Show Me The Perks Podcast | Navigating Australia’s Biggest Tax Changes in Decades

Hi everyone and welcome to Show Me the Perks. This is episode number 26 and today we’re talking about a topic which I’m sure all the listeners have heard a lot about already, which there’s a lot of federal budget tax changes that have recently been both proposed and legislated over the last say two to three months. And I have with me today Simon Wotherspoon, Director of Perks Private Wealth, and Neil Oakes, director of Perks Business Services, and heads up our tax consulting team. Welcome, guys.

Thanks, Kim.

This is the first time we’ve had three people on the podcast. So we’ll see how this goes today. Hopefully we’re not talking over the top of each other. So today is a relatively informal podcast. Not that any of the others are formal, but it’s really about to get some discussion going between the three of us on what these new changes mean for Australians, Australian business owners, and investors.

So Simon giving an insight from the investment angle and what it means for high net worth individuals. And Neil giving his angle from a tax perspective on what it means from a I guess a tax perspective for both individuals as well as business owners in Australia. So thank you both for coming along. I’ve got a few questions to start to ask you and hopefully and we’ll see where the conversation leads us. So my first couple of questions to either of you or perhaps to both of you.

The changes as they were brought through were described as providing a solution to housing affordability. And maybe this one’s for Simon. You know, do you think that the the housing affordability has improved as a result of the changes?

This is probably focusing on the fifty percent discount changes.

Well I think Kim, I mean I’ll probably start by saying I think clearly investing in property and looking up your home price and that sort of thing has become a real hobby for Australians. Like realestate.com must get that many hits on it, but people are constantly looking up property. And really, given the tax settings that we’ve had in terms of the coupling of the negative gearing and the 50% discount on CGT, has been a good environment for investing in property. And people have clearly done really well. So, you know, it’s not surprising. The settings were conducive for investing in property, and the last 30 years investors have done that, you know, prolifically. And I I sort of think I’ve got sympathy for the changes. I certainly think the fact that there’s been lots of incentive to invest in property and pushing property prices up has made to some degree, I mean it’s been one of the factors that that made property to some degree unaffordable. So, I’ve got sympathy for wanting to find a solution.

But I I do worry, and maybe we’ll get into this later, that it’s broader based than just focused on property. Like it seems like we with a property problem, we need a property solution. but the fifty percent discount thing is gonna have an impact on capital investment more broadly than just property. It’s probably too early to answer your question to say whether it’s had an impact on affordability just yet, albeit I guess the concern around it at the moment has seemingly had a bit of an impact on slowing house prices. Yeah. But longer-term impact that’s hard to know.

And to clarify there’s two key changes to housing affordability if you like from the legislation that has been enacted and passed and I’ll throw this to Neil: the two pieces of legislation that have passed are the fifty per cent discount and the negative gearing. There’s probably more than that, but let’s focus on those two as pretty much it as a as a as a sort of with respect to housing affordability – it’s the fifty per cent discount and the no negative gearing on established homes moving forward.

Do you think commercial property starts to look more favourable going forward giving it’s this is only the CGT discount is focused on every asset in Australia pretty much. however, the negative gearing is only focused on residential property, not commercial property.

Yeah. Correct. I mean I think I agree with everything Simon’s saying there. I think you know there’s it’s time’s gonna tell and really I think using a tax to inc to manipulate markets, I think, is always dangerous. I think it’s probably more of a supply side issue rather than a demand side. But that you know, that being said, we’re going to have this is our new world in which in which we’re living. You’re right, it impacts everything. it’s going to cause people to reassess where they’re going to put their capital. Think is the point that we’re sort of all getting to. One thing when it comes, and if we’re still on that affordability side of things, one thing it is actually encouraging people to do is to maximise their investment into their main residence because that’s still tax-free. Suddenly that looks very generous by comparison. Correct. You know, you yes, you’re not getting your tax deductible interest anymore, but you’re not getting that with your rental property either. So I think, you know, from an affordability viewpoint, it’s going to be really interesting to see how that impacts the market for established homes.

