Hello, and welcome to The Australian's Money Puzzle podcast. I'm James Kirby, the Wealth editor at the Australian. Welcome aboard everybody. I have to tell you that the inbox at our email here, the Money Puzzle at the Australian dot com
dot au has something of an imbalance just now. We have a lot of questions on property and we have less questions, considerably less questions on the investment markets, which I find intriguing, I have to say, because I would have thought the investment markets were a little bit more complicated than property. But it's the property people who have
been rolling in. So I feel compelled. Really, it being a Tuesday show when we have a property focus, I feel compelled to do a catch up on this and we will devote today's show toquestions from listeners which cover all aspects and are quite I've basically selected a handful of questions which really represent the sort of questions we're getting, and I think you'll find it very interesting to do such an exercise. I need someone with me, and I have chosen one of our most regular guests on the show,
who I'm sure you're familiar with. Its Stuart Weams of the pro Solution Private Client Group.
Hi Stuart, how are you?
I'm really well, James, thanks for having me on.
I have also had to go as editing these questions because, as you can see, some of them are rather lengthy. Look, folks, as I always say, keep the questions coming. Love to have them. You don't have to tell us your life story. If you want to, you can, but I will ed us that part of us and I'm going to try and zone in on the actual question itself just to keep the show rolling. Basically, Okay, well, look, why don't we get going? And what I'll do is we'll read
them more turly. I might kick off with the first one. Interestingly, folks, this first question about the forty year mortgage is off the back of something I did in The Australian recently, which was off the back of a conversation none other than Stuart Williams, because he actually said to me a few days ago, Listen, you're gonna have a look at this. There's a forty year mortgage coming through the system. You've always been asking about this and here they are. So
Andrew's question. Hi, longtime listener fan. The podcast read with interest your piece about the forty year mortgage in the Australian. I was wondering whether we are entering an era where people will not be expected to discharge their mortgages while they're working. Rather, they will only increase their equity during their working lives and then draw down on it to retire, using whatever equity remains until their home is returned almost
entirely to the institution when they die. Somewhat dystopian, he says, but not unrealistic. Oh not onrealistic, Andrew. The figures show obviously that the number of people who are retiring with a mortgage is going through the roof. And similarly, and a kind of a logical link here, the number of people who take out a lump sum and use that lump sum to pay off the mortgage is increasing too. And it's one of the arguments for people say why you should be able to use SUPER to.
Buy a home.
What is the point of putting it all in SUPER, getting to the end of your working life, getting it back and putting it into the mortgage that you've for the interest rate has been collecting. That's just an argument that's out there at the moment. But on the more broader topic of this. To be specific, it was Pepper Loans that introduced this forty year mortgage. And there's always been long term mortgages thirty years or so often offered, or thirty five years often offered to doctors and lawyers
under specialist funds, but not on general release. And I think that's what was very interesting. What do you think is to your number one? Will we see more of them? Number two? What use have there to our listeners? There's a forty year mortgage out there.
I think the main use is really around boring capacity, James, rather than necessarily repaying over a forty year term. And that's you know, that kind of helps in a way affordability. I'm not saying houses become cheaper, but if my boring capacity increases and I've got the cash flow to meet it, because quite often, in fact, particularly at these interstrate settings, what someone is able to borrow in terms of what they can afford to borrow is quite often more than
what the banks will lend them. And the reverses was true, you know a few years ago, when interest rates were really low and boring capacity was much higher than what people should or probably prudently should borrow. So a forty year mortgage, particularly when interest rates are at higher settings, will extend boring capacity and allow people to borrow more if it's safe and prudent for them to do so. So I think it's a I think it's a trend.
We're working longer, we're living longer. And you know, it wasn't maybe less than two decades ago, the average mortgage term was twenty five years, and so you know, I think it will just trend upwards naturally, and I think thirty five for the banks will probably be the next stop. I think we're going to get there. But I like Andrew's observation, and I share Andrew's observation to some degree.
