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 CONTENTS

ON THE COVER UPFRONT MY MONEY

34 FIGHTING SPIRIT
Beat the high prices
20 INTERVIEW Justin Gilmour,
48 ART OF NEGOTIATIONTactics to get
and save money wealth adviser a better loan

inside
20 The dilemma facing wealthy 6 Editor’s letter 44 Sports investing: How to
farming families 8 Our experts get into the game
44 Get a slice of the action by 10 Outlook: Alex Dunnin 48 Mortgages: Play hardball
investing in sport on why the ASX is in strife with your lender
48 Master the tactics for 12 News & views 50 Family money: Homeless
negotiating a loan women are a hidden crisis
16 In brief
60 Who’s behind the switch to 52 Mind games: The magic and
affordable apartments? 20 Interview: Justin Gilmour hype of artificial intelligence
66 Why the rich love classic cars, 24 Ask Paul: Don’t let money 54 Small business: Are
watches and whisky ruin your relationship entrepreneurs born or made?
70 Love your super: how it’s 28 Smart spending
transforming our lives 32 Paul’s verdict: How can
72 Recycle your debt to invest I retire by 50?
in the sharemarket

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4 MONEY APRIL 2024

 APRIL 2024 ISSUE 276

PROPERTY INVESTING SHARES

64 RENOVATE OR MOVE? 66 CLASSIC BUYS

82 CHANGE OF FORTUNE
Plan carefully to cut Where the rich Microsoft thrives
costs and stress invest their millions after a lost decade

60 Apartments: Affordability 66 Life of luxury: How cars, 78 Thinking big: The ASX
is the big attraction watches and whisky perform reaches beyond our shores
63 Home loan challenge: 70 Love your super: On track 80 This month: Marcus Padley’s
Offset versus redraw for a dream retirement alternative roads to riches
64 Real estate: Outgrowing 72 Debt recycling: Tap into 82 Intelligent Investor: Inside
the family home the equity in your home the world’s biggest company
74 Super: When it’s time to 84 Best in breed: Scott Phillips
wind up your SMSF unearths a quality miner
76 Managed funds: Trouble is
brewing at the office

IN EVERY MONTH
4 Privacy notice
90 Hot seat

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MAY 2

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MONEY APRIL 2024 5

 EDITOR’S WELCOME

TIME TO FIGHT BACK

When we talk about saving money, we
often share articles about how to invest,
where to cut costs and how to improve
money habits.
But a damning report on price gouging
and unfair pricing practices released
in February had the Money team’s
(collective) jaws on the floor. The report
exposed one of the reasons why, despite
all our best efforts, living standards
continue to come down: we are getting
ripped off every day.
Our reporter, Nicola Field, pored over
the 80-page report for the backbone
of our cover story on price gouging
(page 34). Companies with large market
share due to a lack of competition are
using a plethora of methods to benefit
themselves and their shareholders at the
expense of the consumer. At every turn
– whether we’re paying for our electricity
or mobile phone or doing our banking – we
are being slugged above what a product
or service is worth. Because our economy
allows it.
In a significant step forward, former
ACCC chairman Allan Fels’s inquiry into
price gouging casts the spotlight on this
structural problem. And he did consumers
an enormous favour by putting names and
definitions to these appalling practices.
Now we know our drip pricing from our
excuse-flation and loyalty tax. And this
provides a starting point for action.
Next up, how to fight back. Turn to page
34 to find out.
Michelle Baltazar,
Editor-in-chief

SAVINGS & GIVEAWAYS WIN A FREE SUBSCRIPTION WE’D LOVE TO HEAR FROM YOU
Email: money@moneymag.com.au or
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32 A six-month subscription helped you, stories you’d like to see, and phone number. Letters may be edited
to Money for featuring and what you’re facing on your own for clarity or space. Because of the high
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6 MONEY APRIL 2024

 YOUR SAY
Letter of the month
Learn about shares by
playing the ASX game
Paul’s response to Tamara about her
teenagers’ interest in shares (Ask Paul,
February) is insightful. Might I add that an
excellent way for teenagers (or anyone, for
that matter!) to learn about shares is the
biannual ASX Sharemarket Game.
Her children could participate
independently or ask a teacher to enrol
them in the School Sharemarket Game,
where whole groups/classes can compete
for a grand prize.
I’m a secondary teacher myself and
registered my Year 10 students for this
last year. It was fun to see them compete
against each other and learn about such
an important life skill in the process.
Kimberley

Mission accomplished in
building wealth
As an ex-army veteran, I enjoy a mission. My
monthly mission with Money magazine is to
extract at least one money habit to action.
Having been a subscriber for more than
12 years, I find this a constructive process.
For example, for the first few months of
2024 (including December’s Best of the
Best) this mission has enabled me to:
1. Open an InvestSMART Fundlater
account for our children (on top of a
bond account from an issue six years age).
2. Change mobile provider (saving $ 170
a year).
3. Invest through our self-managed super
in managed funds (Betashares, Chester,
First Sentier and Bell Global).
4. Purchase Domino’s shares when they
dropped in value.
5. Purchase high-yielding share-based
exchange traded funds (Vanguard, Global X).
6. Last, invest for the first time in the
farmland sector (Rural Funds Group).
At the end of the month, I finish my
magazine, with its coffee stains and food
smears, with a read of Marcus Padley’s
always wholesome This Month column and
a read of Scott Phillips’s brutally honest
Best in Breed.
Thanks, Money, for providing this
opportunity. We have seen our wealth grow
substantially using this mission method
and, best of all, it is fun to do!
Rob
Delivering the goods
I enjoy the bite-size breakouts as well as
your longer stories. I am no financial whiz,
but I try to learn and do better. Information
is current, practical, relevant and intelligent
for a wide-ranging audience, including
podcasts, books, print and online, so we can
choose the most suitable format. Magazines
are nearly a luxury for some, but Money
delivers – money and time well spent.
Kathryn
From our online readers...
Price gouging is rampant
I used to buy bread for $1 but the price now
is $1.90. Butter cost $4.50; now it is $6.50.
Every conceivable supermarket item has
seen a dramatic price increase. The price
of petrol is a joke. Overnight it can rise as
much as 40 cents a litre and there seems
to be no end in sight for the user from the
greed of these companies. Overall, this
government seems to be bereft of ideas
as to how to curb the rapacity of the large
providers. Australia a lucky country? I must
be kidding myself.
Pensioners are being crushed and
Australia is on the road to creating a society
of haves and have-nots.
Maurice
The pandemic made corpulent corporations
realise they can charge what they like with
impunity. Inflation doesn’t happen by magic.
Prices go up because big corporations
choose to increase them and smaller
businesses, reliant on them, are forced to
follow suit. In my opinion, this is the dark side
of capitalism, and it’s getting darker.
John
Another concerning factor in price gouging,
which appears to be going under the radar,
is the widespread use of artificial intelligence
and machine learning algorithms to drive
dynamic pricing. This remains completely
unregulated – there are no laws governing
this practice across goods and services
in all industries, including groceries,
insurance, airlines and real estate. Even most
stockmarkets globally use AI and ML with
complex algorithms that drive share prices.
Lisa

MONEY APRIL 2024 7

 POINT OF VIEW

‘ What is your pet overcharging peeve? ’

HANNAH TATTERSALL PAUL CLITHEROE ALEX DUNNIN NICOLA FIELD

Contributing writer
It annoys me when retail stores
have a sign saying something
like: ‘Transactions less than $10
will incur a credit card fee’. As
someone who pays for almost
everything using my phone or
smartwatch, it’s annoying to be
penalised for not having cash.
We were all forced to use cards
during the pandemic and many
of us have kept up the habit. I feel
it is unfair to be charged an extra
10c or 50c for buying something
small. Retailers should factor
this amount into the cost of their
products rather than charging
extra at the counter.
See Hannah’s feature about the benefits
of debt recycling on page 72.
Columnist
I hate being overcharged, but
getting underpaid is even worse.
I always recommend that we
put aside some rainy day money.
This is even more important as
we move out of the workplace
and need our investments and
possibly a pension to live on.
We can earn a healthy 5% or
so on our rainy day money. A
term deposit is a good place to
consider for security and high
returns. But contact your bank
before the end date of your term
deposit, or you may find yourself
earning under half the going
interest rate, or possibly zero.
Read about Paul’s raw car insurance deal
on page 42.
Director of research
I live in regional NSW in
Capital Country, 300km from
Rainmaker Information’s office,
so I use a lot of fuel on my
weekly drive to Sydney. About
a year ago I stumbled on the
NSW government’s FuelCheck
smartphone app. I was
immediately hooked. What stuns
me is the regular 30-cent price
gap on E10 petrol among my 10
favourite petrol stations on my
route. My car has a 70-litre tank,
meaning that by filling up at the
right fuel stop I automatically
save $21 every time. How good
is that?
See Alex’s column about the troubles
facing the ASX on page 10.
Contributing writer
So many peeves to choose
from, so little space. Topping
the list, my electricity provider
has started noting on my bill
how much I could save – about
$200 annually – if I switch to
a different plan with the same
company. The catch is that
the onus is on me to take the
necessary steps (read: fill in the
inevitable paperwork) to make
the move. Why not delight a
loyal (20-years-plus) customer
and just make the switch for
me instead of dangling the bait
and expecting me to do the hard
yards to make it happen?
See Nicola’s cover story on how to beat
the rip-offs on page 34.

THE MONEY TEAM

EDITORIAL Senior sub-editors Anthony O’Brien, Marcus nikki.edwards@ MANAGEMENT
Founder & Bob Christensen, Padley, Vita Palestrant, Scott rainmaker.com.au Managing director
editorial adviser Debra Duncan Phillips, Zach Riaz, Hannah Christopher Page
Paul Clitheroe Tattersall, Graham Witcomb Michael Grenenger
Senior journalists 0404 879 120
Editor-in-chief Joanna Tovia, Tom Watson Executive director
PHOTOGRAPHS/ michael.grenenger@ Alex Dunnin
Michelle Baltazar Digital editor ILLUSTRATIONS rainmaker.com.au
michelle.baltazar@ Sharyn McCowen Tom Bennett, Getty Images, Syndication enquiries:
moneymag.com.au Michel Streich, John Mikki Wright
Multimedia producer money@moneymag.com.au
Managing editor Tiedemann, Reg Lynch 0414 318 876 ISSN 1444-6219
Michael Lynch mikki.wright@
Vanessa Walker
vanessa.walker@ PRE-PRESS rainmaker.com.au
moneymag.com.au CONTRIBUTORS Peter Suchecki
Alexandra Cain, Mark MARKETING
Art director Chapman, Nick Cummings, ADVERTISING Marketing manager
Ann Loveday Alex Dunnin, Nicola Field, Partnerships managers Julian Clarkstone
Designer Peter Forrestal, Matthew Nikki Edwards julian.clarkstone@
David Matthews Gibbs, Susan Hely, 0431 107 407 rainmaker.com.au

8 MONEY APRIL 2024

15%+ yields
Govt funded tenants
Borrow up to 90% LVR
 N N I N O UT
DU

LO
X
A LE

OK

Why the ASX is in big trouble

Our struggling national stock exchange needs to find a way
to stop its slide into irrelevance.

A
ustralia’s largest super fund,
AustralianSuper, sent shockwaves
through the nation’s company
boards last year when it led the resistance
that thwarted the buyout of Origin Energy
by the consortium led by the Canadian
private equity group Brookfield.
As dramatic as AustralianSuper’s
actions were, too many people have
learned the wrong lessons from it. It’s not
that our super funds have become too
powerful and need their wings clipped;
the problem is with the ASX itself. It’s
too small, not diversified enough and
has too few large investible, quality
companies capable of satisfying
Australia’s cashed-up, biggest investors.
It means that policy proposals to
require super funds that get involved with
a takeover deal to seek permission, or
impose on them some bizarre duty of
care to other shareholders, totally miss
the point of what’s going on, as well
meaning as they may be.
The real issue is that the ASX needs
to get its act together. If it doesn’t, it
will continue its long, slow slide into
irrelevance, where it may have no option
but to try to merge with the stock
exchange in New Zealand.

Super funds cut back

Sure, the ASX seems big enough, finishing
2023 with $2.6 trillion in market
capitalisation, placing it slightly ahead of
the nation’s $2.4 trillion GDP. But being
now globally ranked as the 17th biggest
stock exchange, only marginally ahead
of Tehran and Johannesburg, shows how
far the ASX slipped and that its glory
days may be behind it.
This points to big problems below
deck. Starting with how, despite the ASX
delivering a healthy total return of 12%
through 2023, its market capitalisation
only went up 7%, meaning that in a boom

10 MONEY APRIL 2024

equities year it went backwards by about $130 billion.
By comparison, the US stockmarket grew 25% in
2023 to $US51 trillion ($78 trillion), making it 30
times the size of the ASX.
This is all the more stunning because the ASX
sits alongside Australia’s world-class $3.5 trillion
superannuation sector, which should give it
a guaranteed stream of hungry investors eager
to pour money into it.
But Australia’s biggest super funds are losing
interest in the ASX. Ten years ago, Australia’s
not-for-profit (NFP) and retail super funds held
25% of their assets in the ASX; today this
proportion has plummeted to just 20%.
The bigger worry here is that the NFP funds,
which are now 75% of all major super funds, are
decreasing their ASX holdings even faster as they
switch their investments into alternative assets
such as private equity and infrastructure and
better-performing international shares.
But digging deeper into the ASX reveals that
a big part of what might be driving this lack of
interest in the ASX is that it has too few companies
listed on it. Worse still, the number of listings, at
about 2200, is about how many it had a decade ago,
meaning there aren’t enough initial public offerings
(IPO). Each year there are about 100 IPOs, but in
the past three years this number has crashed from
the 2021 decade high of 240 to halve in 2022 to 107
and then to halve again in 2023 to 45.
Tech sector is loose change
In net change terms, the number of listings has fallen
in four of the past nine years. But a sign of even bigger
structural problems is the growing number of
delistings, especially among the major high-quality,
global-grade companies of scale that Australia’s
biggest investors, such as our superannuation funds,
need to fill their portfolio stockings each year.
With the ASX already cursed by a lack of sectoral
diversity and hyper market concentration, every
major delisting just makes things worse. Three-
quarters of the ASX market capitalisation is in
financials and resources, and these two sectors
make up nine of the biggest 10 ASX-listed companies.
To see why this is such a problem, the technology
A sign of even bigger
structural problems
is the growing number
of delistings.
sector, which is an astonishing wealth driver that
dominates the US stockmarket, just makes up loose
change on the ASX.
Which is why the recently announced sale of ASX-
listed building materials giant CSR to the French
global giant Saint-Gobain and the likely sale of Boral
to Seven Group Holdings is another body blow.
It will exacerbate the ASX’s market capitalisation
concentration problem, in particular compared
with the US, which just seems to vacuum in global
investment flows.
In Australia, the 10 biggest stocks hold 37% of
the market; in the US it’s 29%. In Australia, the
100 biggest stocks hold 76% of the market; in the
US it’s 54%. In Australia, the 500 biggest stocks
hold 96% of the market; in the US it’s 83%.
No wonder there’s so much excitement about
the imminent backdoor listing of the retail giant
Chemist Warehouse through its acquisition by
Sigma Healthcare. But there’s terror in equal
measure that Australia’s AI sector may soon
be sold off just as it’s getting started.
Australia’s stockmarket is in a fight for its life.
If nothing is done, or can be done, the ASX could
be just a decade away from not even being counted
as its own investment sector.
If that happens, Australians, who love investing
ILLUSTRATION BY JOHN TIEDEMANN.
in equities, will simply go direct to these global
bourses. The ASX will be just where you go for
quirky regional small caps. „
Alex Dunnin is director of research at
Rainmaker Information.
X For a history of the ASX and how to invest outside
Australia, turn to page 78.
MONEY APRIL 2024 11
 THIS MONTH
NEWS &VIEWS
THE BUZZ

Millions of households set to benefit

from supercharged internet
H ome internet has come a
long way in three decades.
Gone are the days of having to
disconnect to make a phone call
and enduring the piercing sound
of a dial-up tone and painful load
times. Well, that last point might
not be totally true.
While loading a website no
longer requires the patience of
a saint, laggy connections and
buffering videos remain the bane
of modern-day browsers.
But a new plan put forward by
NBN Co might go some way to
remedying these annoyances and
meeting our appetite for speed
and stability.
Under the proposal, more than
nine million eligible households
and businesses connected to the
NBN via fibre to the premises
(FTTP) or hybrid fibre coaxial
(HFC) would be offered download
speeds five times faster than
those currently available on the
NBN’s three fastest tiers.
For example, the popular
100/20 Mbps speed tier would
be boosted to 500/50 Mbps,
while the Home Superfast
product would be increased from
250/25 Mbps to 750/50 Mbps.
What does that mean in
practice, though? NBN Co uses
the example of the latest 25GB
Fortnite patch (an online game
for those out of the loop) that
would currently take roughly
36 minutes to download on the
existing 100/20 Mbps speed
tier. However, that would be cut
to just seven minutes on the
proposed 500/50 Mbps tier.
The changes would, in theory,
also provide smoother, higher-
quality streaming on everything
from video calls for work and
live sport to whatever series is
engrossing viewers.
The plan is still in consultation
with industry, but if all goes well,
customers could start to benefit
from these ramped-up speeds
within the next 12 months. So,
what’s the catch?
Unfortunately, not every
home or business will have the
right connection to access the
new speed tiers, meaning that
they may have to look at NBN
alternatives such as 5G home
internet or satellite.
NBN Co has also promised
that the accelerated speeds
won’t come at an added cost to
retailers. While that’s promising,
the big question is whether
providers themselves then hold
back from increasing the price
of their plans.
As consumers know full well
at this point, businesses haven’t
exactly been shy about jacking up
prices in recent years.
At Money we’ll join the chorus
of advocates putting pressure on
providers to absorb the cost this
time. Like the proposed speeds, it
would be a nice change of pace.
Tom Watson

CALENDAR
OF EVENTS ON MY MIND
Friday, April 5
Balance of trade
Financial lessons to last a lifetime
TEWART
ES
Tuesday, April 9
Learning about money is a classroom resources on budgeting, spending, needs
CAROLIN

Westpac consumer lifelong journey. Parents
confidence and teachers consistently tell us
they wish they had learnt more
Thursday, April 11 about personal finance at school
NAB business when they hear about the Talk Money program run
confidence by Ecstra, an independent charitable foundation
committed to building financial wellbeing.
Thursday, April 18 Concerningly, financial literacy has declined,
Unemployment rate with the largest drop among 15- to 24-year-olds,
according to the 2022 Household, Income and
Wednesday, April 24 Labour Dynamics in Australia (HILDA) survey.
Inflation rate Providing financial education at school is a vital
first step. Ecstra helps educators by providing
versus wants plus the newer concepts of crypto,
buy now, pay later and a nearly cashless economy.
Talk Money – the largest face-to-face national
financial education program offered free to all
schools – helps students of all ages to learn money
lessons for life. The demand is huge, with more
than 262,000 students attending more than 7000
workshops in 1125 schools in the first two years.
However, more national action is needed. We
believe personal finance should be a compulsory
subject in all schools, to help set young Australians
on their path to a better financial future.
Caroline Stewart, CEO, Ecstra Foundation

12 MONEY APRIL 2024


SCAMWATCH
Keep ahead of the tricksters
I f there’s one thing you commit to
memory this year, make it this list of four
common scamming tricks.
1. Pretending to be from an authority,
scammers rely on most of us being law-
abiding citizens. So, they commonly
pretend to be from large, familiar agencies,
such as the tax office, a bank and
utility companies.
2. They often couple this with a sense of
urgency: they most definitely do not want
you to have time to think clearly. Scammers
often give you a limited time, perhaps
threatening a fine or a late payment fee.
3. Then they engage your emotions. Once
they have a dialogue with you, scammers will
often use emotive language. Remember that
no legitimate organisation ever does this.
4. They will promise something that’s
too good to be true. If you believe their
offer will lead to great riches, it’s probably
a con job. Scammers rely on the human
propensity to fall for an unrealistic
promise over rational thinking. But don’t
give them the satisfaction.
Stay ahead of the game by regularly
checking scamwatch.gov.au.
Vanessa Walker
APMAN T
CH
AX
MAR
TIP
Avoid the rush to
prepare tax return
A s we approach the end of the financial
year, thoughts may be turning to
preparing your tax return. You must be
able to substantiate your deduction claims,
which for many taxpayers can mean a
mad scramble to find invoices/receipts.
So now is a good time to start getting the
paperwork together.
You must have written evidence to
prove your claims if your total deductions
exceed $300. The records you keep
must prove the total amount, not just the
amount over $300.
The $300 limit does not apply to
claims for a car, meal allowance, award
transport payments allowance and travel
allowance expenses. There are special
written evidence rules for these claims
(such as the logbook for car allowances
and the substantiation exemption for
travel expenses less than the tax office’s
reasonable amount).
Written evidence can be:
• A document (such as an invoice or
receipt) from the supplier of the goods
or services, showing: the name of the
supplier; the amount of the expense;
a description of the goods or services
purchased (if not shown, you can write
this on the document); the date the
expense was incurred; and the date of
the document.
• Evidence you have recorded yourself.
For expenses of $10 each or less
where the total of these expenses is
$200 or less, or where you have been
unable to obtain written evidence – for
example, for toll or parking fees where
you can’t get a receipt. Your records
must show the same details as a
document from a supplier, as described
above. In most cases, an invoice or
receipt for a purchase is the preferred
means of substantiation, but in some
cases a bank or credit card statement
can be acceptable.
Director of tax communications at H&R Block.
mchapman@hrblock.com.au
MONEY APRIL 2024 13
 THIS MONTH
NEWS &VIEWS
BOOK OF
THE MONTH
GOOD WITH
MONEY
Emma Edwards
(Allen & Unwin,
$34.99)
T his practical guide offers
realistic advice on how readers
can improve their spending habits
and take control of their financial
wellbeing. With humour and relatable
anecdotes, Emma Edwards unpacks
how to disconnect from the noise
of consumerism, what can lie
behind emotional spending and how
budgeting and cashflow management
can improve not just people’s money
habits, but how ‘good with money’
they feel they are. In writing the
book, the founder of The Broke
Generation, which provides financial
advice for ‘hot mess’ Millennials, aims
to eliminate the feeling of shame
surrounding debt and overspending.
To win one of five copies
In 25 words or less, share a money-
saving tip that reduces your household
expenses. Enter online at moneymag.
com.au/win or send entries to Money,
Level 7, 55 Clarence Street, Sydney,
NSW, 2000. Entries open March 26,
2024 and close May 1, 2024.
SNAPSHOT When scammers cash in too
Have you been scammed when trying to sell your belongings
(on Facebook Marketplace, Gumtree, eBay etc) in the past 12 months?
Yes, I've been scammed once
Yes, I'm been scammed
more than once
No, but I was contacted by
at least one scammer/bot
No, havent been scammed or
contacted by a scammer/bot
I have not sold my belongings on
these sites in the past 12 months
Source: Finder – survey of 1,039 respondents, December 2023
14 MONEY APRIL 2024
PODCAST OF
THE MONTH
FRIENDS WITH MONEY
#139: TOP PERFORMING
ETFS OF 2023
Guest: Cameron Gleeson
Hosted by: Tom Watson
FRIENDS WITH
I nvestors poured billions
of dollars into exchange
traded funds in 2023. In this
podcast, Cameron Gleeson,
senior investment strategist
at Betashares, discusses ETF
performance in 2023 and the
trends emerging this year.
The number of investors using
ETFs in Australia has risen from
15% to 20% over the past three
years. New investors, in particular,
find them appealing because they
provide diversification and allow
access to asset classes that are
difficult to access directly. They
were the first investment for 14%
of first-timers in the past two
years, according to the ASX.
SCAN THIS CODE TO
ACCESS ALL OUR
FRIENDS WITH
MONEY PODCASTS
5%
5%
15%
28%
46%
NEWS BITES
Australians have a record 200 million
days of accrued annual leave, and the
new Subi platform makes it easier to
cash it in. Employees with more than
20 days of leave can claim them as cash,
with Subi dealing with employers. The
service is free, with a turnaround time
of 12 hours. The benefit for businesses
is that it streamlines the complex and
time-consuming task of navigating leave
entitlements and lowers leave balances.
“It’s about bloody time.” That was the
response of Mary Delahunty, CEO of
the Association of Superannuation
Funds of Australia, to the news that
12% super will be paid on the 20
weeks of government-funded
parental leave from July next year.
“This milestone announcement will
deliver a huge boost to equity in the
superannuation system,” she added.
According to the Bureau of Statistics,
the average balance for men aged 55
to 64 is $326,200 and for women it’s
$246,300 – a 25% difference.
More homeowners are falling behind on
their mortgages because of increased
interest rates and the high cost of living.
The Council of Financial Regulators has
revealed that hardship applications to
lenders for repayment relief have “risen
materially” over the past year. It says
the risks to the financial system are
“contained”for the time being but need
to be watched carefully.
 THIS MONTH
INSURANCE
MY MONEY
Loopholes
lead to
financial
abuse
I nsurance companies are being
urged to redesign their products
and practices to help prevent
financial abuse.
The call comes from the
Centre for Women’s Economic
Safety (CWES), which played an
instrumental role in pushing the
banking sector to adopt
procedures to stem
financial abuse.
A new discussion paper
X MORE produced by the CWES highlights
MONEY the ways in which products such
STORIES as car, home and contents, and
ON other personal insurance policies
P44-58 are being manipulated. Among the
common types of financial abuse,
$5 banknote set for a makeover
C ash users could soon find
themselves paying for their
morning coffee with a new-look
$5 note, as the Reserve Bank
(RBA) has announced a
90%
of the women who seek support
public redesign campaign.
The existing $5
banknote features a
for domestic and family violence portrait of the late Queen
are affected by financial abuse. Elizabeth II on one side and
Source: CWES, Designed to Parliament House on the
Disrupt report other, but the redesign will
see the former make way for
a new theme, which the RBA
says will reflect First Nations
culture and history.
“This could be a story passed
down for generations, a location,
16 MONEY APRIL 2024
victim-survivors report having
their policies cancelled or changed
without their knowledge and
seeing claims denied after
property damage was caused
by an abuser.
“In many cases, insurance policy
terms and conditions prevent the
payment of claims for damage
caused by a policyholder,” says
Rebecca Glenn, the chief executive
of the CWES.
“In instances where an
abuser deliberately damages an
asset covered by a joint policy, a
victim-survivor may have an
insurance claim denied. These
actions may leave victim-
an idea, an instrument or an
object that binds a community,”
says Michelle McPhee, assistant
governor for business services at
the Reserve Bank.
survivors, usually women, in very
difficult financial circumstances,
with damaged assets and no
recourse through insurance.”
To remedy the loopholes
allowing financial abuse to occur,
the CWES has made
19 recommendations, including
that the government modernise
the Insurance Act.
The paper also advocates that
changes be made to ensure
that policies can’t be cancelled
without the knowledge or consent
of victim-survivors, and that
claims can’t be denied if property
has been deliberately damaged
by an abuser.
“Involving the public in
this process is vital, and by
actively engaging First Nations
communities, we can better
capture themes that tell our
nation’s story.”
This will be fifth time that the
$5 note has received a refresh
since the 1960s, with the latest
occurring in 2016 when the
current wattle and wattlebird
were introduced on the middle
COMPILED BY TOM WATSON.
of the note.
Public submissions need to be
lodged by April 30 and the RBA
expects the design and judging
process to be completed by the
end of the year.
 THIS MONTH

PROPERTY
BUYERS SLUGGED

Stamp duty costs

six months’ pay
W hile property prices have skyrocketed in recent
decades, new research by PropTrack and the
e61 Institute has highlighted the meteoric rise of
another cost faced by most home buyers: stamp duty.
The research reveals that in Melbourne, for instance,
it now takes buyers on the full-time average income
the equivalent of six months’ salary ($42,500) to
cover stamp duty imposed by States and Territories,
on a median-priced home. That’s 6.1 times more than
it did four decades before.
“Stamp duty is a large upfront cost for home buyers
that must be saved on top of a deposit,” says Angus
Moore, a senior economist at PropTrack.
“Home buyers in Sydney and Melbourne must save
nearly $45,000 just to cover the stamp duty for a
median-priced home, equivalent to half a year’s worth
of average full-time income. In the mid-1980s, stamp
duty in Sydney was only around $1500.”
Moore says the need for stamp duty reform is
critical to improve efficiency in the property market,
because it discourages people from moving to homes
that suit them.
There is a move to phase out stamp duty in some
parts of the country, though. In the ACT, it’s gradually X MORE
being phased out in favour of a land tax, while in NSW PROPERTY
it was briefly abolished for first home buyers before STORIES ON
being reinstated. P60-65
X Renovating versus moving, page 64.

