daniel-admin – Page 21 – The Hopkins Group

Maximising your tax savings with your investment property

Posted on 28/09/2016 by daniel-admin

One of the most popular strategies for saving on tax is to take advantage of negative gearing – especially in an investment property context.

A negatively geared investment property is where the cost of owning the property exceeds the income made from it. This loss can then be offset against your other income such as salary and wages, thereby lowering your tax liability. As such, when you own a negatively geared investment property, it becomes important to claim as many deductions as you are legally entitled to in order to maximise your tax savings.

But what deductions are you entitled to? Most people would be familiar with the basic deductions such as:

Interest on your mortgage
Council rates
Body corporate fees
Repairs and maintenance
Depreciation

However, what about those items which are not so common?

Landlords Insurance

Landlords insurance is an insurance policy that covers a property owner from financial losses connected with rental properties. Different policies cover different things but the 3 must-haves are:

Theft or burglary by tenants or their guests
Malicious damage or vandalism by tenants or their guests
Loss of rent due to tenant default

The good news, the cost of the annual premium is tax deductible to the landlord.

For more information on landlords insurance, please see our recent blog post.

Depreciation Report

Most people know you can claim depreciation against rental income. But what if you don’t have a depreciation schedule?

There are organisations out there whose job is to provide historic depreciation schedules for existing properties which are now being rented out. They attend the property and look at fixtures and fittings (think carpets, ovens, hot water services) and the construction costs (think initial cost of building the property plus the cost of any structural renovations) and from there they provide you with the figures you can claim in your tax return each year.

Plus, the invoice for their time to do this is also a tax deduction; a double bonus!

Body Corporate Fees … not always deductible

Most of us know that body corporate fees are deductible. However, not all body corporate fees are deductible.

Payments made to administration funds and general purpose sinking funds are deductible. However, if the body corporate requires you to make payments to a special purpose fund to pay for particular capital expenditure, these levies may not be deductible and it would be best to check with your accountant.

Travel Expenses

If you travel to inspect or maintain your property or to collect the rent you may be able to claim the costs of travelling as a tax deduction.

If you fly to inspect your property, stay overnight and return home the following day, all of the airfares and accommodation expenses would generally be allowed as a deduction provided the sole purpose of the trip was to inspect your rental property.

Where travel was incidental or combined with a holiday or private travel then apportionments will need to be made.

What next?

Have you made the most out of your investment property this tax time? If you’re yet to complete your tax return this year or need assistance with prior year returns, our dedicated accounting team are here to help. For more information, check out our rental property checklist.

With an in-house property management team and more than 35 years of property investment experience to draw on, we know how to help you get the most out of your investment property.

Give us a call on 1300 726 082 to discuss your tax needs with one of our accountants today.

VCAT demystified

Posted on 25/09/2016 by daniel-admin

VCAT; a place property managers can sometimes end up but a destination we try to avoid.

So what is VCAT? VCAT stands for the Victorian Civil and Administration Tribunal and it’s a place where members of the public can bring their case forward to be heard in front of a judge in a less formal setting than a court. Basically, it is designed to facilitate dispute resolution between opposing parties without the fees and formalities of court.

While avoiding VCAT is an ideal situation, sometimes things can go wrong. When disagreements arise, we will try and mediate between landlord and tenant to come to a mutually agreeable outcome without having to escalate to VCAT. However, should all parties involved not be able to reach a resolution on their own, a landlord’s agent (i.e. The Hopkins Group) or tenant may need to resort to filing an application to attend VCAT.

As representatives of the landlord, we can do all the administrative work on behalf of the owner and can also attend VCAT hearings on your behalf; however landlords are of course allowed to be present for the hearing if they would like. We encourage that our landlords attend their VCAT hearings, but it is not essential.

Why would a property manager need to take a case to VCAT?

One of the most common reasons property managers end up taking their tenants to VCAT is to try and gain possession of a property after a tenant has not paid their rent.

There is a lengthy process in trying to gain possession – once a tenant is 14 days in arrears you are able to serve a 14 day notice to vacate. Three business days after the 14 day notice to vacate is served, an application to VCAT can be made. The Hopkins Group can look after all this administration on behalf of the landlord.

Once an application has been made, VCAT will then schedule a hearing in which all named parties must attend – this is usually set within two weeks of making the application. The named parties in this case are the tenants and the landlords, who can be represented by The Hopkins Group.

