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Taxation Newsletter – March 2016
February 29, 2016 | 
Author Tax relief for small businesses that restructure on the way
Small businesses are important to the Australian economy, as they facilitate growth and innovation. However, as a small business develops over time, its initial legal structure may no longer be suitable for the business. Where a business has to restructure to accommodate growth, the transfer of assets from one legal structure to another could give rise to unwanted tax liabilities, even though the underlying economic ownership remains the same.
With this in mind, the Government has proposed amendments to the law to provide tax relief for small businesses that restructure on a genuine basis. If the legislative amendments are enacted as proposed, the changes would apply for restructures occurring on or after 1 July 2016. In introducing the Bill, the Assistant Treasurer said that this legislation completes the Government’s $5.5 billion Growing Jobs and Small Business package. Ms O’Dwyer said the Bill will reduce risk and complexity, and will make it easier for businesses to grow.
Trusts’ ABNs to be cancelled if no longer carrying on business
The ATO has advised that the Registrar of the Australian Business Register (ABR) will begin cancelling the Australian Business Numbers (ABNs) of approximately 220,000 trusts, where there is evidence they are no longer carrying on an enterprise.
A trust’s ABN will be cancelled where available information indicates that the trust has not lodged business activity statements and/or trust income tax returns for the last two years. Exclusions to these ABN
cancellations apply for trusts that are registered with the Australian Charities and Not-for-profits Commission (ACNC) or are non-reporting members of a GST or income tax group.
The ATO said entities will receive a letter if their ABNs had been cancelled. This letter will include the reason for the cancellation, and a phone number to ring to have the ABN reinstated immediately if the entity does not agree with the decision.
Withholding tax for car allowances
Car expense deductions for individuals were simplified from 1 July 2015. Employers who pay their employees a car allowance need to withhold tax on the amount they pay over 66c per kilometre. If employers have not been doing this, the ATO notes they should start now to avoid their employees having a tax debt.
TIP: Employers should consider having a discussion with affected employees about whether to increase the withholding amount for the remainder of the financial year to cover the shortfall.
If you have any questions, please contact our office.
Travellers with student debts need to update contact details
Australians with a Higher Education Loan Programme (HELP) debt and/or a Trade Support Loans (TSL) debt who are moving overseas for longer than six months will need to provide the ATO with their overseas contact details within seven days of leaving the country. International contact details can be provided to the ATO using its online services (eg an ATO account linked to myGov).
From the 2016–2017 income year, anyone who has a HELP or TSL debt and earns above the minimum repayment threshold will be required to make repayments regardless of where they live.
TIP: Students’ debt will be indexed each year until it is paid off. You can make additional voluntary repayments at any time, including from overseas, to reduce the balance of your debt.
Small business tax concession refused as threshold test failed
The small business capital gains tax (CGT) concessions contained in the tax law allow eligible small businesses to access tax concessions on capital gains made from the sale of certain CGT assets.
There are threshold tests for accessing the concessions outlined in the tax law. Importantly, the taxpayer must be a small business entity, or a partner in a partnership that is a small business entity, or the taxpayer’s net assets, together with certain associated entities’, must not exceed $6 million. This is the Maximum Net Asset Value (MNAV) test.
A recent case before the Federal Court examined whether a taxpayer was entitled to the tax concessions. In particular, the Court looked at whether the taxpayer had correctly excluded a debt (a pre-1998 loan) from the MNAV test calculation. The taxpayer had not included the pre-1998 loan on the basis that it had no value, being “statute-barred” under the relevant state legislation, in this instance the Limitation of Actions Act 1936 (SA).
However, the Court dismissed the taxpayer’s appeal. The Court confirmed that the pre-1998 loan could not be regarded as having no value, and that the loan amount of $1.1 million should be included in the MNAV test calculation. The inclusion of the amount meant that the sum of the net values of the relevant CGT assets exceeded the $6 million MNAV threshold. As a result, the small business CGT concessions were not available to the taxpayer.
TIP: This case highlights the importance of satisfying the basic conditions to access the small business CGT concessions, in particular when an asset originally excluded from the MNAV test is subsequently included in the test calculation and results in the breach of the MNAV threshold.
“Wildly excessive” tax deduction claims refused
A professional sales commission agent has been largely unsuccessful before the Administrative Appeals Tribunal (AAT) in claiming tax deductions for work-
related expenses, including home office expenses, various grocery items and overtime meal allowances.
