The $12.4 million number plate, and crippling taxes dampen spirits
Inflation to ease mortgage pain, the nation's most expensive number plate, and tax hikes cripple Australia's favourite tipples. Here are five money stories you may have missed this week.
Relief in sight for homeowners
The easing rise in the rate of inflation is good news for mortgage holders and those trying to buy a home. The latest ABS Consumer Price Index data released this week shows headline inflation rose by 0.6% in the December 2024 quarter and 4.1% annually, the lowest quarterly rise since March 2021.
The annual inflation rate for 2023 has fallen to 4.1% from 7.8% for 2022, giving hope to cash-strapped mortgagees that the Reserve Bank of Australia will hold the cash rate steady in February and beyond.
In a further sign of confidence that the rate-hike frenzy is coming to an end, more lenders have joined major banks in reducing their fixed rates this week.
Two Red Shoes mortgage broker Brett Sutton says some lenders have reduced fixed rates by 0.3%-0.5%, which is significant across one- to five-year fixed loans.
"Lenders eager to retain customers are looking to cut fixed rates in order to remain competitive as the signs continue to indicate good news for consumers and the market in general," Sutton says.
"While rates are unlikely to return to the lows of 2020, borrowers can be confident that there is an end in sight to the current period of high interest rates."
Economists predict the Reserve Bank of Australia will hold the cash rate steady in the short term, with the first cuts not widely predicted to occur until September 2024 at the earliest.
Most expensive license plate in Australia
Not everyone would pay more for a license plate than the value of their car, but the winning bidder at a recent Lloyds auction has handed over $11.5 million for the rare 'NSW 1' number plates. Lloyds Auction House describes the heritage enamel plates as a "holy grail must-have for any blue-chip passion investor".
Rare number plates like these are usually passed down through generations within families so being able to acquire them at public auction was clearly seen as an opportunity not to be missed.
License plates were first introduced in 1910 to identify individual cars after a spate of injurious accidents. The state's first police commissioner first owned the 'NSW 1' plates, before businessman Sir Frederick Stewart then acquired in the 1930s for his Oldsmobile.
His widow Lady Majorie Stewart transferred the white-on-black plates to her 1981 Ford Fairmont, but the plates have only now (24 years after her death) passed to a new owner.
Queensland's Q1 number plate also sold at auction on January 27 with a winning bid of $5,655,000. Factoring in the 7.5% buyer's premium, the winning bidders paid a total of $12.4 million for 'NSW 1', and $6.08 million for 'Q1'. Q1 last sold in 1985 for $100,000, and the owner of the 'NSW 1' plates was reportedly offered $200,000 for them in 1988.
High-growth investments indeed.
Simpler self-managed super
Self-managed super funds are needlessly complicated, according to the SMSF Association, and there's too much red tape. In its submission to the Federal Government's 2024-25 Budget, the peak body is asking that transfer balance caps (TBCs), super balance thresholds (SBTs), and the rules overseeing the notice of intent to claim a tax deduction all be simplified.
"Indexing the TBCs on July 1, 2021, and July 1, 2023 has added further complexity to the system, having shifted from having a single cap to individual caps ranging from $1.6 million to $1.9 million," says SMSF Association CEO Peter Burgess.
"This is causing confusion and increasing costs across the sector - and can only increase with future indexation."
Reforming the rules around the notice of intent to claim a tax deduction should be a priority. "How these rules operate is overly complex, contains multiple hurdles and points of failure," Burgess says. "The result is the loss of a tax deduction for an individual making the contribution."
Burgess says the regime is inflexible and does not allow for amendments or remediation, with a point of failure often being due to a simple administrative error that taxpayers are unable to remedy, and the Commissioner of Taxation has no discretionary powers to resolve.
"The operative provisions need reform and modernisation to ensure the law operates in a manner that is fit for purpose," he says.
Crippling taxes dampen spirits
Rum, gin and other spirits are about to get even more expensive, with the spirit excise rising again in line with the Consumer Price Index. Not only does Australia have the third highest spirit tax in the world (Iceland and Norway take out the top spots), it's more than double the tax on beer.
The spirit excise has been tied to the CPI since the 1980s, when there were only a couple of distilleries in Australia. Now there are nearly 600. The Alcohol and Drug Foundation says spirits are taxed so highly because they can do greater harm than other alcoholic drinks.
But distillers are calling for a two-year pause on tax increases to give businesses a break. On a one-litre bottle of Bundaberg Rum the tax paid is currently 63%.
"We are asking the government to do an immediate freeze for two years to give everybody a break so we can start to have a discussion about how we can fix this unbearable tax," Bundaberg Distilling co-chair Amanda Lampe told the ABC.
ESG ratings misleading?
Targeting low-carbon emissions is a worthy pursuit in equity portfolios but mixing ESG and carbon scores in equity portfolio weighting schemes can come at great carbon cost for green investors, according to a new study from global index provider and research house Scientific Beta.
"The green dilution is very strong, regardless of which ESG factors and scores are targeted as objectives, with our research revealing an average dilution of 92% across our portfolios," says Scientific Beta head of investment solutions Erik Christiansen.
"In other words, adding combinations of ESG scores to carbon intensity as a weight determinant in developed equity portfolios dilutes 92% of the initial carbon reduction objective. Only 8% of the carbon reduction objective survived the inclusion of ESG scores in portfolio weighting schemes."
There is a solution, however. Investors can avoid green dilution by using ESG scores only for screening whether companies are included in a portfolio, then using carbon metrics to determine the portfolio weights.
"This conclusion arises naturally from the fact that ESG ratings and carbon intensity metrics are unrelated to each other," Christiansen says. "Our findings are robust across different ESG ratings providers, different carbon metrics and emission scopes, and different portfolio weighting schemes."
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