First Home Buyers Assistance

First-home buyers get some help 

State and federal governments are creating new incentives to help first-home buyers get into the overheated housing market.

 

Buying your own home is the largest purchase decision most people will make in their lives.

However, a long run of low interest rates has fuelled spectacular dwelling price growth, record housing debt and phenomenal asset values, particularly in Sydney and Melbourne. According to the Reserve Bank of Australia, housing prices nationally have increased 7.25 per cent a year, on average, over the past 30 years.

 

Financial analysis and advisory firm CoreLogic adds that housing affordability has worsened over the past 15 years by every measure. It now takes 1.5 years of household income to save for a 20 per cent deposit on a dwelling compared with 0.8 years 15 years ago, the firm’s Perceptions of Housing Affordability Report 2017 shows.

 

Government assistance

There are incentives prospective first-home buyers can use to make their dream of owning their own home come true. This year’s Federal Budget, for example, proposes allowing individuals to make voluntary contributions to their superannuation accounts to save for a house deposit.

 

It is proposed that super contributions and earnings be taxed at 15 per cent, rather than higher marginal rates. Withdrawals would be taxed at their marginal rate, less 30 percentage points. Contributions would be limited to $30,000 per person in total and $15,000 per year and both members of a couple could take advantage of the scheme.

 

Additional non-concessional contributions could also be made but would not benefit from the tax concessions apart from the earnings being taxed at 15 per cent.

 

Currently, the NSW and Victorian governments offer first-home buyers:

• no stamp duty on all homes worth up to $650,000 in NSW and $600,000 in Victoria

• stamp duty relief for homes worth up to $800,000 in NSW and $750,000 in Victoria

• a $10,000 grant for builders of new homes worth up to $750,000 and purchasers of new homes worth up to $600,000 in NSW

• no duty on lenders mortgage insurance in NSW

• a $20,000 grant for new homes built in regional Victoria valued at up to $750,000 – which is double the amount available in metropolitan areas.

 

Most states also have first-home buyer grants, each with different criteria.

 

Some state governments are also making it harder for foreign investors by increasing duties and land taxes and introducing other measures to reduce competition for first-home buyers.

 

Seek advice

There are many investment options that can help you build a deposit, each of which has different risk and return factors, but you don’t have to make financial decisions by yourself. Talk to a Wealth Planning Partners Adviser to develop a plan that’s tailored to you. Your adviser can help you:

• understand your current situation

• identify your financial and savings (home deposit) goals

• determine your current income needs

• prepare a budget

• start a home savings plan

• protect your income and assets through personal insurance.

 

Sources: https://www.rba.gov.au/publications/bulletin/2015/sep/pdf/bu-0915-3.pdf https://www.corelogic.com.au/resources/pdf/reports/housing-affordability/2017-05-CoreLogicHousingAffordabilityReport_May2017.pdf?language_id=1

Posted in Advisers, Australian Economy, Economy, Finances, Wealth Tagged with: , , , , ,

Budet 2017: Proposed Tax Measures

Budget 2017 has proposed a few tax changes.  Read about them here:

Medicare levy

  • Rises from 2.0% to 2.5% from 1 July 2019 to help fund the National Disability Insurance Scheme.

Capital gains tax discount for investors in affordable housing

  • Managed investment trusts will be allowed to develop and own affordable housing. Investors will get a capital gains tax discount of 60 per cent.
  • Investors will get a capital gains tax discount of 60 per cent provided that they invest in qualifying affordable housing.

Small business accelerated depreciation extended

  • Immediate deduction of assets up to $20,000 extended to 30 June 2018.

Education costs

  • Eligibility for student payments will be limited to people undertaking courses approved for VET student loans.
  • Existing student payment recipients will be grandfathered for the duration of their current course unless there is a break in their payment entitlement.
  • You may wish to consider this if you want to fund your child’s education costs.
Posted in Australian Economy, Finances, Taxation Tagged with: , , ,

Budget 2017: Housing Affordability

The Government has announced some Incentives to improve housing options.  Among these, are:

  • Allowing first-home buyers to save a deposit through voluntary contributions to superannuation
  • Disallowing travel deductions for investment residential property
  • Limiting depreciation deductions for plant and equipment on residential investment properties
  • Tightening the capital gains tax rules for foreign investors
  • Reforming foreign investment rules to discourage investors from leaving properties vacant.