And just on the and this is perhaps a wider question, but one of the one of the unexpected items that came through was I guess an end to pre-CGT luxuries where, you know, pre-1985 assets that were considered pre-capital gains tax are now being roped in from 1 July 2027.

Do you see that changing anything with regard to housing affordability? Or you know, are there people thinking, well, I’m gonna sell now because I, you know, my CGT-free time is gonna be up soon anyway, or that’s a small factor at best?

Yeah, it’s really interesting. I mean the whole removal of the pre-CGT was a shock. I don’t think anyone really saw there’s towards a week or so out of the budget there’s a little bit of talk here and there, but it was a bit of a surprise when that came out.

It’s going to be really interesting to see the actual impact of that. So with all the grandfathering, deemed disposal on 30 June 27, reacquisition on 1 July 27, and then moving into indexation, you’re locking in that pre-portion, and then you’re moving on to indexation for everything other than companies going forward. So, when you actually look at the impact of that loss on pre-CGT status, it’s probably not going to be as bad. It’s still not good. But it’s not going to be as bad as most people would think. Just depending on how your asset’s performing versus inflation.

So I think, yeah, it’s gonna be. I mean, I did some calculations recently for a client that bought a property in 1987. They sold it. Settlement is actually tomorrow. and they had a sizable gain, which under the discount method, they will be paying tax on it. but if it was indexation for that period of time, they would they wouldn’t be. Okay. So they bought it, I think was about $3.5M in 1987 and they sold it for five.

Maybe you shouldn’t have advised that to Jim Chalmers and he might not have brought in the changes after all, ’cause maybe the fifty per cent discount is doing the government a favour.

Well I think with as with any change, you’re gonna have winners and losers. Yeah. And I think, you know, there are people who are gonna benefit significantly under both.

Don’t want to get ahead of yourself. I’ve got later on a question on who the winners and losers are in the in the tax changes, but it’s a good segment.

Yeah.

Perhaps.

Simon, with the CGT, do you think I I’ve this is my non-investment sort of thought process I’ve had. Do you think the lack of CGT discount going forward will mean let’s say financial planners or investment advisers in general will be freed up to, you know, perhaps buy and sell assets more freely without worrying about trying to retain assets for a fifty percent discount or worrying about other things. Is there gonna be more active

I do think my view at least one of the unintentional consequences, maybe intentional but let’s assume unintentional, is that it’s going to encourage investors to favour income-producing assets more so. I mean even in Australia we already broadly prefer income-producing assets with franking credits available on dividends, you know, the Australian share market produces or pays out more dividends than any other market around the world. And they’re incentivised to do so. And this is just gonna further incentivise that. So I don’t know if it’s gonna create more trading per se, but I do think it’s gonna create a bit shorter term focus and certainly an income focus from an investor point of view, and demand from investors wanting businesses to pay out profits, where they can benefit from franking credits rather than you know retaining profits and then later returning it as gains where there’s no franking credit attached. So that I mean, you know, talking about unintentional consequences, I just I I would worry that it skews the market to focus on mature, boring businesses, which is fine, but income reducing and now even less incentive for investors to hold capital long term in smaller growth businesses.

Yeah. Or even larger growth businesses. As in does it disincentivise people to let’s say invest in the American market, which is historically low yield paying? Is that potential?

Yeah, that’s right.

And in terms of the other major sort of announcement from the government, which we should add hasn’t been legislated yet, is the thirty per cent tax on discretionary trusts moving forward. So so far it’s not legislated. They have released a consultation paper, so they are quite serious about bringing it through and I think they’re hoping to bring through legislation or draft legislation before the end of this calendar year. Perhaps a question for Neil initially. How do you see this playing out going forward? Are we going to enter a phase where companies are going to dominate people, you know, small business structures more so than they have previously?

What’s the role of trusts going forward, given that if you’re gonna tax them at thirty percent, it’s kind of the same as a company. What’s the role of trusts in the future world? and then I’ll ask you firstly on that question and then maybe pass over to Simon. Similar question, but what it means to investment markets?