Would-be homeowners are ‘more ruthless’

A ustralians feel more optimistic
about the prospect of buying
property. A new Westpac report
intention to buy remains strong
and prospective buyers are
becoming more ruthless with their
into the market and are willing to
compromise to get there.”
The research also
revealed that four in 10 people are goals,” says Damien MacRae, the found that buyers
considering a property purchase in managing director of mortgages are willing to make
the next five years – a 9% increase at Westpac. concessions to
on the figure recorded last July. “They understand it’s a big task, get a foot in
Not every cohort of would-be but they are determined to break the door, with
buyers is feeling as upbeat about three in four
their prospects, though. Home buying considering
The number of people who are intentions in the purchasing in an
aiming to own a home in the next next five years area they hadn’t
five years dropped from 20% to Purchase a first home 16%
considered before
16%, with the vast majority (86%) and one in two willing
blaming the cost of living for Purchase a new home to live in 34% to pay lenders mortgage
delaying their plans. insurance if it allows them
Purchase an investment 44%
“While some buyers have to buy sooner.
paused their housing plans, the Source: Westpac
X Art of negotiation, page 48.

MONEY APRIL 2024 17

 THIS MONTH
INVESTING AGE PENSION

Retirees miss
out on income
A significant proportion of retirees could be
leaving money on the table as a result of
widespread misunderstandings about the age
pension and how it can supplement income from
their superannuation funds.
That is one of the major takeaways from research
by Colonial First State, which found that 64% of
Australians simply don’t understand how the age
pension works while a similar number (61%) are
unsure how to access it.
Craig Day, the head of technical services at Colonial
First State, says one of the biggest misconceptions
is that people think they need to fully retire before
accessing the pension.
“If you’re approaching age-pension age and still
working, it’s worth considering applying, as some or all
of your income may be excluded from the income test
under the work bonus.
“Even if you are receiving the age pension, you can
earn up to $300 per fortnight from work and it won’t
count towards the income test.”
Day also notes that many retirees could be making
the most of their entitlements with a couple of tweaks
to their financial arrangements.
XMORE “If your partner hasn’t reached age-pension age
INVESTING yet, for example, any money in their name in the
STORIES ON accumulation phase of super is exempt under both the
P66-77 income and assets tests.
“Simply contributing to your partner’s super
account instead of your own could result in you being
eligible for more age-pension benefits.”

Bitcoin takes off to scale new heights

T he price of Bitcoin has
reached a new milestone,
breaching the $100,000 mark for
wave of interest in crypto more
broadly as mainstream attention
has returned.”
the first time. The upcoming halving could
The cryptocurrency has drive the price even higher, says

61%
The increase in Bitcoin’s value in
the first two months of 2024.
recorded a rapid rise in value
since the start of the year,
at which point it was trading
at around $65,000, but in
Caroline Bowler, chief executive of
fellow exchange BTC Markets.
“The Bitcoin halving typically
impacts price positively.
early March Bitcoin’s price had The halving event occurs
reached a record high $105,000. approximately every four years and
COMPILED BY TOM WATSON

Jonathon Miller, the managing involves a reduction in the rewards

director of cryptocurrency
exchange Kraken, says there are a
couple of drivers behind the surge.
“A combination of factors has
sparked excitement around this
asset class and contributed to
Bitcoin achieving this landmark:
the recent US spot Bitcoin ETF
approvals; renewed focus on the
upcoming halving event; and a
miners receive for validating
transactions by half. This event is
hardcoded into Bitcoin’s protocol
and is designed to limit the total
supply of Bitcoin to 21 million.”

18 MONEY APRIL 2024


PROTESTS
Executive
pay in
the firing
line
S hareholders are increasingly
objecting to what they regard
as company executives’ inflated
pay packets.
Strikes against executive
salaries among the 300 largest
companies listed on the Australian
SecuritiesExchange (ASX) doubled
during 2023, according to a report
by Georgeson, a shareholder
services firm. A strike occurs when
at least 25% of votes are cast by
shareholders against the adoption
of a board’s remuneration report.
Last year there were 40
successful strikes against
executive pay compared
T ransurban’s ex-boss, Scott
Charlton, left a big legacy.
During his 11-year term, the toll road
operator’s debt pile grew from
$6.5 billion to more than $24 billion,
yet a series of dilutive capital
raisings to pay for overpriced
acquisitions meant the share count
doubled over that time, too.
The damage done by Charlton
will take years to undo. The new
chief executive, Michelle Jablko,
who started in October, has her
work cut out, but Transurban has
announced a decent start to the
financial year.
The company achieved good
traffic growth on most of its
roads, with an average of
2.5 million trips per day for the six
months to December, up 2.1%.
with 21 the year before, while
15 companies only narrowly
avoided a strike.
“Remuneration strikes provide
a company with important
information on how key investors
and proxy advisers are feeling
and companies are generally
keen to avoid a second strike,”
says Paul Murphy, the head of
ESG for the Asia Pacific region
at Georgeson.
“Although investors typically do
not unseat non-executive directors
after a second strike, companies
can face other consequences,
including negative media
AVOID Transurban (TCL)
The Intelligent Investor Graham Witcomb
Higher toll prices increased
proportional revenue by 6.3%,
while a modest 1.7% increase in
operating costs led to a 7.5% lift in
proportional operating profits to
$1.3 billion.
The average interest rate on its
debt sits at a reasonable 4.3% due
to extensive hedging contracts
placed during the pandemic. As
these are renewed, borrowing
costs will creep up. Between its
cash and bank facility headroom,
Transurban has about $3.4 billion of
available funds, which Jablko says is
plenty to cover ‘potential projects
and opportunities’.
THIS MONTH
SHARES
Where shareholders
struck
Company
Link Group (LNK)
Votes against
83.1%
Qantas (QAN)
Harvey Norman
(HVN)
82.9%
81.8%
Lovisa (LOV)
Elders (ELD)
73.4%
62.7%
Highest votes against S&P/ASX 300
remuneration reports, 2023. Source: Georgeson
coverage, higher public scrutiny
and the potential for investors to
‘vote with their feet’ by removing
their investments.”
Qantas was perhaps the most
high-profile company to suffer a
strike when 82% of shareholder
votes went against the airline’s
executive pay scheme in
November last year.
Harvey Norman, Link Group
and Lovisa also had significant
strikes against them, with each X MORE SHARES
company on the receiving end STORIES ON
of a strike featuring at least P78-85
70% of shareholder votes against
their remuneration reports.
Talk of more acquisitions is
worrying, but at least the market is
favourable. Acquiring toll roads at
lower prices should increase
returns on capital over the
long term.
While returns on
capital are likely to
rise, today’s dividend
– no higher than it
was five years ago,
staggering debt levels
and slowing growth
outlook mean the stock
has little appeal. AVOID.
Graham Witcomb is a senior analyst
at Intelligent Investor
MONEY APRIL 2024 19
 INTERVIEW
The wealth
harvester
J
ustin Gilmour grew up with
10,000 sheep for neighbours.
That might not be the norm
for most young Australians,
but when your family runs
a 6000-hectare wheat and sheep farm
near the town of Carnamah, 300km
north of Perth, that’s life.
“I think growing up on a farm was
pretty enviable. Having that sense of
freedom and being in a small community
where a number of the families were fourth-
generation family friends is pretty special.
We even had the benefit of growing up with
our grandparents on the farm,” he says.
“My brother might not agree that I
was much use, but it was an expectation
that everyone helped out around the
farm, whether that be rounding up sheep,
jumping on a tractor at seeding time or
shifting machinery at harvest.”
Gilmour’s prowess as a farmer was
never going to be tested, though, because
he knew early on that a life on the farm
was not on the cards. Instead, after
attending school in Perth, he studied
commerce at university, during which
time he was introduced to the field that
would eventually become his career:
financial advice.
“I was at a former girlfriend’s parents’
farm and they had a farm adviser – an
agricultural consultant – come to the
house. Her dad asked if I wanted to sit
in on that meeting and I came away
thinking that advisory would be really
quite interesting.”
20 MONEY APRIL 2024
STORY TOM WATSON
Profile
Justin Gilmour
Managing partner and private wealth
adviser at Integro Private Wealth,
a wealth management firm based in
Perth. Age 49; lives in the beachside
suburb of Cottesloe, Perth.
After university, Gilmour landed his
first financial planning role at Westpac.
But after three years, he realised that life
at a bank wasn’t for him.
“At the time, the nature of the industry,
and certainly a focus of the banks, was
a very transactional type of approach
to financial planning and wealth
management. So, I guess that I thought –
probably arrogantly – that I could do
a better job. It’s a relationships business
and you need to be there long term in
order for the client to get a benefit out of it
rather than it being a one-off transaction.
That’s the approach I’ve always taken.”
In 2003, Gilmour made his move by
establishing Integro Private Wealth,
the wealth management firm where
he continues to work as a partner and
private wealth adviser two decades later.
“We look at the ‘whole of wealth’
situation,” he explains. “So, it’s really
about finding out what it is that’s keeping
people awake at night; what the issues
are. And then going about meeting those
needs with expertise – even if that’s
putting people together with expertise
outside of wealth management.”
From high-net-worth individuals to
family businesses in the agriculture
and pharmacy space, Gilmour has
a mix of clients, many of whom are
in the regional market – a market he
loves working with.
“It’s really enjoyable because
they’re great people to deal with, they’re
loyal, they take advice and they are
very grateful.”
PHOTOGRAPHY BY TOM BENNETT.
Challenges of succession
Leaving the farm that his grandfather
had cleared decades before was hardly
a unique path. After all, people leave
for the city to pursue careers outside
agriculture all the time.
It’s a reality of life. In times past, it would
have been the norm for the family X
 INTERVIEW

“If you look at the recent increase in land values,

where they have doubled in the past three years,
a lot of farmers have been packing up and
exiting because, from a succession planning
point of view, the only way a lot of them
can equalise their estate is by selling up.”

farm to pass down to whichever members
of the next generation decided to stay on,
but changing attitudes and a rapid increase
in land values are now complicating that.
It’s a trend that Gilmour is well
acquainted with in his role as an
adviser, and one that he’s begun to see
more regularly among clients who are
transitioning out of agriculture.
“If you look at the recent increase in
land values, where they have doubled in
the past three years, a lot of farmers have
been packing up and exiting because,
from a succession planning point of view,
the only way many of them can equalise
their estate is by selling up.
“Attitudes have shifted. Off-farm
kids ask why they shouldn’t be entitled
to the same sort of asset position, the
same sort of inheritance, just because
they’re off-farm.”
It’s not only a financial decision that’s
facing many of his clients, though – it’s
just as much about relationships and the
emotions involved.
Gilmour tells the story of one family
who has been struggling to reckon with
this exact issue.
“We’ve been modelling different
on the land for generations. The second
generation often feel like it’s not really their
land to sell because they were given the
opportunity by their own parents, so they
feel obligated to pass it on to their kids.”
In some cases, Gilmour says that he
will bring in back-up to help smooth
discussions and make sure that emotions
don’t end up running too high.
“A lot of the time we’ll use an
organisational psychologist to help equip
everyone to have respectful conversations
and consider other people’s views, because
if you’ve got family there and someone
says something offensive, then you might
put back the plan six months.”
Managing the riches
There are two sides to Integro as a firm.
First, there’s the traditional financial
planning section, which typically deals cover all their bases, such as the sort of
with clients with a net worth of up to lifestyle they want to lead, if they want to
about $2 million. help any kids or grandkids with school fees
Then there’s the private wealth section, and any gifting they want to do – that sort of
where Gilmour works with high-net-worth thing. So we would basically cover that off
families, particularly in the mining and with a core wealth portfolio, which is liquid.
agricultural sectors, who have fortunes “Then we might have a satellite
that range up to $200 million. portfolio, which is made up of private
At this level of wealth, Gilmour says market opportunities and alternative
PHOTOGRAPHY BY TOM BENNETT.

scenarios for a family who are trying to
work through whether or not to sell the
farm or let their son take it over. But it is
emotional. It’s not like a traditional business.
You live there, you’re connected to it and it’s
your home as well as your business.
“So that’s always challenging,
particularly for families who have been
people don’t need to draw down on
their assets. Rather, they can live on the
income that the money generates and
then reinvest anything that’s surplus to
requirements. Of course, that pot of gold
still requires management.
“We model the client’s outcomes and
work out what amount they will need to
investments – longer duration investments
that are less liquid and higher risk but
give you the ability to shift the dial on
performance. There’s definitely more
of an appetite for that in the high-net-
worth space than in traditional financial
planning, which is more focused on the
core portfolio,” he says.

22 MONEY APRIL 2024

 Interestingly, beyond portfolio structure,
an important conversation Gilmour has
with his high-net-worth clients is about
financial literacy. Specifically, ensuring
that younger family members have the
knowledge to feel empowered.
“Implementing financial literacy
programs for kids who are not that
financially literate is critical, because many
are going to inherit significant amounts. So
you need to equip them with the tools so
they can feel comfortable to have a voice
at the table when those decisions are made
and so that they can make good decisions
going forward,” says Gilmour.
A couple of months ago Gilmour got a
call from a friend and long-term client. It
was bad news. After being diagnosed with
cancer last year, the client had been given
just weeks to live.
He wanted to touch base to sort out his
loans, work out how his wife and his kids
were going to be brought into the fold in
the future and get some closure on his
financial affairs.
“We’ll probably play an even more
significant role for that family going
forward than we ever have,” says Gilmour.
“And we play that role with a number
of families where we see the parents,
then we see the kids and help them to
get financially organised. So, you end up
getting really entrenched with the family
and the relationships within the family.”
Thinking ahead... Justin Gilmour is a firm believer in
the importance of implementing financial literacy
skills in young people, in particular those who may
be dealing with a large inheritance down the track.
For Gilmour, it’s times like these and the
long-standing connections he’s built that
not only make his work rewarding but
vindicate that decision he made 20 years
ago to leave a section of the industry that
he considered transactional and shallow
and start Integro.
“You can make a significant difference.
But it’s about building trust and being
genuinely interested in someone’s
outcomes, because a client will know
if you’re not.” „
MONEY APRIL 2024 23
 LITHEROE
LC

Q&
PAU

A
ASK PAUL

Pensioner Trevor has been hurt financially by his shares crashing by 96%.

Promise of a quick profit on

Need
Paul’s
help?
Send your questions to:
Ask Paul, Money
magazine, Level 7,
55 Clarence Street,
Sydney NSW 2000
or money@
moneymag.com.au.
Sorry, but Paul can’t
personally answer your
questions other than
in the Q&A column. By
submitting your question
to Money, you consent to
having your question and
the response you receive
from Paul published in
the print and digital
edition of Money.
investment was misleading
Q Is it possible to give me some advice
please? Some time ago, I invested in
Australian Bond Exchange at 65 cents
a share on the promise of a price increase to
75 cents within a short period. Instead, they are
now worth 4 cents a share (at the time of writing).
I am a pensioner and this has hurt me very much.
Is there anything I can do? For example, force
them into receivership. I am so annoyed.
Goodness, Trevor, this is pretty ugly. I had never
heard of Australian Bond Exchange, so I’ve been
doing a bit of digging around. It certainly has
some colourful reviews and a share price that
has sunk like a stone. The ASX shows its shares
have fallen by 96.78%.
I can understand how you feel. ASX listing rules,
external auditors, plus all the checks and balances
around things like ‘trading insolvent’, will certainly
take care of issues like insolvency.
The most recent quarterly activity report, listed
with the ASX, shows a sizeable loss but still a
reasonable amount in ‘cash and cash equivalents’.
To no surprise, the company states that it is
undertaking a ‘cost reduction program’. Apparently,
‘client engagement and integration into various
partner firms is not as quick as expected’.
What interests me more, though, is the ‘promise’
of the share price increase to 75 cents in a ‘short
period’. Was that professional advice and was it
in writing? If so, I would recommend a call to the
Australian Financial Complaints Authority (AFCA).
If it was a mate at the bowling club, this is not going
to help you, but if it was professional advice, I would
strongly suggest you contact the AFCA.
Losing money in any fashion is awful for any of us,
but terrible for a pensioner. I think your best course
of action is the source of the advice – that was
clearly misleading.
As to the company, at the end of the day, the
market is the best judge of this, along with ASX
listing rules to regulate its situation. A drop in
the share price of more than 96% is a seriously
bad indicator.
This is the last thing you want to hear, but taking
on the risk in one small company is not what any
retiree or pensioner should be doing. Could all
readers please remember about risk and return,
and also my favourite investment saying: If it looks
too good to be true it will be.

24 MONEY APRIL 2024

Bec has been caught out by a builder’s insolvency.

Leaving a home
at frame stage
is a terrible idea
Q I find myself in a challenging situation after a builder
insolvency. I received $150,000 from the building
indemnity insurance, which is in my bank account
earning 4.5%. The home is at the frame stage, but an additional
$250,000 (the $150,000 building indemnity plus $100,000
out of pocket) is needed to complete it.
I am hesitant to add the extra to my mortgage due to a new
car loan and increased interest rates on my mortgage. I’m
contemplating whether to invest the $150,000 in shares for
a few years or pay off the car loan and explore refinancing.
The initial build price was $270,000 and the new price is
$520,000, so the bank might be cautious due to the
property’s current value.
I’m renting and paying half my mortgage payments to
cover principal and interest at the moment.

Hang on, Bec. I know this must have been a stressful time and
my thoughts are with you. But what has to be a terrible idea is
leaving a home sitting at frame stage. I know nothing about
building, but I can’t see how leaving a home at this stage can
lead to a good outcome. Time and the weather are going to
be most unkind to your property. Equally, building costs go
up each year.
Can we just drop this ‘invest in shares’ idea? I love my share
investments; they are undoubtedly my favourites. Sure, at times
they fall, but over time they go up nicely. They send me beautiful
franked dividends, which also tend to increase over time.
But they are an awful short-term investment. I have no idea
in a few years whether you could make 30% or more, or lose
30% or more. Time is the safety net with shares. I’d
recommend a holding period of at least seven years.
What is more predictable is the short-term rise in building
costs. You can only do what your budget says you can do, but
is there any way the $150,000 would get the property to lock-
up stage? You are paying your mortgage and rent. If you could
plan for your home to be complete in a year or so, does not
having to pay rent assist in covering repayments on the extra
$100,000 you need?
In your shoes, I’d be busting my butt to get this property built.
Clearly, all I know about your situation is what you’ve told me.
This decision needs a deep dive into your income, spending, job
and a lot more. My views can only be general, so seek advice if
that helps you to pull a plan together. But I just can’t see how
paying a mortgage on a home at frame stage and paying rent
while contemplating investing your building indemnity
insurance cash is a great idea. X

MONEY APRIL 2024 25

 LITHEROE
LC
Q&
PAU
A
Patrick is saving to buy a property, so should he move in with his partner?
Q Protect yourself, and don’t let
& money wreck your relationship
A
Q My partner is a couple of
years older than me and has
his own place. He has
recently been dropping hints that he
wants me to move in soon. But I want
to save up and get a deposit and get
my own place so that I am secure.
I am not sure if I should move in with
him and help with his loan or
continue saving up for my own place.
Crikey, this is a challenging month for
Ask Paul on the heels of Trevor’s
predicament (see page 24). But,
Patrick, this is a ripper question.
The biggest disasters in money
inevitably involve human emotion. Fear
and greed are big drivers. Then we have
relationships. No point in me waffling
around – I’m going to need to dive in
boots and all on this one!
26 MONEY APRIL 2024
Patrick, with all the best will and love
in the world, neither you, your partner,
nor I have any guarantee how things
will work out. My view is ‘hope for the
best, plan for the worst’. Without trying
to put a dampener on your relationship,
you have some planning to do. I know
there is nothing like the dry, hard facts
of money to put a dampener on
romance, but you two need a solid
money chat.
You have to protect your own
financial future while being respectful of
your partner’s. I presume you are paying
rent now, so an option if you move in is
to continue to pay that amount of rent
but to your partner. This will allow you
to continue to build a deposit, as your
financial position is unchanged.
If you were to merge your finances,
you both need to be protected. If your
rent and any extra money go into your
partner’s loans, how does that play
out if you part? If you are together for
some time and only make a modest
financial contribution to your partner,
what happens to your partner’s home
if you split?
This is all highly resolvable. You need
to work out before you move in exactly
what the money situation is during the
relationship and, if it ends, how things
are split. This is horribly unemotional; it
feels negative and untrusting. But let’s
be real, relationships can and do fail.
Money is one cause of relationship
failure. Just remove this by dealing
with it now. Get your agreement
documented and do not hesitate to see
a solicitor. The upside is, with money
issues sorted out, you can move on
together and enjoy your relationship.
At 54, Janet wants to start investing
in the sharemarket.
Salary
sacrificing
is the best
way to go
Q I’m 54, recently divorced and plan
to retire at 60. I will have good
super. I work three days a week
and find it covers my expenses, living
modestly. I don’t have a mortgage.
My question is: Is it too late to start
investing in shares, since the sensible
advice is that it is a long game? Or should
I put extra money into superannuation?
The answer is no and yes, Janet. Except we
are going to link shares and super together.
It is certainly not too late for you to be
investing in growth assets such as shares.
Yes, it is only six years to your retirement,
but the whole idea of super is to have it
generate annual returns for you, hopefully
At 39, Josh has two investment properties and a well-diversified portfolio.
No reason to change a terrific strategy
Q I am 39 and have been saving and
investing now for nine years. I
hold two investment properties
worth $800,000 and $570,000, with
loans of $280,000 and $350,000
respectively. I also have $180,000 in
super, $240,000 in equities and $50,000
in cash for an emergency fund.
My question is, should I sell down my
stocks and funds and pay off one of the
houses? The house is paying $30,000
a year before tax and the equity portfolio
is fully franked, paying $30,000.
My immediate thought, Josh, is why sell?
I am very concerned that I am missing
something here. Sure, we have higher rates
of interest and cost-of-living pressures.
You, however, are in a wonderful position.
With significant equity in your properties
for decades. This means having shares in
your super, as part of a diversified portfolio,
is exactly what you should do. I’m hoping
you will be able to add to your super and
have shares as part of your super fund.
Super is just a tax structure, but a brilliant
one. I’ll need you to check your income,
because that links directly to the right answer
for you. You have told me you only work
part-time, but as it is three days a week,
I would think you would be earning more
than $18,200. This where tax cuts in at 19%
(16% from July 1). If you salary sacrifice into
I suspect they are pretty close to break-
even, with the rent covering interest and
expenses. Then you have emergency funds
of $50,000, a healthy super balance for
super, you would pay 15% tax, which makes
super slightly tax effective for you as money
goes in. Then you only pay 15% tax on the
income earned inside super. If you earn more
than $45,000, above that amount tax is
32.5% plus Medicare (30% from July 1). You
would basically halve your tax on any super
contributions made on amounts above that.
Have a chat to your accountant, super
fund or your company’s HR team. I think,
though, you will find salary sacrificing into
a super fund that holds a balanced or growth
portfolio is likely to be a great option.
your age and a good share portfolio. To me,
it seems as if you should keep steaming
ahead. Your properties are obviously well
located; they have both grown in value
well above your loans.
Your only reason to change an effective
strategy is if your life has changed, and this
is what I may be missing. Maybe you want
to take a couple of years off to travel, you
are about to start a family and want to use
one of the investment properties as your
home, or you just want to reduce your
debt and relax?
I’m really not sure. But based on what
you have told me, unless your life plans
have changed, you have a terrific thing
going here. For a 39-year-old, you have a
very valuable and well-diversified portfolio.
Unless your life is changing, I would not
change anything. „
MONEY APRIL 2024 27
 THIS MONTH
SMART SPENDING Destination Starry, starry skies
Stargazers in search of the world’s clearest night skies can find them
at certified dark sky reserves around the world.
Heavenly experiences... clockwise, from above, star trails in the Big Bend reserve in the US; Aoraki National Park, New Zealand;
camping on the summit in Bannau Brycheiniog National Park, Wales.
Four of the best
1. New Zealand
Natural darkness and sky quality are among the
criteria required by the US-based DarkSky
International for a location to be certified as a dark
sky reserve. The Aoraki Mackenzie International
Dark Sky Reserve on New Zealand’s South Island
is one of only 22 around the world. Lauded for its
clear, spectacular night skies, the area is also
culturally significant to MĈori people, who have
historically relied on the stars for navigation.
2. United States
Dark sky reserves require light pollution to be kept to a
minimum. The night sky over more than 160,000sqm
in 22 countries is now protected. Covering 3.5 million
hectares from Texas to Mexico, the Greater Big Bend
International Dark Sky Reserve is the world’s largest.
Book in for a constellation tour and telescope viewing
at McDonald Observatory near El Paso, Texas, to bring
the night skies to life.
28 MONEY APRIL 2024
3. Wales
Sheep outnumber people by 30 to 1 in South Wales,
which is good news for astronomy lovers visiting
Bannau Brycheiniog National Park (Brecon Beacons).
All lighting in the park is dark-sky friendly, making it
easy to spot the Milky Way, major constellations,
bright nebulas and even meteor showers on clear
nights. Stay overnight in a cottage or coach house,
or really become one with the star-studded skies
at one of the park’s camping or glamping sites.
4. France
The Vercors Regional Natural Park in the French Alps
was certified as a dark sky reserve in 2023. By day,
visitors are surrounded by stunning mountain vistas
and verdant valleys. By night, the park’s clear,
sparkling skies are awe-inspiring. On top of that,
efforts to preserve the darkness will protect the
wildlife. Bats and owls are particularly sensitive
to light disturbances. JOANNA TOVIA
DRIVING PASSION
WINE
What to look for
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accommodate enough child seats for school bags and the weekly while driving along. berry flavour. Its
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mention friends, cousins, and so Don’t underestimate the value of first family car, the key criteria are: suitable for everyday
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MONEY APRIL 2024 29

