Budget 2026: What It Actually Means for Investors (And What the Headlines Got Wrong)

The 2026 Australian budget just changed the rules on CGT, negative gearing, trusts, and more. But is it as bad as the headlines say — and what do smart investors actually do now?

Terry sits down with Jayden Post from Cruz Financial and Adi Chanda from Alaya Property to cut through the noise and give you a practical, no-BS breakdown of what's changed, what it means, and how to position yourself going forward.

What you'll learn:

• 📌 The CGT shift that's been 26 years in the making — what the 50% discount being replaced by cost-base indexation actually means for your tax bill when you sell (and why it may not be as brutal as you think)
• 📌 Negative gearing isn't dead — it's just been quarantined — the crucial difference between losing your deductions and deferring them, explained in plain English
• 📌 Why new builds aren't the no-brainer tax play spruikers will tell you they are — Adi runs the actual numbers and the answer will surprise you (spoiler: established property only needs to outperform by 0.3% per year)
• 📌 The trust change that hits 1% of people but generates $4 billion — why it's the most defensible part of the whole budget, and what your alternatives are
• 📌 The real reason young investors are getting smashed — it's not just the rule changes, it's the cash flow crunch, and it was already there
• 📌 What a borrowing capacity drop from $1M to $700K does to property prices — the flow-on effect nobody's talking about loudly enough
• 📌 Why trying to "wait it out" might be the riskiest move of all — and the question Adi's team asks every client that reframes the whole decision
• 📌 Super didn't get touched — and it's still the best tax environment in Australia — how to use this while everyone else is panicking about everything else
• 📌 The structural housing problem no budget can fix — approvals, construction insolvencies, 500K migrants a year, and a rental vacancy rate under 1.5%
• 📌 The one thing every investor in the accumulation phase should be focused on right now — and it has nothing to do with which asset class you pick

The bottom line: It's never as bad as you think. It's never as good as you think. But you do need a plan — and this episode gives you one.

Resources mentioned
Adi's 2027 Tax reform Calculator

Guests:
Adi Chanda, director of Alaya Property
Jayden Post, director of Cruz financial planning 

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Transcript

Speaker 0:00

Welcome back to the Money Minded Podcast. You're here with Tex, and as promised, we're gonna be doing a deep dive into the 2026 budget. As part of this, I've got on two of our new resident experts on the Money Minded podcast, and the first one's gonna be Jayden Post. Jayden Post runs Cruise Financial. It's a financial planning business, and Jayden and I go back a long way. I actually first figured out that I didn't wanna become a financial planner because I spent a couple of weeks in Jayden's business. And it wasn't because of his business, it was because of more what it's actually required in financial planning. Incredible amount of compliance, regulation, red tape, which I find just absolutely onerous. But Jayden and I go back even further than that because I actually coached Jayden when I was working in sport. When I worked for Richmond Football Club, Jayden was one of the athletes there, And I would say that he was one of the most successful athletes that I ever worked with because I think he got the absolute most out of his talent. He got the most out of what he actually had. He didn't have a long, storied career or anything like that, but he was somebody that played, at the highest level and just squeezed absolutely everything he could out of what he had. And he's taken the same mentality into business and built a really successful business. And now he plays a bit of an educational role for the folks in the mentorship, actually running Q&As, running workshops, doing webinars, on specific investing topics that we talk about. So we've been talking about some of this budget. We've been running some sort of masterclasses in there and recording those for the folks. And I wanted to bring his point of view on this as well because he sees this stuff every single day. He thinks a lot about policies. He thinks a lot about legalities and structuring. And he's got a very in-depth, nuanced, and granular view on what this could actually mean and how to think your way through it. So that's our first resident expert, Jayden Post from Cruise Financial. Super excited to bring you, a conversation with him. But we also have another guest in this podcast who's gonna be our resident expert on property going forward as well. So I wanna introduce you to Adi Chanda. Adi runs Alaya Property, and he's become a really close friend. A couple of years ago I saw him, he was a Telstra employee, and he had gone out on his own and started a buyer's agency business, and he started writing on LinkedIn. And if you wanna see a really, really good example of what it looks like to create leverage and go and earn your worth, using the things that you're really good at, go and have a look at Adi's story. He started writing on LinkedIn and sharing his point of view, and he just happens to be quite a good writer. He happens to be able to connect with his writing in a way that very few people do, and he comes across in a market full of people who are frankly just very brash and loud. He came across a lot like a bit of an oasis in the desert, and I kinda mentioned that to him. I reached out to him very early days and said, "Mate, keep doing what you're doing because it's coming across so well. You're standing out so much because you're doing the complete opposite of what most folks in your space do." And so we struck up a bit of a friendship, and We've stayed pretty close since. He's been one of those people that I tend to talk to every few months, and most of the time now, most weeks. And, uh, so I really wanted to bring him on as the resident expert in the property space. Really successful property investor himself, and now has built a really successful property investing business for the folks at Allow Property, and he's gonna bring in that property lens as well today. So you're gonna learn more about these guys over time, but I wanted to get this episode to you because the 2026 budget's massive. There's so many big changes in this, and it's, as I said in the last episode, I think it's one of the most courageous budgets that I've seen. Jim Chalmers has really stuck his neck out here, and, you know, he's taken some big risks. I have to respect that. I don't know how it's gonna work out. I know that usually, a lot of the time, it never works out the way we expect. But directionally, I think he's trying to solve some really big problems. But it also is gonna create some really big problems and headaches for folks along the way as we figure out how to adjust to the changes. And so the whole purpose of this episode is to be able to think our way through that, and just come at it pretty pragmatically. We're not really arguing whether it's right or whether it's wrong. It's more about, okay, what's the so what of this? What are we gonna actually do about it? And so that's really the purpose of this discussion. We're gonna go through, what the actual changes are. We're gonna go through the actual considerations, for investors and considerations for young investors, and what advice these guys have for the clients they're working with, and the way they're positioning themselves with their investing going forward. So I hope you really enjoy this conversation. I hope you really like these guys. I do. They've become really good friends, and you're gonna hear a lot more from them in the future. Now with that said, let's jump straight into the episode

Tex 4:10

All right, welcome back to the "Money Minded" podcast. It has been a while, and I did mention on the last episode that I was gonna get straight into it, and here I am. I'm gonna be introducing you to two of our resident experts going forward. I've got Jayden Post from Cruise Financial here, and a good friend as well, and another good friend, Adi, from Allia Property. So these guys between them have a shit ton of experience, a lot more than me, and can answer a lot more curly questions about what is going on with the 2026 budget. And we've had a few discussions internally around, is it right? What do we think about it? philosophy side of it. But we probably need to start getting to the point of, okay, what do we do about it? And so why I brought the guys in today, and the first sort of introduction to you as a listener, is really just to start digging into their experience and benefiting from the way they're talking about this and the way they're helping position their clients, in this space. So welcome along, fellas, and thank you so much for coming along.

Adi 5:03

Thanks for having me, Terry. This is

Jayden 5:05

Yep. Thanks T- Tez. Pleasure

Tex 5:07

now I've already given you both a pat on the back before we've jumped into this, so you don't have do that. Tell us a little bit about yourself. We don't have to do any of that. We're gonna jump straight into it. today we're gonna go through three different parts, okay? We're gonna go and talk about what are the proposed changes, and I know we've probably all had discussions of this over the last week or so, but it's probably a good timing now 'cause we've waited a good week or so. We've got beyond the reaction side of it and started to think about, what does it actually mean?" So we're just gonna step through what those changes are. If you have been living under a rock and you're not sure what's changing, we're gonna go through those. Then we're gonna talk about what are the implications for investing, what does it mean if you're the average investor? And then what are the considerations for young investors? So between the three of us, we probably all work with a very similar demographic, folks who are in that accumulation phase, folks who are thinking forward, trying to set themselves up for the future. So we're just gonna talk through how are you guys advising them when you think about the client that sort of sits in that stage at the moment. and we'll talk about the ins and outs of that, some of the considerations, some of the risks they're facing, and also I think maybe at the end we can talk about what we expect to stay and maybe what we expect might change because this is still a proposed change, a bunch of this. and I think we all think that, you throw out your biggest, baddest offer first, and then you see where you might end up. So it'll be interesting to see where you guys think, where we land on that at the end as well. So guys, let's jump straight into it. proposed changes. So let's start with CGT. Poshy, I might start with you. Do you wanna just walk through, so what are the big changes here? And let me not use the acronyms, capital gains tax. we've under a very, very different regime for the last 26 years or so. talk a bit about capital gains tax, mate, and the change and why this is a bit of a tectonic shift.

Jayden 6:51

Yeah, sure. at the moment, what we've got currently in place is a capital gains tax discount. So if you buy an asset and then you hold it for at least twelve months, when you go to sell it, if there is a capital gain, meaning you sell it for more than what you bought it for, you actually only have to pay tax on half of the gain. Okay? That's how the current, fifty percent CGT discount works. so what the government's come out and proposed is that from one July twenty twenty-seven, that fifty percent discount will be replaced by, a cost-based indexation for assets held for more than twelve months. one of the other changes they've also recommended to the cap-- w- the application of capital gains tax is that you will pay also a minimum of thirty percent tax to your net capital gains as well. Okay? The government also confirmed, that these changes will also apply to all CGT assets, so that includes property and shares, and will also only apply... also apply to, what's called pre-nineteen eighty-five CGT assets that, can be held by individuals, trusts and partnerships. And just for context as well, those pre-nineteen eighty-five assets, when f- capital gains tax was first introduced, they were grandfathered. So now you've got assets that could have been held for more than forty years that haven't had its CGT applied to them. From one July twenty-seven, they'll now start accruing, a CGT liability

Tex 8:10

What, what-- just give me an example of what a pre-1985 CGT asset might be, because I'd imagine it's mainly probably not our demo that we're talking about here, but just curiosity's sake, same

Jayden 8:22

just, prop- property, shares, anything. Yeah, anything held before, I think it was September 1985. I can't remember the exact date off the top of my head, but that was when they originally introduced CGT, and I'm pretty sure it was in 1985 that the original method of calculating CGT, was using the cost base method. And I think it was in 1999, they then replaced that with the current, 50% discount. So we're basically reverting back to what we had in 1985.

Tex 8:51

Yeah, so you might have had some pretty solid planning in place, some pretty solid modeling in place based bunch of those assumptions, like we-- it doesn't touch us," and all of a sudden you're like, "Whack, that hits us."

Jayden 9:02

it's pretty rare that I come across pre-1985 CGT assets now. If you think about it, you've got to have held these assets now for 41 years from still to be around. if you were 30, you're now 71. Most people in their 30s back then, share investing, things like that wasn't easily accessible in 1985. So there's not too many people that have it, and those pre-CGT, pre-CGT 1985 assets, sorry, if they were passed on through an estate, that's when the cost base was reset and would start accruing a capital gains tax liability at that point in time. So a lot of them have probably changed hands. There's still probably a lot of assets out there that fit into that category. But yeah, from 1 July '27, the proposal is that they're gonna start accruing CGT liabilities.

Tex 9:46

All right, so those pre-CGT, assets are probably not gonna be a big deal, not gonna be a big deal for the folks that we're talking about. But, the minimum 30% thing can be an impact. It's probably, again, maybe slightly older folks. But do you just wanna say a little bit more about that minimum 30%? because that's quite a change too, especially if you're, you are managing tax in different ways and distri- distributing income, to manage tax.