First-home buyers can use super

  • First-home buyers will be able to use voluntary contributions to their existing superannuationfunds to save for a house deposit.
  • Contributions and earnings will be taxed at 15 per cent, rather than marginal rates, and withdrawals will be taxed at their marginal rate, less 30 basis points. Contributions will be limited to $30,000 per person in total and $15,000 per year.
  • Both members of a couple can take advantage of the scheme.
  • Non-concessional contributions can also be made but will not benefit from the tax concessions apart from earnings being taxed at 15%.

First-home deposit salary sacrifice case study

Louise earns $60,000 a year and wants to buy her first home. She directs $10,000 of pre-tax income into her superannuation account using salary sacrifice, increasing her balance by $8,500 after the contributions tax has been paid by her fund. After three years, she is able to withdraw $27,380 of contributions and the deemed earnings.

After withdrawal tax, she has $25,760 she can use for her deposit. Louise has saved about $6,240 more for a deposit than if she had saved in a standard deposit account. Louise’s partner, Craig, makes the same income and salary sacrifices $10,000 over the same period. Together, after three years, they have $51,520 for their first home, $12,480 more than if they had saved in a standard deposit account. (Source: 2017 Budget papers)

Unlocking supply

  • The Government will help boost housing supply by:
  • Providing $1 billion facility for critical infrastructure, such as water supplies
  • Working with the States on planning and zoning reform to speed up development
  • Releasing suitable Commonwealth land, starting with Defence land at Maribyrnong in Melbourne
  • Investing more than $70 billion from 2013 to 2021 on transport infrastructure
  • Specifying housing supply targets in new agreements with the States and Territories.

 

Posted in Finances, Investments, Money, Wealth Tagged with: , , , ,

Budget 2017: Social Security

Lots of Social Security changes have been proposed in Budget 2017.  Here’s a highlights list of some of these.  Please note that these are not yet enshrined in law.

Reinstating the Pensioner Concession Card

  • This will be reinstated for pensioners who lost their pension following changes to the pension asset test on 1 January 2017.
  • Those granted the Commonwealth Seniors Health Card (CSHC) as a result of the
  • January changes will maintain entitlement to this card (and the energy supplement).
  • The Low Income Health Care Card issued as a result of the January changes will be deactivated.

One-off energy assistance payment

  • $75 for single and $125 per couple for qualifying pensions on 20 June 2017.

Family Tax Benefit Part A

  • Changes to the income test for the Family Tax Benefit Part A payments may reduce entitlements. We need to identify and manage the impact of these changes.

Liquid assets waiting period

  • The maximum waiting period for payments will increase from 13 weeks to 26 weeks and apply

where liquid assets are equal to or above $18,000 for singles (formerly $11,500) without

dependants or $36,000 (formerly $23,000) for couples and singles with dependants.

  • It’s important to seek advice early (before termination) to see if we can lessen the impact of these changes. If you are affected, we need to manage cash flow during this period.

Newstart eligibility

Activity tests other than voluntary work may be required to receive Newstart allowances for people aged between 55 and 59.

Former Farm Household Allowance

Recipients who do not receive any other Commonwealth income support will be eligible for loans of up to 50% to refinance their debt to a maximum of $1 million.

Residency test changes

To be eligible for the Age Pension or Disability Support Pension, some claimants will need 15 years of continuous Australian residence (up from 10 years). Generally this won’t affect existing recipients.

Consolidation of payments

  • Seven working-age payments and allowances, including NewStart, will be consolidated into one payment called a JobSeeker payment.
  • Key elements include aligning the participation requirements for recipients aged 30 to 49 with those for recipients under 30, and recipients aged 55 to 59 will only be able to meet up to half of their participation requirements through volunteering.
  • Recipients aged between 60 and Age Pension age will have a new activity requirement of 10 hours per fortnight that can be met through volunteering.
Posted in Australian Economy, Centrelink, Finances, Money Tagged with: , , , ,

Budget 2017 – Who are the Winners & Losers?

WINNERS!!

First home-buyers

First home-buyers can save for a deposit by salary sacrificing into their super.

Downsizers

Downsizers, 65+, can contribute up to $300,000 each to super from the sale the family home

regardless of satisfaction of the work test, total super balance or if aged 75 or over.

Investors

Negative gearing stays for mum and dad investors but travel claims for investment residential properties will be denied and capital expenditure eligibility will be tightened.

Schools

$18.6 billion has been earmarked for extra funding for schools over the next decade.

 

LOSERS!!

Taxpayers

The Medicare levy will increase to 2.5% to help fund the National Disability Insurance Scheme.

