by Jodie | May 3, 2016 | Australian Economy, Budget, Debt Management, Economy, Retirement, Superannuation, Taxation
Treasurer Scott Morrison has handed down his first Federal Budget – the Coalition Government’s third. The winners are low and middle income earners, unemployed youth and small business, and there are significant changes to superannuation.
Note: These changes are proposals only and may or may not be made law.
Summary
- A lifetime cap on non-concessional (after-tax) superannuation contributions of $500,000 will apply from 7.30pm on 3 May 2016.
- The income tax threshold at which the 37% tax applies will increase to $87,000 pa on 1 July 2016, from the current $80,000 pa.
- The tax rate that applies to small business companies will reduce to 27.5% for businesses with a turnover up to $10 million in 2016/17. Further tax concessions will apply in future financial years.
A range of superannuation measures will also apply from 1 July 2017.
- The annual cap on concessional (pre-tax) super contributions will reduce to $25,000, regardless of age.
- Concessional super contributions may exceed the annual cap if certain conditions are met.
- Those aged between 65 and 74 will be able to make super contributions regardless of whether they work or not.
- Tax deductions will be able to be claimed for personal contributions regardless of employment status.
- A lifetime limit of $1.6m will be placed on the amount of superannuation that can be transferred to start pensions.
- Earnings on investments held in ‘transition to retirement’ pensions will be taxed at 15% (currently 0%).
If you’d like to read more, click here: FPA Budget Wrap 2016
by Jodie | May 3, 2016 | Australian Economy, Economy, Finances, Investments
Australians have long been attracted to property as an investment. But we also tend to have a blind spot when it comes to the costs of owning it.
Property holds a special place in the hearts and minds of Australians. But do we let our love for property cloud its true value as an investment?
A strong property market, low interest rates and generous tax breaks have all been magnets for property investors in recent years. The challenge for property investors is making sure you’re weighing up the performance of your investment against what it’s really costing you to own it.
So what are the costs of owning an investment property?
1. Upfront costs
If you’re looking to borrow to fund your property investment, the starting point with many lenders is a 20% deposit. On a $600,000 property, that’s $120,000. If your deposit is less than 20%, you may need to pay Lenders Mortgage Insurance – which can be a significant one-off cost.
Typically the biggest cost when buying a property is stamp duty, which varies from state to state but is close to $23,000 on a $600,000 property in NSW[1].
Add to this legal fees ($1,500-$3,000), building and pest inspections ($300-$500) – potentially for multiple properties – bank valuations ($300-400) and loan establishment costs ($500-600).
Add them up, and these costs could potentially add around 5% to the cost of your investment.
2. Ongoing costs
Once the property is yours, you can obviously start using it to generate an income from tenants. The downside is the ongoing costs.
Loan repayments are usually the biggest cost. For example, a $480,000 home loan with a 30-year term and a 6% p.a. interest rate will generate loan repayments of $2,878 per month. And remember that only the interest portion of these repayments is tax-deductible.
Other ongoing costs include council and water rates, strata levies (if applicable) and home and landlord insurance. You may also have to pay land tax for larger or higher-value properties.
3. Exit costs
At some stage you may want to sell your investment to realise the capital growth you have hopefully earned. The major costs here are likely to be real estate agent fees (typically around 2% of the sale price) and capital gains tax (CGT), which is payable at your marginal tax rate.
You may be eligible for a 50% CGT discount if you hold your property for more than 12 months, but CGT can still be a significant expense – particularly for higher income earners.
For example, if you bought an investment property for $600,000 and sold it for $750,000 three years later, 50% of the total capital gain (i.e. $75,000) would generally be subject to capital gains tax. If you’re in the highest marginal tax bracket, that tax bill could be as high as $36,750 (including the Medicare Levy and Temporary Budget Repair Levy).
Property investing for the long term
There’s no doubt astute investors can make good money from investing in property, particularly in favourable market conditions. But it’s essential to weigh up all of the costs associated with buying, owning and selling an investment property.
