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The Honest Money Show is your guide to understanding what money really is, and where Bitcoin fits in. Hosted by Anja Dragovic, Australia's female-led, Bitcoin-only podcast, it cuts through the noise to explore how money shapes our lives, why the current system leaves so many people behind, and what a clearer, fairer future could look like.
Expect honest, accessible conversations with some of the most interesting thinkers in the space, the kind that take you from "I don't really get this" to genuinely curious. No hype, no pressure, just money, made clear.
Whether you're brand new to these questions or already deep in them, you're welcome here.
Joining me for second time is Peter
Dunworth. Today we're going to be doing a
special episode on the Australian budget,
which has come out a mere few hours ago.
So forgive us if there's some details
missing. We'll do our best to answer the
questions that you guys have with the
knowledge that we have now. But I would
also encourage my international listeners
to stay tuned because there might be
really important things that come out of
this discussion. Countries often like to
sometimes borrow the good and the bad
policies from each other. So I think
there's a lot to be learned here. So thank
you for coming back on Honest Money,
Peter. I'm glad you were talking about
this. I think it's a hot button issue for
a lot of people, particularly all the
Aussies out there. Yeah, absolutely. And
I'm kind of glad I had the foresight to
book you in a few weeks ago now.
But, yeah, let's get started. Obviously
this budget has come out last night. I
rushed home from work to watch it live on
Channel 9. And what is your kind of first
impression? What has been encouraging?
What is concerning? And what is still
unclear? That covers a lot of topics. I
think my initial response to it is one of
concern because I think a great way to go
through life on looking at, you know, what
are the expected outcomes is to show me
the incentives, I'll show you the outcome.
And what this budget tells me is that you
are going to be rewarded if you are a
victim, if you are in and around the
government sphere, if you rely on an
income or draw wages or any benefits from
the government, you'll be looked after and
they will continue to increase that. But
on the flip side of that, if you are
productive, if you have any aspirations of
a better life, if you want to provide for
your family, if you want to get ahead, if
you want to grow your wealth, then there's
been a very clear message sent from the
government to say that this Australia is
not the place to be doing that moving
forward. And I think they've wrapped that
in the guise or cover of intergenerational
equity, which to me and running through
the policies does not look like it helps
out intergenerational wealth transfer at
all. In fact, it's a weighing station and
intermediary to rob you of your
intergenerational wealth transfer to your
children. And at the same time, for any of
those in the younger generations who are
looking to get ahead, it pulls up the
ladder on their opportunities to maximise
their outcomes through clever tax
structuring and hard work and sacrificing
the now for a better future. It pulls up
the ladder on that and it disincentivises
any future investment or current
investment for future outcomes
dramatically. I think the investment
sphere will dry up dramatically. And I've
got huge concerns for small business,
small business operators, venture capital,
investors in Australia, full stop. It does
not look like a friendly place to invest
money moving forward. Yeah, I have been
observing some comments on Twitter. And
last night, I think Rational Aussie posted
something and then I was looking at the
comments. Basically, people were saying
who've been, you know, building their own
business for the last 10 years, they may
work in tech and they've employed people
and they've taken all this risk and
they're not necessarily breaking even yet.
They're really concerned because they're
like, why am I even trying? There's no
incentive for people to kind of continue
doing business in Australia or even start
out. It's outrageous. And this is where if
you want to put things into perspective,
the Australian government launches a
review of our supermarkets when they're
making a 2% to 3% net profit. There's an
outrage from the government when our
biggest companies who employ hundreds of
thousands of people make a 2% to 3% net
profit margin. But there is zero outrage
when you work for 15 or 20 or 25 years of
your life, invest in a business, invest in
a property, pour your heart, sweat and
tears into a property, into a business,
whatever it might be. And then at the end
of the day, you sell it for a profit. You
manage to make a profit. The government
turns around now and says, we'll take half
of that. That seems outrageous,
particularly in light of what they get
upset about. So I think there's a very
clear message to hardworking Aussies that
they do not want you to be wealthy. And
their idea of intergenerational wealth
transfer is to make everyone poorer for
it. So it's going to be very hard, given
the incentive structures that they've put
in place with this budget, to get ahead.
