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Property Investment Blogs Australia

Apartment lending crackdown

Apartment lending crackdownHas the investor apartment lending crackdown increased investor risk?

This lending crackdown could quite possibly increase the risk for off-the-plan apartment investors, who may not be able to complete their purchases because they can no longer get finance from the banks.

What’s the deal?

In 2015, the Australian Prudential Regulation Authority (APRA), which regulates the Australian financial-services industry, introduced new rules to limit investor borrowing. The reason for APRA’s move was to get Australia back to healthy lending practices by helping to stabilise the banking sector, which had recently seen massive growth in lending to property investors.

The banks have reacted by putting stricter lending policies to investors in place – increasing interest rates, requiring borrowers to come up with bigger deposits, and even refusing to lend money at all. In other words, they’ve made it more difficult and more expensive to get an investment loan.

What does this mean for off-the-plan apartment buyers?

These new policies could be especially bad news for off-the-plan homebuyers. In the past, buying apartments off-the-plan has paid off for many property investors, even though buying off-the-plan apartments has always had some level of risk. But now, this lending crackdown could quite possibly increase this risk for off-the-plan investors, who may not be able to complete their purchases because they can no longer get financing from the banks.
Here’s how it works with off-the-plan investing: Investors agree to buy the property – at an agreed-upon price – before construction on the building even begins. Of course, part of the risk is that you never really know what the property market is going to do while the property is being built. (You hope the value of the property goes up.) Off-the-plan investors usually put down a deposit of 10 or 20%. And it wasn’t that long ago that banks were more than willing to lend money to property investors, financing that remaining 80 or 90%.

However, because property buyers can’t get approved for mortgage loans until shortly before settlement of an off-the-plan property (preapprovals are generally valid for only 90 days and still have some conditions), they run the risk of not being able to come up with the outstanding money when the building is complete, particularly if the bank’s lending criteria have changed since they contracted to buy. Thanks to the new guidelines, they risk defaulting on their contract, losing their deposit, and even facing a lawsuit from the off-the-plan developers.

This could impact a lot of property investors. Last year, the Australian Financial Review reported that according to Australian mortgage brokers, 90,000 off-the-plan apartments had been sold across the country, were undergoing construction, but had not yet completed purchase. The AFR article goes on to say that of these 90,000, roughly 18,000 have paid only a 10% deposit towards the full purchase price. For these investors, it may now be a lot harder to get that outstanding 90%.

Allied Investment Group advisers specialise in assisting clients take control of their finances so they can have more choices and security now and as they plan for the future. If you have more questions about the new APRA guidelines or off-the-plan property investment, call us on 1300 886 149.

Super & Property — is this the best tax haven on earth?

Super & Property - the best tax haven on earthUnless you’re rich and famous, it would seem there are few ways to shield your hard-earned cash from hefty taxes. This may just be the best tax haven on earth though. And best of all it’s not impossible for you to use — and you don’t have to go offshore because tax-minimisation strategies are legal in Australia.

You need only look to superannuation and property to find some of the best tax haven benefits on earth.

Take superannuation. It’s as simple as understanding how it is taxed to take advantage of concessions that can reduce your liability. Super is taxed in three strategies: when money goes in the fund (contributions); while it sits in the fund (investment earnings) and when it leaves the fund (super benefits).

Some tax-effective strategies not only reduce the liability at all these stages, they can create a zero tax environment. And you don’t have to be on a high income to benefit.

Co-contribution savings

For those earning $50,454 or less per year (before tax) who make after-tax contributions to their super under the co-contribution scheme are eligible to receive matching contributions from the government. Something for almost nothing.

On earnings less than $35,500, for example, the maximum co-contribution is $500 based on $0.50 from the government for every $1 contributed. In effect, you make a 50 per cent return. Try getting that from a term deposit.

Low and high-income earners can reduce tax using pre-tax dollars through salary sacrificing. This is when your employer redirects a portion of your pay as a contribution to super. By sacrificing some of your before-tax salary and putting it into your fund, you’re taxed at only 15 per cent.

There are caps on the amount you can contribute to super in any one year but the tax savings from making pre-tax contributions through salary sacrifice is one of the easiest strategies to decrease the tax you pay while increasing your super returns.

Investment earnings

The more you put in super the less you pay in tax because income earned in super attracts a maximum rate of 15 per cent. The amount of tax a fund pays depends on whether it has any tax deductions or credits. For example, a growth fund may only pay 7 per cent tax because its dividend income entitles it to tax credits. So it is also good to know in most cases there are no additional tax payable when transferring from one super fund to another to consolidate or switch funds.

Super benefits

There are tax benefits when you become eligible to access your super. Whether you opt to take a super income stream to provide a regular income, or withdraw all or part of your benefit as a lump-sum, in most cases the money incurs no tax.

If you’re eligible to transition to retirement, once the fund starts paying a pension the earnings on the investments become tax-free, along with any money taken out of the fund. In effect, it creates a zero tax environment because the contribution forms part of the “non-taxable component” within super. If you transition before age 60, this portion of income is also tax-free.

Power of property

One of the most popular methods to reduce tax is to buy an investment property. Under the right circumstance, the strategy of negative gearing not only can help cut your annual tax bill but it may also attract a capital gain. This often works best for high-income earners as gearing involves funding a purchase with debt. The loss is deducted from your annual income, which reduces the amount of income tax you’ll pay.

The success of gearing an investment property also depends on making the most of depreciation and expenses. Therefore, it’s important to know what is deductible, what’s not and when to claim or pay for it. For instance, you can prepay interest on an investment loan up to 12 months in advance, then claim the deductions against your salary in the current financial year.

Another way to maximise spare cash is through an offset account on your investment mortgage. Not only can it reduce the interest you pay, it can also shorten the loan term and you won’t have to declare the interest savings as income.

If you are looking to preserve your hard-earned dollars via tax-minimisation strategies you should seek expert advice. Allied Investment Group can put you on the right path to make the most of your earnings. Call 1300 886 149 to find out how.

Should you buy the house next door?

The risk of buying the house next doorWhere and what you buy will affect your return on investment. The real estate mantra “location, location, location” is no less vital when choosing an investment property.

So should you buy the house next door?

It depends. Investing in real estate — or any investment — should be about increasing your wealth and securing your financial future. Therefore a simple rule before considering any property purchase is to understand the market where you are buying.

If you decide to invest in a house in your neighbourhood, you’ll need to do some leg work.

For example, accessing independent information from a source such as RP Data can provide crucial insights into average rents, property values and demographics. You also need to investigate whether council or government are planning works that may impact negatively on the area you’re interested in.

Putting all your eggs in the one basket may not be the wisest financial idea either. Different property markets, for example different States are often at different stages in a market cycle (i.e. one State might be booming and another might be going into a downturn). By having property investments in different markets, you can go a long way towards hedging your bets, which can be of benefit in the long run.

Of course, an advantage of buying the house next door is that you can choose your neighbours. But a disadvantage is if the value of one house takes a hit, it is unlikely the other one will rise.

It all comes down to making considered decisions, because positive returns can be delivered if the fundamentals align. Here’s 4 things to reflect on to mitigate risk:

Buying at the right time is critical

Investing in real estate is all about capital growth, so choosing a property that is more likely to increase in value is the most important decision you can make.

Count the cost of investing

Before making the leap you also need to be aware of taxes involved in property investing and add these into your calculations. Stamp duty, capital gains tax and land tax need to be taken into account. While interest rates will vary over time, property investors can expect to increase rents when rates are on the rise and hold steady when they fall. If you need a hand with your calculations, our advisers at Allied Investment are always more than happy to help.

How you manage your investment

How you manage your investment can also determine whether you will reach your financial goals. It pays to consult professionals you can trust. Getting advice on the cost of owning an investment property and whether it is the right path for you after taking into account rental income and tax deductions you’re entitled to makes sense.

If the fundamentals check out, also consider a property manager to find the right tenant. An agent can carry out reference checks and ensure rent is paid on time. It is money well spent [and tax-deductible] in the quest to get the best possible value from your property.

Investment time-frame

While there’s no doubt investing in property can put you on the path to long-term wealth, it should be seen as a medium to long-term investment to maximise returns. That’s because if you sell it within 12 months you’ll be slugged with a hefty capital gains bill. If you sell well after that then a 50 per cent CGT discount applies if the investment property was originally purchased with the intention to hold it.

Also, it worth noting that it typically costs 5% of the purchase price to get into a property in taxes (i.e. government stamp duty) and fees (i.e. bank fees and Solicitors costs) and up to 4% (i.e. real estate agent fees and advertising costs) to get out. So for every $100,000 you spend on a property, you need to make back an additional $9k before you break-even on any sale.

Critical to a positive outcome is being able to maintain mortgage repayments. So structuring your loan correctly is key. This can be done with the help of a trusted financial adviser and licensed mortgage brokerAllied Investment Group can help you decide whether investing in property is the right strategy and give advice on how to finance the investment. Call 1300 886 149 to put your property plans in place.

Should I buy a property overseas?

Should I buy a cheap property overseas?We are often asked, “can I buy a property overseas?”.

If the lure of buying an inexpensive property overseas in hope it will prove a lucrative investment opportunity over the long term is too great to resist, just remember that old caveat “buyer beware” still holds true. That doesn’t mean you should give up on the dream of holding property abroad. Just do your homework because overseas investments involve significant additional risks you need to be comfortable with before you start.

Of course, there’s never been greater access to international investments, and investing overseas can potentially help diversify a portfolio and give access to opportunities not available at home. But it’s more difficult to ensure the investment suits your needs when you lack local knowledge or can’t regularly inspect the property.

So before you take that leap of faith into foreign ownership, consider the following issues when looking to invest overseas:

Market research 
Property markets are often in different stages of the property price cycle, so find out how prices have behaved where you plan to make your purchase. A trend of rising prices in Australia doesn’t necessarily mean values are doing the same overseas. Jump on a plane to do your homework in the country of choice. And make sure you have all the necessary permissions, licences and planning consents before signing a contract or agreement. As always, seek professional legal advice before you do anything.

Property restrictions
There may be barriers to entry you’ll want to know about. For example, in the US foreign buyers can’t invest in housing cooperatives but can purchase single-family homes, condominiums, duplexes or town houses. In China, there are no restrictions on the types of properties foreigners are allowed to own but investors must have worked or studied there for more than one year prior to purchase. Make sure you calculate all the tax you’ll be liable to pay, both at home and abroad, and as an Australian resident you can be taxed on your worldwide income, including rental income from overseas property and capital gains on overseas assets.

Find a real estate agent 
Don’t succumb to pressure to sign up with a deposit before you’ve obtained independent advice. It’s best to secure a real estate agent with a good reputation and references to ensure costly pitfalls are avoided. In the US the sales commission is paid by the seller, so buyers don’t pay to have an agent work on their behalf but licensing laws differ in each state. Check out an agent’s credentials as the licensing system in some countries doesn’t always ensure they’re qualified to guide you through the maze of finding, evaluating and financing real estate. Plus good property managers and tenants are hard to find, especially when you’re so far away — you’ll need someone on your side.

Retain a lawyer or broker
Although not mandated in the US, UK or Europe, it is a good idea to seek the services of a real estate solicitor (attorney), and where possible a good mortgage broker too, to help with any legal issues or questions you have along the way. A property lawyer can review the sales contract, check the title and other documents relating to your purchase — and advise on legal and local tax issues concerning the property. Just make sure they are fluent in both English and the local language where you plan to buy.

Payment via currency transfer
Changes in exchange rates affect the amount of money you receive or send. Even a small change to the rate could drastically affect the value of your purchase or the income you might receive. Obviously, you’ll need to pay for your overseas property in the relevant foreign currency, either as a large lump sum or as regular mortgage payments. Investigate local laws before using a currency exchange service abroad, or at home. It may sway where you choose to buy.

For those with a sense of adventure, global property investing can pay off but the factors discussed above are just some of the risks you may face. Remember local politics could mean that your entire investment could be at risk, so ensure that any country you invest in is politically stable too.