I mean that’s a big question. Yeah. Like, that question would be what everyone’s thinking about two on its own.

That’s what all the listeners want to know.

I mean I think what’s clear from the consultation paper, and I think they actually go into detail around this, is they want they don’t like the opaqueness of trusts.

So they and tell me about the opaqueness. Why do they think it’s opaque?

So there’s limited reporting. Okay, so you don’t have to report to ASIC if you hit the thresholds. you’re also governed by your deed. You’re not governed by the Corpse Act. So it’s it’s it’s very opaque. And they’re very they’re very clear in that consultation paper that they want to see that cleared or crystallised. And one of the ways to do that is to encourage people to move assets either into their own names or into corporate entities. Because once you’re in a corporate entity, there’s legislation that sits over the top that tells you what you can and can’t do.

Corporations Act.

Correct. Corporations Act. So it’s very clear that that’s what they’re trying to achieve. So are they trying to make trusts unattractive by taxing them and almost forcing people out of them? Is that your view?

That’s my view.

That’s your view.

Yeah. And I think that’s widely shared. in terms of the other things within the consultation that add weight to that factor as well, is in there they talk about, as I say, the opaqueness of trusts. They also allow, well in there they talk about rollovers to enable people to pick up assets out of trusts and put them into companies or unit trusts into the future. But within that they’re very specific around what that company needs to look like. Okay, so what they’re saying is if you will provide a rollover that you can take your assets out of a trust, has to be all assets out of your trust. Can’t leave, can’t pick and choose. Put it into a company as long as there’s no element of discretion whatsoever inside that company.

And this is with respect to the consultation paper that’s within the consultation paper. Of which the consultation’s still ongoing and doesn’t finish until the end of July.

So the consultation paper was released, I think, on 8 July. Closes on 31 July.

2026?

2026, current year, which to me indicates they don’t want any consultation because they don’t want any changes. It’s a very short period. Yeah. And then look to introduce draft legislation shortly thereafter.

And for clarity, this has got this this is its coincidence that it was brought through in the same budget as the fifty per cent discount on intergenerational transfer because the thirty per cent tax on trust has absolutely nothing to do with intergenerational transfer, or is that or is that what it’s chasing?

Well, or is it just coincidence that it came through at the same time? I think it’s all part of the one package and what and the one and the one view. And really it’s going back to just the shortened election.

When was that, Simon?

2019.

Yeah. Where they’ve dropped a couple of the more controversial.

Items out. Franklin credit.

Let’s come back to that ’cause I reckon that’s on the agenda for next after next election.

That’s a big deal.

I’ll give you my view on that. Yeah.

Yeah.

Well, let’s hear Simon. Franking Credits.

I mean, I think Neil’s sort of to summarise what Neil said – I’m gonna say trusts are dead.

Well, that is a question. Before we get

Sorry, Neil, I shouldn’t put words into your mouth. Well I did say what are trusts are not dead.

Trusts are not dead.

What are the new roles of trusts?

Trusts are dead from a tax perspective.

Trusts. I think companies now look more favourable than trusts.

Yeah, definitely. But I think taxing. And it’s going to come down to individual circumstances, but there’s still a very strong role to have trusts as shareholders of companies going forward for matters other than tax. Tax.

Asset protection, succession, those types of questions.

And then managing the thirty per cent on your way out with your franking credits is going to be manageable. In the consultation paper, so if we take a step back on the 30% rule, income derived by a trust goes out to a beneficiary; the trustee pays 30% tax. If the trust owns shares in companies and receives frank distributions, those frank distributions, the franking credits attached to those, get first applied to trust liability, okay. Which, if you’ve got ASX-listed shares, should equal the 30%, so it should be fine.

The situation then comes about where you might have a debt deduction or, you know, a negatively geared asset.

So you’re overfranked within there.

