Hello and welcome to the Australians Money Puzzle podcast. I'm James Kirby. What is the idea behind your investing? What's your longtime idea? When you invest? We're going to assume that sooner or later, perhaps already you own your house, Perhaps already you have you actually have enough to retire. Maybe you don't think you do, but maybe you do. So then the thing is, if you have a family, your family, how are on earth are they going to
buy a house? You know, they've just put lending limits on home mortgages at six times for the banks for twenty percent of their volume six times. No one's buying a house at six times in the major cities it's eight times, nine times, ten times. Just gives you some
idea of the cost the younger generation face. We've got a lot of issues I want to talk about today, but the first thing I want to talk about with my guest Will Hamilton, regular on the Show of Hamilton were the partners and long term member of the Baron's Top one fifty distant in there again of course of late. I want to talk to him about a piece he did recently on The Australian which sparked a lot of comment.
It was basically all about the notion of leaving nothing behind, or as the Americans like to call it, die with zero. That's a book that's been a bestseller over there. How are you well?
Very well, James, Thank you very much for having me.
I was intrigued with quite a personal piece you did. Actually I thought on this, but it is something it's kind of a paradox that a lot of people face, particularly I think property investors. You know, they are stretching themselves, they are negatively gearing. They are they are taking lists, they are going through the relatively mundane issues of running investment properties, and they're doing it with mixed success, often so that they can help their kids buy a house.
A kind of a circular kind of a provise circular situation. So tell me about what this concept and your impressions of it.
It's something we get into discussions with clients a lot, and you know where wholesye license and our clients generally have their in a fortunate position when we get into a state planning and also planning for how they assist children. I often there's a bookshop up in the shopping center above what we are dimicks. And I always say, on the way out, go and buy Bill Perkins, die with zero, now is that right?
You don't really sell them. You didn't put a little stack a reception and make a bit of marrid is.
And it's all relative. It doesn't mean die with zero. It's to give away to your children what an amount that you can afford. So you know, I had to get a little lot of emails people, and thank you
very much giving me some advice on the article. But one is to the extent you can afford it, and to help your children, because it's more important to help your children while they're in their thirties and forties rather than when you die and they're in their sixties, and that's when they need it, especially with the housing differential when I am just a baby boomer. But when we went out there to buy houses and four to five times at your income level versus as you rightly said,
you ten times plus today. And these are issues that our children therefore need our assistance to the extent that we can provide it. Now, there's only so much you can say in nine hundred words. And you know again, some people wrote in and one person was a little bit emotional with respect to the fact that they'd done this and then their children got divorced. So you do
need to get some advice. And what I'm saying is general advice only, but you need to go and talk to your financial advisor about this, and then they're going to put you in the direction of a family lawyer, be it loan agreements, be it financial agreements that you may want to consider. And I think that's very important, important so that you protect children with the assets that they bring into a relationship.
It's interesting, you know, just that issue of I suppose the how it's the house prices, the level of house prices that have sparked particular interest in this. It's always been around as a concept, but it's got an edge now, you know. I was wanted up the old joke about how do you buy a house for four hundred thousand in Sydney's North Shore? You buy it in nineteen seventy nine,
you know that's what you're saying, right. I don't know how much you paid for your house or I paid for mine, but you know the figures are laughed at by the people who are buying houses now, So let's just keep it on that issue, and this is a wider issue obviously, if this could be for any reason, but I think obviously the core reason is very compelling. You know why, your son or daughter will probably be
in their late sixties when they get your inheritance. Statistics would suggest, and in their late sixties if they're the type of people who are active investors, strivers, and they listen to a show like this, chances are they've paid their house off by then, and there was years where they had absolutely nothing, and maybe it wasn't necessary because
you were accumulating at the same time. Now, the thing I'm skeptical about Will is this issue of financial agreements and loan agreements and sending people to the lawyers to do this, I'm assumed. Tell me why you think this is necessary and is it about keeping it literally within bloodlines? To be brutal about it.
I think that depending on the age of a child, line agreements something you should consider now whilst the house price goes up and as I said, you're protecting what they bring in. I think financial agreements are a very personal thing, and we've got clients that insist on them, and we've got clients that there is no way I would ask my children to sign that, So I'm not making it. It's a judgmental call, and I'm not making
a call either way. I think you need to discuss it and make a decision based on something that's right for you and your family on a lone agreement. I think that's a very different matter. That they're not even a thousand dollars for a family lawyer to prepare, and you can actually provide something which I think is a safe thing to.
Do, but if it's a lot of agreement, you're not giving it to them.
Correct, Well, that's on the depending of the structure that it's in and how it's done. That loan can then be forgone on your death.
I see, I see all right, So what is the overarching sort of logic of these greens. It's to protect your children from unexpected events in the future, such as divorce. Am I close?
