Ask Us Anything: Should Australians consider leaving for Singapore or Dubai? + How should renters think about the latest budget?

0:00I'm Adam Schwab. I'm Adir Shifman. And this is The Contrarians with Adam and Adir.

0:10And we're back. Episode 206, Ask Us Anything. We love getting your questions on any topic at all. Hit us. We don't know them beforehand. So you get the unvarnished, unbridled truth from Adir and myself. So over to you, my question number one. Question one this week comes in from Liam. With Adam and Adir, especially Adam, genuinely upset about all things related to living in Australia from taxes to transport, have either of you genuinely considered leaving for a safer, more efficient country or tax haven country like Singapore or the UAE? It's funny that people say you feel more strongly about this than I do.

0:47I think that might have something to do with more disposition and communication than internal emotion. I think it's more obvious when you're passionate, it's more obvious maybe than when I am. Or maybe your bar for 100 % passion starts earlier than my bar, I guess. But I think we feel equally disappointed by a whole lot of things that are going on in this country. Taxation is the latest disaster in our view. I'll speak for both of us on that. Transport, that's there somewhere. But like anti-Semitism and social discord, that's on the list as well. There's all sorts of problems here. I mean, I'll tell you my views.

1:24Firstly, I think even with all these problems, it's hard to think of a better country than Australia as a country, even now. It just isn't as good as it was, but it's hard to think of a better country than Australia. And so I don't want to be like Australia's terrible kind of message because it's great. If I say great, I sound like Trump. I sound like maybe I really do think it's time to make Australia great again, but not in the Trump version of great necessarily because I do think it was the greatest and now it's just great. And I can't leave Australia because to live somewhere else and be a tax resident elsewhere, mostly because I've got parents and kids in Australia.

2:04And my friend Calvin Ong, who you know from Aura, who started Aura Capital, like he lives in Singapore. I mean, that guy lives a great life. Like, I think he pays 20 % tax on his income, no tax on his dividends, no tax on interest, no tax on capital gains. And, like, he's got people that help him with his family life and it's fun for him there. He just, as I said to him, I can't move there because you can't play tennis outside because it's too humid. So what will I do? But if I was going to move, where would I move to? Singapore would be a great place to move. I could move to Israel, as could you, but unfortunately you couldn't, Mike, because you get, if you're like a Jew coming home to your homeland, you get these huge tax benefits, although they're still not as good as Singapore tax benefits, by the way.

2:48You could move to Milan. So Milan at the moment has, you pay a flat, I think it might be either 200 ,000 or 300 ,000 euros max tax. If you pay that tax, that's it. That's your tax paid. And so it basically doesn't go over that. So lots of people are moving to Milan, although I suspect if a left-wing government comes in, that party will be over. You can move to New Zealand. There's no capital gains tax and it's a lovely place, although the economy is in the complete doldrums right now. And so if you put – and Dubai, people move to Dubai, which it turns out is a great place that doesn't protect its citizens from missiles from Iran.

3:25And so – It's protected them pretty well. I don't think there's been any deaths. No, but it's mostly I think kind of been lucky based on where they land, And although I know Israel has now given them anti-missile shields, so I think it's actually very safe now to be in Dubai. And so when you look at that list, what do I think about that list? I think for quality of life, nothing matches Australia. Now, I'm biased because I'm Australian, and I think Israel has its own more incredible quality of life, just different, and so probably that would be my preferred place to move to. But I think Australia is like New Zealand, but like bigger and more stuff to do, which I think is the best.

4:04But if I was 25, completely unencumbered, didn't own a house, my parents are still young and I don't have my own family yet probably, I would absolutely think seriously about moving out of Australia right now to somewhere like Singapore or to Israel, probably more likely if I was Jewish, to Israel. because maybe even if I wasn't because not just the tax benefit of Singapore, it is a great lifestyle for a young person and it's an incredibly good place to build a startup. And so I don't want people to do it but it is pretty good. I think so much depends on what your stage of life is and what kind of sort of person you are in terms of what you want financially.