With any investment it’s important to get advice on how it fits with your goals, risk tolerance, investment time frame and overall portfolio.

Allied Investment Group advisers specialise in assisting clients take control of their finances so they can have more choices and security now and in retirement. Armed with this advice, you’ll be on your way to finding financial freedom and building wealth for the future. It’s never too late to start. Call 1300 886 149 to put your plan in place.

SMSF finance: 7 things you need to know

SMSF Financing - 10 things to know before you finance your next propertyKeep in mind that with SMSF Finance you need to ensure that your fund must has enough cash (including rent) and other liquid assets (such as bonds and shares) to cover loan repayments as well as administrative costs and income tax.

1. Regulators – though lenders – have recently tightened lending criteria
With Australian regulatory authorities concerned about the fast growth of property prices in our largest cities, there’s been a recent crackdown on property investment lending. As a result, a number of banks and smaller lenders have tightened their Self Managed Super Fund (SMSF) lending standards too. Some have even completely stopped SMSF lending.

2. Lenders have reduced LVRs
In response to concerns of the Australian Prudential Regulation Authority (APRA), Australia’s chief banking regulator, lenders have changed the way they’re handling loans for SMSFs. One of the ways they’re doing this is by reducing LVRs. A number of prominent banks, such as Westpac and St George have also put a cap on what investors can borrow.

3. After property settlement, you must meet minimum cash requirements
Liquidity (i.e. cash in the bank or assets that you can easily and quickly convert to cash) can be challenging when you’re investing in fixed assets, such as property as it can take a while to sell a house and get the cash back in your bank account if you need it. Keep in mind that your SMSF must have enough cashflow (including rent) and other liquid assets (such as bonds and shares) to cover loan repayments as well as to cover administrative costs and income tax. With the recent crackdown, lenders will likely want to see two years’ worth of sufficient super contributions and / or they’ll want proof that your compulsory super guarantee is enough to cover repayments in addition to seeing that your SMSF has up to the equivalent of 1 year of cash available to cover any loan payments after you’ve settled a property.

4. Regulations prohibit you from topping up your loan amount in the future
The law governing SMSF’s essentially means that you can’t go back to the bank in the future and ask for more money if you need it, so it’s important to get the amount you need right before you start.

5. Redraw is not available, but offset accounts can be very effective
SMSF loans do not allow for redraw of additional payments. However, you can benefit from an associated offset account. By linking this type of transaction account to your investment loan, your loan balance is offset on a daily basis by the credits in the account and can significantly reduce the interest you owe on the loan and allows you the flexibility to access any additional payments over and above the minimum.

6. The loan process is taking and typically takes much longer
This is true for a number of reasons. First, SMSF loan applications require a lot of time-consuming paperwork. Second, because of the regulatory crackdown, there are simply fewer lenders in the marketplace to handle the loan applications. Along those same lines, SMSF loans are specialised loans; a lender with specific expertise will need to review your loan application, which can take more time than your typical home loan review.

7. There are fewer lenders in the marketplace
Some experts and lending institutions suspect that because of the new lending restrictions, there will be a slowdown in the number of people investing in property through their SMSFs. As a result, we may see more banks and lenders follow AMP’s lead and pull out of this area of the market.

Allied Investment Group advisers specialise in assisting clients take control of their finances so they can have more choices and security now and in retirement. Armed with this advice, you’ll be on your way to finding financial freedom and building wealth for the future. It’s never too late to start. Call 1300 886 149 to put your plan in place.

Is foreign investment in Australia driving house prices?

Does Overseas Investment in Australia increase the price of property?Foreign investment in Australia can indeed make an impact but it’s by no means the only factor affecting the Australia’s property prices.

For example, money coming in from property investors from other Australian states and territories – as well as the fluctuating economies of those cities, states, and territories – are also impacting housing costs. Locals with equity in their current homes, who may be looking at buying a second, third, or fourth property, also play a role in driving up costs.

Recently, it’s primarily Sydney and Melbourne that have seen the biggest bump in property prices which the media often suggest it is due to international investment. In fact, these cities are now two of the most expensive metropolitan areas in the world to buy a home in when you look at house prices in relation to income. But it’s too easy to place all the blame on foreign investors. Experts say overseas investment is actually a relatively small percentage of the Aussie housing market.

What’s more, it’s only certain portions of the market – such as brand-new homes and units close to Australia’s CBDs – that are seeing the effects of foreign investment. These are the areas in which first-home buyers – who’d like to be near the cities, for work or convenience’s sake – are seeing the most competition from overseas investors. As a result, many are either having to shift their property search further outside the cities or looking at properties which require a renovation.

The fact that there is competition also points to a lack of housing supply in the Australian property market, which also drives up prices. In this regard, according to some reports, overseas buyers can actually help with housing affordability, because their investments stimulate the economy, which in turn provides employment and promotes the building of more homes to meet the demand.

Doing their research
The internet is likely another reason we’re seeing increased interest in buying Australian property, not only internationally but also interstate (and inter-territory). These days, it’s so easy to go online for property information. You can find basically everything you need:

•    Prices
•    Glossy photos
•    Virtual property tours
•    Information on specific areas and communities
•    Real-estate agents
•    Mortgage applications
•    Conveyancers and solicitors
•    And more!

It allows investors from basically anywhere in the world (with a good internet connection) to find a home for their money at a higher return than they might otherwise get in their local market.
Not always about return on investment.

Sure, when most people buy a property, they’re looking for capital growth – and again, that’s when they look to urban centres, such as Sydney, Melbourne and Brisbane. But in today’s world, there are other drivers, too.

For instance, there are a lot of people – with a lot of money – in countries with unstable political environments, and they’re looking to put that money somewhere. They may want to purchase a property to provide a safe and secure home for their families, for example. Or they may wish to send a child to Australia for a better education and better opportunities (and they need to house them). Finally, the Australian real estate market has a track record as a relatively safe investment, unlike, say, the volatile US share market.

Allied Investment Group advisers specialise in assisting clients take control of their finances so they can have more choices and security now and in retirement. Armed with this advice, you’ll be on your way to finding financial freedom and building wealth for the future. It’s never too late to start. Call 1300 886 149 to put your plan in place.

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What to look for in an investment property

What to look for in an investment propertySome of the most successful investors use real estate to build wealth. If you’re ready to jump into property investment as an asset class, there’s some things you’ll want to know because where and what you buy can affect your return on investment.

Here’s 5 tips to help you get started when looking to invest in property:

1. Where to buy

  • Look for areas with high growth, that is, where there is potential for capital gains.
  • Look for areas where rental income is high compared with the property value.
  • Research median prices to show what you might pay for property in the same area.
  • Investigate vacancy rates. A high turnover may make it harder to rent the property or make it difficult to sell later.
  • Research proposed changes in the suburb that may affect future prices. Things like planned developments or zoning changes can affect the future value of a property.

2. What to buy
Look for properties with features that have wide appeal, such as a second bathroom, lock-up garage or somewhere close to shops, schools and transport.
Choose a property that will attract more than one segment of the rental market, such as singles, couples, young families or retirees.
Low maintenance costs are important: Units can be perceived to be easier to maintain than houses, although you will have to pay owner’s corporation fees, which can decrease your returns significantly.
Property prices can fluctuate: When deciding if a property investment is right for you, remember that property prices can go up and down.

3. Understand borrowing costs
Buying, selling and managing an investment property can affect your overall return. When you buy a property, you will have to budget for expenses. For example, if you borrow to invest you will have interest repayments and if your investment is positively geared you may pay tax on your rental income. If you sell the property you may also have to pay capital gains tax if the property has increased in value.

Most people borrow to invest in property. But the more you borrow, the more you pay in interest. Therefore, it is important to understand negative versus positive gearing:

Negative gearing
Negative gearing is when your income from an investment is less than your expenses.
A loss can be used to reduce your taxable income which will reduce the amount of tax you pay. You’ll need to know what you can claim as a deduction, and remember you are only reducing your tax payable because income from your investment isn’t covering expenses.

Positive gearing
Positive gearing is where your income from an investment is higher than your interest and/or other expenses. This means you will have extra money left over but you may have to pay tax on the additional net income.

4. What expenses to budget for
There are numerous costs involved in real estate and this is the reason why you should start with a plan and finish with a list of what you’ll need to budget upfront. Consider using the “35% rule”, which suggests that, on average over time, expenses on a property will equal 35 per cent of total income. So if a property rents for $2000 a month, put aside say $700 to cover expenses a month before paying the mortgage payment.

5. Managing an investment property
You have two options when it comes to managing your property: DIY or engage a managing agent.

  • If you manage the property, you avoid paying management costs. But you’ll have to do everything, from showing the property to tenants to collecting rent and organizing repairs. You also need to comply with landlord regulations.
  • If you get a managing agent to look after the property, their management fees are tax-deductible.

There are many ways to get started in real estate so finding the right strategy that best fits your lifestyle is important. Allied Investment Group can set you up with a plan and help you look at ways to fund the investment to fit in with your goals. Call 1300 886 149 to get started on your property investment journey.

Property and SMSF: 10 FAQs

10 most frequently asked about SMSFsThe good news is, assuming you keep your property and SMSF until you retire, you’ll pay no tax on the rental income in retirement
and the tax rate will be only 15% until then.

Investing in property within your self-managed super fund (SMSF) can seem complex and overwhelming. We try to clear up the confusion with straightforward answers to some of the most commonly asked questions.

1. Can I live in the property?
If you’re investing in property within your SMSF, there are a number of restrictions on who can live there. You – as a fund member – are not allowed to live in or rent the property.

2. Can my family, friends, mother, or siblings live in the property?
Likewise, no ‘related parties’ or relatives of fund members can live in or rent the property. The purpose of this type of property investment is to provide retirement benefits to the fund’s members or members’ dependants. ‘Related parties’ include other members of your fund, business partners of fund members, spouses or kids of those business partners, any companies those business associates control or influence, any trusts they control, employers who contribute to your super fund (also known as ‘employer-sponsors’, and any associates of employer-sponsors.

3. If I sell the property, do I get to keep the profits?
Any profits stay in your SMSF. Like other SMSF assets, you’ll gain access to that money when you reach retirement age.

4. Does the rent have to go into the SMSF?
Yes. All rental income goes into the SMSF. The good news is, assuming you keep the property in your SMSF until you retire, you’ll pay no tax on the rental income in retirement, and the tax rate will be only 15% until then.

5. Will the bank take security over my own house?
If you borrow money to buy a property within your SMSF, you must take out a separate loan in which only the property you’re buying is the security for the loan. This way, other assets in your super fund or from your personal life are separated. However, because lenders may consider these circumstances high-risk, they may require personal guarantee(s).

6. Can I borrow 90% of the purchase price?
Currently, the percentage you can borrow typically ranges from 65 to 80% of the property’s purchase price.

7. Do I have to keep my property until I retire?
No. But if you sell a property in your SMSF before you retire, any capital gains that the fund makes may be subject to tax.

8. Does it cost $10,000 to set up an SMSF for property investment?
No. Set-up costs vary widely across the industry, but we charge a flat fee which is significantly less.

9. I’ve heard that the legal minimum is $200,000 to set up an SMSF, is that right?
No. There’s no legal minimum; however, there are a number of things you’ll want to consider before you setup an SMSF. According to the Australian Tax Office (ATO), for example, funds with higher balances had lower operating costs than funds with balances of less than $50,000. The ATO estimates that annual operating expenses for SMSF’s are 0.56%. These expenses include set-up costs and ongoing maintenance fees, such as accounting fees, insurance, and charges you’ll encounter when you make investment decisions. You’ll also want to think about whether you’ve got the time and the know-how to manage your SMSF well. The easiest way to answer some of these questions is to seek professional advice first.

