Financial Planning articles

Why You Should Use a Buyers Agent

: October 9, 2015 3:00 pm : Uncategorized

Buyers Agent

In the highly competitive Sydney property market, investors need every edge they can get and using a buyer’s agent is one way of doing so.

Unlike a real-estate agent who acts in the best interests of the seller, a buyer’s agent is a person who represents the buyer in property negotiations. A buyer’s agent can provide investors with a number of advantages.

For example, when using a buyer’s agent, they may be able to access properties that were made for private sale or that have not yet been listed, essentially giving you access to a larger pool of real estate to choose from.

Furthermore, a buyer’s agent is able to represent you during the negotiation stage of the property transaction. In many cases this means the buyer’s agent is able to use their negotiating skills to save you thousands of dollars in the property purchase.

A buyer’s agent could also use their expertise to assist you in selecting a property from your shortlist that has promising capital gains or rental returns, whichever best suits your property portfolio. A buyer’s agent could even help you construct this shortlist based on your criteria.

It is also an important to note that knowing exactly what you want from your investment property is crucial in using a buyer’s agent. If you fail to be exact about what you’re after, you may find yourself disappointed with the properties your buyer’s agent presents to you.

If you think a buyer’s agent may be worth considering for your property investment pursuit, it is advisable to contact a financial planner who will be able to refer you to a quality buyer’s agent and also assist you with any additional issues or considerations that need to be taken into account for your real estate investment.

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The Alternative to the Age Old Question of Renting vs Buying

: October 6, 2015 3:00 pm : Uncategorized

rent vs buy

With house prices outpacing wage growth and reaching new highs all across Sydney, many of us are starting to question how great the Australian dream of owning your own home really is and if it is even possible.

However, many force themselves to see that owning their own home is the only option, with the alternative of renting, representing dead money and not building up any equity in an asset.

But in the recent years, in response to Sydney’s recent housing boom, many savvy households have adopted a third alternative to just simply renting or buying.

Their strategy involves renting in your current place of residence and having a mortgage for a portfolio of investment properties.

Clearly, this is an interesting alternative to the simple “rent or buy” decision and it comes with a number of very distinct advantages.

Firstly, the rent you pay for living in your own home over the long term will be less than paying the interest costs on a home loan for living in your own home.

Secondly, you are still able to build equity in your investment properties and often, these properties are able to provide better return on investment as you selected these properties, not because you wanted to live in them, but because they offer strong capital gains and rental return potential.

Furthermore, this strategy offsets much of the interest repayments of your mortgage with the rental returns of the investment properties whilst any losses are tax deductible.

Are you thinking about making the switch to a home ownership strategy such as this one? If you are or would like more information regarding it, contact a financial advisor who can help you determine whether or not this strategy best suits your financial needs.

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How To Avoid Land Tax for Properties

: October 2, 2015 3:00 pm : Uncategorized

Land Tax

In February of this year, I wrote an article explaining how property investors could completely avoid land tax by using multiple self managed super accounts to assure the total land value of their property portfolio would be spread. Hence, they will never exceed the tax-free threshold.

However, for those of us that may be unwilling to perform this strategy, there is another method that can exempt you from land tax.

Land tax is a form of taxation applied to the value of any land that is not an individual’s primary place of residence.

Since this tax is a state based tax, only the value of land in each individual state is considered. This allows you to have a larger portfolio in terms of land value and still avoid land tax if you purchase land in separate states.

Consider this hypothetical situation with Ali, who is a property investor.

Ali owns an investment property in Sydney valued at $310,000. He wants to expand his property portfolio with a property that has land valued at approximately $200,000.  If he purchases this second property in New South Wales, he will be obliged to pay $1,348 in land tax as he will exceed the New South Wales land tax free threshold of $432,000 by $78,000.

However, if Ali purchases this second property in Queensland he will have land valued under the land tax free threshold of Queensland ($600,000) and New South Wales ($432,000) and hence be exempt from land tax.

If you are looking to expand your property portfolio, it is advised that you contact a financial advisor to see if you may be able to use this strategy to avoid land tax in your portfolio.