And it's going to be even harder for the
ones that they claim to be helping. Yeah,
like Anja five years ago would have kind
of taken this at face value and thought,
yeah, they're just trying to do their best
to solve the societal problems that we are
experiencing. Because I definitely agree
there is a housing crisis, there is a cost
of living crisis, and those are real
problems that need to be addressed. But do
you have concerns that this might actually
backfire and those very things that
they're trying to solve for? Probably an
adage to live by, which maybe we've
forgotten. Arguably the scariest phrase in
the world is, I'm here from the government
and I'm here to help. This usually
resolves with the complete opposite effect
of what they're trying to do. If we look
at the most recent intervention from the
Australian federal government to help
first home buyers get ahead with the 5%
deposit scheme they're looking to put in
place. Well, what's happened to that first
home buyers market? Property prices have
soared. All it meant that first home
buyers basically paid 5% to 10%, probably
even closer to 20% more for that property
that they've been saving up for. And this
is where I think a good friend of ours,
Checkmatey, says something that's really
important to think about. If you want to
solve that intergenerational wealth, you
want to leave the structures in place and
untouched that allow you to create wealth
from an early age. And what's really sad
about this is that not only are they going
to be removing the capital gains tax
discount from property, but that's across
all asset classes now. So if you are
looking to save for a property, it's
almost impossible now to save for a
property using term deposits in cash
because they're diluting our currency so
quickly. You typically have to invest that
money in something that is going to
outperform. And now this is where the
government gets a double take on that, or
they've just potentially doubled the
revenues. And this is where the law of
unintended consequences is going to play
out. And I think bite them in the bum is
that you're going to have people invest in
assets now that aren't going to be
housing, and they're going to be
incentivized never to sell those assets.
And so I look at what's being structured
in the budget, and it tells me that you
want to buy assets for a long time. You
want to hold those assets for the longest
period possible. And I look at this and
think, you know, in my head, I'm just
thinking, oh, well, what an advertisement
for Bitcoin. Bitcoin, that's the only
asset that you can hold or want to hold
for the rest of your life, in my thinking.
And so I think it's a great advertisement
for Bitcoin. And out of this budget, what
it tells me is that you won't be able to
afford to sell assets to then move on to
the next one. So, you know, you think
about this, if you've got a million dollar
property that goes to $2 million, and then
you want to sell that to buy another one,
an investment property, you're never going
to sell that because $500,000 of that
million dollar gain is going to get eaten
up in the capital gains tax. So now you
have half as much by way of equity for
your next property. So I just look at that
and think that's going to be very
detrimental. And then there are flow on
and second order consequences to this type
of policy, which I think is going to be
extremely detrimental to, you know,
increasing housing or reducing the cost of
housing, increasing housing affordability,
cost of living crisis. All of this is
going to be impacted negatively from these
policies. And it's a real shame. Yeah. So
with the capital gains tax changes, what
exactly is the change that's taking place?
I think 1st of July, 2027. The major
change to that capital gains tax is the
discount on the capital gains tax. So when
you hold an asset, an investable asset for
more than 12 months in Australia, you get
a 50% discount on your capital gains tax.
So what that means is if you make a
million dollars on an asset, you've held
it for more than 12 months, you get a 50%
reduction in the capital gain. So instead
of making a million dollars, they assess
that you've made $500,000 and then you
were taxed on that $500,000 at your
marginal tax rate. So it's an effective
rate of around 22% to 22.5%. Now, with the
removal of this discount, that means it's
going to go from 22.5% to more like 44% to
47% because it also takes into
consideration the Medicare levy, which is
2% and some other taxes that are levied on
top of that. So you're moving the
effective tax rate from 22% up to
somewhere between 45% to 47%. So it's a
huge, it's more than 100% increase in the
tax rate. Yeah. And I can understand why
people are having the reaction that they
are, but like how set into stone is this?
Is there still things that we can do to, I
guess, advocate against this being put
into motion? I think now more than ever,
your vote is more important than ever
before. So the problem with this tax
policy in this budget is that this is a
complete breakdown of the social contract
between the government and its people.
With such wide changes to the tax policy
under this budget, this is something that
you would typically take to an election to
vote on and let the people vote. When John
Howard did it back in the 90s, late 90s,
early 2000s, he had an election based on
this, the GST. That was, he ran a
political campaign. He allowed the
electorate to take a good hard look at it,
vote on it, whether they liked it or not.
