She's On The Money - An Investor's Guide to Tax Time

Episode Date: July 4, 2023

Welcome to the new financial year friends, and today we bring you an investor’s guide to tax time. We step though a few important points on this HUGE topic to give you some general basics, the tax implications and possible benefits of certain investments, plus so much more! Useful links... Money Smart Income Tax Calculator Money Smart Investing & Tax ATO Tax Time Tool Kit For Investors ATO Rental Property Guide   Acknowledgement of Country By Natarsha Bamblett aka Queen Acknowledgements.The advice shared on She's On The Money is general in nature and does not consider your individual circumstances. She's On The Money exists purely for educational purposes and should not be relied upon to make an investment or financial decision. If you do choose to buy a financial product, read the PDS, TMD and obtain appropriate financial advice tailored towards your needs.  Victoria Devine and She's On The Money are authorised representatives of Money Sherpa PTY LTD ABN - 321649 27708,  AFSL - 451289.See omnystudio.com/listener for privacy information.

Hello, my name is Natasha Nabanunga-Bamblett. I'm a proud Yorta Yorta, Kernai, Wolperi and Awadjeri woman. And before we get started on She's on the Money podcast, I would like to acknowledge the traditional custodians of the land of which this podcast is recorded on Awadjeri country, acknowledging the elders, the ancestors and the next generation coming through. As this podcast is about connecting, empowering, knowledge sharing and the storytelling of you to make a difference for today and lasting impact for tomorrow. Let's get into it. She's on the money.

She's on the money. hello and welcome to the new financial year gotcha and welcome to she's on the money the podcast for millennials who want financial freedom. Victoria Devine is with me as always, and we're talking about something very exciting today. Yeah, you've brought a lot of energy for what could have been a very dry topic. It's not going to be dry. I have a good feeling about this. It's the Investor's Guide to Tax Time. That is so juicy. That is spicy, spicy content. Oh, I cannot wait to jump in. I am so excited about this spicy content. Tell me you're not stupidly excited, Bec. I'm stupidly excited. My favorite part about this is that you're not an

investor. So everything that we're going to talk about, completely irrelevant to you. Exactly. I'm just glad you're here with bells on. It's new news to me. I'm a tiny baby in this episode and I hope you teach me a thing or two. But my favorite thing about these episodes is whether you're ready or not to be an investor. My favorite thing ever is making sure you're educated and actually ready for the conversation when it does happen. So like, I cannot wait for the day that you're like, oh, V, I'm investing my first 50 bucks because you're going to have so much education behind you that you're making the right decision for you. I think it's such a misconception that, oh, well, maybe like this episode about tax and, you know, investors, it's not relevant for me. I totally

get that. But like, what if in the next 12 months you get your financial shit sorted enough that you are an investor? You're going to need this next June. You're going to need this for future you. And I think that it's really beautiful in a way to kind of like give yourself that education before you need it. Like I've said it before, and it's probably not the right example, but like you don't become a brain surgeon by like just going in and doing brain surgery. Right. Like you study for years and yeah.

Oh, can you do it by YouTube? That'd be so much cheaper than a med degree at Melbourne Uni. Like honestly. And quicker. Quicker. 20 minutes. You know what? If I ever have to have brain surgery, you best believe I want someone with a real degree,

not someone who's like, I learned it on YouTube. Not me. Not you. You're cancelled. You're cancelled. So today we're going to be stepping through a few very important points on this huge topic to give you guys some general basics when it comes to tax time and your investments and what to do, because it can be super overwhelming. And it's worth obviously bearing in mind that tax implications affect the possible benefits of certain investments. So generally, all of your investment income needs to be declared in your tax return. all of it, every single dollar, interest, dividends, rent, managed fund distributions,

capital gains from properties, shares, and cryptocurrency. And if you're like, oh my gosh, I'm not an investor, V, I just have my money in a high interest savings account. Beck, that's interest. You have to declare that. Oh my gosh, this is so scary. So it's not scary. It's just about being transparent. And to be honest, guys, it's 2023. The tax system is so advanced, that more often than not, you're not even going to have to do the research. It'll just be in your tax return already because your bank already has your TFN. So it's very likely that all of this could be automated for you. And that's why so many times when I talk to people and they say, I'm not sure, should I be doing my tax return myself? You could give it a crack.

It is so much easier than it used to be. So you pay tax on investment income at your marginal tax rate. That's the rate that you pay tax on your normal income. However, there are some special rules that apply to what we call capital gains, which could arise on, quote, the disposable of your assets. That just means you sell them in a fancy way, right? Like capital gains is a tax that you pay when you sell an asset and it is worth more than what it was when you purchased it. Because they look at it and they go, all right, well, Bec, if you bought a share for $10 and it did really well and it got to $15 and you were like, well, I'm going to sell it. They're going to go, okay, cool. You bought it at $10. It's now worth $15. Capital gains will apply to that $5

that you made because in Australia and usually every other tax environment in the world, you have to pay tax on what you earned and you earned that $5. Does that make sense? That does make sense. So you're allowed tax deductions for the cost of buying, managing and selling an investment, which is really cool. So if you've been brokering shares during the year, like you jumped on shares and there were fees, you can claim them on your tax. That is very sexy, I think. But there are also rules around what you can and can't claim as a tax deduction. We'll obviously get onto those later. And I genuinely think that more things should be tax deductible, like something that

really grinds my gears back. And we'll obviously get into more of the semantics of it. But as somebody who is an ex-financial advisor, this really grinds my gears. So you obviously go and see a financial advisor if you've got some money and you want to be in the best possible financial position. And a lot of the time you will see a financial advisor and they will say, all right, Bec, you've got, you know, this amount today and we are going to grow it to this amount over here. And with my advice, you're going to be hopefully hundreds of thousands, if not millions of dollars better off. And you go, great, that's fantastic. What grinds my gears is that process where you're putting yourself first sounds really sexy. That benefits our government significantly. Like the

idea that if somebody, an individual goes and sees a financial advisor about their superannuation, even if they are just a general employee, like we're not talking about millionaires seeing financial advisors, we're just talking about general mom and dad seeing financial advisors, they will be in a better off financial position because of that advice, which means the likelihood of them claiming a pension in the future, far, far less likely, right? So like if you go and see a financial advisor, you're probably not going to rely on the government during retirement because the whole point is that you're working

towards a secure individual financial future, right? Yes. Does that not put the government in the best possible position? Totally, that makes sense. Why are they not letting us claim the cost of initial financial advice where you get your statement of advice on tax? Why can't I claim that? does it not put you in the best possible position government to give me some tax back now on the

probably anywhere between three and eight thousand dollar fee which would be very sexy why can't you let me have that initial piece of advice with some kind of like you know tax incentive so that more of us do it so less of us down the track actually claim pensions and actually need government support but you won't do that isn't that insane when you like extrapolate it out and go, hold on, the government would actually be better off if more of us got advice. And the amount of times I saw people ask me questions when I was working as a financial advisor, oh, can I claim this on tax? And I'd have to go, look, no, you can't, unfortunately, because it's initial advice. But what you can claim is ongoing investment advice. So like after

you've got your initial advice, any monthly fee after that is claimable, but not the initial. And the initial is the thing that scares most people off. Because like if I said to you, hey, back, get financial advice. It will put you in the best possible position. You'll go, oh my God, this is such a good idea, but like, it's such a high upfront cost. I don't mind about the ongoing monthly fee. Like that's completely manageable, but the upfront scares people off. I totally. I've got thoughts. Anyway. Maybe you should write a letter to the tax person. Yeah. Hello, Mr. Taxman, please let me claim this because it will be the goodest for you. Yeah, like that.