Jayden 10:08

Yeah, absolutely. And I'm sure Eddie would see this a lot when you're building out plans for people that wanna retire early utilizing property. so w- a common strategy for some people is they'll accumulate all these assets personally, and the plan is once you've retired or you stop working and have no other taxable income, you slowly stage and sell down these properties. Because if I've got a property where, maybe I've got a $200,000 capital gain, I got the capital gains tax discount, I've now got a $100,000 capital gain. If I incur that in a year where there's no other taxable income, you might pay around about 20, 23 thousand bucks on $100,000 capital gain. If I do that in a year where I've also got $190,000 of employment income, it now pushes that $100,000 into the top marginal tax bracket, and I'm effectively paying, 47% tax on the discounted capital gain. So it's, it can be a fair difference for people who wanna stage it down. And, I think most property investors that have probably held onto properties up until retirement, we're probably talking about gains much bigger than $200,000 to begin with. Okay? So that's a common strategy that people would put in place to, create this wealth over a long period of time, but also minimize their taxation liabilities in the downsizing phase when they're looking to retire and liquidate some of those assets. the government's brought in this measure to say we don't care what else, what other income you've earned. you're gonna pay a minimum of 30% tax on that gain." So if it's a hundred grand gain you've made and you've got no other income, you'll pay 30%, which is, roughly seven grand more in that example I gave before. but if you're already earning $190,000, you still pay the minimum 30%, but you're also gonna pay the extra 17 because that's where your marginal tax rate is.

Tex 11:50

Yeah,

Jayden 11:50

So the opportunity just to minimize your tax liabilities over the long term, because that's what I'm a very big fan of. I- I'm not interested-- I am interested to an extent in clients, minimizing their tax liabilities now, but I also wanna minimize the tax over the longest timeframe possible. Okay?

Tex 12:07

Yeah

Maxwell 12:09

can I just-- this is the part that I was a little bit unclear about, right? So there's the pre '98, '85 that gets now no longer exempt per se, right? But there's also the grandfathering component altogether. So any-anything that comes before 12 May 2026, which is the budget, right? the properties that I hold, they're grandfathered, right? So negative gearing and the CGT, the old rules, the 50% rule and the negative gearing benefits get hold-- get, quarantined into my portfolio. How does it work for someone who's hold it-- held it for 40 years? Is it-- Doesn't that technically put them into the grandfather bucket?

Jayden 12:42

It will up until 1 July 27, so that's why everyone's gonna go around and get valuations 1 July 27. You say, my gain on my asset was here, so here's my new cost base for the purposes of CGT." And then carrying forward, you've got the loss of the discount and the indexation, and you've also got the 30% minimum. So as an example, if I've, if I started a business in 1985 that's now worth 15 million bucks, okay, $15 million is tax-free because it's, it's a pre-CGT asset. And then if I sell the business in 2020, nine and it's grown to 17, I've got a gain of 2 million that I'm gonna be paying a minimum of 30% on whatever the index cost base is now

Tex 13:23

嗯。 Interesting. let's, let's... So I think CGT is relatively clear. That's a bit of a shift. negative gearing, Adi, I might go to you on this one. So given that you're more in the property space, my initial read of this was like, oh, no negative gearing, but it's actually just a little bit more nuanced than that, isn't it? it's not-- there's still like a type of negative gearing happening. It's just not happening against your income. So do you wanna say a bit more about it?

Maxwell 13:48

Yeah. I think just to carry on from, JP's sort of example, right? So negative gearing in its bare essence, it's... Let's say you make $100,000 a year, right? That's your gross sort of wages through your whatever job that you might be, whatever job you might have. You have a property that costs you 50 grand, but the rent covers 30 grand of that, so you have a $20,000 deficit every single year. So your taxable income under the old negative gearing rules, because you were making $100,000, you don't pay tax on $100,000, you pay tax on $80,000. So that $20,000 negative gets taken off your wages. So what this really helps people do, this is people with one, two or three properties with negative gearing, is that your cash flow position is better, right? So at the end of the year, you get a pretty significant, depending on your marginal tax rate, you get a pretty significant return back. So when you look at it in totality, you are no longer $20,000 worse off. You are $20,000 times, whatever the marginal tax rate happens to be. That's what it is. It's a cash flow thing, negative gearing. which again, we'll touch on. one of the things that we wanna talk about is young investors, what's the impact to them? And I think that's... becomes crystal clear what that impact looks like. Now, in the r- new, in the new world, what this-- what happens is those, that negative $20,000 doesn't get offset against your wages. It kinda gets quarantined. So what happens is it It's maybe the best parallel that I can draw is what happens with like companies, right? You incur a loss, you quarantine that loss, and it then just accumulates over time. So at the point where your pos-- your, property becomes positively geared, right? Starts making you money. So now it's $50,000 of rent versus $30,000 worth of income, you can offset the two. So technically to your point, yeah, it doesn't go away. It's not technically going away as in like a none of it exists anymore, like you lose all that money. It's just it gets offset in the future. But what it doesn't help you do is manage your cash flow in the short term. And the other, other aspect is if you do sell it in 10 years' time, like whatever you sell your property for, those quarantined losses that you're accumulating over the years of holding the property also get offset against your CGT or offset against your capital gains, I should say. So again, reducing your tax liability in the long term. So the biggest impact that I'm seeing out of this is your cash flow position gets worse. And to draw a quick parallel to the young investor model Young investors are struggling to get into the market. there's a million different reasons, right? One, property's too expensive, et cetera, et cetera. But it's also a cost of living thing, right? It is already very expensive to live life in Australia, especially if you're in Melbourne, Sydney, Brisbane, whatever it might be, right? negative gearing was an aid. you mentioned a couple of clients that, we've mutually worked on. Negative gearing was an aid for them to, for-- to allow them to hold the property in that short term. Now it's I barely had money anyway, right? I barely had the 20 grand anyway. I'm not getting my 37% tax back at the end of the 12 months. Now, you could have even set up a structure where you had tax variants, where you could actually pick it up every single month. So you could actually manage your cash flow in certain situations based on what your accountant told you on a month-to-month basis, right? So I know some clients actually had that model. So that goes away. So the impact to exi- brand new investors who are like, "Oh man, I'm almost there. I've almost got the deposit for this property. Oh shit, I can't actually do this anymore because I can't afford to hold the property in the short term. I have the deposit for it, I just can't," So yeah. So I have varying degrees of opinion on what this means. and yeah, to keep it pragmatic, that's what it means. You quarantine the losses, you offset it against future rental income or capital gains

Tex 17:31

Yeah it's just a-- I see as just a huge headwind on the folks who are trying to get started in that space. Whereas folks who have already got, they've got great incomes, they're already, a fair way along, they're like, "Ah, I'm all right." So it's... Yeah, it's, it's, yeah, the thinking's quite interesting. Anyway, so we've gone CGT, negative gearing. Let's talk about New builds as well. So obviously this is what the government would point to, to say, "Yeah, no, look, we're not just changing, what's happening with these investors. we are trying to solve the supply side of things," 'cause that's the huge problem here with housing in Australia. We don't-- We're not good at building, we don't build fast enough, we don't talk between state government and federal government, and that's why prices keep rising. So now what they've tried to do here is, change the incentive structure so that you can still get the old negative gearing regime, so you can still get that, offset my losses each year against my cash flow, but it's only for a new build. Is that right, Addy?

Maxwell 18:25

Yes, that's correct. this part I'm clear about. I don't know because the definition is like whatever adds to the supply in the market. I don't know what the actual definition of new build is. Is it like something that's 12 months old or is it something that literally hasn't broken ground yet? So I'm not fully clear on that. I don't know if you have an answer on that, JP.

Tex 18:42

Yeah, do

Jayden 18:42

yeah. they've gotta come and be clear with their definitions, but, new builds can continue to be negatively geared, as we said, and new residential build, residential properties include dwellings constructed on vacant land or where existing properties are demolished and replaced with a greater number of dwellings. So knockdown rebuilds or, substantial renovations that don't increase the supply, they don't qualify. and it's also got here, a new build cannot have been previously sold unless first owned by the builder and not occupied for more than 12 months.

Maxwell 19:15

Ah, okay. Gotcha. So there, there is a more prescriptive definition. Yeah. So under that three, three-tiered rule. Yeah. So all of those things then retain the negative gearing. So it again presents opportunities in the market. But to go back to our previous point, the people that it presents opportunities to, right? If you-- I have my own reservations with new builds as an investment vehicle, right? As in a purely new build,

Tex 19:38

wanna, and I wanna get that. I get right into that later on. Yeah.

Maxwell 19:42

Perfect. So I think I have my own reservations around new builds off the plan, et cetera. But if you're knocking down building two, you've gotten your numbers right, yeah, it can be a fantastic vehicle to add to your overall wealth. But new v- a new brand new build in a brand new estate somewhere? Yeah, I don't know if this is the best investment vehicle, right? it makes me a little bit nervous.

Tex 20:00

Man, do you know, do you ever watch the, you watch "The Wolf of Wall Street"? Wolf Street right Do you remember the, do you remember the scene where, Matthew McConaughey's sitting there and he's doing the right so when this happened, I'm like, off the plan property spruikers are sitting around the table going It's about to be on The, the... I'm not

Maxwell 20:24

all just, it's just, it's all just It's just...

Speaker 7 20:26

fugazi. that's

Tex 20:27

all fugazi

Maxwell 20:29

Exactly.

Tex 20:30

thinking to

Speaker 7 20:30

all fairy

Tex 20:31

just got absolutely kissed on the you know what.

Maxwell 20:34

They did They did

Tex 20:35

but, no, cool. so that's, new builds. Last thing is trust. So I might go back to you, Poster. You wanna talk a bit more about this one?

Jayden 20:43

the discretionary trust is almost dead.

Tex 20:46

う ん。

Jayden 20:46

no. look, people in business, the... We always wanna talk about the ultra-net high worth like they're always the bad ones because they're using all these very, complex structures to avoid paying their fair share, but it's just typically never the case. the h- the most wealthy individuals tend to also be the highest taxpayers in our country as well. but, there are some loopholes or legal loopholes with trusts that, have been able, enabled, groups to pay a lower level of tax. Okay? So one of the common ones is just, again, bringing it back to basics, is, a business owner might own their business in a company, and then they'll have those shares owned by what's called a discretionary trust or a family trust. Those words can typically be used interchangeably. All right? So in the business, the trading entity, maybe the main worker, whether it's mom or dad, gets paid a wage for doing what they do. and then the business maybe makes $300,000 in profit after that. Okay? So that $300,000 in profit might be paid out as a dividend to the family trust, and then the family trust must distribute that income in that tax year, otherwise it'll pay the highest marginal rate of tax. But what a, a discretionary trust allows you to do, it allows you to go, okay, non-working spouse who didn't work a day in the business, who maybe stayed home and took care of the kids, or maybe just was home sewing or doing the garden or playing golf, who knows? but here we'll give you $135,000 because, you don't pay much tax on the fir- well, none on the first 20, only a little bit on 45 grand, and then, maybe 30% all the way up to 135. actually, you know what? My mom's also a self-funded retiree. She doesn't get the age pension. Her only income is just from her super, which is tax-free, so maybe we'll send some of her money th- that way. Okay? But what it basically means is a family group or one person has really generated this 500 grand in the business, but by using a discretionary trust and being able to pay the money out to different family members, they've been able to get that money out into their own pockets, f- maybe an average rate of 20% or something like that. Okay? So that's the way

