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Tax Newsletter – April 2012
May 8, 2012 | 
Author Tax anti-avoidance rules to be tightened
The Government has announced that it will amend the general anti-avoidance provisions in the tax law. First introduced in 1981, the provisions broadly allow the Commissioner to cancel a tax benefit obtained in connection with a scheme subject to some conditions. According to the Government, the changes will ensure the provisions will continue to be effective in countering tax avoidance schemes that are carried out as part of broader commercial transactions. The announcement was made on 1 March 2012 and the Government proposed that the changes would apply to schemes entered into or carried out after that date.
Some commentators have expressed alarm over the Government’s announcement, saying the move will only cause greater uncertainty for businesses when considering key transactions and that it is an overreaction to the Commissioner’s recent court case losses. In particular, the arguments have centred on the announced retrospective start date of 1 March 2012 with little detail on the proposed changes. The Government said it intends to release draft legislation for public consultation before introducing the amendments in Parliament later this year.
Check your small business benchmarks regularly
The ATO has recently updated its small business benchmarks. It has also added two new activity statement benchmark ratios for non-capital purchases and GST-free sales. The ATO uses the benchmarks to identify businesses that it considers may not be reporting some or all of their income. The ATO can also use the benchmarks to quantify income that it considers not reported. According to the ATO, the benchmarks provide the “most accurate predictor of business turnover for each industry”.
It recommended that taxpayers review their relevant business benchmarks regularly.
The ATO has published benchmarks for a wide range of industries, including:
- accommodation and food services;
- building and construction trade services;
- education, training, recreation and support services;
- health care and personal services;
- manufacturing;
- professional, scientific and technical services;
- retail trade; and
- transport, postal and warehousing.
ATO data matching coffee sellers and builders
The ATO has announced data matching programs targeting coffee sellers and hardware store trade account holders as part of its latest compliance activities to tackle the cash economy. The ATO said it has already obtained data from a number of coffee suppliers and a major warehouse chain and from NSW Fair Trading, Queensland Building Services Authority, and the Government of South Australia, Consumer and Business Services. Under the “coffee suppliers” data matching program, the ATO expects to match records of more than 8,000 individuals to ensure they are reporting all their business income. In relation to the “building industry” program, the ATO says around 20,000 individuals will have purchases cross-checked with reported income.
TIP: If you are concerned these data matching programs will affect you, please contact our office.
Private health insurance rebate changes
A package of Bills to means test the 30% private health insurance rebate has made its way through Parliament. The changes will mean the amount of rebate available will depend on an income test for each financial year for individuals and families. The changes will apply from 1 July 2012 and will introduce three new “Private Health Insurance Incentive Tiers”. In conjunction with this, and also from 1 July 2012, the rate of Medicare levy surcharge for individuals and families without private patient hospital cover will increase depending on their level of income.
TIP: Individuals and families should be mindful of the 1 July 2012 start date. Further, some health insurance companies have indicated their intention to increase premiums. Please contact our office for more information.
| Table: Private Health Insurance Incentive Tiers from 1 July 2012 | ||||||
| Tier | Income ($) | Private health insurance rebate | Medicare levy surcharge | |||
| Singles | Families | Under 65 yrs old | 65 – 69 years old | 70 years or over | ||
| 0 – 84,000 | 0 – 168,000 | 30% | 35% | 40% | Nil | |
| 1 | 84,001 – 97,000 | 168,001 – 194,000 | 20% | 25% | 30% | 1% |
| 2 | 97,001 -130,000 | 194,001 – 260,000 | 10% | 15% | 20% | 1.25% |
| 3 | 130,001+ | 260,001+ | 0% | 0% | 0% | 1.5% |
Note: The thresholds increase annually, based on growth in Average Weekly Ordinary Time Earnings (AWOTE). Single parents and couples (including de facto couples) are subject to the family tiers. For families with children, the thresholds are increased by $1,500 for each child after the first.
Tribunal finds businessman a resident for tax purposes
A businessman has been unsuccessful before the Administrative Appeals Tribunal in arguing that he was not a resident of Australia for tax purposes as he had spent most of his time overseas. The businessman was a director of a company incorporated in NSW and he worked for that company as a sales agent on commission, selling Australian residential property to overseas investors mainly in Indonesia. However, the Tribunal noted, among other things, the businessman’s family home in Australia and confirmed the tax assessments and penalties issued by the Commissioner of Taxation for the 2002, 2003, 2005 and 2006 income years. The Tribunal concluded the businessman had his home, or “settled place of abode”, in Australia and was therefore a resident of Australia for tax purposes.
TIP: A taxpayer’s country of residence and the source of income are important issues. As a general principle, an Australian resident is subject to tax in Australia on income derived from all (worldwide) sources, whereas a foreign resident is only subject to tax in Australia on income from Australian sources. There are a number of tests under the tax law. If an individual passes any of the tests, the individual will be considered a “resident of Australia” for Australian domestic tax purposes.
Super rules breached for investment in related entities
In a recent decision, the Administrative Appeals Tribunal affirmed a non-compliance notice issued to a self-managed superannuation fund (SMSF). The Commissioner of Taxation had issued the notice for regulatory breaches in respect of “book entry” loans made via a related party trust. Broadly, the case concerned members of an SMSF who were also directors of the corporate trustee of the fund and other related trusts, including one which operated a family business. The SMSF had invested in a related unit trust which in turn had financial dealings with the family business. The Tribunal confirmed the non-compliance notice after finding there were breaches of the “sole purpose test” and “in-house asset rules” under the superannuation law.
TIP: Broadly, the “sole purpose test” seeks to ensure that superannuation money is set aside and only applied to fund members’ benefits in retirement, whereas the “in-house asset rules” generally restrict an SMSF from having more than 5% of its total assets invested in “in-house assets”. An “in-house asset” can include a loan to, or investment in, a “related party” of the fund. The rules can be complex, so it is important for trustees to carefully consider their investments to avoid falling foul of the rules.
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Property Newsletter – April 2012
An End to the “Dullsville” Tag?
The next ten years will unveil a very different Perth than the one we’re used to. With more than 60 hectares of land set for development, Perth is set to experience significant economic gains and property investors will reap the rewards.
It may very well be the end of an era for Perth. The city famously dubbed as ‘Dullsville’ is set to undergo some radical transformations which could finally put an end to this unflattering tag.
In what is likely to be the biggest ever change seen in Perth’s short 183 year history, the CBD and surrounding areas are set to be overhauled in a radical move to breathe new life into the city. Fast forward ten years, perhaps even just five, and we’ll be seeing a very different side to Perth.