Because it's a very, very, what's the word? Persuasive. It's a persuasive argument. It's persuasive and really, I think that you've really thought this through. I think this is a great idea. I actually have because do you know how frustrated I would get every single time I would have to explain to clients, no, you can't claim me on tax, like you can't claim my initial advice, but you can for your accountant, you can for any other service providers related

to money, just not me, because the government doesn't see me as valuable as I am. Oh, my gosh. Yeah, you need to write a letter. I've just got a lot to say about that process. But then also the part where financial advisors basically undersell themselves completely. Like, you guys are so magical and put people in such good financial positions. But, like, if I busted in the door and said, all right, Bec, we're going to sit you down. I'm going to put you in the best possible financial position of your entire life.

You're going to be so financially secure. See your superannuation. Might be sitting at $80,000 right now. But when you retire, it's going to be well over a million because of my advice. you're going to be literally millions of dollars better off. You'd be like, oh, I'm in. You sound like a sales queen. Whereas financial advisors don't do it that way. They are a lot softer and a lot more gentle with the process because obviously you don't want to scare people off. But then clients have the audacity and come back and be like, oh, $4,000 is a fee. That's insane.

Absolutely not paying that. I'm like, you're literally going to make more than a million dollars because of me, but okay, no worries. Jeez. Anyway, there's just a lot to be said on that topic. That's not what this episode is about, but get financial advice. Now's a good time to think about your insurances as well. So if you haven't got that advice, I would be going and actually, you know, putting yourself in the best possible position. We obviously have a recommendation. Phil from Sky Wealth is who you should be going and talking to about your situation and his fee is not thousands of dollars. It's like 395 for a consultation, which is wild, like for all advice, you can't claim it on tax. I am really sorry, but given his fee is only a

couple of hundred dollars in comparison to thousands to put yourself in the best possible position. I think that's really good money. Give it a go. Anyway, moving on. So V, I want to know when it comes to investing in tax returns, what do you need to have prepared? Everything. Everything. Every single thing. Yeah. You should have like a manila folder. One of those like light yellow ones that give me anxiety from the amount of times I used to use them. I'm going to write that down. Manila folder on my shopping list. If you could get like a label maker and label it as well, that would make it feel a lot more official. It's really stacking up, this label maker. Yep. Yep. You're writing this down. I

like it. You're taking this very seriously. What you want actually is your investment income as a report. Most investment platforms will automatically generate this for you and email it to you. So misconception is that it will be available on the 30th of June or the 1st of July. That is not true. And it's not not true because they're lazy and haven't done the reporting. It's because we actually need the date to pass so that we can actually look at the historical changes and what actually happened in your portfolio. And reporting is actually quite intricate and in-depth. So investment reports usually come out from, I would say, the middle of July. So anywhere between the middle of July to the end of July is when I usually see them hit

my accounts. So if you're one of those people like Bec, Bec wants to get her tax return in ASAP, right? Like once you start investing, that process has to be pushed off a little bit because you're waiting for these reports. So you want your investment income. You want to make sure that you're claiming all the deductions that you're entitled to. So this is really hard if you get to the point where you're like, oh my gosh, I've got to do my tax return. You haven't been thinking about it. You're like scrambling to work out what you can and can't claim. I've said it before on the show, the ATO actually have an app where you can keep track of things throughout the year. But if you're like me and you just don't want another app on your phone, you can actually just

put a folder in your photos and just take photos of things as you go along. If you looked at my albums in my like photo section, Bec, you'd be like this woman's unhinged. Like I have a folder for everything. I have a folder for tax. I have a folder for business tax. I have a folder for all of the outfits I've worn historically that I really like. I have a folder for all of the expenses I've incurred trying to make a baby with my husband. Wild. Like you would literally look at my phone and be like, Victoria, why have you got? Yeah. But when it comes to tax time, you best believe I just flip my phone around and I'm like, hey, Bec, look at all these costs I can claim. That is so good. Make like Victoria. If the ATO needed like proof or receipts,

a photo of a receipt is fine. Is absolutely sufficient. Okay, great. Yeah, because you will have to provide that to the ATO anyway if you get audited, and they're just going to ask for, quote, the original receipt. But a photo of that attached is much easier to go back in email than going, oh, hey, yeah, Mr. Taxman, let me just go under my bed to the shoebox where I keep all of those receipts. Also, something that you probably haven't considered but I've seen happen far too many times is receipts fading. So, receipts, more often than not, are printed on thermo paper. Thermo paper means that when the receipt comes out, it doesn't have ink. It actually heats up and it prints that way. So if you leave a receipt in your car on a hot day,

it is very likely that that receipt loses all of the information that was on it because it's overheated. Do you remember those pens where you could like rub them out, but they were pen? Yeah. That actually disappeared because of friction, not because of the rubber doing it. It was actually friction and heating it up. So one time I used to be obsessed with like erasable pens because I'm a lefty and I mess everything up so erasable pens they don't smudge so I loved that but then also I loved that I could just like erase my mistakes and my notes would always look perfect like I don't know if you've noticed this but I like being organized I like everything to look

perfect like I used to write everything in these like erasable pens notebook car hot day lost every note I ever had for a client and now I've never used an erasable pen ever again because I'm triggered yeah that makes sense that's but that is why and a very long-winded way of saying it's actually better to take a photo and save it because the likelihood of your receipt disintegrating whether you look after it or not is very high now i wonder if i had a piece of paper that may or may not have once been a receipt yeah sent that to the ato and said i'm so sorry this is not just not going to fly. You don't have proof. Yeah. It's kind of like when the police come to get you and it's like innocent until proven guilty. But also you've got to prove that you're innocent.

