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Gen Y: Time to get a grip on your finances with Bubbles, Beer & Budgeting

Gen Y has the world at its feet – but can it afford to make the most of the opportunities thrown its way?


 

In the age of avocado on toast and double shot soy lattes, it’s easy to get caught up in the now and ignore tomorrow. Gen Y’s pay is eaten up by rent, Myki, Netflix, phone plan, brunches and gym – it’s swallowed up by life, leaving nothing for the future.

But we’re here to help you (or your friends and family); to break down the steps to achieving the kind of freedom we all dream of as we navigate study, travel, work, relationships and . . . well, life!

Bubbles, Beer and Budgeting is kicking off for season 2017 and we’re looking for our next group of Gen Y/Millennials to hit with some #finspiration

Join us for a beer or a bubbles and get a grip on your financial future!

The workshops will cover:

  • Financial basics of budgeting and cashflow management
  • Different types of investments at a grassroots level
  • Tools to help you achieve your savings goals
  • Saving for your first home

All this at a cool venue, surrounded by like-minded movers and shakers in their 20s and 30s who want to make a go of their life.

Stay in touch on our Facebook page

Workshop Details

You can choose from one of three dates; the content will be the same with different topics scheduled for later in the year.

  • Thursday 20 April
  • Tuesday 2 May
  • Wednesday 7 June

Time: 6pm – 8pm

Where: Henry and the Fox, 525 Little Collins Street, Melbourne, VIC 3000

Price: $10, includes bubbles, beers, nibbles and take home workbook

 

Click here to book now!

Self-imposed exile won’t HELP you avoid HECS Repayments

Since its inception in 1989 the Higher Education Loan Program (HELP – also known as HECS pre 2005) has become an integral part of the Australian higher education system.

It has allowed many young graduates to work for a few years and accumulate some cash post-study without the burden of repaying their debt until their earnings reached a certain threshold. This system of government-funded, interest free “loans” has also enabled many young Australians to earn enough money to travel to see the world and work overseas – with the added perk being able to put their HELP debt repayments on hold indefinitely.

You see, overseas earnings were never counted toward the repayment income levels – so if you ran away and never came home, you never had to pay the loans back. That is until the 2015 Federal Budget flagged the loophole and marked changes to come in from 1 July 2017.

With student debts expected to hit $70.4 billion by 2018, the Australian government was looking for ways to stop this self-imposed exile of young university graduates who were avoiding their debt. Their solution? From 1 July 2017, those with a study debt who move – or are already living – overseas, will now need to make repayments on their HELP debts based on their income – wherever in the world it is earned.

What does this mean for me?

From 1 July 2017, repayments against your HELP debts will be based on your worldwide income for the 2016/17 income year. So if you live and work overseas and earn any type of income (including Australian and foreign sourced income) that exceeds the minimum HELP repayment thresholds, you will be required to make repayments against your loan.

What is the repayment threshold?

The repayment threshold is AUD$54,869 for the 2017 income year.

If you earn above this amount you have to make an overseas levy repayment.

The ATO has provided guidance on how to convert your foreign sourced income into AUD, which will help you calculate whether or not your earnings are above the threshold.

I am going overseas.  What do I need to do?

If you are going overseas for 183 days or more, in any 12 month period, you will need to let the ATO know within seven days of leaving Australia. This is cumulative and does not have to be all at the same time.

You can notify the ATO through your myGov account.  If you don’t already have an account, visit the ATO’s overseas obligations webpage for details on creating your myGov account.

I’m already living overseas.  Do I need to do anything?

Yes.  If you have a HELP debt, then from 1 July 2017 you will be required to report your worldwide income to the ATO. If your 2016/17 worldwide income exceeds the minimum repayment threshold, the ATO will raise a compulsory repayment known as an overseas levy.

How do I declare my worldwide income?

You can engage an Australian tax agent, like The Hopkins Group, to submit your worldwide income on your behalf. Alternatively, you can do it yourself through myGov.

If you choose to lodge yourself through myGov, then your declaration will be due by 31 October each year.  Should you engage an agent, like The Hopkins Group, then the due date will be extended to the date usually afforded to tax agents (usually 15 May of the following year).

When calculating your income, there are currently three income assessment methods available.

What if my worldwide income is below the minimum repayment threshold?

For the 2017 income year, if you are a non-resident for tax purposes and your worldwide income is at or below AUD$13,717 then you simply need to submit a non-lodgment advice to the ATO and there will be no HELP repayment consequences.

If your worldwide income is above AUD$13,717 but below AUD$54,869, you will need to declare your income to the ATO. However no overseas levy will be raised as you’re below the minimum repayment level.

As the saying goes – all good things must come to an end. Come 1 July, there’s no running away from your HELP debt repayment obligations. If you have any further questions about what this might mean for you or if you would like to discuss anything else related to your HELP debt and/or tax matters generally, please do not hesitate to contact us and speak with one of our accountants today.

General Advice Warning: This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial advice prior to acting on this information.

Credit Cards: The Good, The Bad & The Ugly

Credit cards can be a very valuable tool if they are used correctly and responsibly – but used wrongly, you can find yourself in a whole spot of bother. The majority of bad credit card debt comes from irresponsible spending and a lack of discipline when using borrowed credit. In this blog post, I will discuss some of the pros and cons of including a credit card in your financial toolkit.

The Good

Security

No need to walk around with a wallet full of cash and worrying about somebody pick pocketing you and taking your hard earned dollars these days. Thankfully, with our modern society, we can walk into any store and pull out our card and tap and go. Not only can we use a credit card in store, but we are also able to use it in a secure manner when purchasing online. Most banks will cop the burden of fraudulent transaction on your credit card but if you use a regular debit card linked to your savings account, more often than not you’ll have to wear the cost yourself.