4:46So if you're a founder, then I think a lot of the places you mentioned are probably right. I think if you're a fan and certainly if you've got a business that's got product market fit, as we talked about on the pod last week, I think you need to go to Singapore or New Zealand or a low C2T jurisdiction. I think that's assuming the lunatic Australian government gets their horrendous reforms through. If you're that or if you get lots of money from dividends or interest or capital gains because all of those are untaxed in Singapore. But that's pretty rare. Like not many people are getting big dividends and interest.

5:17Rich people. Yeah, sorry. I'm ignoring the small percentage of rich people because they can sort themselves out. I'm talking about for normal people. I think if you're in your 20s, I think moving to a big city in London or New York for a short period is great. I think you don't want to get trapped in there for too long because it can be a different lifestyle. And then if you do want to come back, it becomes challenging. I lived in London during COVID for six months, which was incredible. I was sort of outside London with my in-laws. So that was a great experience. I think living in London with kids is much more challenged.

5:49My good friend Matt does it and he's had a great experience. But you need to have a great job. Obviously, it's relatively expensive. I think Australia takes a lot of it. Climate-wise, Australia is probably as good as anywhere, especially if you're in really Melbourne, Sydney, Brisbane. Actually, all the capital cities have great climate. Cost of living, obviously, Australia has gotten worse, but there are obviously worse places. I think UK and US are far worse than Australia, cost of living-wise. So we're okay cost of living. Really, the challenge is, I think the real problem for Australia is if you're a wealth creator slash founder, the government's making it untenable for you.

6:21But I think for most others, it's generally a pretty good place to be. Well, let me challenge that. So you're right. I did jump straight into the wealth creator because there's all the questions people have been asking me over the last two weeks. That's who's been asking me questions. But let's think about this. Let's think about someone who's an employee in their 20s, 28, partner, no kids. I'll be specific. Gender doesn't matter. 150K a year AUD. That's what you're earning in an executive type job, like a desk job, marketing, whatever it might be. Finance is its own kind of category. You're paying.

7:04So the tax rate on$150 ,000 is probably 23%. I think that's about 23 % because$200 ,000 is 25%. Yeah, because obviously at$190 ,000 you hit the top tax bracket of 47%, but it's bracketed. You do, but you pay nothing to$18 ,000 and then you pay not much to$45 ,000. And so the blended I think is going to be somewhere between$22 ,000 and$25 ,000. and so we can say that probably$35 ,000 of that is going to the government so you're left with$115 ,000. Would you stay and let's say you're totally unencumbered and you're very happy to live anywhere in the world and the work that you can do is transportable anywhere in the world.

7:48That means wherever I go as long as they speak English let's say I can get a job there in my particular field. How would you think about that? I think the challenge in Australia is housing. I think you've got great healthcare, pretty reasonable transport, but Sydney especially, housing is extremely difficult. Then you've probably put in Brisbane, Perth on the list as well. Melbourne actually ironically is much more affordable. I think renting in Australia is pretty good. I'm comparing this to the global cities, your Londons and New Yorks. We're far cheaper and transport's free in Victoria and basically free in Queensland.

8:20So there's a lot of advantages of living in Australia, but certainly if you're looking at Sydney housing, that Sydney's really the most expensive housing in the world outside tax havens. But if you're on 150k with a partner, you're going to be living in your own apartment, just the two of you presumably at 28. And in Sydney, I mean, it's hard, you're not going to get much change. Like I'm going to say$1 ,000 a week, but even with that, like there's not tons of places to live for$1 ,000 a week. Like you maybe want two bedrooms. So you got like study or something or whatever, I mean, of your$115 ,000 after tax, that's$50 ,000 that's gone on rent, not including the rest of it.

9:02But you've got two incomes. Oh, that's a good point. That's a good point. $230 ,000. So maybe you'd say half. Let's say you lose$30 ,000 exactly. That's what you just said. So you're down to$85 ,000. So you've got$85 ,000 to spend on living expenses and other stuff. I mean, that's doable. That's not a bad life. That's highly doable. I think the challenge is I think renting's okay. I think if you want to buy, that's where you get slammed in Australia. Well, you can't buy. And obviously the changes the federal government is making are going to make it worse because it's going to make it worse for young people because you can't build a deposit because you're getting taxed on asset appreciation.