So you’re overfranked. The question then becomes: how’s that then to work? Okay, so right now you would then. Under current rules, you distribute it to an individual, they’d get a refund of those excess franking credits.

Depending on their tax rate.

Depending on their tax rate. The consultation paper considers this and comes back and says, well, where you do have franking credits in excess of the trust liability under the new tax, there’s two options they’re considering. So option one, which is to just refund the excess to the trustee. That would be a great outcome. And I think that that’s like putting a bit of CPR on the trust there.

CPR.

The other option is to say, okay, well, that excess, the trustee gets to carry that forward and use that to pay future tax liabilities. But they caveat that to say, we’ll consider a limit on the dollar value that can be carried forward and/or the time limit. So depending on what happens with that aspect of it, so the excess franking credits as they’re flowing through a trust, I think that’ll determine whether they’re dead or half alive or where it’s actually at. So, but I think over and above all that tax stuff, asset protection is key, succession planning is key. All of those sorts of side benefits of trusts are still there.

Other than primary producers, obviously as well.

Primary producers is a whole new, a whole different bag ’cause they’re exempt. They keep doing.

So we’re gonna have a spade of farmers popping up everywhere now. Just look at the tax incentives to come through a trust. Yeah, okay. So you can’t feed other income into your primary production business to get a gentle tax hour.

And if I look at most farmers, you know, they their trusts tend to derive rent from renting the farm to an associated company that conducts the business or a partnership rather than being private producers themselves. So I think farmers are still a little bit in the gun here.

Yeah. So you’ve before I jump to Simon, your view is generally speaking, going forward, people aren’t gonna trade through a trust. The trust is gonna that taxing is going to be better elsewhere, either in a company or in in individual names. But the trust still has a role mostly with succession.

I agree with you generally there. If you are a medium business, trading out of a trust might still be viable. Whereby, you know, you if you want to distribute to individuals who are going to be on an average thirty per cent rate anyway, it’s not gonna be of big consequence.

The other big elephant in the room, which kills trust a little bit in this side of things, it’s not the investment side of things necessarily, is the ability to distribute to corporate entities. So pre these changes, you could have the benefit of trading through a trust but accessing the corporate tax rate. That’s now gone with a central double tax on the distributions as it hits the corporate.

So we’ll ask this question: is it the death of the profit bucket count?

I think that’s dead.

Dead.

Dead.

Unless you’re a primary producer.

Even then. Little bit maybe. Little bit maybe. We’ll have to wait and see the results.

CPR. Yeah.

I mean I think I think, you know, the primary producers are going to be really interesting. Because the consultation paper doesn’t touch at all on how that exemption’s to work. Yeah.

And Simon, historically, let’s say investment, you know, financial planners and investors would commonly invest via their portfolios in a superannuation fund. That’s still attractive, arguably more generous now given all these changes.

The super fund is relatively very generous still, so people would do that. But to the extent of their portfolio, and this is high net worth individuals, but to the extent they have savings and investments above what they can get into super, I think historically people would have used trusts quite a lot. Is how does that change in the investment world in terms of how you think about constructing people’s portfolios and where you invest?

Well I think I mean, just taking a step back from trust, yeah I think Neil said at the start of the podcast, like the places that are now much more attractive relatively speaking, are your own house and super. So, you know, you could see maybe this being a bit cynical, but you could see a future where people are living in castles and have got big super funds and that’s where their wealth goes, right? Because it’s much more shielded from tax. beyond that, yeah, I mean I said before, maybe trusted debt, I guess I was thinking from an investment sort of passive investment point of view. And you might not be worse off in a trust necessarily than a corporate, but there’d be no real need, I wouldn’t think, again, subject to the rules and your circumstances, but to have a trust versus a company necessarily. I suspect, for simplicity purposes, I’d expect to see companies as an investment vehicle, superannuation as an investment vehicle. And and potentially people having more in their own home.

Yeah. So if someone came to you, Simon, with, you know, a lot of money in super to the point where they can’t put any more money into Super and then they had invest they had, you know, sold their business and they’ve got cash sitting around, they need it to be invested, you’re gonna be setting that up in a company, in a trust, in individual names going forward, do you think?