Tex 22:57

Sorry, you go. You go

Jayden 22:59

th-that's the way family trusts have typically been used from a tax minimization perspective. They also do have asset protection benefits, which was ultimately one of the main reasons why trusts were introduced, to protect the assets from predators and creditors on behalf of beneficiaries. Okay? But I think over time, that's largely been the sort of secondary purpose for most, I would say, second to the tax minimization benefits available

Tex 23:27

I don't know if you just got the text I sent you, Posey. I sent you, I think-- I don't know if you got it, Addy. But, this one I kinda do understand because I look at this graph and I go, "Holy shit." the top, top one, 1.0, like less than 1% are getting the vast majority of the gains from the trust, and it's $4 billion a year. It's $4 billion a year that they're gonna get from doing that change. so if you're gonna go and find the people who probably are gonna be hurt the least and the fewest of those people, this one to me, I'm like, "Okay." Looking at that graph, I'm like, "Fair, fair enough." Because I'm-- I have a trust. You guys probably have trusts as well. it's gonna impact me, but it's not like... It's not-- I don't look at it and go, "Oh my God," you're killing me here." It's just, it's just not that big a deal. and that's just because I'm not one of those 1%. So

Jayden 24:15

Yeah,

Tex 24:16

annoying Don't get me wrong, it's gonna be annoying, but

Jayden 24:18

Yeah, there's gonna be ways around which you can avoid, initially paying a higher level of tax by using a trust. You can restructure in a company. A company doesn't have to pay all its income out in any given year. It can retain profits. There's asset protection questions that, someone would need to ask. but it is still gonna be like getting it out over the longer term. if you're using a trust, it's gonna be pretty hard to pay anything lower than the 30% tax rate. So getting onto the change that they're, proposed is that all distributions from a family trust now are gonna have a non- non-refundable franking credit of 30%. So again, what that means is the trust is gonna pay 30% tax on all its income before it gets distributed out to beneficiaries. So using a bit of an example, maybe a trust has earned a hundred and f- $300,000, okay? It'll pay 30% tax on that, which is 200-- 90,000, leaving 210. We might say, here, Mom and Dad, we'll just give yous 155 grand to keep the math simple, okay? They'll get their franking credits like they ordinary do. But if those franking credits had to put them into a position where they would have got a tax refund from them, they're non-refundable, so you just lose the franking credits.

Tex 25:28

嗯。

Jayden 25:29

just gone. So that's a way in which ensuring that beneficiaries from a trust have to pay a minimum 30% tax, on those distributions. And, using that example I gave in the first instance, where people can use trusts to get their average tax rate across a family group down to, say, 20%. if it's an extra 10% across the group on that 300 grand, there's an extra 30 grand in tax that someone's gonna be paying now each year. So I, I think that's gonna have a pretty sizable impact on a lot of people. and yeah, I know, Tez, you mentioned, like all these benefits are largely accruing to one demographic, but it is because I know, again, my anecdotal evidence is that the wealthiest people I've worked with by far and away have been business owners. So these are the si- the type of people that use these structures, but they're also the wealthiest because they're taking the most risk, but also probably adding the most value to society. They're creating jobs, creating products,

Tex 26:20

Yeah

Jayden 26:24

to say, we're still paying a minimum of 25% or 30% inside companies and everything else anyway. Yeah, we're retaining franking credits, but still to get it out of these entities into our own names, like you still gotta pay marginal tax rates.

Tex 26:36

Yeah No, it's more their logic. It's their, if you go with their philosophy and what they're trying to, let's say, the message they're trying to send, where they go, "Oh, we're gonna, we're gonna hit the top end of town. We're here for you, the little guy." that's the top, top in that

Speaker 8 26:49

嗯 哼。

Tex 26:50

right, so we've gone through capital gains tax, changes to negative gearing, incentives around new builds, trusts. Just wanna open it up and just let's just a more of a broad discussion here for a second, just around what the implications might be for investing in general. how do you guys see this playing out? And I guess we'll just go off the world of, let's just say that everything that's proposed goes through. How does this change the world of investing in general? What do you guys think?

Jayden 27:17

maybe I'll leave it to Addy to talk maybe more asset class specific, but one of our biggest philosophies is that structure di- dictates outcomes, and a lot of the work we do with our clients around strategy is just making sure that they're investing through the right structures. So whether that's, company trust, superannuation as an example, a lot of it depends on timeframes, goals, objectives, very personal items. but yeah, it's gonna have a massive effect on what structures you end up using. I've had a couple of calls just in the last two days where people were, about to make some moves and do some stuff, and you've really got to sit back and assess, what if this gets in? How does that change things? are the benefits gonna be big enough potentially over the next year or two, where if these changes come in and we've got to switch, it's gonna still be worth doing that? Okay. Because, like as an example, a guy setting up a company, do we put a trust in as the shareholder now, or do we just have him and the wife as the shareholder and don't worry about it? And then what's the benefit to this guy who's the director of a business that's turning over sixty-seven million, what's the benefit to him of not having that asset of that company in his personal name if something happens to him from a risk protection point of view as the director of this company?

Tex 28:27

う

Jayden 28:28

Okay. do you just have it in the wife's name? if you just have it in the wife's name, you can only pay the income out to her then, the dividends. So that's not ideal. so yeah, it's gonna make people think a lot more, and I think, just have to put some sort of value on the protection side of things too. Like a- asset protection, how valuable is it to you?

Tex 28:46

what you're saying is, Posty, I should go and buy private equity around accountants because they're just gonna make a shit ton of money. Go into private equity funds that specialize in accounting firms and just roll them all up. That'll do really well.

Jayden 29:01

Yeah. in my time I've had a few clients come in where they've-- One's actually had a, like a carry-on suitcase full of dividend reinvestment statements from literally all the shares over 20 years like Telstra, CBA, and all that, that they've... yeah. No, I'm dead serious. It took two weeks, one person. It was actually my mom. I paid hourly. I was like Mom come here. This is how you enter it in." She's a bookkeeper, so she's got the knowledge. But I was literally like, "You gotta do this for us." And it took two weeks of her time, like full-time that done.

Tex 29:30

That, literally the worst thing I could ever... I've done hard manual labor for weeks. would rather do that

Jayden 29:35

Yeah,

Tex 29:36

than that

Jayden 29:37

yeah. And it was like, all these papers flying everywhere. Sh- "Is this the pile I've done now? Oh, no. Oh, wait, was pile?"

Tex 29:44

Oh that's for me to think about. No.

Jayden 29:47

So I've had happen a few times, but, coming to the conversation about accountants, yeah, if things change, you've got pre-CGT assets to worry about. Okay, we've gotta get valuations on everything at 1 July '27. Okay, if you go to sell an asset, where's your paperwork for the cost base these two in valuation at this point in time? Let's work out, okay, here's your capital gain for that period. Okay, let's work out indexation for the following period. Here's your capital gain for that period. Yeah. It's gonna be a whole lot more work for professionals. And the ABC said, after the budget that the big winners out of the budget were accountants and financial advisors. But it's interesting because I don't know one or financial advisor that's happy about It

Speaker 3 30:27

Yeah,

Jayden 30:28

one

Tex 30:28

any positive news coming out They'll be like, "Ah, that's not the kind of work I wanna be doing."

Speaker 3 30:33

But you guys wanna start a valuation company? Just-- start it on the 29th of June.

Jayden 30:38

it's,

Speaker 3 30:39

up

Jayden 30:39

On the Wednesday morning walking school, I ran into guy that's quite switched on financially. He's got a couple of business and he's on his phone and it's "Adam, how you going, mate?" And he goes, good." And he goes, "Do you know of any other companies are listed, like valuation companies?" He goes I'm trying to pick a few stocks." So

Tex 30:56

Oh, it is.

Jayden 30:57

that's, clever

Tex 30:58

Yeah. what's your view, Addy? Like, how do you, do you agree? What's your... you're obviously in a sort of a slightly different space, but still investing, so

Adi 31:06

I am. I think I have probably two views on this, right? So JP-- J-Jayden actually helps my partner and I with our overall sort of structures and stuff. So there, there's the personal side to it, there's the other personal side 'cause I do run a business with a specific asset class. So I have a biased view to some degree, right? Because I'm trying to get the best outcome for me and my family as well. So of course, with all the family discretionary trust, there is a pretty major impact on something that, JP and I will have to speak about as well, down the track. I go back to my comment around young investors, man, right? So if I put myself down as the proverbial bad guy here, right? So I'm a guy who was fortunate enough, I started at 23, I built up a pretty decent sized portfolio, has done pretty well over the past 13 years of purchasing property It didn't really ha- raise my hackles that much. I think about it. Yeah, I was more pissed off for the business and more pissed off for the people who are coming to us, right? And it makes me sad 'cause we've already had one person pull out because they're like, "I no-- I can no longer afford the holding costs." And this was gonna be their first property. I look at them and I'm like, "Man, that sucks." They had just spent... I know their story. They had just spent two years saving for a deposit 'cause you don't have the luxury of equity at this point. You feel like, "Ah, I'm almost there." And it got-- the rug got, kinda got pulled from underneath them, right? so I look at all the new investors and younger investors and I'm "Damn, it's very, very-- it's difficult for you." And the problem is, I think the part that I'm finding really hard to conceptualize, and I think this probably hopefully one of the things that they're gonna roll back, is if it's a housing problem that you're trying to fix, fair. Localize it to housing. But why are young people who have got equity shares and like company startups that they've joined because they're- they've opted for things like that rather than take a r- large salary, or if they've been saving into like shares and crypto and ETFs and all of that stuff, right? Why is that being penalized? That part, doesn't make any sense to me 'cause that was gonna be their ticket into a deposit for a property one day, right? So now they're like, fuck, what am I meant to do here? Like I, I have no recourse anymore. I can't buy, I can't buy into a-- I can't buy into the easiest thing I can buy into. I can't just download Stake and invest into a S&P 500," which is kinda like the general

Tex 33:20

う ん

Maxwell 33:22

when you look at all of that, the biggest impact I feel are the young people. Now, we talked philosophically before about the new builds, right? New builds retain all the negative gearing, great. And I understand the underlying principle that it's gonna add to supply. But shit, man, you know who wants to buy new builds? The 500, 600K? Is young people. now there are a bunch of high income-earning investors out there who are vying for Jayden might be actually advising some of these people to be like, "Hey, you need tax benefits. You earn too much. You need to reduce your tax liability." You know what makes sense to them? To go and buy a new build. bow. So, now suddenly you have this entire cohort of, return on investment people vying for the exact same product That's meant to be helping the supply problem. And then you factor in all of the shit around how expensive construction is, right? How absurd it is since the fuel crisis started over a couple of months ago with the wars happening overseas, how much the construction industry-- this is not in the papers as much, right? But how much the construction industry has actually been impacted. Diesel is

Speaker 7 34:33

Sort

Maxwell 34:37

Now, their costs have exploded in the last two months, right? So the projects that we

Jayden 34:43

the cost of the piping and all that

Maxwell 34:44

pipe Everything, man, copper, every single bitumen, right? All the shit that comes before you even build a house, the civil infrastructure is now insanely expensive. So you put all of these pieces together and you're like: How does this help solve this? what are they calling it, guys? intergenerational inequity

Speaker 8 35:05

work, I think. Yeah

Maxwell 35:07

Like you factor all of this in, you're like, how is it helping intergenerational inequity? 'Cause boomers, the people with 60, 70, whatever million dollars of worth of property, they are largely protected. I'm protected, right? So I'm actually like, "Yay," like the stuff that I accumulated, fantastic, right? I'm sorry, I'm not the person that this is targeting, even though the headlines say that, "Yeah, it's the people who have done well that we're going after." It's the people that they're trying to serve. And I see a lot of comments like on, Instagram or LinkedIn or whatever it might be, but saying, "No, this is, this was meant to happen. This is good. This is gonna add to supply." But I don't think people are like fully thinking that aspect through 'cause they're buying into the general soundbites that, Anthony Albe- Albanese is good at, rather than answering actual questions, and Jim Chalmers is really good at, right? But it's not actually-- I don't think it's solving the problem. and then you Sorry, I'm probably going on a tangent, but then I think about we have a rental crisis in Australia as well, right? You're trying to disincentivize investors, great. What is the alternative? Like Melbourne, Perth, Adelaide, they have like crippling rental crisis. Most of these places have a sub 1.5, 1% vacancy rate. The translation to like layman's because people are fucking lining, lining up out the door. It's 40 people per application, right?