The case concerned the taxpayer’s deduction claims in his 2011 and 2012 tax returns. The taxpayer worked as a professional sales commission agent and his employer did not provide him with a dedicated office or workspace. His original claims (which changed throughout the course of the AAT proceeding) totalled over $63,000 for 2010–2011 and over $53,000 for 2011–12, representing at least 30% of his employment income. During the proceedings, the taxpayer abandoned a claim for a $5,388 payment to his seven-year-old son for his “secretarial assistance”.
The AAT found that the taxpayer’s home office claims were “wildly excessive”, and that the taxpayer and his representatives failed to critically analyse how these claims helped produce the taxpayer’s assessable income. The AAT rejected everything claimed under “staff and client amenities”, as it considered the products were overwhelmingly consumed by the taxpayer’s family, making the claims “outrageous and utterly unacceptable”. The claimed meal allowances were also rejected in their entirety. However, the AAT did not disturb heating and lighting expenses allowed by the Commissioner.
GST credits not available for payments on behalf of super funds
The ATO has issued GST Determination GSTD 2016/1, which provides the Commissioner’s view on whether employers can claim input tax credits for expenses paid on behalf of superannuation funds.
The Determination notes that employers may pay expenses on behalf of superannuation funds for administrative convenience. It provides that an employer is not entitled to an input tax credit if a superannuation fund makes an acquisition and the employer pays the expense on the fund’s behalf (eg the super fund obtains legal advice but the employer pays the legal adviser). This is because the advice is supplied to the fund and not to the employer. However, the Determination notes that the fund may be entitled to claim a reduced input tax credit under the financial supply rules (contained in the GST Act), provided the requirements of those rules are satisfied.
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Property Newsletter – February 2016
Which way are rates heading in 2016?
After 18 consecutive months of leaving rates on hold, the Reserve Bank of Australia slashed the official cash rate twice in 2015. So what can we expect for the year ahead?
The two rate cuts that we saw in 2015, the first in February and the second in May, were largely expected for the year, it was just a matter of when.
At the time, there were two key reasons for the RBA to drop rates.
Firstly, the national economy had remained stuck in a sluggish mode despite the cash rate sitting at a record low of 2.5% for 18 consecutive months.
Another reason was the stubbornly-high Australian dollar, which was still trading above US$0.80 at the start of 2015.
Now that we’re 12 months on, and the official cash rate sits at 2%, what can we expect in 2016?
Following its December board meeting, the Reserve Bank of Australia said that it was happy to leave rates unchanged because the prospects for an improvement in economic conditions had firmed in recent months.
It also noted that the national economy continued to grow at a moderate pace, and that an improvement in business conditions had flowed through to stronger growth in employment.
This more upbeat outlook would suggest that, should the economic environment continue to improve, the RBA is likely to leave rates on hold for the short term.
This decision would also be supported by the lower Australian dollar, which has been trading just below US$0.70 for the majority of January.
However, the RBA also left the door open for a possible rate cut. During its December board meeting it said that it was comfortable with the current rate of inflation, which would allow it to drop rates if necessary.
By present indications, though, we’re likely to see rates remain on hold.
However, should growth begin to slow, or the RBA feels it necessary to give the national economy a shot in the arm, then we could be in for a drop in rates in 2016 – possibly to 1.75% or even 1.5%.
Either way, the current financial environment provides property investors with access to cheap finance, and presents an opportune time to build their portfolios.
Furthermore, it’s also a good time for property owners with established mortgages to consider refinancing to secure a better deal.
For more information or a review of your current mortgage, please contact out finance team today.
Don’t become another statistic in 2016
Although it’s widely known that building a large property portfolio can create significant personal wealth, a staggering 3 out of 4 investors only own 1 investment property.
Whatever your reasons for becoming a property investor, be it to retire earlier or provide a more financially secure future for your family, simply buying just 1 property will unlikely be enough to achieve your goals.
The truth is that investors will generally have to build a portfolio of at least 3 – 5 properties to generate sufficient wealth – that’s provided these are high-performing properties as well.
To some, this might sound like a big undertaking but with the correct strategy, financial structures and by acquiring the right properties, it’s within reach of most investors over the longer term.
Despite this, statistics from the Australian Taxation Office show that 72% of property investors own just 1 investment property.