Correct? I think what the logic of these And if you speak to a family lawyer, they'll say, you can protect what you bring into a relationship. You can't protect what you create in a relationship. That's openslaver and so it should be not saying that's you should protect against that you can't. You shouldn't.
I wonder why people don't do it.
Well, I think a lot of people don't know about it. Thinking of an email that I got from one person. It was, you know, as I said, quite emotional about that because this is what happened. They gave some money and then child got divorced. I was wondering, well, did you know about this? And that's why sometimes you should. You should go and get advice, and your financial advisor discusses that with you, and then push and then put will introduce you into a family lawyer that can have
a further discussion and then not expend financial agreements. That's a different matter altogether.
I mean, we see just this morning the usual here we go again, the annual sort of aspa. They all do it.
Now.
How much you should have to you know, be comfortable in a retirement, et cetera. And it should be seventy thousand dollars a year for a couple, and that means you need to have well, you certainly want to have a million, you know, officially it's something like one point six one point seven million, depending on the degree of risk of which you take. But the point I'm leading to is that at a certain point we clear off are at a certain point we say, okay, the house
is paid off. And many investors once they have a certain number, a certain figure in super and maybe they keep working so this figure doesn't have to be anything as high as these calculators say, and many it listens
to the show, will have much more than that. But I wonder is this concern about not having enough in retirement an issue that stops people doing it even if they have plenty, because they say, look, if the world collapses, there's the markets collapse, If I'm stuck on cash rates, if the banks collapse, how am I going to survive?
All my retirement money is at risk. Yes, you say I have a lot, but maybe I don't really have a lot because it's all at risk, and so I can't hand it over just yet, because I worry still that I don't know how much I'm going to cost in the fullness of time. And let's say the nightmare scenario where a couple are both in some sort of elaborate age care with multiple medical bills for years and years, whether they could rack up a hell of a lot
of bills. The point I'm making is do you think that's actually stopping people too.
Yes, I think that it is. As I said, everything's relative and it it's personal. So I'm not saying you must do this, that you do it to the extent you can afford to do it. That's the first thing. And I also I think it's generational.
No tell me about that your concept of it being general intergenerational.
So well, first of all, I write this because I I do believes in and there's intergenerational inequality. And you said that created discussion through the comment section. A lot of people didn't agree on that point.
Yes, the degree if they were perhaps under thirty.
Though, yeah, correct, So they didn't agree on intergenerational inequality, which I do believe there is. So that's where I'm coming from, and that's what I discussed with people. But I know my parents. There is no way my parents would consider this because of a lot of the points you brought up. My mother's in her nineties and she's worried, very worried about the cost of age care and her own health. And I think that you're at a point in time when you can look at this and you
can look at it objectively. There's other things where there's other points in your life when you're focused on other things. And as I stress, to the extent that you can afford it, And I understand some people can afford to a far greater degree than others.
And I suppose the imperative that drives people to make money was in conflict with the different dynamic of giving it away in many cases. Whereas will that be relevant apart from homebuying?
Was I said in the article, and this again, I believe in it a lot of the things Bill Perkins said, But I just want to stress in the book I was zero, But I do want to stress in the book he's obviously a very wealthy man and that comes across so you have to adjust for that. And he's American, so we have to bring it into a cultural perspective. But I also think the thing on creating experiences to
again the extent you can afford it. So if you can afford to create experiences with children and grandchildren and memories, as he says, memories really important. So those experiences lead to memories, you know, because the one reality is we're not going to be here one day. And I think that's I thought that was a really lovely thing, and
I thought that was it really resonated with me. And the other thing is again and some people don't agree with private school education as well, and that came back in the feedback I got. But if it is important, you know, education is you know, there's nothing more in a chance life is education, be it secondary education or
tertiary education. And I know one of our clients is very philanthropic in ensuring that those that wouldn't ordinarily be able to go to university can and he gives through Melbourne University on that and I think he's it's lovely what he does.
So typically this would end up being not it's obviously two days anyway for some investors to pay for their own children. By the time they get to the position we're talking about, their children will have had their school experience, whatever that might have been, and however that much that might have cast. So we're talking about grandchildren often. And
it's interesting. We've got a question coming up at the breakfromt Sandral exactly about this, but on that one, is there any guidance you can give on that you mentioned about long agreements with lawyers for buying homes or perhaps assisting with the Dan Holmes I am actually, which is typically that someone pays ten percent of what the house is going to be. How about on the schools on the ideas on that.
One, someone once said to me, if you can find an investment that's linked to the CPI of school, phees, go for it.
CPI of school is an illegal zone.
Because exactly that. So, yeah, it's a friend of mine and Sydney and he once said that to me, and I always laughed, and I've quoted that often what he said.
It's more relevant every year.
