Hello, and welcome to The Australian's Money Puzzle podcast. I'm James Kirby. Welcome aboard. You know, one of the most popular shows we've had so far this year completely surprise me. You might have heard the episode we did on incentives right, Electric incentives we call that show, which was all the incentives that are available for you in relation to clean energy wherever you are in your home or in your car,
and it was with James Girard. I've had a lot of questions after the show, and so we have to have him on again because there's a lot more to talk about. But just before we do, I also want to talk to James about super tax because I've had a fe lot of questions about that too. So let's do the two. We'll just get the super tax and we'll just bring people up to speed as too we are, and then we will talk about electric incentives the sequel. How are you, James.
I'm doing well. Thank you, James. Good to be on the show today.
Telling me what's the latest on the supertax you're reading.
It's been dragging on for a while. It was introduced to Parliament twelve months ago and it's in the Senate and it looks like the Labor is pretty close to doing a deal with the Greens in the cross benches, so it's likely to come through as legislation in the near future.
Right, because in effect it starts on July one, right, I mean, in theory it starts on July one, twenty twenty five. But they're basically what you The period in which the tax supplies for which the revenue is collected begins on July one, which is a couple of weeks away, so I'm not surprised they're rushing to do a deed. I think the Greens sound like, well, you know, according to the papers, one of which is The Australian, and I would take it pretty seriously because they're very plugged
in at that level. The Coalition won't be doing a deal with Labor on this tax, the Greens will, and the Greens it would seem shell shock, perhaps from the negative reaction to how they objected to just about everything that went into Parliament in the last parliament, seemed to be agreeable towards the bulk of for Jim Chalmers plans. So today's reading all the folks is a it's going
to happen. B it's going to include on realized games. Yes, believe it or not, a whole damn thing is going to happen and all the consequences, which we'll cover as we go. And it may not be indexed. The Greens aren't even pushing for that anymore, which is what they were asking for. They were asking for it to be indexed and to be brought down to two million, but none of that might come to pass as we speak this morning. So look a just a couple of quick
ones on that tax. James, now that you're here, before we talk about the electric incentives and everything else that came from that first show, asks why is the government constantly thinking about tax Why don't they ever consider some savings? Well, just quickly rambish, they don't. Actually, this government has not particularly focused on bringing in new revenue. And the big one,
the big ticket item, is the super tax. Two point three billion a year is the alleged total which they will raise from this, and that is the reason I think that they have brought in this tax. They haven't actually brought in many other taxes. In fact, they've cut them. Maybe think about the personal income tax. I just hot through these pretty quickly, Tom asks, I have a quirky
question in regards to this on realized gains. I think I know the answer, But could you theoretically go bankrupt for a debt to the ATO on realize gains on realized gains in your super? Okay, Tom asked, Gems, could you go bankrupt on the basis of the tax you were hit with? I was thinking about this. I can't see how you could because you'd have three million in super. Would you tell me?
Yeah, I think it's potentially possible. Reading the legislation Division two ninety six, tax is levied to the individual, so the individual will get a bill from the tax office.
And if the individual has no money to pay, if the SMSF for the superinnuation account has lumpy assets in it that can't be liquidated for whatever reason, well then the tax office is going to go after you, just like they would with any other DEBTA, and that could progress through to legal action, which could be bankruptcy proceedings.
We're not a tabloid here, so let's just say, what would you think are the probabilities of that happening? A thousand to one, A million to one.
Look, so you just have to think about the circumstances that could create that event to occur with the bankruptcy. So one, there needs to be an asset there or a superannuation balance of more than three million dollars, and then there needs to be circumstances where that asset can't be sold. Most assets in superannuation funds, even if they're property based assets, they can be sold at some stage.
So it'd have to be something quite unique, such as a closed ended investment trust that maybe has like a ten or fifteen year term and there's no liquidity or redemption windows within that.
You had all your three million super in.
It, exactly. Yeah, it'd have to be something quite niche.
And a lot of the chances of someone having.