You know, like if you get accused of something, they'll be like, well, prove you didn't do it. And you're like, oh, well, damn, I don't know how I'm going to do this. Honestly, TLDR of this conversation, take photos of your receipts, save them somewhere important. It could be a folder. it could be the ATO app, it could be anywhere, but that's going to mean that all of your tax deductions are much easier to one claim because it's just in the one space. But also remember, like I forget all the time, I'm a business owner as well as somebody who claims on my personal tax. So these small things add up. Like if you're going to pop past Officeworks and pick up some last minute things or some like pens or some notes, or, you know, I buy a million Sharpies

and post-it notes, like take photos of those receipts because they're the ones that if it's for work purposes, you can claim. So just make sure that throughout the year, you're just keeping track of stuff, my friend. It'll also mean that when you have to like calculate any capital losses or capital gains when you sell an investment, like just keep everything in one place. It'll make it so much easier. Whether you're doing it individually or you're handing that information over to an accountant, my accountant loves me. He really does because I'm so organized that I make his life so much easier. I can imagine. That would be very nice. Exactly. I'd love to see Victoria walking

through those doors. Yeah. I mean, that's how I feel. I mean, it's probably just my ego telling me that that's it. I doubt it. He's probably just like, yep, another cut-paste client. No worries. But I think. Of course. You can see it in his eyes. Yeah. Yeah. Now, V, what do we actually need to keep records of to show the ATO? Eriting. Eriting. Eriting. Okay. So if you are claiming something, you must have a receipt for that even if it's under the do i say my office this is terrible

i'm gonna get in trouble with the environmental hippies when in doubt print it out like we need it and i don't actually mean print it like on hard paper sure but you know when you like get emailed like a receipt or something love that i say when in doubt print it out because if you hit print like the invoice that you've been sent or the receipt or whatever you can actually save it to pdf and put it in an album and that's what i do i'm not actually printing it but i'm saving it filing it away because I guarantee the last thing small business owners want to do or anyone wants to do is trawl through their emails trying to find an attachment for an invoice that they paid back in January. Right. Nobody wants to do that. How can you remember also, oh my gosh, the amount

doesn't line up because there's lots of different invoices that get paid. Honestly, just file it away. We use an accounting system. At the moment, we're using Xero. So it's all just like tracked in there and it makes it so much easier, that small business side of things. But when it comes to being an individual, like just file it away. Even in your emails, have a little like separate email folder that you can just click and drag things that you think might be relevant to tax time. Call it tax time and call it tax time 2023 or 2024. Because I promise you, you're not going to want to look at all your old tax stuff next year. And at least it's all kind of like folders. So I've got tax time 2020, tax time 2021, 2020. Do you know what I mean? Totally. Just be organized.

it will help you. I love this. I unfortunately do have 20, maybe 30 emails because I, you know, want to sign up for Netflix and have a free trial every month. Yeah. So for me, it's going to be a bit of a nightmare trying to find all the invoices. But if you were doing it as you were going, it would have been much easier, right? Absolutely. So you know what I might do? I might start doing these things. Yeah. When it comes to investments though, what you're really wanting to keep track of is kind of the start and the end of the process. Like the middle ground, it's fun for you, but the taxman isn't going to care as much. What they want to know is how much did you pay for that asset? How much did you sell that asset for? Or how much is that asset worth today? Like,

what is it worth when we do our tax return, right? So like, we also want to understand how much income are you getting from that investment? Make sure that you're just keeping record of all income payments, like your distribution statements or like your rental payment receipts and dividend statements. And then also, Bec, we want to make sure that we are keeping track of any expenses that you incur while owning that asset. So receipts for payments to like manage. So if you're engaging a property manager, claiming it, we are making sure that we are tracking any costs that we incurred to maintain the property. So say something happened to the front door and you needed to replace it on a rental, claimable, because it's an improvement

or a maintenance thing for your property. We also want to make sure that we're claiming any cost that was incurred to improve your investment. So like, as I said before, you're not able to claim first initial advice with a financial advisor, but you can claim ongoing, which is improving your investment. So there's lots to it. You also need to keep your records for five years. That's why I didn't say delete that folder when you're done. Don't do that. You need to keep it for five years on record because that's the period of time that they could potentially audit you for and you'd have to prove it. So just important to make sure that it's all filed away and then you can delete it after five years. If you're anything like me,

you still have your tax return information from 2016. It's all good. Like I don't delete anything because I'm not going to go back through that, but at least it's filed away for future use. Yeah. I love that. Okay. This is interesting about the landlord thing. Sorry. The landlord thing? Not the landlord thing. If you have an investment property. Yeah. Because it's an investment and you're paying for things to improve the property. Yeah. This is interesting. So you can claim it.

That is really, really cool. It's one of the sexy reasons why people who have investment properties, you know, might choose to buy an investment property and then renovate it or make substantial improvements to it while it is still an investment. Obviously, you need to talk to an accountant and get some advice on this because there are like, you know, regulations and things that you need to abide by. But if you, you know, wanted to improve the property and, you know, change the bathroom or update the bathroom, if it's an investment, you can claim some of that. What things can you claim on and what can you not claim on?

So I'm assuming if you like live in a house, it's not obviously an investment. So if you're, you know, fixing up your own house that you have maybe purchased, you wouldn't be able to claim that, I assume? No, no, no, no. Because it's not an investment. Yes, I see. And it has to, like there are certain, that's why I said get advice on it. Sure.

Because you can't just listen to a podcast and be like, well, Victoria Devine said, because babe, that's not going to fly with the ATO. Like I'm pretty close with them, but not that close. Right. Like don't name drop me, you know? like they're probably going to side-eye you. Oh, Victoria said? Okay, well, that's fine. Oh, Victoria, well, in that case, they'll be like, who, this woman again? We're so sick of her. Anyway, what you can claim is interest income expenses. So claiming a deduction for account

keeping fees that you incur on an account held for investment purposes, like a cash management account. So for example, I have a separate bank account with Macquarie because I invest with Six Park as well. So not a recommendation, I'm just sharing some information. I invest through Six Park and through them, I have a cash management account with Macquarie. And that's where essentially I direct debit cash to that account. And then Six Park, which is the investment platform that I use, they actually have authorization to take money just out of that account. So I move money into that account so that then when I say, yep, I would like you to invest X amount of my money, they just take it out of there. And then we need that account because I'm not going to give them

authorization on my daily transaction account, right? Like I want that middle buffer where they can only touch that money that is in that cash management account, that account has fees. So I can claim those fees on tax, which is kind of cool, but a lot of people would just like dismiss it and not think about it because they're like, oh, that's just some structure that I've set up to invest whatever. Don't think about it again. You can claim that and you need to claim that because you're entitled to it. Like we need to claim what we're entitled to. So don't throw away those like fee statements when they come through. If you have a joint account, you can only claim half like or whatever your joint amount is so obviously you can only claim your share of

the fees not like the total fees you can't double dip I'm really sorry because I know some people might be like oh I'm gonna double dip here my partner will do it and I will do it no no no can't do that sorry you can also claim on charges or taxes on that account so for example like if you hold an equal share in an account with your partner you can only claim half of that allowable like account keeping fee. Kind of rude, but also like it makes sense. I suppose. To the second part of your question, you were asking about what you can't claim. So you can't claim a deduction for the interest you incur on personal tax debt. Sorry, I need to absorb that. Say that one more time for me. That's why I just stopped when I said it. Thank you. The interest that you incur

on a personal tax debt. So like if you've got a personal tax debt. Yes. And you owe the ATO some cashola. Uh-huh. And then your accruing interest on that debt, you can't claim that interest because in another circumstance, so like say you bought a house back, you are able to claim the interest on that property because it's for investment but you can't claim the interest on a tax debt. For example, this is coming up because a few people have asked me that question because you might be like, oh, V, why are you mentioning that? That doesn't make a lot of sense.