10. I’m married. Can I have my own SMSF that I don’t share with my spouse/partner?
Yes.

Allied Investment Group advisers specialise in assisting clients take control of their finances so they can have more choices and security now and in retirement. Armed with this advice, you’ll be on your way to finding financial freedom and building wealth for the future. It’s never too late to start. Call 1300 886 149 to put your plan in place

4 essentials of Estate Planning

The essentials of Estate PlanningEven though it’s your estate, estate planning is not one-person job. Between your will and any other documents outlining what you want to happen in the event of your incapacity or death, it can be quite complex, even if you don’t have many assets. So let’s look at the essentials of estate planning.

For your own peace of mind, for the benefit of your family and beneficiaries, and to ensure that everything goes according to your best-laid plan, you’ll want to have a great estate-planning team in place. Your power players are a financial adviser, a solicitor, an accountant, and you.

Your financial adviser
The role of your financial adviser is to establish and organise your financial plan. This means gathering up your financial information, producing statements of your net worth, determining your beneficiaries, and evaluating your investments.

Your financial adviser also has a professional responsibility to encourage you to prioritise your estate planning sooner rather than later – you don’t want to wait till the last minute, and your adviser should be proactive in convincing you to be proactive. They should also have a solid grasp of the fundamentals of estate planning, be able to communicate these to you, and keep them in mind when putting together or reviewing your financial plan.

Being a legal expert, on the other hand, is not part of your financial adviser’s role. (That’s where your solicitor comes in.) However, your adviser should do more than simply refer you to an estate-planning lawyer and wash their hands of it. Instead, they should work hand in hand with your lawyer. After all, your adviser knows your financial plan very well and can help your lawyer better understand your needs and goals. He can also give the lawyer a heads-up on any financial issues you may have. Your adviser should also explain to you what to expect when you do meet with a solicitor.

Your solicitor
Your estate-planning lawyer does have the legal expertise. And a big part of their job is to ensure that all the other team members have a good understanding of the legal issues so you can make informed decisions.

Their role is also to make arrangements for properly settling your estate. These preparations include, among other things, your plan in case of incapacity and your plan for taxes.

Once the plan is in place, the solicitor will then draw up all the official documentation – complete with all the complexities and legalese – for the estate.

Your accountant
Like your financial adviser, your accountant has intimate knowledge of your financial affairs, including your personal income tax. This insider information makes them critical to your estate-planning team. Accountants understand the tax implications of decisions you make when putting together your estate plan.

The accountant’s job is to ensure that your affairs are in order from a tax perspective. Their aim is to both minimise the tax burden and maximise the portion of your estate that goes to your beneficiaries.

Your accountant may also remain on the scene after you die. There will be other administrative tasks to deal with: your last income-tax return, tax returns for the estate, and ongoing administration and tax planning for the estate, for example.

You, the client
Then there’s the team member at the centre of it all: you. First and foremost, your job is to communicate your needs, wishes, and concerns for your estate to your other estate-planning team mates. You’ll want to carefully consider any problems your plan may present – among family members, for example.
Additionally, to further help your estate-planning team help you, you’ll want to keep careful records – personal documents as well as details on how you’ve arranged your affairs.

Finally, it’s critical that you revisit your estate plan on a regular basis or if there are any major changes in your life. Things do change!
With your team mates working closely together in your best interests, you’re sure to have a winning estate plan.

Allied Investment Group advisers specialise in assisting clients take control of their finances so they can have more freedom, choices and security now and in the future. With us on your team, you can rest assured we’ll work closely with you to achieve your financial and estate goals.

Do I need a deposit?

I have a 10% deposit - is this enough?We all want to achieve the great Australian dream. After all, owning our own home is life-changing. It offers security and more often than not leads to being financially better off. The question I am often asked is “do I need a deposit?”.

Interest rates are at an all-time low and tipped to drop further. Plus buying a house is exciting. What’s not fun is saving for the deposit.

So is a 10 per cent deposit enough? Yes, and no.
The new deposit normal is now 20 per cent to avoid paying LMI (Lender’s Mortgage Insurance) — a one-off insurance payment that protects your mortgage lender against your default. If you’re prepared to pay the LMI, you’ll only need a 5-10 per cent deposit.

Given most institutions are restricting the loan to value ratio they’re willing to extend to borrowers, LMI is usually payable if your LVR — the amount you need to borrow as a percentage of the purchase price — is above 80 per cent.

High property prices means that most of us will need to put down a deposit to get a loan approved, and the more money we have the less likely we’ll need to take out LMI.

Therefore putting a borrowing strategy in place is crucial in deciding whether to invest extra time saving up a large deposit, or paying LMI and apply for a loan with a small deposit.

Larger deposit versus a lower deposit
A downside is a small deposit attracts a larger LMI premium. On the plus side, some loans offer additional features, including lower interest rates to reward borrowers with bigger deposits.

Work out what you can afford
There are many ways to save for a home that don’t require major changes to your lifestyle. So it pays to know how big a deposit you can afford. Work out how much you can regularly put aside and how long it will take to reach your goal — then stick to it. The easiest way to see results is to cut back on extras. And that’s where doing a budget helps.

Another tip is to open a high-interest savings account. Once you know how much you can save, make your money work for you. If you leave it in your everyday transaction account, you might be tempted to use the cash. Or If you plan to buy your home in a few years’ time, consider investing your savings in shares or a managed fund.

Rent and invest
Another way to get your foot in the property door is to rent and invest. This option is touted as the Australian dream in reverse brought about by soaring property prices. This new property investment normal is backed up by data that shows by the end of this year more first-time buyers will be property investors rather than owner-occupiers.

Of course, you’ll need to be realistic. On a $400,000 property purchase you could access a 95 per cent loan of $380,000, with a cash deposit of $20,000. So you may need to consider a smaller home, or a property in a different area.

Whether you plan to buy, or invest in a home, it is a huge step — and it’s easy to be daunted by the large sums of money involved. With careful budgeting, saving money towards your property dream is made much easier. Allied Investment Group can advise how much you need to borrow and help you to put an investment plan in place. Call 1300 886 149 to get started on your home ownership journey.

Industry super funds: enter at your own risk

Why you should be cautious of an industry super fundIt may not seem to make a lot of sense, but adviser fees can actually be a smart investor’s money well spent. Which raises the questions about Industry Super Funds: do you “enter at your own risk”?

When deciding on a superannuation fund, the words “don’t believe everything you see on TV” are important to remember. Advertising such as Industry Super Funds’ long-running ‘Compare the pair’ campaigns weigh up industry super funds against retail super funds, with industry super funds coming out on top. But in a 30-second TV spot, you’re definitely not getting the whole story. If you’re considering an industry super fund, there are a couple of reasons you should be careful.

So what is an Industry super fund?
Unions and industry associations developed industry superannuation funds to provide for their members for their retirement. It used to be that these funds were only for those people within the particular industry, but these days, many of them are available to anyone entitled to super.

Advice is worth the price
The first reason to be cautious when looking at industry super funds is the claim that, unlike retail funds, they charge no ‘adviser fees’, paying no commission to financial planners. What ads like ‘Compare the pair’ don’t address is return on investment. It’s true, some industry super funds perform well, but ultimately, it’s no good going with a fund with a no-fee structure if your returns are below average. Sometimes, you could be worse off than if you’d paid the fees and made more money.

It’s worth remembering – and not underestimating – what these adviser fees are for: expert advice.

If your financial adviser is any good, they should have a great understanding of the investments they’re recommending to you. If you skip this advice – and skip choosing the right investment options based on this advice – by going with an industry super fund, you and your portfolio are potentially missing out on some real long-term value. It may seem that this doesn’t make a lot of sense, but adviser fees can actually be a smart investor’s money well spent.

Even industry super funds see the potential benefits that advice gets you. As a result, and as restrictions have changed, industry super funds are offering ‘intra-fund advice’ and ‘scaled advice’ to try to keep financial planners out of the mix. But these limited forms of advice are just that, and they won’t be able to address your full financial picture. There’s simply no substitute for proper financial advice.

Limited options
Reason number two to be careful of industry super funds is that you usually have more limited investment options – somewhere around five to 15 – than you do with a retail fund, which can have as many as 100 options. Industry super funds tend to work according to the belief that their members are financially similar and will invest in a similar small number of funds, which is why they often offer fewer choices. In contrast, financial advisers tend to use an individual-attention approach, customising an investment plan based on your individual goals and attitude towards risk. If you’re actively considering an industry super fund, you want to make sure you have enough selection to suit your wants, needs, and your views on risk.

Allied Investment Group advisers specialise in assisting clients take control of their finances so they can have more choices and security now and in retirement. Armed with this advice, you’ll be on your way to finding financial freedom and building wealth for the future. It’s never too late to start. Call 1300 886 149 to put your plan in motion.

How do I pay off my mortgage faster?

How do I pay off my mortgage fasterFor most of us owning property is our biggest investment, but it doesn’t have to be the most expensive. Regardless of what we owe, by asking the question “how do I pay off my mortgage faster” is the first step on the way to a very smart money move.

Easier said than done? In fact there are numerous ways to reduce mortgage debt without putting undue strain on stretched finances. Here’s 5 that won’t dent the budget.

1. Pay down the principal early
Did you know the point at which you pay the most interest is in the first years of your loan? That’s when the principal is at its highest, so the sooner you pay down the principal the better off you’ll be. An easy way to do this might be to refinance a 30-year fixed-rate to 20 or even 15 years.

2. Make more payments
One of the simplest strategies to pay off your home loan faster and save on interest is to make extra repayments. By paying down your mortgage fortnightly, you’ll pay 13 payments a year instead of 12. Of course, if you can make even more payments throughout the year, such as a lump-sum amount, you could save thousands of dollars and reduce your loan term. And given rates are at all-time lows, round up your repayment to pay that little extra. It all helps.

3. Check out package deals
Ask for a discount on your loan. Some lenders offer professional packages to specific professional groups or members of professional organisations that can shave up to 0.5 per cent or more off your mortgage rate. If you don’t ask, you’ll never know whether you’re eligible. And there’s often further savings tied to a package such as discounted home insurance, fee-free credit card or transaction accounts. Also look into the benefits of all-in-one loans or 100 percent offset loans, which allow you to pay all your income into and repay all your debt from the one account.

4. Consolidate all debts
If you have more than one credit card or loan, pay off the one with the highest interest rate first, or tackle the smallest debt first. Better still, most lenders allow you to refinance all your debts under your home loan. If you have a mortgage and equity in your home, incorporating your personal debt onto your mortgage and increasing repayments could save a significant amount of interest. Consider what you’ll save by transferring credit card or personal loan debts with interest rates of around 15 to 20 percent to your home loan where repayments are under 5 per cent!

5. Split your loan, or pay more off your fixed rate
It seems we don’t have to worry too much about an interest rate rise. However if you want to stick to a budget, fixing your loan is the way forward. But don’t fix the lot. You can hedge your bets by taking out a a split loan, which allows you to take part of your loan as fixed and part as variable. This way you can still make those extra repayments or lump sum amounts on the variable component of your “combination” loan. Already locked your loan down to a fixed rate? Check with your provider whether you can make extra repayments without penalty. Most lenders will allow you to pay an extra $10,000 a year off your fixed loan without incurring extra fees.

There are many more ways to reduce mortgage debt and save on tax at the same time. Allied Investment Group can help you turn your mortgage into a key financial product to suit your personal financial circumstances. Call 1300 886 149 to put your “get out of mortgage debt faster”.

Negative gearing, what is it and how does it work?

Negative gearing - what is it and how does it work?A well-chosen property can deliver future wealth – not only from capital growth but also from rental returns. Negative gearing can assist you along the way.

Most investors use some form of gearing against a mortgage to fund their rental property dream. And that’s where the property buzz word, negative gearing, often comes in.

Put simply, negative gearing in the case of a property means borrowing to invest. The property is negatively geared because income from the investment is less than expenses. That is, the rental income received is less than the loan interest and other expenses being paid out.