Travel insurance

Some cards offer the perks of travel insurance when you pay for your holiday using your card. One less thing to worry about – or have to pay for! This can come in very handy if you’re planning a few weeks in Bali, sitting by the pool, enjoying a few rays and a Bintang . . . and your hotel room gets broken in to or you drop your DSLR camera in the pool. Policies do differ so always be sure to read the terms and conditions to make sure you are taking full advantage of this feature.

Rewards points

Ahh one of my favourite things: being rewarded for spending money. Most credit cards come with a rewards points system which can be used to your advantage if you play the game right. Points can be used to pay annual fees on credit cards, purchase flights, fuel and even gifts for your other half (or yourself which is my preferred option). Just note that you actually have to spend a lot of money to actually earn a decent amount of points; although the way I look at it is that you were going to spend the money anyway so why not get a bit extra for your dollar?

Credit ratings

If you are a young buck stepping out into the big wide world of independence, then a credit card is a great way to show banks that you are good with money and are able to meet financial commitments. You just have to make sure you make all your repayments and keep it under control! If you have a strong history of responsibly managing your credit card, the banks will look favourably upon you when you’re applying for a loan for a new car or house in the future. A good credit rating will open a lot of doors for you.

Budgeting

One handy – yet often overlooked – benefit of a credit card is the ability to use it in your budget planning. But how? you ask. Every transaction that you make from paying bills to buying a coffee can be paid for by your credit card, and in doing so, creating a bit of an audit trail. If you use cash, you don’t have that recorded history of your spending. Come the end of the month, when you look back through your credit card transaction statement, you can see exactly where your money is going (hello pub lunches) and see where you need to cut back on your spending to enable you to save that little bit extra money.

Interest free periods

In my eyes, this is where the magic happens. Most credit cards come with an interest free period which typically can vary from 15 to 60 days. Instead of using the money sitting in your savings account (or better still, an offset account linked to a home loan) you can use the dollars on the credit card which will cost you nothing if paid back on the due date. This will allow you to earn interest (or avoid paying more interest if you have an offset account) as your money will be sitting in an account you own until the bill due date, and you will be spending the bank’s money in the meantime.

The Bad

Don’t get greedy

It’s easy to get carried away with spending money you don’t have, but you really need to be conscious of your limits and know to spend within your own boundaries. Banks will often send you invitations to increase your credit card limit and before you know it, you could be the proud – yet stretched – owner of a credit card with a $50,000 limit. But do you really need a card with that much freedom; that much potential to dig yourself into some serious debt? If you can’t afford to make ongoing repayments on large sums, you should go back to the old-school ways and save for big ticket items. This way, you’ll be earning interest on your savings rather than accruing interest on your credit card. Resist the urge to click on the ‘apply now’ button when you receive these credit increase emails and stand your ground!

The Ugly

Look after future you

You really need to consider the impact of your actions today on your financial freedom in the future. If a credit card is used irresponsibly, it can lead to a lot of financial distress for the cardholder. Perhaps the most devastating result of using a credit card irresponsibly is the effect it may have on your credit rating and subsequent ability to apply for a loan. As a young, single party goer, it might be socially acceptable to have a few credit card debts and some baggage from your world travels, but what happens when you go to buy a house with your partner in a few years and your borrowing capacity is affected by your less than impressive credit rating?

All the fees

Make sure you make your repayments by the due date each month! In a perfect world, you should pay off the entire amount each month but at the very least, you need to meet the minimum repayment. Keep in mind, if you only ever pay the minimum, you’ll never really make tracks on your debt – it’s kind of like treading water in the ocean, but not getting any closer to the shore. The banks make their money by charging massive amounts of interest on the money borrowed if you cannot repay it on time. This can be more than 20% so it is extremely important to have your card paid off in full by the due date so you are not charged any interest on the outstanding balance, nor any late fees.

Tips and Tricks

Sure, in travelling the world and eating at the best restaurants, you might collect some awesome Facebook memories, but you’ll also collect some hefty ongoing financial commitments. Wouldn’t you rather redirect those funds to a savings plan or holiday deposit instead?

Here are some final tips to help you get a grip on your credit card behaviours:

  • Before pulling out your credit card, ask yourself “Do I want or need this?” If you want it – rather than need it – then it is not a necessity and can be put back on the shelf.
  • Lower your credit limit to an amount that you know you will be able to comfortably pay back within the month. This will also reduce the risk of over spending and hopefully avoiding any financial distress in the future.
  • Don’t fall into the trap of having multiple credit cards as you only need one at most. This will allow you to more easily track your spending and stay on top of it.

Credit cards can be a very useful tool and even help you save money, but you need to use them wisely. If you find yourself in trouble and unable to stay on top of your debts, then a financial planner can assist in creating an appropriate overall financial strategy to help you recover from bad debt.

To take that first step, send us an email or call The Hopkins Group on 1800 726 082 and ask to speak to a financial adviser who will be more than willing to help you break the cycle of bad debt and put you on the path to financial security.

 

Disclaimer: Shane Light is an Authorised Representative and John Hopkins Financial Services Pty Ltd is a Corporate Representative of WealthSure Financial Services Pty Ltd Level 1 190 Stirling Street PERTH WA 6000 ACN:130 288 578 AFSL: 326450.

General Advice Warning: This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial advice prior to acting on this information.

In reply | ‘’What I wouldn’t buy: Five successful investors share their advice”

Domain recently published an article titled “What I wouldn’t buy: Five successful investors share their advice”. An associate of John Hopkins wrote to us to seek John’s views on comments made in the article. The following blog post provides an edit of John’s reply.

Off-the-plan

I have never met Steve McKnight, however my understanding is that he is a seasoned, experienced and successful property person. My understanding is that he, unlike many, has never been one of those property spruikers that has promised or stated things as fact that cannot be promised and or are not facts.

So, my comments in relation to this part of the article are purely comments about what Steve has been quoted to have said.