 THIS MONTH
SMART SPENDING
SMART TECH
On our radar: three gadgets that make life easier
Video like a pro
Upgrading your performance on video
just got easier. Snap on your iPhone
and the tracking stand will follow your
face and body movements during
livestreaming, video recording or
video conferencing. It can turn 360
degrees and tilt 90 degrees as you
record or stream video and can keep
going for five hours straight if you
want it to. The internal battery can be
recharged between uses or plug it in
with the 1.5m USB-C to USB-C cable.
The Belkin Auto-Tracking Stand Pro
with DockKit works with FaceTime
and other video conferencing apps and
operates smoothly and quietly. If you
don’t want it to track your movement
anymore, you can turn that feature off
with the push of a button on the device
(no app required).
Cost: $299.95.
belkin.com/au.
GIVE IT UP
Mistreated donkeys given a new life at sanctuary
D id you know donkeys live for
more than 50 years and are more
like dogs than horses? These
affectionate, intelligent animals
thrive on company and
attention but, according
to Sandy Kokas-
Magnussen, manager
at the Good Samaritan
Donkey Sanctuary, they
are very misunderstood.
“People don’t realise the
care they need,” she says.
Kokas-Magnussen took
over the donkey sanctuary from
her mother and, between them, they’ve
30 MONEY APRIL 2024
Charging on the go
Life is filled with painpoints, and batteries
dying at inopportune moments is one
of them. Paleblue has come up with a
solution that makes it easy to recharge
batteries and does the planet a favour in
the process (more than 95% of batteries
currently end up in landfill, leaking
contaminants into the environment). Each
lithium-ion battery has a USB-C port and
LED charging indicator that flashes green
until fully charged. The batteries can be
recharged more than 1000 times, last far
longer than alkaline batteries, and won’t
leak battery acid into your electronics. It
takes under an hour to fully charge a set
of four batteries (whether AAA, AA, C, D
or 9V). Paleblue is a member of 1% for the
Planet, a global network of businesses
and environmental organisations working
together for the good of the planet.
Cost: From $49.95.
paleblueearth.com.au.
been rescuing donkeys for decades. The
sanctuary is located on 120 hectares
in the Hunter Valley in NSW and has an
intensive care hospital for donkeys.
“It’s upsetting, the state some of
them come here in – it’s horrific,”
says Kokas-Magnussen.
The RSPCA, police or rangers contact
the sanctuary if they come across a
donkey in need, and they’re given love
and attention when they arrive. “Some
are timid and have trust issues, and they
won’t come up for a cuddle even years of
being here – they have long memories.”
Many rescued donkeys live out their
days at the sanctuary, while some go to
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track of subscriptions, what show we
were watching on which platform,
and what we might want to watch
next can be a bit messy. Hubbl is
a small device that plugs into your
TV to streamline the watching
of movies, shows, sport and live
channels. It comes with a universal
remote with voice control that
allows you to search for your next
show, control playback and change
settings. Hubbl integrates 18 global
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searching between apps, watching
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a whole lot easier.
Cost: From $99.
hubbl.com.au.
foster homes as companion animals or
farm donkeys after being rehabilitated.
The sanctuary has been a registered
charity since 1990 and relies on
donations. It isn’t as simple as putting
a donkey in a paddock. They eat more
like goats than horses, needing straw
and hay as well as grass, to stay healthy.
Donations pay for feed and medicine,
plus farrier, dental, transport and fuel.
Some people make one-off or
monthly donations while others
sponsor a particular donkey. “We’re
always looking for new ways to raise
funds,” says Kokas-Magnussen.
See donkeyrescue.org.au.
 Give your
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^
 ROE PAUL’
HE

SV
PAUL CLIT

E R DI C T
YOUR QUESTION

I want to retire by 50. How

much money will I need?
I’m 42 with a concrete plan to retire in about six or seven
years with enough capital to live from the dividends
(FIRE – financial independence, retire early). Now, the
question is about my super. I have no issue with waiting
to reach my preservation age, but being in a defined
benefit scheme, would I be significantly disadvantaged
if I am not employed in the last five years before
preservation age based on its formula that takes into
account the latest salary? What are the alternatives?
I am not sure following the advice from my super fund
is in my best interest here.
Gianluca

CASE
STUDY

HAVE A
QUESTION?
If you have a question you’d like
Paul to answer, email
money@moneymag.com.au or write to
Level 7, 55 Clarence Street, Sydney NSW 2000.
Questions need to be 150 words or fewer On the FIRE trail...
and you must be willing to be Gianluca’s goal is ‘financial
photographed. Readers who appear independence, retire early’.
on this page will receive a
six-month subscription.

32 MONEY APRIL 2024

 There’s one critical number
PAUL’S VERDICT
you must calculate first
W e all love a good FIRE, Gianluca!
For me, this mainly involves
sitting in front of one at the snow with
my family and a glass of red wine. But
your type of FIRE I certainly support.
‘Financial independence, retire early’
is a plan that many love the sound of
and aim for.
FIRE would not work for me. Here
I am at 68, still loving answering
Money readers’ questions, writing
articles and – while I try to avoid TV
these days – I still do a bit of radio, plus
sit on a couple of company boards,
which I also enjoy. This is perfect for
me: maybe two days a week of work
stuff and five-day long weekends.
So, FIRE may suit some, but for me
the FI is a goal we should all have. But
the RE bit was of zero interest to me.
Let’s not worry about RE for a
moment and look at FI. Financial
independence is a good goal for all
of us. But these are just words. What
they really mean is totally different
for me, you or anyone else.
I have single age pensioners who
tell me, very happily, that they are
financially independent. One example
of this that really made me chuckle
was Jim. He called me on Nightline
on the ABC some years ago. He was
retired, owned a small property
and lived on the age pension, plus
dividends from his small share
portfolio. A keen fisherman, he caught
fish, grew his own vegetables and
made his own beer, of which he was
very proud. He saved around $50
a week from his age pension. Jim is
financially independent. His income
more than meets his spending.
That is one end of the bell curve.
At the other end, I meet with people
who spend hundreds of thousands
of dollars a year. No making beer
or growing vegetables here. Their
lifestyle is travel, usually a boat and
a love of the theatre and dining out.
So, the starting point for me is FI.
The amount you need for this is not
too hard to work out. If you were
thinking about financial independence
as a goal at age 60, work out, in today’s
dollars, what you would spend at that
age and multiply by 17.
So, if you wanted $100,000 a year,
you’d need investment assets of about
$1.7 million. Sorry, your house does
not count. Anyone have a house that
sends them money? Unless you are
renting out spare bedrooms, houses
cost money.
If you are younger, say under 50, I’d
like you to use a different formula. For
younger people, you need your money
to last longer. If you need $100,000,
I’d use the 4% rule as the average
earnings above inflation from typical
growth-type investments. This means
that $2.5 million in assets would be
needed to be historically safe to spend
$100,000 a year, plus inflation.
What lifestyle do you want?
Gianluca, you want to be a FIRE in
your late 40s. What will you spend
each year, including on your home
or rent, replacing cars, travel, health,
lifestyle, etc? As you will be relatively
young, I think you’ll need to use the
4% rule. Basically, each $1 million
you have will historically be good
for $40,000 a year, plus inflation.
If you want first-class travel and
boats, this number could be pretty
high. If you are more like Jim and
can live happily on $20,000 a year,
but can’t yet get a pension, $500,000
should do it.
The key for you to achieve your
FIRE goals is the amount you plan to
spend. If you don’t have that number,
you can’t be financially independent,
let alone retire early.
Then we need to consider your
super. Here angels would fear to tread
without a plan in hand, plus a long
conversation with you about your
objectives, your career and how this
all works with your scheme.
Most defined benefit plans will
have an age where payments max out
to you, either as a pension or a lump
sum, and I doubt that is late 40s. If it
is a multiple of your final three years’
salary, for example, you could be
penalising yourself.
You don’t seem to have
much confidence in your super
administrators. If so, find a
professional adviser with expertise in
this area. You should agree in writing
what the costs are likely to be, but
it will be a small investment with
potentially significant benefits to you.
If you plan to retire early, that is fine,
but at least understand how much
upside you are giving away.
FIRE is a great idea for some, but it
requires a pretty large lump of invested
capital. If you can do that, great. For
most of us, financial independence, let
alone ‘financial independence, retire
early’, would be a great result. Many
Aussies, like me, have made it to a level
of financial independence that fits our
lifestyle needs. Some of us stop work
completely; others, like me, enjoy a mix
of ample leisure time with a bit of work
to keep the brain ticking over.
This is all super personal. We all
have different lifestyle income needs,
depending on what we enjoy. The
real trick is to have a plan. And that
plan starts with the critical number.
How much do we want to spend
each year? „
MONEY APRIL 2024 33
 COVER STORY

GAME ON! Tired of feeling ripped-off?

YOU VS BIG We expose the dodgy business
practices that are harming

BUSINESS your hip pocket. Then we

show you how to fight back.

A
s Australians grapple with
a cost-of living crunch,
some of our biggest
companies have been
reporting record profits.
Now it’s time for us to take action.
Since mid-2021, we’ve seen prices soar,
with inflation hitting 7.8% in late 2022. It has
meant we are paying more for groceries,
airfares, energy – pretty much everything.
In a bid to tame inflation, the Reserve
Bank has raised interest rates 13 times since
May 2022. Sure, it pushed inflation down
to 3.4% for the 12 months to January, but
at considerable cost to households.
STORY NICOLA FIELD
Research platform Finder has revealed
that one in three (35%) homeowners is
struggling to pay their mortgage. More of
us are forced to dip into savings to get by,
to the point where one in three people
doesn’t have a dollar in their emergency
savings fund.
But not everyone is feeling the pinch.
While households have scrimped, some
of Australia’s biggest companies are
raking in the cash.
Supermarket giants Woolworths and
Coles increased margins to record strong
profits ($1.6 billion and $1.1 billion,
respectively) in the 2022-23 financial year.
As airfares hit a 15-year high in
December 2022, Qantas recorded
a 2023 profit of $2.5 billion. Australian
petroleum company Ampol recently
announced an operating profit of $1.7
billion, with earnings that were the
second highest in the company’s history,

34 MONEY APRIL 2024


in a year when motorists were often paying
$2-plus per litre at the bowser.
These results may be great news for shareholders,
but the cruel twist for consumers is that some of
our leading companies have employed pricing
practices that have pushed inflation higher.
Jim Stanford, of the Australia Institute’s Centre
for Future Work, says that as of the September
quarter of 2022 (the most recent data available),
Australian businesses had increased prices by
a total of $160 billion a year over and above the
increase in input costs.
The net effect, according to Stanford, is that from
March 2021 through to June 2022, corporate profits
exploded by 29%. Labour income crept up by just 8%.
Without these excess profits, Stanford believes
inflation could have been much lower than it was:
an annual average of 2.7%, barely half of the 5.2%
recorded since the end of 2019. It may have spared
homeowners many of those painful rate hikes.
So, what dodgy pricing practices are the big end
of town engaging in?
A no-holds-barred report Inquiry into Price
Gouging and Unfair Pricing Practices by Allan Fels,
the former boss of the Australian Competition and
Consumer Commission (ACCC), for the Australian
Council of Trade Unions (ACTU), has named and
shamed a number of sectors and companies that, he
says, are squeezing some consumers and small
businesses “to breaking point” (see page 40).
5 AREAS WHERE WE’RE PAYING
TOO MUCH
Here we look at key areas that are costing
households, and the steps we can take
to beat big business at its own game.
1POWER BILLS
Unless you’ve been living off the grid or relying
on candles (both increasingly attractive options), it is
almost impossible to have avoided rising power bills.
Between March 2021 and September 2023,
consumers were slugged with a 22.3% jump in
electricity bills. And we’ve been warned to brace
for more.
The official spin is that a variety of complex
factors are contributing to higher bills for
consumers. But Allan Fels is more pointed. He has
previously commented that “the electricity
industry is riddled with questionable prices”. His
ACTU report describes price gouging in the
electricity sector, a highly concentrated industry
at all levels, as being of “great concern”.
The introduction of Energy Bill Relief Fund
rebates from July 2023 has provided some relief,
though only for those who hold concession cards
or receive eligible Centrelink payments.
Turn the tables to win
The Australian Energy Regulator recommends
three steps to save on power bills:
• Find out the plan you’re on – this should appear
on your latest power bill.
• Phone your power company and ask if it has a
cheaper plan or better offer.
• Jump onto the Energy Made Easy website to
compare plans across a range of providers.
See our case study (‘From $450 to $32 for
a quarter’s electricity’) to see how the savings
can stack up. X
MONEY APRIL 2024 35
 COVER STORY
CASE
$200 slashed from
monthly grocery bill
STUDY
Inflation may have left consumers
primed to accept price hikes at the
checkout. But for first-time
homeowners Chris and Isha Rana, spare
cash is a rare thing. Faced with the
double whammy of rising mortgage
repayments plus higher living expenses,
the couple has slashed grocery bills by
rejigging their shopping routine.
“We used to mainly shop at Woolies,
then occasionally pick up a few bits and
pieces from Aldi,” says Chris. “Now we
have flipped things around. We buy
perishables from Aldi and head to
Costco for non-perishables such as
toilet paper and laundry detergent,
which we buy in bulk.
“These days we only occasionally
head to Woolworths or Coles, which
is a complete about-face on how we
used to shop.”
The change in routine has seen
the couple save “at least $200
each month”.
Do they miss the variety offered by
the bigger supermarkets?
Not really. “I was finding that buying
even a few items at Woolies could end
up costing $100,” says Chris.
“Aldi and Costco have all the
essentials plus special buys that
change each week. So, whenever we
do our weekly purchases, there’s
always something different. Plus, I feel
these stores aren’t trying to rip us off
like the duopoly.”
36 MONEY APRIL 2024
2 BANKING
Australia has one of the most concentrated banking
sectors in the world, leaving the big banks well-placed
to make gains at the expense of consumers.
It is especially galling that at a time when millions of
Australians are struggling with higher mortgage
repayments, our four biggest banks, Commonwealth
Bank, NAB, ANZ and Westpac, have lifted their profit
margins to around 35.5% from 32.4% pre-pandemic.
By comparison, Australia’s other domestic banks
have a profit margin averaging 26.0%.
It’s no secret that some banks practise price
discrimination. Comparison studies have found that
across the major banks, the difference between ‘front
book’ rates offered to new customers and ‘back book’
rates paid by existing customers averages about 1.96%
in favour of the newcomers.
And the banking sector is about to become even more
concentrated. In February, the Australian Competition
Tribunal gave the green light for ANZ to buy Suncorp.
That’s despite the ACCC earlier denying permission for
the takeover to go ahead on the grounds it would only
strengthen the big banks’ market muscle.
Turn the tables to win
If you have had any doubts about whether you’re
getting a good deal with your bank, now is the time
to do something about it. Check the rate that applies to
your home loan (one in five homeowners doesn’t know
what they’re paying), then shop around or talk to
a mortgage broker to see if you could do better.
Chances are you can.
According to the comparison site Mozo, the lowest
basic variable rate through the big four banks is 6.54%
with Westpac (at the time of writing). By contrast, you
could pay as little as 5.89% with either Homeloans360
or the Mutual Bank – a potential saving of 0.65%, equal
to winding back the clock on almost three rate hikes.
3 GROCERIES
When the ACTU called for submissions into its
price gouging inquiry, complaints about food and
groceries topped the list. No surprises there.
Despite the presence of IGA, Costco and Aldi,
Woolworths and Coles command 65% of Australia’s
grocery market. This doesn’t just give the two
supermarket giants plenty of clout when it comes
to setting prices, it also puts the bargaining chips in
their favour when it comes to paying suppliers.
Farmers, in particular, are vulnerable to being squeezed.
In its submission to the 2023 Senate Supermarket Pricing
Inquiry, Coles claimed requests for higher cost pricing
from farmers have been “a key driver of supermarket price
increases”. The reality, though, is that both farmers and
consumers can be left short-changed.
PRICE-GOUGING PRACTICES • MONEY-SAVING METHODS • THE LOYALTY PENALTY

As a guide, farmers do not receive a higher price

for branded milk compared with no-frills milk.
(It all comes from the same cows.) A quick check
of Woolworth’s pricing shows a 2L bottle of
branded milk costs about $4.30, while the generic
milk is $3.10. Same cows, same revenue for the
farmer, but the consumer pays more. Business
is skimming the cream from the more
expensive product.
‘Specials’ can also be a source of confusion. In
a survey by the consumer group Choice, 83% of
respondents said it was hard to know if some
promotions offered genuine value.
“Supermarkets are using a number of confusing
promotional practices that make it very difficult
for customers to work out if they’re actually
saving money on their groceries or not,” says
Bea Sherwood, senior campaigns and policy
adviser at Choice.
“Over the past year, Choice has found countless
examples of dodgy and confusing specials at both
Coles and Woolworths.” This includes Coles raising
prices on products it had promised would be
locked-in for a set period.

Turn the tables to win

If you’re a Coles or Woolies devotee, it’s worth
looking at how much you could save by
shopping elsewhere.
“Doing your weekly shop at one supermarket is
convenient, but it might cost you at the checkout,”
says Choice’s Mark Serrels. “We’ve found you can
save up to 20% on groceries if you shop around to
find the best deals.”
Our case study (‘$200 slashed from monthly
grocery bill’) shows how it can be done.

X For more on this topic see Woolworths vs Coles: Which

supermarket is cheaper? online at moneymag.com.au.

4 AIRFARES
Just as in the banking and supermarket sectors,
the domestic aviation market is dominated by a small
number of big players. Qantas, which owns Jetstar,
has 62% of the market. Virgin accounts for a further
28%, leaving smaller airlines such as Rex and
newcomer Bonza to fight it out for the remaining 10%.
Yes, airlines did it tough during the pandemic.
Let’s not forget, though, that Qantas accepted more
than $2 billion in government assistance. Virgin
didn’t fare quite as well, shutting down its budget
arm Tiger, which further reduced competition.
According to the ACTU report, aggressive
fare hikes by Qantas over the three months to
December 2022 beefed up inflation in the holiday
travel and accommodation sector – potentially by X

MONEY APRIL 2024 37

 COVER STORY
as much as 25%. Yet when Qatar Airlines sought
to increase its capacity in the Australian market –
which could have forced fares down through greater
competition – it was knocked back by government.
In the domestic market, price surveillance by the
ACCC shows domestic airfares fell last year after
reaching record highs in late 2022.
The catch is that forking out for a fare is no
guarantee of arriving at your destination. In
December 2023, a whopping 5% of flights were
cancelled, more than double the long-term average.
Put another way, one in 20 of the 4.8 million people
who flew domestically that month would have
received the dreaded SMS saying their flight had
been cancelled.
Turn the tables to win
Travellers can save by carefully timing their
trips. KAYAK’s ‘Best Time to Travel’ online tool
shows return flights from Sydney to the Gold Coast
cost, on average, $134 in May. The cost jumps to
$155 if you fly in July. Hold off until August, and the
average cost dips to $137. Even bigger savings can
apply if you are flying internationally.
The day and time you reserve seats also impacts
the price you pay. Expedia’s 2024 Air Travel Hacks
Report found that booking at least three months in
advance for domestic flights can save you an average
of 30% compared with a last-minute booking. For
international flights, prices are traditionally cheapest
at least 160 days before departure. Reserving seats on
a Sunday can save up to 20%, on average, compared
with making reservations on a Friday.
5 HEALTH INSURANCE
While the ACTU report didn’t focus on health
cover, an investigation by Choice found health
insurers, including the five biggest funds
(Medibank, Bupa, HCF, HBF and NIB) are
increasing the cost of premium hospital cover
at a far higher rate than the advertised averages.
Health insurance providers are allowed to raise
their premiums once a year, after getting approval
from the Federal health minister. On March 5, the
average annual uptick in premiums was 3.03%, with
Federal health minister Mark Butler saying “the
Albanese government has ensured that health
insurance premiums will fall relative to
Australians’ wages and Labor’s tax cuts”.
However, Choice’s Jodi Bird says that over
the past three years, average health insurance
premiums across all levels of cover (Bronze, Silver
and Gold) jumped by 8.6%, with Gold hospital
premiums rising by about 31% on average.
“Several insurers are using sneaky tactics to jack
up the prices,” she says. One such tactic is quietly
38 MONEY APRIL 2024
closing cheaper Gold policies and releasing much
more expensive policies for new customers.
Turn the tables to win
Bird recommends regularly evaluating your
health cover. Downgrading to a more affordable
level of cover can save money, but if you are thinking
of upgrading, she advises: “Don’t just upgrade to
a policy offered by your current fund”. Shopping
around is the secret to saving on premiums.
TOOLS TO HELP YOU SAVE
The ACTU report on price gouging found plenty
of other areas where pricing practices can leave
consumers short-changed. They include overseas
remittances, electric vehicles and even early
childhood education.
There is no getting around the fact that staying
loyal to the same provider can be a budget buster.
The onus is very much on consumers to hunt down
the best deals and take their business elsewhere if it
means landing a lower price (see Paul Clitheroe’s
story on page 42).
Digital tools and services are also available to
help you secure a bargain or save money.
When it comes to power bills, Bill Hero
automatically monitors every energy bill you
receive and helps you switch if it turns out you can
save. It costs $49 to have electricity bills monitored
for a year, or $79 for electricity plus gas.
If you have an issue with a company, you don’t
have to slug it out alone. Handle My Complaint
claims to solve about three-quarters of complaints
it receives. Membership to solve unlimited
complaints comes with a monthly fee of $24.95.
WHERE TO FROM HERE?
Qantas
accepted
Coles and Woolworths are under intense pressure
to take action on prices. The findings of the Senate more than
inquiry into supermarket pricing will be released in $2 billion in
May. Labor minister Craig Emerson is reviewing
the Food and Grocery Code of Conduct and the government
ACCC is conducting its own inquiry into the
supermarket sector, with the results due next year.
assistance
The question is, will any of this deliver hip during the
pocket relief to consumers, bearing in mind that the
big supermarkets are far from alone when it comes
pandemic.
to questionable pricing practices?
The ACTU is advocating for structural change
to help bring prices down. Assistant Secretary
Joseph Mitchell says the ACTU would like to see
the establishment of a Prices Commission.
While the ACCC plays an effective role in
maintaining competition across corporate
Australia, competition alone doesn’t solve every
problem. “The early childhood education sector is

a great example of this,” says Mitchell.
“We understand that parents won’t
pull their children out of a preschool
even if a new centre opens down the
road that offers lower fees because
their kids have already made
important friendships.
“We need a structured response, and
there isn’t one single body dedicated to
looking at high prices.”
Businesses are evolving quickly
backed by advances in technology, and
Allan Fels’s report reveals the rapid
evolution of pricing practices that are
shifting benefits away from the
consumer and towards the profit sector
through strategies such as algorithmic
pricing and ‘excuse-flation’. (See Spot
the Rip-offs on the next page.)
“Ultimately, these strategies are
designed to extract more money from
PRICE-GOUGING PRACTICES • MONEY-SAVING METHODS • THE LOYALTY PENALTY
the consumer,” says Mitchell. “At the
end of the day, we want to see
Australians get a fair deal, and
the ACTU is advocating for price
gouging to be illegal.
“Australia is unique in that
companies can charge excessive
prices and it is perfectly legal. This is
not the case in other areas such as the
European Union,” he says.
“The problem is that we all
know it’s unfair but there is no
[magic] ‘corporate stick’ available
that can be wielded to prevent price
gouging happening.”
“We would also like to see
a halt in the process of big companies
consolidating. The merger of ANZ
and Suncorp is another example of
competition being eroded, and this
needs to be addressed.”
CASE
STUDY
From $450 to $32 for
a quarter’s electricity
A chance conversation with her son
about the price he was paying for
electricity prompted homeowner
Amanda Shirvington, from Orange,
in NSW, to take a closer look at her
own bills and make a few money-
saving changes.
“I was paying about $450 each
quarter for electricity with my old
provider. With the new provider, it’s
now about $32.”
That’s not a misprint. Amanda’s
home is fitted with solar panels, and
her old provider was paying a daily
rebate of just a few cents per kWh for
the first four hours. She says her new
provider, Origin Energy, pays about
12 cents each for all hours, which
“makes a huge difference”.
Amanda also switched her gas to
Origin, pocketing further savings. “We
used to pay about $300 per quarter.
That’s now down to $150,” she says.
“The funny thing is that it wasn’t until
I told my old provider I wanted to close
the account that they started offering
better deals to keep me. In the end,
though, I knew the new provider was
much better.”
To score a trifecta of savings,
Amanda shifted her internet account
to Origin, which she says slashed her
monthly bill from $99 to $49,
an additional saving of $50.
All up, she is better off by several
hundred dollars per quarter – money
that’s better off in her pocket than with
her service providers.
X
MONEY APRIL 2024 39
 COVER STORY

SPOT THE RIP-OFFS

1. Loyalty taxes
Businesses set initial prices low
and then sharply increase them in
subsequent years when consumers
cannot easily detect, question or
renegotiate them and where the
‘transaction costs’ of
changing to other
competitors are high.
Guilty Some banks,
insurers, energy 2. Loyalty schemes
providers. Companies retain and exploit
consumers by providing them with
X Turn the page to read low-value rewards of dubious benefit.
about Paul Clitheroe’s These schemes are also often badly run.
frustrating experience
with loyalty tax. Guilty Frequent flyer and
supermarket schemes.

3. Drip pricing
Firms only advertise part of a
product’s price and reveal other
prices later as the customer goes
through the buying process.
Guilty A number of airlines (both
Jetstar and Virgin have copped
penalties for drip pricing in the past),
mobile phone plans.
4. Excuse-flation
General inflation provides camouflage for
businesses to raise prices without inflation.
As inflation starts to fall, excessive
inflationary expectations and future cost
increases are built into prices.
Guilty Who isn’t? From big supermarkets to
some banks, plenty of big companies claim
inflation is driving prices higher.
ILLUSTRATIONS BY MICHEL STREICH.

