This OUTRAGEOUS unrealised CGT is everyones problem... PLUS what you can do about it!

three million dollars. Now, I know that that number may sound far away for a lot of people, including myself, but this proposal has serious implications for all Australians, not just those with large super account balances. You see this potential tax, this changing rules actually represents a major shift in how our wealth could be taxed and even a road away, and we need to understand what this actually means for us and our long term financial security and

retirement strategies. Now, this episode is not just for people with self managed super funds or high balances. This is for superannuation account holders like you and I, everyday people and of course everyone or anyone who actually wants to understand and protect their financial future, particularly if they do plan on having a long, luxurious and secure retirement. So let's get into this straight away. Bocome back everyone. As explained,

we're going to talk about this proposed superannuation tax. Now what exactly is this? So Labor is proposing from the first of July in twenty twenty five, superbalances above three million dollars will face an extra fifteen percent on unrealized gains. The con t reversial part here is the word unrealized. The unrealized gains are going to be taxed. So what this means is even if you don't actually sell your

asset within super or even receive any income. For example, you know your superannuation own say a property, and it grows one hundred thousand dollars just over the three million dollar mark, and say it's gone from being three million dollars to say three point one million dollars, So you've got one hundred thousand dollar game. You might have to come up with an additional thirty thousand dollars in tax without actually having to sell that property or even receive

necessarily any rental income from that property. So this isn't just like a tax increase, it's actually a change in the underlying definition of taxable income because normally you only pay capital gains tax when you actually sell that asset. This is an unrealized definition and this is the biggest concern and worry and really what is making me really frustrated and angry because what it does is it undoes all the trust, all the attractiveness and the value that

has been built since superannuation began in the early nineties. Now, why is this so dangerous? Is this really setting a precedent? Well, yes, I think so. You see, Australia's tax system has always been built around realized gains, so you know, you only once you had the money in your actual pocket after selling.

So for example, you know, you buy property for say four hundred thousand dollars, and then you go and sell it, say five years later, for say six hundred thousand dollars, you've technically made a two hundred thousand dollars capital gain and you would only pay tax on that gain once you have sold it. And you would pay tax on that two hundred thousand dollars gain depending on your you know, how long you'd held the asset for where it's held

and of course your marginal tax rate. Now, if this is passed by Senate, this could actually completely change the system because what it is is allowing for taxation to be triggered on paper wealth, not real wealth. So even though you haven't sold that asset, I'll use that example again of that four hundred thousand dollars asset, even though it isn't actually technically applicable because we're talking about three million dollar bounces here. But in that example I just used.

What this is saying is, well, guess that property you bought for four hundred thousand is now worth six hundred thousand dollars. Even though you haven't sold it, We're going to tax you anyway. So this is the frustrating part. You are still expected to pay some tax because of the perceived value. Now, if this is past and it's put into place, it could spread to investment properties outside of super It could include business assets, share portfolios, potentially

the family home. This is a slippery slope, you see. Once this mechanism exists, the future governments can expand it. So it's think of it as like winning the lottery, or being taxed on winnings for the lottery before you actual numbers have been drawn. This is not a wealth tax, it's a fear tax. And at the end of the day, does this tax actually encourage us to work hard, contribute to our super and actually feel empowered about our financial future.

Hell no, it certainly doesn't. And this is seriously destructive, dangerous and a huge concern for so many people within my industry as well as everyday Australians. So let's go and talk about the impact it has on self managed

super funds, which I see is the biggest worry. Now, a lot of self managed super funds hold illiquid assets and that was probably one of the main reasons why they used a self managed super fund because of that, you know, flexibility, and they're you know things like property, business premises, like commercial property, private equities, you know, including startups. And then farmers. There are a lot of farmers who

actually own their farms within a self managed superfund. Now, these types of assets cannot actually be sold easily to go and pay those tax bills. What this could mean is if this is past and a farmer gets hit with a bill and the farmer is a trustee of the self managed super fund, they could be forced to sell that entire farm to cover that tax bill for that year on a gain that they haven't actually received. Now, this is another problem that comes on this. There's a

huge administration nightmare. How are we going to actually understand the valuations? This is really difficult. How do you value a farm? You know? How do you value a startup, particularly you know where it is in its journey and the risks it's taken and the debt and so forth. This is really difficult, and this is also incredibly expensive.

You would really need to get a highly skilled accountant with a really niche you know, expertise to be able to do that would be incredibly expensive and also incredibly inconsistent. How can you actually know the true value of an asset if it isn't actually being sold. There's no one actually says they're saying, I'll give you four million dollars for that, or three million dollars that or nine million dollars for that. Like, how do we understand the true value?