Firstly, I find it fascinating that the media and  many others are negative of property that has been purchased ‘Off the Plan’; in other words, property purchased before it has been developed.

There is a suggestion that this is bad, or that somehow between the start of development and the completion there is a transformation that makes an Off the Plan purchase safe because it is now completed. Or in the reverse that it was necessarily dangerous to purchase before it was developed.

I cannot imagine any professional experienced property person, a valuer, a competent property estate agent (as distinct from a good sales agent, I really mean property competent) or an experienced property investment advisor ever saying property cannot be assessed and valued accurately before it is developed.

Whether it is commercial or residential, or most other categories of property, for decades, for centuries around the world, professionals have made assessments of the end property, assessments about value, assessments about the end improvements, about the suitability of the developed property for that particular location, likely demand of occupation and likely demand ownership.  How would property development, the subdividing and the improvements on land with the completion of developments ever happen if it was impossible to make careful judgements before the start of development?

Developers would not develop and banks would not lend if it was not possible.

It is the same for buyers, residential buyers, commercial and other property buyers. Accurate and correct assessments can be made about property before it is developed.

So to say across the board that ‘Off the Plan’ purchasers are bad, is wrong, it is very wrong and would be laughed at by seasoned professionals. These statements are made either out of ignorance, vested interest or playing to popular thought or to obtaining media space or recognition.

Steve says that it is like a new car. The point he is making is that the new car will lose value the moment you drive it out of the show room or, that new property purchased off the plan will lose value the moment you settle.

Firstly, that is not a fact across the board by any means.

Secondly, it is important to say that getting access to quality property in a strong market is not easy and purchasing before a property is developed often gives access to quality.

Thirdly, by buying off the plan it is reasonable to say you can make certain you are purchasing the newest and best properties. The latest in design internally and externally, the best fixtures and fittings, the most up to date in landscaping and common facilities and owners corporation regulations.

And finally, for an investor, that new property offers the highest non cash tax deductions because of sections 40 and 43 of the taxation act through the depreciation of fixtures and fittings and what is referred to as the building allowance.

Respectfully to Steve, if the market is right (in terms of the general and particular markets the property or properties exist in), if the timing is reasonable (in relation to the economy and those property markets), if the development is appropriate (for the location and that market place) and if the specific properties (houses, townhouses or apartments) are quality developments produced by a team that is financially strong, experienced and acting with integrity, there in fact CAN BE great advantages and increases in value before finalisation.

Thousands and thousands of investors and owner occupiers throughout Australia and around the world have definitely had great success by purchasing off the plan over many, many, years past and will continue to do so in the years and markets to come.

To say that is not true is either a lie or it is a statement made by somebody, as I said above, without knowledge or with vested interests.

What is correct to say is, yes, some have purchased the wrong properties, or possibly purchased at the wrong time, or in the wrong market, or purchased property that is poorly conceived, developed or built or purchased from the wrong developers and have not got what they should have or what they wanted.

The answer is to know what you are doing, or take the correct competent advice.

Steve has also made the comment that scarcity drives value. I presume he correctly means value both in regard to capital and income, because they are equally important; definitely so for investors. For heritage type properties, in the right locations, scarcity can definitely be a driver of value. Our clients that purchased terraces in suburbs like South Melbourne or Paddington in Sydney have been the beneficiaries of scarcity value.

However those that bought apartments, and not particularly special apartments, in Kirribilli or Albert Park in Melbourne didn’t miss a beat. Scarcity is definitely one factor in the supply-demand relationship. But so is population increases in strong and independent economies, fashion changes – in regard to types of property or locations – and there are many more factors that add to demand for property.

Steve makes the point; ‘it is hard to see how a new property would outperform the general property market’.

It is crucial when talking about the performance of property markets to categorise into finite categories. To say it is hard to see how apartments would outperform the general market is way too generalised, especially when one adds in ease of ownership compared to some other categories of property or if new, as mentioned above, the benefits of Divisions 40 and 43 of the taxation act.

Also apartments are affordable in the best inner urban locations of ‘major metropolis’s’. Most investors could not afford houses in those quality locations.

Ask those that own apartments in central London, the inner districts of Paris, on Manhattan Island or next to the Ginza Strip in Tokyo. Or for that matter, in Elizabeth Bay, or Cremorne in Sydney, or East Melbourne, or Carlton in Melbourne what they think. Or in the future ask those that have purchased quality apartments in quality locations in Melbourne and Brisbane how they feel.

I can say without any fear of contradiction, if the past is any indication of the future they will be very happy with their actions.

In discussing the case for apartments I am not in any way suggesting they are the only category of residential property to invest in; I am discussing it because it has been suggested that they are bad investments. That is so wrong.

In regard to Steve’s comment about negative gearing, he is referring to the negative gearing of a property investment. I state that because we could purchase a business and negatively gear that purchase or we could purchase a portfolio of shares and negatively gear those purchases.

Secondly, it would be important to know if Steve is talking about negatively gearing costs before tax or after tax.

Gearing (leverage), that is, borrowing money to purchase an investment, or any asset for that matter, can be a worthwhile strategy if it is appropriate in regard to the particular investor and for the purchase of the right investments.

The same is absolutely correct with regard to negative gearing, which is where the costs of owning an investment, including interest, are greater than the income from that investment. In the case of property, this is rent. For certain investors this loss would be deductable by that tax payer against income from other sources of income in that particular tax year.

Gearing and negative gearing can be a very successful method of increasing returns on equity or capital.

Those returns are because the combining of capital growth, income growth and the devaluing of money, thanks to inflation, out strip the losses due to negative gearing whether pre or after tax, most likely over years into the future.

Millions and millions of property investors worldwide have safely enjoyed the benefits of this investment strategy.

The issue is the right investment for the right individual or entity, at the right time, acting as an investor and not a speculator or property trader.