Whereas you think back a few decades, it was, you know, going buy a home, work really hard to pay off the mortgage, and you'll probably live there for fifty or so years, where these days, I think people tend to be a bit more aspirational and understand that we're going to buy this home, then I'm going to upgrade, and m I upgrade a couple of times during my lifetime to league until I get to the location and type
of property that I really want to occupy. And I think then the extension that James is a downsize strategy, which I think has a lot of merit. A down sized strategy includes going and buying a family home in a location that you make friends with, probably that you're not going to ever repay the mortgage down to zero.
You occupy that location when you have children that are going to school and you want close proximity, work all those sorts of things, and then you sell that asset probably when the kids move out a home, reduce your debt, repay all your debt, go live somewhere else. And I like it because it forces you to buy a high quality asset. You're not going to pay any capital gains tax on the growth over that asset. And to some degree, it's a force savings mechanism.
Right at its best when the people are using it sharply and smartly. Is there a logical end point here? Is there a point of which it gets ludicrous? I mean, if I'm thirty and I sign up for a forty year mortgage, I mean, I'll be seventy when I in theory. When I clear it, you're saying you're thinking about the wrong way. You're saying you're not going to clear this, You're certainly not going to pay it down in this sort of gradual way for forty years. That is not
That is not how to optimize these purposes. Is that what you're saying?
Oh yeah, I'm seeing more people, a greater number of people thinking along those lines that, aka, I want to go and buy in this blue chip suburb. The house is going to cost me a lot. You know, if all I did is put every cent towards repaying the mortgage, maybe I'm going to get there. But I know I want to invest in super and invest in other assets, and I know I'm not going to need this big family home. You know, when I retire, I don't need
to be in that location anymore. And there's significant lifestyle benefits to you know, living in a prime location that is close to work, in school, and then it is all these sorts of things. I just think that more people are going to be attracted to that, and the idea that I'm going to go and buy a home, repay the mortgage, and live there for the next fifty years. I think that sort of situation's gone doesn't happen as much anymore.
I suppose plain Devil's that's because here the danger is that someone says, oh, you know, we're struggling. We never received, as someone says, we never save, we're struggling to pay our mortgage because gosh, you know there's three cars out there that'll cost to bomb and whatever. The holiday homes needs a new dream pipe for something. And then they find out, oh, you know what, you could just push
your mortgage out. You could just you know, it was supposed to be thirty years, but we can push it out of forty. And it's the classic kicking the can down the road. Is that the danger here that people will play it that way.
You need to have a strategy, and you need to make friends with the worst outcome of that strategy and the worst outcome of a downsize the strategy is that you have to sell the house when you don't really want to, and you have to move to a different area if you and you might not really want to
at that particular time. But if you can make friends with that, if you can say, we might be forced to sell when we're sixty or sixty five, and we would like to reduce our working hours or retire in full, and we realize we might have to go into a regional area or regional town, but that might be the consequence of our desire to sort of live in this location while the kids are younger or young I think, just make friends with those outcomes and if you can,
if that's acceptable, if that's an acceptable outcome to you and you're willing to make that sacrifice, then great. But I think the people get into trouble when they don't make friends with that oka and then so then they try and force a result that might not be there.
So if there's a.
Change in income, change in situation, you have to sell before you need to. That's a consequence of this strategy. You just need to make friends with it, be rational about it.
Irrationally yeah yeah, and have it as a strategy rather than a channel through which you can sort of kick obligations and further away. Not that the banks will complain about that, but you might find it a problem. Okay, very interesting, none of us. This, of course, my friends, is advice. It's information only. But thank you Andrew and all the Andrews out there. I hope that that was useful to you. The next question, which I'll get sure read,
is about digital and this is really interesting folks. Now, this is where property and the share markets are crossover or fuse.
If you like.
And we don't cover this as much as i'd like to, but property listed property in the shape of property trusts or what they are now called as RITZ or the its is a very interesting area. It's a way that you can invest in property, particularly property you might never have invested in. I mean, you aren't likely to buy an office block. Maybe you will, but it's unlikely. I imagine if you're a listener. Similarly, you're probably not going
to buy a data center. So maybe we'll have the question from George Steuart.