The benefit of this strategy is that you can adjust expenses to influence gearing by either borrowing more or less, therefore paying more or less interest. And given the loan interest is a major expense, negative gearing can assist with the ongoing cost of maintaining the investment — because a loss can also be used to reduce taxable income.

For example, you buy a property which brings in $25,000 in rent each year. The cost of holding it, including mortgage interest, is $35,000. This provides a taxable loss of $10,000, which can be used to reduce the amount of tax payable on your salary.

Another benefit of negative gearing is being able to claim this loss throughout the year. This is achieved by applying to the Tax Office to reduce the amount of tax taken out of your weekly, or fortnightly pay. An Income Tax Withholding Variation allows you to make substantial tax savings and refunds sooner than later. And it is this strategy that can provide the biggest financial boost to build up a property portfolio.

By lodging a weekly, or fortnightly, tax variation with the ATO, you increase your take home salary, releasing potential funds to cover investment costs, such as owners corporation fees or rates.

And it is important to know what expenses can be claimed as a tax deduction when a property is leased. For example, you can claim borrowing costs; landlord and building insurance; agent’s fees and commissions; repairs and maintenance costs; interest on the investment loan plus other bank fees; gardening; pest control and even cleaning costs.

By selecting a property to obtain maximum non-cash deductions, like depreciation, tax benefits are also increased. Depreciation spreads the cost of an asset over several years. It’s set up using a Tax Depreciation Schedule — a report outlining depreciation of assets in the investment property, such as appliances and fixtures, that can also be claimed.

Of course, negative gearing ONLY works if the money from the capital growth is greater than the loss in the rental shortfall. It may seem counter intuitive to be making a loss but the end game is to make that up with a capital gain as the value of the property increases.

Given gearing can play a significant role your investment strategy, getting expert financial advice is key if you need help identifying the right approach to maximise profits. Allied Investment Group can step you through the process, identify the risks and help formulate a plan to tackle any hurdles you may face during your investment journey. Call 1300 886 149 to put your property investment plans in place.

Positive Gearing vs Positive Cash flow

Positively geared or positive cashflow - is there a difference?Know when to go with the flow. Positive Gearing vs Positive Cash flow is an interesting question.

All positive cash flow properties are positively geared but not all positively geared properties are positive cash flow.

Yes, it might sound a bit complex but it is well worth taking a moment to understand it.

Choosing an investment strategy can be difficult. As an investor a lack of cash flow can leave you in limbo, unable to move forward to build up your portfolio.

I often hear from clients that they want a positive cashflow property, and for many investors who have spare savings combined with today’s low interest rates, this is quite simple to achieve as we simply put additional cash in as a deposit to reduce the costs of owning the property to bring them down to a level where the income exceeds the expenses.

Sometimes though what a client really wants is a positively geared property and they don’t want to use any of their spare cash if they have some. What this means is that they actually want to make a profit once they have got their rent in and paid their expenses out, naturally at this point, it is likely that they are now going to have to pay some tax, but at the end of the day, that don’t want to have to put any money from their own pocket in to subsidise the property in any way.

It is more about using these strategies for your own financial gain if you have the flexibility to do so.

So let’s look at a couple of examples:

Based on a positively geared property — which generates more income than expenses before and after tax.

You purchase an investment property and each month it brings in $1,000 in rent and you pay $700 in property expenses. At the end of the month, there’s $300 in cash spare ($3600 before-tax that year). After-tax, based on a marginal rate of, say, 47 per cent, not including Medicare levy or surcharge, you still have more than $150 per month in loose change.

Compare that to the scenario of a positive cash flow property — which generates a loss before-tax but more income than expenses after-tax.

In this instance, your investment brings in $1,000 in rent each month but your property expenses are $1200. Before tax Byou’re down $2400 a year but once you claim, say, $10K in depreciation, based on a rate of 30 per cent, your total loss for the year (on paper) is actually $12,400. Given you are entitled to claim back total expenses [at 30 per cent], you’d receive a refund of $3,720. In effect, you paid out $2,400 but got back $3,720 — a profit of $1,320 after-tax that year.

In this instance, your investment brings in $1,000 in rent each month but your property expenses are $1,200.

Of course, the level of equity or deposit put into an investment property purchase can affect the total annual cost of owning real estate.

Is there a difference? Apart from the opportunity costs of any equity of cash you put down as a deposit, the differences occurs only after taxation is taken into account. That is, a positively geared property is one that delivers a positive cash flow after-tax but a positive cash flow property must generate a LOSS before-tax and a positive cash flow after-tax.

Put simply both strategies generate income, but the decision of what works really comes down to which one best benefits your circumstance: before-tax or after-tax.

That’s why it is important to consider your investment objectives. That is, you may have the cash sitting around in your bank account to buy a property outright, but if you borrow using equity in your home, you can increase the cost of ownership by the amount of interest the bank charges. Or you may prefer to borrow the full amount even if you don’t need to, to increase the face value of the cost of ownership to maximise tax deductions and decrease overall costs.

To put that in perspective, it’s essential to understand that investment properties can be expected to earn either a good rental return or capital growth or better still, both capital growth and a great rental return.

Allied Investment Group advisers specialise in assisting clients take control of their finances so they can have more choices and security now and in retirement. By following these steps, you’ll be on your way to financial freedom and building wealth for the future. It’s never too late to get started.

Insurance – will it pay out when I need it?

Insurance - will it pay out when I need it?Life is full of risks – but some unexpected events can really set us back. Therefore it makes sense to protect the things that matter most.

As our lifestyle changes, our financial circumstances and insurance needs also change.

Perhaps we’ll upgrade our car or house, take out an investment loan or start a business.

If we take out insurance, the cost of repairs, medical treatments, travel changes or theft can be softened. When something goes wrong, we expect an insurer to deal with the disaster — even provide a cash settlement. Of course, such an outcome depends on the terms of the policy.

So are all insurances equal?

We’ve heard the horror tales. Will providers pay out when we need it most?

The simple answer is some will and some won’t. So it is really important to pay atten-tion to the wording about the very items you want your policy to protect.

One the smartest steps when taking out insurance is to ensure it has all the “risk” fea-tures you really need. If a policy sounds too good to be true, or too easy — for exam-ple there’s no medical or questions being asked upfront — then it’s going to take a lot longer to access a payout.

Using a broker can guide you towards insurance that best suits your needs. Especially if you have a specific issue like ongoing medical treatment, or you participate in extreme sports because different insurers have varied views on what they will and won’t cover.

If you have an existing medical condition, the approach is always disclose all, whilst some conditions can affect cover and or the price, many have minimal impact. Full disclosure will mean you can get cover appropriate to your needs, and maximize the chance of a payout when you need it most.

All insurers are different and some will provide cover when others will decline the same client.

To get the right policy upfront requires research, and a good broker can mitigate a lot of problems just by knowing where to start. After all, it is their job.

If you want to reduce risk to you or your assets, consider this top 10 insurance list:

  1. Life insurance
  2. Trauma
  3. Income Protection
  4. Total and permanent disability
  5. Income protection insurance

    There’s a lot of things to protect. So it helps if you understand how much it costs to maintain your lifestyle because if the unimaginable happened, could you cope finan-cially? Luckily, many risks can be bundled under one premium.

Therefore putting an insurance plan in place is an important step towards safeguarding you or your family’s livelihood. And the most that could set you back is the cost of a monthly or annual premium.

If you’re unsure about insurance or have complex requirements, you’ll benefit from speaking with an expert who understands the different products on the market.

Allied Investment Group advisers specialise in assisting clients take control of their finances so they can have more choices and security now and in retirement. By following these steps, you’ll be on your way to financial freedom and building wealth for the future. It’s never too late to get started.

Budgeting is boring, if you hate being successful

Budgets are boringIf you’re spending more than you can afford, it’s time to take action. Budgeting is boring but you have to start somewhere if you want to take control.

When you hear someone say budgets are boring, chances are they’re struggling with debt. And yet budgets equate to financial freedom because the simple act of paying attention to money over the long term is one of the easiest ways to build wealth.

Think of a budget as a realistic plan – based on income, expenses and goals – that will get you out of debt. By reallocating money to where it matters most, only then can you stay on top of finances and start putting funds towards future projects.

Sure getting started can be overwhelming, but it’s worth the effort.

Here’s 7 reasons why.

  1. You’ll stop living from pay to pay
  2. You’ll get a grip on impulse spending
  3. You’ll find the cash to pay that next bill
  4. You’ll be able to set and prioritise financial goals
  5. You’ll be able to build up an emergency fund
  6. You’ll be able to start a savings plan
  7. You’ll be able to live on less, and retire early

Want more reasons to take the boredom out of budgeting?

Then follow these 5 easy steps:

Track your spending
Look at money going in and out for at least a month using your mobile phone, tablet or app to track spending. There’s nothing more exhilarating than monitoring your net worth so redo your budget every six months to make sure it reflects your current income, spending and what you want to achieve. Once you are on top of your finances, you only need update a budget once a year.

Live within your means
Once you see what funds are coming in and going out, you’ll most likely need to start living within your means. This is more than just balancing your budget. It’s about spending less than you make. But it doesn’t have to mean doing without, just cutting back.

Pay down debt
Credit card interest costs big, and it stops you from saving for a major goal, like a home or that dream holiday. The most powerful thing you can do next is redirect as much of your earnings as practical to paying down debt.

Make earnings count
Allocate at least 10 per cent of earnings towards building up a savings safety net. Use direct debit or get your company payroll to split payments into three accounts — 10 per cent into savings account that earns compound interest, 45 per cent in a cheque account to cover bills/debt, 35 per cent in an easy-to-access account for living/entertainment.

Allied Investment Group advisers specialise in assisting clients take control of their finances so they can have more choices and security now and in retirement. By following these steps, you’ll be on your way to financial freedom and building wealth for the future. It’s never too late to get started. Call 1300 886 149 to put your budget plan in place.

Is there really a property boom?

Is there a right time to invest in property?Even in the current property boom, plenty of us are looking at getting our foot in the property door and it is easy to understand why. Some of us are even questioning is there really a property boom. Purchasing property to rent out is still the most popular way to build up assets because it is seen as a safer option than many other types of investment. However, it is a major decision, which requires planning, research and careful budgeting.

The good news is that property can be a potent wealth builder over the long term, and like any investment it experiences cycles. So is NOW a good time to buy in? It depends on your goals. Here’s 5 STEPS you can apply to property investing that will pay off.

1. TIME FRAME
Knowing when to jump in really depends on your investment time frame. Property is an investment with at least a 7+ year horizon. Transaction costs to buy and sell are around 9 per cent, which means you have to make that back before you get the benefit of any growth. Property investment as a short-term investment is only for the very lucky, or the very brave!

2. STRATEGY
The right time to invest in property is as soon as you’re financially ready, and that means putting together a strategy that includes a purchase plan and budget, because you really need to know how much cash you have available to invest and what returns to expect. And you’ll want to look at tax benefits. For example, with a positively geared property the tenant repays your loan while you build equity. This allows you to sell the property later and use the proceeds as a deposit for your next property.

3. PRE-APPROVAL
Be ready to buy the perfect property when you find it by getting pre-approval, a good mortgage broker can be a valuable resource in the step. Did you know that after you take out a loan to purchase an investment property, interest on the loan and most property expenses can be offset against rental income for tax purposes?

4. RESEARCH
Based on your strategy (negatively or positively geared), you’ll be able to begin your search, which will ultimately determine whether there is a good investment out there that fits your budget and loan serviceability. Look for areas where high growth is expected, that is, where there is potential for capital gains. And check out areas where rental income is high compared to the property value.

5. TAKE ACTION
Making property investment work is about getting the fundamentals right, which is usually achieved by solid research, observation and calculated risk. Of course, property prices go up and down, but if you don’t sell you are unlikely to ever make a loss. So don’t let indecision be your biggest barrier to entering the market. With the right advice, research and property selection, you can always profit.