In this futuristic vision of central Perth with the unsightly railway line now sunk, you’ll be able to easily walk from the CBD through serene gardens to the culinary delights of Northbridge, or even catch a public concert in the newly built City Square along the way. New waterways will be carved into the bank along Riverside Drive creating an inlet and man-made island. Here in this riverside haven, you can take a morning stroll along the promenade beside the water’s edge followed by breakfast or lunch in one of the many waterside bars and restaurants. Or, you could head to Kings Park with a picnic before catching a cable car down to the inlet, hiring a bike, and setting off to explore the new city sights on wheels. Further along towards East Perth, you’ll now be able to dock your boat at a mooring by the Causeway and indulge in a little retail therapy while the kids take a dip at the newly built public beach on the foreshore.
All these projects will result in more than 60 hectares of land being developed, more than $10 billion dollars spent on infrastructure and development, more than 500,000sqm of commercial and retail space being created, and the addition of approximately 7000 new dwellings (mostly apartments) into the area.
Whether you agree with the specific plans for these projects or not, it’s hard to dispute that this rejuvenation is exactly what a growing, cosmopolitan city like Perth needs. For some time, Perth has lagged behind other more progressive cities both in Australia and around the world with a city hub that is grossly underutilised and lacking amenity and vibrancy. It’s been a poor reflection on what is otherwise one of the most beautiful and liveable cities in the world.
Importantly, these projects also help address some key economic issues. For many years the city has struggled to supply enough office and commercial space to the market, with Perth having the most expensive office rents in the nation and a chronic shortage of short-term accommodation (just 200 beds have been added to the CBD in the past 5 years). Perth is also growing faster than any other city in Australia and is projected to have the highest percentage growth in population over the next 15 and 45 years.
With land becoming scarcer, Perth will need more multi-residential developments and urban infill to cater to the larger population and these new, smaller households. In an era of growing concern on environmental impacts, the redevelopment of the city centre will also help create a more transit-orientated and sustainable local community that contributes a smaller carbon footprint.
All of this is good news for Perth investors. This ‘new look’ Perth will attract more tourists and their dollars, more jobs and more new residents needing homes, increased consumer spending by locals and increased expenditure and investment by businesses. The projects will help Perth move forward in leaps and bounds by resolving rather than hindering economic problem areas. Along with the strength of WA’s resources sector, Perth should therefore experience significant growth and prosperity over coming years which is necessary to support a rising property market.
Demand for properties in and nearby the Perth CBD will be likely to increase the most as a result of these transformative projects, however Perth overall will probably feel the ripple effects to varying degrees. While apartments have traditionally not been as popular as in the eastern states, that trend is probably set to change. I would however stress caution upon investing in one of the 7000 odd apartments due for construction in these areas. Although demand may increase, supply is also likely to be high which doesn’t make for particularly strong capital growth. The apartment would need to have a key point of difference that would be difficult to replicate to be considered a wise investment in my books.
The future of Perth is certainly looking bright and I’m pleased to see that the prosperity Perth has experienced over the recent decade is starting to filter through to projects such as these, which enhance the city and the economy. It’s just another reason why you’ll be hard pressed to find a better city to invest in over the next 10 years.
Acquisitions: Selecting a Suitable Renovations Candidate – Part One
Many first time renovators make the mistake of rushing into their first project. They are excited and ready to start and unfortunately end up purchasing a property that is not suitable for renovation. They convince themselves that they will be able to fix the problems that impair the property. Sound familiar?
There are a number of characteristics you should look for when scouting a suitable property renovation candidate:
Similar style
People typically prefer to live in a relatively homogenous neighbourhood, where the properties have a similar style. For example, a run down character or period home in a character or period home area would generally be a good prospect.
Open floor plan
Open floor plans and flexible living are a desired part of today’s lifestyle. The floor plan needs to flow well or an opportunity needs to exist for the property to be altered (preferably requiring only minor structural change). The property must be able to accommodate today’s living requirements, such as large dining areas for entertaining and predominantly double bedrooms. You should always have a tape measure with you when inspecting property to renovate.
Privacy
An important feature in any property is the ability to maintain privacy and present a pleasant outdoor entertaining area. Being overlooked by adjoining properties is a serious detriment, especially if it cannot be addressed.
Off Street Parking
If it is not available, you should assess whether it can be added – perhaps to the rear via a paved lane or perhaps the front if it does not compromise the property? Will the council permit covered parking to be installed? If there’s no opportunity to provide parking then this becomes a flaw that may make it harder to sell or rent.
Property with a sense of style or charm
Some older homes that were butchered in the 60’s and 70’s by horrible alterations can possibly be returned to their former self. If the property was build in the 50’s through to the 80’s that it is less likely to have any style or charm that is appreciated today.
Natural light
Does the solar orientation of the property provide for an aspect that lets plenty of winter sunshine into the courtyard areas and the living spaces? Is the home protected from summer sun? Does the inside of the home have lots of natural light? Can dark spaces be fixed, perhaps with skylights? Natural light and solar orientation are becoming more important in the purchase decision.
So be aware, although all properties can be renovated not all properties can be renovated successfully and for a profit. Look out for our next newsletter in which we’ll discuss some of the less desirable characteristics to avoid.
Current Property News: Market Commentary
The latest population projections for WA, released recently by Planning Minister John Day, show that by 2026 the state’s population will grow to over 3 million thanks to strength of the economy.
WA’s population boom expected to be even bigger
The latest population projections for WA, released recently by Planning Minister John Day, show that by 2026 the state’s population will grow to over 3 million. This new view of the future is 400,000 more than previous projections made in 2006.
It is based on a recovery in the fertility rate and the assumption that WA’s record of good economic performance will continue for at least another 20 years, which will drive overseas migration.
In light of the data, Mr Day called for more urban consolidation in Perth and emphasised that outdated practices of pushing the boundaries of the Perth metropolitan area were no longer best practice.
“In other words we can’t continue to rely on peripheral urban developments, greenfields developments, producing urban sprawl as by far the dominant way to grow our city” Mr Day said.
Hot Property
In this month’s Hot Property section, we go back to see how one of our previous buys in Carlisle has performed 12 months on.
Around 12 months ago, we shared with our readers an acquisition in the suburb of Carlisle for a client who had a tight $400,000 budget. They were specifically looking for a property with good capital growth potential, but also a reasonable cash flow to aid in the shorter term.
Buyers’ agent Ray Chua located a fantastic 1970’s duplex half for them in the suburb of Carlisle that met the required criteria. Not only was Ray able to strategically purchase the property under market value, but he saw the potential in creating instant equity and a higher rental yield through a small renovation of the property.