And they said, yep, we'll back you. They
voted him in. And then with the good
graces of the people that have backed him,
he then implemented that policy. Now, what
we've seen is, and this is where the
breakdown of that social contract has
transpired, is less than a year ago, Albo
and were asked whether or not they were
going to change the tax system. What were
they going to do with negative gearing?
Are they going to tax capital gains? What
was that going to look like? And if we
were talking 12 months ago, probably the
biggest concern that everyone had was this
unrealised capital gains tax in super.
Now, that unrealised capital gains tax
never went ahead because there was
sufficient political pressure to basically
quash that. I saw that as the fact that
they would even bring that up to me meant
that we're on the verge of socialism in
Australia. This government does not
respect property rights. They've broken a
social contract with us, the voters, the
people, that, you know, we've had a
contract with our government for the last
hundred years that they would respect our
property rights, that they would allow us
to have a fair system that we could plan a
future for. And in less than 12 months, I
think the Treasurer has undermined the
confidence in arguably one of the greatest
pension systems in the world, Australia's
superannuation system. And now this is
just a double gut punch where they've
broken the social contract when it comes
to building wealth and building out a life
in the country by effectively doubling the
taxes. And unfortunately, I don't think
they're going to stop there. I think the
next iteration of their policy is going to
come with a death duty or an estate tax.
And I think that will be upon us in less
than the next five years.
Yeah, I feel in
many ways the writing was on the wall that
this would happen, particularly because
even the language that is used, it was
always described as a capital gains
discount. The fact the word discount is
used, it's kind of almost telling us what
they think it is like. It's almost like
we're getting a handout, whereas obviously
some people think of it as double taxation
effectively because you're already taxed
on the income that you earn that you've
put aside to invest into something. Again,
yeah. Well, this is the problem. And you
look at this and you think, oh, well, the
discount is kind of a prelude to what they
really want to do, which is take your
assets. We're giving you a discount
because we actually think we should tax
you that. What, you know, and sadly
showing my age here, I'm old enough to
remember that, you know, Australia, I was
born at a time when Australia didn't have
capital gains tax. We have written into
the tax code pre-83 CGT relief. So if you
owned an asset before 1983, that was
precluded from any capital gains tax
because the government basically said,
hey, we're going to bring this capital
gains tax in, but if you own the asset
before this 1983 period, you're going to
be tax-free and you're good. Now, fast
forward to where we are today. I don't
even know if that pre-83 CGT tax relief is
going to be available moving forward on
assets. I dare say, from what I've seen,
they're going to remove the prior
commitment of all previous governments on
that pre-83 capital gains tax relief. So I
look at this and think there is a major
breach of trust between the Australian
people and our government. And this is
where, speaking, I would have spoken to 20
people this morning talking about what are
the outcomes, where are we going to go,
what are we going to do. So there is an
outrage amongst the people I've spoken to
this morning about a lack of fairness and
underhandedness to it and a lack of
honesty or transparency with the
government with what they've introduced.
And I think there is a quiet outrage that
is actually being voiced in a much more
meaningful way. So I think they've done a
very, very good job of waking up the
silent majority. And those hardworking
mums and dads that just want to go ahead,
you know, go to work, mind their own
business, work really hard, put some
savings aside, make sure they've got
sufficient assets to give to the kids at a
future point in time. The government's
just stepped in and said, we're going to
rob you of that opportunity. And I think
they have awoken a monster. This is going
to come back and bite them enormously. And
I can't think of a better advertisement
for One Nation than the policies that have
been served up today. Yeah. Like I 100%
agree. Trust has been broken many times by
the government. And this is what, as a
young person, I'm concerned about because
I definitely want to enter, at some point,
enter the property market. Again, I want
to have a place to live. I don't believe
that the government can do anything to
relieve the pressure of the cost of
housing. I think it's almost like a
structural issue. So anything that they
say, they will try to ease the burden on
young people. I just don't believe it. And
what my concern is, is, as you know,
Peter, I'm ex-corporate, right? I used to
be a wage earner my whole life. And just
recently, I've taken a risk to start my
own business, and I'm still working part
-time on the side to try support myself
financially. But with the rise of AI and
robotics, a lot of white-collar and blue
-collar jobs are going to be replaced over
the next 10 years. So I feel like, in many
ways, this is my one chance to try and
build a brand and earn a living for
myself. And this, in a way, feels as a
form of punishment because I didn't choose
a traditional path. I chose a different
path. And now, I don't know, I just
imagine a lot of young people are in a
similar position. It's like, well, do I
continue working where my unemployment is
so uncertain, the future of my
employability is so uncertain, or do I
take a risk, start my own business, and
now this thing has come in that has just
been like, oh, no, you're not. You're not
going to do that. It's really hard. I
think it's a big, you know, it's a sucker
punch because you've gone out, you've
left, you know, stable employment to take
a risk, to back yourself. And, you know,
the messed up part is that all your hard
work, you know, whatever you do and
however successful you are moving forward
in your ventures, the government will take
50% of that. That, to me, seems outrageous
and egregious. On top of everything else
that they're going to tax you along the
way, tax on petrol, tax on alcohol, tax on
cigarettes, you name it. They tax
absolutely everything. GST, they'll
probably move the GST from 10% to 15%.