I won’t address the issues here but if the suggestion is that positive gearing is the way to go, be wary; all that glitters is not gold. That is a strategy to be very careful with. However it is often presented as the opposite.

Mass-scale apartment developments

Respectfully to Marion Mays, whom from these accounts knows what she is doing, if the only reason to potentially avoid purchasing ‘Off the Plan’ apartments is because of long sunset clauses, I would make these comments.

Firstly, there could be hundreds of reasons not to purchase a particular off the plan apartment.

Macro, micro economic or property market issues, issues to do with the general or particular location of the proposed property, the funding of the project or the organisations involved – the developer most importantly, but also the architect, the builder and others.

It is important to understand the impact of particular sunset clauses – however if we know a particular development will be completed because we know the developer and the development, it is reasonable to accept a reasonable sunset clause.

The fact is most development financiers will not fund a development if there is not a reasonable sunset clause in the contract. Therefore there would not be a property to purchase at all without it. It is the particular circumstances that have to be considered and judged.

In regard to the last paragraph, some of the points sound reasonable but they really depend on the particular property and the particular investor. Marion says to avoid heritage property but how many investors have purchased Victorian houses in Kirribilli, Paddington, Albert Park, South Yarra or other similar locations. They have made millions and millions.

I agree avoid asbestos and flood plains. But I don’t think you need me to tell you that.

When discussing and investigating property, it is so important not to generalise. Further it is crucial not to be glib and to short cut important and often complicated research and due diligence processes.

Capital cities other than Melbourne, Sydney

I do know Michael Yardney and he is to be respected for his many involvements in property over many years.

It is a bit hard to say if Michael is referring to buying off the plan throughout Australia because he would of course know that many have made good money on apartments over the last six years in Sydney. Many have also purchased quality property in Melbourne in recent times, let’s say ten years, and in the right properties and locations these have done well; and that’s not even considering those that purchased at times earlier.

Michael is correct when he infers it is important to be careful. Docklands in Melbourne or the CBD are to be avoided. Brisbane offers opportunity and yet it is half the population of Sydney and Melbourne; therefore it is not as forgiving, so being much more careful about what and where is crucial here.

In Brisbane, just because New Farm and the right property in The Valley (Fortitude Valley) may have done very well from the perspective of income and capital growth, it does not mean all of Bowen Hills will be good. So compared to Sydney and Melbourne – which are both very forgiving, fundamentally because of the population sizes, population growth and the fact that they have strong and independent economies – it is crucial in Brisbane to be very much more discerning and careful.

If the reference is to off the plan purchases, I have discussed this above but to repeat; it is no different to being careful when buying an established property, if you know what you are doing.

An important point to make is that timing in regard to property markets is a very real consideration that has not been discussed in this article.

Michael is correct in regard to his comments about the other states and capital cities; Hobart, Adelaide, Darwin and to some degree Perth, they fundamentally do not have the populations or strong and independent economies that will support their property markets.

Rural properties, hotspots and (just) houses and Dime-a-dozen properties.

In regard to both of these sections I make the following comments.

Firstly, there are some statements that seem reasonable. For example, “steer clear of rural property”, “off the plan apartment purchases aren’t’ always a no go”, “make certain it is a quality build”, “have a balanced portfolio” and “keep away from rural property that depends on one industry”.

They are all possibly relevant issues but frankly each one needs a lot more in explanation, proof, and why or why not these issues matter, in regard to property investment decisions, is essential.

What really does concern me in regard to these two sections is that you can only know so much at the ages of Stephanie and Brenton.

Experiencing and learning and success in property investment is a long term activity and with great respect to both Stephanie and Brenton, it isn’t five years or ten. It is watching, learning and taking actions with both positive and negative results, for twenty years or more that would put an individual in a position to carefully advise on property selection and investment advice for individuals.

With property it is often that many individuals don’t know what they don’t know.

It surprises me that at every dinner party I go to everyone knows more about property than I do.

Q&A | Keys to Success Webinar

On 1 March 2017, The Hopkins Group hosted John’s Keys to Success webinar. We received a couple of interesting questions during the webinar that we felt required a more in depth answer than what was possible in the live chat facility. John has taken the time to answer these questions personally, following the presentation, and we are pleased to share these questions and answers to you here. 

If you would like to watch a replay of this webinar, please contact us and we will email you a link to view this in your own time.

Question: How do you respond to the belief that land appreciates and buildings depreciate?

Answer:

There are three important points to make regarding this question, the first is the use to which you could put to that particular piece of land. The second is the demand for that use in that position and the third is to say that it is not correct that buildings always depreciate in value.

Would you prefer to own half an acre on the shores of Cremorne or in Collins Street Melbourne, or would you prefer to own 400 acres 400 km west of Alice Springs? Of course, the point is the size of land must ALWAYS be related to its ability to be used (town planning) and the demand for that use. Given that land in central Australia an office building that would be an excellent investment in Collins Street or apartments and town houses on land in Cremorne would be your preferred investment every day. But the size of the land is so much smaller. Land, or the size of it, on its own is not the whole story.

You might think that the analogy is not relevant due to the extreme differences and distances but it is the same factors that would apply to land in outer urban areas of Australia’s metropolises (Brisbane, Sydney, Melbourne) and those quality inner urban suburbs that have underlying demand of occupation because of the general amenity provided by being inner urban. What gets sacrificed is the size of land and or the type of property.

Better off a terrace in Paddington or South Yarra than a house and land in Packenham or outer urban Sydney.
If multiple dwelling developments (townhouses and apartments) are in appropriate locations for the type of property and the title to those properties are modern, that is, up to date with today’s laws of title and are therefore easily saleable, transferable and financed, those properties may not be sitting on land but they have rights and title to land for the use that they have been created.

Tell me an apartment overlooking Central Park or Manhattan Island, in Elizabeth Bay overlooking the harbour or South Yarra looking north to the river and west of the Dandenong’s doesn’t have value. They don’t have quarter of an acre land that they are built on but growth in capital and income over decades and decades is beyond question.