That it's relatively low. You have to be quite a high risk taker to throw more than three million.
Yeah, come on, put a number on it. Give us a number, just tell the audience.
Sure, that's a less than one percent. You'll be talking like one in a thousand and one in ten thousand type thing.
Yeah, I'd say it's what a ten thousand door higher. In fact, I would put it way way higher. But you know, Tom, it's a great question. And if we were the type we could get outraged about that, but we only get outraged about things that matter, and we are outraged enough about the super without coming up with
extraordinary arcane theoretical things. There's enough to worry about in practice with this damn stupid, daft ungainly tax that is silly in so many ways, and not because it's on the three million mark, but because of the nature of the exercise and the technique of which they are taxing. Okay, I think that will do on the super tax, James, because there's so much we wanted to talk about with the electric incentives, and there's such demand public demand out
there from our listeners. Would you, just before we get into the questions, briefly explain once more what you said in the first show about what's available to you, for instance, as a homeowner and briefly what's available to you as a car owner in terms of the incentives available out there for anyone in Australia anywhere at any level to basically go clean energy.
Sure thing. So for the home at the moment, the government does subsidize the cost of solar systems to be installed. It's a few thousand dollars there are state incentives as well, but as one of the election promises, Labor came out and said, we'll add thirty percent extra reduction in the cost of these solar systems, which is quite significant. And when you stack the state government and the federal government rebates, in a lot of cases it can halve the cost
of the system. And so I should clarify we're talking about home batteries. I'm saying they're issuing that new thirty percent rebate.
You made the point that more than three homes I think had solar but only one in only a fraction of those homes had batteries, which is what would really make the whole thing come to that.
That's correct, Yeah, and that comes down to I think when most people crunch the Excel spread sheet, they see that the payback period is usually a give or take, but about five years for a rooftop solar system, but the battery can be closer to ten years for that financial payback period. And as such, more people have the
solar panels, but they don't have the home battery. Although in conversations over barbecues, a lot of people want to get the home batteries, but they're waiting for the technology to catch up and get to that point where that the costs come down and the payback period is lesser. So federal government labor have promised to thirty percent reduction in the cost of the home batteries. And that's a
great thing. Now, So when I requnch the numbers, when you add this new rebate there, it gets more compelling. It's not amazing, but it's more compelling to put the home battery in. So I'm assuming that battery installers are going to be run off their feet later this year as this thing starts.
Boom business, I know, the boom business created by the targeted incentives of the Albanese administration. Oh key, and those the barbecue conversations are over gas barbecues or even collar cues either sort of barbecues. I'm not sure. I don't know. I'm hopeless on anything robotely technical. Okay, now very briefly too. On the electric car. What was the incentive available on electric cars that our listeners may not know.
The history is that there's always been a scene callednovated leasing where you can salary package vehicles and the way that it works is that you use part of your pre tax income part of your post tax income, and it's usually a fifty to fifty split to be able to fund a motor vehicle as part of your work package. And you do it part pre tax, part post tax,
so basically you don't pay fringe benefits tax. Now, a couple of years ago, the federal government said that if you purchase an electric vehicle, you don't have to worry about this pre tax post tax thing will allow you to use.
You lease an electric vehicle.
You lease an electric vehicle, yeah, and at the end you do have the option to buy the electric vehicle. So although the word is least, for all intents and purposes, it's your vehicle. You take ownership of it, you wash it, you look after it, and then at the end it's either sold and if there's any difference on the least contract, you have to pay that out or you get cash back if the lease residual is less than the payment
amount that you get for the car. So there's always been in place, and the federal government said that we want more electric vehicles on the road. So if you buy a brand new electric vehicle through this novated leasing scheme, you don't have to use any of your post tax income. You can use one hundred percent of your pre tax
income to fund the vehicle. And now this is one of the best tax breaks going around for high income earners using their pre tax income to fund not just the financing cost, but the ongoing operational cost of a motor vehicle as well. So that's why it's costed the government so much money over the past few years since this scheme has started.