Another common reason property managers attend VCAT is to claim money from their tenants’ bond after they have vacated, to carry out repairs or cleaning needed to bring the property into a reasonable condition.

To try and claim anything equal or less than a tenant’s bond, a standard hearing is all that is required. However, if the amount of money we need to claim exceeds the bond amount, a more complex hearing will need to take place to try and gain possession of both the bond and additional compensation.

In both instances, invoices are required to be presented as proof that works have been completed and are equal to the compensation claimed.

How do you serve a VCAT application?

Applications are served online through the VCAT website; there are also hard copy forms that can be completed.

Once your VCAT application has been finalised, you will need to post a copy via registered post to the respondent in addition to a copy mailed via regular post.

We also recommend emailing a copy of the notice to the respondent to ensure all bases are covered.

The last thing you want is to be bogged down in paperwork. As your managing agents, we can take the hassle away from you and manage these steps behalf of a landlord.

What happens during a VCAT hearing?

There is a lot of preparation that takes place before a VCAT hearing – we need to ensure that we have all the evidence we need to support your case, including copies of all documentation for both the member and the respondent (the tenant).

Then, once everyone has been gathered at VCAT, all speaking parties are required to be sworn in to be heard by the presiding member – an impartial official versed in the law. Parties either swear in on the bible or take an oath or affirmation to declare that everything they will say in the hearing is true and correct.

Once everyone has been sworn in, it’s time to present your case!

The applicant will then present their case first; after the member has heard the applicant’s claim, the respondent will then have their chance to speak. After the member has heard a sufficient amount of evidence, he/she will determine the outcome. A VCAT order is then given to both parties (either immediately following the hearing or posted in the mail) with a summary of the member’s findings from the hearing.

How can you avoid a VCAT appearance?

Most of the time, we can avoid going to VCAT by coming to agreements with your tenants before disputes develop or escalate. We can achieve this by having all tenants pay their rent by their due dates – our team runs daily ‘rental arrears’ reports to chase up any tardy tenants so we can stay on top of it before it gets out of hand.

We also carry out regular routine inspections – initially at three months and then every six months according to the Residential Tenancies Act. This ensures they maintain the property in an immaculate condition and if there are any issues, we can nip them in the bud early. The main objective is to ensure the tenant can vacate the property without issue at the end of their tenancy.

What if I have a pending VCAT appearance?

Attending VCAT can be a very daunting experience, but with the right preparation it doesn’t need to be.

The best advice I can offer is that there is no such thing as over preparing. The more information we have, the easier it is to answer any question the member throws our way. In the lead up to a VCAT hearing, we will stay in touch with our landlords to make sure they’re aware of the issue and the current state of play, and keep the lines of communication open throughout the whole process.

While VCAT is an extreme we hope we never have to resort to, it is always good to know you have someone on your side should the worst happen. Navigating our way through the VCAT maze is just part of the service offering we provide to our clients.

Our property management team has extensive experience in dispute resolution and gaining the best results for their landlords. We know your rights and our obligations under the Residential Tenancies Act and have systems in place to minimise the need to make applications to VCAT.

If you would like to find out more about placing your investment properties in the safe hands of our property management team, why not contact us today?

Somersault into your super thanks to a backflip from the Government

Posted on 21/09/2016 by daniel-admin

It’s been a week since the Federal Government announced its backflip on its proposed superannuation reforms, and now that the dust has settled, it’s time to look at the impact the reworked measures will have on your plans for retirement.

Back in May at The Hopkins Group’s annual economic briefing, #ECON16, you might remember our discussions around the proposed $500,000 lifetime non-concessional cap. Managing Director Michael Williams laid out a bleak scenario for clients who, if they’d exceeded the cap, would have to find other avenues – outside of superannuation – to direct their retirement savings into.

“As we all know, superannuation is a tax effective environment in which to store your money, with a maximum tax rate of 15%. Once you’re in the retirement phase, a zero tax on earnings applies,” says Shane Light, Head of Advice at The Hopkins Group.

“That’s much nicer than a tax rate of assets held outside of the superannuation environment – up to 47.5%. People like the tax conditions that super offers.”

