Hello, my name's Santasha Nabananga Bamblet. I'm a proud yr
the Order Kerni Whoalbury and a waddery woman. And before we get started on She's on the Money podcast, I would like to acknowledge the traditional custodians of the land of which this podcast is recorded on a wondery country, acknowledging the elders, the ancestors and the next generation coming through as this podcast is about connecting, empowering, knowledge sharing and the storytelling of you to make a difference for today and lasting impact for tomorrow.
Let's get into it.
She's on the Money, She's on the Money.
Hello, and welcome to the new financial year.
Gotcha, and welcome to She's on the Money, the podcast for manials who want financial freedom. Victoria Devine is with me as always, and we're talking about something very exciting today.
Yeah, you've brought a lot of energy for what could have been a very dry topic.
It's not going to be dry. I have a good feeling about this. It's the Investor's Guide to Tax Time.
That is so juicy, That is spicy, spicy clcy Oh, I cannot late to jump in. I am so excited about this spicy content. Tell me you're not stupidly excited, Beck.
I'm stupidly excited. My favorite part about this is that you're not an investor. Everything that we're going to talk about completely irrelevant to you. I'm just glad you're here with bells on. It's new news to me.
I'm a tiny baby in this episode, and I hope you teach me a thing or two.
But my favorite thing about these episodes is whether you're ready or not to be an investor. My favorite thing ever is making sure you're educated and actually ready for the conversation when it does happen. So like, I cannot wait for the day that you're like, oh, v I'm investing my first fifty bars because you're going to have so much education behind you that you're making the right
decision for you. I think it's such a misconception that, oh, well, maybe like this episode about tax and you know, investors, it's not relevant for me.
I totally get that.
But like, what if in the next twelve months you get your financial shit sorted enough that you are an investor.
You're going to need this next June.
You're going to need this for future You and I think that it's really beautiful in a way to kind of like give yourself that education before you need it. Like I've said it before and it's probably not the right example, but like you don't become a brain surgeon by like just going in and doing brain surgery.
Right, Like you say, YouTube is yeah, oh can you do it? Buy YouTube baby again?
So much cheaper than a med degree at MELBOURNI like, honestly.
Quicker, quicker twenty minutes.
You know what, if I ever have to have brain surgery, you best believe I want someone with a real degree, not someone who's like learn, not me, not you, You're canceled.
So today we're going to be stepping through a few very important points on this huge topic to give you guys some general basics when it comes to tax time and your investments and what to do, because it can be super overwhelming and it's worth obviously bearing in mind that tax implications and beck the possible benefits of certain investments. So generally, all of your investment income needs to be declared in your tax return, all of it, every single dollar.
Interests, dividends, rent, managed fun distributions, capital gains from properties, shares, and cryptocurrency.
And if you're like, oh my gosh, I'm not an investor v I just have my money in a high interest savings account.
Beck, that's interest, you have to declare that, Oh my gosh, exactly scary.
So it's not scary, it's just about being transparent.
And to be honest, guys, it's twenty twenty three.
The tax system is so advanced that more often than not, you're not even going to have to do the research. It will just be in your tax return already because your bank ruty has your TFN. So it's very likely that all of this could be automated for you. And that's why so many times when I talk to people and they say, I'm not sure should I be doing my tax return myself? You could give it a crack, like, it is so much easier than it used to be.
So you pay tax on investment income at your marginal tax rate, that's the rate that you pay tax.
On your normal income.
However, there are some special rules that apply to what we call.
Capital gains, which could arise on quote, the disposable of your assets.
That just means you sell them in a fancy way, right like capital gains is a tax that you pay when you sell an asset and it is worth more than what it was when you purchased it, because they look at it and they go, all right, well, beck, if you bought a share for ten dollars and it did really well and it got to fifteen dollars and you were like, well, I'm going to sell it, they're going to go okay, cool, you bought it at ten dollars,
it's now worth fifteen. Capital gains will apply to that five dollars that you made because in Australia and usually every other tax environment in the world, you have to pay tax on what you earned.
And you earned about five dollars. Does that make sense? That does make sense.
So you're allowed tax deductions for the cost of buying, managing and selling an investment, which is really cool. So if you've been brokering shares during the year, like you've jumped on shares is and there were fees, you can claim them on your tax. That is very sexy, I think. But there are also rules around what you can and claim as a tax deduction. We'll obviously get onto those later. And I genuinely think that more.
Things should be tax deductible.
Like something that really grinds my gears back and we'll obviously get into more of the semantics of it, but as somebody who is an ex financial advisor, this really grinds my gears. So you obviously go and see a financial advisor if you've got some money and you want
to be in the best possible financial position. And a lot of the time you'll see a financial advisor and they will say, all right, Beck, you've got you know this amount today and we're going to grow it to this amount over here, and with my advice, you're going to be hopefully hundreds of thousands, if not millions of dollars better off. You go, great, that's fantastastic. What grinds my gears is that process where you're putting yourself first
sounds really sexy. That benefits our government significantly, Like the idea that if somebody an individual goes and sees the financial advisor about their superannuation, even if they are just a general employee, like we're not talking about millionaires seeing financial advisors, which you're talking about general mum and dad seeing financial advisors, they will be in a better off financial position because of that advice, which means the likelihood of them claiming a pension in the future.
Far far less likely.
Right, So, like, if you go and see your financial advisor, you're probably not going to rely on the government during retirement because the whole point is that you're working towards a secure individual financial future.
Right.
Does that not pique the government in the best possible positions sense? Why are they not letting us claim the cost of initial financial advice where you get your statement of advice on tax?
Why can't I claim that?
Does it not put you in the best possible position government to give me some tax back now on the probably anywhere between three and eight thousand dollars fee, which would be very sexy. Why can't you let me have that initial piece of advice with some kind of like you know, tax incentives so that more of us do it, so less of us down the track actually claim pensions and actually need government support.
But you won't do that.
Isn't that insane when you like extrapolate it out and go hold on, the government would actually be better off if more of us got advice. And the amount of times I saw people ask me questions when I was working as a financial advisor. Oh can I claim this on tax and I'd have to go, look, no, you can't, unfortunately, because it's initial advice. But what you can claim is
ongoing investment advice. So like after you've got your initial advice, any monthly fee after that is claimable, but not the initial and the initials the thing that scares most people off, right, because like if I said to you, hey, beck, get financial advice, it will put you in the best possible position.
You go, oh my god, this.
Is such a good idea, but like it's such a high upfront. I don't mind about the ongoing monthly fee, like that's completely manageable, but the upfront scares people off.
I totally. I've got thoughts. Anyway, maybe you should write a letter to the tax person.
Yeah, hello, mister tax man, please let me claim this because it will be the goodest for you.
Yeah.
Like, it's a very very what's the word persuasive, it's a persuasive argument.
It's persuasive, And really, I think that you've really thought this through.