What next? So now you’ve made the decision to get into the market, the best thing to do next is remain in the market — especially if you’re looking to use property as a way to replace your income in the long term and retire on your investments. It may be comforting to know that regardless of how markets are performing, there are always pockets of growth and high yields to be found. The key to having a great property investment is ensuring it outperforms the market in capital growth because serious returns come from areas with great growth prospects.

Allied Investment Group advisers can assist you to focus on what you want to achieve, show you how your property investment goals can be realised and more importantly, when to get in. Talk to an Allied adviser on 1300 886 149 who can provide you with the right steps to get your foot in the property investment door.

How Gearing Works

Jump start your nest eggBorrowing to invest – also known as gearing – is a way of using other people’s money to get ahead. Used wisely, it can turbo-charge returns on an investment. So here’s a short explanation on how gearing works.

Gearing is generally a medium to long-term strategy – at least five to 10 years, but even modest amounts invested can generate real wealth given enough time and dedication to this method. For example, most of us are familiar with borrowing to make our biggest investment – our own home – so it is simply applying similar principles when borrowing to invest in assets such as a share portfolio, or property.

Gearing can deliver a sound strategy to jump starting your nest-egg because it offers a way to increase the value of your total pool of investments by allowing you to put down a small deposit and borrow the rest. The key is to make sure the total return (income and growth) is greater than the cost of borrowing.

How it Works

You provide either cash for a deposit, or other assets as security, and receive a loan to fund an investment. The main difference with this type of borrowing is that the loan is used for income-producing purposes, for example, to buy a home that produces rental income, or to buy shares that pay dividends.

When borrowing to invest, you need to consider different types of gearing. Negative gearing is where income from an investment (such as dividends or rental) is less than your interest and/or other expenses. Positive gearing is where income from an investment is higher than your interest and/or other expenses.

There are two main reasons people hold a negatively geared asset. First, you can offset any loss made on one investment, against other income, resulting in tax savings (which works well for those on high marginal tax rates). Second, the capital growth of the assets mean you can sell an asset for a capital gain that more than covers losses over the time the investment was held.

Is gearing right for you?

Depending on your circumstances, the benefits of gearing can include:
If the investment is positively geared, you have access to a passive income stream (extra money in your budget) that can provide greater lifestyle choices.

By borrowing to invest, the capital growth potential of your assets is greater because of the greater capital base to begin with. Gearing can also be used within a self-managed superannuation fund — as long as it complies with ATO rules.

And gearing can be a great strategy if you have a long time frame because the more time your money has to earn, the more opportunity for compounding (adding any earnings received to the amount you contribute [principal] and then reinvesting them to create more potential earnings).

It is easy to see why borrowing to invest can provide a great approach to building wealth. Every year put off investing makes our ultimate retirement goals more difficult to achieve.

Contact Allied Investment Group to find out how gearing can help jump start your retirement nest-egg.

How to pay for that dream holiday

Take that dream holiday sooner - 7 tips on how to pay for itIf you are wondering how to pay for that dream holiday, you’ll know that there is nothing better than that feeling of getting on a plane knowing your holiday is starting today. The excitement of the days and weeks ahead, new places sights smells and tastes.

Deciding where and when to go is all part of the dream holiday planning fun.

To make your dream holiday a reality you will need some money, what-ever your circumstances, once you start a regular savings plan you may surprise yourself how quickly you can get the money you need.

​Here’s 7 tips to help you get away sooner:

 

1. Set up a savings goal and stick to it
When you set yourself a savings goal it’s important to get a savings plan together so you can make your dream a reality. After all, a goal without a plan is just a wish. Therefore, do a little research or take time to:

  • Know how much money is needed
  • Have a clear savings plan
  • Regularly review your progress
  • Have a specific saving time frame

2. Use a budget to ensure you save a little for a rainy day
By taking charge of your money, whether you have a little or a lot, you will ease money stress and feel more secure and in control. Doing a household budget reveals whether you’re spending more or less than you can afford. It enables you to direct your money to where it matters most, so you can stay on top of bills and start putting money towards those future goals like your dream holiday.

3. Use a shopping list to get the most value out of your family grocery budget
Making small changes in your life can fatten your savings and help you budget better. Next time you’re out grocery shopping, follow these money-saving tips:|

  • Take a list so you don’t forget anything. Only buy what’s on the list. This makes it easier to stick to your budget.
  • Put your grocery money in an envelope. Don’t take any other cash or cards with you so you can only spend what you have.
  • Buy in bulk and only go grocery shopping once a fortnight.
  • Use all the food in your pantry before you buy more.
  • Eat a meal or snack before you go to the supermarket. When you are not hungry, you tend to buy less food.

4. Keep your savings in a high interest account – every cent helps
Savings accounts are specifically designed to help your savings grow faster. They offer a higher interest rate than basic transaction accounts. But not all savings accounts are equal. Remember with more money saved, you will be able to take that dream holiday sooner. To decide which account is best for you, compare these features:

  • The interest rate and how regularly you receive the interest
  • Minimum and maximum account balances
  • Compound interest versus simple interest
  • Account keeping fees
  • What interest you lose if you withdraw money and what rewards you get if you deposit money regularly
  • Whether a linked account is required

5. Use an offset account if you have a mortgage
Putting your money into a bank account doesn’t mean you should forget about it. It’s your money so make sure it is working the way you want, for example, a transaction account linked to a mortgage account reduces interest payable as interest is only charged on the net balance, that is, your mortgage balance less your offset account balance.

6. Get every tax benefit you are entitled to
Knowing where every tax dollar is going and why opens up a wealth of savings. So it pays to get the right kind of advice to put the right strategy in place that makes the most of your money. Financial advice gives you confidence that your future plans are achievable. If you’re not on track to achieving your goals, it can guide you on how to maximise savings, show you how tax is calculated and ways to reduce tax through salary sacrificing super, claiming deductions and donations, or reducing investment spending to uncovering any government assistance you’re eligible to claim.

7. Stay informed about money
A great way to stay on track and turn your savings goal into reality is to become savvier with money generally. You can stay informed about the latest money tips and take advantage of the tools and resources by signing up to Allied Investment Group’s weekly e-newsletters.

Allied Investment Group specialises in helping clients take control of their finances so they can have more choices, freedom and security.

Shares v Property Australia?

Shares vs Property?In the past 20 years, residential real estate gained an edge over shares. Investors are often confronted with a choice between shares v property.

And it is easy to understand why: both asset classes traditionally perform extremely well.

In the past 20 years, residential real estate gained an edge over shares. The latest long-term investing report — released by the ASX and Russell Investments in June 2015 — revealed residential investment property returned 9.8 per cent over a 20-year period to December 31, 2014, compared with 9.5 per cent for Australian shares.

So it would seem the shares versus property race couldn’t get any closer, but what factors should investors consider when deciding between investing in these two asset classes? Is it a question of predicting which will be the better investment – shares or property — over the next 20 years?

Given investors can’t rely on past performance as an indicator of future results, it really comes down to five 5 factors:


1. Total returns (capital and income)
Do you need to generate income? If so, you can from both types of investment. That is, you earn money from a residential investment property via rental payments, while dividends are another way of generating an income stream from a share portfolio.

2. Ease of getting started
How much can you spare? Starting out investing in shares requires only a relatively small amount of capital so entry, exit and holding in this market is cheaper and easier compared with property, which has higher start-up costs in terms of entry price and stamp duty.

3. Needs and circumstance
The right investment depends on the individual investor. There are a number of things an investor has to consider such as how long the money can be invested, the level of returns sought and the amount of risk the investor is willing to accept.

4. Tax margins, gearing
Many investors aren’t aware that tax significantly changes returns on both asset classes, particularly for those on high tax rates. That’s where gearing comes in because it can enhance returns for investors at the highest and lowest marginal rates.

5. Time
Investment time horizon: compounding provides a cumulative effect to total returns.

It’s a lot to think about but your most important investment decision will be how you spread your money across the asset classes, for example, shares should incorporate Australian and international stocks, while property could include listed, commercial and residential.

The ASX advises that having your money spread across a range of assets will decrease your overall risk, for example, within shares it reduces the impact on your portfolio if one or two companies perform poorly. However, it really pays for investors wanting ongoing successful returns to learn more about all asset classes [not only shares and property], and seek solid professional advice to develop a diversified investment strategy.

Allied Investment Group specialises in helping clients take control of their finances so they can have more choices, freedom and security.

Retirement – Live the 60’s in Style & Beyond

Retirement - I'm too young / old to think about thatBut you need to take steps now to get the best chance at the lifestyle you want.

The sooner you start planning, the better off you’ll be.

The Association of Superannuation Funds of Australia (AFSA) suggests a comfortable lifestyle for a couple, including entertainment, a car, clothes, private health insurance and holidays, can cost as much as $58,000 a year. Compare that to a modest lifestyle, which still requires about $34,000 a year per couple.

Given the average person will need about two-thirds of their current gross income each year to maintain a modest lifestyle in retirement, it is never too early, or late, to start building up assets, savings and super.

Planning for retirement can be complex so it’s important to get advice from people with specialist knowledge. Advisers at Allied Investment Group can provide strategies to boost income in retirement, which can come from a range of sources, including super, other investments and the age pension.

There are also government incentives that you could be missing out on.
Power of time

The compounding effect

There are three key drivers behind the compound effect:

Rate of the return — obviously, the higher the better.

Contribution — obviously, the bigger the better because it means there is more for returns to compound on.

Time — obviously, as mentioned previously, the longer the better because it means the longer the compounding process of earning returns on returns has to run. Time also helps to smooth out any year-to-year volatility in returns.

Understanding how compounding works will assist in making better decisions when choosing an account that pays interest. An online savings account that pays monthly interest is an example of an account that earns compound interest. A term deposit is an example of an account that earns simple interest, which is only paid at the end of a specified term.

Whether you’re in your mid-20s or mid-50s, if you can afford to put away even just $5 a day, starting now, compound interest will reward — even in today’s low interest rate environment.

Understanding compounding is just one area where Allied Investment Group can help you to improve your savings situation and make savvy financial decisions to reach your retirement goals. There are myriad other vehicles to grow your savings.

Are you missing out on deductions?


Is depreciation important to an investment decisionHow much you can claim in your tax return is an often overlooked element of property investment.

There’s two main reasons for that:
Investors don’t realise how much money they are missing out on by failing to claim.
They don’t understand it is a perfectly legal way of minimising tax.

We are talking about claiming depreciation
Depreciation is simply the amount the Tax office lets you claim for wear and tear on your property if the property is used as an investment and rented out, the Australian Taxation Office allows owners to claim wear and tear against assessable taxable income each financial year via tax deductions.

Of course, the more deductions you can claim on a property, the higher your tax benefit. And as a property investor, it makes sense to be able to claim as many deductions as you’re legally entitled.

WHAT TO CLAIM

The ATO allows property investors to claim a rental and investment property depreciation deduction related to the building and plant and equipment items contained within it. And there are more than 1500 items identified as depreciable assets under capital works, including:

  • Built-in kitchen cupboards
  • Clothes-lines
  • Door and window fittings (such as handles, locks)
  • Driveways
  • Fences and retaining walls
  • Garages
  • Sinks, basins, baths and toilet bowls

Under plant and equipment articles, deductions up to 35 per cent of construction costs of a residential building can be made and include things like carpet [and other removable floor coverings], hot water systems, air-conditioning, security systems, blinds, curtains and light fittings.

Many investors think about depreciation after they’ve purchased a property but it is often better to consider this information before buying to maximise savings. For example, a new property has a lot more depreciation allowance than an older pre-owned property.

HOW TO CLAIM
To claim depreciation deductions, investors need to complete a personalised tax depreciation schedule that outlines deductions available on a specific property for the life of the property, which is used by your accountant when preparing a tax return.

By utilising the benefits of property depreciation, an investor can turn what may otherwise be a negative cash flow into a positive cash flow.

To find out how you can use tax depreciation to save on your current or next property purchase, contact Allied Investment Group on 1300 886 149.