So there are bonds or education bonds and things like that which you can buy or you can just put something away, depending on again, to the extent that you can afford it. And that's what these are, the sum of things which I think you can consider. I'm not saying you should, but you can.
Just one last thing on this before the break. We've had a lot of people on the show skeptical of education bonds. I am too, You are too, okay, So your point is perhaps to have a saving sphere correct that is focused on this issue, but it does not necessarily have to be an education bond. And the fint I always make on the show folks. Is they called education bonds but they are nothing to do with education per sale. They are marketed as such, and it's a scheme,
but it wasn't designed for paying school fees. It has been adopted as such, but that was not its core. All right, really interesting. I've got some really good questions I want to get to and I've kept them for Will, who is a regular on the show and a lot of our listeners are keen obviously to get items in front of him. So back in a moment, Hello, and
welcome back to The Australian's Money Puzzle podcast. James Kirby talking to Will Hamilton as I'm going to do this question second into two parts, folks, because there's two different themes that i want to pick up on. But just quickly, I had a question which came in later actually, and it's from Lily who says I can't keep up with the number of grants for first home buyers. But I see now that the latest grant for shared equity has come out, but of course it has been surpassed by
the first home buyers scheme. At the same time, we've seen lending limits imposed by the banks in the same area what gives. Yeah, thank you Lily.
Yeah.
So they're putting lending limits exactly on the same people who are trying to buy a house, because the ones who need to go over five or six times income will substantially be made up of first home buyers. And then they're rolling out grants a universal first home deposit scheme, which is going so hot, folks, it's going so hot that the banks are putting over they're doing overtime in the departments of the banks trying to fill this out.
And we're getting a super hot segment of the market, which ironically is the exact same market they're throwing the grand set.
What do you think will It's like, look got enough. It still exists, but I haven't looked at it. But a couple of years ago, the Victorian pite government gave stamp duty real life up to six hundred thousand dollars, and the minuteure went over six hundred thousand dollars, you had to pay the full stamp duty. So thing you give when you don't give, And yeah, this is I do believe the federal government's latest equity share scheme that's
absolutely pushed housing prices up. It can't not have the way they've structured it up to a million dollars and you shared equity. That's with a five percent deposit down. That's simple as it was only going to do that.
But the other thing I worry about too is that like it overheats that particular secret action. Not only that, but like the whole market gets skewed to that segment, to this economic theory of push to price.
You know that they actually it's misthought. It was a thought bubble during the election that they've had to rolla leading into the election.
Hm hm, okay, well, Lily, I hope that's useful to you. All those grants are there. And by the way, there's also the first Home super Service scheme, which I think this government are very keen to to not advertise because they don't like it. I don't think they like it all.
Right now, listen, folks, we got to hear. I want you to listen to this very carefully, right because it's come up again and again from listeners, and it's about super annuation caps and how much you can have and at what point various taxes kick in, like the new super at the new super tax at fifteen percent above three million. But here's David. This is what he says. Someone on the show mentioned that, based on current legislation, the amount in the pension account can increase tax free
without limit. I want to know, is he right? If I retire at sixty and I transfer two million into my pension account, and assuming this balance grows yearly, the full amount in the pension account will always be tax free. The fifteen percent tax coming in at division two nine six does not apply to this the pension amount. Okay, just to reiterate, the day you retire, if you have up to two million, that once it's in the box, basically, once it's in the can inside the supersystem the TBC.
To be precise, it won't be taxed even if it grows to three million, four million, yep? Right or wrong?
Right? In fact, Thomas asks a question where he answers. He answers it in his question itself and that that's interesting, And he says, Jim Chalmers, I only talked about division two nine six, which is fifteen percent on tesB more than three million. The situation of between two and three million appears been overinterpreted. So if I have two point four million in super phase I transfer two million into account based pension at the age of sixty five, I
will have to leave four hundred into the accumulation phase. Correct, that's if you convinced on that. But my two million retirement phase can grow to organically, he says two point four million, and the earnings is tax free, not fifteen percent. Correct. Correct.
Yeah, so that's just a final word on that, folks. Okay, that's how it works. The fifteen percent tax, the new one is on amounts above three million. And so for instance, how that might occur is, for instance, if you had three million this, if you had four million the day you retire, well that only two of that would go into that can grow forever and never be taxes. That's right.
Yeah, you got to an accumulation phase and.
The other two well, you can do what you like with it. You're probably going to let it fall into accumulation because it's it becomes fifteen and that's hard to beat. Okay, very interesting. Of course, there are people who also have more than two million, and they haven't even retired. They're relevant two. So we try to cover all angles here. This is easier sometimes, folks, to pin down in in print than it is when we're talking. Because it's a print.