Yeah, absolutely so, George writes. A newly established data center Digco is set to float on the AX on the twelfth of December twenty twenty four with a capital raising of two billion dollars. Its builders one of the biggest floats in years given its anticipated market cap based on a five to five dollars share price, The company is expected to be included in the AX two hundred d nexts. The majority of issued shares will be to retail shareholders,
with an allocation to institutions. Having already closed over subscribed on the basis there should be additional demand from funds and ETFs index funds that replicate the ASX two hundred index. Given this, do you think Digiico will perform similarly to
other large floats such as Guzman and Gomez. Guzman share price peaked at forty two dollars, up ninety percent from its twenty twenty two dollars share price offer, only days after it was announced that Guzman would be included in the AX two hundred index.
Yes, very interesting to George, All very interesting. Okay, a few things there before we get into some details. It probably doesn't make much sense to compare Gosvindi Goelmez to a property trust like this property trust which is going to be the biggest flirt of the year, happening on Thursday, the tirth of December, and not far away. Guzmini Gomez is a peculiar stock. It seems to be a perfectly fine business. I would almost separate the business from the
stock which is having a life of its own. And keep in mind that there is a very small number of what they call free shares out there on Guzmini Gomez, and when you have that, this share price can be very volatile, and it can run up easier or run down easier, and it ran up very easily for that
stock when it happened. Now utterly separately to that, the ate that you mentioned, Digico is very interesting because it captures what we've been talking about on the show regularly for years, which is data centers, a boom area off the back of the explosion of data needs, particularly aligned with the creation, if you like, of artificial intelligence on a mass scale. The man behind Digitico is a guy called David de Pilla, who I expect will be a household name in a year or two if he keeps
going at the pace he's going. He's a deal maker. He was once upon a time, I think with ubs. Is now out there on his own, backed by some very wealthy families and doing deals on a weekly basis across.
All sorts of areas.
But this is one of his This may be his signature dealer, one of them, which is what he captured the excitement over data centers, got bought a few of them, put them in a trust, put the trust up on the share market, and it's the biggest float of the year. I do expect it will do quite well. So we might talk first of all about that idea of getting into property Stewart through a trust. Do you see it as a completely different Someone comes into you and says,
I want to buy property. Do they ever end up buying a property trust.
One of the big one of the great things with property is in direct property is control. You have control over the asset. You have control.
You can't paint the data center that you buy on the share market.
Yeah, you can improve it.
You know, you can assess its value. It's intrinsic value. And that makes a lot of people comfortable that you know, I'm going to pay million dollars for this residential property or commercial property, and you know, I'm pretty confident that it's worth a million dollars. Whereas with Reads, I mean they can trade at premiums or discounts to net tangible assets. You you've got to make some assumptions that the net
tangible asset valuation is reasonable or realistic. And I mean you can put a big sort of question mark there and in some situations and they behave more like an equity than property. So what happens, and we've seen this with Reads perfectly over the last couple of years, particularly Australian reads, is that they fell a lot earlier than actual property valuations. Fel commercial property valuations fail.
So you're saying they behave like shares more than direct.
Property because I move on expectations rather than actual fundamentals. Now that there's some pros and cons to that, I'd like to address if I could, James, I mean one of the observations that George shared in terms of India and the potential demand coming from indexes. So there's been a lot of work around this in terms of what they call index premiums.
We might just say to people just to give them a background on this, folks, It's like, if a company gets so big that it enters the top two hundred, then the theory is start a theory, it's a fact all those index funds that are ASX two hundred funds must buy the company, whether it doesn't matter whether it's good, bad, or hopeless. They must buy it now. So Stuart, you're going to tell us about some research around.
This, Yes, exactly right. And so of course then the index providers announce, you know, two to four weeks before a company is added to an index that's going to happen. So the whole market knows that AKA Vanguard and Beta shares and so forth has to go on by this by this stock. So the research is that the stock appreciates by between three to seven percent sort of three weeks or so prior to being added to an index, and loss three to seven percent three weeks or so
after being added to the index. And so the thesis is that index index funds are overpaying for these stocks, which I guess in isolation is true. Actually, the index funds have got really smart around their trading strategies. And when BHP consolidated its listing, it was dual listed in London and the AX. On the twenty eighth of January, it became solely listed on the AX. On that day BHP went from six point six of the ASEX two
hundred index to eleven percent. So essentially the index funds had to buy a substantial amount of BHP on that day. In fact, on that day over fifteen billion dollars of BHP was traded.