In regard to buildings depreciating in value, if I built an office building, a house, a townhouse development, an apartment building, ten years ago, to build exactly the same buildings today, will cost a lot more. That is a combination of inflation, development costs, government charges, building costs and so on.

Depreciation in buildings occurs in those buildings that are not quality, not in well designed, well-constructed buildings.

All the above doesn’t mean the right house and land properties may not be good investments, it just means in the alternative, to suggest you need buildings on land is the answer and townhouse or apartments aren’t good investments is ridiculous and not borne out in fact.

Question: What’s your take on the recent media reports that banks are blacklisting certain Melbourne suburbs for funding?

“Media reports: The banks are listing certain Melbourne suburbs for funding”

Firstly, if you were in control and responsible for the mortgage assets of one of Australia’s licensed banks, you have prudential obligation and legal requirements to ensure that book is not overly exposed to any one particular category of asset, in this instance, property, in relation to other assets within that book.

Therefore if there is a particular suburb in a metropolis like Sydney, Brisbane or Melbourne, that enables the creation of a high number of a particular type of property, in this instance, let’s say Abbotsford, Melbourne with medium – high density apartments, whether or not that market is deemed a risk at one level or another that bank must curtail its lending.

Secondly and obviously if a particular asset or group of assets is considered high risk in terms of security, the bank would obviously not lend. Using Abbotsford as an example, where certain banks have limited their lending, the issue is very much to do with the numbers that have been developed there and the weighting in their mortgage books.

For reasonable quality developments, all through Abbotsford, there is ample proof of demand of occupation from both owner occupiers and tenants. We have firsthand experience of high demand in recent months for people to occupy many medium-high density categories of property in Abbotsford.

In regard to demand of ownership, there have been many sales in the secondary market, that is sales of individual properties in the open market after a development has been constructed and settled.Compared to say Docklands, and possibly the CBD of Melbourne, where the markets have been driven by off the plan sales mainly to overseas investors. And the local market for both owner occupation and ownership is weak. This therefore would suggest Docklands and the CBD are high risk in comparison to Abbotsford.

The issue is carefully investigating the circumstances around particular markets.

 

How to keep financially healthy with a baby on the way

What does growing your family mean for you? For me, it’s a wonderful time that brings to mind thoughts of those tiny, glorious, bundles of joy that are babies.

But then, what about the financial costs?

Scans, tests, a cot, pram, nappies, monitor, car seat and more; these all cost money and often lots of it. It can be stressful to think about, but if you get your family budget in order early on, your impending costs of parenthood can be less stressful and more fulfilling over time.

With baby number two on the way in my household, this topic is front of mind so I want to share with you my top tips to staying financially fit while your family grows.

1. Consider your hospital expenses

One big thing you need to consider before you give birth is how and where you want your baby to be born. Ask yourself; who would you like to care for you? Can you afford private care? Which is better for you and the baby?

Going Public

Choosing to have your baby in the public health system is the most budget friendly option; there is no charge for labour or birth care in public hospitals. Your birth will be attended by a midwife or the obstetrician on duty, and all costs are covered by Medicare.

With this option, the costs to watch out for are potential out-of-pocket expenses during your post-birth hospital stay, such as use of the hospital’s disposable nappies, or costs for pregnancy care provided by your local GP who doesn’t bulk bill.

Going Private

If you choose a private obstetrician in a private or public hospital, private health cover is strongly recommended.

The costs of your care under the private system will vary greatly depending on a number of different factors, so it’s best to do your research into what these may be based on your ideal birth plan.

It’s worth double checking with your health fund before you get pregnant to see what exactly your policy covers. Remember that most policies have a qualifying waiting period of 12 months, so it’s best to plan ahead and make sure these options are added at least one full year before you conceive.  And watch out for “gap” costs (the shortfall between your policy coverage and the charged cost of a service) that you may have to pay for things like obstetrician appointments.

2. Are you ready for two to become one? Managing your income during maternity leave

Mothers-to-be, who are often in the peak of their earning career, have to stop work to look after their tiny human.

Will your family be able to adjust to dropping to a single income stream?

It can be a big adjustment, so here a few things you can do to make the adjustment as painless as possible.

Prepare a plan
Crunching the numbers to determine how much it costs to live safely in the suburbs, turn the lights on and keep the cat warm can be scary, but it will ensure your money stretches further.

Work out your household expenses and how much you need to sock away for food, mortgage or rental payments, car and bills. A detailed budget can really benefit your bottom line.

Start saving

Allocate some of your hard-earned money to savings. And by savings, I mean money that you can’t touch until baby is born. This is your buffer behind you for emergencies.

You have about nine months from the time that you find out you’re pregnant until the time you welcome your new arrival, so start putting money aside while you have two income streams coming in. Set up a high interest savings account and be disciplined with how much you regularly contribute.

Learn to spend less

Scaling from two incomes to one could be dangerous if your spending habits remain the same despite your reduced income.

Get on board with finding new ways to save money.

Use websites to track when fuel is cheapest and only fill up on those days. Sign up for direct debit on your bills to get discounted rates. Look closely at your home loan and negotiate with the bank for a lower interest rate. Move to a cheaper suburb further from the city to save rent.

While you’re at it – get rid of your credit cards. It’s easy to fall into the trap of spending more than you earn if you pay with credit cards; you’re less likely to keep track of your spending and before you know it you’ve spent away your rent without even noticing. Cold, hard cash is a lot harder to spend. Paying in cash will reduce temptation and ensure you avoid making extra monthly credit card repayments to the bank.

Know your entitlements: Government help and employer subsidised Paid Parental Leave (PPL)

You could be eligible for government benefits such as Parental Leave Pay, a scheme in which you will be provided with minimum weekly wages up to 18 weeks if your income is less than $150,000 per annum.