The client paid $316,000 for the property. Upon settlement, the client proceeded to undertake approximately $11,000 of renovations; this included painting, replacing floor coverings, refurbishing the kitchen, and opening up the living area.
12 months on, a bank valuation was recently ordered on the property. Despite what some would say has been a gloomy period for the Perth property market, the property has netted the owners $90,000 in equity according to this valuation. Some of the improved value is attributed to the renovation which brought the property up to market standards, although the main lesson here is that purchasing the right property with strong growth fundamentals can pay dividends no matter what the state of the market.
SPECIAL FEATURE: Momentum Wealth’s Rising Stars
In this quarterly special feature, we profile one of our star client’s who are well on their way to achieving their wealth creation goals. This month we speak with a couple nearing retirement proving that you’re never too old to start your wealth creation journey.
Hugh Soord and his wife Anne had dabbled in the odd property investment here and there, but it took moving closer towards their golden years to kick-start them into taking property investment more seriously.
With their three children now all grown up and retirement looming, Hugh started contemplating their financial future. Having sold previous investments and not convinced superannuation would provide them with a comfortable retirement, it took a chance discussion with a work colleague (coincidently, a client of Momentum Wealth) that put Hugh and Anne on the right path and in touch with buyers’ agent Mark Casey.
Although the couple had bought and sold some investment properties in earlier years, Hugh openly admits that they just didn’t have the know-how to do it successfully, hence why they had made the decision to ultimately sell each of them.
“We were trying to do things on our own and we thought we were making the right decisions but we weren’t necessarily buying property in the right place at the right time, and we really had no idea how to keep building our property portfolio”, says Hugh.
However, with Mark and the team at Momentum Wealth on side, they now felt in safe hands and confident in the expertise of Mark to help them make the right decisions for their future.
After evaluating a few different properties, Mark found a property in Kingsley that hadn’t even hit the market yet. He proceeded to run background checks on the property, presented comparisons to other properties that were being considered, and gave Hugh and his wife a frank and detailed evaluation of the property’s investment potential. Armed with this information and after a private inspection of the property, Hugh gave the nod and Mark proceeded to secure the property for $485,250. Not only is it a structurally sound 4 bedroom home in very good condition, but it is also a duplex site with the potential to be a triplex site in the future.
Before the dust has even settled on this purchase, Hugh and his wife are already preparing to do it all again with another investment property purchase in about 6 months time. As for the Kingsley property, they would like to hold the property for 5-10 years before looking at developing the land to its full potential. When that time comes, Hugh plans to involve their children in the re-development as a way to give them experience in property investing; something he feels he was never lucky enough to have and learn from at their age.
“For me I wish I’d known about property investment in this way. I mean I knew it was out there but I didn’t know how to do it. If I’d known how to do it at a much younger age I’d be better off now than I am. So that’s what I’m doing with my kids”, remarks Hugh.
Buoyed by their experience so far, Hugh and Anne are confident they’ve made the right move to secure their financial future. It’s a journey they say you don’t need to take on your own, and they count the guidance and advice they’ve received from Mark as being instrumental to their success. When looking for an investment property, Hugh has now learnt the true value of thorough research.
“Find out as much as you can about the property that you’re thinking about purchasing, because if you’re looking at it from an investment perspective, you may be making the wrong decision if you haven’t done that homework and Momentum Wealth does that homework for you”.
As for their age, Hugh and Anne have certainly proven that it’s never too late to invest in property. Hugh admits that investing at his age was initially a bit frightening, with a fear of losing money or worse, your own home. But the fear of not having enough money and assets when he retires was a far scarier prospect that made investing well worth the risk.
Finance: Improving Your Chances of Securing a High Valuation
Leveraging equity from your current properties is essential when building a property portfolio. But what can you do to improve your chances of securing a high valuation.
For most investors, buying further property often means having to refinance with the bank in order to gain access to their equity.
Many people do complain that valuations come in lower than expected. In fairness to valuers, it’s not the easiest job because no two houses are alike. Valuers need to assess the land, location, physical attributes such as age, condition and size of the property, and analyse and compare it to sales of similar properties in the area. Generally speaking they will look back on about six months worth of data but this will all depend on market conditions. If conditions are quite volatile, it could be less; if stable it could be more.
Valuations can, and do, often fall on the lower end of the price spectrum for various reasons. Firstly, valuers have limited time to turnaround valuations. They usually spend their whole day rushing from place to place to return a full valuation in 48 hours or less. This can result in the overlooking of important information. Secondly, the valuer takes legal responsibility for their estimate, meaning they can be held accountable in the event a property needs to be sold and the lender can’t recoup their costs because it didn’t meet the valuation figure. This liability risk can cause valuers to err on the side of caution. Thirdly, as mentioned earlier, it may be because there are limited recent sales to compare against which generally means the valuer will make a more cautious estimation.
So what can you do to improve your chances of a better valuation or challenge an existing valuation you’re already received?
It’s always best to do your homework and preparation before the valuation. There are not many instances I know of where someone has been able to get a valuer to revise their valuation, unless they have been able to present some new evidence which wasn’t considered or available at the time. Generally, you’d probably need evidence of at least two to three recent comparable sales that support your higher estimate in order to have any chance of success. But there are a couple of things you might like to consider prior to a valuation in order to get the best possible outcome:
Prepare a summary for the valuer
Valuers are busy people so it’s a good idea to prepare a short document summarising aspects of the property to give to the valuer prior to the inspection. Use this document to bring to their attention key selling features such as proximity to schools, transport and other amenities, the size of the land, number of living areas, completed renovations, views, and less obvious features like smart wiring. You may also like to propose your own estimate of the property’s value. This should be based on actual comparable sales data (which you should present to substantiate your estimate), not listings currently on the market. Talk to your property manager or a sales agent to see if they will help you obtain access to such information. A sales agent may also be able to shed light on sales within the past month or two that wouldn’t yet be publicly available. Do try to be as objective as possible and draw on a range of recent comparable properties, not just those that support your highest estimate. A valuer is more likely to consider all this information if they feel it is valuable and impartial, but won’t give it a second glance if they sense you’re information is unrealistic or biased.
Order your own valuation
You could also consider organising your own accredited valuation. Typically they cost between $300 and $600. If you go down this path, I recommend using a valuer on the bank’s panel and doing so prior to lodging your refinancing application. If you are happy with the valuation, ask to have it assigned to your lender when lodging your application. Doing it this way gives you more control over the valuation and the bank less control. There is a good chance under these circumstances that the bank may accept your provided valuation but if not, it may still have some influence on their own ordered valuation. You should be aware though that some banks may want to organise their own independent valuation regardless of what you do.