It's huge.
It's the biggest day, particularly in one stock on the AX. But they didn't miss a beat and Vanguard we're all over it. We had a conversation about it a few weeks ago. So I you know, sometimes people make or have share concerns around these index funds are so big, you know how much trading are they doing? Do they affect the market, all these sorts of things. So I
don't know. I wouldn't index arbitrage. I don't think I would be attracted to going buying this rate just because it's going to be included in the ASEX two hundred. But you've got to look at the fundamentals.
Yes, very good but really good question, George, and a very interesting area. And of course David de Pillar has put those two things together. The excitement around outa centers the attraction of property to us at their best, and we'd find out just how good an idea it was on Thursday when he lists what's the biggest flout of the year on the Essex All Right back in the morning. Hello, Welcome back to the Australians Money Puzzle Podcast. I'm James Kirby.
We're talking to Stuart Weems today of the pro Solution Private Clients Group, and I have taken the opportunity on this show basically to package up a lot of your questions because I want to not have many questions in the Christmas break. I'm sure you don't like to have your questions finished. Like everything else, everybody wants to have
everything done by Christmas for some reason. Judging by the amount of sheer activity on my street this morning, I mean, there must have been someone working at every single and every single house seems to me except mine.
Okay, so we have a question from Simone. Now.
Simone is very much in the nature of the type of question a correspondent I mentioned earlier who gave us an awful lot of details, but.
I have narrowed it down.
Stewart has read the whole thing, which will be useful, and I've narrowed it down to her question. And it's interesting questions, very specific in some ways, but also it would be something that people come upon. Simone says, Hi, I've been listening to the podcast since two sixteen, and I wonder if I may ask a question. Of course you may. You've been listening for eight years. That is really something, and thank you, Simone. She says, no one has a clear answer for this, and putting me on
the spot. Here, Stuart, here we go for the purpose of centerlink aged pension asset test. Would adding an adult child name in joint tendancy to the title of their primary place of residence be deemed a gift? Okay, let's run through that again for in terms of accessing the pension. Obviously, if she was to put an adult on the title of her primary place of residence, is that a gift? And secondly, would it impact eligibility for a full pension?
I noticed for a full pension tricky question, but people would have often thought about this, I'm sure, and it's a way I suppose of defending themselves long term in terms of asset security, etc. We are giving advice here as to all the Simons in the world. What do you think Stuart.
Well certainly obviously has an asset test to meet age pension limits, whether you get a full pension or part pension, and those asset limits are different for homeowners versus non homeowners. For single people, if you're a homeowner, you can have three hundred and fourteen thousand addition to your family home. If you're a non homeowner, you can have five hundred and sixty six thousand. Because you don't own a home, of course, you're going to have a little bit more
cash in the bank, hopefully. In this situation, simone talks about adding a joint tenant onto a title, I'm going to assume that there's no she's not intimating that it's going to be sold, that that share is going to be sold for cash. Because it's sold for cash, then it would add to the asset test. There's rules around gifting that limits or have an impact on the pinch. So if you make a gift, that will be included in the asset base for that asset test.
Is there a threshold on that gift.
Yeah, ten thousand per year or thirty thousand over five years is the maximum you can give without it being added to the asset test. And so in this situation, if you were to essentially gift part of your home to a family member, that would be what's called a deprived asset and will be added to the asset test and reduce that person's ability potentially to get an age pension or.
Part pension unless the threshold unless.
They keep a lot of the threat isn't watching the value of a house if you'redding.
It through many years, Yeah, okay.
Thirty grand over five years, it's not going to keep you very far with property prices in Australia. Okay, So the planning opportunities if you do it five years before you anticipate applying for an age pension. So if you could do it at six when you're sixty two and then apply for the age pension it at sixty seven. Seen, a link can only go back five years, So that
would be the planning opportunity in this situation. And I guess the loophole they're trying to close, of course, is that if I've got a family home, I put my son on title, he owns fifty percent, and then I eventually sell the family home. Of course, he gets fifty percent of the proceeds and I therefore only get fifty percent of the proceeds and get a chance to remain
below that asset test cap. So they're obviously trying to close that loophole because some I made an observation, well, if the assets not included for the asset test because it's occupy home, what's the issue here. But I think it's just trying to close that loopholes to get around it. But I think, like everything James in finance, it's really about forward planning as much as you can possibly do to try and achieve the best outcomes.
