Now on afternoons, all things finance with Blake.
Work from Pretzel Wealth.
Organize your free consultation at Pretzelwealth dot com dot au. Okay, bit of abba means it's time to dive into finance with the one and he, mister Blake, went from Pretzel Wealth.
He's here in the studio with us. Hello, Blake A Michael, all right, we're getting our money's working and thad aba down if you want not Now, if you've got a question for Blake one three one eight seven three, anything about your home loan or super or investments or you know, other general financial advices you might need, take advantage of the free advice one three one eight seven three. There's always that complimentary consultation we tell people about as well asn't there Blake.
Yes, certainly. So it's a forty five minute consultation. You come into the office, bring your your statements, whatever questions that you might have, any sort of dark secrets that you want to reveal, all that sort of good stuff, and we'll sit down, we'll unpack it, we'll go through it, and you know, hopefully we walk away a bit more informed.
Indeed, we had the inflation data today CPI or what do they call it? Two point four percent? The headline figure that was up just a tick, I think anything to read into.
That, nothing to write home about. Really trimmed. Main CPI data up a little bit as well, two point eight percent. So it's that's the one that the RBA will look at and say, well, is it getting out of control? That is not a figure which the RBA will be concerned about. They'd say, Okay, it's still within our band of two to three percent, so they'd be quite comfortable in that range. So it's not going to result in drastic rate cuts, but it's sort of where they want to be.
One of the questions is what do they include in the basket of items as it were that they used to formulate these figures, Because I've just got a note from someone who says, well, look, CPI is two point four percent, but my insurance went up thirty seven percent, but Telster internet when I'm twenty percent makes no sense.
Electricity going up nine percent in July, so it's.
Higher if it went for the government rebates, right, So how do they land at this figure?
Well, exactly, so they look at what the average person spends and effectively try to create this basket. Now, they strip out in some cases they strip out volatile items. So if there's a flood somewhere and that affects banana crops, well we'll take out bananas this reading, because they're obviously going to be impacted. So there's a basket of goods. The data comes out or comes across.
To the ABS.
They work out, well, what does this actually cost and what's the cost increase that's occurring, and that's our print. So the CPI is sort of a best guess at what prices are doing.
But you're quite right.
There are some items like insurances, as an example, which are going up far quicker than CPI, But because they don't make up a large component of the CPI, you don't see those big increases to the overall number.
Okay, so they're looking largely petrol prices, energy prices, food and grocery prices, those sort of every day weekly staples as it were. Almost okay, that helps explain it. Well, do the other things you still got to have the money for, don't you? Well, exactly right, Yeah, they're not going anywhere. You know, you're not going to stop insuring
your home. Well, some are well well exactly, and some of the flood affected areas that this insurance policies are going through the roof if they offer them, if they offer them at all, exactly, and some people are choosing not to, not to take it up, and so you know, then you're running the risk.
Okay, if there's another flood, we're not insured. What's the impact on our financial positions. It's sad to see that that's occurring, but that's all part of how the insurers sort of reduce their risk or avoid the risk altogether, because they're in it to make money. They're not there for the love of it, unfortunately.
Okay, this from Bert question on the text line before we get to the calls. He says, I'm seventy seven. Every year I have to withdraw a percentage of my fund this year at six percent. So my question is what affect is this horrible tax? I guess this is the super text we've been talking about unrealized capital games, etc. Going to have on my ow fund.
Well, suppose if Bert's super funds over three million dollars, then he'll get caught up in this division two nine six tax. If it's less, then then no impact at all. But say your superbalance was above three million dollars and it was growing with investment returns and the like. What happens is as part of the calculation, when they work out, well what's the change in balance? To work out the tax, they will add back with drawals from the super fund
or the pension account. But then they'll subtract contributions. So if there are with drawers a six percent withdrawal from super that gets added back on and it's effectively you know you've earned that money. And the logic behind that is, well, okay, we started with a smaller amount, we ended up with a lower amount, but we have to add back with drawals to sort of see, well what did you actually.
Earn for that period. So it's a good question.
But Bert, if your balance is below three million dollars, then you're going to be okay.
Okay, Bert, there you go. Pasquali's called through with a question, Pasquale far away.
Yes right, how are you good? I just I just wanted I just wanted to say, is I'm single, own my own home. And the three quick questions is how much is the maximum I can have in savings? And what is the maximum I can have in my super And is there a capital games text? I heard on your family on your your family home?