Depending on your income and assets, you may also be entitled to other benefits such as the Child Care Benefit, Family Tax Benefit, Parenting Payment or a Health Care Card.

You might also be able to access to employer-paid PPL through industrial awards, or individual employment contracts. It’s well worth checking what you’re entitled to and incorporating these benefits into your budgeting.

3. Thinking ahead – child care and school fees

Now that you’ve started thinking about the initial costs of having children, it’s worth looking ahead.

If you intend to return to work and reinstate your dual income lifestyle, childcare is a hot topic –especially considering how important quality care is for the development of a child. Not only will you need to consider how difficult it is to find a placement in your preferred location, you’ll need to work out how much will it cost.

From nannies to day care facilities, childcare costs vary depending on where you live, what type of childcare you choose and how many hours a week your child will spend in childcare.

When it comes time to go back to work, you’ll need to revisit your budget and factor changes to your income along with the added expense of professional child care services. This will help you decide whether or not returning to work will financially benefit you.

And then comes school.

The reality is children only get more expensive the older they get, when education, transport, school excursions and sporting costs really start to take centre stage in a big way.

In fact, John Velegrinis, chief executive of the Australian Scholarships Group, says parents need to start planning school related finances from the day a baby is born.

If you opt to put your children in private school, school fees could take a large slice of your total income pie each year. That’s even before you consider the costs of soccer/ballet/chess classes, pens and paper, school shoes and backpacks.

The good news is that you’ve got a bit of time to plan for these larger ongoing expenses, so there is no need to fear! The earlier you get on board with applying a strategy to your financial future, the better off you’ll be in the long run.

Remember – while it can be scary to think about all these expenses, growing your family should be a time of joy and excitement. You also don’t have to look at the bigger picture alone. Talk with your family about their experiences and don’t be afraid to ask for help when you need it.

And if you would like professional advice, why not consider speaking to The Hopkins Group? Family is really important to us, and our team is experienced in providing advice in a number of areas including budgeting, financial planning, personal insurances such as life insurance and income protection, and estate planning. We can even help you get a loan for the big car you’ll need to fit all those kids you’re planning on having! Contact our team today.

General Advice Warning: This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial advice prior to acting on this information.

Trumped by the truth

FAKE NEWS’

Does Trump tell lies?

We all know the answer to that.

And if he doesn’t believe that they’re lies that he tells, he must believe they’re just ‘sales puffery’, ‘white lies’ or even more laughably, ‘alternative facts’.

Even my young children know the difference between ‘white lies’ and ‘lies’; there is NO difference. And as for ‘alternative facts’ – I mean come on! Lies are lies are lies.

Now it seems we live in a world where telling lies and committing to actions that you either can’t do, won’t do, or don’t know if you can do, is just the ‘normal’ state of modern U.S. politics.

Thank goodness we are not quite at that point here in Australia – but if our leaders Shorten, Turnbull, and others don’t take a hard stance, it won’t be long before we’re the same.

How terrifying to think that the leader of the free world could have been elected on lies and or sales puffery.

To think that lack of and complete disrespect of issues of equality – whether relating to gender, race or religion – could also be at the core of winning an election in such an important western democracy, is absurd and worrying.

However, we are where we are.

Trump is President.

So with this absurd reality set, we turn to asking ourselves what this means for your future financial wellbeing and what should you be wary of in this modern world where lies flow like currency.

Well, in regard to the first matter, Trump’s presidency should see you approaching your future financial wellbeing the same as you always would.

That long term plan should not be changed.

In other words, taking all into account to this point, there is nothing Trump has said or done which has had consequences that can be seen today or into the foreseeable future, that would have us recommend changes for our clients.

If anything, his commitment to ‘make America great again’ (how egotistical can you get? I think it’s pretty great as it is), associated with some of the planned actions to initiate his contentions could, and in fact have to a recognisable degree, lifted the U.S. economy and positively influenced the general world economy since the election. This view seems to be supported by a number of pundits and may continue in the short term, and possibly out to about five years into the future.

Of course as we go forward this will need to be considered, on balance, with possible negative impacts on world trade, foreign affairs generally and specific impacts for Australia.

But no doubt if the U.S. economy is firing, the positive ripple effects of this will be felt across the world – in more ways than just economically.

As for the second point, we need to take a lesson from Trump.

He may have become President on lies, sales puffery and promises that will not be kept – and maybe that’s worked for him.

However unlike nearly everyone else on the planet, he really didn’t have anything to lose.

His father left him the equivalent of billions of dollars, which he has nurtured and sat on through to today. He obviously doesn’t mind who he insults, hurts or annoys, and his narcissistic personality seemingly knows no bounds and could not be penetrated even by a ballistic missile.

But that is nearly certainly not your situation.

Often we, The Hopkins Group that is, are told we are conservative in our advice and our rhetoric.

I don’t believe we are conservative; I hope and believe that we are caring, accurate and real.

Lies, exaggeration, false promises, and unrealistic views of the future are not what you should build your future on.

Whether it’s in politics, religion, industry and financial services generally, or more specifically with regard to what you personally should or could do with your financial situation, the truth and reality should reign supreme.

Build on real and correct strategies; be conservative but not so conservative that you never take the correct action.

Just remember; if it sounds too good to be true, it probably is.

Lies and unrealistic promises may have worked for Trump, but they will not work for us mere mortals.

How to be Uber smart with your tax responsibilities

Australia may have been slow to take up Uber originally, but these days, it’s full steam ahead for the thousands of drivers who have signed up with the global ride provider.

The extra income is no doubt a drawcard, but if you’ve been quick to get behind the wheel, have you thought about what impact this bonus salary will have on your tax return?

We’ve looked at some common questions below and provided some helpful answers so that you don’t have to take the foot off the pedal when tax time approaches.