I hope that isn't frustrating for our listeners. But the five year I think about central's really interesting and for what it's worth, folks, the rules are the rules, right, so onto the change you are entitled to you in any way that you can legitimately, all right. I hope that was useful. Simone distressed property? Would you read that question?
Stuart?
So the next question is from Jack James. Jack writes, there are reports of rises in distress property sales. What's the definition of distressed property sales?
Yes, s Q and Research has done this.
In fact, just like the person our correspondent there, I had the same thing. I said, what is distressed property? You know, it's not like there's a dictionary definition of it. So I actually went back to Lewis who said, there is that they use a whole pile of variables to
define a distressed listing beyond what you might expect. It's very obvious if somebody who was bankrupt or facing insolvency, if they have a big sign plastered across the house saying must sell, that would fall into it disease the states obviously must sell as well, so they're all distressed listings. He actually encompasses tag words and search words and all sorts of issues to get his particular own in house definition, which is not a global definition, if you know what
I mean. But it's certainly good enough, I thought in the way he explained it to me, and it was really interesting, as you might expect listeners if you've listened to the show at all this year. Melbourne is the trouble spot in many ways economically and certainly on house prices. It has the softest house price passion in the nation, it has the weakest prices. Prices are following by about
one percent a month. And don't you know that the total of distress properties in Melbourne lifted by fifteen point four percent in the twelve months to the start of November, while Sydney, which has had some bad months, was actually overall flat. And to be precise, most of that figure his apartments, and most of those apartments are in the inner city, which is something I would expect that you are not the slightest bit surprised about, Stuart.
Not really, but James, I mean, I think we have to sometimes separate research and reports that are trying to find a headline versus what's actually going on. And I think if I have a look at CBA, which is the most recent lender to report and your results and the largest mortgage lender in Australia, so I think it's
a really good representation. In its financial year twenty four results reported a twenty eight percent fall in loan impairment expenses, so that's actual bad debts or debts they're expected to go bad. Ninety day areas arose, which is a good measure of how people are dealing with their mortgages, so it rose from one point two percent to one point
five percent. Huge numbers, but of course that's probably not unexpected given interstrates are at thirteen year highs and you know you'd have to go back to sort of free GFC levels to have higher interest rates than all is there.
If it's rules from one point two to one point five, people might have no idea what that means at all?
Is that like?
Is that from nothing to nothing? Is it from small to significant?
Look at ninety day areas rates in the US, for example, they have around two and a half percent.
What would I think, what would you think is a point of which the bell rings in our market.
Maybe if it gets closer to the two, you know, high one percent, So I think it starts to look like people are distressed. But again, this is people that haven't defaulted, they're just behind in their repayments, and banks will work with these people to you know, find solutions, and those solutions could include selling a property. A lot of times these situations include divorces and separations. You know, people stop paying their mortgage in that situation. So there's
a lot going on there. And it's just not unexpected when we've come from interesstrates of sub two to now interest rates in the sixes. I mean you're going to expect a rise in ninety day areas. So these distressed listings and so forth, I mean they're always going to exist. But is the mortgage market and the property market in a situation where people are fire selling assets. I don't think it's you know, I think most people that are
discretionary vendors probably wouldn't sell in this market. I think the people that are selling probably are doing so for a reason. But are they distressed? Yeah, I just don't know.
Just throw the classic journalist question at you, which is would you rule out which was always one of my favorites when somebody was saying, you know, you said, would you rule out that there is distress setting going on in the inner city of particularly in Melbourne where the market is weakest.
No, I wouldn't rule it out most definitely. I wouldn't rule it out. And I think the longer interst rates remain at this level, I think we'll see more and more distress. But I mean that's the whole point of raising interstrates is to create, you know, a contraction in terms of monetary supply, and that at the fringes creates a lot more distress for some people than others. So I think we'll see more of it. But is it to the point where you know it's affecting the market
as a whole. I mean, there might be sectors like inner city apartments, but it's a bit strange, these inner city apartments because I remember reading maybe you did some work on it, James, a few years ago about apartments really crashing when COVID hit. Then they had a pretty strong recovery because I was selling quite cheaply. And then now it looks like, you know, at least on the data.
