8 Reasons to Consider Refinancing your Home Loan
If you have had your current home loan for a number of years, it is likely your needs have since changed. That, or you may be missing out on flexible features or add-ons that have since become available.
Refinancing your home involves paying out your current loan with a new one. In many cases, this will be with a different bank entirely. Why? This may allow you to select certain features that better suit your lifestyle, wants and needs.
Here are 8 reasons why you could consider refinancing your home:
1. Save on Fees
Your interest rate will have a significant impact on how much you actually pay on your mortgage. If you have had your loan for a number of years, you may be paying loyalty tax. This is when lenders charge long-term customers a higher interest rate, compared to new customers. Securing an interest rate just 0.5% lower than your existing loan can see you save thousands. Ultimately resulting in your loan being paid off quicker, and who doesn’t want those extra dollars in their pocket?
It is important to remember your home loan is more than the interest rate. All lenders measure their rates differently, which is why it is so important to speak with a Lending Specialist or Mortgage Broker to ensure you are reviewing all aspects of the loan before making the change.
2. Customise your loan
It is likely that your personal circumstances will change over the course of your home loan and you may need to alter your loan accordingly. When getting your home loan years ago, it may have included features that no longer suit you today, or you have found that over time, the features on your current loan are just not being maximised. Adding or removing features to better suit your lifestyle can help give you the flexibility you need. There are a range of features available to you, including flexible repayments, redraw facilities or even offset accounts. As always, it is best to consult our team of Geelong Mortgage Brokers to explore the best path for you.
3. Opt for a fixed rate
Fixed rates work really well in the right situations however upon the end of your fixed rate term, you will be transferred to a higher variable rate by default. However, refinancing your fixed loan once it has ended, may help you avoid having to pay any associated fees with leaving a fixed home loan early.
4. Access home equity
If you want to access your home equity, refinancing is the way to do it. Your equity is the portion of your home that you own outright. You can calculate your equity by subtracting your remaining home loan from the balance of your home’s current value. Accessing your equity can then help fund major purchases or investments.
5. Investment Opportunities
Refinancing your home can help you maximise your equity on your home. You could then use those funds to invest in real estate, shares, or other opportunities.
7. Facilitate Renovations
Enhance your property’s value and move closer to achieving your dream home by undergoing renovations on your property. To avoid having to take out a new loan to fund your renovations and ensure your savings stay in your bank, think about using the equity in your home which can be unlocked by refinancing your home.
7. Debt Consolidation
You may have other debts, including personal loans, car loans or credit cards.
Debt consolidation involves combining those other debts with your home loan. This simplifies repayments and makes managing your repayments more convenient.
8. Switching Lenders
You may not be 100% satisfied with your current lender. This could be due to a number of factors, some of them being: inadequate website, mobile app or in-person services, inflexible repayment methods or a negative experience with the customer service provided. Whatever the reason, if you do decide to refinance based on the lender, ensure you are taking into consideration all aspects of the new loan and not just the lender.
Geelong Mortgage Brokers at The Hrkac Group
If you are considering refinancing your home loan, there are steps you need to take to ensure you are eligible to do so. Our team of Geelong Mortgage Brokers are dedicated to helping you ensure your home loan journey is as simple and stress-free as possible. We have access to a range of home loans offered by banks and non-banking lenders, to ensure we find the best suitable option for you.
Take control of your financial future by meeting with our team of Geelong Mortgage Brokers and home loan specialists at The Hrkac Group. Make an appointment today via our Contact Us page, or phone us on (03) 5224 2366.
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.
One of the surprising things about superannuation is the lack of engagement people have with it.
It is not until retirement begins to appear on the distant horizon that many start to become more interested in how healthy, or otherwise, their retirement nest egg is looking.
One of the problems that has emerged with super over the years has been the proliferation of individual accounts. It was not uncommon for a person to have several individual accounts. Each time a person changed jobs; a new super fund would be opened. This leads to the duplication of super accounts and with that, the duplication of fees and often, insurance coverage.
However, in recent years the trend for people to have multiple accounts has been trending down. For the most part, has been a good thing.