Allied Investment Group specialises in helping clients take control of their finances so they can have more choices, freedom and security in retirement.

8 Tips to get you to your next holiday

8 tips to get you to your next holidaySometimes all it takes is a step in the right direction to get things moving in your favour. So here’s 8 tips to get you to your next holiday.

But, as with most things, that first step is the hardest.

Most of us don’t realise that we make enough money, the issue is we’re far from being careful with it! Unfortunately we budget backwards. We decide what we want — or think we need — to spend money on in the name of “essentials” and then can’t afford to put anything aside for future fun times.

When working out money priorities, we need to choose where we redirect our spending. So it helps to think about which items we need for basic living expenses and which are extras or things we can do without.

This puts us in control of our finances and not our finances in control of our lives.

1. Sounds like a plan

Most people shy away from setting out a plan because they think it’ll mean they have to skimp elsewhere. But it is often about redefining what we believe is “enough” for ourselves and our family to live on to feel confident that our future plans are achievable.

2. Financial advice

If you’re not on track to achieving your goals, getting the right kind of financial advice can also make a big difference. It can help you put the right strategies in place, or come up with more realistic goals.

3. Set up a budget

For families on fixed-income a first step is to re-set priorities by saving for the fun times first. It’s easier than you think. Doing a household budget magically frees up cash. It reveals whether you’re spending more or less than you can afford. It enables you to direct your money to where it matters most, so you can stay on top of bills and start putting money towards those future goals.

4. Make the most of your money

Moreover, it gets you off the financial treadmill. It enables you to sort out your money priorities and find the right balance between spending and saving. By creating a budget that includes savings as an “essential component” of your list, you’ll soon see you can afford museum entry fees or weekends away and ultimately that family holiday. It is as easy as setting aside $20 to $50 a week, or fortnight.

5. Earn interest on interest

To ensure you see this plan through, open an account that earns compound interest and direct debit your chosen amount. Compound interest offers a double layer for your savings. You earn interest on the money you deposit, and on the interest you have already earnt. For example, if you deposited $20 a week in a high interest savings account with a rate of 6 per cent for 21 years, you’d save $43,000.

6. Change one habit and save

Another simple step is to empty your pockets or purse daily. Set aside ALL loose change into a jar and, if possible, make a goal to increase the amount by at least a dollar each week. When you’ve reached $50, pop it into your savings account to add to that compounding interest. It is the little details that compound financially to make a big difference in the future, whether it be next year or in 20 years’ time.

7. Save on bank fees

Some financial institutions offer basic bank accounts with no account keeping fees, free monthly statements, no minimum deposit amounts and no overdrawn fees.

8. Avoid using credit

Debt follows us forever unless we stop using our cards. Of course, there are ways to use credit wisely. It just comes down to sticking to a plan that identifies the expenses we absolutely need to repay sooner.

If you’ve never done a budget before, the first is always the hardest but there are experts to help, like Allied Investment Group advisers who are experts in fixing up finances to allow you to afford future good times with family.

Allied Investment Group specialises in helping clients take control of their finances so they can have more choices, freedom and security in retirement.

So why are SMSFs so popular?

Is there value in having an SMSF?Being able to control how super is invested is a big selling point for self-managed super funds. At least close to one million Australians think so given there’s more than half a million SMSFs looking after retirement nest eggs. So why are SMSFs so popular?

Self-managed funds perform the same role as any other super fund, by investing contributions and making them available to members on retirement. They’re also regulated by the Australian Taxation Office. The difference is fund members are also the trustees.

So why are SMSFs so popular?
The main appeal is their ability to invest in a broad range of investments from shares, managed funds, direct property, high interest cash savings, term deposits and gold for example. And there’s no denying the upside to a SMSF is being able to decide what to invest in and when benefits are paid. The downside is running them requires much more work, though it helps that they’ve become more cost-competitive.

The ATO lists the following top 5 reasons to establish SMSFs:

  • Greater control of investments
  • Better flexibility and choice
  • Better tax-planning opportunities
  • Better investment performance of assets
  • Greater cost savings vs other super funds

When you compare superannuation assets overall — $2.05 trillion as at March 2015— it is impressive that individuals running SMSFs control $520.5 billion of all super assets invested.

So if you want to get your foot in the self-managed fund door, it’s good to know that costs involved in administering SMSFs have come down. They’re much more accessible, especially for 30-and-40-year-olds who previously felt locked out due to the big balances they felt they needed to make setting them up worthwhile. And did you know there’s no required minimum balance to begin a fund? ATO figures on SMSF activity over the past year show 6.7 per cent of funds actually have assets totalling less than $50,000.

What are the costs?

Some industry and retail funds charge up to 6 per cent to run a SMSF. And some providers charge up to $10,000 a year to administer a self-managed fund. Allied Investment Group charges a flat annual fee from $1850, plus GST.

Allied Investment Group specialises in helping clients take control of their finances so they can have more choices, freedom and security in retirement.

Why is Estate Planning Important?

Why is Estate Planning ImportantThe great estate – estate planning

No-one wants to think about death in the prime of life, yet it’s important to decide what will happen to your assets.

Developing an effective estate plan ensures your loved ones are properly looked after. Moreover, it makes sense to put a plan in place leaving instructions about your legal and medical preferences. An estate plan includes your will as well as any other directions on how you want your assets handed out after your death. It includes documents that govern how you will be cared for, medically and financially, if you become unable to make your own decisions.

KEY CONSIDERATIONS

Your WILL is likely to be the primary, though by no means only element of your estate plan. If there’s no valid will in place, an administrator appointed by the court pays your bills and taxes from your assets, then disburses the remainder based on a pre-determined formula which may not be how you intended your assets to be distributed. If you die intestate and don’t have living relatives, your estate is paid to the state government.

Letter of wishes: can also be read in conjunction with your will. Though not legally binding, it provides the ability to guide executors and beneficiaries of your estate on issues which are important to you.

Superannuation: Did you know that your superannuation does not automatically form part of your estate in the event of your death? It does in NSW but if you reside elsewhere it may be appropriate to implement a binding super death benefit nomination so that you can be certain your super will be dealt with in the way you want. If there are no binding death nominations, then the trustee of your super fund will decide how the benefit is to be paid.

Appointing someone as your POWER OF ATTORNEY gives them the legal authority to look after your affairs on your behalf. Powers of attorney depend on which state or territory you are in: they can refer to just financial powers, or they might include broader guardianship powers.

A general power of attorney is where you appoint someone to make financial and legal decisions for you, usually for a specified period of time, for example if you’re overseas and unable to manage your legal affairs at home. This person’s appointment becomes invalid if you lose the capacity to make decisions.

An enduring power of attorney is where you appoint a person to make financial and legal decisions on your behalf if you become unable to do so.

A medical power of attorney only makes medical decisions for you if you lose the capacity to make your own decisions.

You can set up other documents to help legal appointees and family, including:

An enduring power of guardianship that gives a person the right to choose where you live and decide your medical care and other lifestyle choices, if you become unable to do so.

An anticipatory direction records your intentions about medical treatment in the future, in case you become unable to express those wishes yourself.

TESTAMENTARY TRUSTS are usually set up to protect assets. They are a mechanism by which an inheritance can be kept separate from the personal assets of a beneficiary. In effect, they provide benefits in terms of asset protection as well as tax advantages. Here are some reasons to create a testamentary trust:
The beneficiaries are minors (under 18-21 years old)
The beneficiaries have diminished mental capacity
You do not trust the beneficiary to use their inheritance wisely
You do not want family assets split as part of a divorce settlement
You do not want family assets to become part of bankruptcy proceedings
The documents you choose to draw up will depend on your situation, and the responsibilities you are happy to entrust to others. It is important to get legal advice if you are unsure. Contact Allied Investment Group on 1300 886 149 for more information.

Allied Investment Group specialises in helping clients take control of their finances so they can have more choices, freedom and security in retirement.

Risk Insurance – Can your Family afford Not to?

What is Risk InsuranceDid you know that 1 in every 3 Australians will be disabled for more than 3 months before turning 65

… and almost a third of people over the age of 45 who retire early, do so due to ill health and injury.

Don’t risk it

Risk insurance is critical when it comes to setting up your future.

It provides the money you need when things go wrong. Imagine what your life would be like if you or your partner became seriously ill and couldn’t work: would you be able to survive financially?

For example, should you lose the ability to earn an income through illness, injury or disablement, risk insurance can assist with financial goals and obligations. In an event such as death, it ensures security by providing financial protection for your family. For a business, it allows partners to continue running the firm without added capital strain. Moreover, it shifts the financial burden from you to the insurance provider.

Managing risk or planning for risks before they occur is the easiest way to protect what you have but how much cover do you really need? There is no exact answer. Obviously more insurance gives you more protection, but it also depends on what you can afford. The type of risk insurance cover will depend on a number of factors, such as:

  • Age
  • Lifestyle needs
  • Dependants
  • Personal financial circumstances
  • Business requirements

What insurance types are available?

There are different types of cover so depending on your circumstances, you may need one or more. Allied Investment Group advisers provide advice on life or disability insurance, income protection and trauma/crisis insurance, which can be tailored to suit your needs. For example:

Life cover — alleviates the financial burden your family or business associates may be left with after your death. It is paid as a lump sum that beneficiaries can use at their discretion to assist with medical costs, funeral expenses, to repay debts or help to secure their future. There are a number of optional benefits within Life cover that allow the insurer to apply for more features to cover things such as school fees, future expenses to family protection or skilled staff leave to injury in the workplace.

Total and Permanent Disablement (TPD) — provides a lump sum in the event of a permanent disability that prevents the insured from returning to work. It is often bundled together with life cover policy. The funds can be used at the beneficiaries’ discretion to provide for dependants or to compensate for the loss of income, to repay debts or cover medical costs as well as fund lifestyle adjustments such as wheelchairs, ramps and manual car controls.

Trauma insurance — provides cover if the insured is diagnosed with a specified illness or injury. It includes major illnesses or injuries that will make a significant impact on a person’s life, such as cancer or a stroke. It is also referred to as crisis recovery insurance and is often paid as a lump sum. Like TPD, funds can be used at the beneficiaries’ discretion, for example, to pay for additional medical care, or to pay off the mortgage to relieve financial pressure. More importantly, funds can be used to cover rehabilitation, carer or day-to-day costs.

Income protection — is an important consideration for anyone who relies on a salary because it replaces the income lost through your inability to work due to injury or sickness. It is especially suitable for the self-employed, small business owners or professionals whose business relies heavily on their ability to work. Income protection usually provides a monthly benefit of up to 75 per cent of your salary for an agreed time period. It can also ensure that business continuity is catered for even when the owner can no longer run the business. Premiums paid for this type of policy are generally tax-deductible, and you may also be able to pay for this type of insurance through superannuation.

Allied Investment Group advisers can investigate the most cost-effective and appropriate cover for your specific circumstances.

The Risk of Not Making a Decision

The risk of not making a decisionThere is plenty to think about when it comes to retirement. One of the biggest is sometime the risk of not making a decision.

Getting ready both emotionally and financially is critically important to achieving your goals.

Whatever path you choose, one of the big challenges is working out how to pay for it. The financial aspects are often complex, so getting reliable and trustworthy information early is vital.

Often people get in touch with a financial adviser five years from retirement. This is at a time when the most conservative years are the five before retirement through the five following. Leaving plans this late often means your goal is simply to preserve money rather than grow it because you can’t tolerate risk — leaving little scope to make a dramatic difference.

Unplanned savings are better than no savings at all but to get the most out of your retirement, you need to figure out where you want to be and how you’re going to get there. Given we’re all living longer and our retirement savings need to last longer, it’s never been more important to make smart financial decisions.

So let’s wind back the clock. You’re in your 30s and 40s. Sure, it coincides with more pressing demands – marriage, house, children – but consider this: each month you delay cuts significantly into the total savings you have when retirement comes.

So what should you do?  