It looks like there might be selling cheaply. Again, maybe these weren't great assets to begin with and people just took some cheap money to buy what they thought was a bargain but have now realized actually it's not a bargain. You know that it doesn't have the same amenity as living in a quiet suburb.
Okay, And there is that issue always a course jack of endless supply or at least you know the supply can be You know, you can't build five hundred hours as fast, but you can build five hundred apart relatively quickly most of the time. All Right, we take a short break, some very interesting questions from Sean and Adam
on their way. Hello, Welcome back to the Australians Money Puzzle podcast James Kirby with Stuart Weams, and we are galloping through our build up of questions, particularly for property issues and property related issues which stretch as far as
reads and data centers, which we mentioned there earlier. The very interesting float, biggest float of the year coming up, which is a property flow, don't you know, which is the Digico float, and I mentioned also in passing there the very very interesting career of David DiPilla dip I La, who is emerging as something of a deal maker. Extraordinary on the national stage, you might say.
And we haven't had deal.
Makers of that scale for a long time, and they can be very interesting if he keeps going, as I say, at the rate and speed he's going. Okay, we have a question which I think I read yes shown Shaun shown. Given there's plans for superannuation funds to give members limited financial advice, it prompts the question why would this be limited? It seems reasonable to extend a person's holistic situation and
an advisor of their choosing. Surely we now have enough confidence in the financial advice sector and we can put guardrails in place. No. Shown, we don't have enough confidence in the financial.
Sector at all. I'd love to think we do what we don't show.
So the big funds will get to offer limited advice, and I won't get into all the details around that, except that they will offer it and charge in the way they always charge for everything, which is everyone pays the same and no one knows what they're getting for
their money. But maybe in highly limited circumstances where someone knows almost nothing and really need some help, and they only want a very limited piece of advice about their super then the super fund might well be useful, and we really could see some improvement in the provision of financial services on a mass scale. That's the best part of it. After that, there's all sorts of issues. But certainly I think it a way is almost impossible to
expect the super fund to give full financial advice. Would the super fund ever say if I went into I won't mention any name, But if I went in and I said, I'm very happy with my performance with this fund, it's great, but you know, I want to do a few things that I want to take a quarter of it out and buy it by an apartment down the road, and I want to take another quarter of it out, and I want to buy some particular investments that you aren't doing and I wish you were, but you're not,
so I got to take that out as well. Do you think the fund was see, Yeah, that sounds like a good take half your money out of your fond off you Gil Stuart.
Oh, I don't think so. Not if you're a single product provider and these people are working for a single super fun So you know, it's a little bit like walking into a Ford dealership and asking should I buy a forward? What do you think their answer.
Is going to be?
So I think the idea has merit.
You know.
The idea is that if people have questions about SUPER, and SUPER is a very complex area of financial planning, we should have people there to be able to answer those questions and help those people. And at this stage they can't do that because that's giving financial advice. So the governments then thought, well, we're going to create this new type of advisor. Let's call them a qualified advisor.
They haven't told us really what their education requirements will be, but it's going to be a lot less than a standard financial advisor that needs a bachelor's degree and does forty hours of professional education, etc. Per year. So they're not going to have that skill and experience, but let's help them answer, you know, some questions about maybe investment options, the insurance you have in SUPER, maybe even the contributions
you're making. And I think I guess in some circumstances they might be able to do that when people are kind of confused between concession and non concessional and give two nine and three tax and all these sorts of things.
That said, it's a complex area. I think it comes in the implementation though, and that's the key, because if these people aren't well trained and don't know where those guardrails are and don't know that, look, I shouldn't be giving this advice because there's a whole bunch of questions I should be asking, but I can't ask because my advice scope is quite limited. It's going to be problematic. I think it makes sense and people need to understand that.