Tertiary students

University fees will rise by $2,000 to $3,600 for a four-year course and students will have to start paying back their debt when they earn more than $42,000 from July next year, down from $55,000. A 2.5 per cent efficiency dividend will be applied to universities for the next two years.

Child care changes

Only to families with incomes below $350,000 per annum (in 2017-18 terms) will get the child-care subsidy from 2 July 2018. The upper threshold will be indexed annually from 1 July 2018.

Banks

The five biggest banks will be charged a levy, raising $6.2 billion over four years.

Tax avoiders

The ATO will target tax avoidance by multinationals and big business.

Posted in Australian Economy, Budget, Money, Taxation Tagged with: , , , ,

Need to Understand a little more about the Downsizing Contribution?

As you’re not doubt aware, the Federal Government announced it’s 2017 Budget this week and one of the surprise outcomes was the Downsizing Contribution for those looking to move out of a larger family home.  Here’s a little more about how that works…

Downsizing contribution

People aged 65 or over will be able to make a non-concessional contribution to their superannuation of up to $300,000 each from the proceeds of selling their principal residence.

  • Work test does not apply
  • Residence must be held for a minimum of 10 years
  • Total superannuation balance restrictions of $1,600,000 do not apply
  • Restrictions eased on people aged 75 or over.

Downsizing contribution Case Study

John is 75 and Jane is 69 and they both have retirement income streams. They sell the home they have lived in for more than 10 years to downsize and the proceeds are $2,000,000.

George has room under the $1.6 million transfer balance cap. He can make a non-concessional contribution of $300,000 to superannuation and may choose to use the contributed proceeds to start a new account-based pension.

Jane has already used her transfer balance cap. She can make a non-concessional contribution of $300,000 to superannuation. As she has no room under her cap she cannot start a new pension with the contributed proceeds.

It’s worth having a chat with your Adviser to see if this is the best strategy for you, as you may lose Centrelink entitlements, depending on your new circumstances.

Posted in Advisers, Australian Economy, Budget, Finances, Retirement, Superannuation Tagged with: , , , , , , ,

Are You Missing out on Government Entitlements?

The chances are you dutifully file your tax returns every year but are you making the most of your government entitlements? In this article,
we guide you through some key entitlements available for families.

Are you confused about your government entitlements? The good news is the recent overhaul of the Department of Human services no longer means lengthy waits in government office queues or listening to hold music while trying to organise your childcare rebate.

With automated payments and the user-friendly MyGov website, there has never been a better time to take a fresh look at your entitlements.

The birth of a child

Taking time out to care for a newborn can be expensive. However, since January 2011 primary carers now have access to government-funded parental leave payments, which are currently made for up to 18 weeks. There is also a 2-week payment available to eligible dads or partners assisting with a newborn.

Assistance with childcare

To encourage parents with young children to remain in the workforce, there are some great benefits on offer to working parents.

If you have children attending approved childcare and meet the income test (currently below $160,308 for families with two children), you may be entitled to the Child Care Benefit to help with the cost of daycare, vacation care or before and after-school care.

Higher income families may still claim the Child Care Rebate, which covers up to 50% of out “of pocket childcare expenses, up to an annual limit of $7,500.

Assistance for low to medium income families

Single parents and low to medium-income families can take advantage of a range of tax breaks and payments that can make raising a family more affordable. These include:

  • The Single Income Family Supplement, which provides an annual payment of up to $300 to
    help eligible households. The main income earner must earn between $68,000 and $150,000 and any secondary income earner below $18,000.
  • The Parenting Payment for single parents with children under 8 or parents with partners with children under 6 who meet certain income tests.
  • Family Tax Benefit for lower income families with dependent children under 20 (which includes grandparents assisting with childcare).

Summary

We have outlined just a few of the benefits that can help with the cost of raising a family.
To find out more about your entitlements, visit the Department of Human Services website.

Posted in Budget, Centrelink, Finances Tagged with: , , ,

Safeguarding your retirement plan

From wills to long-term budgeting, there’s a lot to think about when making your retirement to-do list. Here’s some tips to make sure you’ve ticked all the boxes.

 

1. Check your will

Without a valid will, an administrator will be appointed to manage your estate, which may cause your family plenty of problems. To save them the stress, ask a solicitor to draw it up for you and make sure you and two witnesses sign it.

2. Plan your estate

Think of your estate plan as your family’s stress-free action plan that they can turn to for guidance when you pass away. It should cover all of your documents, contacts, debts, bills and assets so your family can easily figure out what to do with them.

3. Budget for the long haul

Australians are living longer than ever – which means your retirement savings also need to last longer. Create a long-term budget that will help you live the lifestyle you want – and don’t forget about healthcare costs. Then comes the most important part of a budget – sticking to it.