  • Take control of your finances
  • Make a long-term financial plan
  • Find ways to grow your retirement income

Don’t fall into the risk of NOT making a decision, which is often greater than risking it all for a quick gain late in the game. If you start retirement savings early, you can afford to be aggressive and put money into riskier funds. If your fund loses value, you have time to let it grow again. However, if you’re getting close to retirement (55-plus) and suddenly your investments lose 40 per cent of their value, it will have a huge negative impact on your financial comfort in retirement.

Get on top of your finances as soon as you can to identify:

  • What assets (house, savings, investments) you have and how much they are worth.
  • How much super you have and when you can access it.
  • When you can apply for the age pension and whether you are likely to be eligible.

The next step is to look at how your needs might change over time. Perhaps you’’ll want to travel in the first few years of retirement. Later, you may want to replace your car or renovate your kitchen, even relocate to a foreign country. You might even consider downsizing or moving into a retirement village.

One of the greatest fears we all have is running out of cash. This can be avoided through setting up simple strategies to stretch retirement income and make your money last longer.

Seeking financial advice early can’t be underestimated. Managing finances can be hard work even if you have some financial knowledge. This is where an adviser really comes into their own. They will help you focus on how to use different income sources to fund different stages of your life. The aim will be to plan for the long-term, not just the next five years.

An adviser can help to assess your current position, identify your short and long-term needs, set up financial strategies for achieving your goals, navigate our complex tax system and look into social security implications.

It’s really about working out how much money you need for the life you want in retirement.

To set up the right financial strategy in your 30s, 40s or 50s, contact Allied Investment Group.

Allied Investment Group specialises in helping clients take control of their finances so they can have more choices, freedom and security.

10 Tips for Reducing Your Tax

10 tips for reducing your taxHere’s 10 tips for reducing your tax to ensure your deductions don’t get overlooked.

It pays to know about your income tax and what to do to reduce what you pay or even increase what you claim because no one needs to shell out more tax than required.

  1. Keep records
    One of the simplest things you can do is set up a checklist. It’’s about being organised throughout the year, so file as many electronic receipts as you can, including downloading internet banking interest income details, dividend income statements and share sales. Use your mobile phone to scan paper receipts or ask for an emailed electronic copy. Keeping good records is the top way to ensure you claim every expense.
  2. Claim what you are entitled to
    Claiming deductions is a great tool to reduce overall tax payable. The Australian Tax Office website releases “”reasonable”” deductions for 20 different occupations and most accounting firms provide free lists tailored to all types of income you need to declare for your circumstance. If what you spend during the year relates to earning your income, keep all receipts to claim an apportioned deduction. For example, you can claim work-related expenses such as meals, travel, accommodation and depreciation on tools such as laptops, smartphones, home office furniture, home internet usage or even electricity and gas. If you are unsure of a claim, keep the receipt and at tax time ask your accountant for advice because the things the ATO allows you to claim change each year.
    CLAIM THIS
    Did you know income protection insurance can be claimed as a work-related expense or that small work-related items worth up to $200 can be claimed without receipts? Each item must be less than $10 [for example, stationery, USBs, paper, batteries, calculators] and requires a diary record showing the date the item was bought, where it was bought, and the cost. Don’’t miss claiming travel to visit your tax agent. This includes motor vehicle travel, bus and taxi fares. If you take your own car and use the Cents Per Kilometre method, you may not need to keep receipts to make your claim.
  3. Be charitable
    Your generosity may result in a tax benefit. Every donation over $2 made to a registered charity is subtracted from your taxable income, which means you get a percentage back. Plus planning ahead for your charitable contributions can assist in lowering your taxable income. For example, the strategy of making a large donation towards the end of the tax year may lower your overall tax bracket and therefore boost your tax return.
  4. Medicare levy surcharge and expenses offset
    You can claim up to 20 per cent of your medical expenses after $1,500. There’’s no limit to what can be offset over $1,500. If you do not hold a private insurance policy, as soon as your income exceeds $77,000 for singles or $154,000 for families, you will be required to pay a minimum of 1 per cent extra in the form of the Medicare Levy Surcharge, which is on top of the compulsory 1.5 per cent Medicare levy paid by most Australian taxpayers.
  5. Try salary packaging and adjust finances
    If your company allows it, consider salary packaging any expenditures you can. You might be able to package items such as cars, superannuation, mobile phones or gym memberships using pre-tax dollars. Next, consider adjusting your finances to suit your circumstances. For example, if a couple invest funds in a short-term account earning interest, it is more beneficial to invest it in the name of the lowest income earner who will pay the least tax on it.
  6. PAYG tax payments
    The ATO makes ABN holders and small businesses pay PAYG tax instalments. This occurs once you make in excess of around $70,000 per year, which means that every quarter they will demand approximately $1,400 in tax instalments. It is important to keep in mind that even if you’re not earning that much this year, you may have to pay in this manner because it is based off the previous year’’s tax return.
  7. Timed expenses
    If you know in advance you’’re going to incur a large expense or deduction, choose which financial year you pay or purchase. For example, if you have a large expense which is tax deductible and your income for a particular year is going to push you up to the next tax threshold, it may be beneficial to pay or buy then. This will lower your taxable income and could even move you down into a lower tax bracket.
  8. Investments
    Making an investment can be tax effective. However, speak to a financial adviser before you invest to check whether the investment complies with tax rules. The investment should benefit you now and into the future.
  9. Selling assets, claiming deductions
    If you plan to sell one of your assets which may be subject to capital gains, there are a number of things to consider. If you have owned the asset for longer than 12 months, you may be entitled to a 50 per cent CGT discount. And, you may choose to sell the asset in a year you expect to earn lower income as your capital gain won’’t have as big an impact of your tax liability. You can also claim deductions such as building depreciation on a property investment.
  10. Seek professional advice
    Using a tax agent or accountant saves time and improves your refund. ATO statistics show 70 per cent of Australians use professionals because their job is to help you steer clear of tax problems and help you to pay less tax. The rule of thumb is to file as early as possible if you’’re going to be getting a refund, and as late as possible if you owe money.

Allied Investment Group specialises in helping clients take control of their finances so they can have more choices, freedom and security in retirement. Call 1300 886 149 to put your plan in place.

SMSF v Direct Property Investment

SMSF v Direct Property Investment?Buying property through super is a great way to build up your retirement savings.  So how do you compare SMSF v Direct Property Investment?
 
In the right situation it is an excellent strategy that delivers the choices, freedom and quality of life you want in retirement.

It’’s done through a self-managed superannuation fund, or SMSF. Using this avenue for wealth creation to buy a property inside super allows you to use your super fund balance as leverage. In most cases, you can borrow up to 80 per cent of the property value. Your super fund will contribute a 20 per cent deposit, plus around 5 per cent for purchase costs such as stamp duty.

So it is easy to see why taking advantage of this ability to borrow using an SMSF is gaining popularity. The significant tax benefits within super grow your retirement nest egg much faster because rental income on a property held inside super is taxed at just 15 per cent compared with up to 45 per cent [depending on your tax bracket] outside super. In the event of a sale post-retirement, any capital gain is tax-free. The more tax efficient you are able to retire in, the more money you’ll have in your pocket to  plan your perfect lifestyle in retirement.

To qualify and employ this super strategy, you need to meet TWO conditions:  

  1. Have a household income of at least $80,000
  2. Have a combined super balance of at least $100,000 between you and your partner across all super accounts

 

Key benefits of having a SMSF:

Given super is compulsory, a SMSF allows you to choose the assets [including property of choice] you want to invest in. When you set up an SMSF, you’re in charge – you make the investment decisions for the fund and you’re responsible for complying with the law. It’s a major financial undertaking and you need to have the time and skills to do it. Therefore you should consider professional advice to explain the different ways an SMSF can benefit you, for example:

  • Ability to reduce income tax on investment income and capital gains
  • Increasing your flexibility of investment choice, asset selection and giving you control
  • Ability to manage the risk profile of your investments
  • Managing the income streams at retirement for you and other members of the SMSF
  • Ability to transfer personal assets (shares, gold, art, property etc) into your SMSF
  • Pooling assets of up to four members (allowed) into the SMSF will save on costs

That’s where Allied Investment Group comes in because you’ll need an end-to-end service: a specialist that knows SMSF property investment as well as being a licensed financial planner. You may also want someone who has proven expertise in property research and selection. It’s about providing a customised service, which includes a financial plan exploring what you want to achieve and the steps to get there.

So if you like property as an investment class, only a SMSF allows you to purchase direct property with your super money. But there are some common SMSF property rules you’ll need to follow.

The property:

  • Must meet the ‘sole purpose test’ of solely providing retirement benefits to fund members
  • Must not be acquired from a related party of a member
  • Must not be lived in by a fund member or any fund members’ related parties
  • Must not be rented by a fund member or any fund members’ related parties

An example:
Difference of financing a property inside super v. outside super
Two couples purchase an investment property for $400K at age 40 with a 20 per cent deposit. They have a combined family income of $100,000 with one partner earning $70K and the other $30K. The only difference is that couple #1 [Amber & Barry] buy the property outside super whereas couple #2 [Colin & Denise] purchase a property inside a SMSF.

Fast forward 20 years. Both couples are now 60. Amber & Barry’s property is worth $1,282,854, and they hold $962,854 equity in the property. After rental growth, the weekly rent is now $1283 but of that the couple take home only $1029 a week after a marginal tax rate of 32.5 per cent is applied. If they sell instead, they would come away with $761,909 in cash in after costs and capital gains tax of 22.5 per cent.

Not a bad result, but compare that to Colin & Denise who bought their property within super. Colin & Denise’s property is worth the same: $1,282,854. But because of the tax advantages, they also hold $962,854 in equity plus an additional  $77,083 in savings accumulated along the way. The weekly rent they now receive is $1283, which is 100 per cent tax-free. That accounts for another $254 per week more than Amber & Barry. If Colin & Denise decided to sell their property, they could do so without paying a cent in CGT. The net result is that they would come away with $998,022 in cash after all costs — $236,113 more than Amber & Barry. All because they chose to invest inside super.

The first meeting with an Allied Investment adviser is free. This is where your needs are identified and you decide which service suits your current needs.

Allied Investment Group specialises in helping clients take control of their finances so they can have more choices, freedom and security in retirement. Call 1300 886 140 to put your plan in place.

3 Tips to Getting the Best Interest Rates

Cheapest interest rates are not always the bestInterest rates get a lot of attention and for good reason – so here’s 3 tips to getting the best interest rates.

… they determine the cost of your loan and what you pay back. Even a small difference in rates can make a big difference to repayments.

But sometimes what appears to be the ‘cheapest’” rate isn’’t always right for your circumstances.

Given Australian banks and mortgage insurers have specific criteria they use to assess loan applications, if your situation falls outside their guidelines it can be expensive getting your application approved. For example, if you want to borrow 80 per cent or more of the loan price, mortgage insurance will apply — and the cost can vary dramatically between lenders. By shopping around a borrower can save as much as $2000 on a loan size of $600,000.

Next there’ are many types of interest rates: variable, fixed, split, introductory, principal and interest or investment-only each with their own advantages and disadvantages.

So you can see it takes a lot of work to sift through different loans and lenders to secure the best deal.

The devil is always in the detail. You need to know what you’’re looking for to avoid getting caught in ‘”discounted’” loan traps.

Don’’t be dazzled by honeymoon rates. As the name suggests, they run for 12 months to two years but the life of your loan can last up to 30. To put that in perspective, the lender is generally not going to let you get out of the loan at the end of the introductory period without charging a penalty. After all, once they get you in the door, they don’’t want to let you go.

Introductory rates take one of two forms: “‘fixed discount”’ and ‘”discounted fixed”’ rate. The fixed discount is a rate that is variable, but fixed at a certain level or margin below the standard variable rate. During introductory period, this means the discounted rate will move with the market. The discounted fixed rate is a rate fixed for the introductory period of the loan, and won’’t move with the market.