Terrific So very simply Patrick, cars find a half deductible against your income. But electric cars are one hundred percent if you use an ovated lease standard least package. Yeah, and that's why those that area is booming really interesting and explains to some degree the sudden appearance of electric youth all over the place. They are still youths, but they're not as noisy. They seem to be cleaner too, for some reason, I don't know why. All right, Okay,
we've got some great questions from our listeners. We'll take a short break and we'll be back. Hello, Welcome back to The Australian's Money Puzzle. James Kirby here with James Gerard. James, can you see the questions? I'll read the first one with David says on that electric car leasing, at the end of the lease, do I hand the old clapped out one back and list a new one who carries the cost of the policy issue use the electric cars to not appear to have much value. This is a
great question, David, and it's why I did say. I have said regularly on the show, you're going to get an electric car, release it because in five years, I mean the technology change in five years and electric cars, the five year old electric car is going to look like an antique I reckon in five years time. You think about what's happened in the last couple of years, the charging, for instance, the rapid charging, etc. But so the first part is does he hand it back or
lease a new one? That's up to him, isn't it really?
It is when you take out these electric car novated leases, you get to choose how long, so one year up to five years are the typical timeframes, and also how much of that lease do you want left at the end, and that will then dictate whether you pay more or less on a monthly basis for that novated lease. A really important point that I'd make is that electric vehicles no longer cost one hundred thousand dollars like they did
ten years ago. You can now pick up these Chinese built evs that have been imported in en Mass for thirty five thousand dollars on road, and even if that thing depreciates more than fifty percent over a couple of years, it's still someone a compelling proposition compared to the equivalent internal combustion engine vehicle where you're having to fill up petrol or diesel.
Yeah, but would you say that it's better to li sur by?
The Novata lesne works fantastically, that's game the ability to use your pre tax income that there's nothing else like it that can provide a similar benefit for the average mum and dad worker.
Yeah, and fact a few years ago I remember looking, but there was very little to choose from at that time on novas a least, it's very little. There was Tesla's and then there was one or two odd pod cars that you never heard of, And now I see there as an entire menu of them. Okay, thank you, David. Great question. Okay you want to read it?
One from Chris, Yes, Chris, as I had a follow up question on the topic of batteries. If I were to use this battery to charge my com which I primarily use for business purposes, and to power my home office, internet lights, computers, et cetera. Can I claim the purchase of that battery as a tax right off? I'm answering that you are. I don't know the answer. What I would say is that anything that we discuss on this show is general information. It's not advised. Go see an accountant, Chris,
go see an accountant. But my view would be that yes, it would be tax deductible because it's linked to your ability to generate accessible income, which you're doing working from home. So just like you would claim the other things that you'd mentioned, you're be able to claim the battery as well.
So I think the answer that the answer to your question there would be, Chris, it may be right. That's what we would legally say that to cover ourselves. Legally, we would say it maybe, and obviously our comment on it would be it should be right. Partrick, does this set up by that? I presume he means going electric solar allow the property to go off grid or do
you need to retain an on grid connection. I note that in bad weather, the solar generation can be very low and question whether or not battery storage would be sufficient to keep the property powered. Super question cuts to the heart of the whole debate really about alternative energy and clean energy, whether it can sustain obviously at an industrial level, you know, can it do baseload And you can read ten thousand stories on that if you want to.
But in terms of the particular issue, do you know, James or would have you any idea what the consensus is on that one?