Like what is the formula that we're going to be able to use here? And the other big issue, which is particularly around startups, which a lot of you know, the big superannuation funds actually have exposure to, is the volatility You know, a business might be worth nothing when it first starts up, but it hits gold, you know, particularly maybe technology put a huge amount of money into it, and then all of a sudden it's gone for being

worth nothing to say, thirty forty million dollars. That's how the volatility can exist for a lot of these, you know, venture capitalists. So how are we going to cope with that? Does that mean the whole business gets sold? You know, you imagine owning a residential investment inside a self managed super fund that you set up and it increases in value due to inflation, and that just tips you over that three million dollar threshold, but you don't want to

sell it. But you've still receiving a massive tax bill, and then you don't actually have the cash within your super to actually fund that annual tax bill. So what does that mean? Well, you don't have the cash to pay the tax bill. You're over the three million dollar threshold. You're going to have to sell that entire property. Now what are you going to do? You can't sell the

front door, the bedroom, the backyard. You're going to have to sell that entire property, which then triggers additional fees and expenses like agents, commissions, marketing expenses, legal and so on. And now your property you work so hard for in your self manister fund, you're out of the market. You've completely changed the investment strategy thanks to this tax. Now this problem continues on. It doesn't just stop there. It's

actually potentially going to destroy the investment cycle. You see a lot of investors actually leverage growth to reinvest, you know, equity in property or shares, and taxing before it actually

has been realized completely destroys this strategy. It completely pedalizes that strategic, long term thinking and planning when it comes to wealth accumulation, and it also encourages this knee jerk short term terminism and liquid assets doesn't actually uphold long term financial stability, security and independence, which is really concerning. The other thing we need to think about is this three million dollar figure is not indexed, and there doesn't

seem to be much agreement around considering indexing it. Now. Three million dollars, yes, it is. It is a lot of money to happen superineuration. And you know, if you've got three million dollars in super you've worked hard, you've done well, You've made some great decisions. Now, if this stays in place and is not indexed over the next twenty thirty years, more and more of us will actually

have three million dollars SUPER. And if you ever played around with my superannuation calculators on my website, you'll see that a three million dollars superannuation account balance isn't unfathomable. Hard work, dedication, commitment, you could have a three million dollars in SUPER and then new factor in things like inflation, compounding returns, regular contributions. You're SUPER guarantee, which is now up to approaching twelve percent. From the first of July.

More and more people are going to hit this threshold, which includes younger investors, younger investors who have made brilliant smart investment decisions. You could hit that three million dollars fast, sooner than you realize. And then what about women, Women who have previously been impacted by Super working so hard to now build up they're Super consistently contributing investing, making great decisions, getting quality advice. They can also be caught

up on this. Imagine that you work so hard to get your SUPER back on track and then you get penalized. This disproportionately impacts responsible investors like you and me, and it is so fucking messed up. Now, the AMP Deputy Chief Economist, Diana Mussina, she did some modeling and she actually showed that the average twenty two year old is actually going to be hit by this exact tax by

the time they go to retire. So if you're thinking this is not going to be something your kids need to worry about, grandkids or even like you, you are so wrong. We've all got to wake up and put our hands up in the air and jump up and down so this doesn't actually get past. There's also the psychological damage here and being the impact on our confidence and our fucking trust in superannuation. And I'm sorry just where but this is just disgraceful. I feel like this

is like daylight robbery that's happening right now. So superannuation was designed to be predictable, it was designed to be for the long term, and it was also designed to be fair. There's also the obvious this was designed to actually make people be financially independent, not rely on the government, so destroying people's superinnuation seems completely counterintuitive. But anyway, all right,

I digress. So superinheration back when it was created in the early nineties was designed to empower people like you and I to create our own financial dependence and today control of our money because we can pick where that money is invested. This rule change mid game makes me and I think everyone else feel unsafe. It feels erratic,

and it feels cruel. It's like a fucking punishment. Australians may react in a really negative way, and that is pull their money out of superannuation if they can, which could weaken the entire system. They could pull money out of property, money out of the share market, money out of the Australian economy, the economy, our economy, and that

would then impact our productivity and growth. And to be honest, if you're one of these people that's thinking, yeah, that's what I was thinking of doing, Canna, I don't blame you for thinking like that. It's not what I'm obviously recommending, but you start to think, well, okay, what should I be doing elsewhere? Because I definitely don't want to remintain this commitment to my sexy superinnovation because it's certainly not

looking as sexy anymore. If this does get past. So if people stop trusting the rules, they start looking for ways outside of the system. Money will go offshore, people will start utilizing family trusts and private lending. The damage done to our economy could be irrepairable or because of this one stupid change in rules is a little bit like a marriage between you and your retirement. If you keep changing the rules, you start to wonder whether it's

worth actually staying in the relationship anymore. And as angry as I am, I don't want anyone's eyes wondering. Because under the current system as it is today, without this stupid rule in place, superannuation is still sexy. It helps create financial stability. It also takes away temptation to go and blow that money and spend that money when it's for our long term financial security, freedom and independence. So why would we want to go and mess with it?