Like, it's just an absolute free-for-all
for the government. And, you know, I think
to highlight this as a microcosm, you've
seen that in Australia we have a black
market in cigarettes, tobacco. And the
reason why we do is because there's such
an egregious tax on cigarettes in
Australia. And it's basically created a
black market in cigarettes and tobacco
products that is far bigger than the
legitimate trade in it. And the Australian
government is actually, because of their
greed and the taxes that they've applied
to the legitimate tobacco industry,
basically everyone has created a
workaround and a carve-out for a black
market in tobacco products. And the
government is actually now missing out on
revenue that they would otherwise have
because they're too greedy. And I can't
help but think this change to the budget
that we're seeing here is going to have
unintended consequences, much the same as
what the tobacco industry has faced, but
this will be levied across all industries.
So just going to some community questions,
obviously, like how does this affect
Bitcoin? Well, I think it's a great
advertisement for Bitcoin. You know, I'm
always positive on Bitcoin, but this is
even better. To me, this is a number of
factors. Arguably, one of the great
winners out of this budget. Firstly, to
me, what does this budget say? It says
that we need to invest in assets that we
never plan on selling. So if you're okay
holding a property that, you know, you're
okay is going to be in the right area,
that's not going to have any land issues
or you name it, any type of issues you
could think of, and you're happy to hold
that until your death, then by all means,
go for it. But Bitcoin is the only asset
that I can think of that I want to buy now
and I will be happy to hold until the day
I die. So I think that's a huge advantage
for Bitcoin. The other thing with Bitcoin
is, is that we're now getting the banking
system built out around it. That might
upset a few people, but it's actually very
positive on the whole, I think, for
Bitcoin, getting integrated into the
system. Because I think Bitcoin will end
up eating the system, not the other way
around. But you, having Bitcoin, you'll be
able to borrow on your Bitcoin. You'll
never have to sell it. And that, to me, is
going to be a huge advantage to, you know,
having Bitcoin as opposed to other assets.
Because if you have to, you know, compound
through time at a, say, average compounded
rate at 10%, and then every time you sell
that asset, your equity halves, and then
you've got to compound through time after
halving the asset value, that's going to
be very difficult. You want to compound
through time without having to have any of
those 50% resets, which is what this
capital gains grab looks like. And so, to
me, I think it's a huge positive for
anyone thinking about Bitcoin, because
this is an asset that's going to continue
to grow over the next 1,500 years.
Yeah and
there's something that I remember
James Chek said on one of the more recent
podcasts that he's done, and it's
absolutely stuck with me. One of the top
two reasons why he's super bullish on the
Bitcoin is the people. And this kind of
just is what gives me hope is the silver
lining in this whole thing. It's like I
always have faith that people adapt no
matter what cards they're served, and I
think we will be okay. But it just, yeah,
it just seems like it's such a, yeah,
curveball in a way that's come through.
And I can't wait to see the reactions from
some of my international friends. I think
they're all just going to gasp when
they're here. But to pivot a little bit,
do you think there's a reality where
Bitcoin gets accepted as money in
Australia? Or is that not even like in the
next 10, 20 years a possibility? No, I
think there's, say, a balance of
probabilities. You know, in the next 20
years, do I see Bitcoin getting accepted
as money? I would put that at a 50-50. Do
I think it's likely or probable, like
greater than 50% chance? No, I don't. I
don't think it's going to get accepted.
But what I do think it will do over the
next 20 years, it will be basically
integrated into our banking and financial
system. So it will be as good as cash.