I do. I've covered this once or twice in the Work section of the Australian breaking down the financials of it. So let me spit some facts to Patrick. So the average household uses between fifteen to twenty kilo what hours of electricity on a daily basis, and these time battery systems the capacity is anywhere from five killer what for a smaller one up to fifteen killer what hour for
a larger system. So on that basic mass, it's going to last you like half a day to a day on battery only if there's a blackout, So it's not going to last you very long at all. But one thing which we didn't cover too much in our last episode where we looked at solar and battery systems was the ability which is not really there right now, but
it is coming in it's testing. At the moment. Technology and adaptivity is occurring with regards to being able to plug your car into the home and power your home from the car, so it's called by directional charge in, and some car manufacturers such as Kia and MG they have the hardware in the cars to allow that, so you can plug the charger in from the home to the car and you can send the power from the car to the house. But some manufacturers like Tesla, they're
not there yet. They're promising to provide that technology sometime this year, but it's not there at the moment. So that is an alternative to get in a home battery that that big battery just plumked onto the side of
your house. You can actually get away from that. And if you wait and just see how this technology adapts, in which one becomes a predominant way into the future, it might be better to just wait a bit and then maybe buy anyv if that's on the cards, or use your existing EV to charge at your home and then you don't have to spend eight to twelve thousand dollars on a home battery.
So the car overnight can power the house. I'm not awfully careful here now because I have such a robbery grasp of all this. There's a battery of the car.
Right, there's a battery, big battery of the car.
Okay, battery of the car. I'm confident of that battery. What it has is so powerful and has capacity on used in your driving of the car that you could power your house. Has it got that sort of capacity in a feasible way to do a full home It does.
When you look at the home battery system, they're quite large, insulated big things, and the batteries in the car you don't really see them under the floor, so you assume that they're not that large. But actually the capacity of the batteries in the electric vehicles multiple times bigger than the capacity for the home battery systems. I'm not exactly
sure why, but that's the case. So my electric vehicle has a seventy kilo what hour battery capacity, and going back to the commonly installed home battery systems that you plunk on the side of the house, there between five to fifteen, So we can see the really big difference there, and it's not just powering your home from your electric vehicle.
There's another thing called vehicle to grid and what that would do is you can actually send the electricity from your car's battery or ev battery back to the grid at times when it's needed, maybe at night times, and generate a bit of revenue that way. So that's still in the trial phase in Australia.
I want to try and keep on the main frame here, which is you're saying that we're at a sort of a junction in this evolution of electric and battery power in the suburban home and car, where it would seem just now, it might in the future be that the house battery goes both ways into the car, or it might be that the car goes both ways into the home. Is that right? And one could we don't know just now which way it will go.
That's right.
Wow, Yeah, okay, I see that's really interesting, and it kind of changes the economics of the leasing of the car. I mean, it adds to the attraction if it's the case that the car becomes the sort of the engine room, if you like. Of all this really interesting, Okay, very good. We will take a short break and we'll be back in a moment. Hello, Welcome back to the Australian's Money
Puzzle podcast. I'm James Kirby talking to James Gerard at Financial Advisor dot com dot au, who is also I might add, a sincere car geek and in recent times has updated himself to the world of electric cars. I wanted to ask. There's a couple of questions also, James and John just going to package together now that came
from that first show. The first one is it's criticism of the show, I suppose, and of the whole scene is that it seems like the whole thing is designed for the homeowner with the standard suburban home with a garage and a bit of space for the car, and everyone else's to some extent left out. Is that true?
It is absolutely true. There's a group of people who don't have the ability to be able to put solar panels on the roof and home battery systems in and they include people who live in apartment blocks they need to vote with the other apartment owners to be able to make those decisions. And also people that live in inner city areas where there's no off street parking, so they don't have that ability to be able to in all the cases buy the electric vehicle because it's hard
for them to charge it. I've seen on TV people that stuck electrical cords and put them over trees and over foot paths to try and charge their evs, and councils invariably tell them off due to public liability reasons.
Right dot, Some concerts make an effort, and I assume they will increasingly do so to provide public charges. I mean, I know that there are such council charges out there in public areas that are not in private property. Do they work? I mean I hear stories that there's cues for them, that they're vandalized, et cetera. Do they work? And are there many of them?
They do so. In my household, it's a ritual every Friday night we go to the same Japanese restaurant at Chatswood, which is on the upper north shore of Sydney, and we try and park in one of two electric vehicle spots which have council charges there, and it's really hard to get because they're just so popular. It might be one in every four trips that we're able to actually charge our vehicle on the street using one of these council charges, So I'd say availability of the charger is
an issue. And then another thing which I'd add is that if one of the main drivers for you to purchase an electric vehicle wasn't just the financials but also the environmental benefits, you have to think, how are these council electric vehicle charges generating electricity? It's probably coming from the grid, which is still predominantly from coal powered fire powered electricity generators, which isn't so great for the environment.
