With the recent Budget proposals shocking property investors, business builders and aspirational wealth builders, it’s timely to understand the smartest ways to get richer.
The question I’ve been getting since Dr Jim Chalmers decided to make property investing less attractive is how do you get richer in this less attractive world for aspirational wealth builders?
Before the Chalmers assault on property investing as we knew it, if your tax bill was big accountants and financial advisors would suggest that borrowing for real estate was not only tax-effective, but also in an economy with high immigration and a housing supply problem, capital gain for investors was nearly always guaranteed, provided you bought wisely.
Investors who bought in mining towns before a commodities boom ended were often losers in what many think is a money for jam exercise. Buying at the top of the market before a period of big interest rate rises might have meant some investors were out of the money for five years or so, but over a 10-year period, they were nearly certain to be money makers.
In case you haven’t been following the ongoing complaints about the Chalmers’ Budget, by banning negative gearing for investors buying existing properties and taking away the 50% capital gains discount for investments made after May 12, the demand for property has dropped, taking prices and the Prime Minister and his party’s popularity with it.
So, what am I telling people about how they should build wealth post the Budget of 2026? Here are my 10 rules for getting richer:
- Start with a plan that outlines your goals, such as to retire at age 60 with a total wealth of $5 million made up of a home worth $2 million, super with $2 million in it and other assets worth $1million, which might be property, shares, artwork, collectibles or even a business.
- That plan will have to show you how these goals will be reached, explaining what income you’ll have to source either from employment or from owning a business.
- That income will be the basis upon which you’ll borrow to buy a principal property which is still one of the best investible assets to own because you can sell this capital gains tax free. Some wealth builders have had a plan of buying the worst house in the best street, renovating it and flipping it to upgrade to a more expensive doer-upper/flipper property. Even if you simply buy and stay, Australian properties are nice deliverers of capital gain.
- That income is also crucial to how much will be saved, which in turn will determine what can be borrowed to invest in the assets that will turn your goals/dreams into a reality.
- You have to do a budget that tells you what you earn and how you spend your money. This will show what you can save and how much more income and better spending practices you’ll need to pump the saving, to pump up the borrowings to pump up the value of the assets you own.
- On what assets will make you rich, we’re talking new investment properties, super, shares, exchange traded funds, collectibles and businesses. New properties still will attract negative gearing, which means your gearing or borrowings reduces your taxable income, which gives you a tax refund to help cope with the losses of the rent from the investment property not covering the interest repayments and other costs of being a landlord.
- Super is super for building wealth because it’s only taxed at 15% before retirement and 0% after you stop work. The problem with super, which is its best quality is that you can’t access it until you retire and so long as you’re not too conservative with your investment preferences, super will fantastically increase via the magic of compound interest. A young person putting $2,000 in super from the age of 21 to 30 years of age, would end up having around $40,000 in super by age 30. If they stopped adding any more, then that lump sum would grow to $80,000 by age 39, $160,000 by age 48, $320,000 by age 57, $640,000 by age 63 and close to $1.3 million by age 72! If they kept up the $2,000 contribution for their entire working life, their retirement would come with a multi-million dollar nest egg of golden goose proportions.
- For money that a wealth-builder would want access to, I like borrowing for shares and exchange traded funds (ETFs). Borrowing gives a tax deduction for the interest. And quality shares or ETFs can deliver good dividend income and franking credits. This is an area that many people should do homework on. It can be great to use this play after a stock market crash but over a 10-year period, a good portfolio of stocks tends to deliver about 10% per annum, provided you don’t buy the stocks just before a massive crash of the market.
- Invest time and even money in reading or going to conferences to learn what will give you an investing edge. You can become savvy about investing, the tax rules that can help or hinder you and what the smart investors have learnt and have then shared with others.
- And if you don’t want to do this brain-widening stuff to get rich, but you still want to get rich, do some homework to find a quality accountant and quality financial advisor who’ll help you through the nine other steps that precede this important final money-making message.
My final piece of educational advice is to implore you to really want to be richer. That will be the driver to ensure you take the steps above that will make you richer. Despite the fact that Jim Chalmers has made getting richer harder, no Treasurer with their penny-pinching Budget decisions will stop you from building wealth, if you follow my steps and really want to make your money dreams come true.
As the American business thinker Jim Rohn advised us all: “Don’t wish it was easier, wish you were better!”
(By the way, I will have to update my book called Join The Rich Club for the chapter on investing in property because of the upcoming Budget changes and also the chapter on super because they are always changing the rules on this tax-effective play!)