Speaker 8 36:27

う ん。

Maxwell 36:28

So who solves their problem? They're looking at this being like, fuck, I-- Where do I go now? Like I was already struggling to find a rental." It's harder for inve- It's, it's-- The whole thing is let's disincentivize investors. I get it. it's not a-- it, it's an unproductive asset, fair enough. It doesn't create... But I also have like-- I also think about it in a doorway. I take myself back to 26 years ago when I was a migrant with my family. we didn't own a house for seven, eight years, right? We had to rent. it was just and parcel. So you're letting half a million people a year into the country who have no means to buy a house, initially. Most of them don't. They have to go find a rental. But then you're disincentivizing the people who are providing the rentals in a market where it's already a crippling issue.

Tex 37:14

Yeah

Speaker 3 37:18

that would be pretty hypocritical, right? But I don't think it's solving the issue that they're saying that they're solving. Like you put all of these pieces together and you're like, "What the f- what the

Maxwell 37:27

hell's happening?" do you know what's an stat? So somebody asked me, 'cause I I s- made

Tex 37:33

that point, I think on LinkedIn somewhere, and someone's "Yeah, but what's your solution?" And I look, if I knew the solution, I'd be solving it, clearly." but, but if you want my two cents, you can see commercial property vacancies in Melbourne have gone from less than 7% pre-COVID to now peaking at around 20%. To me, I'd be like, incentivize the refit outs of those properties. There's your supply. No new builds. There it all is. There you go. There's your-- The, to me, I'm like, why are we... And I walk, I just walk around even Geelong. Like I walk through the city, I'm like, "There's a lot of fucking empty buildings here. What are we doing?" I know that's like way off on a tangent, but I just, I, I agree. Like I look at this and I go, I just... If the-- How do you know that this incentive is gonna overcome the cost hurdles that you just talked about, Addy? And if it doesn't, fuck, we're in more trouble. Like we're in a we're

Speaker 3 38:29

but think about JP, sorry, Terry, like you said right at the beginning of this, right? You said that one of the biggest challenges we have, and this is going into a bigger, much bigger systemic problem that we have in the government, but the federal government is making these announcements, but they're not speaking to the state governments, right? The impact on, I think, housing, one of the, one of the big issues that we have here, like what are we, what are we-- like we, we're talking about supply crisis issues, right? But I think that one of the biggest issues we have here is that fucking approvals for this shit is so long, right? To get something off the ground, it's huge.

Maxwell 39:02

It's a long process. People don't realize, like housing estates don't just come up. E-even if you say all the construction issues are gone, there's no fuel crisis, all of that stuff, right? If you park everything away, but let's go back to pre-COVID. We have no like inflation issues, no one's printing money, none of that stuff is happening. We're just in the standard period of construction. But even to construct an estate which might be 1,000 houses, that in and of itself is like a massive endeavor because counting delay-- the council planning delays, approval delays are a massive I've

Tex 39:34

actually, I've actually, I actually invested in one of the best things I- one of the best I ever got was investing in a development of a block of units, a big block of apartments. And that process, so from the start of "Yep, this is the thing that's happening and this is how it all works," that process, I forgot about it by the time it fucking was built. I forgot about it. I'm like, "Oh fuck, that's right." And I drove past day, "That's the units." "Fuck, right."

Speaker 3 39:57

Yeah

Maxwell 39:58

it was so

Tex 39:58

long

Speaker 3 39:58

man, yeah, it's-- But for me as well, it's anecdotal, right? So I had a house, that I built brand new, right? So I bought the land like pre-COVID, went through all of COVID, went through the whole settlements process, et cetera.

Maxwell 40:10

But it took three and a half years for this house to get brought up, right? Now, of course, exigent circumstances, it was COVID, I get it, right? Material costs w- went up and it was a whole thing. But the reality is, with builders going insolvent left, right, and center because they can't make the margins work anymore, most builders are on fixed contracts, right? They're on fixed contracts where the margins can't move. So when the fuel crisis-- Because when, when someone decides to bomb Tyran-- Iran and the Strait of Hormuz gets backed up, and the fuel is no longer as easily accessible, which then has downward supply chain issues going into the diesel costs in Australia, right? When all of those flow-on impacts happen, builders can't do shit. Dev- developers can't do shit 'cause their contracts are fixed. So that's why I think post-COVID, there was a stat I think I read somewhere, it was like 90% more of insolvencies than ever before, right? So builders are going bust left, right, and center. The people that are building this shit can't make the m- can't make the numbers work. To actually build a thing, even if you can make the numbers work, to actually build a thing is fucking hard, right? 'Cause you don't have enough laborers, you don't have enough... there's so- such crippling systemic issues to actually solve the supply problem itself. But you're trying to tax your way out of a problem that is driven by, firstly, the government printing way too much money. Like I'm not gonna, again, going back to the whole Dan Andrews thing, I don't... Or even the previous government that had to print money to get people through COVID. I get it. It was a hard time. I fully understand. But we are seeing the consequences of this shit. And what you're trying to do is you're trying to penalize, right? You're trying to penalize. you're trying to, this is the operative word. You're trying to penalize, but you're not penalizing me, bro. I'm good. You're penalizing the next person who is trying to make it right? They're earning 80 grand. you me- you mentioned a client earlier. She's just a person who's "You know what? I have to take responsibility, radical responsibility or accountability for my own, sort of situation. The only way I can see myself getting ahead is building a portfolio because that's what, my dad did and my, grandpa did," or whatever it might be. I've seen people do this. "Ah, shit. Okay. I can't do that anymore because now shares are taxed and, property going forward is taxed differently, and you've ch- changed the rules of the game halfway through, but you're not actually dealing with the crux of the issue." So Well

Speaker 3 42:36

problem

Maxwell 42:38

I would love to have three-hour conversation into fuck are you like But, and I'm like, if I get started on that shit, I don't think I'd stop. I'd be like, "Yeah, but what I mean..." but I guess what I'm interested in is like flow-on effects.

Tex 42:50

So we know the flow-on eff- some of the flow-on effects is the work for financial planners, work for accountants, but like where does capital go? Say I'm, say s- just put me in this position. I'm a first home buyer. I've already just got into my home. What's my best thing now? Just pay down the mortgage, right? That's almost my best return outside of super.

Jayden 43:12

a really, it's a really good question because it's, the question that investors have always been faced, right? But, in Australia, we've always had a love affair with property and, when you look at the previous returns, it's been for good reason. You've been compensated for taking the risk and finding good quality assets in the property market. the question we've gotta ask, and again, it's an un-answerable question, is what are the re- the returns gonna be in the future? 'Cause if we had that answer, we'd know exactly where to invest our money. But like I said at the start, it's all about figuring out, what's the right structure for me given my goals, objectives, time frames, all that sorta stuff. Because, you and I, Tez, we spoke as well where, superannuation didn't get actually-- it didn't get touched this budget. despite what you may think, super is far and away the best tax-effective environment for anyone's capital in Australia, probably outside of the family home. so it was already a very attractive, environment. It's just that for most people, we don't wanna lock our money away until at least 60.

Tex 44:11

う

Jayden 44:12

Okay. trust got a little bit crappier. Companies technically got a little bit crappier because it's hard to distribute the money out of the companies without trusts anyway. But in terms of capital gains tax, companies never had the capital gains tax discount either. Okay. But once we get through all that and work out what your structure is, the question just comes back, "Okay, what's my expected future return?" I don't see that changing in shares or ETFs in any tangible way because ultimately, Australia makes up less than 2% of the global economy. So what's just happened in Australia is literally like a blip on the world radar. No one gives a shit. But that's been one of the issues that, I'm actually a very pro-property financial advisor. It's probably a little bit uncommon. But one of the main, cases against property is the concentration risk. So not only are you concentrated in one asset class, but as we're finding out now, you're also concentrated into one f- legislative environment, being Australia. So when you're just investing in property, you're just investing in Australia, so if shit happens here, your whole pop- portfolio is affected, where if it happened in America, completely different story, right?

Tex 45:20

That's a great point Never really thought about that part of it.

Jayden 45:26

We also, one other stat in terms of the case against Australian residential property has always been like, oh, if you look at the average returns, it's been X, and if you compare that plus the cost of property and all that, you're almost not really better off. But it ignores the fact, if we take away all the dud properties that any intermediate investor knows to avoid, the house and land packages that have been sold and done nothing for 15 years, or avoiding the hotspots in a mining town that once the project's finished, everyone's gonna leave and the houses are gonna plummet. you take those properties out of the market and maybe your average return is 1% or 2% higher than what the average has been over the last 10 years. That's when property's really attractive. But if we're now working with a new normal because, as Artie said before, major banks have already stopped negative gearing in their servicing calculator. So already banks are saying a person that could have borrowed maybe a million bucks literally two weeks ago, you can now borrow 700,000. And we know that's one of the biggest drivers of property prices. So it hasn't out-- helped answer the question of what do we do next? It's more what do I expect property to do if it still does this with the power of leverage? What could my returns be? And is that something that I'm willing to accept as a risk of investing in this asset class that I'm very comfortable with?

Tex 46:44

Yeah.

Jayden 46:44

So

Tex 46:45

Well, how do you look at it, mate? So if you're sitting there, let's say hypothetical, I've got 100 grand cash. 100 grand's probably enough for me to get in to a property somewhere. maybe not for long if we fuck it up. But, but, like you're thinking about your return, the cash on cash return, the leverage component of property's still there, but we just don't know what the impact of that loss in borrowing power is gonna be across the market yet. you are speculating here, like we don't know yet, but what are you thinking through on that decision? And I'll ask the same of you, Addy, as well

Jayden 47:18

a-a-again, I always bring it back to the client's goals and objectives too. So a good example I can give is I sat down with some clients that we've been working with the last 12 months now. They exchanged contracts on a property about four weeks ago. Okay? So they've signed, they've got an investment property, but, their goals and objectives is to live in the inner west of Melbourne. Okay? It's combined household income of close to 350, b- 350 to 400K. they've got one child at the moment. They're renting. They actually just got, Their landlord sold their property, so they had to find a new one, and just by stroke of luck, they got one 200 meters down the road, but they're going to opens, as Adi said, and there's 30 groups in there. So incredibly difficult. But these guys want to live n-near where they are, but most of their money's being paid to tax and also rent, and they both work, and so childcare as well for their young daughter, and they wanna have another one. but for these guys who wanna buy a 1.2 to $1.5 million home in the inner west, they're not gonna save their way there. 100 grand in an ETF portfolio earning 10%, they might get there in 15, 20 years, but then by then, I'm just saying, "Oh, just max your super and buy a house when you retire."