I heard, Okay, so maximum savings.
I would imagine that you're referring to the age pension with that respect, because there's no cap on I suppose how much you can have in the bank.
You can have whatever you want.
Superinnuation there are caps as well, so you know, roughly speaking, there is a two million dollar threshold. Once you get to two million dollars, you can't really add much more into super apart from concessional contributions. But just to come back to that first point about savings and superinnuation, if it's in respect to the age pension and you're a single homeowner, then to get the full age pension, you need to have assets less than about three hundred and
fourteen thousand dollars. If you want to get some age pension, well that cuts off at six hundred and ninety seven thousand dollars. So that's for the age pension. Now the third question around is there going to be a capital gains tax on your family home. There's no such thing at this stage. At this stage, At this stage, I'll use that at this stage, who knows. So what can occur though, and what could trigger a capital gains is if you've ever had the family home as an investment
property for some period of time. So speak to your accountant about the family home. Have you always lived in it, has it been rented out for a period of time. Perhaps there is some capital gains there, but only if it's been an investment property and not your main residence.
All right, pasqually, good question. Thank you single and owns his own home. If it it's down of Double Bay, you won't be single for too long. Ago picks a few boxes. It's sixteen minutes to two. I shouldn't say that one, three, one, eight seven three. Interesting nat here from Graham, He says, could you ask Blake, will the rise in bond rates in the US? Heaven to fifth?
Here it can on our superannuation funds. So superannuation funds invest in bonds or fixed interest assets. So how it impacts us is that if we're an investment investor and we've bought government bonds from the US or treasuries and their interest rates are rising, the capital value of those bonds declines. So you may see that there is a capital decrease to that asset, so it can have an impact here. Interest rates moving up over in the US
does add or it can reduce the Australian dollar. Although if there's weakness in the United States then money will flow out of the United States into other currencies and therefore those currencies will appreciate. So yeah, it does have some impact. We're not sort of seeing it as being a doom and gloom scenario there. It's just something to be mindful of. You're not going to have huge exposure to US bonds in your portfolio. It's usually quite diversified
that side of the equation. But interest rates rising in the US will have some impact on your portfolio. Expected to rise, well, what's happening at the moment with their downgrade, the recent downgrade that's happened over there, it means that investors are expecting more from the US or higher interest to take a chance or to invest in and buy those bonds cover the risk, to cover the risk exactly,
so they're seen as higher risk. Now you know, there's naturally some revenue coming through from the tariffs in the US and that may help with the deficits that they're seeing. They're still expected to be in deficit by about two trillion dollars. So that's you know the fact that last month they got I think sixteen billion dollars US. You know, that's just a drop in the ocean as to what they're spending. So but it's it's sort of they're trying to get in get their act together the best way
that they can. And so if they can prove to the markets that you know, their budget is coming back in line and everything's looking a okay, then maybe they get that triple A rating again.
But it's up to the up to what they do.
Wouldn't candle that anytime soon? Yes, Now back to this division two nine to six tech. A lot of people, even if they're not directly going to be impacted or worried about this.
Now.
Brendan's just sent me a note that many are asking, and that is Okay, Well, if your investment loses money, will the government pay you?
Oh?
Certainly not No, So what's what's happening there? Is so say one year your part you the tax, you're payable, and then the next year you lose money. Now what will happen is the hir Reill cord a higher benchmark or a watermark for what your balance has reached in one financial year, and you won't pay that tax or that tax calculation won't take effect until your balance exceeds that previous watermark or that threshold. So they're not going
to pay you back. They're just saying, look, if you've lost money and your balance is down, if you get back up to these levels or the previous levels, then we'll start introducing the tax again. So you might have a period of time where the balance has come down, you've lost some money perhaps, and so through that period where you might be making money on Suva, you haven't hit that watermark just yet, then you're not going to pay the tax.
Just quickly. On the capital gains tax and the family Homer, Jeff says, there is capital gains tax if your home is greater than five acres.
Oh, certainly yes in that situations the spot on.
Okay, well done, Jeff, Thank you for the ever popular Blake oint from Pretzel Oil seven three. Now, I just want to make the point before we go to calls and tex You've always been very popular, but ever since this proposal to bring in the division to nine six taxs, you've been extremely popular, and I'd imagine this is true across the financial advice community that people are now alert to this.