The reasons why investors never go on to acquire successive properties vary significantly.
Some lose sight of the big picture, they might become distracted by particular life circumstances or they may choose to go on an overseas holiday or buy a new car instead of investing.
Others may even believe that they’ll be okay owning just 1 investment property because they’ll also have superannuation as well as the government pension to live off.
However, for many people superannuation alone will not provide them with the lifestyle they want.
Furthermore, your government pension starts reducing when you reach specific income or asset thresholds.
For singles, the pension will start reducing when your annual income is greater than $4,212, while couples can only earn $7,488 annually before their pension is affected.
Alternatively, your pension begins reducing when you have assets over $205,500 for singles, and $291,500 for couples.
Whichever test results in the lowest pension payable is the one that the government will apply.
In 2016, don’t become another statistic. If your property portfolio is still relatively small, start taking the necessary steps needed to build a larger property portfolio that will allow you to retire comfortably.
Property development: selling vs holding
It’s a question that’s hotly debated among property investors – should I sell or hold my residential property development? So what is the best strategy to take?
Unfortunately, the answer isn’t always straightforward. The decision whether to sell or hold a development is dependent on a number of factors, such as market conditions, type of development, your financial position as well as your goals.
Your goals for undertaking the development in the first place should play a big part in determining your decision.
Do you want to increase rental returns? Maybe you want to make a cash profit? Or perhaps you want to refinance the development and utilise the equity in the property?
It’s important to be clear on your goals from the outset as this can have a major influence on many aspects of the development.
In most cases in smaller developments, it’s best to hold some or all of the development, provided it’s financially feasible for you to do so and the development is in a good location with long-term growth fundamentals.
This is because when you sell a development, you automatically lose a large portion of the profits through sales agent fees, marketing, income tax (from the cash profit you’ve made) and GST.
Alternatively, investors may be able to develop and sell a portion of the project. For example, in a 6-unit development, the investor may sell 3 units and hold the other 3.
If you do decide to sell, it’s important to hold a good understanding of the market. Selling in a downturn may significantly reduce your profits and it might be better to hold the development until the next upswing in the cycle.
The number 1 rule for a successful leasing
Regardless of rental market conditions, all property investors should follow this 1 rule to ensure they can successfully lease their property.
When it comes time to finding a new tenant for your investment property, there are a number of jobs you and your property manager will need to take care of.
This includes creating a holistic marketing strategy, tending to any maintenance issues, ensuring you comply with the necessary legal requirements and presenting the property in an appealing manner, among others.
However, there is one rule that, if not followed, will make it difficult for you to lease your property – even if you engage the best property manager in Australia.
That is to be realistic about the weekly rental rate that your property can achieve.
While we would all like to receive more rental income, the reality is that your property will only achieve what the market is prepared to pay.
Before you set the rent, ask yourself the following questions:
1) What’s the level of demand for rental properties in the market at present? Is it high or low?
2) How much rental income are comparable properties in the area achieving?
3) What’s the vacancy rate in the area?
4) What’s the length of time that properties are remaining on the market?
A good property manager will complete this research for you to determine a realistic rental price.
Remember, if your asking price is too high, your property may sit vacant for an extended period of time and you’ll end up losing more money than if you’d initially set the rent at a more realistic price.
Riverside suburb boasts premium appeal
This tightly-held suburb borders the Swan River, is in close proximity to major employment hubs and will greatly benefit from a soon-to-be completed makeover of its local activity centre.
East Fremantle comprises a population of about 7,000 residents with a median age of 42 years.
73.1% of the properties in the suburb are fully owned or being purchased with just 24.2% of the stock available for rent, which is below the Perth average of 29.2%.
One of the suburb’s main drawcards is its large frontage on the Swan River and adjoining parks and facilities along the foreshore.
Its local activity centre, Richmond Quarter, has been undergoing a major redevelopment and will feature a new vibrant, mixed-use hub including residential apartments, office space and restaurants.
The state government recently announced that it planned to sell the Leeuwin Barracks site, which sits on the riverfront in East Fremantle.
The land is expected to fetch up to $100 million and be redeveloped by real estate developers for premium housing.
East Fremantle is also conveniently located just 2 kilometres from Fremantle and 17km from the Perth CBD.
With 71% of dwellings listed as houses, the suburb comprises a blend of property, from houses built in the early 1900s to modern new constructions.