So it goes without saying that there was a huge amount of backlash in response to the Federal Government’s proposals, considering the existing annual non-concessional contributions cap is $180,000 – a far cry from the less-than-generous $500,000 over a lifetime (backdated from 1 July 2007).

But the powers that be listened. And they folded.

Treasurer Scott Morrison has come to the party and last week announced changes that allow people making voluntary after-tax contributions to their superannuation to do so, providing their balance hasn’t exceeded $1.6 million.

The changes are more aligned with the current model with an annual cap of $100,000 (commencing 1 July 2017) – still $80,000 less than the status quo, but much more generous than the half a million lifetime cap that was proposed in May.

“These revisions to the non-concessional cap proposal give our clients so much more flexibility when planning for their retirement,” says Shane who acknowledges that whilst there are more options for clients now, time is of the essence.

“It’s still a ticking time bomb though and the closer you get to 65, the harder it is to be strategic with your retirement plans. You just run out of time, and unfortunately we can’t move the cut off ages. There’s no turning back the clock!”

Shane says it’s important to act now and seek advice on how to best structure your savings to make the most of the years you have left in the workforce.

“You don’t want to find yourself ‘too old’ to make the non-concessional contributions that you had planned, and be left stuck with lump sums of money outside of super in a less tax effective environment,” he warns.
Individuals aged under 65 will continue to be able to ‘bring forward’ three years’ worth of non-concessional contributions in recognition of the fact that such contributions are often made in lump sums. But what does this mean?

If a 59 year old client was to sell an investment property and have $600,000 cash at their disposal, they could take advantage of the bring forward rule and put $300,000 (i.e. three years’ worth of non-concessional contributions post 1 July 2017) into super in one lump sum. The final $300,000 would have to sit outside of super for another three years, after which it could be deposited as another lump sum making use of the bring forward rule again. Within four years, the whole amount would be wrapped up in super.

On the flip side, if that client was 65 or older, that $600,000 would have to go in to super in instalments of $100,000 every year for six years (providing they now meet the work test), opening up the client to huge tax implications with $500,000 sitting outside of super in the first year, $400,000 in the second and so on.

“We try to find the most tax effective solutions for our clients to make sure they’re maximising their retirement savings and their money is working for them. Super is a good option and we’re pleased to see the Government has had second thoughts on their harsh budget measures,” says Shane.

“We look forward to talking to clients about making the most of these revised caps and encourage people to speak to their adviser about any age limits that may apply to them.”

Of course, nothing is set in stone and it’s just a proposed change at this stage. The government’s revised superannuation package still has to be passed by the Parliament.

For more information on what cut-off ages and caps apply to you and your retirement plans, call us on 1300 726 082 and ask to speak to a financial planner.

Zero per cent vacancy in August 2016? It happened!

Posted on 14/09/2016 by daniel-admin

With more than 35 years’ experience in providing our clients with expert advice about investing in quality property, we understand that your investment is important.

An investment property leased in a timely manner, to a quality tenant, is a landlord’s dream come true. So let’s introduce you to the team that made dreams a reality this August, achieving 0% vacancy across their portfolio of 657 properties.

Lorena Smirnis, Head of Property Management

Joining The Hopkins Group in 2010, Lorena pioneered the property management service offered to our clients today.

On what zero vacancy means for our landlords, she said:

“A low vacancy rate means there is strong demand from tenants which in turn strengthens cash flows and is a peace of mind for investors.”

Kristy Herbert, Senior Property Portfolio Manager

With more than 17 years’ experience in the property industry, Kristy has tried her hand at a number of roles that have helped shape her client-centric approach.

Reiterating Lorena’s message, Kristy added:

“Lower vacancy means the landlords have more rent in their pockets.”

Tannaya Jessop, Property Portfolio Manager

Beginning her career as a receptionist at a popular real estate agency, Tannaya was quickly promoted into a property management position. Since starting at The Hopkins Group, Tannaya has developed her skills as a property portfolio manager, forging strong relationships with both landlords and tenants alike.

On her role in achieving zero percent vacancy, Tannaya said;

“To ensure minimal vacancy [I would] open my calendar for inspection as many days as possible to have people view the property publicly or privately.”

Samandah Matty, Property Portfolio Manager

Samandah balances the often intense demands of property management with great professionalism and a genuine sense of pride. She skilfully responds to tenants with a can-do attitude while representing her landlords with their best interests at heart.