For an investment, you can claim the interest on the money that you borrowed because it's a cost of investment. Okay. But tax debt, that's not the same. you can't claim the interest on a loan that you take to pay your personal tax debt. Yep. Okay. So if you say borrow money to put into a literal investment, maybe like superannuation or something, would that be considered? Not necessarily superannuation, but you can do it on property. So you might go get a mortgage to buy an investment property and then you'll pay

an interest rate to borrow that money. That is claimable. And then also something that you're probably not have going to come across before, but I've covered on the podcast, just kind of like topically, you can actually borrow money to invest in the share market. So you could claim on that as well. So it's not something that a lot of people in our community do, especially in this economy. I don't think it's, you know, the wisest decision ever, because obviously, as you know, interest rates for borrowing money are quite high, but then the stock market is, I wouldn't say returning low. It's not that, but it's not as good as it could be. So having a leveraged portfolio, so leveraged portfolio just means I have borrowed money to

create my portfolio, is not something that I assume a lot of financial advisors are recommending at this point in time. It is something that financial advisors do use. It is something that I have recommended, is something that I have, you know, worked with, with my clients before. It's also something that I've used personally and owned before, but I don't currently own at the moment because the market just started to not make sense in that aspect. And I sold it and got rid of it and just said, nah, the market's not performing the way I would want it to see for me to take on that risk. Sure. In saying that, if you're listening to this, just as a side note, and you do have a leveraged portfolio and you're like, oh, Victoria doesn't have hers anymore. I should

get rid of mine. That's not the case at all. I am just very risk averse. Yeah. The second there's any like rocky waters, I'm like, ah, run away. So talk to your financial advisor about that because I can almost guarantee that you have a financial advisor if you have a leveraged portfolio. That is a very strong assumption to make. Strong assumption. And we hope so. Not many people go get their own investment loans and DIY the whole thing.

Like if you're going to take on that much risk, Bec, and you're willing to, you know, borrow $100,000 to get into the share market, like very likely that you also see the value in paying for personal advice on that, right? Like just the math is mathing in that situation. The math is mathing. The math is mathing. Yeah. So, V, how about dividend and share income expenses? I like that you're reading that out in a way that you're like,

I've just been pondering my dividend and share income expenses, not I'm back and I did some research and I wrote down these questions to ask Victoria. Yeah. No, I've just been sitting here wondering about dividend yield. Yeah. Wow. Impressive. So, you're right. You can claim a deduction for costs that you incur to invest in shares. As I said before, obviously borrowing money, but that's probably not going to be that popular right now, but ongoing management fees or retainers to like financial advisors and such. Fees for advice about changes to your investment mix or your risk profile. It's kind of like if you're paying somebody to rebalance your portfolio, you can claim that. Yeah. But then you're also able to claim the expenses if you wanted to go

to the annual general meeting of a company that you hold shares in. And I've seen people do this before. In fact, our friends over at Equity Mates, I believe, they did this and went to the US to attend a meeting. And I thought that was so cool. They didn't talk about whether they were able to claim it on tax or not, but I can almost guarantee that they were able to. And I think it's just real cool, like so cool. But I am also a stock and share nerd. And like that would be my dream to be, like, able to be in on one of those. Like, can you imagine going to Wall Street to, like, go to an annual general meeting?

Like, oh. Yeah, well, if I buy, like, shares in, like, McDonald's, for example. Our producer is literally laughing at me and I get it. Sit down. She's been to Wall Street. She's been to Wall Street. Do you know what? I'm going to Wall Street later this year and I have never been more excited.

Like, what are you going for? I'm going to become your Wall Street girlie. Like, oh. Anyway, I actually have a finance conference in New Orleans, which is very cool. I'm so excited. FinCon's in New Orleans this year. Yeah, FinCon's in New Orleans this year. Annalisa?

Annalisa. You've got to be in it to win it. So we're going to New Orleans. If you know anything about geography, you would know that New Orleans is not even close to New York, but it is close enough for an Australian to justify the additional travel to New York. Oh, absolutely. So I'm like, oh, is that a really long flight from New Orleans to New York?

Absolutely it is. How long is it? Oh, it's like four or five hours or something. Whoa. Which is like, it's not like a Melbourne to Sydney. Sure. But like, it's definitely, I'm already on the other side of the world. May as well.

I may as well go see Wall Street. May as well. I'm going to look at that little bull and like rub its little nose and be like, hello, little bull friend. If you know what I'm talking about. I don't. I was going to say. Annalise has patted the bull.

What is this? Bull. It's a brass bull. A brass bull. Yeah, so there's a bull and a bear because like we talk about a bull market and a bear market. So a bull market is where the market's being really aggressive and, you know, it's kind of like waving a red flag to a bull and everything's going up and everybody's happy and there's a lot of excitement. And then the bear market is a market where it's relatively

bare. So like, yeah, kind of like in a hibernation zone, right? So like a bear is obviously a little bit more chill than a bull with a red flag. They're more likely to go into a cave for a little while and have a little nap. Anyway, those are the two like mascots of Wall Street and your girlie is going to pat them. But they're actually just brass statues that are on the street and I'm just really excited. And to be honest, I think I'm going to be excited until I get there. And then I realized it's just like standing on Collins Street in Melbourne and it's actually really boring, but boring and overwhelming people everywhere. I can tell people about it. Yes, exactly. I can gloat about it. I'm like, well, have you been to Wall Street? I've been to Wall

street. Yep. It's going to be a story to tell forever. I stood on the street and did absolutely nothing. I patted the bull. I patted the brass bull. I'm very excited about it. I'm excited for you. All right. Let's get back to talking about tax on your investments. Yes, please. Because you best believe my trip to the US is an investment. Oh. Actually, it will be because it's for a finance conference. Oh, she's on the money. The team's going. Yeah, it'll be good. Anyway, what else can you claim a deduction for? You can claim a deduction for specialist investment journals and subscriptions so you best believe i claim my australian financial review subscription every year borrowing costs and interests we covered that the cost of internet

access oh because you've got to have the internet yes to invest yes uh the decline in value of your computer that you use to invest do you have to be investing to claim these things yeah yeah that's a real shame yeah i mean it's cute that you tried I'm back you our producer just said yes this is about investing so I'm sorry I've obviously

no you're my favourite you are my favourite this is why you're here love you and you can also claim 50% of the listed investment company or LIC

capital gain amount if you are an Australian resident where a listed investment company paid you a dividend and the dividend included an LIC

capital gain amount that's going to mean nothing to you Bec but But if you are listening and you do have an LIC, that is something that you should absolutely consider. Bec, it's just another form of investment and it will be on your annual statements. Okay. A lick. A lick. I mean, we call them LICs, but we really should be calling them licks.