I think this is a great idea I.
Actually have because do you know how frustrated I would get every single time I would have to explain to clients, No, you can't claim me on tax, like you can't claim my initial advice. But you can for your accountant, you can for any other service providers related to money, just not me because the government doesn't see me as valuable as I am.
Oh my gosh, yeah you need to write. I've just got a lot to say about that process.
But then also the part where financial advisors basically undersell themselves completely, Like you guys are so magical and put people in such good financial positions. But like if I busted in the door and said, all right, Beck, we're gonna sit you down. I'm going to put you in the best possible financial position of your entire life, You're
going to be so financially secure. See, your subranuation might be sitting at eighty thousand dollars right now, but when you retire, it's going to be well over a million. Because of my advice, You're going to be literally millions of dollars better off. You'd be like, oh, I'm in You sound like a sales queen, whereas financial advisors don't do it that way. They like are a lot softer and a lot more gentle with the process because obviously you don't want to scare people off.
But then clients have the audacity.
And come back and be like, oh, four thousand dollars is a fee that's insane. Absolutely not paying that. I'm like, you're literally going to make more than a million dollars because of me. But okay, no worries.
Jeez. Anyway, there's just a lot to be said on that topic. Yeah.
That so this episode is about but get financial advice. Now's a good time to think about your insurances as well. So if you haven't got that advice, yes, I would be going and actually, you know, putting yourself in the best possible position. We obviously have a recommend Phil from Skywealth is who you should be going and talking to about your situation. And his fee is not thousands of dollars.
It's like three hundred and ninety five for a consultation, which is wild, Like for all advice, you can't claim it on tax I AM really sorry. But given his fee is only a couple of hundred dollars in comparison to thousands, to put yourself in the best possible decision, I think that's really good money when you.
Had to go anyway, Soling Advice.
So V, I want to know when it comes to investing in tax returns, what do you need to have prepared?
Everything? Everything, every single thing.
Yep, you should have like a Manila folder, one of those light yellow ones that give me anxiety from the amount of times I used to use them.
To write that down. Get Manila folder on my shop list.
If you could get like a label maker and label it as well, that would make it feel a lot more official.
Really stucking up place. Yeah, label maker, yep, yep, you're writing this down.
I like it.
You're taking this very seriously.
What you want actually is your investment income as a report. Most investment platforms will automatically generate this for you and email it to you. So misconception is that it will be available on the thirtieth of June or the first of July. That is not true, and it's not not true because they're lazy and haven't done the reporting. It's because we actually need the date to pass so that we can actually look at the historical changes and what
actually happened in your portfolio. And reporting is actually quite intricate in in depth. So investment reports usually come out from I would say the middle of July. So anywhere between the middle of July to the end of July is when I usually see them hit my accounts. So if you're one of those people like Beck Beck wants to get her tax returning asafety right, yes, Like, once you start investing, that process has to be pushed off
a little bit because you're waiting for these reports. So you want your investment income, you want to make sure that you're claiming all the deductions that you're entitled to. So this is really hard.
If you get to the point where you're like, oh my gosh, I've got to do my tax return.
You haven't been thinking about it.
You're like scrambling to work out what you can and can't claim.
I've said it before on the show. The Ato actually have an app where you can keep track of things throughout the year. But if you're like me and you just don't want another app on your phone, you can actually just put a folder in your photos and just take photos of things as you go along. If you looked at my albums in my photos section, BEG, you'd be like, this woman's unhinged, Like I have a folder
for everything. I have a folder for tax I have a folder for business tax I have a folder for all of the outfits I've worn historically that I really like. I have a folder for all of the expenses i've incurred trying to make a baby with my husband. Wild Like you would literally look at my phone and be like, Victoria, why have you got? Yeah, But when it comes to tax time, you best believe I just flipped my phone around and I'm like, hey, beck, look at all these costs.
I can claim that is so good, makes Victoria.
If the ATO needed like proof or receipts, a photo of a receipt is it's absolutely sufficient.
Okay, great, because you will have to provide that to the ATO anyway, if you get audited and they're just going to ask for a quote the original receipt, but a photo of that attached is much easier to go back in email than going, oh hey, yep, misster tax man, let me just go under my bed to the shoe box where I keep all of those receipts. Also, something that you probably haven't considered, but I've seen happen far too many times is receipts fading. So receipts more often than not are printed.
On Thermo paper.
Thermo paper means that when the receipt comes out, it doesn't have ink. It actually heats up and it prints that way. So if you leave a receipt in your car on a hot day, it is very likely that that receipt loses all of the information that was on it because it's overheated.
Do you remember those.
Pens where you could like rub them out but they were pen, Yeah, that actually disappeared because of friction, not because of the rubber doing it.
It was actually friction and heating it up.
So one time, I used to be obsessed with like eraisable pens because I'm a lefty and I mess everything up, So a raisable pens they don't smudge, So I loved that. But then also I loved that I could just like eraise my mistakes and my notes would always look perfect. Like I don't know if you've noticed this, but I like being organized. I like everything to look perfect, Like I used to write everything in these like erasable pens. Notebook car hot day, lost every note I ever had
for a client. And now I've never used an eraisable pen ever again because I'm triggered. Yeah that makes sense, that's but that is why, in a very long winded way of saying, it's actually better to take a photo and save it because the likelihood of your receipt disintegrating whether you look after it or not, is very high.
Now, I wonder if I had a piece of paper that may or may not have once been a receipt, sent that to the ATO and said, I'm so sorry.
This is not kind of fly that you don't have proof.
Ah.
Yeah, it's kind of like when the police come to get you, and it's like innocent, indelatable, innocent until proven guilty. But also you've got to prove that you're innocent, right, you know, like if you get accused something, they'll be like, well, prove you didn't do it, and you're like, oh, well damn, I don't know how I'm going to do this. Yeah, honestly, TLDR of this conversation, take photos of your receipts, save them somewhere important. It could be a folder, it could
be the a tier app, it could be anywhere. But that's going to mean that all of your tax deductions are much easier to one claim because it's just in the one space. But also, remember, like I forget all the time. I'm a business owner as well as somebody who claims on my personal tax. So these small things
add up. Like if you're going to pop past office works and pick up some last minute things or some like pens or some notes, or you know, I buy a million sharpies and post it notes, like take photos of those receipts, because they're the ones that if it's for work purposes, you can claim. So just make sure that throughout the year you're just keeping track of stuff,
my friend. It will also mean that when you have to like calculate any capital losses or capital gains when you sell an investment, like just keep everything in one place. It'll make it so much easier, whether you're doing it individually or you're handing that information over to an accountant. My accountant loves me, he really does, because I'm so organized that I make his lafe so much easier.
I can imagine that would be very nice, exactly, love to see Victoria walking through those doors.
Yeah, I mean that's how I feel.
I mean, it's probably just my ego telling me that that's it. He's probably just like, yep.