On what the team’s result means for her landlords, she shared the same message as Lorena and Kristy, stating:

“With lower vacancy rates, our landlords are not at a great loss of money between tenancies”

Lauren Wilden-Ross, Property Portfolio Manager

Lauren began her career in property in 2011, securing an assistant property manager position at a Richmond based real estate agency. From there Lauren developed her skills as a property manager, priding herself on delivering a level of service to ensure client satisfaction.

She outlines an efficient way The Hopkins Group can ensure properties get snapped up quickly, in a move that benefits both the landlord and the incoming tenant:

“We have a separate clause in our lease agreement for tenants that can apply for properties as “sight unseen” – this helps to minimise vacancy and ensures that as soon as tenants move from interstate, they have a residence ready to go!”

Claire Weekley, Leasing Consultant/Property Portfolio Manager

The newest permanent recruit to the property management team, Claire manages a small portfolio while also assisting the property management team with the leasing of their properties. From preparing leases to fronting open for inspections, Claire is the lady on the ground liaising with potential tenants, current tenants and landlords with enthusiasm and a professional attitude.

To ensure low vacancy Claire says she tried to pre-approve tenants, “taking time to arrange private inspections when times available don’t suit”. Of the result she added, “lower vacancy shows how hard we work to ensure our clients get the highest return from their investments.”

Our property management team is here for both tenants and landlords alike, to make renting a property a smooth journey end to end. To help us achieve zero vacancy our property management team is supported by a team of administrative staff, trust accountants and open for inspection staff. Our team have worked hard for a great result for our landlords.

If you would like to find out more about entrusting your property with the team that cares, please fill out the form below to receive your copy of our landlord information guide or call our office on 1300 726 082 to speak with someone from our team today!

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To borrow, or not to borrow; the important bottom lines

Posted on 29/08/2016 by daniel-admin

Borrowing money to invest is a strategy as old as investing itself.

The purpose of borrowing to invest, often referred to as financial gearing or financial leverage, is to increase the returns an investor would get on their capital invested.

Financial gearing or financial leverage, like the gearing of a car or bicycle, is when something small has the ability to operate something big.

Financial gearing, at its core, is the level of a person or company’s debt compared to equity. So, this means you start with an amount of money to invest in an asset, then you borrow the rest of the money to enable you to create a bigger investment portfolio with growth investment assets (whether equities or property). Therefore, you invest a small amount of money but receive the returns on a bigger portfolio. This strategy increases potential gains if investments perform well, however it may increase losses if the investments provide overall lower returns than the cost of the gearing.

There are three levels of gearing; positive, neutral and negative.

Positive gearing is where the levels of borrowings are such that the income is in excess of the costs of interest on borrowings and owning the investment (costs could include fees such as property management, administration and owners’ corporation). So, for example, the rent from your investment property is higher than the total of all the costs to hold the property.

Neutral gearing is where the income of the asset is equal to the costs of owning and running that investment.

Negative gearing, as the term suggests, is where the income is less than the costs of owning and running that investment. In other words, there is a financial loss created by owning that investment (before capital growth or other benefits are considered).

Under the Australian taxation regime, if an investor has a negatively geared investment, this usually creates a tax deduction for that tax payer (against other income in the year that loss was incurred).

An investor generally aims to have an overall positive return where the combination of capital growth and after-tax positive or negative income provides them with an appropriate level of return on their capital invested after all relevant taxes.

Using financial gearing as a mechanism to increase returns is a widely used investment strategy for many.

The two bottom lines in benefiting from financial gearing are:

Firstly, make certain you obey ‘The Three Golden Rules of Investment’.

Do your financial planning conservatively and correctly
Acquire the right investments
Give them time

Secondly, know that over your investment life, a crucial aim is to achieve ‘equity build-up’. This can happen in two ways; one, through capital growth, and two, through debt reduction.

Property cycles can sometimes mean that capital growth is slow. Sydney is a prime example of this; up until about six years ago, the city had nearly no growth at all for ten years. People who owned property investments in Sydney during this time would have been pleased if they had directed part of their surplus income into debt reduction, given capital growth was so minimal. At the same time, pre-retirees who held off retiring so they could put a few more years’ income into their debt reduction would equally have been pleased with this strategy.