40 MONEY APRIL 2024

 PRICE-GOUGING PRACTICES • MONEY-SAVING METHODS • THE LOYALTY PENALTY

How exactly is big business raking in the profits at the expense of Australian
households? Here we turn the spotlight on eight sneaky tactics Allan Fels identifies
in his Inquiry into Price Gouging and Unfair Pricing Practices report.

5. Confusion pricing
Confusing consumers with
myriad complex price structures
and plans, making price
comparisons difficult and
dulling price competition. 6. ‘Rockets and feathers’ pricing
Guilty Some telcos, financial and When costs rise prices go up quickly ‘like a
maintenance services. rocket’ but when costs fall, prices fall slowly
‘like a feather falling to the ground’.
Guilty Supermarkets that continued to charge
high prices for meat even though farm-gate
prices were plummeting.

8. Price discrimination
Charging different consumers
different prices for the same product.
Guilty Some banks that offer better
rates to customers likely to leave
them, electricity providers that give
business customers cheaper rates than
households, and medical specialists
who charge different prices for near-
identical services. X
7. Algorithmic pricing
Businesses that use algorithms to set
prices automatically (while taking into
account competitor responses). This
can reduce price competition and is
analogous to cartel pricing.
Guilty Some ride-sharing services.

MONEY APRIL 2024 41

 COVER STORY
THE LOYALTY
PENALTY
How it’s costing you
time and money
Money founder and columnist Paul Clitheroe shares a raw car insurance deal and
the time and effort it took to find an equivalent but better priced policy.
I
am absolutely over being
penalised for being a loyal
customer. No, this is not a
whinge about frequent flyer
points, which are arguably
Australia’s most rapidly depreciating
asset. While I try to accumulate them and
use them to save money on flights, they
are a ‘want’ not a ‘need’.
This is about far more important
things that I would not put in the ‘want’
(nice to have) category, but the ‘need’
(must have) category.
What has made me cranky is an
insurance renewal offer for a car we own.
The renewal amount was $2900. That was
up on last year, but I do understand that
insurers’ costs rise as well.
So, I went into my usual money-saving
routine. First, I checked our car’s value.
That was around $57,000. The renewal
notice strongly highlighted our 65%
no-claim bonus and, as we have been long-
term members with a number of policies,
a further 25% discount. That amounts to
about a 74% discount off the full price,
which is a huge discount and I am sure
many people stop at that point and pay
the premium. It’s hard to beat 74%.
But it all sounded a bit odd to me. This
meant that the full cost, without ‘loyalty’
and no-claim bonuses, must be around
$11,100. Take 74% off that and you get
42 MONEY APRIL 2024
STORY PAUL CLITHEROE
roughly to the premium we were quoted.
This seemed ridiculous, so I thought
I had better start shopping around for
a policy with no discounts at all, using our
information: 65 and older, insured for
40 years with no claims, garaged car
and low annual kilometres.
As you have probably guessed, ‘no
discount’ quotes were way below this.
So, is our insurer playing us and using
the 65%, then an additional 25% discount,
as sales bait to get us to part with the
significant sum of $2900?
In fact, could this premium be based on
a totally uncompetitive retail price? We’ll
come back to that in a moment.
Why we have to shop around
This is a serious issue for us consumers.
We need insurance for our homes and
car as much as we need electricity and
gas, a mortgage, our savings and credit
cards. In a modern world, these are
pretty much essential needs.
Going right back to the Money TV show
in 1993 and Money magazine in 1999, when
it was launched, we’ve been stressing the
need to shop around. This is just a simple
statement of our own, personal financial
literacy. No one expects products to be
exactly the same price. It is up to us to
do the research and ensure we choose
products that fit our situation.
In a world with less competition, this
seemed to work pretty well. Find the
product for your situation and you could
pretty much stick with it year after year.
The internet, however, has created a far
easier entry point for new competitors. In
the past, an institution needed a good old-
fashioned branch network or a distribution
force of salespeople. This is expensive.
Today, we have a mix of branch and online
businesses with many running their
relationship with consumers only online
and a call centre. This has changed the cost
dynamics of a business dramatically.
Technically, this should hugely assist
us consumers. But it can also be highly
confusing and take a lot of time to
compare apples with apples. This, of
course, is why we produce Money
magazine’s Best of the Best Awards each
year: to help us all navigate to the better
products for our situation.
What is bugging me, though, is the need
to constantly switch between providers
 PRICE-GOUGING PRACTICES • MONEY-SAVING METHODS • THE LOYALTY PENALTY
every 12 months. This is a trade-off
between the time you take, which is
valuable, and the savings you make on
an equivalent product. Also valuable.
Electricity, for example, is a pretty
simple thing. It does not come in different
colours, makes and models, nor does it
require working out what your house
costs to build or your contents to replace.
There are ample comparison sites, such as
the Australian government’s Energy Made
Easy, and many others that will cover
where you live. Electricity is a fact-based
decision. It is when you burn power –
peak, off peak, shoulder and so on
– and then choosing the best plan to
fit your energy usage.
Car insurance is harder. To get the best
deal, you really need your insurer to
understand the level of risk you represent.
Personally, we’d prefer not to subsidise
high-risk drivers by not providing all our
information and driving history. You also
need to ensure you are comparing ‘like for
like’. Do you need a replacement car in
case of an accident, lower glass breakage
excess, maintaining your no-claim bonus
if you have an accident, the ease of
making a claim and the level of support
you get. There is a fair bit to do in
shopping around. The big question is,
will you get enough of a financial return
to make it worth your time?
How it worked for me
I went to several comparison sites and
checked out what was recommended for
our car insurance needs. I then went to
three insurers online to get a free quote.
I was looking for an insurer that wanted
to know about us and I quickly found two.
It took me about 10 minutes with each to
fill out detailed information.
It was obvious to me that, with zero
claims in more than 40 years, a not
expensive, garaged car that is driven
fewer than 8000km a year and no
drivers younger than 30, I would get the
best price from an insurer that asked
those questions.
I did take a bit longer to trot out to
the car to get our odometer reading:
obviously the insurers wanted that. We
nominated ‘under 8000km’ a year. In case
of an accident, the insurer would want
proof that we were driving fewer than
8000km, which is totally fair. If we reduce
our risk rating to get a better price, the
insurer should only have to wear the risk
we nominate. With 40 years of no claims,
we also moved our excess to $1000. It was
$850 with our previous insurer.
Yep, I hear you. What is the bottom
line? Previous insurer $2900. New insurer
$1212. Same conditions, bar our ability to
nominate low kilometres and the excess
going from $850 to $1000.
I always recommend you call your
existing insurer to discuss a cancellation,
so I called. We looked at taking the
no-claim to $1000; that led to an offer of
around $2600. I called again to say we
were not renewing and, after being put on
hold, I was offered around $2400. You can
guess what we did: saved the $1200 or so
difference in price.
Another year, another switch?
To finish where I started, with the
loyalty penalty. Next year I’ll need
to shop around all over again. Our new
insurer has a standard 15% bonus for first-
year online buyers. Next year I’ll have
been a customer for a year, and I’ll be most
interested to see if we get an incentive to
pay for another year’s insurance. We’ll be
back online, shopping around to make
sure next year’s deal is fair. Sadly,
I suspect new customers will be treated
better than loyal customers, so we’ll
probably be switching again.
If we all behave in a logical ‘price
comparison’ fashion, you would have to
think that institutions would wake up to
the fact that new customers are expensive
to find. Loyal customers can be cheaply
and easily found; you have our details.
Just send us loyal customers a price that
is competitive with new customers… and
guess what? We won’t be forced to leave. „
MONEY APRIL 2024 43
 MY MONEY SPORTS

For the love

of the game
44 MONEY APRIL 2024
 STORY ANTHONY O’BRIEN
With private equity firms buying stakes in sporting franchises and
high-profile actors such as Natalie Portman and Ryan Reynolds
investing in clubs, is now the time to get skin in the game?
A
ustralians love sport. More than
80% of us participate in some form
of sport to keep fit or to have fun.
Millions of devotees regularly watch
games, tournaments and matches on
television, and hundreds of thousands volunteer to
organise footy, soccer, netball and cricket games at
a local level. Our enthusiasm begs the question:
where are the opportunities for sports lovers to
make money from their passion?
Why sports investing is a hot topic
Recent years have seen sports-based investments
attract considerable interest as high-net-worth
individuals and institutional investors hunt for new
opportunities to invest their capital. Actor Natalie
Portman cofounded women’s football club Angel
City in 2020, while the trials and tribulations of
fellow A-list stars of the screen Ryan Reynolds and
Rob McElhenney and their jointly owned Welsh
football club Wrexham AFC have been documented
in a much-lauded docuseries Welcome to Wrexham.
The president of the San Francisco 49ers, Al Guido,
even expressed an interst in buying into the NRL
after the code’s American debut last month.
In 2022, Bloomberg reported that private equity
firms spent $US51 billion ($78 billion) in 2021 buying
up stakes in sporting franchises.
The influx of capital won’t end there. Global
consultancy firm Deloitte predicts more interest in
sport as an investment, potentially leading to ‘sport’
becoming an asset class in its own right.
The appeal of sporting investments stems from a
range of potential benefits that sport can bring to
a portfolio, including diverse sources of income that
spans ticket sales, merchandise and sponsorship
income, through to the resilience of many sporting
codes to economic downturns. Add to that the growth
of women’s clubs and the diversification of sport can
contribute to a portfolio and you have a winner.
Individual investors trying to get a foothold on
the sport investment ladder tend to encounter
hurdles, largely because many opportunities
demand considerable sums of money, meaning
the bulk of investment opportunities are snapped
up by private equity funds. (Bear in mind that
indirect investment can happen when
a superannuation fund buys into a private
equity fund that in turn invests in sports.)
How to share in the success...
When it comes to sports investments listed on the
Australian Securities Exchange (ASX), the obvious
choice is the Brisbane Broncos (ASX: BBL). At the
time of writing, devoted fans can own a slice of the
Broncos for around $1 per share. But, keeping things
real, it’s doubtful whether the club represents
a solid investment. The dividend yield is
1.50%, a league away from the 5.62% notched
up by sharemarket goliaths like BHP.
On the plus side, in January, the Broncos
announced a profit upgrade, reflecting increased
ticket revenue and merchandise sales driven by
improved on-field performance. The flipside is
that the club’s shares may be harder to get hold
of than a signed jersey. News Corp owns close to
70% of the club, with much of the remaining stock
held by a variety of private companies, creating
a lack of liquidity. The flow-on effect of slim
pickings on the ASX is a lack of exchange traded
funds (ETFs) with a sporting flavour.
... or try sports-adjacent investing
Other options include the Betashares Video Games
and Esports ETF (GAME), which provides exposure
to a portfolio of video game and esports companies X
MONEY APRIL 2024 45
 MY MONEY SPORTS

including Roblox, Nintendo and Electronic Arts.

However, it’s a small fund with net assets of just over
$2 million, not much more than the median value of
a Sydney house. For greater scale, VanEck’s $71
million Video Gaming and Esports ETF (ESPO) also
focuses on video game development and esports.

Take a global position

By looking beyond Australia it is possible to
find a wider selection of sport-based investments.
Soccer fans can pick up shares in the British
football club Manchester United, which trades on
the New York Stock Exchange. (NYSE). The Italian
football club Juventus is listed on the electronic
equity market of Borsa Italiana, while fans of the
Scottish club Celtic can pick up shares listed on the
London market.
Although owning shares in these companies
won’t get you free tickets or meet-and-greets with
players, there is the potential for a financial reward
and an added layer of excitement when you tune
in to watch your team play.
If you would rather invest in your favourite
brand of sportwear or trainers, you will find
companies such as Nike, Puma, Asics and Adidas
listed on various international stock exchanges.
For example, NYSE-listed Nike, the world’s
largest supplier and manufacturer of athletic
shoes and apparel, made an annual gross profit in
2023 of $US22 billion ($34 billion), a 3.8% increase
on the previous year’s result.

Where the wealthy play ball

It certainly helps to be uber-wealthy if you have your
eye on a substantial stake in a sporting franchise.
Mukesh Ambani owns the Indian Premier
League’s Mumbai Indians, which Forbes named
as India’s most valuable cricket franchise in 2022,
worth around $US1.3 billion ($2 billion). Former
Microsoft CEO Steven Ballmer owns the US NBA
team the Los Angeles Clippers, and Walmart heir
Rob Walton picked up the Denver Broncos NFL
team in 2022 for a cool $US4.65 billion ($7.1 billion).
There is also a lengthy list of sporting clubs
owned by mega-rich individuals. These people
didn’t make their money through their sporting the US National Basketball Association (NBA)
investments, they made money elsewhere and loosened its ownership rules to welcome private
invested in their passion project. equity firms as investors – with limitations. Wealth
However, a report by investment manager funds are also able to buy limited stakes in the
Certuity reveals that returns among the four major Reece Walsh of the Major League Baseball and National Hockey
sports leagues in the US have outpaced returns on Broncos is tackled League. The National Football League, however,
by Brian To’o of the
the S&P 500 by close to 5%. Panthers during the still opposes institutional ownership.
The problem for individual investors, especially 2023 NRL Grand Final: Australia has seen high profile ownership
in the US market, is that many sporting codes Panthers v Broncos of some sports clubs, though it hasn’t always
impose restrictions on private ownership. In 2021, in Sydney. ended well.

46 MONEY APRIL 2024

Australia’s potted sports history
In 2015, Football Federation Australia stripped
control of the Newcastle Jets from former mining Returns
billionaire Nathan Tinkler, after the club was
placed into voluntary administration when among the
Tinkler’s personal fortune tanked. It followed
Tinkler walking away from his ownership stake in
four major
the Newcastle Knights a year earlier after dropping sports
millions on the rugby league club.
One of Australia’s most well-known sports clubs
leagues
rugby league’s South Sydney Rabbitohs is majority in the
owned by tech guru Mike Cannon-Brookes, actor
Russell Crowe and James Packer. But their stake is
US have
not a cash cow. The Rabbitohs’ financial accounts outpaced
show the club turned a profit before tax of only
$2.136 million in 2023 – and this was one of its returns on
most profitable years. the S&P
Ideas for cash-strapped fans 500 by close
That’s not to say less well-heeled investors are
locked out of sporting assets altogether. It may just
to 5%.
mean thinking outside the box.
Vince Scully, founder of online advice platform
Life Sherpa, notes that pocketing financial benefits
from sport can be as simple as buying a season ticket
to save on regular entry fees to a game through to
investing in sports memorabilia. When it comes to the
latter, there is no shortage of codes to choose from.
Sports card trading has enjoyed a resurgence in Mario from Nintendo’s
recent years with the market expected to be worth Super Mario Bros
around $US767 million ($1.2 billion) by 2028. eBay popular video game.
is a popular site for trading cards, and if you come
across an NHL great Wayne Gretzky rookie card,
alarm bells should start ringing. One such card sold
for $US3.75 million ($5.8 million) in 2021.
However, as Scully notes, “there are only so
many Wayne Gretzkys in the world”. The irony is
that the Gretzky cards that command the biggest
bucks date back to the 1970s; “back then, no one
knew or cared who Wayne Gretsky was”.
People do make money on sport collectibles, says
Scully, but these collectibles often find themselves
relegated to the rumpus room walls or office
boardroom rather than becoming a ticket to wealth.
Even if you’re not a diehard fan of footy, cricket,
netball or basketball, it can pay to keep an eye on the
results particularly on an international level. A wealth
of academic research suggests that a win or loss by
a national team can filter through to sharemarket
activity, thanks to an uplift (or dampening) of investor
sentiment. It’s something to bear in mind when the
Paris Olympics kick off on July 26. „
Famous esports
investors
Ashton Kutcher – Unikrn,
Backbone
Drake – co-owner of esports
organisation 100 Thieves
Sean Combs – amateur esports
league PlayVS
David Beckham – Guild Esports
MONEY APRIL 2024 47
 MY MONEY GET A BETTER DEAL
Master the art
E
very cent counts when times
are tough. One way to
reduce your day-to-day
expenses is to negotiate the
best possible rate when you
take out a home loan, credit card or even
sign a new phone contract.
In fact, there are plenty of opportunities
to angle for a better outcome across a
range of everyday expenses. The idea is
to know the market and your worth in
it, approach the situation with an open
mind and be prepared to consider non-
traditional lenders, operators or solutions.
James Anderson, 38, who lives with his
wife and two young children in Sydney’s
inner west suburb of Erskineville, had
been with his bank for a decade when he
noticed it was offering new customers
a considerably lower interest rate on
fixed-rate home loans than it was
offering existing customers. At the time,
Anderson’s home loan earned interest at
a rate of 6.14% but his bank was offering
new customers 5.84%.
Frustrated, he contacted his bank about
STORY ALEXANDRA CAIN whether he could pay the same interest
rate on his $750,000 mortgage as new
clients do. When the answer was no,
Whether you want a he took action.
“I had banked with them for more than
lower mortgage rate 10 years and had my home loan with
or a better insurance them for about six years. At the time,
I had all my banking with this bank –
deal, be prepared to my home loan, credit card, transaction
push hard and walk account and insurance and I had never
missed a repayment.
away if necessary. “They still said 6.14% was the lowest
rate they could give my specific home
loan. I threatened to refinance and take
48 MONEY APRIL 2024
all my banking with me and even that
didn’t sway them. I didn’t really want to
refinance, as I remembered how difficult
the process was when I took out my
home loan initially. I didn’t want to go
through that again.”
So Anderson used a service called
Craggle, which gathers together clients
with home loans who want a better rate
and offers them to lenders as a pool.
Lenders then have an opportunity to offer
the group a better rate, with no obligation
on the borrower to switch.
Thanks to Craggle, Anderson was able
to negotiate a rate of 5.8% for his mortgage
with his existing bank, saving $160 a month
on interest. This rate is even lower than the
rate new customers were being offered.
This tool, powered by artificial
intelligence, is just one way consumers can
get a better deal. There are lots of other
avenues to negotiate a better outcome
for bank loans.
Insurance premium doubled
Amber Daines, 47, lives with her two kids
and husband in the NSW Central Coast
suburb of Wyoming. She got a shock when
she went to renew her home and contents
insurance to find the premium had
doubled in a year, despite being with the
same insurer for more than a decade.
“Negotiating was nearly impossible and,
even if we paid annually versus monthly,
the savings were not viable. Insurance
can be a set-and-forget activity but when
you’re looking at thousands of dollars
more for the same insurance – we had
made a claim for a leaking roof in early
2023 – you tend to rethink loyalty to any
of negotiation
brand,” says Daines. (See Paul Clitheroe’s
story on page 42.)
“My husband and I used online tools
like Compare the Market and Canstar
to get better coverage and a lower price.
We managed to save more than $1600
a year in a few clicks. We are now with
Honey Insurance. So far, so good. We
are yet to make a claim, so that may be
the game changer.”
When it comes to renegotiating any
expense, the key is to be proactive,
regularly review your financial situation
and ensure the products and services you
chose in the past still represent good value.
“The better you know and understand
your financial needs, the better placed
you will be to negotiate with your current
lender,” says Commonwealth Bank’s
personal finance expert, Jess Irvine.
“Once you know what product and
features you’re after, it’s a matter of setting
aside time to take action. Do some online
research and then pick up the phone or
book an appointment with a lending
specialist to discuss your needs.”
It’s important to understand where
you have influence and where you don’t
during any negotiation. As Anderson
found out, interest rate terms on fixed-rate
home loans are generally not up for
negotiation. “That said, you can speak to
your lender about their raft of different
products to get a better understanding
of the different options,” says Irvine.
Andrew Grant is an associate professor
of finance at the University of Sydney with
special expertise in consumer credit and
finance. Grant’s advice to negotiate the
best possible terms is to learn as much
about your situation as you can, and
understand your relative strengths
compared to other borrowers in the market.
“Be willing to walk away or choose a
different provider, if that’s what it comes
to. Come to the negotiation forearmed by
having proof of competitor offers that are
better than the rate you’re on.”
Remain calm and clear
He also suggests having some strategies to
calm you down if you become emotional
during the negotiation. “I don’t think
getting upset or angry is a successful tactic.
And you have to be clear. Ask for a reason
why you can’t be offered a similar rate.”
Additionally, get an understanding of
the level of risk you pose to the bank and
take steps to reduce it. For instance, if you
have missed payments on loans in the past,
which has affected your credit history,
work on rectifying this. You can order a
free copy of your credit report from one
Strategies for getting a pay rise
Negotiating a raise can make a huge
difference to your financial wellbeing. But
it’s not just about hard cash. The ability
to negotiate favourable terms can make
a difference to your quality of life.
Psychotherapist Julie Sweet works
with clients to help them develop a
stronger sense of self-worth to negotiate
salary increases and manage their
super. Her advice is to aim high when
negotiating your salary, as opposed to
just going for what you think you can
get. “The answer will always be no if the
question isn’t asked,” she says.
Sweet says self-belief often determines
whether someone has confidence during
financial negotiations.
“Be open-minded because a fixed
mindset is detrimental, so self-regulation
is key. I work with clients to stabilise
their central nervous system and focus
on deep diaphragmatic breathing. Being
emotionally agile is the optimum position
to have robust and healthy discussions
about finances.”
of Australia’s credit agencies, Equifax,
Experian, or Illion.
Grant recommends making use of the
services or tools to improve your chances
of negotiating a better rate. This includes
purchasing reports, such as CoreLogic’s
Suburb Report, which show the bank’s
appetite for lending in particular suburbs.
Look on Realestate.com.au for properties
that have sold in your area and sign up for
their free property price estimate and
market guide. This will give you insight
into your suburb’s perceived risk to lenders.
Remember, good negotiation skills are
also valuable if you find you can’t meet
your financial obligations. Again, you
need to be proactive and let your bank
know if you can’t meet repayments.
All lenders have financial hardship
teams dedicated to helping customers
experiencing financial stress. There are
a range of options that can give you some
breathing space. “These include an
altered repayment plan, going interest-
only for a period or deferral of
repayments,” says Irvine.
Beyond the banks
Banks aside, most essential services have
ways to help customers in distress. For
instance, Telstra offers customers payment
extensions and payment arrangements,
support for moving to a different plan
or prepaid service and longer-term
support based on your personal
circumstances, says Telstra customer
experience executive Mira Bashi.
To negotiate a better deal, explore your
options and be disciplined about
checking that you’re on the best option
for you. The upshot may be thousands
in savings over time. „
X Read more about how to reduce your costs
in Game On: You vs Big Business, page 34.
MONEY APRIL 2024 49
 LY FAMILY
HE

MO
S USA N

NEY

Crisis of the
hidden homeless
Many single older women
whose lives are disrupted by
divorce, illness or a job loss
are struggling to survive.

Y
ou may not see as many homeless
older women living on the streets
as you do young people and older
men. Yet single women aged 65 to 75 who
don’t own their own home are the fastest
growing homeless group.
Homeless older women are often hidden
from public view, staying with family and
friends, living in their cars, or housesitting
and petsitting. But they can only live on the
generosity of others for so long.
Around 34% of single women older
than 60 live in poverty; they are the
lowest income group, earning less than
$30,000, and rent hikes are worsening
their stress and homelessness.
The number of homeless older women
could reach 405,000, according to Housing
For The Aged Action Group (HAAG) and
Social Ventures Australia. Their joint
report, At Risk, bases this forecast on a
number of risk factors experienced by
women aged 45 and older including
renting, job insecurity, part-time work,
low retirement savings and difficulty in
raising emergency funds.
The report found that as these women
get older, they are the most vulnerable to
homelessness in the event of a life shock
such as a separation, divorce, unexpected
job loss, sudden illness or domestic violence.
And because most of these women haven’t
been homeless in the past and have had
fairly conventional housing experiences,
they don’t know where to turn for help.
Often these are capable people who
have worked hard throughout their lives,
holding down jobs while caring for
children and elderly family. But they don’t
have much to show for it. To cater for
family needs, they may have worked part-
time or casually, often in low-paid jobs.