9:33So the one thing young people could do is buy ETFs and buy crypto and then hopefully sell it and buy a deposit. And the federal government's ripped that away. So they've made it. Buy a rental property while they're renting. So they buy an investment, they rent that out, they make money on it, then they can use that for a deposit. I would say it was very hard to a first home as a young person in Sydney and now it's impossible unless you're getting external funds or you're a high-income owner, like high, high. I think overall, I think it's a really difficult question. I think there's a lot of advantages to Australia, but I think it really depends on what your stage in life is.

10:07And I think if you're a wager and a non-founder, being in Melbourne, if you can tolerate the crime and just inter-all and then it's probably not too bad, but ultimately. What about Adelaide? I think Adelaide's good. I think Brisbane's great, Gold Coast's great, Perth's great, Sydney, but for housing, great. All good places to live. So I think we obviously criticise Australia because we've had some own goals in recent times, but ultimately there's still a lot of advantages living here. And we've got a lot of natural advantages with climate and resources and other stuff that does make it helpful to be a resident of Australia.

10:38Each city in Australia has its own unique special part about it, which is not particular to Australia. That's most places. but I would say like Sydney's a really fun city and like the Gold Coast and Brisbane are just the weather and vibe are just super nice and relaxed but I think Adelaide is like the overlooked city of Australia that is a cheap city for what you get yeah and easy get around and yeah it's a ripper great for startups so anyway I'm not trying to sell Adelaide because we're from Melbourne and we want this city to be good again but um yeah I agree with you like there are lots of reasons to day, but I fear that people that are in the business creator world or working in businesses that are creator businesses and who get shares as part of their payment, I feel that it might be increasingly attractive for them to look offshore for the early part of their career or if they're young building a business.

11:34Yeah. Thank you, Adir. My question number two. Question two this week comes in from Daniel over on LinkedIn. As a late 30s renter working in Sydney with a young family, likely never going to purchase a house in my area due to the prices, how should I consider the recent budget announcement for my future? What's your one word answer to that question? Horrific. I was going to say disastrous. Yeah. I mean, I think we're on the same page on this. Well, I think the great irony of this wealth-destructing, death of aspiration budget that the federal government has released. I think they thought this would be a – I think Albanese is wrongly given credit for having this great political antenna.

12:15His political antenna is pretty bad. Obviously, there's a voice debacle. There's been – Tried to fight the Royal Commission? It was a Royal Commission misstep. He's got a bit of a tinny ear and the so-called Labor machine, he beat Scott Morrison who was a dud. Wow. He beat Peter Dutton who was even a bigger dud. He's had really no competition. And now he's got this budget that I think he thought that Gen Z and millennials would embrace it. But I think the problem is if you look at the spectrum, the left and the far left and the Greens voters, of course, they wanted to go further and they were voting Labor anyway.

12:51The reason Labor's been successful in the last two elections is they've taken the middle, let's call it the sensible middle, who a lot of them would have voted Liberal, but a lot of them just got fed up with the far right of Morrison and Dutton and said, oh, Labor seems economically sensible. but we can trust them not to cause any great damage. And they more align with our social policies, which I think is how you and I sat for the most part. Although we were not, we were that without the naivety because we felt that way maybe on social policies, but we certainly did not think they're safe. They're a safe pair of hands.

13:21I did. You put me down as naive because I trusted Albanese when he said he's not going to, 50 times, he's not going to increase CGT, that he wouldn't, because it wasn't politically sensible and it wasn't economically sensible. And I got it wrong. I clearly overrated the intelligence of Jim Chalmers and Grifter Elbow and thinking that these guys were politically astute and economically astute and none of the above. So I think a lot of middle Australia, politically middle Australia, were conned by these grifters and have been lied to. And ultimately, the people, and it's not you and I who have successful business, who have been grandfathered into our valuations, who's going to be hurt.

13:56And it's the Mike's of this world who's blood, sweat and tears building that business, who hasn't got a high valuation yet, who is about to get smashed by these anti-young laws that couldn't be worse. And I've written an article on Substack that just says how basically we're funding old people and making young people pay for it. And Daniel is in the eye of the storm. Daniel should be buying his house with his kids. And ultimately, he almost can't now. And it's just been made worse. So Daniel is the innocent victim of this monstrosity of a budget. So I agree with all of that, obviously. You'll do the – you've just done the piece to camera and now I'll do the question answer in this arrangement.