So, borrowing may be good, depending upon your circumstances, period of investment and risk profile etc., however always keep the above bottom lines in your focus.

Negative gearing is here to stay, what did we dodge?

Posted on 28/07/2016 by daniel-admin

The 2016 federal election is behind us.

Amongst others, the Labor Party’s proposed changes to negative gearing was one of most disputed policy challenges of the election campaign. These changes proposed to restrict negative gearing from existing properties, whilst allowing owners to continue deducting net rental losses against their wage income to new properties only.

In his first video blog, Executive Property Investment Adviser Stephen Phillips tells us how these changes would have altered the Australian rental market.

All I Want for Christmas (in July) is a Juicy Tax Refund

Posted on 19/07/2016 by daniel-admin

What do you have planned for this fine Melbourne winter’s weekend? Heading to the MCG for a game, catching a movie at the International Film Festival, a date with some dumplings in China Town, stocking up on goodies at the South Melbourne market with the family, or causing havoc on the streets catching Pokémon!?

Well there is one activity that might just, just, be more exciting, and I think you know where we are going here…It’s time to prepare your tax return! I am excited. Am I just a soulless accountant with a distorted understanding of fun? Arguable, but stick with me.

Deductions are the Pikachus of your tax return

Having beavered away for the last twelve months earning an income – whether as an employee or through business – it is time to lodge your tax return and get back some of your tax dollars if you can.

If you are expecting a refund, now is the time to collect all of those valuable deductions together to maximise the amount you will receive as a refund. Just think of the extra cash you will have (in two weeks’ time according to the ATO’s current processing time if you lodge today).

What will you do with your refund? An extra glass of gluhwein, new shoes, cheeky weekend getaway? Better still, make your financial planner (and future self) proud and tuck the extra money straight into your savings account, mortgage, investment portfolio, or pay off that last stubborn chunk of credit card debt that has been lingering like a bad smell since Christmas. Mine will be going straight into my savings account and, like a squirrel catching wind of a large batch of acorns to stow away, I can’t wait to increase my emergency fund and sense of financial security.

The early bird gets the worm

Whether you are one to keep meticulous records or a master of last minute madness, lodging your tax return is something that you can’t hide from. It isn’t always a fun job, but if you would like your tax refund completed thoroughly and returned sooner rather than later, tackling your tax return early will allow you the time to think of all the deductions you have incurred while they are fresh in your mind. Scrambling to complete returns when deadlines are approaching often means items are forgotten.

If you are expecting to have to pay tax this year, preparing for this early is equally wise as this will allow time to plan for payment before the due date. Set aside some time to sit down and review the past year of income and expenses. This can be a valuable exercise not only for tax but as an opportunity to assess your spending habits over the past year and look at whether the financial goals you set yourself last financial year were met or how you are tracking with any financial new year’s resolutions you made in January.

Panning for gold

Make sure you claim all the deductions which you are entitled to. For a comprehensive checklist, click here to download our 2016 tax return checklist. Some commonly forgotten deductions include:

professional membership fees
income protection insurance premiums
work related education expenses
portion of your mobile phone bill used for work, and
home office expenses.

Remember, your individual tax return is due on 31 October 2016, unless you choose to lodge your return through a registered tax agent which will extend the due date up until 15 May 2017.

Adopting good habits

Don’t forget that a new financial year has commenced too, so let’s start off this year as new improved organised efficiency masters. New financial year, new organised you! Make the 2017 financial year a breeze by scanning invoices and saving them straight into a dedicated folder as you receive them and try out a tax record keeping app and or online tool available to track deductions. If you are starting a business, talk to your accountant about software you can be using to make record keeping easy, and talk to your accountant for general tax advice in advance.

A problem shared is a problem halved

As we’ve already discussed, tax time can be painful. But you don’t have to go it alone. If you would like to chat to an accountant to help with the preparation of your tax return, drop us a line or give us a call on 1300 726 082 to find out how we can make the whole process easier for you.

And don’t forget to download your tax return checklist. It’s like listening to your Mum before school camp – we make sure you’ve got everything packed in your suitcase before you head off. But we promise not to make you do the dishes.

New Years Resolutions: Six Months Later

Posted on 30/06/2016 by daniel-admin

At the start of 2016 we asked a number of our staff about their new year’s resolutions.

