Registered Trade Marks Strengthen Your Brand

Whether consciously acknowledged or not, trade marks are an integral part of everyone’s daily interactions. The term trade mark essentially means brand. As customers engage with your business, your brand serves as their primary point of contact and their purchasing decisions are influenced by the reputation the brand represents. So, it is essential you protect your brand and the value that lies with it.

 

Why Bother with a Trade Mark?

A trade mark is a type of intellectual property. It can be a word, a phrase, an image, or even a combination that makes your business unique. Think of them as your brand’s superhero cape, granting you the power to stand out in the competitive marketplace.

Registering a trade mark provides peace of mind for your brand. IP Australia has stated that businesses with registered trade marks are 13% more likely to experience growth. Why? Because trade marks influence how people buy. Your brand isn’t just a logo, it’s a promise of quality, trust, and uniqueness.

Think of Apple – that half-eaten fruit is more than just a logo, it’s a symbol of innovation and style. Trade marks transform your brand into a legend that customers recognize and trust, whether they’re scrolling through Instagram or wandering the aisles of a store.

 

Legal Reasons to Trade Mark

  1. Exclusive Use
    A trade mark legally protects your business’s unique brand, products of services. When you register a trade mark, you secure the exclusive right to use that particular mark for specific goods and services. This means you have the authority to take legal action against any unauthorised use of your trade mark by others and to seek compensation for any damages your business may have incurred due to the misuse of your trade mark.Imagine someone employing your business logo to promote their own inferior products or services. Such actions could potentially mislead your customers into believing they are engaging with your offerings. This has the potential to tarnish your reputation. Opting not to register your trade mark means you have no legal recourse in this instance.
  2. Authorising Use
    Another legal benefit derived from registering a trade mark lies in your ability to create licenses for its usage. A trade mark license allows you to charge third parties for utilising your trade mark. This presents a valuable avenue for diversifying your revenue streams while simultaneously expanding the reach of your brand.
  3. Avoid Infringing a Competitors Trade Mark
    Engaging in thorough research and pursuing your own trade mark registration is a strategic move to shield your brand and business from inadvertently using another entity’s trade mark. This proactive step is paramount, considering that IP Australia’s findings indicate a staggering 48% of small businesses encounter the need for rebranding due to contested trade mark infringements.Further a survey of global brands found that 75% of trade mark infringements violations lead to complex and expensive legal proceedings that, on average, resulted in costs of $100,000. So, it can be costly mistake to not trade mark your business.

 

To Trade Mark or Not

Surprisingly, the number of small businesses in Australia with registered trade marks remains below 4%, according to IP Australia. Businesses opting not to register a trade mark may be missing out on numerous benefits not limited to those mentioned here.

  1. An Asset
    Trade marks embody a form of property akin to real estate. A trade mark isn’t just a logo, it’s an asset. As your business grows, so does the value of your trade mark. Additionally, as you own it, you can sell it. They are capable of being acquired, sold, licensed, or even employed as collateral to secure loans for business expansion.
  2. Easy to Differentiate
    The marketplace landscape is often saturated, making it challenging to set your business apart from competitors. Trade marks and brands function as potent communication tools that capture customer attention and differentiate your business, products, and services.

Upon encountering a trade mark, customers swiftly discern your identity, the reputation associated with your business, and are inclined to explore alternatives less frequently. Your brand could essentially serve as the pivotal factor influencing a customer’s purchasing decision, emphasising the pivotal role trade marks play in shaping consumer choices.

  1. Building a Dream Team
    Brands with strong trade marks have the ability of attracting and keeping top-notch talent because employees naturally gravitate towards brands they respect and feel a connection with. Your brand’s trade mark isn’t just a logo, it’s a cheerleader for your team. If it can bring out positive feelings and attachment to the brand, it makes your business a more appealing place to work over competitors.

Research from IP Australia shows that small businesses that register for trade marks are 16% more likely to enjoy strong employment growth. What’s more, small businesses owning trade marks also hire around 3.5 times as many employees as their non-trade mark peers. They also pay a better median wage. Building a strong workforce and growing your business is all in the power of owning your brand’s mark.

  1. Don’t Expire
    Lastly, trade marks never expire so long as you continue to pay the renewal fees every 10 years in Australia. So, you have nothing to lose other than protecting your business and brand by registering a trade mark.

Understanding why trade marks are valuable assets and how they contribute to growth is crucial for businesses. Trade mark registration entails more than a superficial logo. It encapsulates a business’s core, its values, and its distinct promise to consumers. Armed with this comprehension, enterprises can unlock the full potential of trade marks, surging ahead in the competitive arena while establishing a recognisable and legally protected niche.

 

Lawyer Geelong

 If you require assistance of have any further questions about registering a trade mark, our experienced lawyers can assist you and answer any questions you may have.

The expertise and experience of our Geelong Lawyer team at The Hrkac Group can help you regarding registering a trade mark for your business. If you need assistance or advice, please get in touch. To make an appointment to meet with one of our friendly Geelong Lawyers,  contact us via email, or phone (03) 5224 2366.

 

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In the realm of personal finance, the term “credit score” often comes up, though many are unsure of its significance. Credit scores often serve as a crucial component in the decision-making process of potential lenders and creditors. While credit scores are not the sole determinants of your financial fate, they provide a general assessment of your suitability for a loan.

In this comprehensive guide, we explore the ranges of credit scores, shed light on a lender’s perspective, examine the factors that impact credit scores, and offer actionable strategies to cultivate responsible credit behaviour. By understanding the nuances of credit scores and proactively managing your financial health, you can unlock opportunities for better loan terms and financial well-being.

 

What is a credit score?

A credit score is a three-digit number ranging from 300 to 850. Credit scores are calculated using information in your credit report, including your payment history, the amount of debt you have, and the length of your credit history.

There are many different scoring models, and some use additional data in their calculations. Credit scores are used by potential lenders and creditors, such as banks, credit card companies, or car dealerships, as one factor when deciding whether to offer you credit, like a loan or credit card. It helps them determine how likely you are to pay back the money they lend.

 

 So what is a good credit score?

When it comes to credit scores, it’s important to understand that everyone’s financial and credit situation is unique, and there is no “magic number” that guarantees better loan rates and terms. However, credit scores can provide a general assessment of your creditworthiness.

Here are the typical credit score ranges:

  • Fair Credit: Scores ranging from 580 to 669 are considered fair.
  • Good Credit: Scores between 670 and 739 fall into the good credit range.
  • Very Good Credit: Scores from 740 to 799 are categorized as very good credit.
  • Excellent Credit: Scores of 800 and above are considered excellent.

Lenders tend to categorise borrowers based on their credit scores to assess risk and determine loan terms.

Here’s how lenders generally view borrowers based on credit scores:

  • Acceptable or Lower-Risk Borrowers: Individuals with credit scores of 670 and above are seen as acceptable or lower-risk borrowers. They are more likely to qualify for favourable loan terms and credit opportunities.
  • Subprime Borrowers: Those with credit scores ranging from 580 to 669 fall into the category of subprime borrowers. They may face challenges in qualifying for better loan terms due to their credit score, as lenders consider them to be at a higher risk compared to those with higher scores.
  • Poor Credit Range: Borrowers with credit scores below 580 generally fall into the poor credit range. They may encounter difficulties in obtaining credit or qualifying for better loan terms, as lenders perceive them to be high-risk borrowers.