50 MONEY APRIL 2024

Divorce takes a toll
‘Grey divorce’ blows up women’s financial
security. Once the family home is sold, one
or both partners may lack the equity to buy
a new home, particularly later in life.
Only 34% of women who separate and
lose their home manage to purchase
another one within five years and only
44% buy a home within 10 years, according
to the Grattan Institute’s Brendan Coates.
Women who are separated by the
age of 65 are three times more likely as
married women to rent and their assets
lag those of separated men by a third.
In fact, 63% of retired single women
who rent live in poverty.
If you are a homeowner, once you have
paid off the mortgage, your housing costs
go down, although you still pay insurance,
council rates or strata fees, which can be
a real impost for some elderly people. But
when you rent, your costs keep rising.
“The typical outright owner older than
65 spends just 5% of income on housing
compared with nearly 30% for the typical
renter,” says Coates.
He says women who separate often
have more than enough for a home
deposit, but financial institutions usually
won’t give them a mortgage because their
time in the workforce until retirement
isn’t long enough to pay off the debt.
Studies show that the despair and
desperation caused by homelessness,
particularly sleeping rough, lead to
numerous illnesses and mental health
issues. Life expectancy is much shorter.
Of the 1518 homelessness agencies across
Australia, only three are funded as specialist
services for older people, according to
the Mercy Foundation – a social justice
organisation originally set up by the Sisters
of Mercy – that deals with homelessness.
For example, the Home at Last program
in Victoria supports people older than 50 to
find housing, and most are older women.
Older women experiencing housing
stress have unique needs, according to the
Older Women’s Network. It has found
from surveys that “women prefer smaller
dwellings, co-housing and other forms of
intentional housing communities where
older women have privacy but can also
socialise with and support other women
in their living arrangements”.
Government help towards meeting
the rent comes largely in the form of the
Commonwealth Rent Assistance
supplement attached to social security
payments. What a person will get
depends on how much rent they pay and
whether they are sharing or living alone.
The Federal government is spending
$2 billion on social housing, although that
won’t solve the problem. Other Federal
government initiatives include the Home
Guarantee Scheme, which has helped
86,000 people get into homeownership,
including 13,000 in regional areas. The
upcoming Help to Buy Scheme is
expected to benefit 40,000 people who
have a minimum 2% deposit.
Super has a key role
Another way to avoid running out of
money in old age – and potentially
becoming homeless – is for younger
women to pump more into superannuation
as soon as possible. The more money
contributed early in life, the bigger the
benefit later because of compounding
returns. If you only start thinking of
boosting your superannuation in the lead-
up to retirement, it could be too late.
By 60-64, according to the tax office,
women have a median balance of $139,056
compared with $180,928 for men. One in
four women retires with no super.
Those who earn less than $58,445
in 2023-24 can take advantage of the
government’s co-contribution scheme.
Contributing $1000 will add up to $500 to
a super account, depending on a person’s
income. Women with a partner who take
time out of the workplace to have children
should consider how their partner can
make a spouse contribution to their super.
For those with an income of less than
$37,000, a spouse can contribute $3000 to
their super and earn a tax offset of $540.
Avoid the debt trap
An unexpected early retirement due to
a redundancy or health emergency or
death of a partner can spell disaster.
If it occurs before the age pension
Reach out for help
Where can older women with financial
problems turn for support?
For a start, it is important for
them to reach out to their
friendship network for support.
If they need help with credit
card debt, they should speak to the
hardship department that all major
lenders operate.
Women in debt can consider the No
Interest Loans Scheme (NILS). Search
online for details and NILS providers.
These loans are typically for household
appliances, medical emergencies,
repairs, funerals, relocation, pet bills,
computers, beds and much more.
They can talk to a financial
counsellor who is trained to clearly
explain available options. Counselling
is free, confidential and independent.
Phone the National Debt Helpline on
1800 007 007 or visit its website
(ndh.org.au) to find a counsellor.
If women are turned out of their
home, there are a number of
government or charity emergency
accommodation options in each
State and Territory.
qualification age of 67, older women (and
men) may need to raid their super, which
is devastating for their finances in old age.
Older women are often supporting their
adult children and grandchildren,
particularly given the housing crisis, and
may consider accessing their super to help
their children get into the housing market.
While it is tempting to take out a loan to
help their children, women have to think
of their own needs. Will their adult
children be in a position to support them
financially in their old age?
Unfortunately, if they don’t have much
super, when financial difficulties arise, older
women may have to load up their credit
card or, worse, visit a payday lender. „
Find out more about Susan Hely and read
her columns online at moneymag.com.au/
author/susan-hely.
MONEY APRIL 2024 51
 D E M IN D G
LA
AM
PHIL
ES
Beware the AI magic show
Our brains need help to distinguish between technology’s reality and a con job.
I
n 1770, at a lavish party in a Viennese
parlour, the inventor Wolfgang von
Kempelen unveiled his latest
invention with a flair that Steve Jobs
would have been proud of. To the
wonderment of the audience, he revealed
a large wooden box with a chessboard on
top that he described as the world’s first
chess-playing robot. He then opened the
front of the box to reveal all manner of
cogs, pulleys and intricate machinery – it
was very impressive. In particular when
he had a volunteer come up to play chess
and his opponent’s pieces moved
52 MONEY APRIL 2024
automatically. The robot understood all
the rules and could recognise when its
opponent made a mistake or an illegal
move. Von Kempelen called his chess
robot the Mechanical Turk.
It was a sensation. The Mechanical
Turk dazzled the court of the Empress
Maria Theresa in Vienna and toured the
world to packed theatres, even giving
private showings to Napoleon Bonaparte
and Benjamin Franklin. However, it all
turned out to be an elaborate hoax.
The truth was that there was a tiny,
creatively concealed compartment that
somebody could crawl into with a candle.
From here they could view the chessboard
and move pieces using ingeniously placed
mirrors and an intricate pulley system.
While the real machine was incredibly
impressive, Von Kempelen knew it would
never capture the type of attention a fully
autonomous robot would.
It is interesting that we enjoy magic
yet we don’t enjoy being duped. But isn’t
the very delight of magic the fact that
we are being duped? We like it when
entrepreneurs show us something
unworldly, but we get upset if the reality
doesn’t match the promise. The difference
between magic and a con is simply
whether we accept that we are being
deceived. It’s when we are not complicit
in the deceit, and do not understand that
we are being duped, that we get upset.
In a world of AI start-ups with
magical prototypes and flashy
presentations, it’s clear the art of the
Mechanical Turk is very much alive.
And it works. Our brains want AI
to mesmerise us, and we love to be
surprised, delighted and even scared
by the new technology.
Business failed to deliver
I recently had a conversation with
a fellow founder whose company had
been valued at more than $1 billion
a few years ago. Recently, however, it
was revealed that the technology’s full
promise was unfounded and the
valuation plummeted. It didn’t go
bankrupt because it is still a good
tech-based business.
The founder was convinced that
the slight magic trick needed to get the
initial investment was warranted
because, without it feeling like magic,
there would be no way they could have
attracted the top investment they
needed to build such a successful
company. However, he did feel
remorseful at the disappointment
people felt after they found out it was
more Mechanical Turk and less chess
robot. Still an incredible feat of
engineering, just not all it promised.
As investors, how do we enjoy the
magic without getting caught up in the
hype? How can we ensure that we are
investing in something real and not
vapourware? A magic show is fantastic,
a con is not, and our brains struggle to
tell the difference.
When giving advice to people facing
this dilemma, I share three rules of thumb:
1 First, never invest in anything you
don’t fully understand. If you can’t
explain clearly how the business
Ways to dial down
excitement in the
makes money, or how the value or face of hype
product is produced, then don’t invest
– irrespective of how exciting or
glamorous the technology might be.
• Consciously slow your
breathing. Our physiology
There are many great businesses you and psychology are closely
will understand. Enjoy the show, just linked. Our body interprets
don’t invest in it. a slow heart rate as a sign
If you really love a new idea or a new to stop producing the
technology and desperately want to dopamine and serotonin
invest, spend the time learning it that flood our brain and
before investing. This seems obvious muzzle our critical thinking.
in the cold light of day, but when being Breathing exercises, such
bedazzled by a great magician and as the box technique
with emotion running high, it is much (inhale, hold, exhale), are
easier said than done. excellent for this.
• Go for a run or do some
2 Second, recognise the emotion for
what it is. It’s okay to be excited by
an opportunity, but when you’re too
other demanding exercise.
As well as releasing
energy, this produces
excited, you’ve checked out from any neurotransmitters
rational thought. Recognising what you that can help achieve
are feeling and dialling it down is critical chemical balance.
for good decision making. This is
different from suppressing, which is just
• Use disappointment
to your advantage. Be
ignoring your emotions. In this scenario, disappointed at something
emotions are still driving your decision- small like your lunch, the
making – you’re just blind to it. weather, your fingernails
– something irrelevant.
3 Finally, slow things down. Great
magicians and salespeople love
time pressure because it amps up the
This can be a quick brain
hack to tame high arousal
excitement. Be careful
emotion and diminishes critical not to imagine being
thinking. Rarely do things need to go disappointed at missing
at the pace the magician wants. out on the investment
Understand the business, dial down opportunity you are
the emotion and slow down. It’s not a considering – this will
blueprint for always making the right trigger fear and further
decision, but you will make better ones. reduce critical thinking.
We all love a great magic show. But
it’s a good idea to keep in mind that
where there is magic, there is usually Phil Slade is a behavioural
a concealed compartment. „ economist, psychologist,
X Read How to Spot a Deepfake online and co-founder of decision
at moneymag.com.au. architecture firm Decida.
MONEY APRIL 2024 53
 I EN S M AL
’B R
LB
H ON Y
U S I N E SS
A NT
Join the entrepreneurs’ club
Are successful small business owners a breed of their own,
or is it possible for anyone to learn the ropes?
A
few weeks ago, a colleague’s
teenage son reluctantly enrolled in
university. The teen, fresh out of
high school, was keen to go straight
into business for himself, try his hand
at running an enterprise and skip
the five-figure student HELP debt
he’s likely to accumulate in the
process of landing a degree.
But his parents – both small
business owners themselves – felt
a degree was an essential building
block for career success.
In the end, Mum and Dad won out.
But it raises the question, are
entrepreneurs born or made? Is
entrepreneurship a skill that can be
learned, or is launching a small business
simply a matter of seizing opportunities?
“Theory is great but most times it
doesn’t work in the small business world –
that’s just a fact of life,” says Anne Nalder,
founder and CEO of the Small Business
Association of Australia (SBAA).
While Nalder may favour experience
over book learning, she stresses the
value of self-assessment.
“When a small business owner goes
in as a start-up, they need to undertake
a self-evaluation. No one wants to stifle
enthusiasm or entrepreneurship. But the
reality is that you need capital to get
started and you need to undertake due
diligence to know if running a small
business is right for you, because it
certainly isn’t for everyone.”
From here, Nalder believes small
business owners need to continually
upskill to stay abreast of trends. “Small
business owners wear two hats – their
business management hat and their
creative hat.” She notes that management
skills can’t be underestimated, adding:
“Tax office data shows lots of small
businesses fail due to lack of finance
and/or poor management”.
54 MONEY APRIL 2024
While knowledge may be power,
some of the world’s most successful
entrepreneurs have demonstrated that
a university education isn’t always a
stepping stone to success in business.
Mark Zuckerberg, who dropped out of
Harvard to work on Facebook full-time, is
now worth an estimated $US176 billion
($271 billion). Daniel Ek, co-founder
of Spotify, spent just eight weeks at
university. His net wealth is estimated at
$US4.4 billion ($6.8 billion). Sir Richard
Branson, owner of Virgin, dropped out
of school at 16. His current net worth is
about $US2.9 billion ($4.5 billion).
New courses can help
Sure, these are extreme examples, but
even if you have more modest business
aspirations, help is at hand for budding
entrepreneurs. This year the Australian
government established Startup Year
courses, also known as accelerator
program courses, to enhance and
develop student skills, capabilities and
networks, and to foster greater levels
of entrepreneurialism and talent.
Eleven universities have been selected
to deliver Startup Year courses as part of
a 2024 pilot. A new course launched by
Flinders University, for instance, aims to
give university graduates and postgrads
key insights to launch a new venture or
realise a ‘passion project’ or ‘disruptive
idea’ in less than 12 months.
Flinders University’s new Graduate
Diploma in Entrepreneurial Growth
gives recent university graduates and
postgraduate students the insights into
commercialising ideas, solving social
and community-based challenges, and
creating jobs of the future.
“This is not a standard student
experience – participants will fully
immerse into the world of ideas and
exploration,” says Professor Chris
Brebner, pro vice chancellor, curriculum
impact. “They will join a community of
like-minded thinkers who are looking to
launch, commercialise or explore an
innovative idea in any field.”
To support students participating
in approved Startup Year courses, the
government has established a new loan
program for eligible participants through
the Higher Education Loan Program
called STARTUP-HELP.
If you don’t have a university
background, all is not lost. Organisations
such as the Small Business Association
offer free and low-cost webinars that can
help budding entrepreneurs accelerate
their skill base.
That said, Anne Nalder cautions that
success ultimately calls for dedication and
patience. “Forget about making a quick
profit in small business,” she says. “You’re
likely looking at two to three years of hard
slog before you make a profit.” „
Find out more about Anthony O’Brien and
read his columns online at moneymag.com.
au/author/anthony-o-brien.
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INCOME INVESTMENTS
Boost your
cashflow with
mortgage funds
The opportunity to get a regular income with attractive rates
of return, secured by real estate, is now open to all investors.
ndividual investors can now more
I
easily access mortgage funds, an
investment opportunity that has
traditionally only been available
to institutional investors and high-
net-worth individuals, and benefit
from the regular income and
diversification advantages these funds deliver.
Before allocating money to mortgage funds, however,
it’s important for investors to ensure that the fund
manager has a strong track record in the asset class
and a proven method for managing risk through
market cycles.
How they work
A mortgage fund is an investment product that is
on-lent to borrowers who use the funds to buy or
develop properties or for other investments. In return,
the fund promises to pay investors a regular income
with the interest paid by the fund’s borrowers.
Investors typically allocate money to a mortgage
fund because they want access to a regular stream
of income and attractive rates of return, generated
by a fixed, short- to medium-term investment,
secured by real estate.
“Mortgage funds are becoming an increasingly
popular investment with retail investors, sophisticated
investors and self-managed super funds,” says
Morgan Ng, managing director, Maxiron Wealth.
Pooled funds
Mortgage funds come in two main categories: pooled
and contributory funds.
A pooled fund is an investment vehicle through which
multiple investors contribute funds that are used to
invest in a diversified portfolio of mortgages. The
Maxiron Monthly Income Trust, for example, is
structured so that the fund lends to a special purpose
vehicle which on-lends to borrowers. For added security,
the special purpose vehicle holds additional capital and
promises to pay the trust a fixed rate of return.
Fixed-rate funds give investors exposure to a source of
regular, passive income at a known target rate of return
for a fixed term. Some funds also offer a variable rate
of return, but investors have less certainty about the
income their investment will generate with these funds.
Pooled mortgage funds may offer a range of short- to
medium-term investment options, to allow investors to
manage their cashflow requirements.
“These structures offer diversification benefits,
as investors are able to spread their money across
a pool of mortgages. This may reduce the risk because
the money is apportioned over a number of loans,
rather than simply being exposed to a single loan or
borrower,” explains Ng.
This diversification mitigates the risk of investors
losing money in the event any borrowers default on
a mortgage, as the other investments will continue to
generate interest to pay investors a return.
 This report is sponsored by Maxiron Wealth. It was independently researched and written.

More recently, pooled mortgage funds have become
more accessible to investors, as options in this asset
class have emerged that have a lower minimum
investment amount than wholesale mortgage funds
generally require. These retail investment funds must
meet stringent regulatory requirements to ensure
investors’ funds are properly protected and managed.
“This has opened up the mortgage fund
opportunity to a larger group of individual
investors,” says Ray Saedi, executive fund manager,
vice president, Maxiron Wealth.
The way funds work, provided the special purpose
vehicle manages its loans well, is that investors
earn interest regardless of the performance of the
underlying loans, which may impact returns. They
have no influence over where the funds are invested.
Contributory funds
By contrast, with a contributory fund, investors
have direct control over where their funds are
invested and can choose their level of exposure
to particular properties.
The main disadvantage of contributory mortgages
is that there is normally a smaller number of assets in
the fund versus pooled funds, which increases risk on
a relative basis, especially if any borrowers default.
With contributory mortgages, interest isn’t Mortgage
usually paid until the loan has been fully funded. funds are
Plus, investors are normally required to allocate
a large minimum amount – often hundreds of
becoming an
thousands of dollars – to these funds. This is increasingly
because there is a limit to the number of investors popular
who are part of the fund.
Additionally, contributory mortgages come with investment.
liquidity limitations. Each mortgage in the fund has Morgan Ng,
managing director,
different terms and conditions, so investors may Maxiron Wealth
not be able to access their capital on a short-term
basis, with their funds tied up for months or years.
“You can’t easily withdraw your investment until
the loan is repaid by the borrower. This can be
a problem if you need extra funds for unbudgeted
expenses or emergencies,” says Saedi.
As for the impact of different variables on
performance, pooled mortgage funds with a fixed X

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INCOME INVESTMENTS This report is sponsored by Maxiron Wealth. It was independently researched and written.
target return rate are often attractive to investors
looking for investments whose returns are
uncorrelated to the current economic cycle or interest
rate movements. This is because the unit price, rate
of return and term are fixed. So, the target rate the
fund earns doesn’t change within the term of the
investment, no matter where the cash rate cycle is.
Nevertheless, it’s vital for mortgage funds to adjust
their strategies to take into account current market
conditions. For instance, during periods of economic
uncertainty, fund managers may shorten borrowing
terms from 18 months to 12 months, for example.
Or they may reduce loan sizes.
“This can increase the turnover of loans and reduces
the risk of default or late payments,” says Saedi.
What to consider first
Investors need to explore many factors before
allocating money to a mortgage fund.
As a starting point, it is worth looking into
the different types of borrowers in the fund. For
example, develop a picture of the credit quality of the
entities whose loans are in the fund, the industries
in which they operate and the type of properties
to which the fund managers are prepared to lend.
58 MONEY APRIL 2024
The wider the universe of borrowers – for
instance, a healthy range of different residential
and commercial loans, and the industries and
geographies of the properties in the fund – the lower
the risk to investors.
It’s essential to understand how the fund manager
assesses borrower risk. “Ideally, borrowers pay interest
based on risk-adjusted rates. So, when borrowers are
assessed as higher risk, they pay interest at a higher
rate than borrowers who are assessed as representing
a relatively lower risk,” says Ng.
It’s also important to unpack how the fund is
governed. The best funds will have independent
oversight and auditing – that is, the trustee is totally
independent of the manager of the fund.
Do some research into the fund manager and
management team’s background and experience to
develop a level of comfort about how the fund’s
assets are managed.
The key is to understand how the fund generates
a return, manages risk and performs through the
economic cycle. That’s the best way to ensure the
investment is aligned to your long-term investment
goals and can help support your income and
cashflow requirements. „
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 PROPERTY APARTMENTS

Beyond the
backyard
As city house prices keep rising, homebuyers are
turning to more affordable apartments and making the
most of the convenient lifestyle. STORY JOANNA TOVIA

M
ore than 2.5 million Samantha Reece, director of Australian modern constructions (gyms, common
Australians already Apartment Advocacy (AAA). “As housing areas, gardens).
live in apartments, but becomes more expensive and families or “These days, apartments offer a true
a wider range of buyers downsizers don’t have the time or desire lifestyle and there’s nothing nicer than
are considering the to maintain large yards, they are turning swimming in the pool and knowing
move in the face of eye-watering real their eyes to apartments.” you don’t have to clean it,” says Reece.
estate prices and a growing desire to live Before the 1990s, newly built blocks Convenience and lifestyle are two of
an easier life in a convenient location. of flats tended to be just that – blocks. the main reasons people want to live in
In Sydney, the median house value has Balconies were small or non-existent and apartments, according to a recent AAA
already topped $1.6 million. Although buildings lacked the amenities of more survey of 3300 apartment dwellers. In fact,
apartment prices are also rising, the
median price in the NSW capital is a
whole lot more affordable at $796,000. Median house and unit values, combined capital cities
Price differentials are similar in $1000k $944,229
Australia’s other big cities. In Melbourne,
the median house value is now more March 2020 pandemic
than $1 million (apartments $580,000). $800k $677,358
Brisbane is catching up, with apartments Houses
now costing a median of $524,202 and Units
houses $888,285. Overall, houses in $600k
Australia’s capital cities have a median $650,279
value of $1,094,539 and apartments
$400k
$638,372, according to CoreLogic. March 2020 pandemic
Apartment living is being considered $580,546
by growing numbers across the country, $200k
from young couples and retirees to
parents with teenagers and young,
single-parent families. $0k
“The Australian dream of a quarter- 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024
Source: CoreLogic
acre block is dead, unfortunately,” says

60 MONEY APRIL 2024

67% would choose an apartment over
another type of property because they are
looking for less maintenance. More than
two-thirds of respondents were satisfied
with their apartment (in NSW, 68% of
owners would recommend apartment living
to friends and family). Proximity to public
transport, shops and cafes was high on the
list of what they loved about it.
Families are moving in
But just who is living in them? In NSW,
57% of owners are professionals and
managers and 18% are retirees.
“Around 10% of Australian families live
in apartments, but not enough is being
done to accommodate this demographic,”
says Reece. “In particular, we are seeing
families with teenagers moving into
apartments because then they can be in
the catchment they desire for schools.
This is especially so with single-parent
families who are also time poor.”
She says families are seeking
apartments with three or four bedrooms
and amenities such as basketball courts,
pools and games rooms that can serve
as break-out spaces for the kids.
Other buyer preferences vary from small
boutique blocks to high rises with views.
What everyone wants, however, is
a place that makes them feel safe and
offers them the lifestyle they’re seeking,
says Reece. “Ideally they want to be close
to shops, cafes, public transport and
either parks, rivers, oceans or the CBD
so they can fill their time with fun
leisure activities.”
While location and proximity to
lifestyle amenities matter, apartment
design does too if you want to truly enjoy
where you live.
Jimmy Thompson, design director at
the architectural practice MJA Studio,
says apartment living can be every bit
as good as living in a house.
“A house is great because you have
so much frontage and access to light
with few neighbours, but the best of
apartment projects do all of this and add
a sense of security and opportunity for
community that you don’t always get
with a house. Plus, you often get a much
better view.”
Light and aspect are vital when it
comes to apartments, he says. “Even
smaller-scale apartments can be imbued
with a great sense of generosity when
care is taken to ensure the quality of
light is optimised.”
MJA Studio, based in Perth and
Melbourne, designs multi-residential
projects with an emphasis on natural
light. “Wherever possible we create
dual- and triple-aspect apartments where
you have access to light on multiple sides,”
says Thompson.
The best apartments give residents
passive and active control of light access
through screening and balcony overhangs
to mitigate unwanted hot summer sun
while allowing in winter sun.
“We all spend an inordinate amount
of time within buildings, so as designers
and architects it’s our responsibility
to ensure that the buildings we create
are full of positive spaces that support
mental health and a sense of community,”
says Thompson.
Spaces that prioritise access to natural
light and ventilation do just that, as do
apartment buildings that respond to their
local context, heritage and environment.
“They should also incorporate a sense
of whimsy and delight,” he says.
What to look for
When it comes to choosing an apartment,
Thompson recommends thinking about
what’s missing in your current home or X
MONEY APRIL 2024 61
 PROPERTY APARTMENTS
what annoys you about it, as well as how
you want to live.
“Once you’ve established these criteria,
it’s much easier to review your options
against one another,” he says.
Along with considering natural light,
ventilation and ceiling heights, Thompson
suggests finding out whether or not
low-volatile materials have been used
inside. If not, the apartment could be
harmful to your health.
“Pay special attention to the track
history of the developer, architect and
builder,” adds Thompson. “The proof is
always in the pudding.”
Storage space, parking, soundproofing
(can you hear people talking through the
walls?), security and outdoor space are
other considerations, along with a layout
that flows and maximises living space.
If you’re into greenery, a balcony with
a hose attachment to easily water your
plants can also be a real bonus.
Calculate the costs
Strata fees can add substantial costs to
apartment ownership, so factor these in
when you’re working out how much you
can afford to borrow. These fees cover
the cost of repairs and maintenance.
Although an apartment building that has
a pool, gym and expansive common areas
is appealing, keep in mind that owners
will inevitably have to pay higher strata
fees to maintain amenities like these.
The owners corporation or body
corporate (the group of owners managing
what gets spent on the building) will
likely have set up a sinking fund to pay
for repairs. If not, residents will have
to pay out of pocket whenever
renovations are needed. Check if there
are any plans to carry out maintenance
or renovations on the building before
you sign on the dotted line.
It’s also smart to check if there are any
legal proceedings under way in relation
to the owners corporation. If there are, it
could be a red flag that the apartment is
being poorly managed.
Asking to see the owners corporation
minutes from the last annual general
meeting can give you a clearer
understanding of the building’s history
and how it’s being run.
62 MONEY APRIL 2024
Buying off the plan
Being able to take your pick of apartments
in a building that is yet to be constructed
is one of the advantages of buying off
the plan, and you may even be able to
customise the floorplan. You can also
secure the apartment purchase at a fixed
price, allowing you to benefit from capital
growth if properties go up in the area
(the opposite will happen if prices fall).
AAA recommends checking how
long the developer has been building
apartments and recommends visiting
their previous projects (get the lowdown
on the building’s quality from the strata
manager if you can). Conduct similar
checks on the appointed builder.
NSW Fair Trading advises potential
buyers to carefully check contract
conditions and seek legal advice on
the terms and restrictions it contains.
It’s also crucial to understand what you
become liable for if you withdraw from
the contract and what you can do if there
are building defects. „
Is apartment living
right for you?
I f you’re used to living in a house with
a backyard and room to move, it can
be quite an adjustment relocating to an
apartment (not least working out what
to do with all your belongings). Renting
first is a good idea if you’ve never lived in
an apartment – the reality can be quite
different from what you imagined.
Samantha Reece, from Australian
Apartment Advocacy, says it’s important
to keep in mind that apartments have
their own community, as with the more
traditional neighbourhoods – it’s just
vertical rather than horizontal.
Although buildings are being designed
with better acoustics and resident
comfort in mind, Reece says anyone
considering living in an apartment
needs to be tolerant, good at sharing
and community minded.
“As with any community, it takes more
than a building to create harmony – it is
the members themselves who ensure
positive relationships.”

Offset vs redraw
which is better?
Minimising the interest you pay on your loan is a worthwhile goal,
but there are some pitfalls to watch out for.
O
ffset accounts and redraw
facilities can dramatically
reduce the interest you pay
on a home mortgage or
investment loan and
impact how quickly that debt is paid off.
Offset and redraw facilities both
allow you to make extra repayments
against your loan, but offset accounts
offer more flexibility for both home
buyers and investors. For most borrowers,
flexibility is a good thing, but for those
who want to make lump sum repayments
into their loan and don’t want easy or
regular access to that money, a redraw
facility could be suitable.
Which one is best for you?
A redraw account is part of your loan,
while an offset account is separate from
it. You can use the money sitting in your
offset account much as you would any
savings account. Accessing the money
sitting in redraw, however, can take one
or more business days and there may be
restrictions on the amount you can
withdraw and how often.
There’s another catch with redraw
facilities, if you’re an investor claiming the
interest on your loan as a tax deduction. If
you withdraw funds that have been sitting
in redraw and use them for a holiday or
other purpose unrelated to investing,
you will no longer be able to claim tax
deductions for that portion of your loan.
Let’s look at an example. You’ve bought
an investment property by taking out a
$500,000 loan. At tax time, you can claim
the interest on this loan as a deduction. An
inheritance of $100,000 comes your way,
so you put it in redraw, reducing your loan
STORY JOANNA TOVIA
balance to $400,000. You later decide to
use $70,000 of that money to buy a new
car. The downside with redraw facilities
is that you can only continue to claim
interest on the $400,000 portion of the
loan, even though your loan balance has
gone up to $430,000.
If you had signed up for an offset account
instead of redraw when you took out the
loan, in the same scenario you’d still be
able to claim interest as a tax deduction
on the loan balance of $430,000.
More powerful tool
Matt Turner, managing broker at GSC
Finance Solutions, says offset accounts
are much more popular than redraw,
particularly with investors, because
making extra repayments and then later
PROPERTY HOME LOANS
withdrawing them doesn’t affect the tax
deductibility of the debt.
Turner recommends borrowers use an
offset account rather than redraw, despite
the probability of having to pay a fee for
doing so and the possibility of a minor rate
differential between loans that have an
offset account attached and those that don’t.
“Having an offset account gives you full
control,” he says. “Nine times out of 10,
we’re setting a client up with the offset
account, even with those initial costs,
because the tool is that powerful.”
On a 30-year home loan of $600,000
with an interest rate of 6.5%, if your offset
account has a starting balance of $20,000
and you make additional repayments of
$100 a month, you’ll pay the loan off 3.5
years sooner and save $159,870 in interest.
In the same scenario, but making $500 in
additional payments, you would shave six
years and seven months off your loan and
save more than $300,000 in interest.
Getting the most out of your offset
account can depend on your savings
habits and self-discipline. Some borrowers
direct their monthly pay straight into their
offset account, live off their credit card
and pay it off in full at the end of every
month with the funds in their offset
account. But this approach doesn’t
work for all people.
“We find that can lead to some poor
behaviours,” says Turner. “If you don’t
pay it off in full in time, you’re saving
6% on the home loan but then
spending 20% on the credit card.”
Instead, he recommends using the offset
account as you would a savings account,
putting every dollar you don’t need for
life’s essentials into that account. „  

MONEY APRIL 2024 63
 KLEY REAL
AL

ES
PAM

TATE

Should you renovate or move?

