninitiated, it seems like, well, they are what they say on the label, but actually there's a lot of evidence in our market that balanced is quite growth focused, and growth is terribly growth focused. There's no legal definitions on that, and there's a fair bit of rubber or rubbery definition on that area, which the super funds. It suits them and they don't want to talk about it, and they certainly don't want a debate about it because it suits them to have it that way. But it's a time where you do worry about the fact that people think they're super is more balanced or more conservative than it actually is, or I'll just leave that one sitting out there. The last is a question from ram who says, and this only came in recently, so that the budget was a couple of weeks ago. He says, I have a question regarding the federal budget. What's the point of a budget lock a lock in besides making a select few feel important. I understand it's market sensitive information. Why not release it publicly on market clothes experts have enough time to react. Yeah, well, it came from the whole thing of locking everybody in was on is on the understanding that they could they weren't locked in, and all their WiFi wasn't turned off and everything that they could believe it orough they could move the market right, so they could say, oh, look there's a change in banking legislation or whatever which is going to change the fortunes of A and Z banks, so I'll buy them now, I tell my friend to sell them now or whatever. It's extremely unlikely that would happen in the first place, but that's what it's all about. And if it was any consolation, it doesn't make you feel the slightest bit importance to be locked inside in the room for a long time half one to half seven, six solid hours. So but that's the I'm sure people wonder what on earth is it all about. That's what it's about. And there's there's two, isn't there, Stuart. There's a media one which is the one that gets all the attention, but there's another one for anyone who's interested. Isn't it right? If you work for an NGO, or you work for whatever, senior Citizens of Queensland or something, and you want it's important for you to be in there, you can register and go in and that's almost as big as There's a couple of hundred people in that one as well, and they're under the same thing. They go in from half one to half seven. And the tradition ram is that you can't unleash the information until the treasure begins his speech. The cynics in Canberra say it makes everyone listen to the treasure. That's what it's all about.

I can think of better ways to spend my time. James.

I can think of better ways to spend my time. James.

That's right. Well, as I've mentioned on the show before, the marvelous thing about it, the hard thing about it, it's like it's like going for a very long run, a marathon. But the plus side is that you remember everything because you're in there for six hours studying and you don't really know it for the rest of the year. So that's I would say, I like it, but I am I appreciate what it does for my brain in those six hours. Okay, thank you and thank you Stewart so much there to crunch through. Really interesting about the share market nerves, if you like, and how that might play into better property the even more money pushed at the property market, which would all push up prices. Every single one of those incentives would push up prices. We know that, we know that's just an economic fact. May get some young people into the market hopefully that as well. Very interesting about the ATO I didn't know that. That's worth keeping in mind everybody, and we will be back. I've got Chris Cuff, the legendary Chriscuff coming up on the next edition. We are going to talk about where we are ano that there is something of a pose we hope in the share market. It will give someone a great opportunity to have a look across as to where people have their settings.

That's right. Well, as I've mentioned on the show before, the marvelous thing about it, the hard thing about it, it's like it's like going for a very long run, a marathon. But the plus side is that you remember everything because you're in there for six hours studying and you don't really know it for the rest of the year. So that's I would say, I like it, but I am I appreciate what it does for my brain in those six hours. Okay, thank you and thank you Stewart so much there to crunch through. Really interesting about the share market nerves, if you like, and how that might play into better property the even more money pushed at the property market, which would all push up prices. Every single one of those incentives would push up prices. We know that, we know that's just an economic fact. May get some young people into the market hopefully that as well. Very interesting about the ATO I didn't know that. That's worth keeping in mind everybody, and we will be back. I've got Chris Cuff, the legendary Chriscuff coming up on the next edition. We are going to talk about where we are ano that there is something of a pose we hope in the share market. It will give someone a great opportunity to have a look across as to where people have their settings.

Thanks Stewart, Thanks James, being found. As always that was.

Thanks Stewart, Thanks James, being found. As always that was.

A Stuart Wems the pro Solution Private Client Group. Very good, keep those emails rolling in the money puzzle at the Australian dot Com dot Au. Today's show was produced by Leah sammag Gloom

A Stuart Wems the pro Solution Private Client Group. Very good, keep those emails rolling in the money puzzle at the Australian dot Com dot Au. Today's show was produced by Leah sammag Gloom