Another cut paste client, no worries, But I think of course you can. You can see it in his eyes. Yeah yeah, Now, V what.
Do we actually need to keep records off to show the ato erroiting erroting errooting? Okay, so if you are claiming something, you must have a receipt for that, even if it's under the.
Do I say in my office this is terrible. I'm going to get in trouble with the environmental hippies. When in doubt printed out like we need it, And I don't actually mean to print it like on hard paper. Sure you know when you like get emailed like a receipt or something. Love that I say, when in doubt printed out, because if you hit print, like the invoice that you've been sent or the receipt or whatever, you can actually save it to PDF and put it in an album.
And that's what I do.
I'm not actually printing it, but I'm saving it, filing it away, because I guarantee the last thing small business owners want to do, or anyone wants to do, is troll through their emails trying to find an attachment for an invoice that they paid back in January?
Right, how do you want to do that? How can you remember? Also?
Oh my gosh, the amount doesn't line up because there's lots of different invoices that get paid. Honestly, just file it away. We use an accounting system at the moment, we're using zero, so it's all just like tracked in there, and it makes it so much easier that small business side of things. But when it comes to being an individual, like just file it away. Even in your emails, have a little like separate email folder that you can just click and drag things that you think might be relevant
to tax time. Call it tax time and call it tax time twenty twenty three or twenty twenty four, because I promise you you're not going to want to look at all your old tax stuff next year. And at least it's all kind of like folders. So I've got tax time twenty twenty, tax time twenty twenty one, twenty twenty gen know what I mean. Totally Just be organized, it will help you.
I unfortunately, do have twenty maybe thirty emails because I, you know, want to sign up for Netflix and have a free trial doneary every month. Yeah, so for me it's going to be a bit of a nightmare trying to find all the invoice.
But if you were doing it as you were going, Yeah, were very much easier, right.
Absolutely, So you know what I might do if i'd start doing Yeah.
When it comes to investments, though, what you're really wanting to keep track of is kind of the start and the end of the process, like the middle ground. It's fun for you, but the tax man isn't going to care as much. What they want to know is how much would you pay for that asset? How much did you sell that asset for? Or how much is that asset worth today? Like what is it worth when we
do our tax return? Right, so, like we also want to understand how much income are you getting from that investment. Make sure that you're just keeping record of all income payments like your distribution statements or like your rental payment receipts and dividend statements. And then also Beck, we want to make sure that we are keeping track of any expenses that you incur while owning that asset, so receipts
for payments to manage. So if you're engaging a property manager claiming it, we are making sure that we are tracking any cost that we incurred to maintain the property. So say something happened to the front door, and you needed to replace it on a rental claimable because it's an improvement or a maintenance thing for your property. We also want to make sure that we're claiming any cost
that was incurred to improve your investment. So like as I said before, you're not able to claim first initial advice with a financial advisor, but you can claim ongoing which is improving your investment, So there's lots to it. You also need to keep your records for five years. That's why I didn't say delete that folder when you're done.
Don't do that.
You need to keep it for five years on record because that's the period of time that they could potentially audit you for and you'd have to prove it. So just important to make sure that it's all filed away and then you can delete it after five years if anything Like me, you still have your tax return information from twenty sixteen.
It's all good. Like I don't delete.
Anything because I'm not going to go back through that, but at least it's biled away for future use.
Yeah, yeah, I love that. Okay, this is interesting about the landlord thing. Sorry, the landlord thing, not the landlord thing. If you have an investment property.
Yeah, because it's an investment and you're paying for things to improve the property.
Yeah, so you can claim it. That is really really cool.
It's one of the sexy reasons why people who have investment properties, you know, might choose to buy an investment property and then renovate it or make substantial improvements to it while it is still an investment. Obviously, you need to talk to an accountant and get some advice on this because there are like, you know, regulations and things
that you need to abide by. But if you wanted to improve the property and you know, change the bathroom or update the bathroom, if it's an investment, you can claim some of that.
What things can you claim on and what can you not claim on? So I'm assuming if you like live in a house, it's not obviously an investment. So if you're you know, fixing up your own house that you have maybe purchased, you could be able to claim that.
No, no, no, because it's not an investment and it has to like they're asked, And that's why I said, get advice on it.
You can't just listen to a podcast.
And be like, well, Victoria Device said, because babe, that's not going to fly with the ATO, Like I'm pretty close with them, but all that close, like don't name drop me, you know, like they're probably gonna side, are you all? Victoria's said, okay, Victoria, Well in that case, like give me who this woman again?
Like we're so sick of her. Anyway.
What you can claim is interest income expenses, so claiming a deduction for like account keeping fees that you incur on an account held for investment purposes, like a cash management account. So like, for example, I have a separate bank account with McQuary because I invest with six Park as well, So like not recommendation, I'm just sharing some information.
I invest through six Park and through them, I have a cash management account with mcquarie, and that's where essentially I direct debit cash to that account and then six Park, which is the investment platform that I use, They actually have authorization to take money just out of that account, so I move into that account so that then when I say, yep, I would like you to invest X amount of my money, they just take it out of there.
And we need that account.
Because I'm not going to give them authorization on my daily transaction account, right like I want that middle buffer where they can only touch that money that is in that cash management account. That account has fees, so I can claim those fees on tax which is kind of cool, but a lot of people would just like dismiss it and not think about it because they're like, oh, that's just some structure that I've set up to invest whatever.
Don't think about it again. You can claim that, and you need to claim that because you're entitled to it, Like we need to claim what we are entitled to. So don't throw away those like fees statements when they come through. If you have a joint account, you can only claim half, like or whatever your joint amount is. So obviously you can only claim your share of the fees, not like the total fees. You can't double dip. I'm really sorry because I know some people might be like, oh,
I'm going to double dip you in. My partner will do it and I will do it. No, no, no, you can't do that.
Sorry.
You can also claim on charges or taxes on that account. So for example, like if you hold an equal share in an account with your partner, you can only claim half of that allowable account keeping fee. It's kind of rude, but also like it makes sense. Yes, suppose to this second part of your question. You were asking about what you can't claim. So you can't claim a deduction for the interest you incur on personal tax debt.
Sorry, I need to absorve that so that at that time.
I just stopped when I said that the interest that you incur on a personal tax debt. So like, if you've got a personal tax debt, yes, and you owe the atos and casholer ah, and then you're occruing interest on that debt. You can't claim that interest because in another circumstance, so like say you bought a house back, you are able to claim the interest on that property, oh, because it's for investment, But you can't claim the interest on a tax debt.
For example.
This is coming up because a few people have asked me that question, because you might be like, oh, they, why are you mentioning that that that doesn't make a lot of sense for an investment. You can claim the interest on the money that you borrowed because it's a cost of investment.
Okay, I taxed it. That's not the same.