Different lenders have different criteria when it comes to granting credit, which may include information such as your income or other factors. That means the credit scores they accept may vary depending on that criteria.

Credit scores may differ between the three major credit bureaus (Equifax, Experian, and TransUnion) as not all creditors and lenders report to all three. Many creditors do report to all three, but you may have an account with a creditor that only reports to one, two, or none at all. In addition, there are many different scoring models available, and those scoring models may differ depending on the type of loan and lenders’ preference for certain criteria.

 

What Factors Impact Your Credit Score?

Here are some tried and true behaviours to keep top of mind as you begin to establish – or maintain – responsible credit behaviours:

  1. Pay your bills on time, every time. This doesn’t just include credit cards – late or missed payments on other accounts, such as cell phones, may be reported to the credit bureaus, which may impact your credit scores. If you’re having trouble paying a bill, contact the lender immediately. Don’t skip payments, even if you’re disputing a bill.
  2. Pay off your debts as quickly as you can. By reducing your overall debt load, you can improve your credit utilisation ratio, which is the amount of credit you’re using compared to your total available credit. A lower credit utilisation ratio can positively impact your credit score.
  3. Keep your credit card balance well below the limit. A higher balance compared to your credit limit may impact your credit score. Aim to keep your credit utilisation ratio below 30% to maintain a good credit score.
  4. Apply for credit sparingly. Applying for multiple credit accounts within a short time period may impact your credit score. Each application typically results in a hard inquiry on your credit report, which can temporarily lower your credit score. Only apply for credit when you truly need it and can responsibly manage additional credit accounts.
  5. Check your credit reports regularly. Request a free copy of your credit report and check it to make sure your personal information is correct and there is no inaccurate or incomplete account information. You’re entitled to a free copy of your credit reports every 12 months from each of the three nationwide credit bureaus by visiting www.annualcreditreport.com. By requesting a copy from one every four months, you can keep an eye on your reports year-round. Remember: checking your own credit report or credit score won’t affect your credit scores.
  6. Dispute inaccuracies. If you find information you believe is inaccurate or incomplete, contact the lender or creditor. You can also file a dispute with the credit bureau that furnished the report. At Equifax, you can create a myEquifax account to file a dispute. Visit our dispute page to learn other ways you can submit a dispute.

A good credit score is crucial for accessing favourable credit terms and opportunities. It represents your creditworthiness and the likelihood of paying back borrowed money. By understanding how credit scores are calculated and practicing responsible credit behaviours, you can work towards achieving and maintaining a good credit score, which opens up doors to better financial opportunities. Remember, building good credit takes time and discipline, but the effort is well worth it in the long run.

 

Mortgage Broker Geelong

As you prepare to take the leap into home ownership, it’s important to consult with a Mortgage Broker to understand your obligations.

The expertise and experience of our Geelong Mortgage Broker team at The Hrkac Group can help you with securing a home loan. If you need assistance or advice, please get in touch. To make an appointment to meet with one of our friendly Geelong Mortgage Brokers, contact us via email, or phone (03) 5224 2366.

 

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With tax season rapidly approaching, we all enjoy exploiting any offset offered by the government to reduce our tax bill. Unfortunately, it’s important to note that the Australian Taxation Office (ATO) has recently announced the Low and Middle-Income Tax Offset (LMITO) has been discontinued and will no longer be available to claim starting from this 2022-23 financial year. You might be wondering how this change affects you and your tax bill.

 

Firstly, what was the LMITO

 The LMITO was introduced in the 2018-19 financial year as a temporary measure to provide relief to individuals earning low to middle incomes. This offset gave taxpayers earning up to $126,000 a maximum tax break of $1,500. It aimed to supplement the income tax cuts introduced by the government and benefit those who may not have benefited significantly from the changes in tax brackets.

The LMITO was structured as a non-refundable tax offset, meaning it could reduce the amount of tax an individual owed. However, it did not result in a cash refund if the offset exceeded the total tax liability if you did not use the full offset amount of $1,500. For example, if you earn $35,000 in the financial year, the maximum you could receive as an offset was $675 and there was no more you could claim or receive. LMITO only reduced the tax payable amount where you had paid tax during the year. The offset amount varied depending on an individual’s taxable income, as seen in the table below, with the maximum benefit available for claiming $1,500 to those earning between $48,001 and $126,000 per year.

Taxable income Maximum offset amount
$0-$37,000 $675
$37,001-$48,000 $675 plus 7.5 cents for every $1 above $37,000, to a max of $1,500
$48,001-$90,000 $1,500
$90,001-$126,000 $1,500 minus 3 cents for every dollar above $90,000

 

There is still an offset to be claimed, the Low Income Tax Offset (LITO).

 With LMITO being discontinued for the 2022-23 financial year, there is still an offset that can be claimed, called the Low Income Tax Offset (LITO).

Are you finding these acronyms confusing, is this the same offset?

The Low Income Tax Offset (LITO) is in place to help low-income earners, those earning up to $66,667 per year. So, if you earn more than $66,667, you cannot claim this refund.

Similar to the LMITO structure, LITO can only reduce the tax payable amount where you have paid tax during the financial year and it is a non-refundable tax offset. Meaning it will reduce the amount of tax an individual owes but will not result in a cash refund for the portion not offsetting their income. The offset amount varies depending on an individual’s taxable income, as seen in the table below:

Taxable income Maximum offset amount
$0-$37,500 $700
$37,501-$45,000 $700 minus 5 cents for every $1 above $37,500
$45,001-$66,667 $325 minus 1.5 cents for every $1 above $45,000

 

Impact on taxpayers

 The removal of the LMITO will have varying effects on taxpayers depending on their income levels. Individuals who previously benefited from LMITO may experience a slight increase in their tax bill. The extent of the impact will be directly related to their taxable income and how the changes in the regular tax rates and brackets align with their circumstances.

It is important to note that while LMITO has been discontinued, the tax cuts that were implemented alongside its introduction remain in effect. These tax cuts, which were aimed at benefiting low and middle-income earners, are still applicable and will continue to provide some relief.

Rest assured, the discontinuation of the LMITO won’t impact your monthly pay cheque. However, if you previously enjoyed the benefits of this tax offset, its cessation means a higher overall tax payment and a potentially reduced tax refund during tax season.

 

Don’t forget you CAN now claim for your home office expenses if you are working from home

Remember the ATO has introduced changes to home office claims for the 2022-2023 financial year. These changes aim to reflect the increased costs associated with working from home and to make it more straightforward for taxpayers to claim their home office expenses. You can read our blog here to learn further details of what exactly it means for you.

 

Geelong Accounting

As you prepare for the upcoming tax return season, it’s always advisable to consult with a tax accountant or use a reliable tax calculator to understand the changes and accurately estimate your tax obligations. Staying informed about tax policy updates is crucial to ensure compliance.

The expertise and experience of our Geelong Accountants at The Hrkac Group can help you with your tax return. If you need assistance or advice about what offsets you can claim or whether you’re entitled to claim working-from-home expenses or any other tax questions, then please get in touch. To make an appointment to meet with one of our friendly Geelong Accountants, contact us via email or phone (03) 5224 2366.