It depends. I mean. Let me I was get serious for a minute. I would defer to ta to Neil, the tax specialist. Let’s get the structuring, the tax structuring right, and then I would help with the investment. But from my nontax specialist point of view, I suspect you’ll end up with more companies and you’ll use the corporate keep things simple,  just have it in the company, straightforward.

Our companies don’t get the indexation, though, unfortunately.

No, that’s right. But coming you know, distributions out of a trust are gonna be taxed at thirty percent as a minimum anyway. The other thing that there’s gonna be more consideration about, yeah, maybe not for the sort of high net worth, ultra-high net worth sorts of people, but for people looking to save for future objectives might be things like investment bonds, where it’s thirty per cent tax paid and they have interesting ways of minimising the tax within the structure. It doesn’t hit personal tax returns, et cetera. So and you don’t have to have the issue of paying dividends out of these things when it matures, you can just take the money having been tax paid. So think those structures will develop and come in more into consideration as they particularly for people saving for future events as opposed to retirement.

Kids’ education that’s obviously that’s right.

Yeah.

Bonds have been a fairly poor cousin to every other investment style in recent years, but they do suddenly look a bit more generous than they previously did given these changes, don’t they? And in terms of the franken credits, how do you you know investing in Australians by their nature love a good frank and credit refund. How do how does how has the game plan changed going forward in that regard?

Yeah, I mean, I don’t think I think for investing and the way we might invest, which I would say is a relatively diversified portfolio. So you may well have, you know, twenty, thirty per cent of your portfolio in Aussie shares, but a range of other things. I don’t think it changes significantly how you would invest. It’ll certainly change how you might consider which assets you’re holding, which entities, but in an overarching sense, you probably end up with a very similar portfolio. And a good investment is a good investment regardless of tax. You know, shouldn’t let the tax drop be the driver. So I can’t see it changing things dramatically, to be honest. I said before, controversially, maybe franking credits is next.

I’m waiting for this.

This is tell me what you think.

Just a cynical view, and as you said, it’s sort of maybe it comes back to the shortened twenty nineteen when when at least Franking Credit refunds were on the chopping board. But you know, if we have a world where trusts are taxed at thirty percent on distributions and cannot benefit from franking credits, yet a company can distribute with a franking credit attached, maybe there’s some level of unfairness and that’s a rationale for that’s even the playing field and remove some of those benefits of franking credits. Cynical, but you’d I just wonder whether that’s the next thing to come.

Yeah, individual shareholders are definitely better off than holding it through it as a structure.

As they get their refund of franking credits.

So if as Simon cynically suggests, one day they come along and remove Franking Credit refunds, then it just levels the playing field. Yep. Take a brave government to go back there. They seem to have lost in the twenty nineteen election off pretty much off the back of that. Yeah.

But who would have thought that a government would remove pre-CGT status, remove the fifty percent discount, yeah. And introduce entity tax or taxation of trusts in one blow.

And when you say remove it, perhaps just for the listeners, describe that a little bit better. That you’re almost quarantining the gain, if you like, up until 30th of June 2027, aren’t you? In terms of those things. So, you know, and to that point, and this perhaps goes to both of you, the evaluations at 30 June 2027 are going to be quite important.

Imagine people let’s say I was cynical, I would be and I had myself a personal asset or some of some kind, I’d be trying to a property asset, for example. I’d probably be trying to am I am I trying to get the valuation up at thirtieth of 30 June 2027. Obviously within the realms of legitimacy, but the higher the better, presumably because I get a fifty per cent discount on the gain up until 30 June 2027 before I then fall into indexation. Is that fair, or does it depend? Depends on what happens after that.

I think in all instances the higher the value the better. Because A, you are maximising your fifty percent discount and B you’re getting a bigger cost base to then index from. Yeah.

So I think everyone’s gonna be hunting value as in June next year and asking them to be nice and value as high as as is supportable.