You can't claim the interest on a loan that you take to pay your personal tax dep yep. Okay, So if you say borrow money to put into literal investment, maybe like superannuation or something that can be considered not
necessarily superannuation, but you can do it on property. So you might go get a mortgage to buy an investment property and then you'll pay an interest rate to borrow that money that is claimable and then also something that you're probably not have going to come across before, but I've covered on the podcast, just kind of like topically, you can actually borrow money to invest in the share market,
so you could claim on that as well. So it's not something that a lot of people in our community do, especially in this economy. I don't think it's you know, the wisest decision ever because obviously, as you know, interest rates for borrowing money are quite high, but then the stock market is I wouldn't say returning low. It's not that,
but it's not as good as it could be. So having a leveraged portfolio, so leveraged portfolio just means I have borrowed money to create my portfolio is not something that I assume a lot of financial advisors are recommending at this point in time.
Sure, it is.
Something that financial advisors do use. It is something that I have recommended, is something that I have worked with with my clients before. It's also something that I've used personally and owned before, but I don't currently own at the moment because the market just started to not make sense in that aspect and I sold it and got rid of it and just said, yeah, the market's not performing the way I would want it to see for
me to take on that risk. Sure in saying that, if you're listening to this, just as a side note, and you do have a leveraged portfolio and you're like, oh, Victoria doesn't have hers anymore, I should get rid of mine, That's not the case at all. I am just very risk averse. The second there's any lack rocky waters, I'm like, God right away, So I talk to your financial advisor about that, because I can almost guarantee that you have a financial advisor if you have a leveraged.
Portfolio, that is a very strong assumption.
Strong assumption, and not many people go get their own investment loans and diy the whole thing. Like, if you're going to take on that much risk back and you're willing to, you know Moorrow one hundred grand to get into the share market. Like very likely that you also see the value in paying for personal advice on.
That, right, Like, just the math is mathing in that city. The math is Mathan, the math is mathing. So V, how about dividend and share income expenses?
I like that you're reading that out in a way that you're like, I've just been pondering my dividend and share income expenses. Not I've just been beck and I did some research and I wrote down these questions to ask Victoria.
Yeah.
No, I've just been sitting here wondering. Yeah about dividend yield sealed?
Yeah?
Wow, impressive. So you're right.
You can claim a deduction for costs that you incur to invest in shares, as I said before, obviously borrowing money, but that's probably not going to be that popular right now. But ongoing management fees are retainers, financial advisors and such fees for advice about changes to your investment mix or your risk profile. It's kind of like if you're paying
somebody to rebalance your portfolio, you can claim that. Yeah, but then you're also able to claim the expenses if you wanted to go to the annual general meeting of a company that you hold shares in. And I've seen people do this before. In fact, our friends over at Equity Mates, I believe they did this and went to the US to attend a meeting, and I thought that
was so cool. They didn't talk about whether they were able to claim it on tax or not, but I can almost guarantee that they were able to, and I think it's just real cool, like so ye, But I am also a stock and share nerd and like that would be my dream to be like able to be in on one of those like can you imagine going to Wall Street?
Like you go to an annual general meeting?
Like oh yeah, well if I buy like shares in like McDonald's.
Our producer is literally laughing at me and I get it. Sit down, she's been to Wall Street. You know what.
I'm going to Wall Street later this year and I have never been more excited, Like what are you going for?
I'm going to become your Wall Street girlie? Like anyway, I actually have.
A finance conference in New Orleans, which is very cool.
I'm so excited.
Yeah, I think concin New Orleans this year and a Lisa you gotta be in it to win it. So we're going to New Orleans. If you know anything about geography, you would know that New Orleans is not even close to New York, but it is close enough for an Australian to justify the additional travel to New York.
Oh.
Absolutely.
So I'm like, oh, is that a really long flight from New Orleans to New York?
Absolutely? It is. How long of it? Oh, it's like four or five hours.
Away, which is like it's not like a Melbourne to Sydney, sure, but like it's definitely a moody on the.
Other side of the world as well. I may as well go see Wall Street as well.
I'm gonna look at that little bull and like REBT's little nose and be like, hello, little bullfriend. If you know I'm talking about I don't kind of say a aalsa is part of the bull.
What is this ball? It's a brass bull. So like the brass bull.
Yeah, So there's a bull and a bear because like we talk about a bullmarket and a bear market. A bull market is where the market's being really aggressive and you know, it's kind of like waving a red flag to a bull and everything's going up and everybody's happy and there's a lot of excitement. And then the bear market is a market where it's relatively bear so like yeah, kind of like in a hybernation zone, right, So like a bear is obviously a little bit more chilled than
a ball with a red flag. They're more likely to go into a cave for a little while and have a little nap. Anyway, those are the true like mascots of Wall Street, and your girlie is gonna pat them, but they're actually just brass statues that are on the street. And I'm just really excited, And to be honest, I think I'm going to be excited until I get there and then I realize it's just like standing on Colin Street in Melbourne and it's actually really boring.
But boring and overwhelming people everywhere tell people about it, Yes, exactly, I can gloat about it. I'm like, well, have you've been to World Street. Yep, it's going to be a storytell for a bar. I stood on the street and did absolutely nothing.
I padded the ball, the brass ball. I'm very excited about it for you. All right, let's get back to talking about tax on your investment. Yes, please, because you best belief my trip to the US is an investment.
Actually it will be because it's for a finance conference. Oh, she's on the money. The team's going.
Yeah, it'll be good anyway. What else can you claim a deduction for? You can claim a deduction for specialist investment journals and subscriptions, so you best believe. I claim my Australian Financial Review subscription every year. Borrowing costs and interests. We covered that. The cost of internet access. Oh, because you've got to have the internet to invest. Yes, the decline in value of your computer that you used to invest.
Do you have to be investing to claim these things? Yeah? Yeah, that's a real shame. Yeah, I mean it's cute that you tried. It's so cute, just said, yes, this is about investing. So I'm sorry. I obviously know you're my favorite. You are my favorite why we're here. I love you.
And you can also claim fifty percent of the listed investment company or l C capital gain amount if you're an Australian resident where a listed investment company paid you a dividend and the dividend included an LIC capital gain amount. That's going to mean nothing to you, Beck, but if you are listening and you do have an l C, that is something that you should absolutely consider.
Beck.
It's just another form of investment and it will be on your annual statements.
Okay, A lick A lick.
I mean, we call them LICs, but we really should be calling them licks.
It's a bit it saves time, you know, life is sure.
Yeah, and also it's just way more fun. Like we already think that the investment world is, you know, overly capitalized when it comes to complexity of acronyms.
Yes, but might as well add another. Why not just call it a lick? Exactly right? Anyone, any context.
No context that when we're investing in shares, here are some things you can't claim the fees you incur for drawing up an investment plan. So, as I said before, that's the thing that I get frustrated about unless you're carrying on an investment business. Okay, you're probably not, so
don't worry about it. Some interest expenses where you borrow money under a capital protected borrowing arrangement to buy shares units in unit trusts and stapled securities, the interest is treated actually as the cost of the capital protection feature.