Do I need to declare my Income to the Australian Taxation Office (ATO)?

Yes. Any income you earn is required to be declared to the ATO.

Money made as an Uber driver is still ‘income’ – it should not just be considered ‘cash in hand’ or pocket money that can quietly be slipped under the mattress.

Declaring your income is important – now more than ever – as the ATO is receiving large amounts of soft data from sources such as Uber. If you fail to declare your income, you will not only be required to pay tax, you will also be charged penalties and interest.

What deductions am I able to claim?

You can claim the business use portion of the following:

  • Tolls
  • Parking
  • Passenger costs, i.e water, mints, etc
  • Licensing or service fees paid to Uber
  • Mobile phone bills
  • Some costs associated with becoming an Uber driver

There may be other deductions available on a case by case basis, so it is important to keep all your receipts to discuss with your accountant at tax time.

It should be mentioned that you are not able to claim the following:

  • Costs for your driver’s license
  • Fines – parking, speeding, red light, etc
  • Clothing or meals

What’s the difference between claiming cents per kilometre and logbook?

Cents per kilometre

  • Can only claim up to 5,000 kilometres
  • From 1 July 2016 the rate is 66 cents per kilometre
  • Using cents per kilometre includes general car expenses such as, servicing, petrol, depreciation etc, therefore not able to claim any additional expenses for your car.

Logbook

  • Must keep a logbook over 12 consecutive weeks, which is required to be updated every five years.
  • Your logbook must include the following:
    • Date of travel
    • Odometer reading at the start and end of the drive
    • Number of kilometres travelled
    • The reason for the travel
  • You may be able to claim the following:
    • Car insurance
    • Services
    • Repairs
    • Petrol
    • Depreciation
    • Car registration
    • Loan interest

To find out more about the kilometre vs log book reporting options, read our blog post ‘Get your motor running‘.

Click here to download a log book template

Do I need to register for GST?

The short answer is yes. But it’s complicated.

The general rule is that a small business must be registered for GST, if it has a turnover of more than $75,000. Most drivers wouldn’t meet this threshold if they’re just working part time out of hours to supplement their main income. So you’d think they’d be exempt from GST rules? Incorrect.

In August 2015, the ATO announced that all Uber drivers will be required to register for GST – regardless of turnover. Uber recently challenged this in the Federal Court but lost with Justice John Griffiths maintaining that Uber is a taxi service under the law, and should be treated accordingly. So what does this mean? If you’re a driver who hasn’t been paying attention to your GST responsibilities, you could find yourself in a spot of trouble. Speak to an accountant who can help with your registration and make sure you do the right thing.

What do I need to consider in terms of tax when it comes to setting up my new Uber business?

  • Open a new bank account that is purely for your Uber income and expenses; this will make it easier to determine what are personal and business related expenses.
  • Make sure you keep aside between 30 to 40% of your business income to cover tax payable.
  • Engage a Tax Agent such as The Hopkins Group; they will be able to provide advice and assist with completing your quarterly BAS and your Annual Income Tax Return.
  • Look into using a software program such as Xero. It gives you the ability to allocate your income and expenses, you can save all your receipts, pull out reports, etc. An accountant at The Hopkins Group can provide you with a demonstration of this handy tool.

Life as an Uber driver does have its benefits, but you need to make sure you play by the rules so the extra work and earnings aren’t in vain. You need to treat your ‘side job’ as a driver the same way you would your ‘day job’ and be responsible with your record keeping and filing.

To discuss your tax responsibilities and make sure you stay on the straight and narrow with the ATO, speak to an accountant at The Hopkins Group on 1300 726 082 or send us an online enquiry.

 

 

General Advice Warning: This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial advice prior to acting on this information.

 

When sacrifice can be a good thing

Sometimes it pays to work smarter, not harder, and find opportunities to save money in a proactive – yet subtle – manner. 

Salary sacrificing is one strategy that can be adopted to help in your long term savings plan. It might seem like a small and insignificant change, but in the grand scheme of things, it can really pack some punch.

In this blog post, we break down the dos and don’ts of salary sacrificing to help broaden your understanding of one more tool you can add to your financial wellbeing toolkit.

For the purposes of this blog post and planning for your long term financial security, we’re going to focus on salary packaging for super.

What is salary sacrifice?

Salary sacrifice (also known as salary packaging) is a government initiative that allows you to pay for some items or services straight from your pre-tax salary – therefore reducing your taxable income and putting more money in your pocket.

It is an Australian Taxation Office approved scheme, but you do need agreement from your employer to be able to take part as they have to pay fringe benefits tax on the benefits provided to you. That is, all benefits except for superannuation.

Who should salary sacrifice?

Everyone’s situation is different but typically, salary sacrifice is particularly advantageous to middle and high income earners.

Not-for-profit organisations have special exemptions and their employees are eligible for attractive benefits that make salary packaging a rewarding option. People working for not-for-profits can receive cash benefits such as entertainment and loan repayments from pre-tax income.

A salary packaging arrangement must be agreed to at the start of employment and should be discussed when finalising contract negotiations. It cannot be retrospective so needs to be in place before you earn the income.

What can you salary sacrifice?

It all depends on who you work for – the benefits available to you are determined by your employer, but most will at least offer salary packaging for super.

Some of the other common benefits include:

  • Cars
  • Computers
  • Childcare
  • Meals and entertainment
  • Holidays

Why salary sacrifice into super?

Giving up some of your pay and redirecting it into your superannuation can be a good way to save tax in the short term, and grow your retirement savings in the long term.

Any pre-tax funds that are contributed to super receive a special 15% tax rate as opposed to that portion of your salary being taxed at your marginal tax rate, which is typically much higher.

What this means, is that the higher the marginal tax rate, the higher the savings.

Having said all that, the super contribution limits are changing and after 1 July 2017, if you have an adjusted taxable income of more than $250,000, you will need to pay 30% tax on super contributions.