It'll be as good as that. But you won't
have to sell it. And truth be told, you
never want to sell that because that's the
asset that's going to continue growing at
the fastest rate possible. It'll
outperform property. It'll outperform
shares. It'll outperform everything else.
And if you've got the financial products
wrapped around Bitcoin that allow you to
borrow on it, why would you ever sell it
and then pay half of those gains in tax to
the government? That seems stupid to me.
Yeah. And I did have one community
question. I know you don't like to do
short-term price predictions, but I think
a lot of people are very keen to know what
you think the end of 26 might look like.
Given I'm so bad at these, please don't
take any note of what I'm about to say.
But I think we could see $126,000 back to
an all-time high by the end of the year.
That's six or seven months away. The
positive arguments for that is that we've
got the midterms coming up. We've got
celebration in the U.S. of a 250-year
anniversary. From what I'm hearing, there
could be a strategic Bitcoin reserve
announced. If that's the case, then that's
going to be a huge, huge bonus for
Bitcoin. It'll be the green light from
other nation states to adopt Bitcoin as
their global reserve currency, as well as
the U.S. You also have reasons to be
bullish on Bitcoin and why we could get
back there quicker than most think is that
STRC product from strategy is now
generating huge amounts of volume. And
I'll probably talk to you offline about it
because it's an ill-formed thought at the
moment. I don't want to say something
that's totally irresponsible. But I see
that STRC product that strategy has put in
place as potentially the tipping point.
This is the inflection point for the
Bitcoin market where Saylor will buy so
much Bitcoin, he will determine the price
at the market. And this is where, for me,
I think there's a very real probability
that that could happen. If I look at the
flip side of that, what are the things
that are going to take away from Bitcoin
going back to those all-time highs? There
is going to be a flight of capital from
all assets into the trade of AI. Now,
whether that's – if you look at what's
coming up from a liquidity perspective in
the marketplace over the next six months
before the end of the year, you're going
to have the launch of the IPO of SpaceX
and possibly as well as Anthropic. These
are trillion-dollar businesses that are
basically going to take a huge amount of
capital and risk capital away from
everything else, including Bitcoin in some
way, shape or form. I think the software
industry is going to suffer greatly from
this because a lot of that risk capital or
growth capital is going to move out from
there into your AI IPOs, and that creates
a sucking sound. And when you take that
liquidity out of the current system, that
literally creates a pressure drop, and it
needs to fill the space, so there's going
to be a fall in values in some way, shape
or form. How much Bitcoin is affected by
that, I'm not sure, but for anyone chasing
that trade, I would just caution them with
this is that it's very, I think, myopic to
chase Bitcoin. The trade of abundance, i
.e. AI, and sacrifice the scarcity trade
to chase abundance, because by the very
nature of abundance and AI, everything is
on basically a cost curve to zero. There
is huge pressure pushing prices down,
tokens coming down, AI models getting more
efficient. Basically, it's a race to the
bottom as far as capital extraction, and
these AI industries are hugely capital
intensive. So I look at that and think,
they're typically businesses that I don't
want to be in when there's a race to the
bottom, and it's a capital intensive
industry. They are things that I run from.
And the flip side of that is, is that
these trades are abundant. So basically,
they're open to everyone, and there's no
major moat at this point in time around
those industries. Yes, there are partial
moats in time when it comes to building
out infrastructure or energy or chip
manufacturing, things like that, but that
typically gets resolved. So I caution
people to chase the abundance trade at the
cost of the scarcity trade, which is
Bitcoin. So I think there'll be full
circle on that AI trade where people have
chased it, lost money, made money, and
then they'll realise, I've done all this
work, and I'm still not better off in
Bitcoin terms. Maybe I should just buy
more Bitcoin. And that's what will end up
happening. Yeah, that's an interesting
thesis. But what other asset class do you
think Bitcoin is going to take value from?
Will it be gold? Will it be bonds? Where
is it going to try to absorb capital from?
This is going to be wildly unpopular, and
I know who I'm talking to. So not to make
light of it, but Bitcoin is actually going
to increase the size of the credit and
debt markets exponentially. And this is
where Bitcoin doesn't need to take from
gold. It doesn't need to take from stocks.
It doesn't need to take from the property
market. Bitcoin can go exponentially in
value just by absorbing a lot of the bond
market. And the bond market, if you
understand how banking works with the
fractional reserve nature of our existing
banking system, you can, well, this is
literally how our banking system works.