It saves time, you know, life is short. Yeah. And also it's just way more fun. Like we already think that the investment world is, you know, overly capitalized when it comes to complexity of acronyms. Yes. Might as well add another one. Why not just call it a lick? Exactly right. And not give anyone any context. No context. Love that. When we're investing in shares, here are some things you can't claim. Okay. The fees you incur for drawing up an investment plan. So as I said before, that's the thing that I get frustrated about unless you're carrying on an investment business. Okay. You're probably not, so don't worry about it. Some interest expenses where you borrow money under a capital protected borrowing arrangement to buy shares,

units in unit trusts and stapled securities. The interest is treated actually as the cost of the capital protection feature. Again, not going to mean a lot to you. You just can't claim it. No, you're not. Don't lie. How did you know that? I just know you well enough by now, Bec. Sit in my eyes. Becker Rooney, sit down. Also, you can't claim brokerage fees and other transaction costs, but you can include these in the costs to work out your capital gains tax when you sell the shares. So there's just, honestly, I feel like I am talking a lot and over-complicating it.

It shouldn't be that complicated. It is 2023. Your investment platform that you're investing on is going to provide you with all of this information. It will either be automated or it will be something that you're able to go into your platform and automatically generate if it's not an email that you get. And it will be, I promise, far less complicated than what Bec and I are making it sound right now, right?

Like all of this talk about like borrowing costs and interest and LICs and leaks and you know, management fees and you know, whether you can claim travel, all of that makes sense. but it's far less complicated if you are just a general investor and you've gone on like I don't know raise do it spaceship does it let's not even start on spaceship or raise at the moment but you know shares do it self-wealth do it every other investment platform that you are using they are all going to have reporting for tax time because they are based in Australia yeah okay so don't stress that's good I just don't want people to be overwhelmed by going oh my god I became an investor. And now it's all so confusing when it comes to tax and I don't want to screw myself

over. You're not going to screw yourself over, I promise, because it's not that complicated. Yes. Don't be scared. And if you're feeling like it's complicated, it's probably because you haven't looked at the investment reports yet. It's not because you're silly. It's just because you haven't seen it. Yes, exactly right. Exactly. Don't be afraid. No, don't be afraid because it can be really easy and it's only easy once you learn about it,

but you've never learned about it. So that's why it's not making a lot of sense. It's a little bit scary. V, I think we need to go to a break. I do want to go Google tenant rights so that I can talk about how much I can claim on my rental property and whether I can move in with my tenants over Christmas. That sounds very exciting for you and your tenants. Well, lucky I have no tenants. Perfect. All right, there, we are back. Now, let's jump straight back into it. I want to know about

rental and holiday home expenses. Hot. Yeah. Is it because you have a rental or holiday home that you haven't spoken to me about before? So many. I've got at least 10 rentals, at least 10 holiday homes, and I just want to know what I can claim on. Oh, well, the internet's now going to come for you and be like, landlords suck. Did you know you suck? I did know I suck. But also for anyone listening, I am joking, I promise. Yeah. No, she actually doesn't have any homes. Yet. Yet. But you'll get. Yet. Yet. Yet is the operative word here. We are optimistic about it. But yes, Bec, you are correct. You can claim interest expenses that you incur on the loan that you use to, and here's the summary, buy a rental property. Buy a depreciating asset for the

rental property. What's a depreciating asset, Bec? I'm going to say air conditioner. Yep. Air conditioner. Why? Because once you buy it, it won't go up in value from there. You're a wizard. Thank you. Exactly. Anything that's going to decrease in value. Yes. So air conditioner, great example because if you bought it today,

it's probably insanely expensive and you're probably not feeling that good about having to buy a new air conditioner for a property that you don't even live in. It costs you, what, two grand or something. But if you went to sell it tomorrow, it wouldn't be worth two grand and in 10 years I guarantee there's a way better version out there. Yeah. Right?

Like that's exactly what a depreciating asset is. you can claim expenses for making repairs to the rental property so for example if the roof broke during a storm you could claim that so a couple of years ago I lived in a property that had a really big beautiful skylight I mean I thought it was beautiful but it turns out it was just perspex because a couple of years ago we had a massive hail storm do you remember like I think it was like 2020 just pre-covid where that massive hail storm came through and everyone's car was absolutely ruined. Yeah, I think I remember they were like golf ball sized. Yeah, it was absolutely insane. So our skylight just got trashed. Like we were having hail come straight through the

skylight and into our hallway. And like we ended up having to like go stay at my parents' house for a couple of days because it was just like so ruined, right? Anyway, that didn't cost me anything because I was a tenant. All I had to do was move out. But my owners or the owners of that property they had to pay to replace it and that's fine but they could have claimed that on tax because that was a cost of maintaining the property wow that is so cool i mean the hail wasn't cool no it wasn't cool kind of sucked it's just unreal that you can claim that i like it finance renovations to the rental property so like you can claim to you know obviously as i mentioned before pop a new bathroom in for your tenants which in turn would add a value to your

property because, you know, updating it. And you can also claim interest expenses where you have prepaid for up to 12 months in advance. So that is important because you're, I see your little glazed over eyes and you're like, so what? But essentially, let's say you've got a service and you're paying for insurance or you're paying for something for your rental property and it was cheaper to pay for it all at once. Like, you know how we've spoken about on the podcast before how it's one of those things that I think wealthy people forget they have the privilege of and that's being able to pay things in advance for a significant discount so like whether that's insurance or health insurance or whatever so if you're prepaying anything for your rental property

or for your investment in advance because it gets you a sweet discount you can still claim that amount even if it's for the future you can claim that on your tax return now because the payment was made within this first financial year okay but you can't claim if you're doing the month by month payment. No, but you could claim the month by month payments that you've already made. But if you've prepaid into the future, you can claim that. That's a whole conversation. And I think we should do a whole podcast about like wealth privileges, like discounts you get because you're wealthy. I mean, it does sound a little bit like that. If you have money to invest, you can claim. Well, it's kind of like, you know, we were talking about this on the podcast probably

a couple of months ago now, because Bec, do you know it's July? Oh my gosh. Do you know what that means? What does that mean? You passed your she's on the money probation period. Yes. Look at you go. Did you know I'd get here? I knew you'd get here. Oh, that's so nice. I didn't know. What do you mean you didn't know? I've been begging you to come on the show for so long. And now I win. I win. She's here. She's here. We both win. We both win. But anyway, essentially, I think we should do a whole episode on this idea of wealth privilege, because it's like the shoe concept that we were talking about a couple of months ago where, you know, you were saying that you colored in a pair of shoes with black texture. Honestly, 10 points for innovation, Gryffindor. Thank you.