Aim for the right type of valuation
As mentioned earlier, there are different types of valuations – desktop, kerbside (drive-by), and full. The type of valuation you receive could potentially work for or against you. For example, if your property is a bit of shambles from the outside but fully renovated within, then you will want to get a full valuation to ensure the valuer inspects the property internally. You may simply ask the bank for the valuation you wish, but if they don’t oblige you may be able to influence the type of valuation you receive. For example, if you borrow a large sum of the property’s value or a not already a customer of the bank you are applying at, this would more than likely guarantee the bank pursues a full valuation.
Present your property well
A misconception amongst investors is that a valuer will be able to see past the mess and clutter of you or your tenants and value the property on its fundamentals. This is untrue. The valuer needs to base their estimation on what your property would get today, presented as it currently stands. We all know poorly presented homes can turn off buyers, hence why presentation is important to securing the best valuation. Remove the beat up old cars decaying in the front yard, mow the lawn, tidy up, de-clutter and fix up the old peeling paint.
Leveraging equity in your properties is a key wealth creation strategy so getting a fair and strong valuation is critical to maximising your portfolio. If you have had a poor valuation, or believe you will, give some of these suggestions a go or talk to one of our finance brokers who will be able to help you improve your chances.
Momentum Wealth and its affiliated entities are not Accountants or Financial Planners. While all information is provided in good faith, you should seek your own independent advice in relation to all matters regarding investing, taxation and superannuation.
Property Management: Protecting Your Interests With the Right Lease Term
Little thought is often given to the length of a lease. However, choosing the right lease length can benefit owners in more ways than one.
When leasing a property, one of the areas that often doesn’t receive enough thought is the length of the lease.
Most residential leases have a typical length of six months, twelve months or even twenty-four months, but there are circumstances where it’s beneficial to deviate from the norm. If you have plans to renovate or sell the property in the near future, then it would be wise to consider a shorter lease as it’s very difficult (if not impossible) to move a tenant on when they are signed under a fixed lease. However, shorter leases can expose owners to more frequent periods of vacancy and higher management and maintenance costs.
On the other hand, longer leases provide stability and security for owners, which can be particularly important for those who have a large mortgage on the property. The risk in offering a long lease is that owners can be stuck with tenants they aren’t happy with and have less flexibility over their investment should their personal or financial circumstances change.
Owners and property managers should also consider the overall portfolio of the owner when setting the lease length. Preferably, owners should not have all their properties’ leases expiring close to one another. In the event one or more tenants decide to move on, the owner could potentially be left with more than one property being vacant at the same time. Lease periods should instead be staggered to protect the owner’s cash flow. This could mean setting a more unusual length like 8 months or 13 months for some leases.
There may also be times of year when leasing a property can be more difficult, for example the week of Christmas. In this situation, the expiration date of the lease should ideally be adjusted to fall a few weeks before or after this time to minimiseany possible vacancy period.
Good property managers don’t just manage your property; they appreciate the needs of an investor and always go one step further to ensure your best interests are managed also.
Development: Protecting Yourself When Acquiring Your Development Opportunity
You’ve done your research and now you are ready to put an offer in for your development property. It sounds straight forward, but there are some potential traps that you need to avoid.
Although you may have conducted substantial research prior to placing your offer, it’s unlikely that you would have had the time or the opportunity to cover all your bases. With that in mind, it’s an absolute necessity to have a ‘due diligence’ clause in your contract of purchase. This gives you the ability to walk away if you are not satisfied for any reason with the outcome. Despite what some people may believe, a finance clause is not adequate!
You must also remember that sales agents work for the seller, and for that reason their contracts are skewed to suit the seller’s needs and not necessarily yours. A properly written due diligence clause is essential; a poorly written one could cost you tens or even hundreds of thousands of dollars. Using a buyer’s agent is a good way to manage this process as they should have the appropriate clauses to insert into the contract and can also protect your identity and motives for purchasing to give you leverage.
Where possible you should aim to negotiate a reasonable period for due diligence, enough for you to undertake all the extra checks you need to. And also, a longer settlement is also advisable.
Once your offer and all terms and conditions have been accepted, then it’s time for you to get started on your post-acquisition feasibility study. Start by refining your numbers (particularly in light of any new information you acquire), and begin conducting your due diligence. This is your opportunity to look at the property in more depth, find out if there are any nasty surprises, and walk away from the deal if you’re no longer comfortable.
Your due diligence can encompass a number of things. Start by talking more freely with sales agents about realistic sale prices and get the builders on site to ensure your costing estimates are valid. Consider undertaking a soil analysis to ascertain what sort of foundations might be required (amongst other things), investigate the services available and where they are located (such as sewerage lines), and check the title for any restrictive covenants or easements. Talk with surrounding property owners about the site and your plans – this will give you an indication if you’re in for a battle! And don’t forget to liaise with the local council about your plans and their requirements to make sure your proposed development has a strong chance of approval.
There is lots of work to be done once you decide you’re ready to place an offer, it’s definitely not the time to rest on your laurels. But know that if you go into it with your eyes open, you can rest assured that you’ve done all you can to protect yourself and make your development a success.
Wealth Protection: Shopping for the Right Income Protection
Three centuries ago, the original premise of life risk insurance was based on the assumption that an unexpected event, such as death would affect another party detrimentally. If no detriment to another party resulted from such an event, there was nothing to insure. Insurance is most definitely not designed to be a windfall, if it was, it would be classed as gambling.
Travel forward to today and nothing about that basic premise has changed. To compensate for the detrimental effect of an unforeseen event is still what insurance is all about. The available tools have changed however, such that advisers now have a plethora of products with which to work to solve the risk management issues of clients. But apart from the tools – products – which we use to craft protection packages, advisers can also offer clients their capacity to provide advice.
This, alas, is where the process is still falling down. It is all too often that the advice provided has been driven by just a few fact finding questions which have not adequately uncovered the totality of a client family’s detriment. Rather than asking “What are all the circumstances which would be of detriment within your whole family (and business for that matter) sphere, if you were to die?” The common questions imply “What would happen to your spouse and children if you were to die?” This is not broad enough, if an adviser is to do a truly thorough job during the advice process.
If an architect were to construct a plan for a high-rise office building without considering the safety exits, the plan would be flawed and the building, if it went ahead, would not be appropriately catering to the risks which the building’s occupants may have to face. Planning for such a substantial project must employ breadth – and depth – of vision. This idea similarly applies to the “sphere of risk”. It simply widens the aperture over the client’s circumstances so that all detriment likely to result from an event is discovered and addressed in the advice given.
