It’s Vanguard’s budget wish: tax-free investment accounts for the under-45s
In four-more Tuesdays, it’s the Federal May Budget time! On that Tuesday, May 12, we get to hear the big ideas of those who’d influence Treasurer Jim Chalmers before he signs off on the money game plan for the year. Chalmers has two jobs that will give him a pass or fail on his figuring.
The first is how he cuts his spending. And the second is the calibre of his tax changes where changes to negative gearing and the capital gains discount look like they’ll be high on the agenda.
I maintain with the budget deficit at an estimated $36.8 billion for this financial year, Chalmers will politically target those who are unlikely to vote Labor — business owners, wealthy investors, those with more than one property investment and so on. So, the idea from the managing director of the Aussie division of the world’s largest exchange-traded fund Vanguard Australia might appeal politically to the Treasurer but it might not make economic sense.
Vanguard’s Daniel Shrimski thinks taxpayers under the age of 45 should be given a tax reprieve for the returns made on $20,000 worth of investments to help them save a deposit for a home.
In The Australian Matthew Cranston gives us an idea of just how significant Vanguard is. This US fund manager invests, wait for it, $17.4 trillion worldwide. Consider this to see just how big Vanguard is: the GDP of the USA is US$32 trillion each year, while China’s total production is valued at US$20.6 trillion!
Yes, Vanguard is a big kahuna in the investing world, so the Treasurer won’t rule out a big idea from an organisation that actually pioneered cheaper and more diverse investment products called exchange traded funds or ETFs.
Here’s Shrimski’s plan in more detail:
- A tax-incentivised investment account would be created.
- There’d be no capital gains tax on the returns.
- The money couldn’t be touched for two years.
- The account is capped at $20,000.
- It would cost the budget $540 million a year or $2.7 billion over five years.
Britain, Sweden, Japan, Canada and the US have plans like this to promote home ownership. Behind these measures to boost saving is that too many people are in low-return savings accounts on which they pay high tax rates.
Cranston put the poor savings story into a simple context: “Australians hold 23 per cent of their household financial assets in cash and deposits, yet across the past decade the average annual return from cash has been only 2 per cent.”
He also points out that economists argue that anything that improves the ability for people to buy a property will only fuel house price increases and that the Government must help increase the supply of properties.
Of course, that would mean making the life of builders and developers less taxing, literally. But the size of the deficit and the political goals of the Albanese Government are not on the same page as developers, who risk their money to build properties people could buy.
Given history taught us that governments are hopeless at actually building and managing low-cost housing, the private sector needs incentives to bring more properties to market.
the government would probably rather the young spend all their Super on buying a property so as to continue propping up prices on our appallingly badly managed housing market in this country.
I tell young people if they have a home loan, then put all their savings in an offset. In that way, not only is it tax-free, but effectively get the home loan interest rate on their savings. 🙂
Should we make under-45s’ savings tax-free? ……………….No.
They will simply find other extravagances to waste it on !!!
“Young people primarily spend their money on clothing, food (including dining out), and entertainment/gaming, with a strong preference for online shopping and sustainable brands. Key spending areas also include digital services (subscriptions/apps), beauty products, and experiences like concerts.”…….no mention of housing ! After all , a large number of them still haven’t left their parents home yet !!
They will simply find other extravagances to waste it on …..and , as usual , it leaves the rest of us to carry the financial burden and responsibilities they REFUSE to take-on !
Their general attitude towards the rest of us leaves a lot to be desirable !
And GRATITUDE is CERTAINLY NOT part of their attitude !
It’s all about “me”……….”poor me” ……VICTIMHOOD and self pity !
…………….The following ‘opinions’ show their general attitude to the rest of us !
“In my opinion, I see the generations as kind of like this: greatest generation leads to boomers leads to millennials leads to Gen Alpha. Silent generation leads to Gen X leads to Gen Z. I think millennials share a lot of similarities (for better or worse) with boomers. Both had large protest cultures that gave way to a kind of almost hedonism before a crash. For boomers, it was the ’60s summer of love and protests against Vietnam, followed by the greed-is-good ’80s. With millennials, there was the Occupy Wall Street and Obama hope culture, plus the sleazy indie party culture in Brooklyn and LA. The only difference is millennials got absolutely screwed over by the recession and have been getting screwed ever since.”
“As a Gen Z’er, I feel a pretty strong sense of camaraderie with millennials. We have an understanding, you know? Similar environment and struggles, all of us victims of a damaged system, struggling in solidarity, etc.”
. “Y’all are silly in a good way. I’m glad you guys were the first to want to talk about emotions and mental health. Thanks to that, our generation is much more emotionally intelligent than many of the previous generations. My therapist is a millennial, and she’s awesome.”
“I do think older millennials are a little narcissistic and never really grew up, but that’s just my own bias from my experiences with my older siblings and friends who were born in the ’80s.”
“In my opinion, I see the generations as kind of like this: greatest generation leads to boomers leads to millennials leads to Gen Alpha. Silent generation leads to Gen X leads to Gen Z. I think millennials share a lot of similarities (for better or worse) with boomers. Both had large protest cultures that gave way to a kind of almost hedonism before a crash. For boomers, it was the ’60s summer of love and protests against Vietnam, followed by the greed-is-good ’80s. With millennials, there was the Occupy Wall Street and Obama hope culture, plus the sleazy indie party culture in Brooklyn and LA. The only difference is millennials got absolutely screwed over by the recession and have been getting screwed ever since.”
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You say “Chalmers will politically target those who are unlikely to vote Labor —”
Nothing has changed there then ! They target anyone that has wealth and attempt to confiscate it ……because they have no concept of how wealth is actually created !
BUT HEY……..YOU KNOW WHO ELECTED THEM and THE TEALS and THE GREENS !????