{"id":154936,"date":"2025-07-04T19:19:25","date_gmt":"2025-07-04T19:19:25","guid":{"rendered":"https:\/\/websitedesigns.com.au\/elankanew\/?p=154936"},"modified":"2025-07-04T19:21:36","modified_gmt":"2025-07-04T19:21:36","slug":"noel-news-76","status":"publish","type":"post","link":"https:\/\/websitedesigns.com.au\/elankanew\/noel-news-76\/","title":{"rendered":"NOEL NEWS"},"content":{"rendered":"

NOEL NEWS<\/span><\/h2>\n

\"NOEL<\/p>\n

“Persistence is the hard work you do after you get tired of\u00a0<\/i><\/strong><\/span>
\ndoing the hard work you already did.”<\/i><\/strong><\/u><\/u><\/span><\/p>\n

NEWT GINGRICH<\/span><\/p>\n

The Podcast<\/u><\/u><\/span><\/h1>\n

Renowned broadcaster John Deeks and I discuss all the big topics covered in this newsletter in detail each month.<\/span><\/p>\n

\"NOEL<\/span><\/p>\n


\nListen Now on Spotify<\/a><\/span><\/p>\n

Welcome to a new financial year.<\/span><\/h1>\n

Once again, we\u2019ve lived through an eventful stretch \u2013 full of bold predictions about what might happen if Donald Trump returned to the White House.<\/u><\/u><\/span><\/p>\n

My inbox was flooded with questions:\u00a0Should I sell everything? Will the markets collapse?<\/i>\u00a0But my answer never changed. If you hold a well-structured share portfolio, the smart play is to stay the course. Long-term investing means riding out the inevitable turbulence.<\/span><\/p>\n

\"NOEL<\/span><\/p>\n\n\n\n\n
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Cartoon by Bob Rich for Hedgeye<\/u><\/u><\/span><\/p>\n<\/div>\n<\/td>\n<\/tr>\n

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And yes, we certainly got some turbulence. In early April 2025, global markets took a dramatic turn. On April 2, President Trump announced sweeping tariffs, triggering the \u201cTrump Thump\u201d \u2013 a historic two-day plunge that saw the S&P 500 fall 10.5%, wiping out over $3 trillion in value. But by April 9, the administration paused the tariff rollout, sparking a powerful rebound. Major indices posted their biggest gains in years, with the S&P 500 back in positive territory by 13 May. That rollercoaster week reminded us just how sensitive markets are to political shocks, and why staying informed matters.<\/u><\/u><\/span><\/p>\n

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There\u2019s no doubt markets, especially overseas, are more volatile, with wild price swings becoming the norm. Two key drivers are behind it. First, traders chasing quick profits jump in and out, fuelling the noise. Second, investor psychology kicks in; everyday people reacting emotionally to headlines. One of the great benefits of shares is their liquidity. You can sell quickly if needed. But liquidity is a double-edged sword \u2013 it makes markets jumpier. Traders play their games, while mums and dads panic and bail out, often at the worst possible time.<\/span><\/p>\n<\/div>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Picking winners<\/strong><\/span><\/p>\n

Often when I talk about investing in shares, the most common response is, \u201cI don\u2019t know where to start.\u201d For me, the simplest approach is to invest in the index, using low-cost funds like STW or VAS. Of course, everyone wants to pick a winner. But if you look at the table below, you\u2019ll see the reality: while a few shares had spectacular gains, many delivered terrible results.<\/span><\/p>\n

\"Often<\/span><\/p>\n

In contrast, the index delivered a solid return of 13.3% for the year \u2013 a great outcome, especially when you take a long-term view. And no stock picking decisions to make! The reason 13.3% differs from the newspaper headlines of 10% is that the papers didn\u2019t include the dividends paid to investors. And of course, franking made them even more valuable.<\/span><\/p>\n

\"NOEL<\/span><\/p>\n

Visit to Adelaide<\/strong><\/span><\/p>\n

Geraldine and I had a wonderful visit to Adelaide, even though the weather was much colder than in Brisbane. I spoke to three groups of mainly older citizens and received the usual barrage of questions. It was particularly satisfying to have audience members come up and tell me how much my books have changed their lives and those of their children.<\/span><\/p>\n

\"NOEL<\/span><\/p>\n

For quite a while, I\u2019ve been doing a regular morning talkback program on ABC Adelaide, but this visit gave me the time to do it directly from the studio. It was great fun.<\/span><\/p>\n

\"NOEL<\/span><\/p>\n

There\u2019s nothing difficult in what I talk about. It\u2019s really about the basics: spending less than you earn, investing regularly, having compound interest work its magic, investing in a diversified portfolio, and keeping in mind that the most important factor that determines how much money you\u2019ll have when you retire is the rate of return you can earn on your finances.<\/span><\/p>\n

But I\u2019m still concerned about the lack of financial literacy that exists. Whenever I speak to an audience, irrespective of the numbers or the demographics, I ask them which tax they would prefer to pay: income tax, GST or capital gains tax.<\/span><\/p>\n

Very few pick the obvious answer, which is capital gains tax. It\u2019s the best tax because you don\u2019t pay it till you dispose of the asset, and as long as you\u2019ve had that asset for over a year, you get a 50% discount on the amount you are required to pay. Furthermore, there is a range of strategies \u2013 such as catch-up contributions \u2013 that can alleviate it.<\/span><\/p>\n