For both options, the cost and stress levels can be high, so careful planning is key.

H
ome is a structure that provides
us with accommodation, but for
many of us it’s much more than
that; it’s our sanctuary, a place where we
feel happy and secure.
Even if our home no longer provides the
space or layout we need, many of us are
still reluctant to up sticks and move. For
some, renovating an existing home to
make it a better fit is the solution. But this
is not always possible or practical.
To renovate or move is a dilemma most
people will face at some stage. A growing
family requires more space, housing
several generations under the one roof
needs bespoke accommodation solutions
and often empty nesters require less space.
If you love your home, including its
location, and you have the capacity to
change things to suit your needs, it’s well
worth investigating the renovation route.
It can be a more cost-effective way to get
the home you want.

Calculate the costs

One of the biggest costs of selling and
buying a home in Australia is stamp duty.
The median house value in Australia is
$760,000 and the stamp duty slug on that
varies from a low of $22,362 in the ACT to
$42,956 in South Australia. Add in selling
costs for your current home and this could
well blow out to $50,000-$75,000. If you
renovate instead of move, you can direct
this towards your renovation budget.
To help you decide, think about what
changes your home needs. Are they
cosmetic, such as bathroom/kitchen
remodelling and painting, or will the
layout change to add more space, maybe
even a granny flat?
The costs vary widely. The Archicentre
Australia website offers a calculator that
gives you a guide to the cost of your plans.
If I want to upgrade my kitchen, bathroom,
ensuite and laundry, for example, the guide
cost is $96,000 to $108,000. If I also want to
convert my attic to a living space, the cost
guide blows out to $197,000 to $216,000.
And if I need re-plumbing, rewiring and
re-roofing on top of this, the cost increases
to $240,000 to $276,000. This can make it
easier to work out what you can afford.
To help you decide if this is your best
course of action, you should:
• Check with the local council to make
sure your plans are within the rules
and find out what approvals, if any,
you will require.
• Calculate the likely increase in value
to your home once the work has been
completed. A local real estate agent can
help you do this, but if you want more
surety hire a professional valuer. Often
the value of a property is improved by
more than the cost of renovations, but
not always. Your planned renovations
may overcapitalise your property –
meaning you would not recoup the cost
of the work if you sold in the short term.
If you plan to live in the home for a long
time, this may not be of great concern.
• Get plans drawn up. This can be done
by a building designer, draftsperson or
architect. An architect is likely to cost
more, but if it’s a big, complicated job
this could be money well spent.
• Seek quotes from tradies. Experts
recommend getting at least three.
Even after you have chosen your tradies
and know the price more accurately, add a
contingency of 10% to 20%, as overspends
are common on renovation projects. And

64 MONEY APRIL 2024

if you need to relocate while the work
is being done, you will have to add YOUR ‘RENOVATE OR MOVE’ CHECKLIST
rental and storage costs.
Working out how to pay for your
renovations is another hurdle. If you Renovation pluses Renovation downsides
have built up sufficient equity in your 1. You can create a home tailored to 1. You are in for a period of dislocation
home – the difference between the your specific needs and preferences. and disruption, whether or not you stay
value of your home and how much 2. You can stay put, which is ideal if it’s in your home while the work is done. It
you still owe on it – this can be an close to work and amenities, and you could be for longer than expected.
easy option. For example, say your have good neighbours. 2. You’re likely to face cost overruns.
home is valued at $800,000 and you 3. You could increase the value of your 3. You run the risk of overcapitalising.
have a home loan of $440,000, your home with considered updates. 4. Renovating can be very time
lender will calculate 80% of the value 4. You don’t have to worry about moving consuming – particularly if you are
of the property, $640,000, as the value costs, agent fees and stamp duty. managing the project on top of your
you can borrow up to. This means regular job – and stressful.
your usable equity would be $200,000
($640,000 less $440,000 mortgage).
Another option is to use your savings,
including those accrued in your offset
account. For a major renovation, you
may consider a construction loan.

Chance to top up super

Moving can be an easier alternative
and may be your only solution if your
home can’t be reconfigured or
extended to meet your needs. For
those age 55 or older, an added
incentive to sell and move is that they
may be able to take advantage of the
downsizer contribution to super. If
you are in that age group and have
owned your home as your main Moving pluses Moving downsides
residence for at least 10 years, it’s 1. It gives you a fresh start, more 1. It can be a costly option. Apart from
likely you will be able to contribute space and a new location. the purchase price, you need to factor
up to $300,000 (from each spouse) 2. You might make a considerable in stamp duty, agent fees, marketing
from the proceeds of your sale. profit from selling your current home. costs, home staging fees, solicitor/
If you do decide to sell and move, 3. You avoid the work and stress conveyancer fees and removalist costs.
it’s generally prudent to sell first so involved in renovating. 2. You may realise the grass is not
you know exactly what your budget is greener in the new location and
for your new home. And don’t forget you miss a lot of the conveniences
to take into account the selling and associated with the location of your
moving costs. „ former home.
3. Often you don’t find everything you
Find out more about Pam and read need in your new home and you end
her columns online at moneymag. up having to renovate anyway.
com.au/author/pam-walkley.

MONEY APRIL 2024 65

 INVEST COLLECTIBLES
Living
a life of
luxury
The very wealthy’s love of
classic cars, art , jewellery
and wine extends to their
investments. Just how well
do these assets perform?
STORY TOM WATSON
W
hen the topic of investing is
broached, most people’s
thoughts turn towards assets
such as shares, exchange
traded funds, managed funds,
property and bonds.
They’re less likely to think about a 2008 bottle of
w Comte Georges de Vogüé Musigny Grand Cru or
a Hermès Birkin 35 bag.
According to Knight Frank’s 2024 The Wealth
Report, wealthy individuals – those with a net
worth of more than $US30 million (about $45
million) – typically dedicate 20% of their portfolios
to luxury collectibles.
The most popular are art, watches, classic
cars, wine and jewellery. And Knight Frank found
that the joy of ownership was the number one
motivation for investing in such goods, and
wanting to turn a profit came second.
But how do these assets perform as investments?
And perhaps, most importantly, can they prove
a worthwhile addition to the portfolios of regular
investors, or are they better left to the experts and
those with deeper pockets?
In mid-November, a rare 1962 330 LM/250 GTO
Ferrari went under the hammer at an RM Sotheby’s
66 MONEY APRIL 2024
auction in New York. It was the most expensive
Ferrari ever sold at auction, fetching
$US51.7 million ($78.6 million), including fees.
That wasn’t the only record-breaking sale
during 2023. As the Knight Frank report notes,
records were also set for a bottle of whisky at
$US2.7 million ($4 million) and a coloured
diamond at $US34.8 million ($53 million).
Andrew Shirley, editor of the Knight Frank
Luxury Investment Index (KFLII), says the sales
at the top end of the market don’t paint the full
picture. “It sounds like a bumper year for luxury
investments. However, the index reveals a less
positive picture. KFLII edged into negative year-
end territory in 2023, albeit by a fraction of a per
cent, as several stalwart members of the index
dropped into the red or showed minimal gains.”
The index, which tracks the value of 10 asset
types across the luxury investment sector, was
down 1% over 2023 as a result of drops in the value
of rare whisky (-9%), classic cars (-6%), handbags
(-4%) and furniture (-2%).
Dietrich Hatlapa, a classic car guru and Knight
Frank contributor, says the fall in classic car
values was unsurprising following a strong year in
2022 and the temptation for investors to raise their
 It was the
most expensive
Ferrari ever
sold at
auction.

allocations in strong-performing spaces such as watches inside out and could tell the year, rarity Dream ride... a 1962
equities. “It’s a very small market, so it only takes and value of a watch on sight – he ran a very good 330 LM/250 GTO Ferrari
a minor change in portfolio allocations to have an business. Most of us, however, do not possess that that fetched more than
$US51 million at auction.
effect, and probably there has also been a degree level of knowledge.”
of profit taking.” This, Fraser says, gets to the heart of one of the
On the other side of the ledger, art was the major questions about luxury investments: X
best-performing category with an 11% growth
rate in 2023. That was followed by jewellery
(8%), watches (5%), coins (4%), coloured Shifting value of luxury
diamonds (2%) and wine (1%).
investments
The 2023 dip for luxury investments was an 12-month 10-year
Asset class
exception to the recent norm, though. Since its price change price change
launch in 2013, the value of the index is up 100%, Art 11% 105%
helped by triple-digit growth in the value of the Cars -6% 82%
whisky, watch, wine and art sectors over the
Coins 4% 56%
past decade.
Coloured diamonds 2% 8%
Expertise is the key Furniture -2% 40%
Charlie Fraser, a private wealth adviser at
Handbags -4% 67%
Shadforth Financial Group, says he’s heard his
fair share of stories about investors making Jewellery 8% 37%
considerable profits on luxury items they’ve Watches 5% 138%
sold. However, he warns that without genuine
Whisky -9% 280%
expertise, it can prove a risky play.
“One of my first jobs was working for a jeweller Wine 1% 146%
who specialised in vintage watches. He knew Source: Knight Frank Luxury Investment Index (fourth quarter, 2023).

MONEY APRIL 2024 67

 INVEST COLLECTIBLES
without that level of knowledge, how do you know
how much to pay for an item in the first place? “Listed
shares, for example, can be valued by looking at all
manner of quantitative data such as cashflow and
profit. Luxury items do not produce an ongoing
income, so determining the present and future value
is far from an exact science.
“This is why most people do not find luxury
investing a success. Unless the investor possesses
knowledge that others don’t, it is unlikely the
strategy will be consistently successful. The old
adage applies that you make your money in the
buying, not the selling,” he says.
Ultimately, Fraser recommends that if people are
interested in luxury items, they should operate
through a lens of passion rather than treating them
as an investment, at least until they have built up
a portfolio of other assets.
“As an evidenced-based investment firm, we
advocate that our clients ‘immunise their lifestyle’
through low-cost, highly diversified investments
before considering satellite or ‘moon shot’
investments. Only once we have established the
level of capital that needs to be set aside through
detailed long-term cashflow modelling would we
then consider investing funds outside of that
disciplined approach,” he says.
Self-managed super rules
One way a number of Australians invest in the likes
of art, cars, jewellery and wine is through their self-
managed super funds. According to the Australian
68 MONEY APRIL 2024
Clockwise from left... Rolex Lady
Datejust. The Invocation, (1903)
by Paul Gauguin. Pink ruby
diamond ring.
Taxation Office’s (ATO) latest figures, $636 million
worth of collectibles and personal use assets are
being held in self-managed super funds (SMSFs).
Because these kinds of investments are designed
to help fund people’s retirements rather than to
provide any benefit or pleasure beforehand, the
ATO has strict rules around how they should be
treated and stored.
For example, collectibles held in an SMSF, such as
a work of art, can’t be stored or displayed in the
private residences of any related parties, nor can
they be leased out to someone else. Items also need
to be insured in the fund’s name within seven days
of acquiring them.
Fraser warns that while SMSF owners in
particular would need to be extra careful about
sticking to the rules, he suggests that all luxury
goods or collectible investors, including those
who hold them outside SMSFs, will benefit from
taking precautions.
 “Typically, all second-hand luxury goods are
valued according to the condition of the item.
Therefore, it would be vital to maintain the item
in the condition in which it was purchased.
Scratches on a watch or poorly stored wine would
severely affect the future value of the item.
“Storage of the items is particularly important
when purchasing the luxury goods through an
SMSF. The ATO has set strict rules around the
storage and use of luxury items when owned in
a super fund. Contravention of these rules can
have serious financial implications.
“That’s why we advocate a very clear delineation
between luxury items for enjoyment and those
considered an investment.” „

Collectibles held in an
SMSF, such as a work of art,
can’t be stored or displayed
in private residences.

Investors caught out

by empty promises

I n 2017, Tasmania Police launched an

investigation into Nant Barrel Holdings. Hundreds
of investors had bought barrels of whisky from
the business for as much as $14,000, with Nant
promising to buy them back after four years while
paying investors a 9.55% annual return in the
interim. That return never eventuated, and an audit
revealed that hundreds of barrels had never been
filled or were missing entirely.
So how can would-be whisky investors avoid
being caught out?
• Beware of guaranteed returns. Genuine
investments rarely come with guaranteed returns,
so any business offering them should be treated
with scepticism. So, too, should those promising
overly generous returns.
• Assess the company. It can pay off to take your
time looking into the business in question. Make
sure it’s a legitimate company with a proven track
record, with easily viewable terms and fees and
positive reviews from past customers.
• Verify the whisky. If you’re buying a barrel or
bottle, see if you can have it authenticated by
a third-party expert.
• Don’t succumb to pressure: To force your hand,
scammers will often pressure victims into making
a rushed decision. So, if you’re feeling pressured,
don’t be afraid to walk away.

MONEY APRIL 2024 69

 INVEST A GUIDE TO SUPER

Super covers
The system of compulsory contributions – now 32 years old – is helping
millions of Australians to fund their retirement dreams. STORY ALEXANDRA CAIN

A
ustralia’s universal
superannuation system is
the envy of the world and
the blueprint for similar
schemes globally, having
transformed the Australian economy since
its introduction in the 1980s.
We become part of the $3.6 trillion system
from the time we get our first job and start
paying a portion of our salary into our
account. Super also slashes government
expenses and funds Australia’s biggest – and
some of its smallest – businesses. So, it pays
to know how it works.
In 1986, Bob Hawke’s Federal
government kickstarted the current system
with the Retirement Income Policy
Review. The superannuation guarantee
(SG) was subsequently introduced in 1992
at 3% of qualifying employees’ salaries,
typically public servants and white-collar
staff from big businesses, during Paul
Keating’s time as prime minister.
Today, an employer must pay 11% of an
employee’s ordinary time earnings into
their super fund, with this figure scheduled
to rise to 12% by 2025.
Australians older than 18 are entitled to
be paid the SG into a default fund selected
Do you know what
MySuper/default super is?
Heard of it
15%
Yes
37%
No
48%
Survey conducted
February 5-16, 2024,
Source: moneymag.com.au with 799 respondents.
by their employer, or an alternative fund of
their choice, when they start working.
To receive SG contributions, funds must
offer members a default choice known as
MySuper, which gives workers a low-cost,
balanced way to invest their retirement
savings. Surprisingly, Money magazine
research indicates almost half of us
(47.6%) don’t know what MySuper is.
It is possible to change your
fund, but you need to consider
any consequences, such as
fees or charges or loss of
entitlements such as life
insurance. Money’s
research also shows
that many people
(15.1%) don’t know how
to compare funds, while
12% don’t change because
of the perceived
administration hassle.
You are able to request a
transfer of your account balance online
through your myGov account or by
contacting your existing fund.
The Australian Prudential Regulation
Authority (APRA) now publishes an annual
performance test that compares more than
160 funds, representing $292 billion of
members’ benefits. The 2023 results show
more than 44% of funds under-performed
their benchmark.
Take the long-term view
While improved transparency is welcome,
advisers caution against making rash
decisions about changing super funds.
“Superannuation by nature is a long-
term investment,” says Brett Schatto,
CEO of financial consultancy Pride
Advice. “So, you want your fund to make
decisions that are going to be fruitful over
a 20-year period. The risk is if funds are
getting benchmarked year-on-year, it may
change the way they invest because they
don’t want to be an outlier and be called
out as a bad performer.
“There could be a reason for the under-
performance, such as higher fees or the
fund having made an investment that hasn’t
yet paid off relative to the benchmark. It’s
a bigger problem if funds underperform
two years in a row.”
APRA’s data can also help members
compare fees with similar funds.
Members pay different fees and
working out how the fund
charges members is not
always easy. Expect to
pay separate admin
and investment
management fees.
“It’s difficult to
understand super funds’
fee structure from their
website. But the total cost
should be less than 1% of
the member’s balance,”
according to Baker.
Significant tax savings
At its heart, super is a preferential tax
investment vehicle. Under existing rules,
contributions are taxed at a concessional
rate of 15%. This means money
contributed to superannuation is taxed at
a lower rate than if it were taken as salary.
You can also make extra contributions to
your super fund from your pre-tax income
– this is known as salary sacrificing. It
lowers your taxable income, effectively
reducing the tax you pay.
Plus, investment earnings in super are
generally taxed at a maximum rate of 15%.
The economy benefits, too
The super system is, however, much more
than a tax-efficient retirement savings
scheme. Superannuation contributes to
financial stability and economic growth. It
boosts national savings and provides funds

70 MONEY APRIL 2024


the circle of life
for domestic investment, which drives
labour productivity and living standards.
Super funds build Australia’s future
infrastructure. Assets such as airports,
roads and bridges are a natural fit for super
funds to own, given the long-term nature
of the income that infrastructure produces
and super funds require.
It also increases investor focus on long-
term, sustainable returns and offsets an
ageing population’s drag on economic
growth. It’s estimated that lifting the SG
to 12% will save the Federal government
roughly $34 billion on expenses such as age
pension payments between 2021 and 2060.
While super provides an economic boost,
it also has a cost, given the tax concessions.
However, the Federal treasury estimates the
benefits will outweigh the costs by 2038.
Where it’s invested
“Super funds buy equity takes in hundreds
of businesses in Australia and thousands of
businesses around the world across all
industries,” explains Brian Parker, chief
economist at Australian Retirement Trust,
which has $230 billion under management
and two million members. “In any economy,
wealth is built by businesses. So, if you
invest your capital in businesses, you enjoy
the benefits of that wealth creation.”
By investing in cash, term deposits, local
and international government and company
bonds, plus a huge array of other assets,
funds are limiting exposure to any single
asset or risk through diversification.
Your exposure to the assets your super
fund invests in depends on the investment
option you choose. Higher-risk options
typically have more exposure to assets such
as shares and property. Balanced portfolios
generally are invested in growth and stable
assets in a 60:40 split. Lower-risk options
usually have a bias towards income-
producing assets such as bonds and cash.
Super fund investors don’t have a direct
beneficial ownership in the fund’s
underlying assets. Rather, the contributions
they make buy units in the fund. Member
funds are pooled and the super fund’s
trustees determine what to buy, usually
using recommendations made by
professional investment managers.
Units prices are typically published
on the fund’s website, but check how your
fund operates.
The way superannuation is invested has
changed over time with Australian funds
having much more clout overseas than
they used to.
“We need to have the broadest universe
of investment opportunities we can find
because the super industry puts to work the
money of 23 million people. This gives us
a great deal of responsibility,” says Parker.
A success story, but more to do
The super system has dramatically
improved the lives of many retirees. But
superannuation is still relatively young and
many opportunities remain to tweak it to
create greater benefits.
Although many Australians will have
contributed to super their entire adult life,
they may still find that this money alone
is not enough to fully fund their
retirement. The Australian Securities &
Investments Commission’s Moneysmart
calculator tells us that someone who
is 18 today, earning $50,000 a year and
contributing the 11% SG to their fund,
would have $414,622 in their super
fund when they retire at 67, which is
unlikely to be enough to support
a self-funded retirement.
Additionally, debate
is ongoing about
extending the super
guarantee to people
younger than 18 who
earn less than $30,000 a
year.
The gender super
imbalance is also a hot
topic. The good news is
that the government has just
announced that 12% super will be
paid on publicly funded paid parental
leave from July 2025.
This should go some way to redressing
LOVE
YOUR
SUPER
Special report
the gap. According to the Bureau of
Statistics, the average balance for men
aged 55 to 64 is $326,200 and for women
it’s $246,300 – a 25% difference.
Quality control is another limitation of
the super sector. APRA’s performance data
shows the industry grapples with subscale
funds that deliver under-performing
products and struggle to deliver value.
This is being somewhat addressed by
a consolidation taking place across the
industry. Australian Retirement Trust is an
example, with the fund formed by a merger
between Sunsuper and QSuper in early
2022. It’s likely that poorly performing and
small-scale funds will be acquired by more
robust competitors over time.
While there’s room for improvement, the
super system remains an inherently
successful part of the Australian economy,
and one that will continue to support our
workers, businesses and the economy as
a whole long into the future. „
Insurance in super is a bonus
A standout feature of the super system is the
inclusion of insurance inside the fund, which
provides protection for millions of Australians.
Most super funds offer members life, total
and permanent disability (TPD) and income
protection insurance. While this means you
don’t have to pay premiums from your
own pocket, a downside is that
they will reduce your balance.
Be aware also that funds
cancel insurance on super
accounts that haven’t
received contributions
for at least 16 months.
New super fund
members younger
than 25 no longer
automatically receive cover
inside super, and people
whose account balance is less
than $6000 are not covered.
Contact your fund if you’re not sure how
it approaches member insurance.
MONEY APRIL 2024 71
 INVEST HOME EQUITY
Ins and outs
of debt recycling
A
s any savvy investor
will tell you, there is
good debt and bad debt.
Bad debt is non-tax-
deductible debt – the
amount you clocked up on your credit
card for that European holiday; the loan
you took out to buy a new car.
Good debt typically refers to tax-
deductible debt, such as that accrued
when money you have borrowed
from the bank is used for an income-
generating investment such as
property, stocks or bonds.
Then there is a strategy that allows you
to replace the non-tax-deductible debt in
your principal place of residence with
deductible debt from investments: it’s
known as debt recycling.
72 MONEY APRIL 2024
STORY HANNAH TATTERSALL
The equity in your family
home can be used to
fund a tax-deductible,
income-generating
investment.
Debt recycling offers many benefits. First,
it enables you to use the equity from your
family home to fund an income-generating
asset elsewhere. This enables investors
to accelerate their original home loan
repayment by using the income from the
investment to pay back the loan faster than
the typical term of 25 or 30 years.
“By refinancing their principal place
of residence and taking out that equity, in
other words recycling that debt, that debt
transitions from a non-tax-deductible debt
to tax-deductible debt,” says PK Gupta,
managing director of Consulting by PK
and former JP Morgan investment banker.
“Yes, they have more debt on it now, but
they’re getting a tax deduction. At the same
time, they’ve been able to buy an income-
generating asset, let’s say a property worth
$500,000, that is rising in value. That is tax-
deductible debt because it’s an investment
property and it’s producing an income,
which is in turn paying off that original
principal place of residence.”
Unlike refinancing, which is when you
take out a new home loan usually to get
a better rate or to access extra funds, debt