The average house price sits at $1.2 million and the area is zoned mostly low density residential (R12.5 to R20) with higher zoning along Canning Highway.
37.1% of the population also identify as working professionals, which is almost twice the Perth average of 19.9%, and is reflective of the affluent residential population.
There are two primary schools in the suburb – Richmond Primary and East Fremantle Primary.
What are the top investment destinations for 2016?
Momentum Wealth kicks off its 2016 seminar series later this month with a look at what’s in store for property investors in the year ahead.
Our first seminar for the year, ‘National Property Market 2016’, will explain the best investment destinations, how to find an investment property that will outperform the market and the danger spots to avoid, among other investment strategies.
Following the seminar, attendees will also have the opportunity to speak with our consultants over drinks and canapes.
More than 180 property enthusiasts attended last year’s event and we’re expecting another big crowd in 2016.
The seminar comes at a time when a number of property markets around Australia are nearing significant turning points, with some coming off the boil while others are expected to experience an upswing.
In the midst of these shifting markets, it’s crucial for investors to stay informed and understand the various factors that will influence these markets in the year ahead.
To secure your seat for the evening, simply follow this link. Tickets are only $29 per person or $39 for a pair.
We look forward to seeing you there!
Property syndicates: Why join forces?
It might seem unusual to pool your money with a group of people you’ve never met, but there are a number of advantages to joining forces to invest in property.
Whether it be a residential property development or the acquisition of a commercial property, both investment vehicles can deliver great returns to investors.
However, both of these options also share a common problem – they’re both highly capital intensive.
The reality is that many investors simply don’t have the financial capacity to pursue these investment options by themselves.
For example, a good-quality commercial property would typically cost at least $2 million to purchase and usually require a loan-to-value ratio of 65-70%.
Likewise, while small-scale residential developments are typically feasible, most investors wouldn’t be able to finance a boutique apartment development, which could cost anywhere from $2 million – $7 million to complete.
However, a property syndicate is a practical option that allows investors to gain exposure to these larger assets but at a fraction of the cost.
The advantage of these larger assets, such as residential developments and commercial property, is that they typically provide investors with higher returns or profits and access to better quality investments than they could achieve on their own.
By investing in these assets via a syndicate, you’ll also have peace of mind that the investments are managed/developed by an experienced team, provided you engage a reputable company with a good track record.
When investing in a commercial property trust, another advantage for investors is that they’re generally not liable for the trusts’ loans and won’t be subject to commercial loan reviews or personal guarantees.
While property syndicates aren’t suited to every investor, they should be at least considered to determine if they fit into your property investment plan and are aligned with your investment goals.
Momentum Wealth regularly offers opportunities to investors to participate in property syndicates. Find out more by contacting our corporate property services team.
Are you suited to commercial investments?
Acquiring the right commercial property will prove to be a great investment asset, however what type of investors are suited to commercial and why?
Despite much of the media coverage focusing on the residential market, commercial property can play an important role in anyone’s property portfolio.
However, it’s typically only suited to investors who have reached a certain point in their investment journey.
So who are these investors?
To put it simply, commercial property is usually suited to investors who want more cash flow.
Generally, commercial property offers net yields of between 7-9%, compared to residential property of between 3-4%, and therefore provides investors with a handy stream of income.
Those about to retire should consider investing in commercial property as a means of substituting their salary once they’ve finished work.
However, you don’t necessarily need to be nearing retirement to consider commercial.
Investors who have already built a sizeable portfolio of residential properties should also consider commercial as a means of diversification.
As a general rule of thumb, investors should hold at least 4-5 residential properties before buying commercial assets. However, each investors’ situation is unique and advice should be taken from a reputable property investment advisor.
Investors considering investing in commercial property should also possess the following:
- Hold substantial equity as commercial property is a higher price point
- Understand the risks and returns as these are different from residential property
- Is comfortable with longer vacancy periods, which is typical in the commercial market
- Has the time to do significant research to find a good commercial property (or willing to appoint a buyer’s agent to do the work for them)
An alternative to direct investment is to consider investing via a syndicate or unit trust, where you own a smaller piece of the property but you have the ability to diversify and spread your risk through a wider number of properties.