 

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When you buy property in Victoria, under all circumstances, you require the assistance of a property lawyer or a qualified and experienced conveyancer. It basically means that when buying a property, you will need to be advised of exactly what the conveyancing process entails.

Generally, a conveyancing transaction consists of three main stages:

  1. Pre-contract
  2. Pre-completion
  3. Post-completion

Experienced property lawyers have specified and detailed knowledge about property conveyancing and a broad knowledge of property law, such as consumer law provisions, and the various legislation that applies to buying and selling land. Generally, it is advantageous to have a legal firm and solicitor working in your best interests.

 

Caveat Emptor – ‘Buyer Beware’

When buying real estate, the buyer assumes all risk. It is up to the purchaser to make any and all investigations in regard to the contract, the property, and to conduct all due diligence enquiries before they sign the contract. It is solely their responsibility. As signing the contract deems that you have understood the contract and you will be held to its contents.

However, this does not give the seller the right to provide misleading or fraudulent information. A purchaser can rely on Australian Consumer Law provisions to terminate the contract, if the information relied upon to purchase the home, is misleading and/or false.

Things that the buyer should investigate but are not limited to are the following:

  • Having a lawyer review the contract and vendors statement before signing anything.
  • Check the person selling the property is the person who owns it.
  • Making enquiries with local Council on planning or building applications nearby.
  • Checking for encumbrances e.g. caveats, planning restrictions and overlays, or easements
  • Checking if you can do what you want with the property such as extensions, subdividing, and development.
  • Details of building permits over the last 7 years and check to see if any building works performed without a permit by the current owner could be raised as a issue by Council in the future.
  • If there is a pool, spa, or pond, is it properly fenced, registered and up to current compliance codes.

 

Our top 5 tips when purchasing property to protect yourself

1. Make your own enquiries

Remember the real estate agent has been hired by the vendor and they do not act for you. They are required to disclose certain information to you by law, but they may miss providing important details that could affect you after settlement. Don’t solely rely on what the agent or seller tells you. You need to understand the price you should be paying for the property given the area, council rates, stamp duty, transfer fee, government fees, and other fees that may be involved if you purchase the property. Whether the bank will lend you enough money, do you have pre-approval and what are the estimated repayments for the loan. You need to be well-versed in all areas of the process to make sure you fully understand what you’re entering into, not just what you’ve been told by someone not invested in the future ownership.

 

2. Arrange for a building and pest inspection

These are essential and can be added to the contract as a special condition or arranged for in the Cooling Off period (usually 3 days after contract signing). These inspections will come at a cost but will be well worth it for your peace of mind. They will reveal if the property has any defects or requires any type of work. The inspection reports should also be able to provide an indication of what it would cost to fix the issues. If there are defects found, this can provide you with the opportunity to cancel the contract if a major structural defect or a major pest infestation is found, you could also negotiate and check to see if the vendor will complete the repair works prior to settlement or give you the opportunity to renegotiate the contract price if you want to do the works yourself.

 

3. Employ a property

There is no substitute for using an experienced conveyancer or a property lawyer to act on your behalf. Given your primary goal when buying property is to increase your wealth, it makes sense to pay for professional advice to protect yourself and your investment from any mistakes or things that you didn’t consider or turn your mind to being a key aspect of your purchase (for example, rental possibilities or surrounding developments). Your conveyancer will be able to do all the necessary statutory searches and then be able to go through these documents with you, as they understand it all, and see if there are any issues or things to note. It’s during this process that you may discover that the Council has the right to widen the road or take part of your land or that the sewer is on your property, and they will be digging up your entire front yard.. There’s a lot involved in reviewing a contract and conducting due diligence investigations. Making enquiries and engaging a lawyer upfront is going to be well worth your money down the track and it could end up saving you hundreds of thousands of dollars from a simple oversight.

 

4. Title insurance

Another way you can protect yourself is to take out title insurance. This form of insurance is the most comprehensive protection against risks that may affect the legal ownership of your property and your right to occupy and use the land, and it’s good for the entire period of your home ownership. It protects you from future events like finding out that your boundaries are in the incorrect place, and the previous owners built on a part of your neighbour’s property. It also protects you in instances like if the Council sends a notice saying you have a structure on your property that did not get approved with permits and must be pulled down. Your conveyancer will be able to give you more advice about the merits of this type of insurance.

 

5. Ask questions

Lastly and importantly make sure you ask every question you can think of. Your conveyancer never actually goes to see your property. So, it is up to you as the purchaser, the one signing the contract and being held to the agreement, to ask all the questions. Ask the agent, ask the Council, ask your conveyancer. It’s best to have asked the question than to think it doesn’t matter and later have it be an issue and cost you lots of money, it could be a very expensive lesson to learn! There are so many things to understand, and you should utilise all the resources you have to make sure you understand everything before your sign on the dotted line.

 

Bellarine and Surf Coast Conveyancing

If you’re interested in knowing more about what is required when buying real estate, speak to our expert property lawyer at The Hrkac Group.

A smooth property settlement depends on all legal and financial obligations being met, and that can require liaison between a number of different parties including solicitors, lenders, and real estate agents – even representatives of local councils.

Our lawyers and conveyancers’ expertise and experience in facilitating a stress-free settlement can help ensure a positive outcome for you. So, whether it’s a change of name or transfer of title, an application for subdivision, or any matter regarding commercial or residential conveyancing, you can rest easy knowing it can be handled under one roof at the Hrkac Group. If you’re looking for conveyancing/property law services, look no further. To make an appointment to meet one of our friendly team at HG Legal Services today, feel free to contact us via email at legal@hrkacgroup.com.au or phone (03) 5224 2366.

If you are one of those people that are looking for opportunities to maximise your super and claim a tax deduction along the way, there are strategies that may help.

However, like most things relating to superannuation, there are some conditions attached.

In this blog, I will focus on concessional contributions and the ability many people have to exceed their annual concessional contribution cap without adverse tax consequences.

 

What is a concessional contribution?

Concessional contributions are those contributions made to a superannuation fund by an employer, on behalf of their employees. Employer contributions include the compulsory 10.5% ‘superannuation guarantee’ contributions, contributions made under a salary sacrifice arrangement, and other discretionary contributions an employer may make.

Personal contributions are also concessional contributions when a tax deduction is claimed for the contribution.

Concessional contributions are treated as taxable income of the superannuation fund to which they are made, meaning they are taxed within the super fund at a rate of 15%. This is sometimes referred to as ‘contributions tax’.

 

Contribution cap

The current annual cap or limit on concessional contributions is $27,500.

Where concessional contributions exceed this annual cap, an excess concessional contribution arises. Exceeding the cap is something that should generally be avoided. When a contribution exceeds the cap, the excess will be taxed at a person’s marginal tax rate.

 

But wait, there’s more!

Before 1 July 2018, if a person didn’t fully use their concessional contribution cap in a particular financial year, the unused portion was lost.

From July 2018 this changed.

Subject to meeting certain conditions, a person may now carry forward the unused portion of their concessional contribution cap, which has accrued since 1 July 2018, for up to five years.

However, there is one condition that needs to be satisfied.