Especially when our system, our superannuation system that is is known as being one of the best in the world. It is really admired, respected and there are a lot of other countries really looking into what we do and seeing how they can incorporate it in their own country. So let's keep moving on this, because whilst I like to talk about the problem. I also like to talk about solutions, ideas and strategies. So what can we do? Obviously, Number one, we've got to stay informed. This policy is

still a proposal, it's not actually more yet. You've got to go and talk to your financial planner and your accountant sooner rather than later, talking to them about super splitting. Is this something that you can do? You know, depending on how many members you've got and obviously how much money,

and if your partner is in your superannuation. Looking at valuations, self managed superfunded valuations, looking at liquidity strategies, particularly, you know, looking at making sure that you've got cash and perhaps the strategy now changes so that you're not making new investments, you're perhaps piling up cash and letting it sit in the self mattered super fund. Also looking about tax planning, looking at potentially shares Australian shares with franking credits that

can help reduce that tax. Or you know, if you are over preservation age, which promotivus is around about sixty or above, perhaps you need to look at taking some money at a superannuation. But of course don't go and do that without professional and formal advice from your accountant and your financial planner. You also may want to look

at maybe looking at some more liquid assets. If your self managed super fund is predominantly filled up with property like commercial property or residential property that's not liquid, perhaps you need to start including other assets that you can actually sell one hundred thousand dollars worth or ten thousand dollars worth, or you know whatever you need to potentially fund these things that you're not ever backed into a situation where we have to sell the whole entire property.

The other thing you want to be talking about, your financial planner, where is looking at assets for your investment strategy or retirement strategy that are perhaps less volatile, so that you don't need to worry about a spike in volatility where it pushes you over temporarily over that three million dollar threshold triggering this tax for you. Perhaps you need to look at more boring, stable, less volatile and investments.

Perhaps this really is important to you. Know, it pays to be prepared, and you know this is not a time to panic, but it's certainly not a time to stay silent because this is grossly unfair to all of us. So you know, you pick up the phone, write a letter to your MP. Policies like this shouldn't ever be rushed, and I feel like this is being rushed through at a disturbing, concerning rate. So as I wrap up today's episode, and I think I have literally like spattal over my

mirancrophone because I got in so passionate about this. You know, whether your superbalance is thirty thousand dollars or three million dollars, this proposed change should really concern you. This may look like a rich person's problem, but if it is past,

it is going to eventually impact all of us. Furthermore, this isn't just about tax It's about changing the rules of the game, shifting the burden and punishing the very behaviors that we're actually trying to encourage, like long term planning, financial independence, growing your future wealth responsibly so that we don't end up on the government demanding an age pension every single year. So I'm sorry if I've gotten a little bit passionate. I'm sorry if I've offended you with

my swearing. I promise you I wasn't trying to scare you, but I want to empower you. I want to help you understand what is happening and why your voice and your plan matters more than ever before. I don't want you to wake up one day go gosh, what's this tax? Why am I now being asked to pay this tax? What's this all about? And think why didn't Cano ever tell me about this? Well I am. I'm telling you right now so that we can do something and hopefully

get it shut down for good. Now, if you are one of those very fortunate people who does have three million dollars or more in super can, I strongly recommend getting advice, not advice from influencer or from listening to a podcast like this or reading a blog post, go and get personal advice professional advice from your accountant and

your financial planner as soon as possible. Whilst this may not necessarily be passed, it may be delayed for a little bit in past, say in six months time or a year's time, it is still worth getting proactive advice so that you can make any recommended changes smoothly while being completely informed and knowing what is best for you and your goals, and of course all the costs and

risks involved. So all right, let's keep the pressure for as smart, successful superanneration policy as it should be, and as well, continue to invest with purpose, keep an iron our economy and what's right for everyone, and support productivity and innovation in this country. Now as always, as a wrap up today's episode, keep that financial fire burning right within. This is Sugar Mamma's fireplay.