This is done by asking questions beyond the impact on just the spouse and children, it is finding out about any particular group of people who would be impacted if an event occurred, such as parents, adult children, ex-wife or ex-husband, disabled niece or cousin for whom the client is legal guardian, etc.
The lack of attention to the building safety exits would be easily noticed and rectified by the engineers and builders. However in the risk insurance advising arena, the missed elements of risk insurance advice and the subsequent plan are most likely to be noticed only when it comes time to claim. Like the fire in a building with no exits available, the client’s circumstances might well be in trouble at this point.
The risks which will pop up as ‘unplanned-for problems’ might be so familiar to the client that they don’t even think of them. These risks might sit at the edge of the adviser’s vision but are often shadowed by the ‘main game’: that is the risks and consequent needs of the immediate family. The adviser or client may never have thought of these peripheral risks during the advice process.
Many clients have not been through or their adviser may not have provided a thorough enough advice process and this unfortunately only becomes evident at the worst time, a claim. Are you comfortable that you have catered for the appropriate safety exits?
Justin McManus is a representative of AXA Financial Planning Limited, ABN 21 0005 799 977 AFSL 234663. This information has been prepared without taking account of your objectives, financial situation or needs. Before acting on this information you should consider its appropriateness, having regard to your objectives, financial situation and needs
Tax Newsletter – March 2012
Wrong property valuations can be costly
A few cases recently before the courts have centred on the issue of property valuations. If a valuation of a property is not above board, the ramifications could include a larger tax bill. The Australian Tax Office (ATO) has recently highlighted what it believes to be recurring issues concerning valuations of property in relation to the application of the GST margin scheme provisions. Often, when certain elements of a valuation are outside an acceptable range, the ATO says the ultimate valuation is higher than it should be resulting in a lower margin and less GST payable. One common area of contention is the use of purported comparable sales figures in making a valuation. The ATO has warned that comparable sales must withstand objective scrutiny of their comparability.
ATO to hold refunds pending checks
The government has announced that it will amend the tax law to allow the Tax Commissioner to hold onto refunds pending “verification checks”. Assistant Treasurer Mark Arbib said the legislation would provide the Commissioner with “legislative discretion” to delay refunding certain amounts to taxpayers pending necessary verification of their claims. Interested stakeholders have a very small window of time to comment on the draft legislation which is in response to a recent Full Federal Court decision which required the Commissioner to immediately pay to a taxpayer GST refunds worth around $930,000. The ATO had withheld the money pending the outcome of its audit of the taxpayer’s entitlement to the refunds.
Tricky excess super refund proposal
The government has released for comment draft legislation to implement its proposal to give individuals a once-only option to be refunded excess superannuation concessional contributions up to $10,000 from 1 July 2011. The proposal aims to stem the instances of inadvertent breaches of the caps which result in the “excess contributions tax”. However, there have been criticisms that the $10,000 amount may not be enough. Another concern is the application start date of 1 July 2011. Many commentators have said it should apply from at least the 2009–2010 year when the concessional contribution caps were halved to $25,000 ($50,000 for those over age 50 until 30 June 2012).
TIP: Although the proposed refund may provide some welcome relief in limited situations, it is not without its complexities. Some commentators have indicated that many individuals could still find themselves inadvertently breaching the relevant caps. If you have any questions, please contact our office.
No more deductions with Youth Allowance
The government is expected to introduce legislative amendments soon to prevent deductions against all government assistance payments for individuals from 1 July 2011, following a controversial High Court decision in 2010 (the Anstis decision). In that decision, the High Court had allowed an individual who incurred study expenses in gaining Youth Allowance to deduct the expenses from her assessable income. The government’s proposed legislative amendments will also affect students on Austudy and ABSTUDY.
Personal services income test failed
The Federal Court has recently confirmed an earlier Tribunal decision that the taxpayer had failed the “unrelated clients” test for the purposes of the personal services income (PSI) rules in the tax law in relation to a drafting business he carried on through his private company. However, the Court found the Tribunal had not properly applied the “business premises” test.
This issue has been sent back to the Tribunal for
re-determination.
TIP: Many consultants and contractors operate as a sole trader or through a company, partnership or trust. In many cases, the income received for the work they do may be classified as PSI if certain tests are not passed. However, the PSI rules do not apply to individuals or interposed entities carrying on a “personal services business”. It should be noted the ATO has recently advised that it will hold onto some income tax returns to check for PSI where appropriate. Please contact our office for any assistance.
Unfranked dividends from off-market share buy-back
A taxpayer has recently been unsuccessful before the Administrative Appeals Tribunal in arguing that an amended tax assessment was excessive. The amount of tax in question was around $195,000. The Tribunal concluded the amount of $451,600 for unfranked dividends that the taxpayer had received from a selective off-market buy-back of her shares in a company was properly included in her assessable income for the 2009 income year.
TIP: Off-market share buy-backs can give rise to deemed dividends. In the above case, the Tribunal held the consideration for the buy-back was a “deemed dividend” that was assessable to the taxpayer under the tax law in the year in which the buy-back occurred. The rules to determine the deemed dividend in these situations can be complex. In addition, special rules may apply to determine a capital gain tax (CGT) liability. In the above case, it was determined that there was no CGT as the shares were acquired before the commencement of the CGT provisions (that is, they were “pre-CGT shares”).
Tribunal highlights responsibility of SMSF trustee
A recent matter before the Administrative Appeals Tribunal has highlighted the importance of what it means to be a trustee of a self-managed super fund (SMSF). The case involved a trustee of an SMSF along with her husband. In 2006, some $3,460,000 was removed from the SMSF and transferred to an overseas bank account of the husband. The Commissioner issued a non-complying notice to the taxpayer along with an income tax and penalty assessment. Among other things, the taxpayer argued she had no knowledge of her husband’s acts as co-trustee and that the SMSF was entitled to a deduction for the misappropriated funds. However, the Tribunal affirmed the non-complying status of the SMSF and held there was no deduction available in this case. It also affirmed the 75% shortfall penalty. The taxpayer has appealed to the Federal Court against the decision.
Property Newsletter – March 2012
Property Management: Want more growth plus high rental returns? The answer may be outside.
A large block can help an investor build wealth, but tenants are typically unwilling to pay more to live on a large block. So, is there a way to make the outdoor space more valuable to tenants and therefore increase rental returns?
A small property on a large block can be an investor’s dream. It can deliver strong capital growth as well as the opportunity to add value through developing the property in the future. But while a large block can help an investor build wealth, tenants are typically unwilling to pay more to live on a large block, resulting in lower rental yields for this type of property.