For every $1 that you put into your bank
account, the bank lends out $20. Under the
Basel III Accords, anyone can look that
up. That's basically the capital adequacy
ratio that is required by all the globally
systemic important banks. Now, that $1 on
the balance sheet allows them to lend out
$20. Bitcoin on the balance sheet is going
to allow them to lend out $20. And this is
where I see the STRC product as being a
complete and utter game changer because
that is going to be risk-weighted. This is
a technical term for basically banking.
But having STRC as a risk-weighted asset
on the balance sheet of the banks will
allow them to 20x leverage that asset. So
for every million bucks you've got in
STRC, the bank, from the hedge fund
perspective or investment banking
perspective, will be able to lend out $20
million. So I think the price of Bitcoin
going exponential is actually going to be
created by the very thing that it's out to
destroy, the debt markets. Yeah, that's
really interesting. So is the risk based
on the fact that it's backed by Bitcoin
rather than credit? Those two things will
merge. And if you are self-custaining your
Bitcoin, you won't have to worry about
what it means. You'll be immune to all of
the market fluctuations. Yes, the price of
Bitcoin will go up and down in a day and
week, month, year, whatever it might be.
But if you self-custaining your Bitcoin,
you will be immune from any of the
problems that TradFi is going to inflict
upon Bitcoin. Well, that's really
interesting. Like I always consider and I
never know the answer, but like what is
the end game of all of this? Like what
does Bitcoin look 20, 30 years from now?
Well, I just, yeah, that's the part I'm
most curious to see whether how it
integrates with the rest of the system.
You know, the generations being born now,
they won't even really have an
understanding like you and I do of self
-custaining Bitcoin. That will be such a
foreign concept to them. I don't think the
world. I think there'll be some people who
operate as sovereign individuals that walk
around the Bitcoin and are immune to it.
But for all intense purposes, I think the
generations of 10 and under now will see
that Bitcoin's completely integrated into
a seamless service or product that they
use now and they'll have no idea what's
under the hood. Yeah. But also wanted to
ask, you know, in Australia, obviously
we're seeing a very loose respect for
property rights. Do you think there will
come a time where self-custody is at risk
in Australia? Yeah, that's an interesting
topic. I hope not. And I think if we look
at what's happened with the Clarity Act
and some of the legislation that's looking
to pass with that, I think we can assume
that in Australia we will follow the US's
lead and preserve self-custody rights. So
for that, I'm pretty confident that
Australia will follow that lead and we
won't have issues around self-custody. I'm
sure there'll be a fight at some point.
They'll want to integrate it all into the
system so they've got full control over
it. But the beautiful thing about Bitcoin
is you can do whatever you want with it.
So I think people will fight for that. And
I think we've got cover from the current
administration in the US that's outlined a
framework to ensure that self-custody
Bitcoin is going to be protected moving
forward. Yeah. But just coming back a
little bit back onto the budget, because I
went on a little tangent then, what does
it mean for property investors? And
particularly, like, I want to understand
for those looking to enter and also for
those who are currently holding
investments. Do you think people will try
to sell off some of their properties
before this thing takes place? I've got no
doubt they will. Having conversations with
clients as we speak about what do we do
now? We've now got a deadline for July
next year, 2027. If we sell the property
before that, we have a 25% tax rate. If we
sell it after the 1st of July, 2027, it's
going to be 50 cents in the dollar. I've
got clients sitting on tens of millions of
dollars in gains. Although they're very
generous and magnanimous with all sorts of
things, they don't think the government's
doing a particularly good job spending
their money. And they don't want to double
the amount of tax that they have to pay.
Now, this is a forcing function for
getting very clear on the investments that
you're holding, why you're holding them,
and what your future expectations are of
that. And this is literally what we're
going through with clients at the moment
to really understand what's their plan
moving forward. And, you know, do the
property or shares that they're currently
holding really allow them to achieve what
they want to in the future? And this is
where I think there's going to be a glut
of property come to the market before that
1st of July, 2027. I think if you look at
who are going to be the winners and losers
in this, I think there's going to be an
opportunity for investors, sorry, for
first home buyers early next year or
sorry, mid next year to take advantage of
this glut of property on the market.