14:37So what does this budget mean for Daniel? So just as a recap, I think 30 years old or 30s, renting in Sydney, what does it mean as a consequence of this? It means that when you – so your existing investments, So if you own shares already, whatever they're worth at the end of next financial year, that's a baseline. And if you sell them before then, you'll get the old capital gains tax. But let's say you're trying to invest. What it means is that you'll be paying a much higher rate of tax on any gains you make from any shares you buy. It means that if your friend has a startup that you want to give$10 ,000 to, for example, as like a lot of people actually do.

15:24now like it's quite common to get like friends and family but real 30 year old friends and family so that ten thousand dollars if that startup really succeeds there's a very high chance that your tax rate on that gain is going to be pretty close to 47 percent because the cost base will be irrelevant for calculating the gain and so that would be up from 23 and a half percent there's a very high likelihood it's going to be harder for you to find your next rental because there'll be fewer properties on the market because there's no incentive for people to buy investment properties now until they fall substantially in value or until I can jack rents up substantially.

16:03So I think in the short term, you'll feel an increase in rent. And then in the medium term, maybe we'll get a significant fall in house prices. But I think it's more likely that what happens before that is just an increasing shortage of rental properties. So I think it'll be harder to find a rental property. I think the number of rental property, sorry, the number of properties in your price range that you could have considered buying as an owner, that was going to be hard enough as it is. But I think those, the number of properties will diminish because a lot of those properties are rental properties that turn over and it might've been hard for you to buy them as an owner occupier competing with investors, but now it will be impossible for you to buy them because they won't be on the market because no investor is going to sell their rental property anymore, which is where most of the turnover of stock comes from and most of the properties that first home buyers can afford come from.

16:57And so I guess you could try and buy a new build, but that's not going to be near your area presumably anyway. So there's some of the headwinds that this budget will make you face. But the other problem you've got is probably a bit of a medium term problem, I'm up three years out, which is we're in an era of very high inflation. This year's 5%, this inflation rate. And we're now spending even more money by we, I mean they, they're spending even more money and that's going to push up inflation or keep it higher than it otherwise would be. And our income tax rates are very oppressive in this country and kicking at very low levels relative to the average salary.

17:35And so what it means is that your salary is going to be constant pressure to go up to pay for the inflation, but you're going to be paying a very substantial percentage of that in tax because of our high tax rates. And so that's not a consequence of the budget. I mean, the inflation is, but the fact that they left the income tax rates unchanged, I'd blame the budget for that as well. And that's another consequence for you. And of course, leaving it unchanged is actually increasing them because of the bracket. credit. That's right. They actually got up. And if you look at what Paul Keating, obviously, Tim Jim was a student of Paul Keating.

18:11Keating introduced CGT to lower income tax, which had a lot of merit to it. But these guys are grabbing more and more income tax, more and more cigarette and tobacco excise, more and more alcohol excise, not touching the foreign-owned tech companies, not touching the foreign-owned gas companies, just smashing middle Australia. They couldn't have got it more role. So what could be the off-finition? What could be a positive that comes out of this budget for you it's possible that house prices might tank it feels unlikely because i think there'll be a flight of capital to primary residences as a tax haven um so i think that might happen but it feels unlikely but maybe you can get into a house because the prices crash i think if you've got superannuation which you don't so that's actually not going to help you at all but like it's superannuation is even more attractive than usual now, I guess.

18:59I mean, I honestly, I'm not trying to be totally negative. I really struggled to think of any upside for a 30-year-old renter working in a company in Sydney. I can't think of any way this budget has made life better for them. And there's a lot of ways it's made it worse. Yeah. And that's why it's been so badly received by all but the old and the far left. We'll go to a super quick break back with our last question just in a moment.

19:30Michael, question number three. Our final question this week comes in from Prudence. With all the CGT changes in the budget increasing the rate of capital gains tax on Australian residents, do Adam and Adir know the policy reasons why non-residents are still exempt from CGT on the sale of assets that are not taxable Australian property? Like the reason the theme is tax and CGT is that isn't all anyone has been talking to me about for two weeks. Although on the main episode, I'll have a chat about what I've been hearing in cafes, which is actually interesting in its own way. But I'm not surprised that this is the theme of these questions this week.