No, though I suppose the person would say, would argue that the core component is feeding, is not decreasing, and on that basis in the right direction. Is there only protocol? And this is it just like whoever it gets there first? Is can you book them?
You can't book them, But there are apps where you can see around your local area which charges are available, which ones are being used, and the cost as well. And what I've noticed is that if there are say two charges side by side, if one of them is being used and you come and use the second one, you don't get the full speed of the charger. You
only get fifty percent because the power gets split. So for you to get that faster charge in you need to be the only one charge in your vehicle there, right.
I see, Gee, okay, sounds like there's a fair bit to go on the civic side of this, And I suppose to some extent that's an issue of scale. If you remember the early days of mobile phone, will I get a mobile phone? Well, only so many people have a mobile phone, you know. But then would you get a mobile phone today? Well, of course, you can barely
live without it. And maybe that we're coming to that, moving towards that inflection point where it's all the economies of scale makes sense around around this issue of clean energy and solar power in particular, above the electric cars second hand value good, no good, hopeless, peaceable. It's always a question.
It's really interesting because I think that the commonly held perception is that they're junk. They're worthless after the battery runs out. However, looking at the experience of teslas, which have been around the longest for electric vehicle manufacturers, there still is an aftermarket for them. People are buying them
ten years old. They're paying tens of thousands of dollars for these teslas with wonky batteries because they're just having the batteries replaced, and understand that it can be anywhere from ten to twenty thousand to replace the battery. But you do that and you've got this electric vehicle that will last another ten years with very minimal maintenance required.
And then if we come back to today's electric vehicles, which are circup thirty five thousand for the more budget orientated ones, again spend ten thousand dollars on it, and then after five years you might pick it up for fifteen thousand or so. So someone will spend some money, so twenty five thousand, and a lot of people won't
be able to afford the full thirty five thousand. It's a lot of money, but they might be able to afford and scraped by twenty five so there'll definitely be enough to market and an industry there where these electric vehicles will be old batteries taken out, those batteries recycled, new battery put in, and then they'll be sold again.
So it quite funny to see or because we don't see this at the moment, but the used car dealers are going to have more electric vehicles being sold rather than just internal combustion engine vehicles.
Yeah, And if the old car electric car, it's given a battery to d to replace the battery it had ten years ago. Is that battery almost for sure to be a better speedier, charge faster.
Yeah, it'll be comparable, but it'll be lighter. It'll probably last for longer as well, because the battery technology has improved over the.
Take less time to charge this battery.
Yeah, it will take less time to charge depending on the hardware of the car. If the hardware within the car can be upgraded to match the better specs of the battery, yes, But if the hardware is stuck ten years ago for the car, well then no, you're stuck with the charging speeds ten years ago.
Well, the ten year old car can take this new battery anyway, can It is optional whether you upgraded. It will work in the old car. The new battery will work in the old car.
That's correct. Yeah, it will absolutely work. And I was speaking to my local mechanic a little while ago when he was teasing me saying that I'm going to be replaced by AI over the next ten years.
And he was teasing you that he would be replaced by AI.
Are you you were saying that I'm going to be replaced by AI. So I gave it back to him, saying that you're going to be replaced by electric vehicles. You're not gonna be able to service cars anymore. And he said something really interesting. He said that I've thought about this and I can see it coming. I'm seeing less cars come into my workshop because more people are buying electric vehicles that don't need the heavy servicing that
traditional cars will have. He said, but there is a developing industry where combustion engine vehicles, so to be clear, the petrol and diesel engine vehicles are being repurposed into electric vehicles. So it feels there's this industry emerging where you'll be able to just take your petrol toy camera in, leave it there for a day, and then it pops out as an electric vehicle a day later.