I think a good time for us to announce the new arm to Perks. The valuation Perks valuation. Take an optimistic view on valuations.

We could do that. However I I sense there’s a conflict between us using them each time and a and a correlation between unnecessarily high valuations and tax advice.

Yeah, and I think we’re not opening one of those for all the listeners.

And I think one of the more serious. Well, not serious, but one of the issues that I see about this whole valuation aspect is the government just seems to think that there’s broadly three classes of assets. There’s shares, there’s property, and there’s a business.

There’s a myriad of other assets that are CGT assets. There’s rights, there’s water entitlements. Water entitled like there’s a a myriad of of assets that don’t necessarily have a secondary market.

Collectibles.

Collectibles, art, etc. And the impost for valuations is just going to be through the roof.

Would it have been better if they grandfathered it?

Well they they sort of have by value. I don’t know how else

you could you could go about it and just said whatever assets you’ve already got and get the fifty per cent discount until the day you sell it and then everything else starts afresh. That would have been true grandfathering as opposed to.

Yeah, I can’t see how that would help housing affordability ’cause nothing would sell.

Wow, that’s true. That’s true. Although earlier on we described that housing affordability wasn’t necessarily fixed by it anyway, ’cause it was supply side.

Yeah, correct. Yeah. Correct. But I think it would make it even worse. And I think you’ll see that a bit with the grandfathering of the negative gearing as well.

Yeah.

I think there’s a lot of properties that are going to be hung on to that might not otherwise have been hung on to. Yeah.

So people actually hang on to them because they’ve got an asset that does gain negative gearing capability.

Correct.

Yes. Yeah.

I mean, and I think, you know, we’re not going to go into it in detail here, but the whole chain there have been some fundamental changes to capital gains. How we apply losses, et cetera, which is going to be detrimental and it’s going to cost tax for people…

Just as much as the 50% discount.

Just as much as the 50% discount.

So you know, and that probably does have connotations into investing, where I think if I can explain it as best as I can, and you can tell me whether I’m right, Neil. But yeah, previously, if you sold a parcel of if you bought BHP shares in several different parcels over a period of time, when you went to sell them and made a gain or a loss for that matter, you could choose which one, which parcel you sell if you like. You you literally pick your parcel and sell accordingly. Whereas going forward, there’s no picking. There’s there’s a definite order. There’s an order of conceded losses, which as you can imagine, is not normally favourable to the taxpayer, which is perhaps in the fine print of what the government has brought in and it hasn’t got a lot of airtime in terms of and I think but but yeah

I also think in particular with that is it it’s the requirement to apply your capital losses first against your discountable gains as well.

Not the other gains. Not the other gains.

So that hurts it does.

There’s an extension of that too, I think, from an investment point of view. And again, potentially unintended consequence, which is, you know, so going forward, capital gains are going to be taxed on the real gain above inflation as opposed to the fifty per cent discount. So it’s you might see let’s say a portfolio of five stocks. One stock does particularly well. It grows at a rate above inflation and now the other four do okay, but they grow at the rate of inflation, no real gain. So the investor’s done well from one or even the other four might be just below inflation. And in aggregate they’ve grown at the rate of inflation or just under. So in aggregate they’ve made no real gains, yet they’ll be taxed on the one that makes the real gain above inflation with no offset against the ones that haven’t made a gain against inflation. So after tax they’ll they will have made a loss, a real loss against inflation.

Yeah.

And so that to me, I mean there’s lots of connotations of that. But one thing it may well do is encourage people

To stop investing directly in stocks and having a collection of stocks, but rather through one entity or one fund, for example.

So an ETF type. Like an ETF.

So ETFs look more attractive in

Potentially. Potentially.

Loss making share in their portfolio and, just approaching 30 June, they’d sell it and rebuy it in a in a short time frame and which was which is prohibited ultimately under the tax rules. You know, is this a f essentially their way of prohibited yet difficult to in practice? Is this an easy way for the I mean, what is the reason for the government coming through and changing the order of how you allocate these gains just for their own benefit? It seems if I was a cynic, they may be they maybe got jack of people using the wash sale but finding it difficult to prove that they did a wash sale.