Top debt-recycling strategies
• Buy high-growth assets that have
the potential to increase in value.
• Keep an eye on your investments
and sell those that have accumulated
substantial equity over time to
free up capital for debt reduction
and reinvestment.
• After selling, use the proceeds to
reduce your non-deductible home
loan debt.
• Reinvest in fully geared investments,
ideally in high-growth areas that
enable you to take advantage of
negative-gearing tax benefits.
recycling, when used strategically, can be
a smart tool for investors wanting to grow
their property portfolios, says Lewis
Johns, an investment lending manager
with the Australian Lending & Investment
Centre (ALIC).
Johns says many of ALIC’s clients take
advantage of debt recycling by selling
an investment property that has gone
up in value, paying off the investment
property loan and using any money left
over from the sale to reduce their
personal home loan.
“Because I’ve paid down my home loan
and reduced my non-deductible debt, I’ve
now created more equity in my property,
so I’ll then use that equity to buy another
investment property with a fully geared
tax-deductible debt,” he says.
What are the risks?
Any investment strategy comes with risk
and debt recycling is no different. The
risks include:
• Your investment may not increase in
value as expected. You are counting on
its value increasing to make a profit.
If the particular asset you invest in,
whether it’s property, crypto or shares,
doesn’t perform as you had wanted it
to, this may result in a loss.
• Interest rates can rise steeply, as we’ve
seen in the past few years, making the
investment more expensive to hold
onto, says Johns. It’s important to have
consistent cashflow: if the income
earned on the investment isn’t enough, Reap the long-term CASE
STUDY
you will need to find another way to rewards
pay back the loan. “You should always Thao Bui was 24 when she
also seek professional tax advice from
your accountant before undertaking
purchased her first property in
East Melbourne in 2006 for $275,000.
this type of strategy,” he adds. Three years later, the four-bedroom,
• You may over-recycle. Some investors
find debt recycling such a good way
standalone house had doubled in
value. Bui used debt recycling – that
to pay off debt that they continue to
invest in new assets. “Let’s say the
is, the equity she had in that first
home – to buy an investment property.
investment has doubled,” says Gupta. “I used the equity to fund the whole
“I can now refinance that investment
and buy another investment. It can
property – I didn’t use any deposit,”
says Bui, now 42.
carry on like that. Now, of course, “When I sold my second property,
there are risks involved with that I purchased a house-and-land package.
because every time you take on debt, And that hasn’t performed as well as
good or bad, it’s still debt. And so, I hoped. I used equity, so no deposit at all.
you still have to pay it back at some “But the other investment properties
point and you still have to pay I bought in 2009 and 2012 made a lot of
interest on it.” money and I was able to sell them and
• You should consider capital gains tax,
which applies to the profit you make
start a business.”
After six years running her own
from selling an asset such as shares or business, Bui sold it in 2021. She
property. The profit made from selling then bought four more investment
your asset must be declared in your properties within 18 months: in
income tax return. Bundaberg and Rockhampton,
Queensland; Horsham, Victoria; and
Can anyone do it? Armadale, Western Australia.
You don’t need to be an experienced For Bui, the long-term investment
investor to consider debt recycling. strategy has paid off. “I first purchased in
“Anyone who has at least $100,000 of 2006, so it’s been over a number of years,”
equity in their home should be able to she says. “I didn’t do it in five years.”
do this,” says Gupta.
However, you do need the right
advice. “This is a more complex lending
scenario,” says Johns. He recommends
getting lending advice from a specialised
investment broker, as your typical home
loan broker won’t have the expertise; tax
advice from an accountant, to make sure
you are operating within the Australian
Tax Office rules for deductible debt; and
financial advice from a planner to make
sure this is in line with your long-term
wealth and retirement goals.
With property, a wealth- and
investment-oriented buyers advocate
can advise you where and what to buy to
make sure the asset increases in value
sufficiently to allow you to be able to sell
in the future and use the proceeds to
reduce non-deductible debt. „
MONEY APRIL 2024 73
 ESTR ANT
AL
SU
P
VITA
PE R
When to wind up your SMSF
Running your own fund can lose its appeal, perhaps
because of the time and effort it takes or the costs.
A
lthough there are many
advantages in setting up
a self-managed super fund
(SMSF), circumstances change and what
may have been a sound decision years
ago may no longer apply today. There
are a whole host of reasons why people
decide to wind up their SMSF.
They may decide they no longer wish
to be burdened with the responsibility of
running their SMSF or that their spouse
hasn’t got the expertise to take over in the
event that they become ill or pass away.
It could be that divorce or the wish to
simplify things drives the decision.
“Complexity is a factor,” says Marisa
Broome, the principal of Wealthadvice.
“Everything nowadays has so much
compliance attached to it. If they’ve been
dealing with an accountant for a long
74 MONEY APRIL 2024
But there’s a way out.
time who has retired, and the new
accountant isn’t as good and doesn’t have
the same history, it all becomes too hard.
“When people are working, they keep
thinking they’ll have time when they
retire to pay more attention to it, but all
of a sudden, in retirement, there’s a whole
lot of other things they want to do and
time becomes a big issue as well.”
Cost is another factor, she says,
especially if the balance drops. “As the
fund gets smaller, the cost as a percentage
of it becomes much higher.”
Ongoing costs can include accounting
fees, auditing fees and preparing an
actuarial certificate. “If you’re not an
investment expert, you may be using a
financial planner. They’ll be charging
a fee, and they may have the SMSF on a
platform, and that will have a fee. It could
cost the fund 3%, 4% or 5%, which is
higher than a retail product or a big
industry fund.
“Cost is incredibly important, but
you’ve got to work out how much you are
prepared to pay for whatever level of
service you are getting. If you like being
involved – even if your accountant is
expensive – but you’re actively making
good investments, cost becomes
irrelevant. It’s only relevant when you
are not seeing value,” says Broome.
If you are not seeing value any longer
and want to roll your savings over to an
industry fund, you will have to sell all
your SMSF assets whether you are in
accumulation phase or pension phase.
Your new fund will only be able to
accept cash, so any non-cash assets
will have to be sold.
Ways to cut costs
If you roll over to a retail product
(those owned by the banks and financial
institutions) you can do what’s called
an in-specie transfer.
“You don’t have to sell the assets. You
can transfer the assets into the fund. The
beneficial owner is still the same, it’s still
your account, but it’s in someone else’s
trust deed and they’re doing all the
compliance on the account,” says Broome.
“If you have a financial adviser that
helps and they keep oversight of it,
at least you’re getting rid of half the admin
costs, you’re getting rid of having to
deal with the accountant, deal with the
auditor, and deal with all those other
administrative issues.
“So, if cost is the only driver, look at
how you can reduce costs first before you
think about closing the SMSF. If your
driver is complexity or the fact your
partner may not have the financial
capability of continuing the fund, then
that’s a different decision altogether.”
Broome says winding up costs can
be high. “It depends on who does the
paperwork. If your accountant is doing all
the paperwork for the in-specie transfers
or doing all the selling of the assets,
they’re going to charge you a lot more.
“If you’re used to managing the fund
yourself, there’s a lot of stuff, like the sale
of the assets, you could handle yourself.
As long as you keep good records, it will
be much cheaper for you to wind the fund
up that way by being involved yourself.”
Downsizer contribution
Your first step in the process should be to
find out what your options are and weigh
up the pros and cons. “That’s why it’s
good to shop around. If you want
simplicity, get someone else to do it all
for you – go to one of the big industry
funds and get them to do it all.”
There may be other lifestyle decisions
you are contemplating, she says, like
downsizing your home, in which case you
could make a downsizer super contribution
– $300,00 for a single person or $600,000
for a couple – and do it all in one hit.
You may also need to do partial
rollovers into the new fund if your SMSF
Industry funds provide an alternative
The reasons people wind up their SMSF
are being keenly observed by large
industry funds.
“At UniSuper, we’ve seen trends
emerging in those taking up SMSFs,” says
Derek Gascoigne, state manager, advice,
at UniSuper, in an article on investment
website Firstlinks. “The average age of
UniSuper members rolling out to an SMSF
is age 50, while the average age of our
members who roll money in from an SMSF
is 62, and with an ageing population we
are seeing more members rolling in from
their own SMSF.”
“Over time, the SMSF members’
financial goals and their desired level of
involvement in managing investments
may change or wane, or the original
purpose for creating an SMSF may no
longer be necessary, for example, if the
asset that it was specifically set up to own
is no longer held within the fund. In our
experience, some people start to ask
if this is how they want to be spending
their time.”
Depending on the assets in the
SMSF, and the professional
advice received, Gascoigne
says running costs can be
anything from $1500 to
$10,000 a year, even before
assets are complicated and
take time to sell. Additionally,
make sure you’ve drawn down the
minimum pension you are required to
take for the financial year, plus enough
to live on.
If you only have a small balance left,
you need to work out whether there is
any point to having your money in super
at all. “If you’ve only got $150,000 left in
super, and that’s the only asset you’ve
got, you have to question whether it’s the
right option. Super is powerful when
you’ve got lots of assets.
“The less you’ve got in super and the
older you are, and the less other assets
you have, super starts losing its
attractiveness because of the tax-free
adding the management costs of any
underlying investments.
Dena Brockie, head of superannuation
and retirement products at AustralianSuper,
says her fund’s research “shows that
46% of SMSF account holders who open
an account with the fund switched as
a result of being frustrated with the
complicated nature, time investment
and cost associated with managing the
SMSF account”.
She says AustralianSuper’s self-managed
investment option, Member Direct, enables
members to invest in ASX 300 shares,
exchange traded funds, listed investment
companies, term deposits and cash
through an easy-to-use online platform.
“Members can combine their Member
Direct investment portfolio with
AustralianSuper’s other investment options
to manage their desired investment strategy.
“The Member Direct investment option
offers a cost-effective alternative to
the ATO-regulated SMSF sector.
AustralianSuper takes care of all the
administration, compliance and
reporting requirements. There
are no set-up charges and
ongoing fees are lower
compared to an SMSF,”
says Brockie.
threshold. You can earn
$20,000 in income pretty much
without paying any tax.”
“SMSFs have a fantastic place in the
investment landscape for people who
understand the complexities of looking after
them, the estate planning benefits; those
sorts of option. There’s an important place
for them. But they’re not for everyone.
“If life’s starting to get too hard, or
you’ve just realised you don’t have the
financial interest in being actively
involved in it, there are better options
out there for you,” says Broome. „
Find out more about Vita and read
her columns online at moneymag.com.au/
author/vita-palestrant.
MONEY APRIL 2024 75
 Z MANAGE
IA D
FUN
ZACH
DS
Tough days at the office
Stress in the global commercial real estate sector threatens to spill over to Australia.
D
espite the resilience of the global
economy in the face of aggressive
interest rate hikes, investors are
debating the source of the next market,
and economic, shock.
A leading candidate is the stress in
the US, and global, commercial real
estate (CRE) sector. This represents a
downside for global investors and has
implications for Australian real estate
investment trusts (A-REITs).
In our discussions with global investors,
we hear concerning anecdotes about
offshore CRE markets, such as property
transactions happening at a deep
discount to the last sale price.
76 MONEY APRIL 2024
Global policymakers are aware of these
issues and their ramifications. This is one
of the reasons why forward interest rate
expectations in the US are pricing in
significantly more cuts to the Federal
Reserve policy rate in 2024 (compared
to what the Federal Reserve itself has
officially guided). In short, the market does
not believe the Federal Reserve can hold
rates without risking material damage to
the global CRE sector, which risks causing
contagion across the global economy.
The global CRE market has experienced
structural changes over the past five to
10 years due to the shift from instore to
online shopping, combined with the Covid
work-from-home shift. This alone led to
a 60-70% reduction of office attendance
rates (compared with pre-pandemic) in
some major cities.
Pressure on returns
Australia is following the US, with
increasing online retail sales penetration.
All of this is having a material impact on
leasing demand and vacancy rates. In
addition, higher interest expenses are
putting pressure on operating returns
due to debt in the capital structure. In
Australia and the US, the effective rents
on new leases are about 5-10% below
pre-pandemic levels.
 Not surprisingly, valuations across
the globe have dropped. In Australia,
aggregate valuation measures have fallen
by about 10% for offices and 8% for retail
and industrial segments since mid-2022.
Listed Australian real estate investment
trusts have had similar revaluations of
CRE assets.
It wouldn’t be a stretch to assume
valuations will decline further, though it
is difficult to estimate by how much. In
Australia, listed REITs own about 10% of
the office space and 60% of retail space.
Our analysis finds that, broadly, A-REITs
are in a better position than they were
headed into the GFC. However, we have
limited financial visibility on the rest of
the property owners, which are private.
Lessons from the GFC
It’s important to note that when
investors look at the A-REIT sector, they
shouldn’t use the 2008 GFC playbook
indiscriminately. Today’s REITs are
different, although the lessons learnt
from the GFC still stand. Leverage is one
of the most important considerations,
and from that perspective the gearing
(weighted average) of A-REITs of about
25% today is much lower than the 45%
in 2007-08.
Furthermore, pre-pandemic payout
ratios were 100%, and most of the funding
was from Australian banks (on relatively
short-term maturity) with geared offshore
assets. All this led to REITs either going
bust or undertaking highly dilutive equity
raisings during or after the GFC.
In our view, the main ways offshore
problems will impact Australian REITs are:
• Broad sell-off: Market sentiment
towards the sector deteriorates, driven
by events offshore, and is reflected in
A-REIT share prices locally.
• Higher participation of global
investors: Australian REITs now rely on
foreign investors for debt funding. It is
estimated that about 45% of total debt is
sourced from offshore markets (driven
by the US). Further, foreign investors
are also active participants in the
domestic corporate bond market, which
makes up about 20% of large A-REIT
debt. Therefore, any disruption to this
3 FUNDS
Resolution Capital Global TO
WATCH
Property Securities Fund
(ASX: RCAP)
Gives investors exposure to the
underlying returns of some of the
world’s highest quality real estate assets
through a portfolio of global REITs and
property companies. The fund aims to
provide both income and capital growth
over the long term. It is denominated
in Australian dollars and hedges the
underlying foreign currency exposures.
VanEck Australian Property
ETF (MVA)
Gives investors exposure to a diversified
portfolio of ASX-listed securities with
the aim of providing returns before fees
and other costs that closely track the
index. It has diversified exposure to
commercial, retail, office, specialised
and industrial property in a single trade
on the ASX.
UBS CBRE Property Securities Fund
A portfolio of mainly A-REITs that
the investment team believes are
undervalued by the market, based on
the in-house assessment of future
cashflows. The fund aims to outperform
(after management costs) the S&P/ASX
300 Property Accumulation Index over
rolling five-year periods.
funding source will have implications for
the sector.
• Australian banks have been
more conservative with CRE: They
are better placed today given they have
exercised conservative lending practices
that have reduced the potential for
systemic risks from any issues in
commercial property markets.
Australian banks’ aggregate exposures
to CRE have been declining since the GFC
and now sit at about 5.5% of total assets.
There has also been an increased
regulatory oversight from the Australian
Prudential Regulation Authority (APRA).
Since the GFC, a higher proportion of
commercial property bank loans have
been written with a loan-to-value ratio
(LVR) of less than 65%, along with
covenants that earnings cover twice their
interest expenses.
All else being equal, Australian banks
are better placed from risks in the CRE
market. However, any offshore stress may
in the first instance still impact domestic
banks’ share prices. Interestingly, it
is foreign bank branches that have the
most concentrated exposures to
Australian commercial property.
• Debt expiry: We have analysed the
debt facility expiries for members of the
S&P/ASX 200 A-REIT index over the
next five years. If there is a major market
shock and debt markets freeze, expiring
debt facilities may be difficult to renew
or are likely to be done at higher rates
and/or unfavourable terms. On this front,
over the next two years, most REITs
appear to have manageable debt facilities
rolling over.
• Gearing: Overall, this is at
manageable levels, with an average of
about 25%. We don’t see major risks of
breaches of debt covenants even if there
is some further hit to asset valuations.
Gearing covenants tend to start at around
50%. Most of the S&P/ASX 200 REITs
have gearing of between 20-35%. In
our discussions with some REITs,
management teams continue to look to
offload non-core assets to reduce debt.
• Interest cover ratio (ICR):
Broadly, the ability of Australian REIT
to service their debt obligations remains
healthy. The average ICR ratio of 5.5 is
comfortably above covenant levels. This
means there is some buffer available to
these REITs should interest rates move
further against them.
We see large Australian-listed REITs and
Australian banks better placed to navigate
any spillover stress from global CRE
compared with the GFC. However, there are
clearly several direct channels that could
see any stress from offshore markets make
its way to domestic REITs. „
Zach Riaz is an investment manager
and director at Banyantree Investment
Group, with responsibilities across
equity and multi-asset strategies.
See banyantreeinvestmentgroup.com.
MONEY APRIL 2024 77
 SHARES STOCK EXCHANGES
STORY MATTHEW GIBBS
With 80 stock exchanges around
the world and more access than
ever to international markets,
Australian investors have much
to gain by looking beyond the ASX.
The world is
your oyster
T
he mantra for much
of my time at the
Australian Securities
Exchange (ASX) was
“what we do matters”.
I first used it when answering a question
from a new starter about why the ASX
was always in the news. I wasn’t boasting,
just simply acknowledging that the ASX,
like other major stock and securities
exchanges around the world, operates
at the heart of the national economy.
Exchanges support price discovery,
capital allocation, risk transfer and wealth
creation. Their rules help provide fairness
for participants and stability for the
system overall. And their initiatives can
improve financial literacy and shape
corporate behaviour.
With that privilege comes scrutiny.
Given the role exchanges play, it goes with
the territory. In fact, it is the importance
of the role, its public purposefulness,
that draws people to work at exchanges
like the ASX.
Exchanges are attractive to investors,
too. Most obviously, equity exchanges (as
opposed to their futures cousins) provide
a platform for the buying and selling of
78 MONEY APRIL 2024
listed company stocks and, increasingly,
exchange traded funds (ETFs). This
gives investors a stake in the fortune
(or otherwise) of the entities.
Shares in the exchanges themselves
can also be traded, thanks to the almost
universal demutualisation of these once
member-owned enterprises. This was
led by the ASX, which was the first
exchange in the world to demutualise
and list on itself in 1998.
Technology allows investors in
Australia to access opportunities
on international exchanges from the
comfort of their local broker. The world
is now an investor’s oyster. But, as
Shakespeare meant with his original
quote, shucking oysters requires hard
work: not all contain pearls.
Competition is fierce
Technology and globalisation also allow
companies to access capital for growth
more widely than ever before. They
might take a secondary listing on
another exchange or list solely offshore
where investor interest, analyst coverage,
index inclusion or compliance costs are
more attractive.
Exchanges compete fiercely for
foreign listings. The ASX has about
250 foreign companies on its board,
particularly from the US, New Zealand,
Canada and Singapore. Investors should
not overlook the opportunities already
at our doorstop when considering an
international strategy.
Exchanges have come a long way from
their origins in 16th-century Europe,
where traders met in coffee houses to do
business, although a wander around any
CBD shows cafes and commerce are still
strongly linked. Australia’s first bourse,
a word derived from the French for
‘money bag’ or ‘purse’, arose in
Melbourne, powered by activity on the
Victorian gold fields in the 1850s.
The ASX was born in 1987, when
Australia’s six State exchanges joined to
create a single, electronically connected
national market. It merged with the
Sydney Futures Exchange, home of
greasy wool derivatives, in 2006. That is
when the ‘S’ in ASX was changed from
‘stock’ to the more encompassing
‘securities’. Today, there are multiple
venues in Australia where securities
are quoted and traded.
 TIPS FOR INVESTING
INTERNATIONALLY
• Identify your interest – individual
stocks, specific sectors or the
broad market?
• Is the market established (for
example, US, UK, Japan) or emerging
(for example, China, India, Brazil)?
• Do you wish to invest directly on
an overseas exchange or get
exposure through a locally offered
exchange traded fund?
• What are the different
brokerage fees?
• How are dividends and
distributions paid? And what are
the tax implications?
• Keep in mind time zone and
currency differences.
• Consider the political and regulatory
risks of the foreign jurisdiction.
• Do you have access to up-to-date
and reliable data and information?
I like exchanges and worked at two of
them. They are the ‘national carriers’ of
the financial world, perceived as public
utilities, over which the people claim
sovereignty. One politician likened
the proposal to merge the ASX with the
Singapore Exchange in 2010 to “putting
the High Court of Australia up for sale”.
Not surprisingly, few attempts at cross-
border exchange mergers succeed.
There are roughly 80 major stock
exchanges in the world, with a combined
market capitalisation of about $US110
trillion ($170 trillion). The Australian
market represents about 2% of that value.
Moreover, our top 10 companies account
for more than 40% of the S&P/ASX 200.
We are small and concentrated. While
I love Vegemite on toast, a slice of Swiss
cheese or spread of English marmalade
provides tasty diversity.
Here’s further context. Dubbed by
some as ‘the most important stock on the
planet’, Nvidia, the Nasdaq-listed artificial
intelligence chipmaker, recently reported
‘insane’ earnings for the quarter of $US22
billion ($A34 billion). Consequently, the
value of the company soared beyond
$3 trillion, which exceeds the combined
value of all the entities listed on the ASX
(about $2.6 trillion).
Strong international focus
Clearly, most of the world’s investment
opportunities are beyond the sea.
I am not alone in thinking so. The 2023
ASX Australian Investor Study found that
“more investors than ever are branching
out into other vehicles like international
shares”, with 16% of local investors
holding international shares directly.
A similar percentage of intending
investors plan to focus on international
shares in the coming 12 months.
It makes sense. Investing
internationally offers:
• diversification into different markets
(such as the US, Europe or Asia) and
into sectors that might have limited
representation in Australia (AI,
aerospace or clean energy)
• access to the biggest and best-known
global brands (such as Apple,
Mercedes-Benz, Sony, Unilever
or Visa)
• opportunity to benefit from different
economic cycles
• participation in emerging trends or
innovations before they arrive locally
or become mainstream
• improved risk management by
allowing you to spread your
investments more widely and reduce
the concentration in your portfolio.
We are already familiar with
international exchanges and their
offerings. For example, there was a time
when The Magnificent Seven was a 1960
Western movie starring Yul Brynner and
Steve McQueen (we won’t count the 2016
remake with Denzel Washington and
Chris Pratt). Today, ‘the magnificent
seven’ is the collective noun for the tech
titans listed on Nasdaq in New York:
Alphabet (parent of Google), Amazon,
Apple, Meta (parent of Facebook and
Instagram), Microsoft, Nvidia and Tesla.
We are also familiar with overseas
indices like the Dow Jones (US), Nikkei
(Japan), Hang Seng (Hong Kong), DAX
(Germany) and FTSE (UK). Indices are
barometers of a country’s financial
performance. Many of the major global
indices are reported daily in the
Australian media and have an impact
on the fortunes of our own benchmark
All Ordinaries Index.
Access to global markets
As the saying goes, ‘When America
sneezes, the world catches cold’. The trick
is how to be a part of it without getting the
flu. Or getting squashed!
The two largest exchanges in the US –
the New York Stock Exchange, known for
its size and ‘open outcry’ trading floor,
and Nasdaq, the technology hub –
collectively account for 43% of the world’s
stockmarket capitalisation. A distant
second, by region, are the exchanges in
the European Union, followed by China
then Japan. India is the market on the rise.
The most efficient way to invest
internationally is probably by way of
ETFs, which provide investors with
exposure to a wide range of companies,
regions, asset classes and strategies. They
do so cost effectively, transparently and
in the same way shares are transacted
on the ASX.
Many local brokers also offer direct
access to global markets, allowing
investors to buy individual stocks listed
on an overseas exchange. There might be
more paperwork involved and possibly
higher brokerage fees, but this method
does provide targeted exposure.
Investing outside Australia is different
from investing at home, so there are
extra factors to consider (see Tips for
Investing Internationally).
And avail yourself of the plentiful fact
sheets, seminars and broker reports now
available to help inform you about
investing internationally.
Investors have more choice than ever
before. As Shakespeare might have said,
when not shucking oysters: “O brave new
world that has such opportunities in it”. „
MONEY APRIL 2024 79
 D L E Y T H IS
PA

MO
M A RC U

N TH

Four alternative roads to riches

Forget the boring old 20-stock, set-and-forget portfolio. There are much more
interesting approaches – in theory, at least.

A
tried-and-tested approach to
investing is to buy yourself
20 Australian stocks, never
selling, sagely quoting Warren Buffett
at dinner parties and wondering why
you are going nowhere. But there
are alternatives.
Here we go with four of them –
40 years of stockbroking wisdom
and stupidity distilled.
off the yacht club in Sorrento, on the
Mornington Peninsula, in Melbourne.
It was a symbol of how the stockmarket
can pay off.
The story goes that some years earlier
they had agreed to each put $50,000 into
a joint account they called the Boat Fund
and traded it up to $1 million, paid tax and
bought the boat.
It was quite a story, and it pioneered
a new chapter in investment theory.
Two brains are better than one,
especially when they are both traders
and have something to add to the
combined investment knowledge (key
point). Twice the market presence, twice
the network, twice the information,
twice the number of opportunities, twice
the number of ideas and half the risk
because, after all, unchecked, we
all love to gamble.
Share your trading with someone of

1The Boat Fund

In the 1990s, a couple of city traders,
one a fund manager and the other a
stockbroker, bought a $400,000 boat
that then sat, ostentatiously, on a mooring
We always think of diversifying our
investments. But maybe we’ve got it all
wrong. The Boat Fund experience taught
us something new. It’s not the investments
we need to diversify, it’s the investors.
similar experience (or more experience)
and you have a natural cap on irrational
exuberance, impulsive action and
unconsidered lashes, the Achilles’
heels of all lone traders.