Again not going to mean a lot to you. You just can't claim it. No, you're not, don't lie. How did you know that?
I just know you well enough by Naive Beccer Rooney sit down. Also, you can't claim brokerage fees and other transaction costs, but you can include these in the costs to work out your capital gains tax when you sell the shares. So there's just honestly, I feel like I am talking a lot and over complicating it. It shouldn't be that complicated. It is twenty twenty three. Your investment platform that you're investing on is going to provide you
with all of this information. It will either be automated or it will be something that you're able to go into your platform and automatically generate if it's not an email that you get, and it will be I promise, far less complicated than what Beck and I am making it sound right, right, Like all of this talk about like borrowing costs and interest and laics and licks, and you know management fees and you know whether you can
claim travel. All of that makes sense, but it's far less complicated if you are just a general investor and you've gone on like I don't know. Raise do it, Spaceship does it. Let's not even start on Spaceship or Raise at the moment.
But you know shares is do it self, Wealth do it.
Every other investment platform that you are using, they are all going to have reporting for tax time because they are based in Australia.
Yeah, okay, so don't stress. Good. I just don't want people to be overwhelmed by going, oh.
My god, I became an investor and now it's all so confusing when it comes to tax and I don't want to screw myself over. You're not going to screw yourself over, I promise, because it's not that complicated. Yes, And if you're feeling like it's complicated, it's probably because you haven't looked at the investment reports yet. It's not because you're silly. It's just because you haven't seen it. Yes, exactly right, exactly.
I'm so afraid.
No, don't be afraid, because it can be really easy, and it's only easy once you learn about it. But you've never learned about it, so that's why it's not making a lot of sense.
A little bit scary. I think we need to go to a break.
I do want to go google tenant rights so that I can talk about how much I can claim on my rental property and whether I can move in with my tenants over Christmas.
That sounds very exciting for you and your tenants. Well, let's doo lucky. I have no tenants. Perfect. All right, there we are back.
Now let's jump straight back into it. I want to know about rental and holiday home expenses.
Yeah.
Is it because you have a rental or holiday home that you haven't spoken to me about before? So many I've got at least ten rentals, at least ten holiday homes, and I just want to know what I can claim on. Oh well, the Internet's now going to come for you and be like, what suck? Did you know you suck?
I did know I suck.
But also for anyone listening, I am joking, I promise.
Yeah. No, she actually doesn't have any hosts.
Yeah, but you will get yet yet. Yeah is the operative word here. We are optimistic about it. But yes, Beck, you are correct. You can claim interest expenses that you incur on the loan that you used to And here's the summary. Buy a rental property, buy a depreciating asset for the rental property. What's a depreciating asset.
Beck, I'm going to say air conditioner. Yep, air conditioner.
Why because once you buy it, Yeah, it won't go up in value. From there, you're is it exactly anything that's going to decrease in value?
Yes, So air conditioner great example, because if you bought it today, it's probably insanely expensive and you're probably not feeling that good about that. Having to buy a new air conditioner for a property that you don't even live in cost you what two grand or something, But if you went to sell it tomorrow, it wouldn't be worth two grand, and in ten years, I guarantee there's a way better version out there.
Yeah, right, Like that's exactly what it appreciating us.
It is.
You can claim expenses for making repairs to the rental property. So for example, if the roof broke during a storm, you could claim that. So a couple of years ago, I lived in a property that had a really big, beautiful skylight. I mean I thought it was beautiful, but it turns out it was just perspex because a couple
of years ago we had a massive hailstorm. Do you remember, Like I think it was like twenty twenty just pre COVID where that massive hailstorm came through and everyone's car was absolutely ruined.
I think I remember there were like golf the size size. Yeah, it was absolutely insane.
So our skylight just got trashed, like we were having hail come straight through the skylight into our hallway and like we ended up having to like go state my parents house for a couple of days because it was just like so ruined.
Track.
Anyway, that didn't cost me anything because I was a tenant. All I had to do was move out. But my owners or the owners of that property, they had to pay to replace it, and that's fine, but they could have claimed that on tax because that was a cost of maintaining the property.
Wow, that is so cool. I mean I think the hail wasn't cool. No, it wasn't cool, kind of sucked. It's just unreal. You can claim that, I like.
It finance renovations to the rental property, so like you can claim to you know, obviously, as I mentioned before, pop a new bathroom in for your tenants, which in turn would add a value to your property because you know, updating it. And you can also claim interest expenses where you have pre paid for up.
To twelve months in advance.
So that is important because you're I see your little glazed over eyes, so what. But essentially, let's say you've got a service and you're paying for insurance, or you're paying for something for your rental property, and it was cheaper to pay for it all at once, Like you know, how we've spoken about on the podcast before, how it's one of those things that I think wealthy people forget they have the privilege of, and that's being able to pay things in advance for a significant discount. So like
whether that's insurance or health insurance or whatever. So if you're prepaying anything for your rental property or for your investment in advance because it gets you a sweet discount, you can still claim that amount, even if it's for the future. You can claim that on your tax return now because if the payment was made within this first financial year, Okay, so.
You can't claim if you're doing the month by month.
Payment, no, but you could claim the month by month payments that you've already made. But if you've prepaid into the future, you can claim that. That's a whole conversation, and I think we should do a whole podcast about like wealth privileges, like discounts you get because you're wealthy.
I mean it does sound a little bit like that if you have money to invest, you can claim.
Well, it's kind of like you know, we're talking about this on the podcast, probably a couple of months ago now, because Beck, do you know it's July?
Oh my god, do you know what that means? What does that mean? You passed your shoes on the money probation period? Look at you go? Did you joink in here? I knew you get here? Ah, that's so nice. I didn't know. What do you mean you didn't know? I've been begging you to come on the show for so long, and now I win. I win. She's here. Haha, we both win. We both win.
But anyway, essentially, I think we should do it whole episode on this idea of wealth privilege, because it's like the shoe concept that we're talking about a couple of months ago, where you know, you were saying that you colored in a pair of shoes with black text. Honestly
ten points for innovation, gryffindor thank you. But if you hadn't colored your shoes in, you probably would have gone to like Kmart or Target or something and brought, you know, a reasonable pair of shoes that would have lasted three months and then you would have had to replace it. But if you had significant wealth behind you, or you know, any type of financial privilege, you maybe would have just gone and bought a more expensive pair of shoes that
would have lasted two or three years. Yes, and I think that there's such privilege in being able to buy those higher ticket items. Like with insurance, people who have significant savings behind them can go, oh, it's health insurance twenty percent cheaper if I pay it in Bolk right now. Oh great, I'll just pay that. That's a discount that's not then passed on to, from my perspective, the people
who need it. So it's this concept that you know, wealthy people continue to get wealthy, but they also have a number of different privileges afforded to them because they can put their money where their mouth is, and we can't do that right now, Yeah, that makes sense anyway. What you can't claim though, let's go through that. So you can't claim interest for periods of use for the property for private purposes, even if it is a short term.