To be able to carry forward the unused portion of the concessional contribution cap, a person must have a total superannuation balance of less than $500,000.

 

Total superannuation balance  

The total superannuation balance is the value of all superannuation a person holds, including pension accounts, calculated on the previous 30 June [1].

By way of example, Bertina had a superannuation account with a balance of $58,000 and an account-based pension with a balance of $420,000 on 30 June 2022. Her total superannuation balance is $478,000.

Therefore, she has met the first condition enabling her to carry forward the unused portion of her concessional contribution cap that has accrued since 1 July 2018, to the 2022-23 financial year.

 

Taking advantage of the carry-forward opportunity

Let’s assume that Bertina is 64 years old and retired. In 2022-23 she sold an investment property that resulted in a capital gain of $100,000 being added to her other assessable income.

Bertina’s concessional contribution cap for 2022-23 is $27,500.

In this circumstance, Bertina could make a personal contribution to superannuation and claim a tax deduction of $27,500 to help offset the tax payable on her income, including her capital gain.

However, if she has any unused concessional contribution cap that has accrued since 1 July 2018, she is able to carry the unused cap forward to 2022-23.

For the sake of this conversation, let’s assume that the unused cap from 1 July 2018 through to 30 June 2022 totals $50,000. Bertina is able to make a personal tax-deductible contribution to superannuation of up to $77,500 in 2022-2023.

This will go a long way towards reducing the tax she might otherwise be paying on her capital gain.

 

Speaking of tax

When it comes to making superannuation contributions, tax is just one consideration.

As mentioned earlier, tax-deductible superannuation contributions, such as the one Bertina intends to make, are treated as taxable income of the superannuation fund. In this example, the contributions tax that will be deducted from Bertina’s contribution of $77,500 is $11,625.

Before claiming the tax deduction for personal superannuation contributions, Bertina will need to ensure that her personal income tax rate is 15% or more, otherwise, she could end up paying more tax than necessary.

 

Is there anything else to consider?

People are generally able to make concessional contributions to super if they are under 67 years of age. From 67 through until turning 75, they will need to have met a work test, or be eligible for the work test exemption, to make personal contributions to super.

For those that are employed, carrying forward the unused concessional contribution cap can be useful when looking to make contributions under a salary sacrifice arrangement, or even when topping up concessional contributions by making personal tax-deductible contributions.

Like most things involving superannuation, there are a lot of moving parts – multiple issues to be considered.

When looking to maximise contributions to superannuation we highly recommend you consult with a qualified financial adviser to ensure the strategy is appropriate.

 

[1] Special rules apply for members of defined benefit superannuation funds and for pensions other than account-based pensions

 

The content within this blog has been sourced from our Licensee, Alliance Wealth’s blog ‘Realise Your Dream’.
https:// https://blog.centrepointalliance.com.au/realiseyourdream/some-timely-advice-0

 

General Advice Warning
This information has been provided as general advice. We have not considered your financial circumstances, needs, or objectives. You should consider the appropriateness of the advice. You should obtain and consider the relevant Product Disclosure Statement (PDS) and seek the assistance of an authorised financial adviser before making any decision regarding any products or strategies mentioned in this communication. Whilst all care has been taken in the preparation of this material, it is based on our understanding of current regulatory requirements and laws at the publication date. As these laws are subject to change you should talk to an authorised adviser for the most up-to-date information. No warranty is given in respect of the information provided and accordingly, neither nor its related entities, employees, or representatives accepts responsibility for any loss suffered by any person arising from reliance on this information.

 

Liability limited by a scheme approved under Professional Standards Legislation.

 

The COVID-19 pandemic has changed the way people work, with more and more people choosing to work from home where allowances are made. The Australian Tax Office (ATO) has recognised this change with the announcement of changes to home office claims for the 2022-2023 financial year. The aim of these changes is to reflect the increased costs associated with working from home and to make it more straightforward for taxpayers to claim their home office expenses.

Here’s what you need to know about the changes and how they could affect you.

 

‘Fixed rate’ claim increase

When claiming deductions for costs incurred when working from home, taxpayers can choose one of two methods to claim working from home deductions: either the “actual cost” or “fixed rate” method. Only the fixed rate method is changing. The revised fixed rate method applies from 1 July 2022 and can be used when taxpayers are working out deductions for their 2022–23 income tax returns.

The fixed rate for home office expenses has been increased from $0.52 per hour worked to $0.67 per hour worked. This increase reflects the higher costs associated with working from home, such as electricity, heating, and cooling. This increase in the claim rate will help to offset some of these expenses and make it easier for taxpayers who have worked from home over the past year to claim what they are entitled to.

 

Phone and internet costs are now included in the rate

To accompany the changes to the fixed rate, the ATO announced that phone and internet costs can no longer be claimed on top of the claim rate. These costs are now included in the claim rate, which means that they cannot be claimed separately. This change reflects the fact that phone and internet expenses are now considered to be part of the basic running costs of a home office.

 

‘Actual cost’ method

There are no changes to the actual cost method, and taxpayers can still claim the actual work-related portion of all running expenses. But you must continue keeping detailed records for all of the working from home expenses you are claiming, including:

  • A record of the number of hours worked from home during the income year (either the actual hours or a diary or similar document kept for a representative 4-week period to show the usual pattern of working at home).
  • All receipts, bills and documents to show you have incurred expenses.
  • A record of how you have calculated the work-related and private portion of their expenses (for example, a diary or similar document kept for a representative 4-week period to show the usual pattern of work-related use of a depreciating asset such as a laptop).

The ATO is reminding taxpayers that if you are claiming via the ‘actual cost’ method, you’re not able to claim a deduction for expenses which have already been reimbursed by your employer.

 

More information

Whichever method of claiming is used, if you purchase assets and equipment for work that cost more than $300, you cannot immediately claim the full amount. For each of these items, the deduction must be claimed over a number of years and the work portion claimed (known as decline in value or depreciation). The ATO has online calculators to help taxpayers work out the decline in value of assets and equipment purchased.

 

The changes to home office claims for the 2022-2023 financial year reflect the new reality of working from home. The increase in the claim rate and the inclusion of phone and internet costs in the rate are designed to make it easier for taxpayers to claim their home office expenses. The changes to the calculation methods make things more simplified, and are aimed at ensuring that taxpayers can claim their expenses in a fair and consistent way. As always, it is important to keep accurate records of your home office expenses and seek the advice of a tax professional if you are unsure about any aspect of your claim.

The expertise and experience of our Geelong Accountants at The Hrkac Group can help you with your tax return. If you need assistance or advice about claiming working from home expenses, get in touch. To make an appointment to meet with one of our friendly Geelong Accoutants, contact us via email or phone (03) 5224 2366.

 

Liability limited by a scheme approved under Professional Standards Legislation.

The Reserve Bank of Australia has said it expects about half of all outstanding fixed home loans to switch to variable rates in 2023. This equates to around 800,000 home loans, totalling about $350 billion.

Many Australians were lucky to lock in record-low fixed interest rates on their mortgages in the last few years; but for some, this may be coming to an end in 2023. This will leave affected households paying two to three times their current fixed rate, due to rapidly rising interest rates.

If your fixed-rate home loan is approaching its end, you’ll need to make some decisions. Should you re-fix your loan at a new rate, change to a variable rate, or even consider refinancing to a new mortgage provider?