Superannuation Law Requirements
Recent changes to superannuation laws now require employers to look for existing superannuation accounts before simply paying their new employees’ super to their default fund. In addition, superannuation laws specifically require superannuation funds to identify and consolidate multiple superannuation accounts held by their members. This is referred to as intra-fund consolidation.
The Australian Securities and Investment Commission (ASIC) carried out a survey and found that three out of nine trustees of superannuation funds did not have policies in place to identify members with multiple accounts. ASIC is working with super fund trustees to increase compliance in this area. While the idea of consolidating super and eliminating multiple accounts will be desirable, there will be occasions where having more than one superannuation account is either necessary or desirable. Superannuation benefits will generally comprise a taxable component and a tax-free component.
Estate Planning
When it comes to estate planning, there may be value in making non-concessional contributions, which form part of the tax-free component. This separates accumulation accounts thereby quarantines them from taxable superannuation benefits.
Often superannuation fund membership will include life and total and permanent disablement insurance cover. And, in many instances, this cover has been included without the need for the member to meet any medical requirements.
Therefore, for a superannuation fund member that has multiple superannuation accounts with embedded life insurance cover, and their health makes it unlikely they can obtain insurance either at all, or at an affordable price if they were medically underwritten, holding more than one superannuation account with life insurance attached can be a bonus.
There will be situations when consolidating superannuation accounts cannot be done. Alternatively by doing so would not be in a member’s best interest.
The obligations imposed on superannuation funds to consolidate their members’ multiple accounts into a single superannuation account may be contrary to some of the strategies that have been specifically structured to obtain a particular outcome. With that in mind, it is important to pay attention to any correspondence you receive from your superannuation fund. Remember reinstating a former situation, particularly if intra-fund consolidation has occurred, may be difficult and very time-consuming.
Expert financial advice with The Hrkac Group
Having a financial planner on your team can be worth its weight in gold when navigating the complexities of superannuation. Plan a meeting with our Geelong-based Financial Planning team. Make an appointment today via our booking link, email or phone (03) 5224 2366
The content within this blog has been sourced from our Licensee, Alliance Wealth’s blog ‘Realise Your Dream’.
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.
A recent review of the Privacy Act Exemption in Australia has brought forth a pivotal change. This will impact small businesses with an annual turnover of $3 million or less. In this article, let’s explore the reasons behind this shift. We’ll delve into the significant proposals made by the review, and discuss the implications of these changes for small businesses. We’ll also look at the steps the government plans to take to ensure a smooth transition while safeguarding individuals’ privacy.
A Changing Landscape of Privacy:
The digital age has ushered in a new era of data privacy concerns. Personal information is more vulnerable than ever. To misuse and data breaches, making the protection of this data of paramount concern. The Privacy Act in Australia plays a crucial role in safeguarding individuals’ privacy, but its application hasn’t been consistent. Small businesses, with annual turnovers of $3 million or less, have been exempt from certain privacy obligations. This is set to change.
Proposals from the Privacy Act Review:
The Privacy Act review has proposed several key changes aimed at strengthening data privacy. These proposals have gained the government’s support, marking a significant shift in the country’s privacy regulations. The proposed changes include giving individuals greater control over their privacy. This is done by ensuring entities seek informed consent regarding the handling of their personal information. Additionally, entities will be held accountable for the way they handle individuals’ information. With enhanced requirements for information security and destruction of data when it’s no longer needed. Moreover, the review seeks to simplify obligations for entities handling personal information on behalf of others and introduces the idea of a Children’s Online Privacy Code to provide stronger protections for children online.
Removal of the Small Business Exemption:
One of the most substantial proposals from the Privacy Act review is the removal of the small business exemption. This exemption had previously spared small businesses with annual turnovers of $3 million or less from certain privacy obligations. However, the review committee found that community expectations around privacy had evolved, and they fully expected their personal information to be safeguarded. The removal of this exemption is a clear reflection of the changing landscape of data privacy, but it comes with a caveat. The government has acknowledged that further consultation with small businesses and their representatives is necessary to understand the full impact of this change.