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Stories from our clients: Kaboodle Hampers

: April 17, 2015 4:50 pm : Interesting Article, Uncategorized

TasteofEverything1I find it a privilege to work with so many interesting and diverse clients ranging from organic farmers to brain surgeons.  We even work with a few retired Accountants who have more colorful stories than one could ever imagine would come out of the mouth of an Accountant.

I have often thought it would be great to interview a few people and share their stories.

Sydney couple Scott and Kirsten Leys have been receiving financial advice from us over the past few years and over the past 12 months, they have worked very hard to launch their online gift shop business – Kaboodle Hampers.

We ask Scott and Kirsten 7 business and personal questions and hope that you enjoy reading.

I also encourage you to check out their website www.kaboodlehampers.com.au as it has many great gift ideas!  There is also a promo code in the article for a 15% discount on your next order.

 

1 – Tell us about what your business does?

Kaboodle Hampers is an Australian online gift shop specialising in premium gift hampers designed to make someone’s day.

Our gourmet food & wine hampers and luxury pamper gift baskets are the perfect solution for anyone looking for unique gift ideas – whether it’s for your mum, best mate, top client or entire staff. And new parents will love our gift hampers filled with top-notch baby products.

Browse our online range of quality hampers at www.kaboodlehampers.com.au, place your order and have the hampers delivered to any address in Australia.

We deliver Australia-wide for only $9.95, dispatching orders daily from our Sydney office.

Need stylish hampers for your company or event? We offer branding options, gift customisation and bulk discounts. We’ll gladly source other products you’d like to include. See our corporate orders page.


2 – Why did you want to run a business in this field?

My ideal field of business would be one that has a positive effect on people, giving gifts to people always puts a smile on ones face. Combine that with an online business as online shopping is becoming increasingly popular, with 85% of Internet browsers purchase online these days.

After many months of research I decided I wanted to design and create hampers. I knew it was a competitive market though if I aim for quality in our products, service and customer service we would do really well.


3 – What do you enjoy most about the business?

The creativity of designing beautiful gifts for your families, friends, business colleagues and clients and knowing we are making people happy each day.


4 – What is the greatest opportunity and challenge that you currently face? 

The door of opportunity opened for us Christmas 2014 which confirmed we had the winning ticket for opportunities with our hand picking quality products, and beautifully customised gift boxes. Our clients were very impressed!

The biggest challenge for Kaboodle Hampers is marketing and sales. There are so many ways to marketing a business and choosing what works for your business and in budget is our greatest challenge.


5 – What business advice can you give to others?

In all business you need qualified people in certain areas and finding those people is hard. Do your researches ask loads of question and maybe ask for trials. It did take some time though I’m now extremely fortunate enough to have a great team of professional who help in those areas.


6 – Can you provide any special offer to our readers?

Use Promo code ADVISOR to receive 15% of your next order. Valid 1 use per user.


7 – If you could spend one day as an animal, which animal would it be and why?

I would be a bird because their main duties are searching for tasty food and sightseeing. I have a great love for finer foods and after travelling for 4 years in my younger days, I continue to enjoy sightseeing and travelling the world.

Veuve_Yellow_Brut_1

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2014 Budget summary

: May 14, 2014 1:48 am : Uncategorized

In every decade there is one budget that ends up being a game-changer in Australia. The Budgets of 1988 (return to surplus), 1996 (spending reductions), 2000 (GST) were strategies that permanently altered the economic dynamics of the Australian economy.

This years Budget is likely to join this list, as it facilitates the move to smaller government, more infrastructure investment and less household dependency on government payments in the out-years.

However, don’t expect all the Budget changes to become law…

Given this Budget has many contentious spending cuts and tax increases, the path of the plan through the Australian Parliament won’t be as easy as it was in the Howard years or even for Gillard Government.

Indeed, at no time in the next three years will the Coalition have control of the Senate and given the unusually large, and split, cross bench the Budget is unlikely to get through the legislature unscathed. In the current Senate the Coalition has 34 seats and needs 39 to pass legislation. The ALP has 31and the Greens have 9 and there is one independent and democratic labour party member.

Supply bills will pass automatically, which is the standard operating procedures today, but changes in programs cuts or tax increases through the Senate is likely to be somewhat problematic, especially the deficit levy, fuel excise increase, pension growth decreases and healthcare copayments. The situation won’t improve with the new Senate in July either.