You know, if you're going to ask a question like should I make additional SUPER contributions? For me to answer that, As a financial advisor, I need to know about your personal situation outside of SUPER, what your cash frow looks like, what are the ASTs sets you have, what your home mortgage is doing, what your longer term plan is. I can't in isolation go, oh, well you'll get a tax deduction, so yeah, why not put some more money into SUPER.
That's not really advice. That's really just explaining how the legislation works and what the tax consequences are. So I think it's problematic. I like the idea help people because it's a complex area. How do you implement it is another big question though.
Okay, okay, very I hope that was used to you. Sean.
There is this whole thing about what they call them. They shouldn't call them qualified advisors. That's absolute nonsense. To call them that. In house advisors it might be a fair description of what they are, but of course there's a big game going on there because you know, everyone wants to sound as good as they can.
Don't They just like job titles, all right?
Final question is from Adam, and Adam is a Victorian based property investor and guess what he's got a couple of issues.
Okay, do you want to read that one?
Stuart, absolutely so. Adam writes, the Victorian government is introduced a retrospective land tax on private land, even if it's part of your principal place of residence. When it's on a separate title, the solution may be simple merge the titles, but this is not always possible when the land was bought on at different times or is financed by different banks. For example, we bought land at the rear of our
gardenless house to make a garden several years ago. After buying the house and financed it with a different bank prior to the new tax. The principles of fairness would suggest fairness and the Victorian government. The principles of fairness would suggest the Victorian government should make this tax perspective and allow people to plan for their finances or apply for an exemption for personal gardens, garages, etc. Which no
one derives income from. I realize this may seem like a First world problem to those that are not affected, but the sizeable tax goes against the except the principle of new taxes being prospective rather than respective. Is there any advice from you or your contacts may have.
Okay, well, we don't have advice, Adam, what observations would be? Yes, of course there is a tradition, though somewhat imperiled and under threat, if you like that. Taxes should always be grandful. In otherwise, you don't give up one morning and find there's a tax and you're hit with it. You're giving time to plan. And that has always been the case. And that was again another one of the problems that
often comes up when they introduce a new tax. But then from the government's point of view, they say, if you introduce it fast on the night, you catch all the people you want to catch, and that's what I expected politically from a real politic point of view, is
what's going on. We won't talk about the highly individualized setting there, except to say, do you think that tax was the land tax of Victoria which has caused a lot of problems, which has definitely drained confidence from the state because of its stature that it was a targeted property investor property onerous tax? Do you think that particular one did actually follow the wrong side of the line in terms of procedure fairness as taxes go.
This rule relates to contiguous land, which I've never come across that word contiguous, but land that is adjoining your principal place of residence. It was called the tennis court tax, James, and that's really what it was targeting. I guess people interact the bought next door and had a tennis court.
I often wonder if.
If I had no one ever played tennis on those courts.
That's right, they do.
Now I'll properly get their money's with. And so from one January twenty twenty they started charging land tax in situations like that on metropolitan Melbourne only so regional that's fine. If you've got land that adjoins your home on a separate title that doesn't have another dwelling and it's used for domestic purp, you're still okay. Of course, the Victorian government wants to raise taxes, and the quickest way to do that is implement it yesterday and don't give people
an opportunity to plan around these things. I think with these sorts of changes, Yeah, it makes sense if you are going to allow them to combine the titles, because that's one way to obviously circumvent it. Give them time in order to do that, including refinances. So I mean Adam mentioned that his land is financed by two banks. It shouldn't be a big deal to combine those titles.
You will have to refinance with one of those banks or another one in fact, but it should be easy to sort of clean that up and therefore avoid the land tax. But people need time in order to do that. But I think that's probably the government's idea. If you don't give them time to sort themselves out, at least you'll be able to charge the land tax for at least one year maybe two before they come to terms with it.
Yes, which is what I was alluding to I think there when I was seeing the political part of this is, you know, to grab as much as you can, all right, Okay, very good, not advice, of course, observation and information for Adam and all the Adams out there. Terrific. Great to talk to you, Stuart Williams. Love you to have you on the show as usual.
Thanks, Jans, being fun as always, great questions.
We'll have you back in the new year and look forward to talking to you again and look forward to having lots of questions folks. Keep them rolling the money puzzle at the Australian dot com dot Au. Today's show was produced by Leah Samuel Glue. Talked to you soon.