The final advantage is that death does not trigger CGT. It passes the liability to the beneficiaries who will only pay CGT if and when they dispose of the asset that\u2019s been bequeathed to them.<\/span><\/p>\n

Another question I ask the audience is who understands franked dividends. Usually only a couple of hands go up. It\u2019s a sad fact that franking credits are one of the best ways to boost the rate of return on your portfolio and also give yourself tax-advantaged income.<\/span><\/p>\n

If your kids were earning $100,000 a year and they had income from franked dividends, that income would be tax-free because the franking credit of 30% would wipe out their 30% tax.<\/span><\/p>\n

As an example, take a portfolio worth $200,000 in an index fund, using the numbers of 4% franked income and 5% growth. If that portfolio produced a total return of $18,000 over 12 months, there would be no immediate tax on the $10,000 of capital gain because the asset was not disposed of, and the dividends would be tax-free thanks to franking.<\/span><\/p>\n

It\u2019s the best wealth-building strategy in the country.<\/span><\/p>\n

Talking tax<\/strong><\/span><\/p>\n

For the umpteenth time, tax reform is back on the agenda, this time as the centrepiece of Treasurer Jim Chalmers\u2019 latest talkfest aimed at boosting productivity. Chalmers is now positioning himself as a crusader against red tape, but it\u2019s hard to take that seriously when, according to recent reports, the Albanese government has introduced 5,000 new regulations in its first term.<\/span><\/p>\n

\"NOEL<\/span><\/p>\n

Beyond the usual story of wasteful government spending at every level, the deeper issue lies in changing demographics. The number of non-taxpayers is rising rapidly as more Australians retire and live longer \u2013 90% of retirees pay no income tax at all. Add to this our skewed personal income tax system, where just 12% of taxpayers are footing 62% of the bill, and the imbalance becomes clear.<\/span><\/p>\n

The problem is that any taxation changes will be difficult to implement. Just look at the current system. Once a person earns $135,000 a year, they start losing 39% of every extra dollar. That jumps to 47% once they hit $190,000. These are hardly high-income figures by today\u2019s standards. Yet, we\u2019ve created a system where someone earning $190,000 loses almost half of every additional dollar they earn. There\u2019s something fundamentally wrong with that. It shifts the focus from earning more and being more productive to finding ways to minimise tax, and that\u2019s a dead weight on the economy.<\/span><\/p>\n

\"NOEL<\/span><\/p>\n

Image by macrovector_official on Freepik<\/span><\/p>\n

For years there\u2019s been talk about eliminating the capital gains tax exemption on the family home, but that\u2019s a practical impossibility. No government would dare to do it, and even if they tried, the massive disparity in house prices across Australia would make it unworkable.<\/span><\/p>\n

There\u2019s also ongoing discussion about reducing the capital gains tax discount, but again, implementation is tricky. A fundamental tax principle is that you shouldn\u2019t tax for inflation. Yet, removing or reducing the discount without addressing inflation would do just that. And even if they phased it in by applying the change only to assets acquired after a certain date, you\u2019d see a frenzy of purchases before the deadline, followed by a slump. The result? Distorted markets, disrupted planning and more confusion than clarity.<\/span><\/p>\n

Super is always a target, and now there\u2019s talk that the government might slap a 15% tax on pension-phase accounts that are currently tax-free. But there\u2019s a major flaw in that plan: super\u2019s entire purpose is to provide a low or zero-tax haven. A couple with $800,000 invested in their own names would pay no tax anyway, thanks to offsets and franking credits. Tax their super, and they\u2019ll just pull the money out and invest it themselves.<\/span><\/p>\n

\"NOEL<\/span><\/p>\n

Image by jcomp on Freepik<\/span><\/p>\n

As always, there are rumours about changing the way family trusts are taxed. Many of the country\u2019s wealth producers run small businesses, and with so many going broke in the first five years, asset protection is a top priority. If you\u2019re a sole trader or in a partnership, all your personal assets are at risk if things go wrong.<\/span><\/p>\n

That\u2019s why most business owners use a trust or company structure. A trust doesn\u2019t pay tax itself \u2013 it distributes profits to beneficiaries, who are then taxed at their marginal rates. While trusts can offer some tax advantages, these are limited for most business owners. Typically, the beneficiaries are mum, dad and the kids, but distributions to children under 18 are taxed at the top marginal rate once they exceed $416 a year. With the 30% tax bracket now stretching to $135,000, there\u2019s little point in targeting trusts with a special tax \u2013 owners would simply start paying distributions as wages instead.<\/span><\/p>\n

The only practical solution is to increase the GST to 15% with no exemptions. That would strike a blow to the black economy and ensure retirees contribute something towards the rising cost of supporting them.<\/span><\/p>\n

Any GST increase will be slammed as regressive \u2013 hurting the poor more than the rich \u2013 but that argument applies to most embedded taxes. Petrol tax, liquor excise and cigarette duties are all regressive, yet widely accepted. The real strength of GST is that it\u2019s almost impossible to avoid. It captures a large slice of the cash economy and, while it may hit low-income earners, it hits big spenders hardest \u2013 those with the most disposable income.<\/span><\/p>\n

They call us “The Elderly”<\/strong><\/span><\/p>\n

A friend sent me this. I think it may touch a chord in most of you.<\/span><\/p>\n