So, is there a way to make the outdoor space more valuable to tenants and therefore increase rental returns? I believe so. Although the size and quality of a property’s indoor space plays a large role in determining what tenants are willing to pay, the outdoor space offers excellent opportunities to boost the rental value.
In fact, recent research and trends suggest that desirable outdoor spaces are one of the few characteristics that a tenant would be willing to pay more for. And in a place like Perth with long, hot summers and alfresco lifestyle, outdoor space is probably more important than in any other city around Australia.
But not all spaces are created equal. Properties with large outdoor areas can put off tenants because of the effort and costs associate with maintaining the outdoor area. Some tenants might discount a property entirely because of a high-maintenance outdoor area.
What’s clear is that tenants don’t want to open the back door to a sparse landscape of endless grass, an old Hills Hoist, and meters of bland fencing. Nor do they appreciate an overgrown jungle. The truth is many of them aren’t motivated to look after an outdoor area that they just don’t use.
Unfortunately though, this scenario is all too common as many investors place little importance on the outdoor areas of their investment property, focusing instead on the presentation of the interior. When the outdoor spaces do receive attention, it is usually the front garden that gets most of it. While this is valuable for street appeal, it might not be enough for tenants if the back area is poor and unusable.
So, what do tenants want in an outdoor area and how can you make your investment property more desirable to them (which will improve your rental yield and help you rent your property faster)?
What tenants ultimately want is an area where they can entertain guests, a relaxing environment where they can unwind after work, and green gardens that are attractive but require minimal maintenance.
Here are some key features and ideas you may like to consider for your property:
BBQ area
Just about every tenant would want a space where they can place a table to entertain guests by the BBQ. A simple paved area or small deck would be ideal, or even a gravel area with stepping stone pavers would do. If there’s existing ugly concrete, consider painting it or laying do-it-yourself decking tiles over the top for an inexpensive update.
Sun coverage
To make the space more usable and complete it as an ‘outdoor room’, consider some sort of shade structure. This could be as expensive as a covered pergola or as cheap as an open pergola with a vine or some shade sails.
Hardy plants
A bit of greenery will never go astray, but choose plants that are hardy, slow growing and need virtually no maintenance. Visit markets and discount nurseries to pick up some bargains and make your dollar go further. There’s no need to go overboard; using plants as borders around hard areas (like paving) and in a few feature beds is all that’s necessary.
Partitioning
Sometimes the size of the yard can make it too big a job to improve and too expensive. In this case, consider partitioning or screening off a part of the yard and instead focus on just improving a smaller, more usable area nearby the house.
Of course, when it comes to improving the outdoor space of your property, the exact specifications of what is desired will vary from area to area. For example, properties in family areas may need to have grass for the kids, while in other areas tenants may prefer no grass at all but prefer a large shed with plenty of storage. It’s worth doing some research by looking at other competitive properties on the rental market to see what you’re up against and what the outdoor areas are like of properties that appear to be most in demand.
Don’t forget that improving the outdoor spaces isn’t just about attracting tenants; it also adds value to your property. For buy-and-hold investors, it can be worth spending a bit more on the outdoor areas. For those looking to redevelop in the near future, it doesn’t make sense to spend too much if it’s only going to be torn apart, however some small, inexpensive changes can make the world of difference for the short term.
Speak to your Momentum Wealth Property Manager first about updating the outside of your property. They can give you an idea of the market expectations and what potential value an update may add to your property.
Finance: Helping your kids get on the property ladder
These days more and more kids are relying on their parents to help them buy their first home or investment. And most parents are happy to help if they can. So as a parent, what options do you actually have?
With property prices climbing year on year, it’s not always that easy for the next generation to jump onto the property ladder. It’s no wonder then that these days many mums and dads are willing to put their hands in their own pockets to help their kids kick-start their future. Some of the options could be:
Provide cash for a deposit
If you are in a position to do so, you could provide all or part of the money to put towards a deposit. If you don’t have cash but have equity in your property, you could refinance your property to pull out the cash although you will now have repayments to make on this new loan. Providing a deposit can be made as a non-repayable gift or as a repayable loan. If it’s provided as a loan, some lenders may require a formal contract to be signed. If you are close to retirement, also bear in mind there are social security consequences with gifting that need to be considered.
Buy the property jointly
In this scenario, you buy the home as ‘tenants in common’ with your child. This allows you and your child to treat your share in the property separately, and to split ownership however you wish – for example, 40% ownership to your child, 60% ownership to you.
Act as guarantor
If you have equity in your own property (ies), you may be able to use this as security for your child’s purchase. Your child will still need to borrow the full amount, but may avoid lenders mortgage insurance if the sum you put forward as security allows their loan-to-value ratio to come down to 80% or less. With this option, you do not have to physically dip into your pocket at all – you are simply just making a promise to the bank that you will support the loan (in full or in part) if your child defaults. While you may think this is unlikely, you must be prepared for the risk of this outcome as it does happen and shouldn’t be taken lightly. Once your child’s house has grown enough in value, you will be able to be released from their loan.
If you don’t have the financial capacity to help your children, don’t be dejected. The best thing you can do for your child is to help them become financially savvy themselves as early as possible. There are many ways to do this – for example, if you are able to have them stay at home longer, help them to save through paying you board which goes into an interest-bearing account in their name and then put towards a house deposit when they are ready. Learning to save, recognising the importance of long-term goals, and understanding the fundamentals of investing in property wisely is worth just as much, if not more, than money itself.
If you are looking at assisting your child financially with the purchase of a property, speak to a Momentum Wealth broker. Different lenders have varying requirements, and with the recently implemented NCCP legislation, your broker can advise the best options that are suitable for you.
Hot Property
In this month’s Hot Property section, we highlight a house in the suburb of Rivervale that was purchased by Buyers’ Agent Mark Casey on behalf of his client who was looking for a future development site.
Overview:
With two properties already under their belt, our clients were looking to acquire their third investment. Buyers’ Agent Mark Casey was put on the case to find them a high performing future development site, that would also generate a good rental return for the short term. The client was looking for a property located close to the city and proposed football stadium to be built in Burswood.
The final property chosen was a 1960’s brick and tile home in Rivervale which is close to the city, within the client’s desired search area, and with strong growth potential. Mark’s superior knowledge of the area enabled him to widen his search as he was aware the particular location and street selected has only recently been rezoned to higher density.
Located on a triplex potential site, the selected property perfectly matched the client’s needs and Mark was able to acquire it well under the estimated market value and approximately $50,000 under the advertised price. Today, it is also achieving an excellent rental yield of 4.4%.