Implications for Small Businesses:
The removal of the small business exemption carries significant implications for small businesses across the nation. They will now need to adapt to a new set of regulatory requirements, which could prove challenging. Non-compliance with these new regulations could result in penalties, fines, and reputational damage. Therefore, small businesses must not only understand these changes but also put in place strategies to adhere to the Privacy Act and protect customer data.
Ensuring Compliance and Data Protection:
Small businesses can prepare for the changes by conducting a privacy impact analysis and data audit. These assessments will help in understanding the extent of data handling and its potential vulnerabilities within the organisation. Implementing robust data protection policies and practices will be key to ensuring compliance with the evolving regulations. These policies should cover data security, access control, encryption, and procedures for data destruction when it is no longer required.
Government’s Commitment to Privacy:
The government has demonstrated a strong commitment to ensuring data privacy in the digital age. This commitment is not new; it builds upon past actions. In the previous year, the government significantly increased penalties for privacy breaches and empowered the Australian Information Commissioner with greater authority to address such breaches. In response to the changes brought about by the Privacy Act review, the government will conduct an impact analysis. The government is also set to collaborate with community members, businesses, media organisations, and government agencies to develop legislation and guidance material that aligns with the new privacy landscape.
The Expectations of Australians:
Australians are increasingly reliant on digital technologies in various aspects of their lives. Whether it’s for work, education, healthcare, or everyday commercial transactions, the digital realm plays a crucial role. In this context, when Australians are asked to share their data, they rightfully expect that it will be handled and protected with the utmost care and security.
The removal of the small business exemption from the Privacy Act signifies a significant transformation in Australia’s data privacy and protection approach. While it may pose challenges for small businesses, it is crucial for ensuring individuals’ privacy and building trust in a digital age. The government’s commitment to working with small businesses and other stakeholders is a positive step toward a smooth transition. As the digital landscape continues to evolve, small businesses need to adapt, prioritise data protection, and honour the trust that customers place in them. This change is a reminder that data privacy is a shared responsibility. All entities, regardless of size, must play their part in safeguarding personal information.
Geelong Accountants
If you’re interested in knowing more about your obligations as a small business, speak to the expert Geelong accountants at The Hrkac Group. Non-compliance with these new regulations carries the risk of penalties. Small businesses need to understand these changes and put strategies in place to adhere to the Privacy Act and protect customer data. Contact our experienced team of Geelong accountants if you need help implementing data protection policies and practices to ensure compliance with the evolving regulations.
To make an appointment with one of our friendly Geelong accountants today, contact us via email or phone (03) 5224 2366.
The dream of owning a home is deeply ingrained in Australian culture. For many, it represents a significant milestone in their lives, symbolising financial security and stability. But, the rising cost of housing in many parts of Australia has made this aspiration increasingly challenging for first-time buyers.
Furthermore, the dream of owning a home has been made even more difficult due to stricter lending practices by banks, sluggish wage growth relative to inflation, and concerns about fluctuating interest rates. In response to this challenge, commencing on July 1st, 2023, the government’s Home Guarantee Scheme expanded its eligibility criteria. It has been made to be more accessible for individuals who have long aspired to homeownership.
Understanding the First Home Guarantee Scheme
The First Home Guarantee is an Australian Government initiative. It’s aimed at speeding up the ability to buy a home for eligible buyers. The Scheme comprises several key components, each aimed at assisting first-time buyers in different ways:
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First Home Guarantee
This component of the Scheme helps eligible first-home buyers secure a home loan with a lower deposit. Typically, banks require a deposit of at least 20% of the property’s value. Under the scheme, eligible buyers can purchase a home with as little as a 5% deposit. The government guarantees the remaining portion of the deposit, effectively eliminating the need for costly Lenders Mortgage Insurance (LMI). This makes homeownership more attainable for those who may have been struggling to save a large deposit.
Beginning on July 1, the upcoming changes will extend eligibility beyond singles and de-facto couples. Now encompasses family members, siblings, and friends who can collaboratively apply and divide the expenses associated with a first home deposit.
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Regional First Home Buyer Guarantee
This program is for eligible first-home buyers looking to purchase their first home in a regional area. It enables them to do so with a deposit as low as 5%, without incurring the expenses associated with LMI.