Wow, I suppose that's probably happening at the top end luxury messids or whatever rolls roys or whatever. You know, the car is very valuable and collectors will do anything to keep What they spend on them is unbelievable, so they would have no qualms at all or spending whatever it takes to make that an electric version of what it used to.
Be or whatever.
Very interesting. Yeah, I don't know about you being replaced by AI and the mechanic either. I don't know, so you could be replaced by AI, and the mechanic could be replaced by a robot. We all have our concerns, none of which I think we need worry about too much if we're good, and that's all you have to be, all right now, Carl. The final question for cup, which is a considerable question hot water heat pumps and solar
hot water. We get right into the plumbing here. You discuss solar panels and batteries, which was great, but I was curious about how hot water heat pumps and solar hot water systems fit into the picture. My possibly outdated understanding is that roughly a third of household power goes into heating water, another third into running the fridge, and
the rest into everything else. So I'm wondering, ay, are you generally better off with solar hot water or with electric water heating powered by roofed up solar, and how do the rebates or incentives compare between those options? James Soluers, Thank you, James.
So to be clear, Carl is speaking about the thing that you see on some people's roofs where there's this big shiny aluminium looking thing with then these solar panel looking things that they come off it. That is the rooftop solar And I'd always thought that it was a solar panel then heating up the water inside of that water tank that's kept on the roof, but it's not
actually a solar panel. It's actually tubes and the sun hits those tubes which has water in it, and it heats up the water inside that tube and then sends it back into the big canister. And that's how rooftop
solar works. And that's starkly different to what Carl's mentioning with the hot water pump, which I understand to be what you're having your laundry that the water tanks or underneath your house or outside the side of your house, which you can then separately have solar panels installed on the roof which can then power the electric pumps inside
of those water tanks to then heat your electricity. So looking at those two things side by side, it depends on the state incentives, which varies from state to territory, but generally, as a ruler thumb, you get more incentives to put solar panels on the roof than you do to put the rooftop sol the hot water system in and also on an ongoing basis, it tends to be more efficiency with the solar panels paired up with the heat pumps or the water tank combo compared to the
rooftop hot water solar. And the reason is that there's a thing called boosting, which is thesefto hot water solar things they still have electric pumps in them because if there's no sun for a couple of days, well then you don't have cold showers. So they still need to heat the water up at times, and that can be variable when that electric pump kicks in, and it could be at peak times, which then you have to pay
more electricity. Whereas if you have solar panels on the roof, you can actually time with the settings, decide when you're going to heat up your hot water tank that you're keeping your laundry or underneath your house. So the operating costs of lower as well. So both are great, But i'd give the tick of approval or the winner would be the solar panels paired with an internal water tank system.
Okay, and the rebeats and incentives.
Similar similar, yes, similar, bit slightly higher for the solar panels.
Right, very good, okay, folks. I do hope that really brings you up to speed on this issue. I know everyone, many people are very interested in this issue. I find the electric car story amazing, James. I must say, even in the period we've been talking about it, how much it's changed and how much it's going to change. And if you had said to me even I remember asking. I remember telling someone that sooner or later they're going
to have coal mines powered by alternative energy. And I remember this person just laughing, and that's come to pass. If you had said to me three years ago, there will be electric utes and they will be very popular, that they'll be one of the biggest selling utes around, I would have said, you must be kidding, and guess what the Give someone a good deal and they will move like lightning. I think they what's it called the byd Uts. It's now the one of the biggest selling utes.
Yeah, the Shark. I believe it is a shark.
That's right, Yes, that's right, that's the one. So there you go. You see, it happens very quickly so you've got to keep up to speed. And James Gerard, I must say financial advisor, car geek and what Heart avelergy expert's the ideal guest to have on the show today. Thank you very much, James.
Thank you so much. And don't forget whiskey collector as well.
Yes, sometimes we can almost see that we can peep at that whiskey collection when he does across from home. All right, lovely to talk to you. Keep those questions rolling, everybody the money puzzle at the Australian dot com dot au. Talk to you soon.