Ironically, this is going to be at a
really bad time because I think interest
rates will be substantially higher from
where they are now. I think property
prices will be substantially lower because
there'll be a glut of property coming to
the market. There are people already
selling now who can't afford the
properties that they've got because the
interest rates have gone up. Now, if you
listen to the budget, he'll tell you that
interest rates are going to come down and
inflation is going to drop to 2.5 or 2.25%
by halfway through next year. So it's only
a temporary inflation spike. I think
that's total horseshit. Pardon the French,
but I don't see that. I don't see
inflation rates coming down. I think
they're going to be persistent. They're
going to be sticky. That means that the
government's got or the RBA's got no
choice but to maintain interest rates or
increase them. That's going to put further
pressure on the housing. That's going to
mean that rental prices are going to go
up. So I think if you're a first home
buyer, I think it's going to be very
advantageous in the next 12 months to
purchase a property. But if you're an
investor, I think there are some very
tough times ahead. I think you're going to
have one of two things. You're either
going to have to sell the property now
before that discount window evaporates or
alternatively be prepared to hold that
property for a long period of time until
the next government comes in and says
we're going to reinstitute the discount.
So you're going to have to play either the
really short game or the really long game.
And how you do that, I think, is going to
be a matter of personal preference, you
know, what you see moving forward. But I
think homeowners are going to be big
winners out of this as well because what
this tells me from an investment
perspective, the only tax-free investment
that you have left now is your own home.
And, you know, growing up, I was told your
home is not an investment. Every
investment book you read, everyone tells
you the home is not an investment. But the
tax system has been structured in a way
where people are incentivised to put as
much capital into their owner-occupied
home and then trade up and trade up and
trade up until you end up with $100
million properties in the eastern suburbs
of Sydney or, you know, the finest suburbs
of Melbourne. So the game has changed. And
now it's actually going to be very
property-centric for a lot of investors
now. They're incentivised to get rid of
that, you know, get rid of those
investment properties, sell their own
home, consolidate all of those, you know,
all of that equity into one mega purchase.
And this is what we'll probably see, an
upward pressure on owner-occupied homes
and downward pressure on investment
properties. Yeah. So really, if you're, I
guess, in the housing, you're a young
person and you want to buy a residence to
live in, you really kind of have about 12
months before house prices inflate again.
Yeah, I do. Is that what you're saying?
After 12 months, you'll see property
prices start to move and go up. And, you
know, the first home buyers priced out of
the market. And then, unfortunately, from
what I can read, the structures that you
can build long-term wealth in that you can
pass down through generations is going to
be eviscerated. Those structures are no
longer going to be viable moving forward.
Yeah. I mean, that's a lot to take in. But
I just want to come back to another
question I had from the community is, you
know, obviously a lot of people are now
reacting to this. And it's like people
who've been for a number of years thinking
about potentially leaving Australia with
their families. We're kind of waiting for,
okay, we'll just see how things plan out.
I love Australia. Beautiful weather.
Beautiful country. Love everything about
it. I want to stay here. I want to fight
for it. But, like, I feel like for many
people, this is now the straw that's going
to break the camel's back. And do you see
there's going to be a massive exodus of
high net worth individuals leaving
Australia? I don't even think it will be
high net worth individuals. I think
there's going to be a mass exodus of young
people as well. Why would you stay here to
pay a 50% tax rate? If you're, you know,
successful enough to earn more than $250
,000, why do you want to give half of it
away? Why not move to Singapore? Why not
move to a low tax jurisdiction where you
can earn a fortune, pay no tax, get ahead?
Or, you know, get cheap help with the
family. Like, all of these things are on
the table. Australia is a wonderful place
to live. I really am sad at the, you know,
at saying that and thinking that. But I
would have had close to 20 conversations
today. Four of the 20 conversations
revolved around how do I move, how do I re
-domicile out of Australia? That's 20% of
the conversations I've had. So I look at
that and I think you can extrapolate it.
Maybe there's a bias to the people I talk
to. Put whatever filter on you want with
that. But I think there is going to be a
huge incentive for young and old like to
basically move out of Australia because
the tax regime is, it's basically
crippling. And we haven't even got to the
point where there's going to be estate
taxes on that. Now, let me just give you a
brief example of what this could look
like. Talking to a client, they, you know,
their parents, basically old, looking to
pass down wealth. They've done very well.