On July 1, the upcoming changes will extend eligibility beyond singles and de-facto couples to encompass family members, siblings, and friends who can collaboratively apply and divide the expenses associated with a first home deposit.
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Family Home Guarantee
This initiative offers eligible single parents with dependents the opportunity to apply for a mortgage with as little as a 2% deposit, without attracting LMI, thanks to the government acting as guarantor. It’s accessible to both first-time homebuyers and single parents seeking to enter or re-enter the property market, whether they intend to purchase an existing property or build a new home. This scheme is intended to help alleviate some of the financial stress that often accompanies single parenthood.
Starting from July 1, the forthcoming changes will broaden eligibility criteria to encompass not only single parents but also single legal guardians of children, including siblings, aunts, uncles, and grandparents.
Who’s Eligible to Apply?
To apply for the Scheme, following the changes that took effect on July 1, prospective homebuyers must meet the following criteria:
- Citizenship or Residency: Applicants must be Australian citizens or permanent residents at the time they enter into the loan. Commencing July 1, permanent residents will now be eligible for all three guarantees offered under the scheme.
- Age Requirement: Homebuyers must be at least 18 years of age to be eligible.
- Income Limits: The income threshold for eligibility is an annual income of up to $125,000 for individuals or $200,000 for couples, as indicated on their Notice of Assessment issued by the Australian Taxation Office.
- Deposit: A minimum deposit of 5% of the property’s value is required. However, for those applying for the Family Home Guarantee, a minimum deposit of 2% is sufficient.
- Owner-Occupancy: Applicants must intend to use the purchased property as their primary residence, establishing them as owner-occupiers.
- First Homebuyer Status: Eligibility extends to first-time homebuyers who have not previously owned or held an interest in a property in Australia. Additionally, homebuyers who have not owned a property in the past 10 years are eligible under the scheme.
- Loan Approval: Applicants should be capable of securing a loan through a participating lender.
What Type of Property can be Bought?
In order for a property to qualify for eligibility, it must meet the criteria of being categorised as a ‘residential property’. Residential properties that meet the eligibility criteria encompass the following:
- An existing house, townhouse, or apartment
- A house and land package
- Land and a separate contract to build a home
- An off-the-plan apartment or townhouse
The program aids in acquiring or constructing a modest home, with the condition that the residential property’s value does not surpass the applicable price cap for its location. The specific price caps for capital cities, major regional centres, and regional areas can be referenced here.
Key Considerations when Financing Your New Home
When it comes to financing your new home, it’s essential to temper your excitement with thoughtful consideration and careful decision-making. Owning a home is a significant step. It demands thorough research and prudent choices that can profoundly impact your future as a homeowner. Several key considerations should include:
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Type of Home
Begin by defining the type of home you’re seeking. Are you in pursuit of your dream home, or is an entry-level home more aligned with your current goals? Consider your family’s needs, the required space, and whether the home should accommodate future growth. Additionally, assess if the neighbourhood matches your lifestyle preferences and necessities.
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Financial Assessment
Evaluate your financial situation. Determine the amount you can save for a deposit, as a larger deposit can reduce long-term interest costs on your loan. Ensure your income and financial stability align with your new home purchase and think about whether you’ll be able to consistently service your mortgage. Explore potential government initiatives or subsidies for which you may be eligible.
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Home Loan Considerations
Delve into the specifics of your home loan. Have you consulted with a mortgage broker to explore various loan options? Understand whether you’ll be subject to paying LMI and assess whether a fixed or variable interest rate is more suitable for your circumstances. Additionally, consider whether you’ll secure your home loan through a traditional bank or an alternative lender.
Mortgage Brokers Geelong
By taking these factors into account and speaking with our expert mortgage brokers in Geelong, we can help you confidently finance your new home and set a solid foundation for your homeownership journey.
The expert lenders at The Hrkac Group are committed to helping borrowers get the most from their lending. Our 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, feel free to contact us via email or phone (03) 5221 2355.
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.
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
- 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. - 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. - 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.
- 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. - 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.
- 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.
- 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:
- 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.
- 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.
- 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.
- 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.
- 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.
- 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:
- Pre-contract
- Pre-completion
- 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.
- 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. - 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. - 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. - 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. - 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.
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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.