20:07Like this is what Australia, this is what people in business at least or interested in business in Australia are talking about nonstop at the moment. Does this question specifically pertain to the grandfathering of the current CGT setup on locked-in gains pre-1st of July 2027? No, it's a question on why do foreign investors, so non-Australian entities or citizens, not pay GST at all? They're exempt. Oh, all right. You're right. I get the question now. And so just to be clear, just to get some background. So if you're a foreign investor, you don't pay CGT on non-property assets. My understanding is you do pay it on property and property-rich assets.

20:59But if you're buying shares, you're buying companies, et cetera, you don't pay CGT. And that's unusual because most countries will charge you tax if you're buying and selling assets in that country and then they might have a tax deal with your country where the tax you paid in that country gets recognised so you don't get double taxed. According to Gemini, the reason why foreign investors are exempt from CGT on shares, really, companies, is to make it competitive with other countries who apparently also don't have it. Which is ironic given Australia has the highest capital gains tax regime for residents in the world.

21:37So, they don't seem to have an issue with taxing Australians, but they're more than happy to let foreigners snap up our assets, bid up our assets and not pay. So actually, it's a really good question that you've got an Australian buying a share in whatever Telstra BHP, and you've got an American or an English person or a Chinese person buying a share in BHP. They're at a natural advantage. They're paying zero tax, whereas Australians paying potentially 47 % tax. Can I be more, I can say something even much more egregious than that example? an Aussie buy shares in BHP, a New Zealander buy shares in BHP, the Aussie will pay a very high rate of tax on their gain.

22:23It won't be 47 % in the top bracket because if they hold it a bit, there'll be some indexation. If they don't, it will be. It's at least 30. Yeah, at least 30. The New Zealander will pay no tax in Australia when they sell and then no tax in New Zealand when they bring it back. So that New Zealanders paid zero tax buying BHP on the ASX. And the Aussie has paid 30 % plus tax buying the same share. Yeah. I mean, I don't think people fully understood the perversity of that as a concept. And like you used the US as an example, but the reason I used New Zealand is like that was offered to be a state of Australia at Federation.

22:59I mean, there can't be any closer like correlation to Australia than New Zealand. And like that is what is going on with this change. Now, mind you, it was still a difference between 25 % and 0 % before this. But the thing is, it's moved in the opposite direction. It was 23. 23.5%. Yeah, I'm rounding. You're right. 23.5%. Because if you're on the top, it really depends on what tax bracket you're on. But yeah, you've got a 50 % discount, essentially. Well, I mean, that's the answer. What do you think about that answer in terms of a good basis for policy? I'm trying not to be leading with that. I don't know what you think about it.

23:33I think it's a great question, Pritinz. I think exempting foreign residents is understanding. The other reason that foreign residents are exempted is it's actually quite hard to track. Like sometimes if you're using trustee companies, it's quite hard to know and it's difficult for the ATO to actually get the money, which is a big part of the reason. I think the issue is if you're going to keep foreign residents at zero, fine, but Australians should be certainly not at 47 or minimum 30. That's the outrageous part of all. And that just shows why this policy setting is so catastrophic for especially young Australians.

24:05Older Australians, if you're in super, it's 10%. So if you're over 65, you're fine. So old people, again, talk about this in a bid to save intergenerational equality, they've made it worse. But if you're old, you're fine. If you're rich, you're fine. It's if you're trying to get ahead, if you're 30, 35, 40, and trying to buy shares, buy assets, buy companies that might give you a return that you can maybe buy a house one day, they're the people who are getting absolutely shafted here. But, you know, having a 0 % tax rate, CGT rate, for foreign-based owners, that does – maybe everyone does it, I get it.

24:41But that does significantly increase the likelihood that Australian assets are going to fall into foreign hands. Like that is an unavoidable consequence of this. And so – Well, the great irony is it's to attract more capital, yet they're happy to penalise Australian capital. It's just so hypocritical. And so maybe that's the fundamental point. The fundamental point is not whether they should be charged 0 % because I think it's a hard argument to make that they shouldn't be, although there is an argument, but your remarks are very powerful. Like it's hard to track it. Everyone else is not doing it, et cetera.