In this article, we’ll talk through your options when it comes to preparing for the end of your fixed interest rate.

 

What is a fixed-rate mortgage?

A fixed-interest rate home loan is one where the rate of interest you pay on your mortgage is locked in for a certain period. In Australia, a fixed rate typically lasts between one and five years. During the time your rate is fixed, your interest rate and your compulsory repayments won’t change.

If you fix your interest rate when interest rates are low, you could be saving yourself from paying more when interest rates rise. But for this reason, fixed interest rates tend to be a bit higher than variable rates. While it makes it easier to budget for the future as you know exactly what your repayments will be, you could also be missing out on big savings when the interest rate falls.

Also, many fixed-rate mortgages do not have offset accounts, which means that extra savings cannot be used to reduce interest paid on the loan. With a fixed rate, you are sometimes impeded in terms of how quickly you can pay off the loan. A break fee may be incurred if you want to pay it off early.

 

What is a variable rate mortgage?

A variable-rate home loan features an interest rate that may change over time, according to the rise and fall of interest rates. If you choose a variable rate home loan, you may be able to take advantage of any interest rate decreases over your loan’s term, meaning you pay less interest on the home loan balance and your repayments go down.

On the other hand, when the interest rate increases, so too will the amount of interest you’re paying, meaning your repayments will go up.

 

How can I prepare for the switch?

If you don’t do anything before your fixed term rate lapses, your mortgage provider generally switches your loan to its standard variable rate, which can be much higher than some of the discounted options available to new customers.

If you are worried about what will happen when your fixed-rate mortgage ends, you should speak to a trusted financial expert at your earliest convenience. This helps you avoid any scenario where you are stuck with the imposed rate your current lender offers when the fixed rate period ends.

It’s important to research your options because, with each rate increase, your borrowing capacity can be reduced because lender calculations on household expenditure and expenses change. And as house prices fall, you could end up owing more on your house than what it is currently worth. Here are the steps we recommend you take prior to the end of your fixed interest rate.

  1. Negotiate with your current lender
    Speak to your current lender in advance to find out what your rate will change to. This gives you an opportunity to compare with other rates available in the market and think about whether switching providers is right for you. You could also negotiate a better rate to save you the effort of moving to a new provider.
  2. Research what other lenders can offer
    See how your loan stacks up against other home loans out there to determine if you’re getting a competitive interest rate. If you do find a better offer, switching providers can be the right move. But make sure you’re aware of the costs involved in switching, as borrowing costs and fees can sometimes be greater than the amount you would save.
  3. Consider re-fixing your home loan
    Even though now may not be the best time to go with this option, if you have enjoyed the certainty that comes with a fixed-rate loan, you can refix your mortgage with an up-to-date interest rate. However, you will be locked into the new fixed interest rate for a period of your loan term, unless you choose to end the contract earlier which may result in break fees. Be sure to also carefully check out the features of a fixed loan too, such as fee-free extra repayments, redraw, and linked offset accounts. Many fixed-rate loans do not provide these features.
  4. Consider splitting your loan
    If you can’t decide on a variable or fixed rate, or if you want a combination of flexibility and predictability, you can potentially have part of your mortgage fixed and part variable. For example, you could have 60% of your loan on a fixed rate and 40% on a variable rate. This approach can offer you the best of both worlds. The variable rate component lets you take advantage of any interest rate falls, while the fixed portion shelters part of your loan from rising interest rates.
  5. Talk to a trusted lending professional
    If you can’t decide which option is best for you, a mortgage expert may be able to offer you advice. They can look at your finances and recommend options that suit your specific needs. They’ll also be able to guide you through the process of switching to another provider if that’s what you decide.

 

If you are worried about what will happen when your fixed-rate mortgage ends, you should speak to a trusted financial expert at your earliest convenience. Before you make any decisions, crunch the numbers with an online mortgage switching calculator.

The expertise and experience of our Geelong Mortgage Broking team at The Hrkac Group can help you with your home loan, whether it’s securing a new interest rate for you, refinancing your current loan, or discussing the finance of an investment property. To make an appointment to meet with one of our friendly Geelong Mortgage Brokers, contact us via email or phone (03) 5224 2366.

 

Liability limited by a scheme approved under Professional Standards Legislation.

Back on the 1st of July 2018, a new opportunity arose that allowed older Australians to make contributions to superannuation without meeting the normal age limits and other conditions required for making contributions.

The introduction of “downsizer contributions”, which allows older Australians to contribute up to $300,000 of the sales proceeds of an eligible dwelling to superannuation, has been a real hit.

In the first year of the scheme, approximately $1bn of downsizer contributions were made. But this has increased significantly since then.

In her video address to the SMSF Association National Conference held in early 2022, the (then) Minister for Superannuation, Financial Services, and the Digital Economy, Senator Jane Hume stated that $9.4bn of downsizer contributions have been made.

The ability for older Australians to channel additional money into superannuation has been a winner.

The original purpose behind introducing downsizer contributions was to help address Australia’s housing crisis by encouraging older Australians to downsize their accommodation and move to smaller homes.

Like most things in life, there are conditions attached to making downsizer contributions, including:

  • The home must be situated in Australia, not be a caravan, houseboat, or mobile home, and have been owned by a contributor or their spouse for more than 10 years,
  • The home must, at least for a part of the time it was owned, have been the contributor’s principal place of residence. That is, the sale must qualify for at least a partial exemption from the capital gains tax,
  • The contribution is made to superannuation within 90 days of receiving the sale proceeds,
  • A written election notice is given to the superannuation fund, no later than when the contribution is made, informing the superannuation fund the contribution is a downsizer contribution,
  • A downsizer contribution has not previously been made, and
  • The contributor was aged 55 or over at the time of making their contribution.

 

The maximum downsizer contribution is $300,000 per person. Therefore, a couple could jointly contribute up to $600,000 of the sale proceeds of their home to superannuation.

When first introduced in July 2018, a person had to be aged 65 or older to be able to make a downsizer contribution.

From 1 July 2022, the minimum age was reduced to 60.

Legislation that sees the minimum age further reduced to 55 received Royal Assent on 12 December 2022, with the reduced age limit taking effect from 1 January 2023.

The opportunity to contribute up to $300,000 of the sale proceeds of a family home to superannuation is very attractive.

With a reduction in the qualifying age limit to 55, we will see more Australians having the opportunity to bolster their retirement savings.

However, even though the age limit for making downsizer contributions has been reduced, the other conditions remain in place.

If planning to sell your family home and contribute surplus proceeds to superannuation, it is important to understand the conditions that need to be met for a downsizer contribution to be eligible.

In addition, for those receiving an income support benefit from the Government, including an age pension, be mindful that selling your family home and spending less on replacement accommodation, whether making a downsizer contribution or not, may result in a reduction of your income support benefit.

When considering downsizing, and potentially making additional contributions to superannuation it is important to seek appropriate financial advice before proceeding.