Generally speaking, property should be looked at as a long-term investment for 5-10 years – giving you time to achieve the capital growth and income you need to average out the costs and make it a successful investment.
[1] http://stampduty.calculatorsaustralia.com.au/stamp-duty-nsw
by Jodie | Apr 28, 2016 | Australian Economy, Budget, Economy
Despite much talk, the Federal Government announced over the weekend they won’t be making any changes to negative gearing in the upcoming budget.
The news of course, was met with familiar cries that the tax concession distorts property prices and encourages speculative investing. According to our sources at BlueWealth Property, some of the most vocal criticism came from the Grattan Institute who released a paper titled ‘Hot property: negative gearing and capital gains tax.’
In a break from tradition, the Prime Minister responded to criticism of the announcement in writing, saying that ‘the [Grattan Institute’s] paper is littered with factually incorrect statements, claims that are unsupported by evidence and direct contradictions. And its economic analysis in many places leaves a lot to be desired.’
Mr Turnbull further builds the case for negative gearing by noting the effect of its removal on the rental market and income equality..
It seems most likely that the Liberal, (or Labor government as the case may be) will maintain negative gearing in its current form.
Read the Prime Ministers full response here
For more on the impact of Labour’s policy, click here.
by Jodie | Mar 14, 2016 | Advisers, Business
Well, they say that the only thing constant is change and that’s certainly true, especially for the Team at Wealth Planning Partners in 2016.
Not so long ago, we had five advisers on the team, and this is now down to three.
Chad Enstrom has decided to leave the financial services industry and move on to follow his dreams, and Russell Sheasby has started his own company with a new Dealer.
That leaves Leanne Brazel, Richard LeComte and Amanda Cassar at Wealth Planning Partners, continuing to take care of your financial needs.
Amanda has recently completed her SMSF Specialist Adviser Accreditation with the SMSF Association and attended their annual conference in Adelaide, jam packed with technical data and learnings. If a Self Managed Super Fund is something you’ve been thinking about, she’s the one to ask!
Richard continues to specialise in Insurance Risk strategies for his clients and without Leanne, the office just wouldn’t run as it should.
We’re quite proud that Leanne was recently nominated for Practice Manager of the Year at the FSP iLearn conference in Melbourne and we’re pleased to announce she was a finalist in her category.
An Award that took the Team by surprise was Amanda winning the Casey Kinnaird Memorial Award for Outstanding Contribution to the Community for the work done over the past 12 months with The Hunger Project.
It’s also now heading close to the end of financial year, so if you’ve been thinking about topping up your super, salary sacrifice or making the most of some tax deductions, now’s the time to get in and get the ball rolling. Don’t hesitate to give us a call if you’d like to discuss any strategies that are relevant to your situation.
by Jodie | Mar 14, 2016 | Advisers, Finances, Money, Wealth
We all have good intentions when it comes to our wealth. We want to save more, pay down debt, invest well and do better financially… and yet, most of us never meet our wealth or financial goals.
Other things easily get in the way of our resolutions and we get to another January 1st and give it our best shot for a couple of weeks before petering out yet again.
One of the best things you can do for yourself is to find someone to be accountable to. Who is a friend, colleague, family member or professional who is not going to let you give up, who will check up on you, get you to raise your standards and meet those goals you’ve decided you want to achieve?
People who get their goals, quite often set up consequences for themselves, should they not achieve what they set out to do.
As an example, if you don’t pay $1000 of the credit card by a certain date, tell a friend you will donate some money to a charity and make it painful! $500 not $20. Or you’ll give up one of your favourite things for a month, or something else that’s designed to keep you in line. What’ll hurt enough to keep you motivated?
What is a goal in the area of your personal wealth that you’ve wanted to achieve for years and kept putting off?
Who is the best person that comes to mind who you can ask for help from? Send them an email or call them today! Make things start happening for you!