But if you hadn't colored your shoes in, you probably would have gone to like Kmart or Target or something and bought, you know, a reasonable pair of shoes that would have lasted three months and then you would have had to replace it. But if you had significant wealth behind you or, you know, any type of financial privilege, you maybe would have just gone and bought a more expensive pair of shoes that would have lasted two or three years. Yes. And I think that there's such privilege in being able to buy those higher ticket items. Like with insurance, people who have significant savings behind them can go, oh, is health insurance 20% cheaper if I pay it in bulk right now? Oh, great. I'll just pay that. Yeah. That's a discount that's not then passed on to, from my perspective,

the people who need it. Right. So it's this concept that, you know, wealthy people continue to get wealthy, but they also have a number of different privileges afforded to them because they can put their money where their mouth is and we can't do that right now. Yeah, that makes sense. Anyway, what you can't claim though, let's go through that. So you can't claim interest for periods of use for the property for private purposes, even if it is a short term. So like if you've got a holiday house and then you're holidaying in it and you spent two weeks there, you can't claim those two weeks, any part of the loan. So like you can claim the interest, but like not the actual loan. You can't claim interest when the property was used for private

purposes when you took out the loan or refinanced it. That's redrawn for private purposes, even if you're ahead in your repayments. You can't use it when you buy a new home if you don't use it to produce income, even if your rental property is security for that loan. And you can't on funds used to buy vacant land until the time construction on your rental property is complete, like completely completed, not like, oh, it's halfway there, like done and it's ready and available for rent. So like that is something that I think a few people get a little bit stuck on when they're like, oh, but I bought land and I'm building an investment property. I should be able to claim it. It's like, well, the land's vacant. It's not actually an investment yet. It's not like

drawing any income from rent. You can't claim that yet. Right. I see. Okay. So if your loan was used to buy a rental property or something else, like say a car, you can't just repay the part relating to your personal purchase even when you've refinanced. All loan repayments are appointed across both purposes until all the loan has been repaid and you are no longer claiming interest expenses on that property. So it's a little bit complicated. The best thing to do is obviously talk to your accountant or your mortgage broker. Your mortgage broker is going to have a complete grasp of this. Like I, you know, again, shameless plug for my own business, Zella Money, we literally finance thousands of properties a year for clients. And if you haven't

already. Like it is tax time now. You're probably looking at it going, wow, my interest rate really needs looking at. You're probably thinking about the fact that, oh, wow, I'm about to come off my fixed period. I need to talk to someone. Go talk to Kate. Go talk to Nikki. Go talk to Jacqueline. Go talk to anyone in my team who can go, all right, Bec, sit down. What are we looking at? You know, what's the market look like? What's your loan look like? What's the best possible outcome and structure? Because I've said it before, and this is something that a lot of people don't like to hear because we don't like change, right? But you do not need to be loyal to your bank. I know you might have been with a particular bank since they gave you a little

yellow checkbook in primary school, but that doesn't mean that that's going to put you in the best possible position. So sometimes having someone who sits down and goes, oh, well, I have access to 70 different lenders. Let me show you which one would work best for your financial position. Like go and do that because a lot of clients that we're talking to at the moment, especially like in June, coming up to the end of financial year, were really stressed either about their fixed interest term coming up or the fact that interest rates had increased so much that they weren't able to like balance lifestyle and stuff. So a lot of the time we kind of sat down and restructured them in a way that, you know, maybe some clients are moving to not paying

principal and interest at the same time. They're just paying interest for a fair period of time so they can like build back up their emergency fund and, you know, still have the lifestyle that they deserve while we wait for the interest rates to come down. So definitely, and I mean, do you know what? At the end of the day, I don't care which broker you see. I've got a team of great ones. If you want to see them, that's fantastic. But go and see someone who can put you in the best possible position because mortgage broking, Bec, it's free for you. Like it's literally a free service. Mortgage brokers cannot charge you individually. That is actually very cool.

It's very cool because the bank pays them. And I mean, then you would think, oh my God, commissions are involved. No, like we legally cannot make more off you. Like the bank shares their profit with me, not part of your interest rate. The interest rate is not higher. In fact, it can be lower because of the relationship your broker has with that bank. So it's all just a sexy process from my perspective. That's great. It feels like a win-win-win. Hot girl shit. Okay. So I feel like it's time to talk about my personal favourite topic. Yeah. What is it? And something I know lots about. That is the straight experience of women in Australia.

Yeah, that's exactly right. Straight rights, all of that stuff. Also, second to that, I know a lot about, obviously, capital gains and losses. Oh, yeah. Oh, that's actually same. Yeah, and negative and positive gearing. Yeah, okay. So I... I knew you were going to ask this.

I was like, oh, Bec's going to really want to talk about negative and positive gearing in this current environment. And then I wrote some notes. So are you ready? Perfect. Yes, I was going to say I actually, because I know so much, I feel like I'm going to sit back and let you, you know, do the talking if that's okay. Yeah.

So please go ahead. Look, at the end of the day, Bec, if you personally, you were thinking about selling an investment for more than what you acquired it for. So if you went and purchased an investment, we use that example of a share that was $10 and it went up to $15, you're making what's called a capital gain. So your job as an individual consumer is to include every single capital gain in your tax return in the year that you sold that investment. So although capital gains are taxed at your marginal tax rate. So like if you go to work and your tax rate is 32.5%, that's how much you're going to be taxed on your investments. If you've held that investment for more than 12

months, you're actually only taxed on half that capital gain. So if we look at that example of that $10 share, you made $5, it was worth $15, you decided to sell it. If you sold it in less than 12 months, so you held it for like eight or nine months, you'd be taxed on that $5. But if you hold it for more than 12 months, you're taxed on $2.50 instead. So that is a very big money win and it's also a very big money loss if you haven't thought about capital gains when it comes to investing for the first time. Because how many people in our community have gone, you know what, I really want to invest and I'm so excited about this. And they go and they purchase their shares and then they might get, you know, some cold feet or they might see a really good interest rate

return and they go, oh, that's really sexy. I'm just going to sell. Like we need to actually have a bigger picture hat on here and go, all right, well, Bec, actually you need to hold it for more than 12 months because you could end up losing a fair chunk of it. You don't want to lose stuff just because you didn't know. A lot of that happened and not necessarily in our community, but I've seen a lot of it happen. And let's like, you know, attack finance bros. Some finance bros who brought cryptocurrency and it went up real quick and then they sold it. And then they're like, what the hell? Why am I having to pay so much tax on this? This wasn't worth it. No, because you didn't do your homework, mate. No, because you didn't know about capital gains,

did you? So right now, Bec, you are now officially smarter than a finance bro. Whoa, that's huge. You're welcome. Thank you so much. It's an honour bestowed to not many. That's very true. And I'm very grateful for it. Yeah, you're welcome. But that discount in effect is going to halve the marginal tax rate that you pay. So it is significant and needs to be taken into consideration. And it's applicable on

basically everything. So property, shares, you know, bonds, whatever you're purchasing, cryptocurrency, it doesn't matter what it is. It's really important to actually do that. Do you know what it doesn't apply on? What? Cars. Oh, depreciation. Yeah. No, there's like lots of rules about it, but I think I've spoken about it on the podcast before, but if you bought a car and then sold it for a profit, that's personal. It's not actually. Oh. Yeah. It's why a lot of people buy cars and restore them and sell them like really high-end cars like they might buy a fancy rundown Porsche not that you or I could afford that but they might buy a fancy rundown Porsche and to them it's like a money wing because it was like $90,000 and you're like oh my god