 

James’s 17 top areas of focus in Budget 2014

 

1. High income earners levy

A 2% levy will apply to those earning an income above $180,000. The impost is for three years only from 1 July 2014 to 30 June 2017 and means that those earning above $180,000 will pay the extra 2% levy on all income in excess of $180,000.

That is if you are earning $200,000 you will be faced with an additional 2% on $20,000 – a total levy of $400, or if you are earning $300,000 you will be paying a 2% impost on $120,000 – or $2400.

 

2. Healthcare to cost more

From 1 July 2015, previously bulk-billed patients can expect a charge of $7 per visit towards the cost of standard GP consultations and out-of-hospital pathology and imaging services.

For concessional patients and children under 16 years, the contribution will be limited to the first 10 visits each calendar year.

 

3. Age pension age to increase to 70 by 2035

The Budget confirmed the Treasurer’s earlier announcement that the age pension age will increase to age 70 by the year 2035. This means that those born on or after 1 January 1966 (currently 48 years of age or younger) will have to wait until they are 70 before they are eligible for the age pension.

 

4. Paid parental leave to commence

The government will proceed with the paid parental leave scheme from 1 July 2015. Under the scheme mothers will receive up to 26 weeks of salary up to a cap of $100,000 per annum.

This translates into a maximum payment of $50,000 over the 26 week period. Women earning over $100,000 a year will receive paid parental leave but it will be capped at an equivalent of $100,000 per annum. This scheme will be funded via a 1.5% levy on companies earning taxable income over $5 million.

 

5. Simplifying Medicare safety net arrangement

From 1 January 2016, a new Medicare Safety Net will replace the existing Original Medicare Safety Net, Extended Medicare Safety Net and Greatest Permissible Gap.

The new Medicare Safety Net will contribute towards out-of-pocket costs for Medicare eligible out-of-hospital services.

Once the annual thresholds have been met in a calendar year Medicare will pay 80% of any subsequent out-of-pocket costs, capped at 150% of the Medicare Benefit Schedule (MBS) fee.

The annual thresholds are:

- $400 for concessional singles and concessional families

- $700 for non-concessional FTB-A families and non-concessional singles

- $1,000 for everyone else.

 

6. Fuel excise to rise (except for aviation fuels) – indexation to be re-established

The government will secure funding for additional road infrastructure projects by re-introducing biannual indexation by the CPI of excise and excise-equivalent customs duty for all fuels except aviation fuels.

This will commence from 1 August 2014. The diesel fuel rebate is unchanged, meaning it will continue to apply to excise, including the excise increase.

 

7. Impact on Equity Markets

Winners

The sectors that will benefit most are in the transport and superannuation sectors.

Transport will benefit from the promise for funding to build or complete various road and rail infrastructure. This will be positive in the short and long term for construction companies (including Leighton LEI), and in the longer term for toll road operators (including TCL) and road and rail companies in general (TOL, Asciano AIO) when existing traffic bottlenecks are improved.

Significant opportunities from Government downsizing (outsourcing) and the sales of government departments.  Banks like Macquarie Group will benefit from this activity via involvement of the sales.

Losers

Mining services companies are expected to be impacted from the forecast significant decline in resource related spending over the next few years (except for LNG projects, which are projected to remain strong).

Some negative impacts on consumer discretionary spending affecting companies like JB Hi Fi.

 

8. Business gains and losses

The Government remains committed to cutting the company tax rate by 1.5% from 1 July 2015 to 28.5%.

For companies earning more than $5,000,000 in taxable income, this reduction will be offset by the 1.5% levy to fund the paid parental leave scheme which also commences from 1 July 2015.

For small to medium businesses, it will provide a boost to profits.

 

9. Focus on pensions

Pension payments will have the asset and income test thresholds frozen for 3 years from 1 July 2017.  The Government will index pensions to inflation rather than wages from September 2017, this is expected to reduce pension increases.

 

10. We will be contributing more super

The Super Guarantee will increase from 1 July 2014 to 9.5% (from 9.25% currently). Itwill then remain frozen for 4 years, after which it will increase 0.5% a year until it reaches 12% in July 2022.

 

11. And when you have to keep working…

The Government will introduce a new wage subsidy, Restart, to encourage businesses to employ Australians who are aged 50 and over and have been on income support for at least six months. Employers may receive up to $10,000 over 24 months in Government assistance.