Tax Newsletter – February 2016
Single Touch Payroll pilot and tax offset proposed
The Government is looking to cut red tape for employers by simplifying tax and superannuation reporting obligations through its initiative called Single Touch Payroll (STP). “Employers currently manually report Pay As You Go (PAYG) withholdings to the ATO,” the Assistant Treasurer Kelly O’Dwyer said. “Under the new STP this information will be automatically reported to the ATO through Standard Business Reporting (SBR) software.”
The ATO will be conducting a pilot in the first half of 2017 focusing on small businesses. From 1 July 2017, all businesses will be able to commence STP reporting, with the option to make voluntary payments. In addition, the ATO will transition employers with 20 or more employees to STP. From 1 July 2018, employers with 20 or more employees will be required to use STP enabled software for reporting to the ATO. The Government will make a decision on timing for rolling out STP reporting for employers with less than 20 employees after the pilot is completed.
To assist small businesses with a turnover of less than $2 million, the Government will offer a $100 non-refundable tax offset for SBR-enabled software. This offset is proposed to apply from 1 July 2017 and for software purchases or subscriptions made in the 2017–2018 financial year only.
TIP: Although there are benefits to streamline reporting, some commentators have highlighted cashflow concerns relating to making more frequent payments. Real time pay day reporting also gives the ATO an earlier intervention signal to contact struggling businesses. If you have any questions, please contact our office.
GST simplified accounting methods for small food retailers
Simplified GST accounting methods are available for small food retailers if they meet certain eligibility conditions. Many small food retailers buy and sell products that are taxable as well as products that are GST-free. Accurately identifying and recording GST-free sales separately from those that are taxable can be difficult, which makes accounting for GST complicated. However, there are five simplified GST accounting methods to choose from to help businesses meet their GST obligations. These include the Business norms method, Stock purchases method, Snapshot method, Sales percentage method, and the Purchases Snapshot method.
TIP: Business needs change and it may be prudent to take a look at whether there are advantages with adopting a SAM. Do you need help deciding which method would be best for your small food business? Please contact the office for assistance or further information.
Government’s Innovation Agenda contains tax incentives
The Government is looking to support innovation and its recently released Innovation Agenda proposes a suite of new tax and business incentive measures. A key proposal is to provide concessional tax treatment to encourage early stage investors to support innovative startups. Under the proposal, investors will receive a 20% non-refundable tax offset based on the amount of their investment (capped at $200,000 per investor, per year), as well as a 10-year capital gains tax exemption for investments held for three years. The Government has advised that the scheme is expected to commence during 2016 as soon as supporting legislative amendments are passed into law.
TIP: The incentive is proposed to be available for investments in companies that: undertake an eligible business (scope to be determined); that were incorporated during the last three income years; aren’t listed on any stock exchange; and have expenditure and income of less than $1 million and $200,000 in the previous income year, respectively.
ATO data matching real property transactions
The ATO has issued a notice announcing that it will be acquiring details of real property transactions for the period 20 September 1985 to 30 June 2017 from various state revenue offices and tenancy boards. In relation to rental properties, the ATO is seeking details of rent paid and contact details of landlords. In relation to property transfers, the ATO is seeking details of the transfers, including details of the transferors and transferees and any state land tax and/or stamp duty concessions sought.
The information will be matched to the ATO’s data holdings. The ATO said an objective of the data matching program is to ensure taxpayers are correctly meeting their taxation obligations. The ATO expects that around 31 million records for each year will be obtained. Based on current data holdings, the ATO said records relating to approximately 11.3 million individuals are expected to be matched.
TIP: The data matching program goes all the way back to the start of the capital gains tax (CGT) regime in September 1985. Some commentators suggest this could be the ATO looking for CGT revenue on previously undeclared capital gains or incorrectly claimed CGT concessions. Note also that the ATO intends to carry on its data matching program from 2017. It will no longer announce details of its program as law changes will make it mandatory by then for revenue authorities and other entities to report real property transactions to the ATO.
Tax treatment of earnout rights on business sale
A Bill has been introduced in Parliament that proposes to amend the tax law to change the capital gains tax treatment of the sale and purchase of businesses involving certain earnout rights (ie rights to future payments linked to the performance of an asset or assets after sale). As a result of these amendments, capital gains and losses arising in respect of look-through earnout rights will be disregarded. Instead, payments received or paid under the earnout arrangements will affect the capital proceeds and cost base of the underlying asset or assets to which the earnout arrangement relates.