Tex 48:28

う ん。 I

Jayden 48:33

and leverage. That's the harsh reality of it. and we've just gotta hope that, because I think we spoke on our, little episode we did the other day, I still think Australian property's gonna be a very desirable asset for a lot of people, particularly property in, say, like the inner west of Melbourne. people are always gonna willing to live there. People are always gonna run- wanna rent there. your overall return, it just might change in its, characteristics. Rather than getting a 7, 8%, long-term growth in that area, maybe it's 6%, but you're getting 4, 4.5% income as opposed to typically 3, 2.5% historically. so I, I still have the belief that it's gonna be, a good long-term asset, s- especially when you've got leverage. But again, it comes back down to client's goals and objectives. What are you trying to achieve? What are your timeframes? if this is something like you wanna live in this house and you want it to be in the next 10 years or as soon as possible, take some risk and do it. if you're happy renting, maybe it's another investment vehicle that's gonna help you build wealth over the long term, and you don't have to take the risk on, buying one asset concentrated. and the next one after that is just, using people like a layer, to really avoid those average properties that bring that long-term average return of the property market down. So

Tex 49:42

was gonna ask you, Addy. I was gonna ask you, Addy. you were talking about the average returns of your property. I'm like, "What's your average returns, Addy?" I've seen the case studies. I'm like, "I'd to know that." You know what it is now, don't you? What is it?

Speaker 3 49:53

Yeah, we, as we-- if you look at it, to be honest, I don't wanna, I don't wanna spruik it to the point that, yeah,

Maxwell 49:57

for the first 12 months, I wanna be really mindful of this. I-- no part of me is ever gonna say, "Oh, the first year return that you got is now gonna compounded for the next 30 That's not how right? But property in, in, in its essence is like you, you don't wanna be But just, Addy, you mind just nod your head. Is it between 12 and 80%?

Speaker 3 50:19

Just

Maxwell 50:19

outside. It's actually 81. I

Tex 50:22

was yeah, I was reading it and my jaw was like, "Oh, what?"

Speaker 7 50:28

Yeah

Speaker 3 50:29

think right

Maxwell 50:30

it does show the value of, 'Cause, to JP's point, and I've always said this, like cons- yes, you're gonna be concentrating, so you wanna be precise. And then Adi and I, for the folks who are in the mentorship, we walk through the actual framework that these guys use to be able to, identify property that is poised for growth.

Tex 50:46

And, once you see it, you can't really unsee it, but there is a depth of work that has to go into it to get it all correct, to make sure that you're not guessing. and the amount of... and now I've I guess I've seen behind the curtain when I look at that, I actu- I shudder to think about how many folks are just wading into the property market with fuck all idea.

Maxwell 51:05

buy this house and get

Jayden 51:06

massive negative gearing benefits because it's a build.

Tex 51:09

what worried about, right? Like the dun-dun, the Wolf of Wall Street blokes are like, "Yes, lambs slaughter, come to me." it's, yeah, it's... I think about, if I could peer into people's brains at an auction, right? And I think about where the intel is, it's very highly concentrated in one or two brains, and the rest of them, pretty empty.

Speaker 3 51:29

yeah。

Maxwell 51:30

Yeah. Yeah. I think property general, and I think financial education even above that, is just low in general, right? If it was high, then, JP and I would be sitting on a yacht right now, and you too Terry right? but it's not, right? People-- We still have do a lot of convincing to we're like, "Hey, there's a better way to do things. There's a reason why your property didn't do anything for the last 15 years," right? So to, to the earlier point, I think about property is what you don't wanna be happening, 'cause it, it's a compounding game at the end of the day, right? So what you don't wanna be doing ideally is you w- you don't wanna be getting into a property that's not gonna do anything for three years because you're not, you're compounding off a shit base at that point. That's why I like... So our framework almost hone in on properties that are gonna do well in the first 12 to 24 months because then you're comp- compounding off a bigger base. Now, long term, of course, you're gonna go, go-- If you look anything over 40 years, of course, it's gonna go back down to that 6%. But compounding earlier allows you to build a portfolio or equity position earlier, which then allows you to tap into the next property, which then allows you to compound faster, right? But if you sit on, if you buy a property, don't do anything, it doesn't do anything for five years, it doesn't help you at all because you're not gonna save your way to the next deposit in the next five years. So that's why I like the idea of compounding earlier, so focusing the frameworks on short term. Now, Cole, if you're buying in super, different story, right? That is a 30-year game. You don't want to-- 'cause there's no refinancing, there's no drawing equity out. It's just you sell, pay your taxes 10%, whatever it is. different vehicle. We don't talk about that. There is, I think-- Sorry, can I just also add another point? I think there's gonna be a lot of SMSF spruiking happening as well because it's largely Addy, I got back that copy to you on the SMSF

Jayden 53:12

selling course we're gonna do

Speaker 3 53:14

Oh, and,

Maxwell 53:14

reviewed? 'Cause I was

Jayden 53:15

gonna start posting.

Speaker 3 53:17

yeah,

Maxwell 53:17

it's perfect And I think, we're also starting a valuation company and a house and land company, but that's a different-- It's un- it's unrelated to this, so don't worry a mortgage broking company that we're gonna give referrals to every

Speaker 3 53:28

That's right. Exactly. Why are you giving all our secrets away? What the hell?

Maxwell 53:32

it

Speaker 3 53:33

so th- yeah, so there's a few different things there.

Maxwell 53:35

But can I also mention there's-- I don't know if people have caught on to this part, right? We happen to be in a very, quite a high inflationary environment at the moment, right? That- that's a sucky place to be. But because we happen to be in a high inflationary environment, the compounding effects of inflation over the period that you hold property post 1 July, is actually cut into your gains quite dramatically. So if you have the benefit of buying something that's doing above average growth, 'cause average is average, right? It's the average of everything. Now, of course, average means there is things that are outperforming, there are average. That means there are things that are underperforming over the long term. Not every property defaults to 6%, right? That's the average of the entire Australian market. But because we're in a high inflationary environment, it's gonna cut into your gains over that compounding period. So that's something that I want people to be mindful of as well. So yes, capital gains tax is changing, and it's looking a bit shit, but your cap-- the cost base that is being indexed based on inflation, because inflation is high, that indexation get more into that, cut more into that profit or that, the delta between your sale price and your cost than more people realize. Yeah

Tex 54:45

So essentially you're gonna get a bigger discount later

Speaker 3 54:48

Effectively, right? Because you happen to in a high inflationary environment. So ironically, it's actually working in your favor, right? in the event that your property grows just in line with inflation, not something that you wanna be in, but if you're-- you know, if the average inflation over the next 10 years is 3%, your property's only growing 3%, you technically have no CGT.

Maxwell 55:08

But is that where you wanna be? No, not really, right? That-- what's the point of that? You might as well just, I don't know, r- put it into cash or something. う

Speaker 3 55:20

What actually do-- what does this do for the overall picture that is the Australian property market?

Maxwell 55:26

Are the returns gonna change? Is it gonna go from 7% to average of 6%? It's a really good point, right? But if we just park the budget stuff for a while, when we go back to 2021, '22, when the first interest rate hikes started happening, right? It had a very similar impact. It started impacting, maybe not as dramatic, but it started impacting people's borrowing right? What was $800,000 yesterday after the first RBA hike, it now suddenly became 750. So we've seen this story play out before. It's not completely brand new. Australian property has never done better than in the last four years, right? So borrowing capacity hits doesn't necessarily mean all of property goes downhill. It just means a certain subset, like the premium properties, the ones that were expensive and the a- affordability was low anyway, they get impacted. over the last four years, the likes of Queensland, regional Queensland, Perth, Adelaide, have exploded. Why? Because they were affordable, right? People are not gonna-- To your point, people are not going to stop investing in property. That does-- that's not going to happen. What people are going to do is they're just gonna pivot their attention to what they can achieve. So at the moment, like we are seeing a lot of great opportunity based on fundamentals and all the data frameworks that we go through. It's like really boutique type of apartments all around Melbourne, right? Now, this particular asset class, if you think about it, is a 5.5% to 6% rental yield. Very different to a standard house that you find in Melbourne or any major capital city. So with a 5.5%, 6% yield, if you go in with a 20% deposit, right? If you just run some basic numbers and vacancy rates in a lot of these pockets are like 1%. So the direct correlation is that rents are growing at compounding 6%, 7% every single year. So 哼

Speaker 3 57:17

the yield is high to begin with, you are compounding that rental yield over time at 6%, 7%, 8%. The delta of your negative cash flow is reducing year on year. So you technically become positive cash flow a lot sooner than you would with a standard house, right?

Maxwell 57:34

What does that mean That technically means your negative gearing is not really a thing after three, four years, right? Of course, don't quote me on specific years Yeah

Speaker 3 57:43

What does that mean though? It means as an investor, you're like, I've gotta get creative here. My borrowing capacity just went from 700 to 500.

Maxwell 57:50

I need to look for something more affordable. I don't wanna get dealt with, like all this CG- all this, negative gearing stuff. why don't I just pivot to something with a higher yield?" Not mining towns, but maybe dual occupation, right? Something that comes with a five and a half, 6% gross yield. So there's a few different things I think that's gonna happen that comes out of this. People are not-- And, oh, and to-- Again, on top of all of this, you're still letting in a half a million people. These people have to live somewhere, right? also you're still shit at approvals and you're still printing money.

Speaker 3 58:21

Exactly

Maxwell 58:22

so you're printing people, you're printing money, you just don't print the approvals. You're just stuck You just can't do You can't,

Speaker 3 58:28

That's exactly

Maxwell 58:29

right can't get the approvals right.

Speaker 3 58:31

man

Maxwell 58:31

So when you pack peop- when you put all of that together, I find it really hard to believe that disincent- trying to disincentivize investors getting into the market for returns is actually gonna have the impact that it does. 'Cause you put all of those pieces together, the construction pipelines, the population growth that is happening, the, opportunities in the high yield sort of low capital market, 'cause you can still buy apartments for 450 grand, in a lot of these う ん Yeah

Speaker 3 59:03

little calculator that I've shared with both of you guys, right?

Maxwell 59:06

And I'll share with the team as well. If you actually put it in the, put it in the show notes. Dep-

Tex 59:09

take some time to actually just work through this because the hysteria that that comes out after it, y- a-and it ends up you go, "Okay, fair

Speaker 3 59:17

Yeah.

Maxwell 59:18

It's bad yeah

Speaker 3 59:21

can I give you a soundbite of that? I actually just realized I never thought to r-run this until I think like 10 minutes before we started this. I was like, at what point, right? Because everyone's "Oh, should we just buy a new build for negative gearing and CGT benefits?"

Maxwell 59:34

Now, everyone at a high level understands the drawbacks of new builds. You're buying into developer margins, and not just any developer margins, you're buying into 2026 and 2025 construction cost developer margins. That's a very different picture to 10 years ago, right? probably buying smaller land because land is just, is apportioned separately. there's a lot of different like drawbacks, I think, to buying into new build for an investment purpose. Addy

Speaker 3 1:00:05

does established start making more sense?" how much does a, new property have to outperform an established property for a new property to make sense when you factor in the tax benefits?