 

The content within this blog has been sourced from our Licensee, Alliance Wealth’s blog ‘Realise Your Dream’.
https://blog.centrepointalliance.com.au/realiseyourdream/a-downsizer-update
General Advice Warning
This information has been provided as general advice. We have not considered your financial circumstances, needs, or objectives. You should consider the appropriateness of the advice. You should obtain and consider the relevant Product Disclosure Statement (PDS) and seek the assistance of an authorised financial adviser before making any decision regarding any products or strategies mentioned in this communication. Whilst all care has been taken in the preparation of this material, it is based on our understanding of current regulatory requirements and laws at the publication date. As these laws are subject to change you should talk to an authorised adviser for the most up-to-date information. No warranty is given in respect of the information provided and accordingly neither nor its related entities, employees, or representatives accepts responsibility for any loss suffered by any person arising from reliance on this information.
Liability limited by a scheme approved under Professional Standards Legislation.

With the state of the world’s economies, persistently high and rising inflation, and so much uncertainty, homeowners are bracing themselves for even more rate hikes from the Reserve Bank of Australia (RBA). This is impacting Australians in all aspects of their spending, and even though housing prices are reported to be declining, homeowners are still being forced to borrow more and more to enter the market.

The latest lending indicators from the Australian Bureau of Statistics (ABS), in the table below, show that the average mortgage size (for owner-occupier dwellings) was $594,938 in October 2022 — up from $572,087 in October 2021.

Although the average Australian home loan has only increased by $22,851 this is after the impact of surging property prices that was witnessed across the country over the pandemic. According to property research firm CoreLogic, Australian housing values increased 28.6% over the latest upswing, which equates to an average increase of $170,700.

Lenders are feeling the burden of increasing interest rates, rising inflation, and increases in loan repayments.

 

Average loan size by state and territory — October 2021-22 (Source: ABS)

Where is the market headed?

The current trend of the Australian property market is being driven by how the rate hikes have affected affordability. There has been a decrease in demand for purchasing homes and an increase in home listings. With a shift in demand towards cheaper and more affordable homes like units. This is likely to continue driving growth in the unit sector while the housing market is levelling off.

As a first home buyer, most of the average loan values listed above are still below the state and territory property price caps for the First Home Loan Deposit Scheme and New Home Guarantee initiatives. These schemes allow eligible first home buyers to purchase a home with as little as 5% deposit without paying Lenders Mortgage Insurance, which on average helps people purchase their first home 4 years sooner. So taking advantage of these schemes is a great tool helping you get into the market sooner before prices and the amount you need to borrow rises.

No one gets ahead by waiting

Amid the confusion of interest rates, inflation, property prices stabilising, many are wondering if now is the time to buy. If you got one lesson out of the pandemic, it should have been buy and buy now. During the early stages of the pandemic, many people held back from buying with so much uncertainty and fears of a property price crash. However, the opposite occurred and prices soared, leaving those who were just watching in the dust. Instead of trying to time the market perfectly, you should aim to buy as soon as you have a deposit and your finances in order. The sooner you get into the market, the more time you will have to benefit from your property’s growth.

The expertise and experience of our Geelong Mortgage Broking team at The Hrkac Group can help you in the process of obtaining a home loan, refinancing your current loan, or to discuss the finance of an investment property, whatever your personal circumstances. To make an appointment to meet with one of our friendly Mortgage Brokers today, feel free to contact us via email or phone (03) 5224 2366.

The information provided in this blog is of a general nature only and is not intended as either advice or recommendations and is not tailored to your specific circumstances. Please also note that this does include any information on any Payroll requirements imposed by any State or Territory Governments outside of the State of Victoria. Please contact our partner – SIBS Bookkeeping team or us – the Hrkac Group Accountants team – if you would assistance as to how, or if, any of the abovementioned would apply to you.

Liability limited by a scheme approved under Professional Standards Legislation.

It was announced in the 2019–20 Budget that the government would be expanding on Single Touch Payroll (STP) to require additional information. Known as Single Touch Payroll Phase 2, the mandatory start date of this new process was the 1st of January 2022.

This expansion was meant to streamline reporting for employers who are required to report information on their employees to multiple government agencies. It will also make it easier for customers of Services Australia to receive the correct payments on time.

As we near the end of the first year of Phase 2 reporting, it becomes more important to make sure you are reporting correctly. Penalties for reporting mistakes will start to be enforced after 31st  December 2022.

Although users of some types of software, in particular Xero, have a blanket extension from the ATO until the 31st March 2023 to report their first STP Phase 2 pay run.

Our knowledgeable Geelong Accountants have put together some information on the Single Touch Payroll Phase 2 expansion, to serve as a helpful guide for you to reference at any time.

 

1. What do I need to do to prepare for STP Phase 2?

The first thing you should do as a business is to acquaint yourself with Single Touch Payroll Phase 2 and how it impacts your reporting requirements.

Preparation is key. A comprehensive dialog with business leaders, advisors, and employees to determine your individual organisation’s requirements. Then you can formulate and implement a plan ahead of the compliance deadline.

Ensure that your payroll software is up to date. Software providers have updated their payroll solutions to accommodate these changes, allowing your businesses to provide the newly required information.

 

2. What are the key changes?

The way you submit your Single Touch Payroll report, the due date, and the end-of-year finalisation declaration for each employee have not changed. Tax and superannuation details are still required as before.

While the first installment of Single Touch Payroll was introduced to reduce reporting requirements and allow Australian businesses to digitally engage with Government agencies in a single process, Phase 2 does require businesses to undertake additional reporting. The changes will be an adjustment for many.

STP Phase 2 aims to streamline your reporting process by including information that you currently provide in different ways and on different forms all in one place in your STP report. This brings with it changes that reduce reporting requirements in some areas and require additional reporting in others. The following areas reflect these changes:

 

Tax File Number Declarations
The details collected from Tax File Number declarations – including Tax File Number, employment type, and higher education debts — are to be included in STP reporting, so the declaration itself is no longer required to be sent to the ATO.

Employee Separation Certificates
Employee Separation Certificates are no longer necessary, as information about why an employee has left the business will now be provided via STP reporting.

Lump Sum E payments
Before, if an employer paid an employee a payment owing from a previous year, a Lump Sum E letter had to be provided to the employee. The letter is no longer required as this information is now to be included in STP reporting, with details of the payment to appear in the income statement of the employee.

Child Support
There is now the option to include child support garnishees and deductions in STP reporting, reducing the need to provide documentation to the Child Support Registrar.

Employment Type
Optional prior to the introduction of STP Phase 2, reporting of employment type is compulsory under the new way of reporting. Businesses must declare whether their employees are full-time, part-time, or casual, in addition to new categories such as labour hire or volunteer.

 Disaggregation of Gross
Income must now be itemised by each of its components, including salary sacrifice, overtime, paid leave, bonuses, commissions, director’s fees, and allowances (allowances must also be individually itemised) rather than reported as a gross sum.

 Country Codes
If you have Australian resident employees working overseas, businesses will need to provide details of the host country, in the form of a Country Code.

Reporting previous Business Management Software IDs and Payroll IDs
You can now provide the ATO with previous Business Management Software IDs and Payroll IDs in your STP report. If you’ve changed your business structure or changed payroll software and you’re having trouble with finalising previous records, providing this information can help reduce and fix issues with employees’ duplicate income statements in ATO online services. This is voluntary and not all software platforms will offer this functionality.