Result:
Purchase of a 3×1 brick and tile house in Rivervale, 5km from Perth CBD.
Purchase price: $499,000
Estimated market value at time of purchase: $520,000 – $540,000
Savings: $21,000 – $41,000
Suburb Snapshot: Hamilton Hill
Our bi-monthly Suburb Snapshot section shares our tips on the best suburbs to keep a watchful eye on for your next investment purchase. In this month’s issue, we’re going to profile the southern suburb of Hamilton Hill.
Hamilton Hill is a large established suburb located approximately 16km south-west of the Perth CBD.
Situated near the coast, it is just a short drive to Fremantle and is surrounded by the suburbs of Spearwood, North Coogee, South Fremantle, and Beaconsfield. The suburb is easily accessed via the key transportation routes of Leach Highway, Stock Road, and South Street and is convenient to a number of amenities including Cockburn Gateway Shopping Centre, Murdoch University, St John of God Hospital, and Murdoch train station.
It is home to a number of primary and high schools, both within the suburb and just beyond, and enjoys the benefit of a number of parks and reserves including Manning Lake wetlands and surrounding natural bushland. Additionally, homes on the west side of the suburb are ideally situated within a ten minute walk of popular South Beach.
Hamilton Hill has a number of features which make it a potentially sound investment. Many parts of the suburb are undergoing transformation and thanks to the Department of Housing´s Urban Renewal Program, the number of state housing projects has diminished with the advent of newer re-developed estates such as Phoenix Rise.
The suburb will benefit from the approved Phoenix Central Revitalisation which includes a number of areas for rezoning and rejuvenation of the Phoenix town centre. It will also feel the effects of the proposed Cockburn Coast District Structure Plan for the beach-side and old industrial area alongside it which are set to transform into a cosmopolitan hub of activity. The area was just recently rezoned from Industrial to Urban by the Metropolitan Region Scheme and is now out for public comment. It’s expected these plans will bring more young professionals to the area.
Properties in the suburb offer good value for money and are quite affordable in light of the future potential of the area. Properties around Manning Park and west of Carrington Street tend to be most popular and command a more premium price accordingly. Houses are a mix of both old and new, and include everything from apartments and villas to family homes and large plots ripe for development.
Prices in the area typically start in the low $200,000 – $300,000 which will buy an apartment or small parcel of subdivided land. Three bedroom villas or duplex’s are available from the low-mid $300,000’s although better properties usually fetch more than this. Larger plots of vacant land are mostly in the high $300,000’s. Houses start from $400,000 with more desirable properties in the high $400,000’s and larger family homes and potential development sites starting in the low $500,000’s up to as much as $850,000. Rents range from around $275 to $500 per week depending on the property.
Key Statistics
| Growth rate (1 year average) | -4.5% |
| Growth rate (5 year average) | 3.0% |
| Growth rate (10 year average) | 11.3% |
| Population | 9,258 |
| Median age of residents | 39 |
| Median weekly household income | $702 |
| Percentage of rentals | 37% |
Source: REIWA.com.au, January 2012
Wealth Protection: Prostate Cancer & Trauma Insurance
Prostate cancer is the most common cancer for Australian men. After lung cancer, it is also the second most common cause of cancer deaths for Australian men. Each day about 32 men learn they have prostate cancer and tragically, every three hours one man loses his battle against this disease.
Trauma Insurance and the Trauma Insurance Plus Plan provides valuable cover, should the policy holder suffer from prostate cancer. It can provide financial support at a time when they need it most. It can be used to obtain specialist medical attention not covered by health insurance, or cover financial commitments.
Key features of the Trauma insurance plus plan
Trauma insurance is about protecting the policy holders lifestyle and supporting them through the financial stress a traumatic condition like prostate cancer can bring to an individual and their loved ones.
Some Trauma Insurance Plus Plans will make a 100 per cent benefit payment if a prostate tumour is classified under the TNM (or equivalent) classification system as:
· T1c or above, or
· T1a or T1b with a Gleason Score of 6 or above, or
· T1a or T1b and is considered untreatable or if the person insured is required to undertake major interventionist therapy.
A partial payment (the greater of 20 per cent of the benefit, or $10,000, up to a maximum of $100,000) will be made for prostate tumours classified as T1a or T1b under the TNM (or equivalent) classification system with either a Gleason score less than 6, or where major interventionist therapy is not required. Please refer to the Insurance product disclosure statement for the full definitions.
Trauma reinstatement option
Some trauma reinstatement options enables clients, who have been paid a claim, to reinstate their trauma policy 12 months after the insurer receives their claim form. Without this option, it is unlikely they will be able to repurchase trauma insurance.
Most other insurers would typically exclude the original event the client claimed on when their trauma insurance is reinstated, and the new trauma policy issued. There is only one Insurer who has industry leading trauma reinstatement option allowing a client to claim again on cancer and heart attack eventsrelated to their original claim. A partial benefit of the lower of $50,000, or 10 per cent of the benefit amount under the new plan will be made.
Justin McManus is a representative of AXA Financial Planning Limited, ABN 21 0005 799 977 AFSL 234663. This information has been prepared without taking account of your objectives, financial situation or needs. Before acting on this information you should consider its appropriateness, having regard to your objectives, financial situation and needs.
Acquisitions: Real Estate Contracts – What you should know when purchasing a property
In the excitement of buying property, many investors overlook the importance of including sufficient contract clauses to protect themselves. As Kent Cliffe explains, it is not the Sales Agent’s job to represent the best interests of the buyer.
I have come across a number of people who have purchased property through a sales agent and have been badly burned by not seeking representation when purchasing the property. It is the Sales Agent’s job to represent the seller. Therefore, they are naturally aiming to get the seller the best price and use contract clauses that most favour the seller.
When purchasing a property, it is crucial that buyers are aware of the potential pitfalls when it comes to real estate sales contracts. These contracts are legally binding documents – once accepted and signed by both parties (purchaser and seller) you are obligated to uphold its terms and conditions.
Contracts for the sale of property do vary from state to state so advice is recommended before you place offers to ensure that you are adequately protected and not in breach of any legal requirements.
At Momentum Wealth, we always add our own clauses to contracts to protect clients from concealed or unforseen circumstances.
Researching properties for purchase can be a time-consuming process, especially when looking at multiple properties. There may also be some issues that weren’t attended to before placing an offer on the property. This is why we always use a sufficient “get-out” clause to protect clients in these instances.