So like if you've got a holiday house and then you're holidaying in it and you spent two weeks, that you can't claim those two weeks gotcha any part of the loan. So like you can claim the interest, but like not the actual loan. You can't claim interest when the property was used for private purposes, when you took out the loan or refinanced it. That's redrawn for private purposes,
even if you're ahead in your repayments. Can can't use it when you buy a new home if you don't use it to produce income, even if your rental property is security for that loan, And you can't on funds used to buy vacant land until the time construction on your rental property is complete, like completely completed, not like oh it's halfway there, like done and it's.
Ready and available for rent. Right.
So like that is something that I think a few people get a little bit stuck on when they're like, oh, but I bought land and I'm building an investment property, I should be able.
To claim it.
It's like, well, the land's vacant, it's not actually an investment yet. It's not like drawing any income from rent. You can't claim that yet.
Right, I see.
Okay, So if your loan was used to buy a rental property or something else, like say a car, you can't just repay the part relating to your personal purchase, even when you've refinanced. All loan repayments are appointed across both purposes until all the loan has been repaid and you are no longer claiming interest expenses on that property. So it's a little bit complicated. The best thing to do is obviously talk to your accountant or your mortgage broker.
Your mortgage broker is going to have a complete grasp of this, like I you know again shameless plug for my own business, Zella Money. We literally finance thousands of properties a year for clients. And if you haven't already, like it is tax time now, you're probably looking at it going, wow, my interest rate really needs looking at. You're probably thinking about the fact that, oh wow, I'm about to come off my fixed period. I need to
talk to someone. Go talk to Kate, Go talk to Nikki, Go talk to Jackeline, go talk to anyone in my team who can go. All right, Beck, sit down, what are we looking at?
You know?
What's the market look like? What's your loan look like, what's the best possible outcome and structure? Right, Because I've said it before, and this is something that a lot of people don't like to hear because we don't like change. Right, But you do not need to be loyal to your bank. I know you might have been with a particular bank since they gave you a little yellow checkbook in primary school, but that doesn't mean that that's going to put you
in the best possible position. So sometimes having someone who sits down and goes, oh, well, I have access to seventy different lenders, let me show you which one would work better for your financial position, Like, go and do that.
Because a lot of clients that we're talking to at the moment, especially like in June coming up to the end of financial year, were really stressed either about their fixed interest term coming up or the fact that interest rates had increased so much that they weren't able to
like balance lifestyle and stuff. So a lot of the time we kind of sat down and restructured them in a way that you know, maybe some clients are moving to not paying principle and interest at the same time, they're just paying interest for a fair period of time so they can like build back up their emergency fund and you know, still have the lifestyle that they deserve while we wait for the interest rates to come down.
So definitely, And I mean, do you know what, at the end of the day, I don't care which broker you see. I've got a team of great ones. If you want to see them, that's fantastic. But go and see someone who can put you in the best possible position. Because mortgage broking back it's free for you. Like it's literally a free service. Mortgage brokers cannot charge you individually.
That is actually very cool.
It's very cool because the main pays them. And I mean then you would think, oh my god, conditions are involved. No, like we legally cannot make more off you, Like the bank shares their profit with me, not part of your interest rate.
Like the interest rate is not higher.
In fact, it can be lower because of the relationship you're broker has with that bank. So it's all just a sexy process. From my perspective, that's great. It feels like a win win win.
Hot girlshit. Okay, So I feel like it's time to talk about my personal favorite topic. Yeah, what is it?
And something I know at about that is a straight experience of women in Australia. Yeah, that's exactly right, straight rights, all of that stuff. Also, second to that, I know a lot about obviously capital gains and losses.
Oh yeah, and that's actually same. Yeah. And negative and positive gearing. Yeah okay. So I knew you were going to ask this.
I was like, Oh, Beck's going to really want to talk about negative and positive gearing in this current environment.
And then I wrote some notes. So are you ready perfect?
Yes, I was going to say I actually, because I know so much, I fe like I'm going to sit back and let you do the talk.
That's okay, Yeah, so please go ahead.
Look at the end of the dayback if you personally you were thinking about selling an investment for more than what you acquired it for. So if you went and purchased an investment, we used that example of a share that was ten dollars and it went up to fifteen dollars, you're making what's called a capital gain. So your job as an individual consumer is to include every single capital gain in your tax return in the year that you sold that investment. So although capital gains are taxed at
your marginal tax rates. So like if you go to work and your tax rate is thirty two point five percent, that's how much you're going to be taxed on your investments. If you've held that investment for more than twelve months, you're actually only taxed on half that capital gain. So if we look at that example of that ten dollar share, you made five dollars, it was worth fifteen dollars you
decided to sell it. If you sold it in less than twelve months, so you held it for like eight or nine months, you'd be taxed on that five dollars, But if you hold it for more than twelve months,
you're taxed on two dollars fifty instead. So that is a very big money win, and it's also a very big money loss if you haven't thought about capital gains when it comes to investing for the first time, Because how many people in our community have gone, you know what, I really want to invest and I'm so excited about this, and they go and they purchase their shares, and then they might get, you know, some cold feet, or they might see a really good interest rate return and they go, oh,
that's really sexy. I'm just going to sell, like we need to actually have a bigger picture hat on here and go all right, well, Beck, actually you need to hold it for more than twelve months because you could end up losing a fair chunk of it.
You don't want to lose stuff just because you didn't know.
Yeah, a lot of that happened, and not necessarily in our community, but I've seen a lot of it happen. And let's like, you know, attack finance bros, Simmer finance Bros. Who brought crypto currency and it went out real quick, and then they sold it and then they're like, what the hell? Why am I having to pay so much tax on this?
This wasn't worth it?
No, because you didn't do your homework, mate, Nah, because you didn't know about capital games, did you. So right now, Beck, you are now officially smarter than a finance bro.
WHOA, that's huge. You're welcome. Thank you so much, John on a bestowed to not many. That's very true and I'm very grateful for it. Yeah, you're welcome.
But that discount in effect is going to have the marginal tax rate that you pay, So it is significant and needs to be taken into consideration, and it's applicable on basically everything, so property shares, you know, bonds, whatever, you're purchasing, cryptocurrency. It doesn't matter what it is. It's really important to actually do that, you know what. It doesn't apply on what cars? Oh, depreciation, Yeah, no, there's like lots of rules about it. But I think I've
spoken about it on the podcast before. But if you bought a car and then sold it for a profit, that's personal, it's not actually oh yeah, it's why a lot of people buy cars and restore them and sell them, like really high end cars, Like they might buy a fancy rundown Porsche. Not that you are I could afford that, but they might by fancy run down portion to them.