80 MONEY APRIL 2024

 When you have to persuade another
brain to trade before you do, the idea has
to have integrity. It is a lot harder to lose
your head and your shirt when there are
two of you. Two traders combined are less
emotional, less prone to stupidity and
more likely to trade with discipline.
On the flipside, they are also more
likely to take a bigger plunge when
the story is good. Difficult for
‘The Lone Chicken’.
The Boat Fund is a great concept. The
diversification of investors, committed to
each other by the mixture of assets, is a
recipe for success.
Now all you have to do is find $50,000
and someone with half a brain that you
want to share a boat with. That narrows
it down a bit.
2The One-Stock Portfolio
You might remember this one; it’s
a classic.
We have all heard the cry. A spread
of equities, bonds, property and cash.
A spread of international and domestic
investments. A spread of sectors including
resources, financials and industrials. In
fact, by the time you leave the average
financial planner, you may think you’ve
bought five managed funds, but in fact
you have a portfolio of 14 asset classes
and 3000 stocks domiciled in half
a dozen countries.
But those 3000 stocks won’t save you in
a bear market and will dilute your returns
in a bull market. It is the Chicken Little
approach and, worse than that, it fools you
into thinking you are safe. It is a matrix
that prompts laziness and inattention and,
on that basis, diversification is arguably
more risky.
So, let’s depart for a moment. Cut across
all the consensus preaching and consider
the blasphemy of the one-stock portfolio.
Why wouldn’t you pick just one stock?
If you want low risk, what’s more risky?
Knowing a little bit about 20 stocks you’re
not watching or everything about one you
are. ‘Diversification is a protection against
ignorance’ (Warren Buffett), for people
who don’t know what they are doing. But
if you are not ignorant? If you do know
what you are doing?
Trading one stock is more intense, it
focuses the mind. You pay attention and
paying attention is good. You do a lot
more work before you buy. You think
harder about every trade. You plan. You
set levels. You develop a strategy. You are
more disciplined, more vigilant.
With so much at stake you are more
risk averse, not less; you have to be. You
are sensitive to bad news. You are in
touch. With one stock, trading is not
necessarily more risky at all or more
short term. It is less risky because you
have your head in the game.
And you will be more inclined to use
stop-loss orders. You only have one to
monitor, after all. You will sell instead
of prevaricating. You will control the
outcome rather than leave it to luck and
the long term. And you will do something
that those investors with 20 stocks rarely
do: you will regularly cash out.
You will find that cleansing; entering
the eye of the storm. Clarity returns. The
world is at your feet and you then have
the time and the cold emotion to put your
total effort into something too few of us
spend any time doing: looking for the best
single investment in the whole world at
that moment in time.
One good stock. As Mae West said, “Too
much of a good thing can be wonderful”.
3The Blunderbuss
This is another maverick strategy that
I have seen work. It’s a ‘shoot and hope you
hit something’ approach to investment.
Say you had $1 million to invest.
Whereas the traditional portfolio would
split that up into 20 lots of $50,000 and
invest in 20 diversified blue-chip stocks,
the Blunderbuss buys 20 highly leveraged,
small-stock ‘punts’ instead.
Come back after a year and the hope
is that, on average, although two stocks
will have gone to zero, 16 are worth
between $45,000 and $55,000, one is
worth $200,000 and one – the rocket
under the rock you were hoping to find –
is now worth $2 million.
No big blue-chips. No yield. No sector
diversification. Just organised gambling
with the odds narrowed through a lot
of work, information, research
and networking.
4 The Zombie
This is similar to the One-Stock
Portfolio but includes an addition: blind
faith. The Zombie portfolio has one stock
but whereas the one-stock trader constantly
cuts his losses and tries again, the Zombie
never sells, never changes the stock.
This portfolio theory works on a piece
of stockbroking advice given to my
brother-in-law when he sat down next to
a legendary Melbourne stockbroker on his
first day at work and asked the question,
“How does the stockmarket work?” The
advice went something like this. “Son, the
way to make money in the stockmarket is
to find one stock, that’s less than a cent,
that has half an idea, buy millions of
shares and spend the rest of your career
marketing it.”
The art of this is to know absolutely
everything about a stock no-one else has
ever heard of and then ceaselessly tell
everyone about it. My brother-in-law was
unrelenting. At every family gathering,
from Christmas to christenings, he would
start with the line, “Have you heard about
XYZ?” He turned $16,000 into more than
$1 million. In one stock.
This approach is not for the faint-
hearted. The Zombie investor can lose
more than the average mortgage on a one
cent move and it moves two cents a day.
The Zombie investor doesn’t sell on the
spikes; doesn’t sell on the troughs. This is
long-term, high-risk investment, but the
Zombie knows all the risks.
When he’s 45, the Zombie will call you
to either (a) borrow some money or (b) to
invite you to join him in the Bahamas.
A last word. Please, don’t try doing any
of this at home. It’s not advice, it’s a story.
You know the rules. „
Marcus Padley is the author of the daily
stock market newsletter Marcus Today.
For a free trial, go to marcustoday.com.au.
MONEY APRIL 2024 81
 SHARES INTELLIGENT INVESTOR
Inside the
world’s most
valuable company
W
STORY NICK CUMMINGS hether through Azure’s cloud
infrastructure, Office 365’s
productivity suite or the
Microsoft ubiquitous Windows, Microsoft’s
presence touches nearly every
has emerged aspect of our digital lives. Six product lines now
from a lost produce more than $US10 billion ($15 billion) in
annual revenues.
decade It wasn’t always like this. In early 2000, co-founder
as a tech Bill Gates left the company and Microsoft began its
slide towards a lost decade. Back then, everything in
powerhouse Microsoft revolved around Windows, to the point
worth that maintaining its dominance was more important
than anything else.
more than The monopoly mindset caught the attention
of European competition regulators – Microsoft
Australia’s was eventually fined $US730 million ($1.1 billion)
500 biggest for non-compliance of settlement conditions in the
browser wars – but was also driving the company
companies. into a Windows-obsessed dead end.
Microsoft tried to extend its Windows-centric
thinking into these new domains as the internet
and mobile phones took hold. Internet Explorer was
pre-loaded onto PCs, and Windows OS for mobiles
began to appear on the company’s Lumina mobile
range. Both were failed attempts at trying to get a
cat into a sock, the futility of which was utterly lost
on Microsoft CEO Steven Ballmer, who called
Google ‘a house of cards’.
It was the culture rather than the money that was
the problem. Enter Satya Nadella, the unknown
head of cloud computing who joined the company
in 1992. As a product-focused engineer, Nadella was
everything Ballmer wasn’t.
In his first public briefing, Windows didn’t get
a mention; instead, Nadella emphasised cloud and
mobile computing. Past mistakes such as the purchase
of Nokia, which he had voted against, were impaired
82 MONEY APRIL 2024
and 18,000 jobs were eliminated. The new focus was
market leadership rather than settling for a distant
third behind the likes of Apple and Google. Company
decisions had to be driven by customer satisfaction
rather than the Windows protection racket.
Reform’s huge payoff
Nadella has led a root-and-branch reform of
Microsoft’s culture, its products and acquisitions.
The scoreboard speaks for itself. Since he took over
in 2014, profits have risen nearly fourfold and the
share price has increased more than tenfold.
Microsoft is divided into Productivity and
Business Processes, Intelligent Cloud and More
Personal Computing. The future centres around the
first two divisions, where Microsoft is a one-stop
shop for an enterprise’s digital needs.
The enterprise market is different. Office workers
might be the user but they are rarely the customer.
Microsoft learnt this early on, tailoring its distribution
and product suite to cater to the needs of decision
makers – typically the chief technology officer (CTO)
or information officer – rather than end users.
Whether staff prefer Zoom over Teams or Google
Workspace over Office 365 is largely irrelevant to
corporate decision makers, who prioritise
simplification, cost reduction and security. The fewer
vendors a CTO has to deal with, the more they like it.
This is how Microsoft’s one-stop shop has
prevailed, delivering a full suite of cloud computing,
email, office productivity software, cybersecurity
and marketing in one easily installed package.
A company’s technology stack can be radically
simplified using Microsoft products. The integrated
nature also lowers costs and enhances security.
Service and distribution are also key. Microsoft
relies on more than one million partners, including
Dicker Data and Data#3, to sell, service and distribute
its products to clients. This unique
capability reduces the time taken to
troubleshoot problems and deliver products.
Microsoft’s enterprise solutions are
housed in its Productivity and Business
and Intelligent Cloud divisions. The most
important product is Azure, the cloud
computing competitor to Google Cloud
and Amazon Web Services.
Leveraging its partner network and
established client base, the company’s
market share has increased from 13% in 2017
to 23% last year. Assuming momentum can
be maintained, Azure’s revenue could
increase to $US150 billion ($231 billion) by
2030, based on a projected market size of
$US500 billion ($768 billion).
The Dynamics 365 suite of business
applications integrates an enterprise’s
sales, customer service, marketing, finance
and operations functions onto one
platform. Data sharing becomes painless
when used alongside established company
products, such as Office 365, enabling quick
decision-making. The only competitor
offering that comes close is Salesforce.
Then there’s Microsoft’s enormous
cybersecurity business. In 2022, revenues
surpassed $US20 billion ($31 billion),
double the amount achieved in 2020, with
the two enterprise divisions delivering
$US62 billion ($95 billion) in operating
profits. Margins were equally impressive,
climbing to 44%, up from 36% in 2018.
The latest company results cap one of
the great corporate turnarounds. The tech
giant has surpassed Apple as the world’s
most valuable company, boasting a
$US3 trillion ($4.6 trillion) valuation.
Thanks to Nadella, Microsoft’s might has
been restored. It’s a powerhouse in cloud
computing, enterprise software and
artificial intelligence, with profits up
nearly fourfold since he took over in 2014.
Its worth now exceeds the combined
value of the ASX’s 500 largest companies
and dwarfs ‘the big Australian’, BHP, by
a factor of 20. If it were an economy,
Microsoft would rank as the seventh largest,
sandwiched between the UK and France,
and nearly twice as big as Australia’s
(granted this isn’t apples to apples).
Betting on the Metaverse
One might have thought the laws of large
numbers would catch up by now, but its
latest result proves otherwise.
In the three months to December 2023,
revenue increased 18% to $US62 billion
($95 billion) led by the Azure cloud and
Office 365. Job cuts and improved cost
control helped boost operating margins to
44%, resulting in a 26% jump in earnings
per share to $US2.93 ($4.50).
The acquisition of game developer
Activision Blizzard increased revenue
growth by 4% but had a 5 cent (8 cent)
negative impact on earnings per share due
to integration and transaction costs. At
nearly $US70 billion ($108 billion), the
purchase is the company’s largest and will
be housed within its Xbox division. It’s all
part of a bigger bet on the Metaverse.
Nadella describes this as a place where
‘digital and physical worlds come together’,
while others see it as the next evolution of
the internet. For now, think of the Metaverse
as an immersive 3D-gaming experience.
Big tech is wasting no time. Meta
Platforms (formerly Facebook) has
undergone a rebranding and invested
billions of its advertising profits into
developing a virtual reality headset.
Meanwhile, Apple’s latest product, the
Vision Pro, marks its first attempt at
becoming the iPhone of the Metaverse.
Despite having a headset product,
Microsoft’s strategy leans more towards
software than hardware (HoloLens). The
Activision deal gives it a massive library
of popular games and the tools to develop
immersive experiences across consoles,
smartphones and computers. This
capability could be paired with its cloud
computing resources and corporate
Rolodex to launch an enterprise version
of the Metaverse.
Experimentation is already under way,
albeit in a rudimentary form. It’s hard to say
whether it will succeed, but the company’s
unified culture and interconnected products
make that more possible than ever.
Microsoft isn’t expensive at 34 times
next year’s earnings with mid-teens
earnings growth potential. Nadella
nirvana is in full swing, and the
company’s latest results suggest there’s
more to come. We’re updating our
recommendation to reflect this, with the
buy price moving to $US300 ($461) and
the sell price to $US450 ($691). HOLD. „
Nick Cummings is an analyst at
Intelligent Investor.
MONEY APRIL 2024 83
 S BES
L LI P T
HI

IN
SCOT T P

B R EE D
SECTOR RESOURCES

The price is right - sometimes

Instead of gambling on the fear and greed created by volatility, it’s
safer for the investor to focus on a miner’s quality.

I
f the expression ‘May you live in interesting enticing, until you remember the famous investing
times’, usually attributed to the Chinese, was maxim from John Maynard Keynes: ‘The market can
applied to a single ASX sector, I think it would remain irrational longer than you can remain solvent.’
have to be resources. These businesses tend to While he was talking about investors, he could have
be price takers and that price is usually nothing been talking about resources companies, too.
if not volatile. And that’s the crux of resources investing. The higher
Just ask lithium investors. In early 2019, it was potential returns also come with higher potential losses.
selling for more than $US25 ($38) per kilogram. You also need to out-guess the other guy. If share prices
Then, in late 2021, it was less than $US8 ($12). Fast- are already high, because other investors are already
forward to late 2022 and the price had risen more foreshadowing higher commodity prices, the
than tenfold to about $US85 ($129), before crashing opportunity has already passed. Ditto on the way
to less than $US15 ($23) earlier this year. And down. (It’s not just commodities, by the
so it goes, as Billy Joel once sang. way; just ask the investors who decided
Lithium, of course, might be the to wait ‘until Covid has passed’ about
resource du jour, but similar, if Foolish the opportunities they missed.)
less extreme, experiences takeaway The less risky option is to
aren’t uncommon right It’s no surprise that, when looking for our focus on quality players. Yes,
across the extractive Best in Breed, we’re going to focus on the more the upside isn’t as big, but
spectrum. Oil, iron, gold… qualitative aspects of a business and eschew neither is the downside.
they’ve all had their highs the high-stakes gambles of trying to out-guess the And quality can come
and lows. Worse for equity other guy on commodity price timing. So, internal from different sources.
investors, there’s not much diversification is important, as is low-cost provision. A company that is
that a company can do Sticking to known quantities is also probably internally diversified
about it, and because many going to work in our favour. across a number of
costs are fixed, the impact With that formula, we end up with the spun- resources has less risk
on profitability is more out portion of the old BHP Billiton – a business from any one or two whose
extreme again. that comprises a mix of commodities and market prices tank. Or a
Which doesn’t mean you can’t geographies. That makes South32 miner or driller with a low-cost
make money out of resources. our Best in Breed. position will be more able to
Indeed, many investors are drawn to absorb a period of low prices without
volatile share prices because it means they needing to borrow money, or issue more
can often take advantage of the bouts of fear others shares, just to stay in business.
experience (to buy their shares at rock-bottom prices) Be warned, though: having a number of different
and greed (to sell to them at ‘frothy’ valuations). deposits of the same commodity might protect you
The problem is that you have to be able to time from site-specific or sovereign risk, but it won’t do
both, and to do so accurately and repeatedly, at a rate much to offset price falls. „
that surpasses the boring, if historically incredibly
profitable, buy-to-hold approach. Scott Phillips is The Motley Fool’s chief investment
And, of course, the volatility has an extra wrinkle: officer. You can reach him on Twitter @TMFScottP,
the companies likely to do best from a commodity Facebook scottphillipsmoney, and via email
price upswing are those that were most marginal ScottTheFool@gmail.com. This article contains
(or straight-out loss-making) at the bottom. Which is general investment advice only (under AFSL 400691).

84 MONEY APRIL 2024

Best in Breed’s 2024 tips so far*
SECTOR STOCK ASX CODE
Discretionary retail Premier Investments PMV
Consumer staples Woolworths WOW
Resources South32 S32
*The table is compiled throughout the year, with each month’s
new tip appearing on the list for the rest of the year. The focus
is on the fundamental long-term qualities of the businesses.

MONEY APRIL 2023 85

 YOUR GUIDE TO SUPER DATA

T
DATABANK he tables on these pages contain
data and information to help you
compare managed funds, which are
pooled funds managed professionally
by investment experts.
Managed funds displayed in these
tables are multi-sector or asset class
specific. Multi-sector managed funds
invest across a diversified mix of asset
types spanning equities, property,
bonds, cash, infrastructure, private
equity and alternatives.
Managed funds are normally set up
as unit trusts. You may be able to invest
in them directly or through a platform.

Top 5 sector benchmarks

Sector Benchmark 1-year return 3-year return 5-year return 10-year return
(pa) (pa) (pa)
Australian Equities S&P ASX 200 Accum Index 7.1% 9.6% 9.7% 8.4%
International Equities MSCI World ex AU Index 25.7% 14.2% 14.3% 12.9%
Property S&P ASX200 A-REIT Index 10.2% 7.6% 5.1% 9.2%

Australian Fixed Interest Bloomberg Barclays Australia 1.9% -2.6% 0.5% 2.6%
(5-7 Y) Index
International Fixed Interest Bloomberg Barclays Global 2.8% -3.0% 0.2% 2.4%
Aggregate Index
Top 5 Australian funds by size
Mngmnt Start 1-year 3-year 5-year 10-year
Name APIR code fee (pa) date Size return return (pa) return return (pa)
(pa)
Vanguard International VAN0003AU 0.18% 1997 $24,518m 25.2% 13.7% 13.8% 12.4%
Shares Index Fund
Vanguard Australian Shares VAN0002AU 0.16% 1997 $19,634m 6.5% 9.2% 9.6% 8.3%
Index Fund
ISPT Core Fund 1994 $17,903m -6.5% 3.3% 3.2% 7.6%
Vanguard Australian Shares VAS 0.10% 2009 $14,584m 6.6% 9.3% 9.7% 8.3%
Index ETF
DEXUS Property Fund 0.55% 1995 $11,040m -8.8% 3.3% 3.3% 7.9%

SECTOR AVERAGE 0.67% $808m 8.7% 5.6% 6.6% 6.8%

Top 5 funds by 1-year return

3-year 5-year 10-year
Mngmnt Start 1-year
Name APIR code fee (pa) date Size return return return return
(pa) (pa) (pa)
Loftus Peak Global Disruption Fund MMC0110AU 1.20% 2016 $337m 55.7% 10.9% 20.4%
Hyperion Global Growth Companies WHT8435AU 0.70% 2014 $2421m 52.8% 7.2% 19.0%
Fund
Magellan High Conviction Fund - Class B MGE9885AU 0.78% 2017 $39m 36.1% 7.3% 8.7%
Munro Concentrated Global Growth GSF9808AU 0.70% 2019 $88m 36.0% 6.4%
Fund
Magellan High Conviction Fund MGE0005AU 1.35% 2013 $176m 35.7% 6.8% 8.2% 11.0%

SECTOR AVERAGE 0.81% $760m 10.7% 8.0% 9.0% 8.4%

Top 5 diversified funds by 1-year return

3-year 10-year
Mngmnt Start 1-year 5-year
Name APIR code fee (pa) date Size return return return (pa)
return
(pa) (pa)
Betashares Ethical Diversified High DZZF 0.39% 2019 $72m 19.7% 9.1%
Growth ETF
Source: Alpha High Growth Fund ETL3086AU 0.89% 2021 $23m 17.1%
Rainmaker Information. Data
sourced January 31, 2024.
Betashares Diversified All Growth DHHF 0.19% 2019 $331m 15.8% 10.5%
*Numbers stated here depict
ETF
averages, other than the Rank MLC Wholesale Index Plus Balanced MLC7387AU 0.29% 2017 $839m 15.8% 7.7% 8.2%
column, which is the total
number of funds in the category. Betashares Ethical Diversified DGGF 0.39% 2019 $42m 15.6% 5.9%
For any queries on these Growth ETF
tables, please contact
info@rainmaker.com.au. SECTOR AVERAGE 0.69% $608m 7.3% 4.8% 5.6% 5.7%

86 MONEY APRIL 2024

 DATA SOURCED JANUARY 31, 2024

These products may be recommended
to you by a financial adviser.
The performance results displayed
are the annualised investment returns
each managed fund has delivered after
DATABANK
taking into account taxes paid by the
unit trust and investment fees.
Research was prepared by Rainmaker
Information. For more information see
rainmaker.com.au

Top 5 Australian equities funds by 1-year return

Mngmnt Start 1-year 3-year 5-year 10-year
Name APIR code fee (pa) date Size return return (pa) return (pa) return (pa)
BetaShares S&P/ASX Australian ATEC 0.38% 2020 $216m 25.3% -1.3%
Technology ETF
Elston Australian Emerging ETL7964AU 0.66% 2021 $15m 17.7%
Leaders Fund - Class A
ECP Growth Companies Fund OPS2991AU 0.90% 2020 $20m 14.8% 5.1%
Australian Ethical Diversified AUG0019AU 0.95% 2012 $287m 14.6% 7.8% 9.6% 9.4%
Shares Fund
Australian Ethical High Conviction AUG7919AU 0.80% 2021 $7m 13.8%
Fund - Wholesale PF
SECTOR AVERAGE 0.66% $873m 6.8% 8.7% 9.5% 8.5%

Top 5 international equities funds by 1-year return

Mngmnt Start 1-year 3-year 5-year 10-year
Name APIR code fee (pa) date Size return return (pa) return (pa) return (pa)
Global X FANG+ ETF FANG 0.35% 2020 $456m 85.8% 17.2%

Global X Semiconductor ETF SEMI 0.57% 2021 $154m 65.5%

Loftus Peak Global Disruption MMC0110AU 1.20% 2016 $337m 55.7% 10.9% 20.4%
Fund
Montaka Global Long Only Equities MOGL 1.27% 2017 $91m 52.8% 9.8% 8.7%
Fund (Managed Fund)
Hyperion Global Growth WHT8435AU 0.70% 2014 $2421m 52.8% 7.2% 19.0%
Companies Fund
SECTOR AVERAGE 0.83% $857m 18.0% 9.8% 11.3% 10.7%

Top 5 income-focused equities funds by 1-year return

5-year 10-year
Mngmnt Start 1-year 3-year
Name APIR code fee (pa) date Size return return (pa) return return
(pa) (pa)
iShares S&P/ASX Dividend IHD 0.30% 2010 $313m 9.6% 8.7% 8.2% 4.9% WHAT
Opportunities ETF THEY MEAN
Perpetual Income Share Fund PTC0002AU 0.99% 1993 $161m 9.6% 11.5% 9.6% Performance after
investment fees.
Investors Mutual Equity Income IML0005AU 0.99% 2004 $508m 8.6% 12.3% 6.2% 7.1% Investment returns after
Fund investment fees annualised
to describe each fund’s
First Sentier Equity Income Fund FSF1676AU 0.96% 2014 $120m 8.4% 8.0% 8.3%
returns per annum.
Betashares Aust Top 20 Eqt Yield But if your managed fund
Max. Fund YMAX 0.59% 2012 $462m 8.4% 10.6% 7.7% 5.1%
achieves a high return
and charges you an
SECTOR AVERAGE 0.78% $515m 6.2% 9.1% 7.9% 6.9% extra “performance
fee”, Rainmaker has not
Top 5 ESG funds by 1-year return taken this into account.
Mngmnt Start 1-year 3-year 5-year 10-year Past performance is
Name APIR code fee (pa) date Size return return (pa) return (pa) return (pa) not an indicator of
Betashares Global future performance.
Sustainability Leaders ETF ETHI 0.49% 2017 $2945m 38.9% 16.8% 20.9% Rank. Funds are ranked
Pengana Axiom International against all managed funds
Ethical Fund HOW0002AU 1.35% 1994 $335m 32.9% 6.8% 11.5% 9.3% in each segment, not just
those included in each table.
Magellan Sustainable Fund MGE4669AU 1.35% 2020 $8m 30.0% 11.1% Indices and averages.
Acadian Sustainable Global Arithmetic average
Equity Fund FSF0710AU 0.97% 2005 $187m 26.3% 14.9% 14.1% 11.9% investment returns or
Vanguard Int. Shares Select average fees for all fund
Excl. Index Fund VAN1579AU 0.20% 2016 $620m 25.6% 13.7% 13.9% investment options within
each category, that is, not
SECTOR AVERAGE 0.78% $258m 10.5% 6.2% 8.4% 8.5% fund size weighted.

MONEY APRIL 2024 87

 YOUR GUIDE TO SUPER DATA

he table helps you compare super funds.
It showcases publicly available MySuper
investment options offered by some of
Australia’s biggest funds.
Rainmaker categorises them into risk
options based on percentage of growth
assets in their portfolio. The high-growth
risk option has more than 85% in growth
assets (growth has between 75% and 85%),
balanced has between 55% and 75%, and
capital stable products have less than 55%
growth assets.
The performance results are the
annualised investment returns each option
DATABANK
has delivered after taking account of all taxes
and fees. Past performance is no indicator of
future performance.
The table only lists funds designated
AAA, Rainmaker’s Super fund quality
rating. Rainmaker Information prepared this
research. moneymag.com.au/super/funds/compare.

Best Super Funds: Top 20 MySuper – January 31, 2024

Ranked by 3-year return
Growth Risk 1-year 1-year 3-year 3-year 5-year 5-year
Name of fund & investment option Strategy assets category return rank return rank return rank
(pa) (pa)
Mine Super - High Growth LC 89% High Growth 10.6% 5 8.5% 1 8.9% 1
Telstra Super Corporate Plus - MySuper LC 89% High Growth 8.6% 12 8.0% 2 8.4% 4
Growth
Active Super Accumulation Scheme - High LC 95% High Growth 8.4% 14 7.8% 3 8.4% 5
Growth
ART - Super Savings - Business - Lifecycle LC 77% Growth 8.3% 16 7.7% 4 7.7% 8
Balanced Pool
Virgin Money SED - LifeStage Tracker LC 90% High Growth 11.2% 4 7.6% 5 8.6% 3
1979-1983
Essential Super Employer - Lifestage LC 74% Growth 11.5% 2 7.6% 6 7.1% 16
1980-84
FirstChoice Employer - FirstChoice LC 96% High Growth 11.5% 3 7.6% 7 7.0% 18
Lifestage (1980-1984)
Hostplus - Balanced S 81% Growth 6.5% 33 7.5% 8 7.6% 9

Mercer CS - Mercer SmartPath 1979-1983 LC 89% High Growth 9.3% 7 7.2% 9 8.0% 7

Aware Super Employer - High Growth LC 84% Growth 9.9% 6 7.2% 10 8.6% 2

GuildSuper - MySuper Lifecycle Growing LC 100% High Growth 8.9% 10 7.1% 11 8.1% 6

AvSuper Corporate - Growth (MySuper) S 76% Balanced 8.0% 18 6.7% 12 7.1% 15 WHAT
THEY MEAN
HESTA - Balanced Growth S 69% Balanced 7.9% 21 6.7% 13 7.1% 17 Performance after
fees: When calculating
ANZ SCSE - ANZ Smart Choice 1980s LC 80% Growth 9.0% 9 6.5% 14 7.2% 14 fees, Rainmaker assumes
AMP SignatureSuper - AMP MySuper a member has $50,000
1980s LC 86% High Growth 9.2% 8 6.5% 15 7.4% 13 in their account.
MLC MasterKey BS - MySuper Growth Strategy: Some
Portfolio LC 85% Growth 7.3% 28 6.5% 16 MySuper products invest
your superannuation
Vision Super Saver - Balanced Growth S 70% Balanced 8.4% 15 6.5% 17 7.5% 11 based on age and are
known as lifecycle
TWUSUPER - Balanced (MySuper) Option S 72% Balanced 8.7% 11 6.4% 18 6.8% 21 funds (marked LC). The
table includes the LC
AustralianSuper - Balanced S 66% Balanced 7.4% 26 6.2% 19 7.6% 10 option for 40-year-old
members. Non-lifecycle
Rest Super - Core Strategy S 69% Balanced 7.4% 25 6.2% 20 6.4% 25 funds are known as
single strategy (S).
Rank: Funds are ranked
SelectingSuper Benchmark Indices – Workplace Super against all MySuper
Performance to January 31, 2024 investment options
Index name available in Australia.
1 year 3 years (pa) 5 years (pa) Indices and averages:
To produce these
Rainmaker MySuper/Default Option Index 8.1% 6.3% 7.0% indices, Rainmaker
analyses the results
Rainmaker Growth Index 9.4% 7.0% 7.7%
of more than 3300
Rainmaker Balanced Index 7.5% 5.4% 6.2% investment options.

Rainmaker Capital Stable Index 5.5% 3.1% 3.9%

Rainmaker Australian Equities Index 6.5% 8.9% 9.5%
Rainmaker International Equities Index 15.8% 7.5% 9.8%
SOURCE: RAINMAKER INFORMATION. RAINMAKERLIVE.COM.AU

88 MONEY APRIL 2024

FRIENDS WITH

PODCAST

Earn. Save. Invest.

Join Money Editor-in-Chief Michelle Baltazar as she
chats with finance experts to explore the art of financial
literacy and resilience in the modern money landscape.

Visit moneymag.com.au/category/podcast
 HOT SEAT
“My son is the rightful heir to my basketball
cards and Cabbage Patch Kids portfolio.”
Melinda Buttle
Comedian
The creator of the beloved
Mum/Lyn character on
Instagram is the go-to woman
for her take on the absurdities
of modern life. She is a regular
on Network Ten’s The Project
and has written for shows as
diverse as the ABC’s Ronny
Chieng: International Student,
The Drum, You’re Skitting
Me and Please Like Me, and
Network 10’s This Week
Live. She is currently on tour
(appearing at the Melbourne
and Sydney Comedy festivals)
with her show Not Here to Put
Socks on Centipedes.
What was your first job?
I worked at Woolies in the deli,
and I loved every minute. I
loved it. I always sprinkled extra
seasoning on the hot chooks
– customers are king, after all.
I learned a lot about people.
Many members of the public
don’t care that you’ve already
cleaned the slicer and the shop
closes in two minutes.
What’s the best money
advice you’ve received?
Will you be able to sleep at
night if you do this? That’s the
crux of it for me. Shares are a
hoot, but if you’re sick to your
stomach when they drop 1%,
then it won’t work out for you.
90 MONEY APRIL 2024
What’s the best
investment decision
you’ve made?
Buying property. I bought
my first house in Ipswich,
Queensland, and the mortgage
was $242 a week. This was in
2019 FYI. Don’t tell everyone
– I want to stash another one
away first, please.
What’s the worst
investment decision
you’ve made?
I didn’t understand the risk
and time needed to invest in
international managed funds.
I’d put in $2000 and when it
dropped to $1200 a month later
I panicked and pulled it out. I
also used to spend all my pocket
money on basketball cards,
thinking I’d sell them and move
straight into a mansion.
What is your favourite
thing to splurge on?
I have a problem with candles
that smell like a fire in a log cabin.
If you had $10,000, where
would you invest it?
I’d get an exchange traded fund
and tell myself I won’t even
look at it for two years, then
check it daily. Now, when will
you post me the $10,000 we
talked about?
What would you do if
you only had $50 left in
the bank?
I’d get back on the relief teacher
call-up list and start emailing
my resumé to schools I can
walk to (to save on petrol, of
course). Not my first time with
$50 in the bank, guys.
Do you intend to leave
an inheritance?
Yes, definitely. My son is the
rightful heir to my basketball
cards and Cabbage Patch
Kids portfolio.
Is there anything
that’s funny about
money to you?
I tried to make being a landlord
funny on stage. It did not go
well. I gave up very quickly.
Do you think there is
something wrong
with capitalism?
Gosh, let me pull out a high
school economics essay! I don’t
know; I tell jokes about going to
the dump for a living.
Finish this sentence:
Money makes…
me buy three coffees a day.
I know, I have to stop, it’s just
getting ridiculous. „
Vanessa Walker
 Stay in control of your super
59% of readers check their super balance at least
once a month. Have you checked in with your super lately?

LOVE YOUR
SUPER
P70

AFFORDABLE OPTIONS SUDDEN WEALTH SPORTS INVESTING

PERKS OF BUYING AN APARTMENT THE RURAL INHERITANCE DILEMMA WHY IT’S A HOT TOPIC

The Love Your Super

project takes place over
YOU VS
March and April 2024 and we BIG BUSINESS
HOW TO BEAT SOARING PRICES & SAVE CASH
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WHY THE RICH BUY CLASSIC CARS, WATCHES & WHISKY
RECYCLE DEBT TO BOOST YOUR FINANCES

you make the right decisions Read:

when it comes to your super. Super covers the
circle of life (page 70)
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Super hub today:
moneymag.com.au/
love-your-super

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