Clarifying the CGT treatment of earnout rights has been a long time coming – it was first announced on 12 May 2010 as part of the 2010–2011 Budget. The amendments contained in the Bill are proposed to apply from 24 April 2015. However, note there will be protections for taxpayers who have undertaken other actions in reasonable anticipation of announcements made about the amendments in the 2010–2011 Budget.
TIP: The ATO has released details of its administrative treatment pending the formal enactment of the legislation. Please contact our office for further information.
Are your super saving goals on track?
The new calendar year is a good time to conduct a superannuation health check and set some new goals to help boost superannuation savings. Although there have been no seismic shifts in the superannuation landscape of late, it may be prudent to reacquaint yourself with the rules. The following are some considerations.
- Make extra contributions – the general concessional contributions cap is $30,000 for 2015–2016. For people aged 50 and over, there is a higher concessional contributions cap of $35,000 for 2015–2016.
- Check super savings – it is a good habit to check your super balance regularly. You may also want to protect your super from identity crime. For example, you may want to change passwords for accounts that can be viewed online.
- Look for small lost super accounts – the threshold below which small lost super accounts will be required to be transferred to the ATO has increased to $4,000 (from December 2015).
- Consolidate multiple super fund accounts – you may want to consider consolidating multiple super fund accounts. This may help avoid paying multiple fees, reduce paper work, and make it easier to keep track of your super.
- Salary sacrifice super – you may want to ask your employer about salary sacrificing super, or you may want to consider reviewing existing arrangements with your employer.
TIP: Professional advice should be obtained before implementing a new retirement saving strategy. Please contact our office to discuss your circumstances.
Property Newsletter – January 2016
3 financial structures that can limit your borrowing capacity
Don’t let your financial structure hold you back from achieving your property goals in 2016 – here are 3 common finance mistakes that can limit an investor’s borrowing capacity.
When seeking to build a sizeable portfolio, many investors focus on the need to find properties that will grow in significant value.
However, investors also need to be aware of their financial structures because the wrong arrangements can severely constrain one’s borrowing capacity, and subsequently their ability to build a large property portfolio.
Here are 3 finance structures that investors should typically avoid.
Cross Collateralisation
Cross collateralisation is when a lender uses two or more of your properties as security to issue you a loan. This effectively keeps you tied to the one lender and can reduce your ability to borrow – in some instances, your lender may stop lending to you altogether. It’s best to secure each loan with one property only to maximise your lending capacity.
Ownership structures
Some accountants or financial planners may suggest you buy property via a trust. While a trust ownership may help with asset protection, this type of ownership structure can also limit an investor’s borrowing capacity. Some lenders will not allow the negative gearing claims for loan serviceability where the property is owned in a trust. Before establishing a trust to buy an investment property, it’s best to engage the advice of a mortgage broker who specialises in investor loans to assess your borrowing capacity.
Joint and several liability loans
When borrowing jointly with another person, you are each individually responsible for the entire debt but only entitled to half the rental income. This can adversely affect your borrowing capacity outside of the joint purchase, particularly if you’re buying with someone other than your partner.
Easing affordability provides bargain buys for investors
Housing affordability in two capital cities across Australia has improved making it a great time for investors to find some bargain buys and build their portfolios.
Both Perth and Brisbane currently represent great value for money for property investors.
Housing affordability has improved in both cities over the past year, according to credit rating agency Moodys.
In Perth, the average household spends about 21% of their income on mortgage repayments, down from 23.9% a year earlier.
This is the lowest level since 2004, and is a result of the low interest rate environment, migration easing from its recent peak and moderating prices over the past year.
Similarly, conditions have also eased in Brisbane where households spend about 23% of their income on mortgage repayments.
The improvement in the housing market in the Queensland capital can be attributed to many of the same reasons seen in Perth.
As both of these cities continue to transition from the resources boom to develop strong and diversified economies, investors are presented with a window of opportunity to acquire high-performing properties at reasonable prices.
Both cities represent great value for money, particularly when compared to Sydney and Melbourne, where households spend 39% and 32%, respectively, of their income on mortgage repayments.
Given the strong, long-term fundamentals of both Perth and Brisbane, it’s a great time for savvy investors to take advantage of the improved buying conditions.
Take action to achieve your development goals
If you’ve always wanted to become a property developer, make 2016 the year that you realise your dreams.
For those who have never done it before, the thought of developing your own property can be a daunting, yet highly exciting prospect.