It's like a money win because it was like ninety thousand dollars and you're like, oh my.
God, that's literally completely out of my budget anyway, like that's a house deposit.
And then they restore them and sell them for like one fifty. Then they don't pay tax on that profit.
Really, I have to like tell the government that they it's completely transparent process, Like they're not doing anything right. It's just that's not an asset that's deemed to be an investment.
That's pretty cool. Yeah, isn't it wild? I mean completely unreachable.
And I mean if you're listening to this podcast and you're like, that's a good way of making money, like good luck getting in the door, Like, yes, it's a lot, but a lot of people do do that, and that's you know, a bit of a money win. I mean, I could afford a Tarago, do you reckon? We could do one of those up together back?
Oh god?
Yeah, love a Toarago.
Yeah, we could get around Brunswick in that, yes, polite. Do you even sell it for a lot of money too? Like it pimped out chirago totally?
Those are going for a lot. Maybe not a Toarago specifically, but vans that have like beds in the back.
Oh no, specifically talking about it. We could do a Torago. Thanks to do it.
But if you're selling an investment for less, right, so I know we're talking about profit profit profit. Sometimes you sell an investment for less, there might be a few reasons behind that. You might be selling it because it no longer serves you, it's no longer aligning to your values. You might be selling it because you need the money out asap. You might be selling it because you've looked at it and you're rebalancing your portfolio and you're like, goddamn,
this investment has not paid off in a while. I've checked out all the reports, and I'm just going to get rid of it and cut my losses.
There could be a number of reasons.
Why you're choosing to sell an investment for less than the cost you acquire it, in which case you're making what's called a capital loss, which is the opposite of a capital gain. And these can still be sexy, So you might be losing money, okay, But we want to make sure that we're not just burying our head in the sand when we're making a loss. We're like keeping track of them because a capital loss on one asset means that you could reduce other capital gains made in
the year that that loss occurs. So like all balances itself, we look at our portfolio as a whole. Or if you didn't claim it because you're like Victoria, I made a capital loss on my one investment, I've got nothing to claim it against, Like.
I don't have capital gains to like offset it with.
Don't worry, Beck, you can carry it forward to offset future capital gains.
Oh my god, So I told you it could be sexy. Yeah.
Trueever, I thought we'd have this conversation and use the word sexy as much as we have.
Sexy en loss in the same sentence. Yeah, it's novel. It's no novel. It's not something you'll hear every day.
It's funny because when I do speaking events, like, I am obsessed with speaking events, right like, And if you don't know that I do them, now you do?
You welcome.
I probably do a speaking event or two a week, which is why my voice is always cooked beck. But I go into people's workplaces and I'm like basically trying to convince them that caring about their financial wellness is a genius idea and it is just, so, you know, very easy sell. So I go in and I talk about all these things. So I'll be like, oh, here's your money story, let's talk about this, here's what the saving and investing in you know, all these asset classes mean.
And then oh, let's talk about superannuation. Super is so sexy.
And I literally stand in front of and a couple of weeks ago I did it, and there were two hundred people in the room, and it was like from the ages. I think they said their youngest staff member was like twenty one and their oldest was like in his late sixties, and it was like really diverse. And I'm just like, Superannuation is really sexy in front of all these people. And then after they're like, yeah, the board that was there really enjoyed your presentation.
I'm like, oh cool.
So I stood in front of an ASX listed team and their board were watching me go, super is really sexy.
He'll let me explain it.
And then I'm pretending to get all hot and flustered about it, and I was like, I've never felt more humbled.
Oh my gosh, I think, but it is so hot, Like it's so sexy, totally.
Have you ever heard of anything as hot as Superannuation.
No, I've never seen nor heard.
I think my husband and I on our first date, talked about Superannuation. I just I knew it was true love.
I just knew that we were going to get married. Yeah, he was irresistible. Once you said the word super, I care about my super and I was like, oo, that's nice. Yeah all right, tell me about your emergency fun. Yeah that's basic. Let's move on. I haven't got allowed dirty talk on this show. Okay, okay, I'm sorry, I'm sorry I brought us down.
This next part I'm very excited about because I actually have no idea what positive and negative gearing is, but I've always wanted to know, and I feel like you're going to explain it in such a nice, gentle way for me.
It's not going to be gentle. It's going to be sexy. Whoa, she's getting very hot.
So positive and negative gearing. A lot of people talk about this when they buy property, and.
They're like, I'm going to positively gear it and it's going to be really sexy, or they're like, yeah, well it's negatively good. Negatively gid properties don't really exist that much nowadays because our interest rates are so high, and I'll explain why.
So it's really worth bearing in mind here the financing options that you are choosing when picking an investment. That is why I harp on about the fact that you need to talk to a mortgage broker.
Can you bet go.
And get a mortgage or a loan on your own? Yes, absolutely you could. You can walk straight down to your bank and you can.
Sort it out yourself.
Okay, why would you do that when you could talk to someone who does this at a minimum of forty hours a week, day in days out, knows exactly what they're talking about to put you in the best possible position. Because I promise when you walk into your bank, if you talk to a mortgage broker that works for a bank, and I'm so sorry to any mortgage brokers that are listening to this and you're like, I work with a bank,
I'd like, I get it. It's a good job. At the end of the day, nobody's better than anybody else. But as a consumer, if you walk into a bank, let's call it the Bank of Victoria, because we're not going to pick on any one bank.
Go to the Bank of Victoria.
The Bank of Victoria only has access and the brokers that work there only have access to the products that the Bank of Victoria is able to issue.
Sure, so they.
Might go, oh, well, we have two different mortgage OPTIONSPEC this is the best one for you. They're not lying that is the best option out of all the op that they're able to write for you. They go, beck, this option A is the best for you, and you go, oh yeah, why oh, because compared to b it's just not you know, as good for your situation. You go, oh, okay,
no worries. But if you go down the street and talk to a mortgage broker who is independent of a bank, they're going to have access to seventy plus options, so they might go, oh, Beck.
I see your situation.
Actually, don't go with that original Bank of Victoria that you wanted, because you're actually going to have to have a full twenty percent deposit, or if you have less than twenty percent and you do ten percent deposit, you're actually going to.
Need to pay LMI.
But because of your career, because of what's going on, I actually have the Bank of Beck, and the Bank of Beck they're going to actually wave your LM I and put you in a better possible position. And you know it has all these bells and whistles that you said was really important to you. You're right, well, V I didn't know that that credit union even did mortgages go yeah, no, they're not as big, but they're really good and they're going to put you in the best possible position.
You go, great, I've got the best.
Outcome for me, So please make sure that when you are you know considering your financing options. You're not just going oh, I'm a smart individual and I can absolutely do this. You can, I promise, Beck, if you were going to get a mortgage, you could go on every bank website, look at the rates, look at the interest, look at the fees, and make a decision that makes sense for you. But you don't know what you're looking for, right.