4. Invest in your future

From boosting your superannuation to investing in shares, understanding your investment options can make a huge difference to your retirement savings. When you start investing – and you should start early – make sure you have a mix of investments to spread your risk.

5. Be wary of scams

Investment scams are on the rise in Australia, with perpetrators directly targeting retirees to access their superannuation funds. Protect yourself by never giving out your financial details over the phone or by email. And be suspicious of anything that sounds too good to be true.

6. Start thinking about insurance

Many insurance policies expire at a certain age, leaving you without cover. And if yours comes from your superannuation fund, it could be eroding your savings. From age-based insurance policies to products that cover funeral expenses, you should seek professional financial advice to develop a plan that is appropriate for you as you enter retirement.

Posted in Budgeting, Debt Management, Finances, Insurance & Protection, Investments, Money, Retirement Tagged with: , , , , ,

Government Entitlements for Retirees

The Government has legislated changes to the Age Pension rules from 1 January 2017, which it estimates will see 300,000 Australians lose all or part of their pension entitlements.1

If you are retired or about to retire, some careful planning now may put you in shape to access at least a part Age Pension. Here we outline some strategies to consider.

Building up the super of the younger member of a couple

If you are retired and have a spouse who has not reached Age Pension qualifying age, making contributions to your spouse’s super account may be beneficial. This is because super in the accumulation stage is not counted towards the Age Pension assets or income tests until the member reaches Age Pension qualifying age or begins an account-based pension.

Gifting

Gifting money (for example to a family member or charity) can help to reduce your assessable assets. The Government has set a limit of $10,000 per financial year for a single person or a couple, limited to a total of $30,000 over a five-year period. If you are planning to gift more than the allowable limits, check the rules here as penalties may apply.

Pre-paying a funeral plan

While it is not something that everyone would like to consider, pre-paying for a burial plot or funeral expenses can make good financial sense. As well as saving your family expense when you die, prepaid funeral plans and burial plots are not assessable assets for Age Pension purposes.

Using certain income streams

Certain annuities are assessed more leniently under the Age Pension rules than other investments, which may help you to achieve a higher level of Age Pension.

When purchasing a term annuity, you can select the proportion of capital (residual capital value) you would like returned to you at the end of the investment term. Annuities with a residual capital value of less than 100% are generally assessed favourably under the income and assets tests.

Speak to your adviser for more details as the rules differ depending on when an income stream was commenced, its term and your life expectancy.

Summary

If you are concerned about how the upcoming changes to the Age Pension rules will affect you, arrange a meeting with your financial planner who can help you to structure your income and assets to make the most of your entitlements.

Source:
1. http://www.superguide.com.au/how-super-works/300000-retired-australians-to-lose-some-or-all-age-pension-entitlements
Posted in Finances, Investments, Retirement, Savings, Superannuation, Wealth Tagged with: , , , ,

Retirees and Life Insurance

You’re retired, the house is paid off and the children are self-sufficient, – it may be time to review your life insurance?

Policies expire

People take out life insurance while they are working to protect their dependants if they die prematurely.

Life insurance policies, including income protection, trauma, and total and permanent disability (TPD) insurance, generally expire when you reach a certain age, even if you are still working. So, let’s consider some of the insurance products you may have and see how long they generally last.

Insurance options

Term life insurance is a popular policy option. Beneficiaries receive a lump-sum payment if the policy holder dies or suffers a terminal illness and the usual expiry age is 99.

TPD insurance is paid in a lump sum if an accident or illness prevents the policyholder from earning an income. The usual expiry age for this type of insurance is 65.

Trauma insurance covers a major illness or injury, such as a stroke or car accident. It covers specific events and is paid out in a lump sum that can be used for any purpose, such as living or medical expenses. The usual expiry age for this type of insurance is 70.

Income protection insurance covers loss of income caused by accident or illness. Typically, these types of policies pay 75 per cent of the insured person’s income but there are many variations in their terms. The usual expiry age for this type of insurance is 70.

What about my super?

There are usually additional rules for policies held within a superannuation fund. Life insurance coverage through super usually ends at the age of 65.

When deciding whether to take out or continue your life insurance, you may wish to consider such things as any outstanding debts, including any mortgage repayments, as well as the needs of those you leave behind.

Nevertheless, each person’s circumstances are different and if you are unsure of what you need, talk to your financial adviser.

Posted in Advisers, Insurance & Protection, Retirement Tagged with: , , ,