 

3. Benefits of STP Phase 2

Benefits for employers
Single Touch Payroll Phase 2 information is intended to streamline employer interactions. You’ll no longer have to send the ATO your employees’ tax file number (TFN) declarations, Employee Separation Certificates or provide your employees with Lump Sum E letters, as your requirements for these are met all in one place, in your STPP2 reporting. If you were using a concessional reporting option, such as for closely held payees or for inbound assignees, you can now meet your requirements, again all in one place, by reporting on income types in your STPP2. You can also voluntarily report child support deductions or garnishees (or both) through STPP2 reducing the need to send separate advice to the Child Support Registrar.

Payroll information is shared in near real-time with Services Australia, making it easier to provide or confirm employment and payroll information about your employees, and for your employees to provide employment and payroll information such as pay slips for prior periods.

 Benefits for employees
The ATO will have better visibility of the types of income employees have received at tax time, allowing their details to be more accurately pre-filled on their individual income tax returns. The new information reported will allow the ATO to prompt employees to make changes if they’ve provided their employers with incorrect information so they can avoid getting a tax bill.

 

4. Are there penalties for STP non-compliance?

The introduction to STP Phase 2 came with a grace period for reporting mistakes, which is scheduled to finish on December 31st, 2022. As mentioned earlier, this excludes users of some types of software, in particular Xero, who have a blanket extension from the ATO until the 31st of March 2023 to report their first STP Phase 2 pay run.

For more information on popular software solutions Xero and MYOB, see these links:

https://www.xero.com/au/programme/single-touch-payroll/stp-2/

https://help.myob.com/wiki/display/myob/Getting+ready+for+STP+Phase+2

Under STP, the penalty for late or missed reporting is $210 days for every 28 days your report is overdue to a maximum of $1,050 for small businesses, $2,100 for medium entities, $5,250 for large entities, and $525,000 for global entities.

 

In conclusion

Changes in reporting requirements can be daunting, but our expert Geelong Accountants at The Hrkac Group are committed to providing you with sound business advice and updates. If you want to grow your wealth, improve cash flow, and minimise your tax, talk to our professional, approachable, and proactive Business Accountants at The Hrkac Group.

The expertise and experience of our Geelong Accounting team can help ensure the success of your business. To make an appointment to meet with one of our friendly Accountants today, feel free to contact us via email or phone at (03) 5224 2366.

The information provided in this blog is of a general nature only and is not intended as either advice or recommendations and is not tailored to your specific circumstances. Please also note that this does include any information on any Payroll requirements imposed by any State or Territory Governments outside of the State of Victoria. Please contact our partner – SIBS Bookkeeping team or us – the Hrkac Group Accountants team – if you would assistance as to how, or if, any of the abovementioned would apply to you.

Liability is limited by a scheme approved under Professional Standards Legislation.

Did you know?

By 1895 each Australian State had introduced its own inheritance (estate) tax. This tax was also often referred to as “death duties”.

Federal estate tax was introduced in 1914 but was abolished 65 years later, in 1979.

The States have also abolished their inheritance taxes, starting with Queensland in 1978. By 1982, all States had abolished their state-based death duties.

 

Death Duties today

While it is true Australia no longer has an inheritance tax or death duties in the strict sense of the word, there are some taxes that may become payable on a person’s death.

 

Capital gains tax

While death itself will generally not trigger a liability to pay capital gains tax, when certain assets are sold by a person’s estate or by beneficiaries that inherit those assets, the disposal may result in capital gains tax becoming payable.

The rules governing capital gains tax are complex and will depend on the nature of the assets (e.g. shares, investment properties, former main residence). In some circumstances, the sale of an asset may be exempt from capital gains tax (such as the sale of a former main residence that is sold within two years of death).

When dealing with a deceased estate, guidance from a suitably qualified accountant or tax agent is recommended to ensure liability for tax is managed appropriately.

 

Superannuation

Another significant area of inheritance tax “by stealth” is a deceased person’s superannuation benefits.

Superannuation held by a person at the time of their death may include benefits in the accumulation phase, the pension phase, or a combination of both.

Superannuation benefits may be minimal – perhaps a few thousand dollars or they may be significant – potentially hundreds of thousands or even millions of dollars.

When a member of a superannuation fund passes away, their superannuation savings must be cashed “as soon as practicable” following death. While “as soon as practicable” is not specifically defined in legislation, it is generally expected superannuation death benefit should be paid within six months of a person’s death. However, this may not always be possible, particularly where a dispute occurs, there is difficulty in locating potential beneficiaries, or where superannuation assets cannot be readily sold.

Superannuation death benefits can be cashed in two ways:

  1. Payment of a pension to certain eligible beneficiaries – generally to a surviving spouse; and/or
  2. Payment of a lump sum to nominated beneficiaries or to the estate of the deceased.

Superannuation law imposes restrictions on the classes of beneficiaries that can receive a death benefit directly from a superannuation fund, either in the form of a pension paid on the death of a member or as a lump sum. Often superannuation funds will pay a member’s death benefit to their legal personal representative to be dealt with as part of their estate.

Death benefits are also not just governed by superannuation law. They are also impacted by taxation law.

A superannuation death benefit paid as a lump sum is tax-free when paid to a “dependant” (as defined in tax law). Where the death benefit is paid to the estate of the deceased, a “look through” is applied to determine who the eventual beneficiary of the superannuation death benefit will be. If the ultimate beneficiary is a “tax dependant”, the benefit is tax-free.

A tax dependant includes:

  • The spouse, or former spouse of the deceased,
  • The deceased’s children under 18 years of age,
  • Anyone with whom the deceased had an interdependency relationship just before they died, or
  • Any other person who was financially dependent on the deceased at the time of their death.

In general terms, parents, brothers, and sisters, adult children, and grandchildren of a deceased person are unlikely to be a tax dependent of the deceased. Financial dependency can be difficult to determine.

When a superannuation benefit is paid to a person other than a tax dependent, we need to determine the components of a deceased member’s death benefit. This information can be obtained from the deceased’s superannuation fund.

Tax components may include one or more of the following:

  1. Tax-free component
  2. Taxable component – taxed element
  3. Taxable component – untaxed element

The tax-free component generally comprises contributions made to superannuation for which a tax deduction has not been claimed. This includes non-concessional contributions and downsizer contributions.

The taxable component – taxed element will comprise tax-deductible contributions (including those made by employers and personal tax-deductible contributions) and investment earnings on contributions.

A taxable contribution – untaxed element will include certain contributions made to an untaxed superannuation fund – generally older style funds for public servants. Life insurance proceeds paid to a deceased member’s account following the member’s death may also give rise to an untaxed element.

When a death benefit is paid, the components are taxed in the following manner:

  1. Tax-free component – is exempt from tax
  2. Taxable component – taxed element – taxed at 15%
  3. Taxable component – untaxed element – taxed at 30%

If a superannuation fund pays a death benefit directly to a beneficiary, rather than to the estate, Medicare Levy (2%) is added to the tax rates mentioned above.

 

Should I withdraw my super?

One of the questions often asked by seniors, particularly when it is likely their super will pass to non-tax dependants such as adult children, is whether super should be withdrawn as a lump sum while they are still living.

Remember, the tax-free component and taxable component – taxed element withdrawn as a lump sum by a member aged 60 or older, who is still living, is exempt from tax.