 

12. The Government economic outlook

The government forecasts inflation of 2.25 per cent, below the RBA’s forecast range in fiscal 2015 of 2.5 per cent to 3.5 per cent.

The unemployment rate is forecast to lift to 6.25 per cent by the end of fiscal 2015, and remain around that level in 2015-16.

Treasury has forecast a A$29.8 billion deficit for the 12 months through June 2015, down from A$49.9 billion this fiscal year, with shortfalls narrowing in the following three years

The government expects the deficit to shrink to $2.8bn by 2017-18, with a return to surplus tipped for the end of the decade. The government projects surpluses to build to over one per cent of GDP by 2024-25.

 

13. Family Tax Benefit changes: two-year freeze on rates and other changes

The government will freeze the current Family Tax Benefit (FTB) payment rates for two years from 1 July 2014.

Under this measure, indexation of the maximum and base rates of FTB Part A and the rate of FTB Part B will be paused until 1 July 2016.

The Treasurer also announced other changes to FTB, including a reduction in the FTB Part B primary earner income limit from $150,000 per annum to $100,000 per annum, with effect from 1 July 2015.

 

14. Higher education – good and bad

The Government will reduce the minimum income threshold for repayment of Higher Education Loan Programme (HELP) debts from 1 July 2016. A new 2% repayment threshold will be set at 90% of the minimum 4% threshold that would otherwise have applied in 2016-17 (estimated to be $50,638). There will be no other change to current repayment rates.

Furthermore, the annual indexation method applied to HELP debts will be changed from the Consumer Price Index to a rate equivalent to the 10 year Australian Government bond yield (capped at 6.0% p.a.) from 1 June 2016.

On the other hand, from 1 July 2014, a tertiary loan system will be extended to TAFE students who will have access to 4-year concessional trade support loans tohelp them complete their trade course.

 

15. Option to withdraw excess non-concessional contributions

The government will give individuals the option of withdrawing excess non-concessional contributions made from 1 July 2013 and any associated earnings, with thoseearnings to be taxed at the individual’s marginal tax rate.

(Non-concessional contributions notably include non-deductible personal contributions made from a member’s after-tax income.)

Currently, superannuation contributions that exceed the non-concessional contributions cap are taxed punitively at 46.5%. The proposed new measure will bring the tax treatment of excess non-concessional contributions in line with that for excess concessional contributions, for which taxpayers already have a withdrawal option.

 

16. New assistance for small businesses

The government will establish the “Small Business and Family Enterprise Ombudsman” to act as a one-stop shop and a single entry point as a means for small businesses to find out about government services and programs.

A unit will also be setup in the Department of Finance to provide specialist advice on contracts and to ensure small businesses are not disadvantaged as part of Commonwealth departments’ tendering and procurement processes.

 

17. Reminder: Increase in the Medicare Levy from 1 July 2014

As per the 2013 Budget, the Medicare Levy will increase from 1.5% to 2.0% from 1 July 2014 to provide funding for Disability Care Australia. This measure has already been legislated

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Getting ready to retire starts now!

: March 31, 2014 11:38 pm : Uncategorized

When you approach retirement, you begin to think about what you will do with all your free time. Go on holidays, tick boxes on your bucket list, learn to play an instrument because you never found the time before, or maybe keep working as you need to maintain social contact.

However, one thing to keep in mind is that retirement is like being on a weekend all year long.  What happens most of your weekends?  You spend money that you earned during the week.

To make the most of your retirement, you should think about your goals and priorities, and assess your retirement resources. Having goals is a good thing, but do you have enough resources to achieve them?  In most cases, retirement may come from a mix of superannuation and Centrelink payments and that may not be sufficient to achieve your retirement dreams.  So, you will either have to reduce your goals or try to keep working if you can still do so.

Furthermore, you may want to provide some financial assistance to your children or grandchildren to help them achieve their goals.

It is never too early to think about retirement, owing an investment property or contributing to your superannuation will provide you with the extra funds you need in retirement

Planning ahead will help you cover any unexpected expenses and assist you in achieving all your goals. If you have more money than you can spend in retirement, that’s always a good thing for your children.

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