I don’t know how to answer that, but one thing it seems to me, why would they do that? To me it’s a shorter-term incentive to the government to do something like that. In other words, get the tax now rather than it being deferred and people choosing how and when they pay the certain tax. So it’s relatively shorter term and from the government’s point of view to get the money now. And one of the broader issues is probably getting a little bit above the tax per se, but is you know, we we’re talking a lot about the tax changes, and some of these things will certainly change behaviour like we’re speaking about. but it’s pretty hard to tax your way to prosperity. Like it’d be really great to see what changes might encourage investment in things that make Australia a more wealthy country in aggregate. And so yeah, maybe that’s coming. But this this is focused on seemingly getting more out of the existing tax base, squeezing more out of it and picking at winners and losers, as opposed to prosperity more broadly.

And it’s a good theoretical discussion because I have wondered through this phase whether the it it’s seemingly aiming towards bringing tax onto you know, taxing labour and wealth a little bit closer. And i is that an early shot across the bow to say we want to make sure we’re getting a good amount of tax from wealth, if you like, because if you know, in years to come if everyone loses their jobs to AI, then there is no tax coming off Labour. So is this an early salvo to make inroads into it early? But look that might be

That’s a deep thought.

Yeah, w we end up in some deep paces sometimes and

called the death of a few things.

But I’ve wondered whether that was their early shot. If taxes from Labour are going to reduce over time, maybe they’re getting prepared for it and changing the budget structurally to mean that they’re not quite as impacted by it in years to come ’cause something’s gonna get taxed. If it’s not the wage earner, it’s going to be businesses and otherwise ultimately. you would think. But maybe I’m thinking too much about it.

But I think if we assume that’s correct, I would have thought the easiest way would have been a consumption broad based consumption GST. Increased GST rather than investment. hidden investment.

Mm-hmm. Yeah.

We’ve got a there’s CGT changes that are already in place. This podcast is is shamedly about business owners and high net worth individuals and their and private.

There’s a lot of listeners out there who are listening to this thinking, what do I need to actually do? I mean outside of getting valuations on assets in in June 2027, that’s probably one action that they take. But, you know, should they be considering restructures within their group or or, you know, when if they come and visit their accountant, what are the types of things that, you know, you you would be talking through with them? And mostly I’m talking I mean the CGT changes and negative gearing changes are one thing. They’re already legislated, they’re in place, and it they’re really they’re almost a little bit easier because it’s like, well, you can’t do much about it. It’s just they’re gonna tax you differently. And it might change what assets you purchase in future. But that’s sort of where the game ends. But the discretionary trust tax changes quite a lot and it’s going to make people fundamentally think whether the way they trade and the structure they have now is the right structure moving forward.

I think the first thing is don’t rush. I think there’s going to be for most smaller businesses, probably a restructure, not necessarily a moving of assets, but maybe how they administer and how they extract profit out of their structures. So, I think post 1 July 28, we’re going to start seeing a lot more people paying themselves wages rather than trust distributions to sort of use up tax-free thresholds, get up to that 30% band, and then start to top people up with trust distributions from that point to make sure that we’re not wasting that trustee withholding amount. So, I think there’s definitely going to be a lot of that sort of change happening. There’s going to be, I think, a lot more planning around how things are managed going forward. But there are going to be significant restructures into corporates. And I think that’s definitely on the cards.

Particularly where you have, you know, ideally, you know, somebody earning more than three a business earning more than $380,000 if you’ve got mum and dad involved, would ordinarily be looking to use dump companies, with that not being available or bucket co’s.

We killed them earlier on.