The first day of July marks the halfway point of 2016 and the beginning of the new financial year. We caught up with our staff to see how their new year’s resolutions are coming along.

How to get good financial advice

Posted on 20/06/2016 by daniel-admin

Seeking financial advice can seem like a daunting task. There are many different providers on the market, each eager to grab your attention. This alone can cause many individuals to be hesitant to seek financial advice and often leads to a number of questions that often go unanswered; “do I really need this advice”, “how much is it going to cost”, “is this the right kind of service for me?” Finding a financial planner can be easy, though finding a financial planner that works for you and your circumstances can be difficult.

One of the questions we often hear from prospective clients is “How do I get good financial advice for myself?” To help you answer this question, we’ve compiled some useful considerations.

Do you need advice?

Opting to do it yourself may be cheaper, but it isn’t for everyone. Those who have more complex financial affairs, don’t have the time or aren’t particularly confident when it comes to financial matters will be better off seeking an adviser.

Most people want a combination of information and advice. The former may cover questions like “how much should I be saving for retirement”, or “what is more tax efficient; a pension or an investment outside of the superannuation environment?” The latter may involve recommending an appropriate strategy or product to help meet your financial goals.

Ask for recommendations

As we are a word of mouth referral business, most of our clients are indeed sourced through this method. Asking friends, family and colleagues for their recommendation can be a great starting point, but don’t rely solely on this. Always check that an adviser is authorised appropriately via Moneysmart’s Financial Adviser Register. All of The Hopkins Group’s financial advisers can be found on this register.

Do your homework

Even if you don’t feel confident making your own decisions, do some research first. Think about your financial goals, your attitude to risk and what you are hoping to achieve from the meeting. Is it specific product recommendations or a complete overhaul of your finances that you are after? The more research you do, the less likely you are to buy into an unsuitable product. The adviser may come up with quite a different plan of action, but should be able to discuss the pros and cons of either course.

Complete paperwork early

Completing a standard fact find in advance and sending it to your adviser can give a reasonable knowledge of your circumstances before the first meeting. This saves time and in some instances reduces your fee if you are being billed by the hour. Usually the fact find is given and completed during the first meeting, but requesting and completing this beforehand can be very beneficial to you and your adviser. At The Hopkins Group we understand that your time is valuable. In your first meeting we spend time getting to know you and building a rapport, rather than filling in forms.

Be honest

To make good recommendations, an adviser will need to ask you lots of questions — some of which may be quite personal. Be honest, don’t just say what you think they want to hear. Be wary of advisers that seem too keen to recommend specific products before getting a full account of your circumstances. Our first meeting with a client is designed to pinpoint what your financial goals and objectives will be going forward and the specific product recommendations will be provided at subsequent meetings.

Know what you are paying

Make sure you ask about the costs of the advice provided. Ask about commissions paid to the adviser, both upfront and on an ongoing basis (known as trail commission). Be suspicious of advisers who appear not to be charging for their services at all – chances are you will end up paying more than you think or receive inferior advice. As the old adage goes, “you only get what you pay for”.

Ask about regular reviews

The initial advice might be great, but a financial plan should not be a ‘set and forget’. What if economic conditions or your personal circumstances change? Do you get regular reviews for the costs paid? Are these reviews one-on-one meetings, or an annual statement through the post? Often people lose more money by failing to monitor investments, and adjust accordingly, rather than being sold poor investments to start with.

Here at The Hopkins Group we pride ourselves on preparing our clients for their financial future and by following the aforementioned points they will be a step ahead of the game when they sit down to speak with us.

If you wish to discuss any of the points raised in this article, or would like to speak with someone with regard to any financial matter, please feel free to call our office on 1300 726 082 and ask to speak with a financial planner who will be able to assist.

Financial advice and services are provided to you by John Hopkins Financial Services Pty Ltd as an Authorised Representative of Wealthsure Financial Services Pty Ltd AFSL 326450. John Hopkins Financial Services Pty Ltd is the financial services division of The Hopkins Group.

Reality of retirement

Posted on 06/06/2016 by daniel-admin

In March 2016, we asked our Facebook friends what they feared most about their retirement.

Head of Advice Shane Light and Senior Financial Planner Anthony Malvaso, sifted through the comments to answer what it takes to achieve a long and comfortable retirement.