J Obvis is more precise. All right. I have very interesting question from Sandra which is on the theme that we'll started with, so we'll come back to that one second. Hello and welcome back to The Australian's Money Puzzle podcast. James Kirby talking to Will Hamilton. Okay, Will, question from Sandro which does kind of correspond or echo some of the issues we talked about at the start of the show about leaving the extreme version of dying with zero.
But it's not, of course dying with zero. It's about thinking about whether you should help people in your life earlier rather than later. Sandro, I want to invest for my grandchildren. My initial thoughts are to add approximately two thousand per child annually on their birthday into the ASX two hundred and etf. I suppose that is or something similar and this should compound to something significant in twenty
years when they go to buy a house. I'm interested in some ideas and strategies on how to set this up the most cost effective and today who was named should be in most tax effective way, et cetera. Any information would be much appreciated. Okay, sandral not you say you will.
Yes, So first of all, Sandra, go and talk to an accountant. I presume they might to ask you to set this up in your name, in the parents' name, as in trust for the children. That's the first thing. So just otherwise that there is tax at the full marginal rate for children, so you might just want to get some tax advice on that. First of all. The second thing is I wouldn't put it into an Australian ETF.
I would look as a global equity one. For instance, we're now one point six percent of the MSCI aqui that is Australia to invest in the other ninety eight point four percent not necessarily, just one point six percent of global equity markets. And yeah, this strange share market is going to close out effectively square this year as against global markets because it's the global markets. They've got
growth in other parts. So that's the second thing I would do is just make sure you invest globally rather than just domestically.
Yeah, very good, and of course not advice Candra, just to information only, but those global indusies they're easy to get to. Just remember, and when we talks about MSCI, that's the Morgan, Sandy, Capitol, International, Indicies and a lot of the global ets run off that as they should. But also keep in mind that what's the number now, sixty four percent or so? Oh yeah, it's actually US, yes, yeah, yeah.
So you know the fact is you're the majority of your money will be on Wall Street, but that varies over the year central and there's times for that's been an undred and fifty percent, but in recent times it has absolutely just mushroomed inside the global markets to some extent that reflects a certain dullness in Japan, Australia, even that Europe over various years as the US and the big tech companies just went through the roof and still
do with the AI boom. All right. Now, on question is from shown but the shau n I wonder could you consider doing a segment giving all the accounting maneuvers and profit shifting that companies use, why don't governments consider
replacing corporate tax within universal revenue tax. That way, the economic activity that takes place within Australia It's borders will be taxed here, not when the company chooses to record its profits something I mean, obviously, the sentiment is a noble sentiment there shown, and in fact, a lot of economists wouldn't have a problem with your concept, And indeed, the Productivity Commission has recently put out something similar to that, which is a sort of is it a cashflow tax?
Is that the idea will that they would.
Yep, that's Look. I think what Sean said has some merit, but the reality is that unless you get both sides of politics together, we're not going to tackle the inequity that there is in a tax system. And one of the big things that we need to tackle in this tax system is the paya and the hYP percentage of total taxation rays through that which is not indexed, unlike in some countries, and therefore we have bracket creep as well as a major issue. So look, a whole tax system.
The taxac was written in nineteen thirty six. I think that says it all, and both sides of politics should get together on a bipartisan basis and tackle this.
And we're inordinately tax taxing people. Correct, individuals get taxed. They carry the whole system, which is of course working individuals. That is which brings us back to the very notion at the start of the show. About inequity and how even inside SUPER like people say, oh super is all about you know, it's unfair because of the tax breaks for older people. But it's unfair even inside the system because the concession of tax breaks for contributing to SUPER
are they are low and they have moved for years. Meanwhile, the amount you can have gets in mixed all the time, not to mention the pension which gets index twice a year. So there is plenty of inequity even within SUPER and intergeneration in equity at that. But in your case, folks, I think if you've been listening to the show today, I think there was a really interesting notion there and
something that's really worth considering. And honestly, even on a more pragmatic basi as well, what is the point in hanging on to your investment property for three more years if the money is supposed to go to your adult children who are trying to buy a house. That would be at that would be in sort of microcosm, wouldn't it really?
And as I say to people, it's the pleasure of giving as well when you can, you know, and want to stress if you can afford it, that pleasure of helping and giving and saying that reaction and that the gratitude from giving, and you know, it was a very big discussion. I talked about the fact that intergenerationally, those that are of an older generation, this is far more difficult.
And I actually talked to a woman in the late eighties to do this, and I said, look, you've got no gratitude personally from it when you're dead, why don't you do it now? And as I said in the article, some of the grandchildren were in tears and she got incredible satisfaction from that.
Yes, it's interesting, isn't it. As you say, there's no point letting them know that you were really okay when you're gone. Okay, thank you very much. Well, great show, Thank you James, great discussion. As always, I'd like to know what you think of that, folks, I really would. So let's let's hear from you the money Puzzle at the Australian dot com dot au. Talk you soon.