Maxwell 1:00:15

From what I could tell, don't quote me on this, so someone can run these numbers themselves, is 0.27% of capital growth year on year. to run that back, an established property has to outperform a new property by 0.3% year on year to exceed the actual, the benefits that come with negative gearing and CGT. And that's-- I'm talking about overall return. That's factoring in capital growth, rent, et I guess the question you gotta ask yourself is, am I so sure that my established property in an established pocket, with a 600 square meter block, with existing, where I can actually put in improvements, I can upgrade the kitchen, get some capital out of it, increase my rent, things that you cannot do with new builds. Am I so confident that property where I can do a bunch of shit to with a bigger land is not gonna outpace my brand-new build that sits this way, but it's on half the land by 0.3%? Surely. Holy shit you're not helping. You're not helping. We want buying new builds I'm And I was thinking as well, like the, the byproduct of what you said before, Ady, is everyone's gonna be starting to think differently about price points they can get in at, and everybody's gonna be c-clamoring at the same price point. They almost create a property fucking boom, because now all of a sudden, all of the purchasing power has less places to go.

Tex 1:01:36

It goes into the same places, bids up prices in those areas. It doesn't make, that doesn't make property more affordable, it makes it less. But you got more people bidding on the same kind of properties. That's, yeah,

Speaker 3 1:01:48

There's

Maxwell 1:01:48

This is the irony of

Speaker 3 1:01:50

Yeah, it's a super complex thing. I am-- obviously, I'm, JP and I and the three of us are trying to provide context in the co- in the span of an hour on something that is an incredibly complex thing. So again, like I said at the start of the call, before the call started, I don't envy being the PM or the treasurer having to pass this stuff on, right?

Maxwell 1:02:09

This is a hard thing. I get the premise. I think they probably have the right intentions beyond just hopefully trying to get into the next election cycle. I get it. But I think it just wasn't very well thought through. at a high level, I'm like, "Shit, you're just not dealing with some of of the issues," which is decades of policy failure that has gotten us to this point. I think working with state governments and improving approval pipelines and putting better safeguards in place there so it doesn't take three years to stand up a standard house, residential house, is actually a much better option. Very hard to do, very long term as well, but it's probably a better option than trying to tax your way out of it, 'cause historically, taxing your way out of it one thing I can be absolutely certain of. Like I'll, I will bet to my bottom dollar this is gonna happen. It won't turn out the way they think 'cause never has. Cause you just can't like, that, that's-- I think I did put something up on it the other day and I was like, to think that a coup- like I don't care how smart you are, you can't outsmart an economy.

Tex 1:03:08

It's a complex adaptive system. There's no way that you can wrap your head around the amount of interdependencies, correlations, causations. You cannot get your head around that 'cause you are not a genius. And it's just... The irony of CGT, the 50% discount, 100% when they put it in, do you know what the sell was? The sell was, this is gonna make property more affordable. It's gonna it more affordable. So the ultimate irony of, the ultimate irony of this would be the same thing. It does the complete opposite of what they say it's gonna do. So it's

Speaker 3 1:03:45

But to be fair though, to be fair, if you just put the current budget into Claude, surely you don't have, you don't have to be the smartest person in the thing anymore. If you just put it into Claude, Claude will be like, "What the fuck is this?

Maxwell 1:03:57

What are you doing to bro?

Speaker 3 1:03:58

What are you doing?" You don't... We have supercomputer at our disposal now.

Maxwell 1:04:02

yeah,

Tex 1:04:04

You know how you're like Claude says, "Gaddy," each time you go back it's "Don't go back at it, Tex. Don't go back at it fucked it up last time."

Speaker 2 1:04:10

yeah, that's

Maxwell 1:04:10

come back

Tex 1:04:11

here

Speaker 2 1:04:12

Exactly.

Maxwell 1:04:12

it's gonna be interesting, man. have you ever heard of the dog in the manger problem, Addy?

Speaker 2 1:04:17

No. What's the dog in the manger

Maxwell 1:04:18

problem I don't know. I try to default to, the humans at the center of this and the, the self-interest and, how does it all, how does it all play out? And, there's this ei-18th century economist, his name is Henry, I think it's Henry George, and he talks about land and how economists fucked up when they lumped land in with other forms.

Tex 1:04:37

They said labor, capital, land, they're all assets. but land performs differently to labor and capital as an asset. and it tends to... for example, if you got a 10% influx of population into a town, what do you expect to happen to prices? Are they going up by 10% or more? More than 10, right?

Speaker 2 1:04:54

Yep

Maxwell 1:04:55

Yeah. a lot of the productivity that's happening in that place actually gets sucked up into the land.

Tex 1:05:01

And then what happens is, you have the folks who have benefit from that, they have this problem, and the problem is kinda, I don't necessarily wanna increase supply. Do you know what I mean? I don't necessarily wanna fix that problem. at the core of it, the policymakers, why are they so bad at supply? Because it would hurt them. And what's that Upton Sinclair quote? It's "If a man's salary depends on them fixing a problem, they'll never figure out how to fix that problem."

Jayden 1:05:29

It's for a understand when his salary depends on him not understanding it. Yeah.

Tex 1:05:34

we know that the problem is supply, and we know that the problem is approvals and the fact that federal government and state government don't talk to each other, to me, this is what I'd say. I'd say, "None of you in the government can invest in property. Now let's fix supply."

Speaker 2 1:05:46

Yes.

Maxwell 1:05:47

what I'd say.

Speaker 2 1:05:48

Yeah. Yeah, true. Yeah, take the incentive away.

Maxwell 1:05:51

You're not allowed-- You can't be in that market. yeah,

Tex 1:05:55

because

Speaker 3 1:05:56

independent review of your intentions. I don't know how you do this, but it, it doesn't take geniuses to figure out there are some holes in this budget, right? Why are ETFs and shares, caught up in this?

Maxwell 1:06:07

Why are businesses suddenly caught up in this? The people who are actually, producing economic activity. why are you taxing productivity and like ambition? there's just so much nuance to this and I'm like, some of-- something doesn't feel right. And you're right, maybe it's this is the biggest, baddest proposal and then when you roll it back you look like heroes 'cause you're like, "Oh, we listened to the public." I don't know. know what the is I think we all-- I think it sounds like we've had these chats anyway. I think guys both agree

Tex 1:06:31

too like I can't see it staying the same. Like it would have to... I would-- If I was Jim Chalmers, and I wanted you to feel like you'd got something back, I'd start there, and then I'd make a series of c- of incrementally smaller in, concessions so that you feel like, "Oh, yeah, he got it. we got him. he bent over, he changed his mind, he backflipped yeah. And so but where we ended up is actually where I wanted to start. That's what I'd do. so I kinda I'll bear the next two, I'll bear the next two weeks of scare pains, campaigns, and all that sort of stuff, so that by the end of it, people go, "Yeah, it's pretty reasonable." But where, what reasonable is now was completely unreasonable two years ago. yeah, so it's gonna be,

Speaker 3 1:07:08

help but wonder, this is the cynical part of me. I can't help but wonder if you just remove this... If you just remove the fact that they can't-- Let's say you can't run for the next election, right? You cannot run for the next election. You cannot curry favor with a certain cohort of constituents or whatever it is, right?

Maxwell 1:07:22

I just get this vague feeling they're trying to position themselves as heroes to the next generation, which probably makes up a large the people that are like, "Yeah, finally taxing the rich," not understanding the system that works. 嗯。

Tex 1:07:36

I reckon they've been watching the growth of, I reckon they've just been watching the growth of Gary Stevenson's YouTube channel, and they've gone, and they've gone, "Oh, we can j- we can get-- we can capture that." 'Cause it, it does. 'cause Gary Stevenson's message is tax wealth not work,

Speaker 2 1:07:50

That's

Maxwell 1:07:50

right. Yeah. right? so if you look at this on its face, this is exactly that. It's exactly that. It's basically, "Hey, why are we treating wealth different to work? We shouldn't. We should treat it all the same." So that's why... they've done all three together. and if you, a-a-and if you, it doesn't matter what form it is, that's wealth.

Tex 1:08:07

It should be the exact same as work. So I look at that, I go, it's almost like you've taken it literally, you've drunk the Kool-Aid, and you haven't really thought through, "Okay, where does that end up?" so yeah, it's 'cause when they, they kept talking about it, they say it's in- it's inequity. It's the generational inequity. They're only saying... I think that's lip service because it's not actually what it's doing. What it's doing is wealth and work. Trans- they wanna tax people's s- sweat the same. They wanna tax people's sweat the same as assets. It's like assets have been pure, and that's a better way to make money, and for some way it's, we will let you have that 'cause that's better. But work is less noble. So if you wanna appeal to the person who feels working class, you go, "Fuck yeah, I just leveled the playing field for you."

Jayden 1:08:54

also feel like a l- a lot of the language has been, we've spoken about intergenerational inequity and things like that, but it's really sh- should be targeted at property. They want people to be able to afford to buy their own homes, all this sort of... why don't, why aren't we just saying that? Why isn't it, this is about putting a dampener on the property growth in Australia so more people have a chance to buy a home where they want to live? basically just come out, be honest. We don't want house prices growing by 8% every year because it's just too hard

Tex 1:09:26

You know why they can't do it though? 'Cause nobody wants to hear my pri- my house prices going down. So you-- it's like you can't... It's like the populace kinda ha- gets here. they want-- They're trying to have their cake and eat it too. They'll be like, "It's not gonna hurt your house prices, but we need to fix housing." But to me, even if they get this right and they thread the needle and it works right, and maybe house prices, they do dampen, it's gonna take so long for incomes to get up to point where... A- and, that is 10 years down the road. So does that generation, do they give a shit? Or are they gonna go, "Hey, been two years, nothing's happened. See

Jayden 1:10:01

at the same time, you've had all these people, we're trying to drive innovation Australia and, foster tech, entrepreneurship and all that, but all we're doing is saying, "Yeah, yeah, try. We're just gonna take more of a stake in your business really, more of a cut."

Tex 1:10:14

That's why I don't, why I don't buy the i- d- race-- that's why I don't buy the generation in- inequality, and I don't the, "We wanna make Australia more productive." It is, we're trying to fix the housing problem, but just like you said, I don't get this, the rest of 'Cause while you're saying, while you're saying that, just for the listeners, so Adi obviously works in property, and Jayden's saying there's a housing problem. We need to dampen housing. This is getting out of hand. And Adi's nodding his head, and I think everybody thinks that someone like Adi would be like, no. Make houses go." the thing is, it's a business anyway. It's gonna make money anyway, right? It's not it's not like everyone's "No, these prices need to go rocketing to the moon," because I think everybody understands it'll get to a p- point where, it doesn't work. So you do have to fix it, and I think, I have the privilege of talking to you, Adi, I have the privilege of talking to Bryce, from Empower Wealth, like every day now, and he's the same thing. They're like, "No, we acknowledge there's an issue there. We need to fix that, but we don't think you fix it like this."