We killed them earlier on. So we need to look at picking up and moving the business across. The key is gonna be is how do we do that? And commercially, like it’s all as a tax guy, it’s really easy to sit here and say, just move your business. The practicalities of it are huge. And so I think in my mind there’s going to be more and more novel structures that come out where there’s already starting to be classes of shares and stuff. Not so much that, but more so people taking trusts and using the term preserving the ABN. All right, so that you don’t have to write to every customer, you don’t have to deal with every employee, you don’t have to deal with every major supplier to move the business. So it’s about can we resettle trusts to put them into fixed trusts. Can we insert holding companies above unit trusts?

Yeah.

There’s a lot of that sort of structuring that I think will start to roll out early next year once the rules are known with a little bit more certainty. I think definitely the rollover that’s been touted in the consultation paper is easy and simple. Yeah. But I’m just not convinced it’s going to be the best option.

I was going to say it’s fair, having briskly read the consultation paper, you’ve probably read it in more detail than me, Neil, but it doesn’t appear to be a place for the faint-hearted, and it’s complicated. And yes, there are rollovers and they may well be quite useful and quite good rollovers, in terms of what it means for people, but it looked like there’s a lot of devil in the detail and you’re going to want to get it right, and it’s not. It’s not I will shift from a trust to a company; that’ll be easy. There’s a heck of a lot to come.

It’s not, it’s not simple. And you know, for us in South Australia, we’re very fortunate we don’t have stamp duty on cafe property.

Well, on anything, apart from residential and primary production land. If you’re in Queensland, for example, you’re paying stamp duty on everything. Everything. Yeah. So that could be quite expensive.

So, you know, the simplicity of here’s a really nice rollover, everyone can move from a trust into a corporate, I don’t think quite stacks up. And that’s why I think you’ll start to get these novel structures that are going to start to roll out.

Are people going to start moving to South Australia from Queensland?

They’re more than welcome to.

Side benefit perhaps. And Simon, when I mean we’re obviously talking there about restructures, but how do you what’s your view on how this will shape?

How you have discussions with clients when they come in. They come in, they know there’s been a lot of changes on a number of different fronts. If that client was coming to see their financial planner, what would they be talking through?

Well, I think I talk broadly about I don’t think our investment portfolios, the way we approach investing, is going to change dramatically. Clearly, you need to be aware of tax and the sorts of assets you’re holding in various entities and optimise for the best outcomes. I do think, and we said before about super being relatively more attractive, I do think it’ll sort of focus relatively younger people on super a bit earlier than we might have otherwise. You know, and otherwise, you know, the boring things, paying down your mortgage and focusing on doing that and then looking at super as your first port of call, perhaps it encourages people to do that a little bit earlier than they might have otherwise.

Yep. Yep.

Yeah, and the CGT aspects of any people with pre-CGT assets, does it change anything if they’re holding on to some old CBA shares or something from a long time?

Yeah, I mean I I it it’ll depend clearly, but yeah, some people might take the view that that’s been some level of an asset to hold that pre-CGT thing and why sell it if I can continue to benefit from gains without tax, well now they could take the view, you know, clear the decks and that you know, massive BHP holding or CBA holding, for example, we could sell and now diversify into something else.

Depends on the rate. Yeah. Value increase compared to inflation. Really.

That’s right.

It does. Yeah. Hopefully there’s a big upswing in values just prior to 30 June 2027 just to help out those valuations as well.

Yeah, very good.

Well, thank you both for the discussion today. Hopefully the listeners have learnt a lot. I certainly have. This was designed to be more of a fireside chat to encourage generic conversation. So for all those listening at home, this wasn’t you know, there wasn’t a direct questioning. We were probing the questions to see where we landed, to give listeners an insight into yeah, two directors of Perks who are very in the detail of these cheese changes and still working their way through it and hopefully giving everyone an insight into what might be possible and how it might affect them.

So yeah, thank you both for coming on the podcast today and I hope I hope all the listeners have got lots out of it. So perhaps we’ll have another podcast in twelve months or so’s time to see whether what’s called out the grave.

Yeah

What we prematurely killed off and what’s managed to survive and whether the franken credits are genuinely on the chopping board for the next twelve months, perhaps in the next budget.

Thanks, all right.