Right Yeah, speaking with colleagues, you know, we're all getting asked the same question. You know, what does this mean for me? And you know what should we do to get ahead of it? And so the natural reaction from people is to jump and sell properties or sell assets and try to get money out of super that's their natural reaction a moment, which rightly so. But you can
do this after it's come into effects. So if your plan is to reduce your balance below three million dollars, you have until the end of the financial year in which it comes into place. I say it comes into a play from one July this year and on the by thirtieth or June twenty twenty six, if you've gotten your balance down below three million dollars, you're okay. So there's plenty of time for people to work out what
does that actually mean for them. We don't have to jump and react and have a bit of a flurry to try to exit. It's okay, get some advice first. But Jack colleagues are saying that they're being inundated with questions around what do we actually do here, because we don't really want to pay the tax, and you know, you can understand why, and so they're trying to come up with strategies to make sure the money is still working.
I can't understand why they spend it so wisely charitable of us.
It's a very charitable cab.
So it's just one of these things that people don't like the idea of. And so how do we navigate around this? But we've got a bear in mind that you know, we're taking it out of a very tax effective environment. Perhaps investing that money personally isn't the greatest move. So we've just got to weigh up what the consequences
look like. And everyone's portfolio is different, and so there's different types of portfolios that have been constructed, and so maybe it's better to just cop the tax because you're actually going to pay less in the long run.
It's the principle that's upset people more than the practice. I think, Okay, let's go to more calls. How Steven's got one for you? Hi, Stephen Good you've got Blake. What's the question.
I'm currently with one of the big industry super funds. I've been talking to a financial planner. I'm in my early fifties and they're recommending some of the retail funds or platforms like PUB twenty four and other things like that, and we's just after a bit of feedback on the difference. The difference of the two.
Yeah, I suppose in a nutshell, and it really comes down to what you're after. So, you know, if the industry fund's ticking all the boxes for you, then there's nothing wrong with the industry fund. Some of the other platforms like a HUB twenty four or you know there's a BT Panorama or others. You know, what they do is they offer flexibility. And so when I say flexibility, I'm talking about you know, you've got the world of investment options to choose from. You can go into direct
equities or exchange traded funds. You can buy term deposits through them. Although some industry funds do offer term deposits as an option, so that would be the reason for changing or going into a platform like that if you are wanting to actually see what you're invested in. Industry funds don't really provide this too well. They say you're in Australian shares and you say, well, what shares am
I in? Well, Australian shares, good luck, and so the platforms offer you the ability to say, well, actually I want some BHP or I want some Commonwealth Bank. I want to actually know what's going on there. The platforms can be a little bit more expensive because you're getting
you're getting access to many different investments. So just find out what the costs are, make sure you're comfortable with the decision that you're making, and really it comes down to what do you actually need and what do you feel is the right move moving forward?
Okay, Stephen, good question. Mike's got an interesting one, high Mike.
Yeah, Look, I'm just wondering in relation to the super I know the rules of a family home. What would we be up against in what we're both still alive converting our house into the boys' names?
Okay? Have you always lived in the home?
Mike? Have you? Yes?
Had always been the home?
Okay, So if you converted into the boys' name, capital gains is unlikely to be there.
What you will be up for is stamp duty.
Now, stamp duty gets calculated based on market rates, so you can't give it to the boys for a dollar and expect to not pay any stamp duty. It just won't won't happen. So you've just got to work out, well, what's the value of the property. Maybe speak to a real estate agent or get it valued, and then you can go online and look up how much stamp duty
would be applicable for that transaction. You could speak to a conveyance, so I suppose it would help you do the title transfer, but just be aware that there would be some stamp duty on that. You're also giving away the family home, so if you're going to live somewhere else, that's fine. If you're planning on renting, there could be
some Centerlink implications for doing so. Equally, you're gifting money is away, so maybe if there could be some granny flat right arrangements where you can get around that with Centerlink. I'd encourage you, Mike, just to get some advice first before you transfer it. Understand the costs UNDERSTAN and the complications on say age pension, and make sure you're making that informed decision because there's a few different aspects here that you might want.
To look at.
A couple of knock ons. Good question though, Thank you, Mike, Thank you Blake. A lot of questions still coming through. You'll here same time next week. We'll dealve into them.
Then we'll see you there.
All the best Blake went there from Pretzel. Don't forget that complimentary consultation. Book it with Blake today Pretzelwealth dot com dot au