Case study

Zach earns $80,000 before tax, excluding his employer’s super contribution.

If Zach decides to redirect $10,000 of his pay into salary sacrifice super contributions, he will save $1,950 in tax, with the extra money going into his super fund.

 

Zach’s boost Does nothing Salary sacrifices $10,000
Take-home pay $60,853 $54,303
Tax $19,147 $15,697
Extra money into super $0 $8,500
Net benefit $60,853 $62,803 ($1,950 better off)

 

Assumptions: The figures used in this table are estimates only and are based on 2016/2017 income tax rates and a Medicare Levy of 2%.

Do’s

  • Make sure you can afford to do without the salary sacrificed amount as funds cannot be accessed for the period of the arrangement.
  • When speaking to your employer about salary sacrifice, understand that your employer does not have to agree to salary sacrifice, however they still do need to pay the 9.5% Super Guarantee (SG).
  • Request that your salary sacrifice agreement be in writing and be signed by your employer for your own protection.
  • Seek professional advice to maximise your savings.

Dont’s

  • Don’t forget that you are actually giving up part of your salary to redirect it into super, so your take home pay will be lower.
  • If you have a current arrangement, don’t forget to adjust your salary sacrifice contributions to avoid going over the concessional cap that is coming into play from 1 July 2017.
  • Don’t forget that employer paid super (currently guaranteed at 9.5%) counts toward your concessional cap.
  • Don’t lose any of your employer paid super entitlements as a result of salary sacrificing. There is a loophole in the super guarantee rules enabling an employer to cut an individual’s super entitlements when the employee reduces their taxable salary.
  • Don’t jeopardise your savings potential by going it alone. You can get help from the professionals and make your money work harder for you.

Where do you start?

The most important do before requesting your employer to start salary sacrificing is to speak to a financial planner who can look at the big picture and see how this piece of the puzzle fits in.

A financial planner can assist in creating an appropriate overall financial strategy and consider salary sacrifice in the context of your long term plan.

Call The Hopkins Group on 1800 726 082 and ask to speak to a financial planner who can help assess if salary packaging is a good option for you. You can also fill out an online enquiry to get in touch with our team.

 

 

***

Disclaimer: John Hopkins Financial Services Pty Ltd is a Corporate Representative of WealthSure Financial Services Pty Ltd Level 1 190 Stirling Street PERTH WA 6000 ACN:130 288 578 AFSL: 326450.

General Advice Warning: This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial advice prior to acting on this information.

Getting smart with money

For most young adults, considering investment strategies can be duller than an episode of Better Homes and Gardens. With recent changes made to superannuation and pension laws, Australians are being forced to consider their retirement at a younger age. But Gen Y is a fickle bunch with a short attention span – how can we break it down into plain English to set them on the path to reaching their long and short term financial goals?

Here are some useful tips to becoming a more savvy investor, helping you – or your kids – to achieve those financial goals.

1) Make sure your personal finances are in order

The most important thing to have when starting an investment portfolio is capital. It is essential to begin saving a sufficient amount of money to invest into the market. Reducing credit card debt, limiting discretionary spending and committing to savings goals are crucial for building up cash.

2) Make it a part of day to day life

While social media has made us more connected, it has also made us more distracted, whittling away at our productivity and opportunities to spend time on personal growth. You have to ask yourself, is seeing what this person eats every day making me a better person? We’re not saying go off the grid; instead, use social media to your advantage. ‘Follow’ industry voices and thought leaders and soon, your social media newsfeed will be full of educational posts that can build your investing knowledge in a fun and relevant manner.

You could also go old school and turn to a book (or kindle if you’re a committed digital native!). Why not get stuck into ‘how to’ guides or autobiographies written by successful investors, or embrace YouTube or Investopedia and watch tutorials on investment basics in your spare time? You can take time out on the train or before bed to upskill in investing, instead of scrolling aimlessly through cat memes on Facebook. Podcasts are another great resource – just search by ‘investment’ in your phone’s podcast app, but try to stick to local market content.

3) Manage expectations

Rome wasn’t built in a day and neither will your nest egg be. While outperforming the market isn’t impossible, it is ill-advised. When individuals begin to speculate rather than truly understand their investments, that is when things can go wrong. Aim for modest returns similar to that of the market you are invested in.

4) Research

Put the same effort into understanding your investment selections as you would when purchasing a car or television. Properly read through research reports provided by various research houses, inspect a company’s financial statements and ask around to gauge the public perception of the product in question. It also a good idea to make comparisons with other companies or funds within the same market or industry – there are websites that can help you do this.

5) Diversify

Having all of your eggs in one basket is a dangerous game, we all know this. For example, if you have all of your money invested in Australian equities and there is a crash in the market, you stand to lose a significant amount of your portfolio. If your portfolio is spread across a range of different asset classes, you are safeguarded against any dramatic declines in one particular asset. Likewise, a dip in international equities could be offset by a rise in property prices if you’ve diversified your investments and placed your eggs in more than one ‘basket’.

6) Speak with a professional

There is no shame in seeking advice, whether it be chatting with a financial adviser or a stockbroker. You go to a doctor when you’re sick don’t you? Get a mechanic to check out your car if it’s broken down? A finance professional will be able to sift through the technical jargon and work with you to achieve your short and long term financial goals. This will give you more time to focus on other, more important facets of your life.

The most important tip of all is just to DO. If you keep your money in your back pocket instead of investing it, your money isn’t working for you; the only money you will have is what you save and it won’t keep up with the rate of inflation. It’s time to have your money working for you, growing in value, so that you can have the lifestyle you desire, now and for the future.

Get the ball rolling and speak to a member of our Financial Planning team. Call 1300 726 082 or drop us a line if you’d like to set up a time to discuss your interest in investing in your future.

 

General Advice Warning: This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial advice prior to acting on this information.

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