Ask an Adviser: 4 case studies on the new CGT changes with Alex Luck

**Ren** (0:00)
Hate the rules all you want? Don't throw your strategy out the window because of it.

**Alex Luck** (0:04)
There's nothing wrong with shares.

**Ren** (0:05)
Yeah, yeah, yeah.

**Alex Luck** (0:06)
Why are we suddenly having to tax them more? NDQ, you would potentially end up paying about $73,000 more in tax.
Equity Mates!

**Bryce** (0:15)
Welcome to another episode of Equity Mates, a show where we explore what's possible in the world of investing. My name is Bryce.

**Ren** (0:21)
And I'm Ren, and today we are talking, all things are investing after the budget.
But don't worry, this isn't another budget hot take. We're over a month since a lot of these changes were announced, and we want to actually dig in to what they mean for investors. And we've got a number of case studies from an expert who's in the room with us, and he's going to take us through what he's done and what he's learnt. Alex Luck, welcome back to Equity Mates.

**Alex Luck** (0:50)
Thanks guys, good to be here.

**Bryce** (0:51)
Alex is the co-founder of Everest. And if you would like to speak to Alex or any of his team after listening to this conversation to get financial advice, make sure you head to equitymates.com/advice.
Alex works with many people from the Equity Mates community. So thank you for doing that.

**Ren** (1:11)
Now before we get into it today, we just want to time stamp this episode. We're talking at the end of May, the changes that were announced at the budget haven't been legislated yet.
So we know that things might change. There's an ongoing consultation period. So we thought it was important to just time stamp where we are. But Alex, we gave you a bit of homework for this one.

**Alex Luck** (1:32)
Yeah, just a bit.

**SPEAKER_4** (1:33)
Yeah, a lot.

**Ren** (1:34)
In fact, we gave you so much homework that we don't think we're going to be able to get it all in this episode. You've got six case studies you've done for us.

**Alex Luck** (1:40)
Yeah, I think that's six in total.

**Ren** (1:42)
We're going to try and go into three, but we'll reference all six throughout. But in the show notes or the YouTube description, you can click the link and you can read all six in all detail, everything we're talking about today and more. So you can see all of the hard work that Alex has done for us. So thank you for doing that. Thank you very much.

**Bryce** (1:59)
We should say the case studies are all centered around the big questions that have come through the budget.

**Ren** (2:03)
Yeah.

**Bryce** (2:04)
So things like what happens to capital gains tax after a property sale, established versus new builds and the implications there, property versus shares, dividend versus growth, negative gearing implications, and just what are the new tax rules around, how do they impact ETF investors? So the real meaty ones that are still getting a lot of debate in the Equity Mates community.

**Ren** (2:27)
Yeah. I'm sure there'll be some debate in this episode as well.
Let's start with the first scenario that you've modeled for us today, Alex, and you've taken four ETFs. I would hazard a guess, four of the more popular ETFs in the Australian investing community.

**Bryce** (2:42)
Yeah.

**Ren** (2:42)
You put them head to head under the old rules and under the new rules.

**Alex Luck** (2:46)
Yeah. So when we were preparing for this episode, Bryce was basically talking around some ideas of what we could do. So I thought it would be good to model back a relatively vanilla ETF, broad-based index covering multiple markets to see how it would fare under the old rules and how it would fare under the new rules. But instead of looking forward, I wanted to look retrospectively just to obviously see what would happen essentially.

**Bryce** (3:12)
Using real data. So the scenario is we have $100,000 invested from the 20th of November 2017, which was the date that VDHG, the Vanguard High Growth Fund, came to the market. Distributions were reinvested and we sold the ETFs on budget night, the 12th of May. So holding period eight and a half years. We wanted to compare the capital gains tax implications under the old system versus the new system.

**Alex Luck** (3:39)
That's correct. Yeah. VDHG being a good benchmark. A lot of people are familiar with it, like I said, broad-based ETF there. So good, I guess, kind of yardstick, if you want to call it that.

**Ren** (3:49)
Now, what we haven't said is the other ETFs we're comparing it to. So Vanguard Diversified High Growth, then VHY, the Vanguard High Yield ETF, IVV, the iShares S&P 500 ETF, and NDQ, the Betashares Nasdaq 100 ETF.