However, property development doesn’t have to be scary or a highly onerous process. You just have to align yourself with the right people who hold the right skills to get the job done.
Engaging a company to manage the development of your property can be one of the easiest and most financially rewarding ways of developing a property.
Essentially, a lot of the leg work, that is researching and finding the best designers, builders and trades people has already been completed for you.
Furthermore, a development manager will also have a comprehensive understanding of the required processes and procedures, including when to gain council approvals, liaising with utilities providers and suppliers, insurance coverage and contract negotiations and terms, among other issues.
Whether it’s completing a retain and build or the construction of a boutique apartment complex, a development manager will work with you to obtain the most cost effective outcomes, by minimising delays and costs and maximising profits.
A good development manager will have a good track record of delivering a variety of projects. Ask to see or inspect some of their existing projects under construction and even speak with previous clients.
Property development doesn’t necessarily mean having to get your hands dirty or completing physical labour on the weekends.
Additionally, given the efficiencies that a good development manager can deliver, it’s easy to see the value in paying a professional to oversee a development for you.
So if you’ve always aspired to complete a property development, make 2016 the year to fulfil your goals.
Mark the start of 2016 with a cosmetic facelift
With the advent of a new year it can be a great opportunity for investors to complete some minor cosmetic upgrades to keep your properties looking modern and tenants happy.
Part and parcel of owning a property portfolio is the need to complete maintenance and upgrades to prevent properties from becoming run down and looking tired.
While it’s easy to see this as a cost, a better way of looking at this is the upgrades will help to maximise rents – some of these costs can also be claimed as a tax deduction. Furthermore, all savvy property investors should have a specific budget set a side each year for completing such cosmetic works.
In the spirit of a fresh year, New Year’s resolutions and so forth, it can be a great time to complete any necessary cosmetic upgrades your properties might need.
This could include laying new carpet, applying a fresh coat of paint and changing fixtures and fittings, such as taps, door handles and light switches.
Property investors should also consider completing cosmetic upgrades to the exterior as well.
Cleaning outside walls, painting or replacing rusting gutters and completing landscaping can significantly lift the appearance of a property.
Sometimes just focusing on 1 or 2 bigger tasks, such a landscaping or painting internal walls, can make a big difference for the tenant, particularly if the garden is overgrown or paint job is over a decade old.
If you’re using a good property manager, they’ll be able to provide you with a list of recommendations as to the best and most cost effective upgrades to complete.
Syndicates prove popular with investors
Momentum Wealth’s most recent residential development syndicate proved highly popular with investors after closing fully subscribed last month.
The Momentum Wealth Prime Property Development Fund (PPDF), which was launched in November last year, received commitments totalling $4 million and was closed in early December.
The PPDF comes on the back of our highly successful Carine Rise development syndicate, and will target the acquisition of a development site and subsequent construction of a boutique apartment complex.
The PPDF also follows the successful launch of the MPS Diversified Property Trust in July 2015 by our affiliated company, Mair Property Funds.
Following its launch, the MPS Diversified Trusts completed two successful raisings totalling over $6 million.
The funds were used to acquire high-quality commercial properties in Victoria and Western Australia, which will provide robust returns to investors.
Keep an eye out for further syndicates and trusts from Momentum Wealth and Mair Property Funds in the forthcoming year.
Finance Newsletter – December 2015/January 2016
RATE CRASH!
Do you have the best rate available?
If your interest rate is over 3.99% variable then you may be able to save thousands per year by changing loans and or banks. I have access to a Major bank that is currently offering customers a 3.99% variable rate .This NOT a honeymoon rate, discount is for the life of the loan. Conditions apply – owner occupied homes 80% LVR maximum. If you are interested in saving thousands per year call Mercia finance to see if we can show you how to benefit from a better rate. If you think fixing your rate is s good idea you can currently fix an owner occupied home loan for 3.95% for 3 years.
Investors will have read that most banks are increasing the rate on investment loans. This includes current investment loans. If you are a property investor check your rates and find out if these increases apply to you. If you are not sure Ask Mercia finance for an obligation free loan check. Some institutions are not increasing the rates for investors. So this is a good time to make sure you have the best loan for your circumstances.
If you have questions regarding any type of loan, call Dan Goodridge on 04144 233 40. Our service is free of charge to you the borrower and we have access to all the major lenders in WA. Mercia home loans is not closing during Christmas break, so call us anytime. After hours is OK.