Speaker 3 1:11:09

Dude, my, my

Maxwell 1:11:09

thing when it comes to property, I'm not-- sorry to interrupt, Jayden. my philosophy when it comes to property, right? Man, I have stake in the game as well because I have a niece and a nephew, and probably kids down the road who are gonna face this exact same issue, right? I have no intention to, give them deposits and things like that. You need to figure this shit So I have-- I have a personal stake in the game. So I have-- There is no incentive really for the properties that I buy to compound for the next 30 years at 10, 10% year on year. that's a-- It's an absurd thing. The reason, part of the reason that I'm in this business at all is to avoid you from buying the one that's 2% a year, right? if the market is moving at an average of 5% or 6%, can I at least help you get that, right? Can I at least not help you avoid, a calamitous fucking mistake that is gonna ruin your financial future, where you buy something... This is why JP's in the game as well, right? the help that he's gives my partner and me is just "Hey, man, you're thinking about something in a very niche, isolated way." That's why we pivoted to JP, right? 'Cause I was trying to be my own financial planner. It wasn't working out too it turned out. So it's all-- It's as much as getting them incent- it's as much as getting them returns, but it's also to prevent them from making mistakes, 'cause property, ironically, is one of those things that you can make a lot of mistakes in. So I have no incentive, just like Bryce wouldn't, to have properties grow for 20% year on... That doesn't-- That's not what I'm talking about. It's just there, there are different... Now, of course it helps when do you mean, mate? you're not a greedy landlord? Do you

Speaker 3 1:12:37

then

Maxwell 1:12:38

landlord

Speaker 3 1:12:41

It's just, yeah, it's, I, I think there's so many different fucking soundbites out there that are completely out of context. Do you know what I mean?

Maxwell 1:12:50

Because you have much louder people in my industry, and I think you guys spoke to this in the last one. The much, much louder people who are just-- They give the archetype of the dickhead landlord. Do you know what I mean? they position themselves as the dickhead landlord because it's good for marketing or whatever it might be. And there is obviously there's some flow on consequences of that as well, But that's a whole other topic that, that probably is a different But Yeah. man

Tex 1:13:18

I just-- It's, it is. you correct, you stick your neck out that way and you act like a dickhead people are gonna turn around and say, "Hey, let's rip that down. Let's rip it

Speaker 2 1:13:25

Yeah, exactly. Yeah. Let's get him off his pedestal. Yeah.

Maxwell 1:13:28

But so thought-- my thought experiment, Adie, is, and I think you were-- this is what you were getting at, is like, what society do you want your kids to grow up want the one where you have to hoard homes and then give them one or give them a deposit for them to get anywhere? Or do you want the society where they can stand on their own two feet, make it, have self-efficacy of knowing they figured it out?

Tex 1:13:45

And I think everyone's in agreeance. If you take your own-- 'cause all this, like the, some of these tax things are massive headwinds for us. but ultimately if we're trying to get to a direction, if we're trying to get to a society where that's more possible, like fuck it, give it a go. Give something a go. but also if it doesn't work, fix it. Yeah

Speaker 2 1:14:07

This

Maxwell 1:14:07

on the whole, like the whole budget though, it's just, while the intention, a lot of it's been coming around intergenerational quality, fixing the housing problem, all it's really done is mean that anyone that's gonna be successful is we're just taxing you more.

Jayden 1:14:19

That's the crux of it. you run a successful business, we're gonna tax you. You're a successful property investor, we're gonna tax you more. that's it. that's just the way I see it. And, there's a lot of people out there that will... I, I don't believe half the stats I see anymore because I just don't know the source of truth, and I'm not the engineering type to go and try and find, is this actually true? But, I've seen lots going around about, how bloated our government is at the moment, how bad they are at spending money. and I'd just prefer people to come out and say, "Again, look, we're trying to fix a housing problem, pro- problem. the best way we think to do it is by taxing people more. We're gonna spend it more responsibly or pay off the deficit or something like that." Because I also look at it and I think, most successful business owners I know, when they've got money out of their business, they've done it in a very tax effective way. where have they then gone and stored that money?

Tex 1:15:12

Yeah back in equities or property. Yeah

Jayden 1:15:14

Yeah. So it does add to it. And I can see in a roundabout way how just increasing the taxes of those people might help, help reduce the, the growth in the property prices for that reason. But I'd just prefer come out and say it and be more responsible about it. spend the money better. And like we

Tex 1:15:32

they haven't-- Yeah, the deficit's still there and it's slightly bigger. So you'd go, wouldn't you rein in your spending too?" Like you would've

Jayden 1:15:39

that, that's what I mean. Like we talk about printing money, and Terris, you mentioned before, like one of the easiest ways to take money out of the com- economy and deflate property or asset prices altogether is just to increase taxes and take it out of the system.

Tex 1:15:52

Yeah Yeah

Jayden 1:15:54

that's one way you can do it, and if that's what you're trying to do, just come out and say it and "Okay, you're gonna charge us more taxes to be here. I've got a decision to make. Do I wanna stay here? Family's here. Yes, probably. Okay."

Speaker 2 1:16:04

Or

Maxwell 1:16:05

man it's very I like what Mark, I like what Mark Bouris has said, right? I think, I actually think he's spot on. so the problem I have way they're doing it, so the RBA is hitting homeowners, and I guarantee I see homeowners every day. I'm there every fucking day with these people.

Tex 1:16:17

They are not spending. It is not coming from them. And Michelle Bullock said it herself, if you don't know who she is, she's the RBA governor. She raises rates the last time. She goes, "This will do absolutely nothing to r- to, to fix inflation or to adjust inflation for the next six months. It'll do

Jayden 1:16:33

I think she, she actually

Tex 1:16:34

it will do, was make people default on their fucking homes.

Jayden 1:16:37

Yeah, Yeah. w- there something where she had a small backhanded crack about the government and their spending, basically they're really doing anything to help me?

Tex 1:16:44

s- same thing. So it's basically "Hey, I'm gonna keep whacking homeowners if you don't stop spending." And you're like, how does that make sense?" So but so we've got cost push inflation in the economy, which is oil, right? So cost push inflation, that's not affected by my spending. I don't-- It's not my fucking fault, right? So doesn't-- Like I'm, I'd guarantee we're not spending into the economy, okay? And then there's only one generation that is, who is helped by higher interest rates, boomers with cash, right? So what does Mike Bora say? "Hey, increase GST. That's how you get those people. That's how you get them people changing their spending habits." But that's not what we do. What we do is we go, "We've got one hammer and everything looks like a nail. We raise interest rates." We raise interest rates. It's just,

Speaker 8 1:17:31

嗯

Tex 1:17:35

lack of, the, the fact that they're not coordinating in that way, RBA, government, and even like just that, right? 'Cause there is some very good evidence CBA put out last year on where that spending, where the demand pull inflation comes from. And it is that generation just because they feel richer when interest rates go higher. So you wanna change spending, then increase GST. Easiest way

Jayden 1:17:57

I'd actually, I hadn't heard that, point of view before, but, on the surface level it makes a lot of sense, like a insanely amount of logical sense. do it now

Tex 1:18:06

Yeah, just don't be a pussy and do it.

Speaker 2 1:18:09

Yeah

Maxwell 1:18:10

like it's just, yeah. that, that's the generation, th- their generation. So it's "Hey guys, I'm gonna hurt us." But who knows? Who knows how it's gonna play out? sorry, You go,

Speaker 3 1:18:21

I think-- no, I was just, I think as you guys were riffing, I was thinking about like the whole comment JP. you're a business owner, you've done well, you pulled the money out, you put it into property.

Maxwell 1:18:30

う ん

Speaker 3 1:18:31

Adds to the property supply problem. If I can stop that from happening.

Maxwell 1:18:36

I don't know. can we just stop people from buying property? make it about property. Don't fucking tax the ambition and the underpay that you went through for 20 years. Do you know what I mean? Like local-- I don't know how you do it. Like I'm not saying this is do you know what, do you know Do you know

Speaker 3 1:18:50

easy

Maxwell 1:18:50

process Yeah the 18th century economist, you know what his solution was?

Speaker 3 1:18:54

嗯，

Maxwell 1:18:54

He called it the single t- he called it the single tax. So you actually don't tax anything else except land. You tax nothing else.

Speaker 7 1:19:05

Ja

Tex 1:19:09

gains of the economy so well,

Speaker 2 1:19:12

Yeah

Tex 1:19:12

that you need to make sure that it's mobile, it's moving, 'cause otherwise it's that..." I didn't even get to explain that dog in a manger problem, right? So dog in a manger is essentially, hey, dog stands in front of the hay and barks at the horses. It doesn't eat the hay, it just stops the horses from eating the hay. and it's the problem that happens with property, where beyond a certain point it does get to that stage where you're like, "No, keep the hay, keep it going 'cause it's be- better for me that way." it's qu- that's quite a extreme thing. But he's "But look, land is not the same. You couldn't, shouldn't treat land the same as labor and capital. It's its own thing. and you need a, an, and his thing was like, just tax land and don't tax anything else." which I mean, that'd be an interesting experiment. Who knows, gents? how are you-- I'll just ask you guys one more question to wrap this up. Thank you so much for spending your time on this. But, how are you advising-- So someone's coming to you in that sort of accumulation phase right now. What's the number one thing that you're saying to keep this in mind, when you're thinking about making important financial decisions going forward?

Speaker 3 1:20:10

Look, I'm a hyper-rational sort of person, right? So I'm quite numbers driven, and I think the team, we have a... I think we're a nice balance between like EQ, "Hey, we understand where you're coming from, but hey, have you thought about this?" So the way we are doing it is we in a lot of the conversations over the past six days since the budget, we just pop up the calculator that I've built, that we've built collectively.

Maxwell 1:20:28

We show the actual returns, right? And I, if you look at our Slack channels th- in the business where they've had this conversation, where the team has had this conversation with current clients and as prospects, they're like, "Oh, wait, what? What? Oh, it's not that bad. Oh, okay. That's actually okay." so I think I'm tr- we are taking a pretty pragmatic approach, especially the ones that we are helping getting into like the asset class that I men- asset type that I mentioned earlier, which is the, high-yielding Melbourne apartments. They're unaffected. they're not really caring about it. And the funny thing is, they're not affected all the way from the person who's buying their first property to the person who's actually buying three of them at the same time. So they are unaffected once you I think when and I think when the market figures it out, they'll be affected. Because

Tex 1:21:11

everyone will be like, "Ha." Yeah.

Speaker 3 1:21:13

Oh, shit. Yeah, think they already have. the pod-

Maxwell 1:21:15

the podcast didn't, the podcast didn't help that we did a couple about, two months ago, so that didn't help. it turns out people actually listen to us, so that's not great so yeah, was my mum

Speaker 3 1:21:23

approach has been more pragmatic.

Maxwell 1:21:25

So we're taking So your thing is your thing is like, hey, but stop, just don't read the headlines for a second. Just do the math here. Just look at act- look at the actuals, let's make some, let's make some reasonable assumptions, stress this and go, 'Okay, what does this actually mean?'" Instead of just buy into the hype. Yeah and al-also, like just, okay, so let's say you don't do this, that's fine. You don't do this and it is a, you take the hit. You wanna wait for, you wanna wait for the actual legislation to be passed through law and blah, blah, blah. You want it to be actually firmed up, in f-on firm grounds. But so is everyone else is waiting for that too. what impact do you think it has on the overall sort of strategy, right? Are you gonna wait? It's like the whole, "I wanna wait for interest rates to come down." But my friend, so is everyone else. So it's a, is that the best strategy? Are you just, are you taking something that is within your control out of your control? So we speak to it a more philosophical sense, in a pragmatic sense as well. And I think once people actually look at the numbers, I think they're pleasantly surprised. They're like, "Oh, this is actually... Why is this so hyped up in the media? This is actually not that bad. This looks okay for us. We can still manage it." so I think taking that kind of an approach and combining it with "Hey, we get it. We fully understand that this is probably the biggest change that's happened in, what, 26 years since, since 1999," whatever it was, right? we get it, but hey, doesn't change your strategy. And the, I think the flip side as well, man, I think I, I'm sure JP is doing this as well. What's the alternative? Have your goals changed? You wanted to pay off your house in 10 years, right? Has that changed? No, it hasn't. Okay. Then if you don't invest in this property and you don't invest in shares and you don't go down the investment side at all, are you now suddenly in a position to save your way to that, paying off the house? no, of course not. okay, then is a $20,000 delta in the course of those 10 years, which is what sort of modeling is showing. Let's make it 50 grand. Let's make it 100 grand. Let's make fucking crazy, some crazy number. Are you still net positive ahead of where you would've been? Yes, we are. Ah, okay. Then what's changed? This is an election cycle thing. It might not even survive an election cycle. So why are you making lifelong decisions that affect your family, your life, your future, your retirement on the back of a single announcement that might not survive an election cycle? So when you put it in that kind of a format, it has really helped. Now, of course, it's not gonna help everyone, but generally the consensus has been, "Oh, this is not that bad. let's carry on." So yeah, it's been good. Love it. Thank you, Matt. Appreciate it. Posie, what about you?