You know what the bank is trying to tell you from their sales pages on their mortgages.
Right.
You go into a bank and I promise that person has been trained in sales, not in financing options, because that's just what works for that environment. It doesn't mean it's wrong, it doesn't mean it's bad. It just means that you, as a consumer, deserve to be educated in what a mortgage broker does. I'm obviously wildly passionate about it because with Kate, I own Zella Money, which is
a mortgage broken company. But something that we super pride ourselves on is just this super transparent nature of working with our clients and going all right, Beck, well if that's a goal of yours, Like the amount of times we sit down with people just like you and go, oh, you're not ready. I don't want you to do this yet because you don't have enough of an emergency fund.
And that's not me going, oh, you can't afford it, like, it's me going, I actually want you to be in a stronger financial position so this doesn't screw you in the future, yep. Like, And that to me is one of the hallmarks of a good mortgage broker or a good finance broker, or someone who actually cares.
And that's not that common in our industry. Yeah. Sorry, but.
All I could do is talk about finance all day. But let's talk about positive and negative gearing. You're going to walk away so educated. So positive is where you borrow money to invest, and the income from that investment or that property, for example, like the rent that you get is more than the cost of keeping that investment. Okay,
so that sounds sexy. Positive means more than So you might have a mortgage and it is three thousand dollars a month that you pay to the bank, but you're renting it out for four thousand dollars, right, So that means that you're making quote a thousand dollars profit.
Sure, you will have to pay tax on.
That, but positive gearing is essentially where you end up with more money on the table than what it costs you to run that investment. So then obviously we need to take into consideration things like interest and other expenses and you know daily maintenance and you know property fees. But we're just with simplifying this down. It's where you
end up with more money. Negative gearing is something that obviously it sounds very sexy and a lot of people want a negatively geared property, and I'll give you an example of why. So negative gearing is where you borrow money to invest and the investment income is less than the cost of the investment, so you're out of pocket back.
So you might be paying, same example, three thousand dollars a month on a mortgage, but the tenants that you have only paying you two and a half thousand dollars a month, so you have to cough up an additional five hundred bucks.
A month for your investment property.
And there's a number of reasons why you might do this, and that's why negative gearing is relatively popular and not popular because you go, I don't want to put additional money in. But when you do, investors negatively gear because they can generally claim a tax deduction for investment loss, and that kind of brings down their taxable income or
helps them in another portion of their life. Right, Like, the aim for that property is that it increases in value so significantly that it will offset the losses that
you made in earlier years. So like, as you know, the property market over the world the last thirty or forty years has gone gangbusters, and we all know the story of the mediocre, middle aged white man being like I bought my first investment property at the age of twelve, and like you know what I mean, they bought it for like twenty thousand dollars and that house is now worth two million or something.
Ridiculous.
That is why they're doing it, because they might have rented it out and been making quote a loss, but now that property is worth two million dollars, right, so they're in.
It for the big bank. Okay.
Why I said before that negative gearing is not something that is attractive these days is because properties aren't increasing as much as they used to. Sure, so historically, beck, let's buy a property in ten years, it will be worth double.
That's hot.
Like that's where the real value is, right, I mean, ten years will sell that property and we'll have a whole heap of cash money win. But unfortunately, nowadays property doesn't increase in the same way that it used to, and so it's not something that is as attractive to investors. Obviously, in a perfect world, from my perspective, i'd have both. I'd have a property that's positively geared, where my tenants are paying me more than my mortgage, and also the
property increases in value significantly. We're not talking about thoughts or feelings on landlords or property ownership or whatever that is right now, that's just us talking about basic economic spec Sure, not opinion. But I think it's really important to understand the difference between positive and negative gearing. And that's why if you sat down with me and said, v I've saved house to posit, I really want to buy an investment property, we would extrapolate that all out.
And a mortgage broker will do that with you.
So they'll sit you down and go, okay, Beck, what's the intention of this purchase and you go for investment? Okay, Well, what do you want to get out of it? Do you want to own this property until you're in your sixties and you're retiring or do you want to own this for like ten twelve years?
What's that look like like?
And you would share that information and we would sit down and work out, all right, well, what does rental yield in that area look like? A rental yield is just basically saying how much will the tenant page week? And so you'd work out, all right, well, the tenant will pay this month each week, and a property in this location costs five hundred thousand dollars to buy, so this is what you'd be paying on your mortgage and what that looks like. And then because it's investment, we
might actually look at a few different options. So as you know, beck a lot of properties around you know, five hundred thousand dollars is probably on the low end nowadays of what you can purchase, because the average property price in Melbourne right now is about a million dollars, which is insane. Let's not talk about it too deeply because it will make us very depressed. But let's go with that five hundred thousand dollars example.
You might be able to buy.
An apartment in Richmond, but you also for five hundred thousand dollars might be able to buy a house in an estate an hour or so out of the city, and both of those are valid options for you, but it will depend on what your expectations of rental yield are. So you might look at it and go, all right, well, the if I spend five hundred thousand dollars on an apartment in Richmond, I might be able to rent it out for four hundred and fifty or five hundred dollars
a week. Sure, But if I buy a house in the suburbs in an a state you know, might be new build for five hundred thousand dollars off, the plan might be a relatively small block, and you might be able to rent it out for three hundred and fifty dollars. So you might look at it and go, wow, the properties in Richmond to get more rent That is unequivocally
true because it is closer to the city lifestyle. All of those other things come into play, But that apartment might not increase in value as much as the house will over time.
Sure, the house is.
More likely to increase in value, but it will depend on when and where and how what the economy is looking like. Because recently those properties they are increasing in value but not by too much sure in comparison to if you had done that exact same thing thirty years ago, guarantee that property would have made a fair bit right.
So I think it's important to take into consideration, like what does that mean when it comes to purchasing property, because you might go, be, I don't think that property prices are going to go up that much more, and I can afford, you know, five hundred thousand dollars to buy an apartment, but I've realized that if I pay a little bit more, I can get a better property further out, and I might get more capital gain in
the future. And at that point you might look at it and go that means I'll be negatively gared and it will cost me some money to owe, but like, that's a risk I'm willing to take. So there's just a lot to take into consideration. But essentially, positively geared is where you borrow money to invest and the income from the investment is more than the cost to you to keep that property or that asset, and negative is
the exact opposite. I love that also to throw another spanner in the work for something called a neutrally geared property and that's where all of the costs break even.
Ah, beautiful, It makes sense, doesn't It does make sense. The math is mathing. I think this is a really good place to leave it. Else Nope, but I am so done.
I cannot fathom how we would make an investor's Guide to tax time. I'm more sexy. So we're just going to drop it here and hope that you guys enjoyed it.
Awesome, that sounds great. Have a good week, guys.
We will see you on Friday for you then bye.
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