I am still surprised at the number of people who believe the use of a finance clause will protect them should they change their mind about purchasing the property or find some problem with the property that they were not aware of. Typically finance clauses state that the purchase of the property is subject to you the purchaser obtaining finance within a particular time period.
Anyone using this clause on its own is taking quite a risk. If you discover something that may affect your purchase decision, (for example a development next door, or structural problems with the house) then you may find yourself in breach of the contract if you walk away from the sale.
We always ensure that we use other clauses or sufficient “get-out” clauses to cover our clients. This provides them with an option to walk-away if something arises that we were unaware of when making the offer on the property.
The Real Cost of Buying the Wrong Property
It’s no secret that the Perth property market has suffered over the short-term since our 2006 boom. However, with the resources boom fuelling a two-speed economy, property in Perth has been viewed by many (and myself included) to make a “recovery” more so than its national counterparts.
With increasing rents, low interest rates and the ability to purchase property at competitive prices, there is currently an excellent window of opportunity for investors.
It’s at this time of rising confidence that investors need to be savvy, cautious and selective with their purchases. Not all properties grow at the same rate – and the cost of buying the wrong property could be higher than you think.
What’s the worst that could happen?
Property is a popular investment vehicle for many Australians because it appears safe and stable. It’s widely believed that all properties will grow in value, and that the “worst case scenario” is simply a lower rate of capital growth.
Sadly, this is not the case. Recently we have been contacted by owners of properties that have significantly dropped in value, severely undermining their owners’ investment goals. Other properties have stayed stagnant and are likely to continue in this vein for a number of years to come. Unfortunately none of these people used Momentum Wealth to find their property and they have suffered as a result.
Here’s some examples:
Townhouse, QLD : Purchased for $384,900 Re-valued at $238,000
Apartment, WA: Purchased for $349,000 Re-valued at $310,000
Apartment, WA: Purchased for $1.2 million Re-valued at $850,000
Townhouse, VIC: Purchased for $510,000 Re-valued at $380,000
Why did these investment properties fail?
Every property is different, and there’s no perfect matrix of investment factors that will always produce the same result. However, we noticed a few common factors between these examples that contributed to their poor performance:
Too much supply: Property, like the wider economy, is a game of supply and demand. Large quantities of new supply, such as new apartments and new house & land packages, hold back the capital growth of established properties in the area. While there is ample supply of brand new properties, there is no incentive for established property prices to rise. Not only this, but when developers are under pressure to sell more properties (as they have been in most cities in Australia over the last 3-5 years), they offer discounts and incentives on their brand new properties which effectively discounts your property as well!
New property supply is not evenly distributed across Australia’s capital cities; in every city, there are regions that have significant supply of new property (with more supply still to come), and suburbs which are tightly held. Investors who buy in these over-supplied locations can find themselves waiting for years for “the next boom” instead of enjoying the steady capital growth they expected.
Inflated purchase prices: Another reason that some properties have not increased in value is because of commissions loaded into the price of some of the projects by developers. Our finance division has been flooded with requests for assistance where investors have realised they have lost significant value in their properties. The problem is, many of these properties were never worth the contract purchase price. Commissions in property marketers can be significant and can add up to 10% to the property sale price – putting the investor on the back foot before they’ve even begun.
Investor-targeted marketing: All the properties listed above were marketed by “Property Investment Companies” as great investment properties. The problem is, when a development project is marketed primarily at investors, it can hide the real state of the market.
Exercise caution
We’ve said this before, but I will say it again. Be careful who you trust as your property advisor. A few things for investors to consider are:
- If an “advisor” is offering to help you with acquiring an investment property without it costing you a cent, that’s a serious alarm bell. You need to ask the question, how are they getting paid if you’re not paying them? More often than not, they will be paid a handsome commission from a developer for selling their property to you. In that case, are they really acting in your best interests and providing you with unbiased investment information? Stick with property firms who don’t take any commissions from developers and instead get their payment directly from you. It may appear to cost you more upfront, but it will easily pay itself off in a great investment.
- If you are looking to buy an investment property, be wary of businesses that help you acquire the property but that also sell property. This could be directly, as in they also function as regular real estate agents, or indirectly, in that they have “relationships” with developers and the like. This presents a real conflict of interest as it is in their best interests to try and sell you the properties they promote, rather than other (perhaps better) investments on the market for which they don’t make a cut on. Only a Buyers’ Agent can truly represent the buyer in a property purchase.
- Be cautious about businesses that will only sell you very specific projects. Typically these projects are branded developments that are heavily marketed. You can usually spot them because they are packaged and promoted under a name that sounds rather glamorous. These projects in most cases are brand new off-the-plan apartments or house and land packages in outer suburban growth corridor areas. In some cases these types of projects may be an okay investment, but more often than not you can do much better elsewhere. Generally they are fully priced, full of fat including sales commissions and GST, in areas with below-average growth prospects. Not a wise investment in my books.
- If anyone tries to tell you investing in real estate is a guaranteed investment, they’re lying. Very few things in this world are guaranteed. Although property has generally been relatively stable and profitable for many over the last 100 years, real estate is still a risk like any other investment. If they tell you it’s easy to become a millionaire in next to no time, without of taking a reasonable level of risk, they’re also lying. You can become a millionaire through property investing but it requires time, patience and most importantly smart investing.
Too many people don’t understand enough about investing in property and rely fully on the advice provided to them, often via just one source. In these current market conditions, it remains crucial that investors choose properties selectively. The wrong property purchase could leave the purchaser waiting for another Perth “boom” – while the right purchase will benefit from the tightening market conditions to provide excellent returns to its purchaser in the next 1, 3, and 10 years.
Momentum Wealth and its affiliated entities are not Accountants or Financial Planners. While all information is provided in good faith, you should seek your own independent advice in relation to all matters regarding investing, taxation and superannuation.
Finance Newsletter – March 2012
Good news for all borrowers – the banks have broken up with the Reserve Bank.
This means if you look around you are likely to find a better rate than you currently have.
Use this opportunity to speak with a mortgage broker to ensure your bank is looking after you and that you have the best loan for your circumstances.
Some banks are currently offering great discounts on home and investment loans. Fixed and variable.
If you think rates are going up, (the last independent move by the banks was up) then consider fixing. You can fix for 1-3 years at a lower rate then you currently have. So if rates do go up you will save even more.
A great fixed rate is available from ANZ. You can get a fixed rate of 5.99% for 3 years. Compare that with your bank’s current offering? There are many benefits of using a mortgage broker and our services are provided to the borrower free of charge.
Call Dan Goodridge on 0414 423 340 or e-mail dg@iinet.net.au at Mercia Finance for obligation free finance information.