that's literally completely out of my budget anyway like that's a house deposit and then they restore them and sell them for like $150 then they don't pay tax on that profit. Really? Yeah. Do they have to like tell the government? It's a completely transparent process like they're not doing anything wrong. It's just, that's not an asset that's deemed to be an investment. That's pretty cool. Yeah. Isn't it wild? I mean, completely unreachable. And I mean, if you're listening to this podcast and you're like, that's a good way of making money, like good luck getting in the door. Like it's a lot, but a lot of people do do that. And that's, you know, a bit of a money

win. I mean, I could afford a Tarago. Do you reckon we could do one of those up together, Bec? Oh God, yeah. Love a Tarago. Yeah. We could get around Brunswick in that. Yes, please. I reckon we could sell it for a lot of money too, like a pimped out Tarago. Totally. Those are going for a lot, maybe not a Tarago specifically, but vans that have like beds

in the back. Oh no, I'm specifically talking about a Tarago. We could do a Tarago. Let's do it. But if you're selling an investment for less, right? So I know we're talking about profit, profit, profit. Sometimes you sell an investment for less. There might be a few reasons behind that.

You might be selling it because it no longer serves you. It's no longer aligning to your values. You might be selling it because you need the money out ASAP. You might be selling it because you've looked at it and you're rebalancing your portfolio and you're like, goddamn, this investment has not paid off in a while. I've checked out all the reports and I'm just going to get rid of it and cut my losses. There could be a number of reasons why you're choosing to sell an investment for less than the cost you acquire it, in which case you're making what's called a capital loss, which

is the opposite of a capital gain. And these can still be sexy. So you might be losing money. But we want to make sure that we're not just burying our head in the sand when we're making a loss. We like keeping track of them because a capital loss on one asset means that you could reduce other capital gains made in the year that that loss occurs. So like all balances itself out. So we look at our portfolio as a whole. Or if you didn't claim it because you're like, Victoria, I made a capital loss on my one investment.

I've got nothing to claim it against. Like I don't have capital gains to like offset it with. Don't worry, Bec, you can carry it forward to offset future capital gains. Oh, my gosh. See, I told you, it could be sexy. Yeah, that's great. Whoever thought we'd have this conversation and use the word sexy as much as we have. Sexy and loss in the same sentence.

Yeah, it's novel. It's novel. Novel. It's not something you'll hear every day. It's funny because when I do speaking events, like I am obsessed with speaking events, right? And if you don't know that I do them, now you do, you're welcome. I probably do a speaking event or two a week, which is why my voice is always cooked back. But I go into people's workplaces and I'm like basically trying to convince them that caring

about their financial wellness is a genius idea. And it is just so you know, it's like very easy sell. So I go in and I talk about all these things. So I'll be like, oh, here's your money story. Let's talk about this. Here's what like saving and investing and you know, all these asset classes mean. And then let's talk about superannuation. Super is so sexy. And I literally stand in front of and a couple of weeks ago I did it and there were 200 people in the room and it was like from the ages I think they said their youngest staff member was like 21 and their oldest was like in his late 60s and it was like really diverse and I'm just like superannuation is really sexy in front of all these people and then after they're like yeah the board that was there really

enjoyed your presentation I'm like oh cool so I stood in front of an ASX listed team and their bored were watching me go super's really sexy here let me explain it and then I'm pretending to get all hot and flustered about it and I was like I've never felt more humbled oh my gosh I think but it is it's so hot like it's so sexy totally have you ever heard of anything as hot as superannuation no I've never seen nor heard I think my husband and I on our first date talked about superannuation and that's when I just I knew it was true love I just knew that we were going to get married yeah he was irresistible once he said the word superannuation I care about my super and I was like, oof. That's nice. Oof. Yeah. It's very nice. All right. Tell me about

your emergency fund. Yeah, that's based. Let's move on. We have not allowed dirty talk on this show. Okay. I'm sorry. I'm sorry. I brought us down. This next part I'm very excited about because I actually have no idea what positive and negative gearing is, but I've always wanted to know. And I feel like you're going to explain it in such a nice, gentle way for me. It's not going to be gentle. It's going to be sexy. Whoa. Yeah, watch out. Watch out. It's getting very hot in the studio. Watch out. So positive and negative gearing, a lot of people talk about this when they buy property and they're like, ah, I'm going to positively gear it and it's going to be really sexy. Or they're like, yeah, well, it's negatively geared. Negatively geared properties don't really

exist that much nowadays because our interest rates are so high and I'll explain why. So it's really worth bearing in mind here, the financing options that you are choosing when picking an investment. That is why I harp on about the fact that you need to talk to a mortgage broker. Can you, Bec, go and get a mortgage or a loan on your own? Yes, absolutely you could. You can walk straight down to your bank and you can sort it out yourself. Why would you do that when you could talk to someone who does this at a minimum of 40 hours a week, day in, day out, knows exactly what they're talking about to put you in the best possible position? Because I promise when you walk into your bank, if you talk to a mortgage broker that works for a bank, and I'm so sorry

to any mortgage brokers that are listening to this and you're like, I work with a bank. I get it. It's a good job. At the end of the day, nobody's better than anybody else. But as a consumer, if you walk into a bank, let's call it the Bank of Victoria because we're not going to pick on any one bank. Go to the Bank of Victoria. The Bank of Victoria only has access and the brokers that work there only have access to the products that the Bank of Victoria is able to issue. Sure. So they might go, oh, well, we have two different mortgage options. Bec, this is the best one for you. They're not lying. That is the best option out of all the options that they're able to write for you. They go, Bec, this option A is the best for you. And you go, oh, yeah, why?

Oh, because compared to B, it's just not, you know, as good for your situation. You go, oh, okay, no worries. But if you go down the street and talk to a mortgage broker who is independent of a bank, they're going to have access to 70 plus options. So they might go, oh, Bec, I see your situation. Actually, don't go with that original Bank of Victoria that you wanted because you're actually going to have to have a full 20% deposit. Or if you have less than 20% and you do 10% deposit, you're actually going to need to pay LMI. But because of your career and because of what's going on, I actually have the Bank of Bec and the Bank of Bec, they can actually waive your LMI and put you in a better possible position. And, you know, it has all these bells

and whistles that you said was really important to you. You go, wow, V, I didn't know that that credit union even did mortgages. Go, yeah, no, they're not as big, but they're really good and they're going to put you in the best possible position. You go, great, I've got the best outcome for me. So please make sure that when you are, you know, considering your financing options, you're not just going, oh, I'm a smart individual and I can absolutely do this. You can. I promise, Bec, if you were going to get a mortgage, you could go on every bank website, look at the rates, look at the interest, look at the fees and make a decision that makes sense for you. But you don't know what you're looking for. Right. You know what the bank is trying to tell