Jayden 1:23:55

I-I-I'd echo, 99% of what Adi said. the only difference for us is, we're licensed financial advisors. We have our own AFSL. there's probably more, a few more tools in the toolkit which we can advise around. But ultimately for clients, like we've got many clients that we're employing what you'd call a rent-vesting strategy. The unfortunate reality for people like that is, early strategies that we've written up, if all these changes get through, they're just not gonna be able to get through that strategy in the same timeframe as what we initially expected because their borrowing capacity's taken a hit. It's just not possible. so you just... y-you gotta, you're gonna do something, So we've just gotta work out what that next best thing is, and like for the client I mentioned today where, you know, they just exchanged contracts on an investment property. We got them into the market. They've got some leverage there. They've got some negative gearing. Fantastic. really for those guys, given the changes in negative gearing, borrowing capacity, it really needs to shoot the lights out, and that could be five, six years before they've got equity to go again if they wanted to do that at that point in time. So all of a sudden, for those sort of clients, probably having realistic conversations around, this is a big if, what happens in the property market. But that strategy which you're happy to go down, and is a really aggressive strategy, is just probably not gonna be available to you in that same timeframe. So if we're being realistic about this, we're gonna have to extend your timeframe out a little bit. So does that mean it now starts to bring in other investment vehicles for them? maybe it is investment bonds because they're, getting close to the highest marginal tax rate. You don't wanna pay down non-deductible debt, so let's put some of your savings away into a structure that's gonna pay 30% tax and be CGT-free after 10 years. Now, there's a lot of other things that, I don't like about investment bonds, but for them, what's the best alternative after that? Do you put it into an ETF portfolio where you can have the, compounding gains on your unrealized gains? Do you put it into super because now their timeframe to buy the house they want's maybe probably 15 years away at best? super, you can access it only five years after that, so we just say, stuff it. Let's just maximize super, build as much wealth as possible, and just come to terms with we're probably gonna be renting." So i-it's just

Tex 1:26:03

just while you're on that, just while you're on that, first home super saver, still happening?

Jayden 1:26:11

Yeah, it's still happening. Yeah, absolutely. rather limited. Yeah. it's rather limited. when you compare it to, the average house price in the capital cities, the difference it makes to your savings or deposit is relatively immaterial. any individual can effectively put 50 grand into super, get a bit of a tax benefit for it. You also get a guaranteed return on that money when it's in the superannuation environment, which is quite nice. It's obviously better than savings, in the bank. it all helps at the end of the day. but these clients in particular that I spoke about, they came to me and they'd already had a property which they'd sold, something like that wasn't available to them anyway.

Tex 1:26:48

But is that... This might be a stupid question, so just forgive me if it is. CGT is same on that though?

Jayden 1:26:55

On first home super saver scheme or super?

Tex 1:26:58

selling out of... no. Is it just, how do they treat it when you pull money out of it? Is it not a capital gain or it is?

Jayden 1:27:06

when you pull money out for the first home super saver scheme.

Tex 1:27:09

Yeah

Jayden 1:27:10

Yeah, it's not a capital gain. I can't remember, but it, the amount you pull out does go in your tax return, but it comes with a tax offset as well for it.

Tex 1:27:16

OK，OK

Jayden 1:27:18

think from memory it's a 15%, offset on the earnings.

Tex 1:27:23

Okay.

Speaker 3 1:27:24

can I just the one, one comment that I ha- I have on that? They have-- they started that, what was it JP, July 2017, right?

Maxwell 1:27:31

Ye- yeah, sounds about right. Yeah. Yep

Speaker 3 1:27:35

It's al-almost coming up on nine years. It was meant to allow people to get into the market, right? The, the-- that it.

Maxwell 1:27:41

What has happened in the last nine years? 嗯。

Speaker 3 1:27:45

most of that shit anyway, right? the returns that you might and the... I don't wanna, I don't wanna be doom and gloom, but they have tried the demand side before, like they did-- because they didn't fix the underlying issue, right?

Maxwell 1:27:56

The issue is supply. You increase the supply, the demand-- But the demand, if the delta between de-demand-- All you're doing is adding fuel to the demand part. You're not Yeah, 100%. Yeah Yeah.

Speaker 3 1:28:08

I understand the intention behind it, but I think it's just very poorly thought out because you're just not fixing this.

Maxwell 1:28:15

And e-even in their budget, they said part of this means, what was it? 35,000 fewer homes will get built. I was like: the fuck Great

Tex 1:28:25

A-and they're ex they're expecting the, and they're expecting the incentive to fix the L- but that'll get beyond the... Yeah, we haven't... Yeah. It's not gonna work. yeah, that makes sense So well thanks for that, fellas. sorry Pro, so you've, you wanna finish that off?

Jayden 1:28:37

yeah, it just, you come back to the drawing board again and, sorry if I'm repetitive, but it just goals and objectives, what's your timeframes, and you work backwards from there. what's the most important structure? It starts to reveal itself when you realize, how limited are, am I by borrowing capacity? What's the likely glo- growth rates on some of these assets? What's my likely position in any timeframe? And then you can make a realistic decision around the path you want to take because you can see it unfolding. And yes, things change, things like this happen, and then you just gotta go back to the drawing board and revisit the strategy, and just be realistic about things

Tex 1:29:12

Yeah. Good points. One thing I would add is, it's shocking to me, like we've started doing this work over the last 12 months now, how few people have a plan for their income at all.

Jayden 1:29:23

you got a program that could help solve that, maybe Tez?

Tex 1:29:27

I definitely do. but but it's just, but it's just it to me, like the human capital thing works so hard. if you are that early stage investor, your big conf- your big constraint now is cash flow 'cause negative gearing doesn't work the way that it used to, and that's the reason why you're gonna really struggle. So why don't you increase your cash flow? what's the fastest, best way for you to do that? Increase your top line.

Speaker 3 1:29:48

if you start a business, you're gonna get taxed on that too, Terry.

Maxwell 1:29:54

just be an employee. I'll just

Tex 1:29:56

be

Jayden 1:29:56

those

Tex 1:29:56

of my business and

Speaker 3 1:29:57

get into government and become prime minister,

Maxwell 1:29:59

that's I

Jayden 1:30:00

just reckon have lots of kids and just put them on as employees. Just slave labor who cares

Tex 1:30:04

but in all seriousness, I really do like at this stage you wanna become more productive. That's the answer. The, like the answer to these problems is becoming more productive, and that's almost across the board. We're in a low s- we're in a low pr- we're in a sort of a stagflationary sort of environment. We've got low productivity. We all have to get more productive and grow our way out of the problem. and that's macro and that's micro. And, yeah, it's--

Speaker 7 1:30:26

Yeah

Tex 1:30:30

super, important. You gotta think about if that's the constraint, resolve the constraint 'cause everything else you are just hoping that the thing outside of you does the job and gets you through. But you are-- Like your focus is on the outs, it's on the external, like the stuff that you can't necessarily control. What happens if all of your future wellbeing is coming down to what happens in ABC market? like you're, you are the source of your wealth and the best shield is going, I've got a good strong cash flow. I've got a plan for that. and none of this touches me anyway." that's the investor that doesn't give a shit about any of this stuff. They're like, "Yeah, sweet. Carry on."

Speaker 3 1:31:06

Yeah. the irony is as shitty as that situation is where you're like, "Fuck, I'm despondent. There's nothing I can do, so I just gotta get more productive. I've gotta pick up more skills," blah, blah, blah.

Maxwell 1:31:16

Yeah. It's actually good for Australia because it adds to the creative, productive, productivity value of Australia, right? That, that mindset of I can't do anything apart... I can sit here complaining that my job doesn't pay me enough and I'll never be able to save my w- way enough." thing is, yeah, it makes me wanna be more productive, add to the overall economic sort of, progress of Australia. But it go- comes back to the same thing. You also get disenfranchised because you're like, shit, I'm now getting taxed on that ambition," right? I want to get ahead, but I'm-- Not just property, take property out of it, so I'll take my bias out of I'm talking about it from a small business owner, 'cause typically, if you want to outpace general income, you're gonna have to start something yourself, eat shit for five years, 10 years, whatever it might be, underpay yourself, sleep in the office, don't have an office, sleep in your garage, blah, blah. But then, yeah, so I think I just, I can't-- I'm struggling to get past some of the thinking behind... I love that thinking. Yes, I wanna be more productive. I wanna get the skills. I wanna be AI expert, whatever it might be, whatever the next thing is. But you're not allowing them to benefit from this either. You know what I mean? you're not, you're not-- You're taxing that ambition that you have. So for most people, it's just "Fuck, man, I'll just-- I'll rather just resign to the fact that I will never own a home. No point running a business. I'm just happy working for the next 40, 45 years and just drinking beer, right? on the weekends Which is finish a podcast episode on that.

Tex 1:32:42

I refuse to. I just... that is

Speaker 3 1:32:45

let's go for another hour and a half then.

Maxwell 1:32:49

That's so off

Tex 1:32:51

That's so off-brand for me. I can't do it

Speaker 3 1:32:54

You... Hey, JP, say something positive, to counter

Maxwell 1:32:58

that say something positive, boys, but I've just gotta go run. I've gotta eat a

Jayden 1:33:02

protein bar get to the gym

Speaker 3 1:33:03

Okay. Oh, God.

Maxwell 1:33:06

Thanks, I appreciate it, Posey.

Speaker 3 1:33:08

Y- you can e- you can edit

Maxwell 1:33:09

that part out Ladyd. Oh, that was joke.

Jayden 1:33:13

going to bed.

Tex 1:33:15

Oh, you can't be productive in bed. What are you gonna do there? Just fucking hustle will ya?

Jayden 1:33:20

I know. I know. my alarm for 2:00 AM, and I've got the sauna heating up as well, and

Tex 1:33:24

here's how, here's how I wanna finish it. All right? It's never as bad as we think. It's never as good as we think. We're all gonna be fine.

Speaker 2 1:33:33

True.

Maxwell 1:33:34

it

Speaker 8 1:33:35

And

Speaker 2 1:33:35

it.

Maxwell 1:33:38

Fellas, thanks so much. is actually a bit longer than I thought, but, super, super valuable. appreciate you coming and bringing the, bringing your insights, your wisdom, your experience, to the conversation, and we'll do it again in five years and see

Tex 1:33:50

where we're at

Speaker 2 1:33:53

That

Maxwell 1:33:54

I might be 300 kilos,

Tex 1:33:56

a big with a big, We'll see. We'll see. good stuff. All right. Thanks again, fellas. We'll, we'll talk soon

Speaker 2 1:34:04

gents

Maxwell 1:34:04

Appreciate See you guys Bye