They've got circa a $12 million estate to
pass down. Under the current tax regime,
with the cost base that they've got, they
stand to inherit about $10 million, which
is a huge amount. However, with the advent
of the change in policies moving forward,
if they sell that property after the 1st
of July, 2027, instead of receiving $10
million, they'll receive $8 million. And
if they put in place an estate tax, which
is like every other tax in the UK, the US,
Canada, and Europe, instead of receiving
the $8 million, they'll end up with $3.4
million out of a $12 million estate. So an
effective tax rate of 75%. Because not
only are you paying the 50% on the capital
gains now, you're also going to pay a 40%
tax on death duties. And I look at that
and think, this
is not the way I would like to see
equality brought to Australia by making
everyone poor. Yeah. Yeah, exactly. But am
I correct in assuming, so if someone
decides, you know, this is the straw that
broke the camel's back and they decide
they want to move their family abroad,
they've been researching potential
countries for some time now. Now, is it
true that it would still require two to
three years to actually, like, legally
break up with Australia, essentially, in
which case they would actually be caught
in the higher tax percentage after 1st of
July, 27? No, I don't think it's a two to
three year window. I think you've got a
choice with your superannuation. Oh,
right. So you've got up to two years while
you're deciding to leave the country,
whether or not you want to exit or not.
But from what I understand is you can
notify the tax office. It's not, I think
it's more a six month period rather than a
two to three year period. But check with
your accountant. Yeah. Yeah. Okay. That's
good to know. I was like, I just, I don't
know where I got that from. I just thought
it was like a long term process to, yeah.
For those approaching retirement, what are
you seeing people do with their super?
That's a great question. The last four
months we've seen the superannuation
system completely undermined by Jim
Chalmers. The thought of taxing unrealised
capital gains tax in super was an
abomination. I think it would have single
handedly ruined capitalism in Australia.
And I'm thrilled that that didn't get up.
But that hasn't stopped instituting stupid
policies. To me, superannuation is one of
the low tax environments. But I can't help
but think it's like that meme with the,
the emperor, not the emperor, the Star
Wars meme with the fish eyed character who
talks about it being a trap. To me, this
is going to be a trap for Australian
investors where, because the only low tax
environment that you have left is the
superannuation, everyone's going to pile
money into the superannuation system. And
that is going to be then taxed and used in
whatever way they say fit. And the federal
Labor government a few years ago now
thought that they wanted to institute a
policy that they use everyone's
superannuation or a portion of it to
create low cost housing. And what's
interesting is that breaks the golden rule
of our superannuation system, which is the
sole purpose test. The sole purpose test
basically says that all money in your
superannuation needs to be for the benefit
of members' retirement. Now, how, pardon
the French, but how the fuck on earth is
me subsidizing low cost housing good for
my retirement? I don't want to seem brash
or abrasive with this, but that does not
benefit my retirement one bit by
subsidizing low cost housing somewhere
that I get suboptimal returns. And it's so
brazen that this government thought that
that was a good policy and everyone would
be happy to do it. And that was shut down.
Then they've come up with the stupid
policy last year where they said, we're
going to tax unrealized gains. Moving
forward now, they're going to tax balances
of over $3 million. And I look at this and
think the superannuation system, well,
it's the best tax environment that we've
got. Unless you're over the preservation
age, which means you can withdraw your
super at any time. I wouldn't be telling
people to put money into this system
because you don't know what they're going
to mandate your capital do. They can turn
around and say, we're going to mandate
every dollar in this superannuation system
goes to paying off the national debt. Or
providing affordable housing or paying for
infrastructure projects or be funneled
into the union movement, which is going to
waste billions of dollars like they have
in Victoria. I look at this and think this
is a captive environment that doesn't
allow you full control of your capital.
And unless you reach preservation age, you
are hostage to whatever the government of
the day tells you you have to do with
that. And I don't think, particularly for
your audience and the people I talk to,
they're focused on being self-sovereign.
They don't want to be mandated or dictated
to what they have to do. And the very
thought of having anything like that, I
think, is repulsive. So I wouldn't be
adding any extra capital to the
superannuation system unless you're at an
age that you can take it out immediately
with no cost to doing that. Right. So what
is kind of the runway that people have to
do so before things get worse? I don't
want to be facetious here, but it can
always get worse. We're not Venezuela yet.
Well, thank you so
much for your time. I really appreciate
much for your time. I really appreciate
you coming on.