you from their sales pages on their mortgages. Right. You go into a bank and I promise that person has been trained in sales, not in financing options, because that's just what works for that environment. It doesn't mean it's wrong. It doesn't mean it's bad. It just means that you as a consumer deserve to be educated in what a mortgage broker does. I'm obviously wildly passionate about it because with Kate, I own Zelda Money, which is a mortgage-broking company. But something that we super pride ourselves on is just this super transparent nature of working with our clients and going, all right, Bec, well, if that's a goal of yours, like the amount of times we sit down with people just like you and go, oh, you're not ready. I don't want you to do

this yet because you don't have enough of an emergency fund. And that's not me going, oh, you can't afford it. Like it's me going, I actually want you to be in a stronger financial position so this doesn't screw you in the future yeah like and that to me is one of the hallmarks of a good mortgage broker or a good finance broker or someone who actually cares and that's not that common in our industry yeah sorry but all I could do is talk about finance all day but let's talk about positive and negative gearing you're gonna walk away so educated so positive is where you borrow money to invest and the income from that investment or that property for example like the rent that you get is more than the cost of keeping that investment. Okay. So, like, that sounds sexy.

Positive means more than. So, you might have a mortgage and it is $3,000 a month that you pay to the bank, but you're renting it out for $4,000. Right. So, that means that you're making, quote, $1,000 profit. Sure. You will have to pay tax on that, but positive gearing is essentially where you end up with more money on the table than what it costs you to run that investment. Yeah. So, then obviously we need to take into consideration things like interest and other expenses and you know daily maintenance and you know property fees but we just we're simplifying this down it's where you end up with more money. Negative gearing is something that obviously it sounds very sexy and a lot of people want a negatively geared property and I'll give you an example of

why. So negative gearing is where you borrow money to invest and the investment income is less than the cost of the investment. So you're out of pocket, Bec. So you might be paying, same example, $3,000 a month on a mortgage, but the tenants that you have are only paying you $2,500 a month. So you have to cough up an additional $500 a month for your investment property. And there's a number of reasons why you might do this. And that's why negative gearing is relatively popular and not popular because you go, I don't want to put additional money in. But when you do, investors negatively gear because they can generally claim a tax deduction for the investment loss. And that kind of brings down their taxable income or helps them in another portion of their life. Like the

aim for that property is that it increases in value so significantly that it will offset the losses that you made in earlier years. So like, as you know, the property market over the last 30 or 40 years has gone gangbusters. And we all know the story of the mediocre middle-aged white man being like, I built my first investment property at the age of 12. And like, you know what I mean? They bought it for like $20,000 and that house is now worth $2 million or something ridiculous. That is why they're doing it because they might've rented it out and been making quota loss, but now that property is worth $2 million. Right. So they're in it for the big bank. Okay. Why I said before that negative gearing is not something that is as attractive these days is

because properties aren't increasing as much as they used to. Sure. So historically, Bec, let's buy a property. In 10 years, it'll be worth double. That's hot. Like that's where the real value is, right? And in 10 years, we'll sell that property and we'll have a whole heap of cash money win. But unfortunately, nowadays, property doesn't increase in the same way that it used to. And so it's not something that is as attractive to investors. Obviously, in a perfect world, from my perspective, I'd have both. I'd have a property that's positively geared where my tenants are paying me more than my mortgage. And also the property increases in value significantly. We're not talking about thoughts or feelings on landlords or property ownership

or whatever that is right now. This is just us talking about basic economics, Bec, not opinion. But I think it's really important to understand the difference between positive and negative gearing. And that's why if you sat down with me and said, V, I've saved house deposit. I really want to buy an investment property. We would extrapolate that all out and a mortgage broker will do that with you. So they'll sit you down and go, okay, Bec, what's the intention of this purchase and you go for investment. Okay. Well, what do you want to get out of it? Do you want to own this property until you're in your sixties and you're retiring? Or do you want to own this for like 10, 12 years? What's that look like? And you would share that information and we would sit

down and work out, all right, well, what does rental yield in that area look like? And rental yield is just basically saying how much will the tenant pay each week? And so you'd work out, all right, well, the tenant will pay this much each week and a property in this location costs $500,000 to buy. So this is what you'd be paying on your mortgage and what that looks like. And then because it's investment, we might actually look at a few different options. So as you know, Bec, a lot of properties around, you know, $500,000 is probably on the low end nowadays of what you can purchase because the average property price in Melbourne right now is about a million dollars, which is insane. Let's not talk about it too deeply because it

will make us very depressed. But let's go with that $500,000 example. You might be able to buy an apartment in Richmond, but you also for $500,000 might be able to buy a house in an estate an hour or so out of the city. And both of those are valid options for you, but it will depend on what your expectations of rental yield are. So you might look at it and go, all right, well, V, if I spend $500,000 on an apartment in Richmond, I might be able to rent it out for $450 or $500 a week. Sure. But if I buy a house in the suburbs in an estate, you know, it might be new build for $500,000 off the plan, might be a relatively small block and you might be able to rent it out for $350. So you might look at it and go, wow, the properties in Richmond get more rent. That is

unequivocally true because it is closer to the city lifestyle. All of those other things come into play, but that apartment might not increase in value as much as the house will over time. because the house is more likely to increase in value, but it will depend on when and where and how and what the economy is looking like. Because recently those properties, they are increasing in value, but not by too much. In comparison to if you had done that exact same thing 30 years ago, guarantee that property would have made a fair bit, right? So I think it's important to take into consideration, like what does that mean when it comes to purchasing property? Because you might go, V, I don't think that property prices are going to go up that much more and I can afford,

you know, $500,000 to buy an apartment, but I've realized that if I pay a little bit more, I can get a better property further out and I might get more capital gain in the future. And at that point, you might look at it and go, that means I'll be negatively geared and it will cost me some money to owe, but like that's a risk I'm willing to take. So there's just a lot to take into consideration, but essentially positively geared is where you borrow money to invest and the income from the investment is more than the cost to you to keep that property or that asset and negative is the exact opposite. I love that. Also, to throw another spanner in the work, there's something called a neutrally geared property and that's where all of the costs

break even. Ah, beautiful. Makes sense, doesn't it? It does make sense. The math is mathing. I think this is a really good place to leave it unless you have anything else you'd like to. Nope, I am so done. I cannot fathom how we would make an investor's guide to tax time more sexy. So we're just going to drop it here and hope that you guys enjoyed it. Awesome. That sounds great. Have a good week, guys. We will see you on Friday. See you then. Bye. The advice shared on She's on the Money is general in nature and does not consider your individual circumstances. She's on the Money exists purely for educational purposes and should

not be relied upon to make an investment or financial decision. If you do choose to buy a financial product, read the PDS, TMD and obtain appropriate financial advice tailored towards your needs. Victoria Devine and She's on the Money are authorised representatives of Money Sherpa PTY LTD ABN 321 649 27708 AFSL 451 289.