The answer to this question is – it depends!

For example, if a member’s superannuation balance is comprised entirely or has a significant portion of tax-free component, the tax payable on death will be minimal, if any.

However, if the benefit includes a significant portion of the taxable component, then the progressive drawing down of super as a person ages, may be worth considering.

Of course, if superannuation is withdrawn and invested outside of the superannuation system, income earned on the investments, and capital gains, will be taxable.

At the end of the day, managing superannuation in our maturing years will depend on several factors including:

  1. Who is the likely beneficiary – a tax dependent or a non-tax dependent?
  2. What are the components of the superannuation benefit – tax-free, taxable, or a combination?
  3. What tax is likely to be payable if superannuation is withdrawn and is invested outside the superannuation system?
  4. What is the member’s current health status and longevity outlook?

Unfortunately, there is no simple answer to avoiding tax payable on superannuation death benefits however there are strategies that can be drawn upon to minimise tax.

As every person’s situation will be different, seeking appropriate advice from a licensed financial adviser is recommended.

 

The content within this blog has been sourced from our Licensee, Alliance Wealth’s blog ‘Realise Your Dream’.
https://blog.centrepointalliance.com.au/realiseyourdream/australias-secret-inheritance-tax
General Advice Warning
This information has been provided as general advice. We have not considered your financial circumstances, needs, or objectives. You should consider the appropriateness of the advice. You should obtain and consider the relevant Product Disclosure Statement (PDS) and seek the assistance of an authorised financial adviser before making any decision regarding any products or strategies mentioned in this communication. Whilst all care has been taken in the preparation of this material, it is based on our understanding of current regulatory requirements and laws at the publication date. As these laws are subject to change you should talk to an authorised adviser for the most up-to-date information. No warranty is given in respect of the information provided and accordingly neither nor its related entities, employees or representatives accepts responsibility for any loss suffered by any person arising from reliance on this information.
Liability limited by a scheme approved under Professional Standards Legislation.

If you have a home loan, or are in the market to buy a house, you are most certainly aware by now that interest rates are rising at a rapid rate. The Reserve Bank has this month raised the cash rate by 0.5 of a percentage point for the fourth straight month in a row, and governor Philip Lowe has said the board expects to increase interest rates even further over the months ahead. The cash rate target of 2.35 per cent is the highest since the beginning of 2015. As a result, home loan rates are also certain to rise.

Governor Lowe’s post-meeting statement once again reiterated that the bank’s board is “committed to doing what is necessary” to bring inflation back within the bank’s 2-3 per cent target range “over time”. Analysis by RateCity suggests that this most recent increase will add an extra $200+ per month to repayments on a $750,000 mortgage. The total increase in monthly repayments on a $750,000 mortgage since the RBA began lifting the cash rate from its all-time low of 0.1 per cent in May, will be over $900.

These rises aren’t unprecedented; in 1994, the cash rate went from 4.75 per cent to 7.5 per cent in just five months. All the same, things may be feeling a bit scary in your household right now. So what should you do in response? Here are five suggestions:

 

1. Don’t panic

Don’t panic, there are many ways to survive and thrive in these challenging times. Your lender wouldn’t have approved your mortgage unless they were sure that you could cope with a worst-case-scenario series of rate rises. So unless your financial position has severely deteriorated since then, you should be able to cope with higher repayments. While a higher mortgage repayment may strain your budget and certainly cause concern, it’s most likely never going to get to the point where you must default on your mortgage. Soaring rates, increasing inflation, and oil price hikes are all part of the economy. There are things you can do to prepare for rate rises and keep your finances on track.

It may help to understand exactly how the rate increases will impact your bottom line. If you have a financial planner, mortgage broker or someone who can assist you in these matters, book in a catch up. By understanding how much more money you need to find each month, you can start to make the proper arrangements. Stay positive and don’t despair. Rising interest rates can be challenging. Talk to one of our expert lenders if you need help understanding your options.

 

2. Get ahead of any problems

If you think you might struggle to continue making your repayments, contact your lender now to discuss your options. It’s important you make contact before you miss a repayment, not after, because the more warning you give your lender, the more flexible they’re likely to be. No one wants you to default on your loan. Understand your options. If you’re struggling to make ends meet, there are other avenues you can take.

When speaking to your lender about your circumstances, see if they have available options to defer, pause or reduce your repayments if you are suffering from financial hardship. Many lenders in Australia offer a hardship policy, and you should speak to them if you feel the situation is becoming too difficult for you to manage.

 

3. Budget for rate rises

Make a budget and commit to it. This will help you stay across your finances and ensure you’re not overspending. Understanding where your money goes is important for anyone, under pressure from rate rises or not. If you don’t already have one, create a budget that encompasses all of your income and all of your expenses. Make sure that you capture everything, including major expenses (such as loan repayments, bills, groceries, and fuel) and also smaller expenses and luxuries, (like take-away, streaming services, etc.). Once you have an idea of your actual cash flow, you can start to make more informed decisions about your spending.

If rates increase, you must find the increased repayment in the budget somewhere. Assume your mortgage rate will rise by 2 percentage points. Calculate what your new monthly repayment would be and start paying it now. You can put the extra money into an offset account, a redraw facility or a special savings account. If you have a variable home loan, an offset account can be a useful tool. You can still use it as a regular transaction account but, just by having the money sitting there, it reduces how much interest you’re paying on your loan.

 

4. Improve your savings rate

Finding crafty ways to reduce your expenses could give you a bit more breathing room as rates rise. When times become a little tougher, it’s always good to look at where your money is going and try to reduce your habit-spending where possible. We tend to overlook smaller purchases, like your daily take-away coffee, that bottle of wine with dinner, or other minor impulse purchases. Perhaps you could skip dining out every couple of weeks, cancel your weekly meal box or reassess some of the household brands you buy. Reducing your overall spending is the main objective if you find yourself needing to free up some extra cash to make way for increased repayments.

Now could also be a great time to ask for a raise or a promotion. Employees are in a unique position to ask for a raise this year, because high inflation and tight labour markets are expected to continue. Additionally, you could look for new income opportunities on the side.

 

5. Switch to a better loan

The home loan market is intensely competitive, which is why lenders often charge new borrowers lower interest rates than loyal customers. So you could be making big savings by refinancing to a lender offering a comparable loan at a lower rate. Try finding one with an offset account attached to the loan account. This is an effective tool to bring down the amount of interest you owe whilst providing you with available funds for any emergency that may arise.

 

In conclusion

Don’t give up. rising interest rates can be challenging. Talk to an expert lender if you need help understanding your options.

The expert lenders at The Hrkac Group are committed to helping borrowers get the most from their lending. Our in-house team of financial experts can help you create a financial plan that works for you and your individual circumstances, and can help you make the right decision about managing your home loan. If you want to discuss your options, speak to an expert Geelong Mortgage Broker at The Hrkac Group.

Our Geelong Mortgage Brokers’ expertise and experience in facilitating your home loan can help ensure a positive experience for you. To make an appointment to meet one of our friendly Geelong Mortgage Brokers today, feel free to contact us via email or phone (03) 5224 2366.

Liability limited by a scheme approved under Professional Standards Legislation.