Some lenders may also “‘cap”’ or limit the amount of extra money you can pay off the loan during the introductory period, which, in turn, may limit the benefit of having the introductory period.

So what should you do to get a clear picture of the best value loan? Compare interest rates, product features, and fees and charges because they can add up to thousands of dollars over the life of your home loan.
Comparison rates – Always compare interest rates, product features, and fees and charges.

Comparison Rates
OptionComparison RateInterest RateFees Charges
Home Loan “A”5.00%4.50%0.50%
Home Loan “B”4.35%4.25%0.10%

In the example, home loan B will cost less than home loan A, even though home loan A has a lower interest rate. However, ensure the features being offered by each loan suit you.

If that sounds like too much of a hassle, an Allied Investment Group mortgage broker will investigate the comparison rate, which includes the interest rate or weekly repayment amount, plus fees and charges. Best of all they’’ll start with policy and analyse which lenders might provide the amount you’’re seeking to borrow and match the best interest rate, along with product features and other associated fees and charges. In short, they’’ll create a tailored plan that best suits the life of your loan. Contact Allied on 1300 886 149 for more details.

Allied Investment Group specialises in helping clients take control of their finances so they can have more choices, freedom and security in retirement. Call 1300 886 149 to put your plan in place.

Salary Sacrifice – What is it?

What is Salary Sacrifice?Salary sacrifice is simple to set up and the benefits can be huge.

So what exactly is it and how can you take advantage of this Australian Tax Office authorised way of restructuring your income?

Often called salary packaging, it provides a popular solution to make the most of your income through an approved arrangement that benefits employers and employees. It is where you can pay for a range of everyday goods and services at zero risk to your employer. For example, under a salary packaging agreement you can purchase items such as a car, a laptop or a mobile phone out of pre-tax pay. It means you can get a better deal on the item you want, lower your taxable income so you pay less tax and end up with more money in your back pocket.

Who benefits from salary sacrifice? Packaging is a proven legal method of increasing your net pay so it is more effective for people on mid to high incomes. However, anyone paying an income tax rate above 15 per cent can benefit.

What can you package?

The items you can purchase under a salary packaging agreement depend on your profession and the type of organisation you work for. There is usually no restriction on what can be packaged but for ATO purposes benefits fall into three categories: fringe benefits (FBT), exempt benefits and superannuation.

Fringe benefits: cars, property (including land and buildings), shares or bonds, and expense payments such as car loan repayments, school fees, child-care costs, home-phone costs and health insurance.

Exempt benefits: portable electronic devices, computer software, protective clothing, tools of the trade and briefcases.

Superannuation: Your employer already has to pay 9.5 per cent of your salary (from July 1, 2014) into your super fund, so topping it up via salary sacrifice will further aid retirement. The perk is the fact the tax on the super contribution is just 15 per cent on earnings (like interest) from the invested money. For example3, salary sacrificing $10,000 a year into super could reduce your tax by as much as $1500 on an income of $45,000.

With that in mind, consider the type of lifestyle you want in retirement. Next you’’ll need to estimate the income required. This is where an Allied Investment Group adviser can assist. Once you identify how much extra is needed, compounding takes over to boost super savings. Of course, the earlier you start, the longer your investment earnings have to grow. Case in point, a weekly salary sacrifice amount of $20 results in a cash-flow loss after tax of $16.70 a week at the lowest tax rate, and $13.70 at the tax rate most people pay. Over a 40-year period, a person can put an extra $136,810 into super1. To put this into perspective, by foregoing about three big Mac meals a week, with the increased amount you will have in superannuation, you will be able to earn about an extra $156 a week in retirement.
Are there limits on how much you can salary sacrifice?

Given any salary sacrifice agreement must be entered into prior to the income being earned, before setting it up check what limits your employer has on the maximum amount you can sacrifice — and whether they allow you to change or stop the arrangement whenever you want.

The first meeting with an Allied Investment adviser is free. This is where your needs are identified and you decide which service suits your current needs.

Next talk to Allied Investment Group to discuss how you can make salary sacrifice work best for you because if you exceed certain limits, called contribution caps, any contribution over this amount may be taxed up to the highest marginal tax rate plus Medicare levy, and an interest charge to recognise this tax is collected later than income tax. [From July 1 2014, the concessional contribution cap for the 2014-2015 financial year is $30,000 for people aged under 49 years, and $35,000 for members aged 49 or over.]

Allied Investment Group specialises in helping clients take control of their finances so they can have more choices, freedom and security in retirement. Call 1300 886 140 to put your plan in place.

Should I Pay My Loan Fortnightly?

Should I pay my loan fortnightly?If you want to pay off your mortgage faster, most lenders will let you in on a commonly known mechanism of making fortnightly payments to your home loan. But is it the only option? Should I pay my loan fortnightly?

Realising fortnightly repayments allows you to slash up to tens of thousands of dollars from your mortgage payments, and cut the term of your loan by years. In terms of your disposable income, the difference isn’t much, but the advantage over the long term is.

How fortnightly repayments work: Paying fortnightly allows you to squeeze in one extra repayment a year. For example, based on the monthly repayment of $2,000, after a year you will have paid $24,000 (12 x $2,000). To pay fortnightly, just split the monthly payment in half, making a fortnightly payment of $1,000. Given there are 26 fortnights in a year, you’ll pay $26,000 (26 x $1,000) or an extra $2,000 more than if you were making repayments monthly, and therefore you’ll have less interest payable.

An important note that lenders don’t often mention is if you do select fortnightly payments, they must be set up correctly. There are two ways this can be done: a true repayment option and an inflated (or accelerated) repayment option. The inflated option is best as the interest cost is less, allowing you more of your repayment to go towards paying the principal off your loan, which means your mortgage is paid off sooner.

What about weekly repayments?

It’s the same outcome as fortnightly. Let’s assume your monthly payments are still $2,000. Divide this figure by 4 to get $500 per week. If you pay $500 per week, you’ll pay $26,000 by the end of the year (52 weeks x $500 = $26,000). So, based on those numbers you’ve still only made one additional monthly repayment by the end of the year. But you’re ahead for a different reason – the way you interest is charged.

Impact of small change / payment frequency: If you can’t afford an extra monthly repayment a year, consider nominating the amount you want to pay with each repayment you make. This means topping up the minimum amount. Without stretching the budget too far, you can round up each payment to say the nearest $10 or $20. This is easier to remember and it counts as making an extra repayment. For example, if you have a mortgage of $300,000 with a 4.5% interest rate, the monthly principal and interest repayment is $1,520.06 over a 30 year term. Use loose change to top this figure up by $20 to $1,540.06 each month to shave 10 months off the end of your mortgage term and save $7,741.57 in interest charges. Imagine how much more you could save and how much faster you’d repay your mortgage if you could round that number up even higher.

Use an offset account:
Another simple way to reduce the amount of interest you’re charged and pay off your mortgage faster is by linking your loan to a 100% offset account. Every dollar you leave in your offset savings account actively reduces the amount of interest you pay on your mortgage. For example, $50,000 in a 100% offset account on a home loan of $300,000 would see interest-only calculated on a balance of $250,000. At an interest rate of 4.5% over 30 years, this could amount to a saving of $56,000 in interest, with six years cut from the home loan.
Mix it up and save:

Knowing different ways to reduce your mortgage provides the freedom to mix and match methods to suit your own budget. You can even put them all to good use and take advantage of the interest savings as you repay your home loan down faster.
The first meeting with an Allied Investment adviser is free.

Talk to an adviser at Allied Investment Group today to find out if you have a competitive interest rate or if your loan is structured the best way to save you money.

Allied Investment Group specialises in helping clients take control of their finances so they can have more choices, freedom and security.

Is Personal Financial Advice Worth It?

Personal Financial Advice - is it worth itTaking an active interest in your financial situation is a necessary step to protect yourself and your family. So is personal financial advice worth it?

The type of financial advice you need depends on your life stage, the amount of money you have to invest and the complexity of your affairs.

Getting the right kind of financial advice can make a big difference because it provides confidence that your future plans are achievable.

If you want a recommendation that takes your own situation into account, you need personal financial advice.

This allows you to sort out your financial goals and develop a plan to achieve them over time.

That’s where Allied Investment Group comes in. Co-Founder Robert Stevens believes in starting with the end goal in mind.

While it is best to get advice early in life to help navigate the road ahead, it is never too late to be guided through your financial journey, from understanding your finances, income, expenses, to setting up a budget, or ways to control your spending.

And personal financial advice is often most valuable when you’re going through big life events, such as starting a family, being retrenched or managing an inheritance. It’s also great for less immediate goals like growing your super or planning for retirement.

How personal financial advice can help you

  • Set and achieve your financial goals
  • Make the most of your money
  • Get any government assistance you’re entitled to
  • Feel more in control of your finances and your life
  • Avoid expensive mistakes
  • Protect your assets

Personal financial advice value adds by helping you sort out your financial goals. Without a plan, you tend to have savings that are spent. With a plan, you are investing money to achieve a desired outcome.

Most importantly, advice will help turn thought into action, especially if you tend to put things off. It allows you to put the right strategies in place, or come up with realistic goals.

It’s crucial to talk to someone who is a licensed adviser, such as Allied Wealth, which can help you understand the scope and type of advice needed:
Simple, once-off advice on one issue addresses a particular aspect of your finances, that is, you’re not looking for advice across your while financial situation. An example is the best way to contribute to your super.

Broader financial advice involves a comprehensive financial plan to set goals and covers investments, insurance and superannuation and retirement planning. Once a strategy is set, you can control it and go back for further advice if the need arises.

Ongoing advice is for those wanting their financial affairs managed. For example, you might consider establishing an ongoing service with an adviser that involves regular reviews to reassess goals, financial position, strategy and investments.

The first meeting with an Allied Investment adviser is free. This is where your needs are identified and you decide which service suits your current needs.

Allied Investment Group specialises in helping clients take control of their finances so they can have more choices, freedom and security in retirement. Call 1300 886 140 to put your plan in place.

4 ways to enjoy Christmas and have cash left over

5 ways to enjoy Xmas and have cash left overPressure to provide the perfect Christmas tops the list of reasons people over-spend during the festive season, so we look at ways you can enjoy Christmas and have cash left over. And the Christmas spend per household is on the rise, averaging about $1,000-$1,500 for food and presents.

If you want to spend smart this Christmas and create memories instead of debt, follow these 4 tips to get the most out of the festivities and have cash left over.

1. Adopt new Christmas traditions
Consider starting some new traditions the whole family can join in and save along the way. Here’s a few ways you can do it:

  • Have some fun with a Secret Santa or Kris-Kringle arrangement. Draw names out of a hat so everyone has to buy just one fixed-price gift. Just make sure you set the amount everyone needs to spend.
  • Consider giving out smaller gifts on Christmas Day and make a pact with family to go shopping together for a larger present in the Boxing Day sales.
  • Think of others less fortunate. Make a donation to charity in the name of a family member or friend and give them a card showing who or what their gift helped. Remember, the donation is tax-deductible.
  • Arrange for everyone to ‘bring a plate’ for Christmas Day lunch so everyone pitches in and splits the cost and effort.

2. Set a budget
If you don’t want to compromise your Christmas spend, then set a budget to ensure costs don’t blow out. It’s as easy as making a list of who you will be buying for and allocate an amount per person. And, if you are hosting dinner, lock down the numbers to work out how much you need to spend on food and drink. Then consider the following and save:

  • Shop at local farmer’s markets for fruit and vegetables.
  • Buy in bulk. Get all the extended family on-board to buy pantry items for Christmas lunch in the lead up to Christmas so you don’t have to do it all at once.
  • Super-cheap deals are available online and can halve the cost of buying items in the supermarket. Also look for discount codes to get even greater savings.
  • Choose lay-by over credit cards. This way you won’t run up debt you can’t afford and you’ll have your presents paid off sooner than later.

3. Commit to a savings plan
Treat savings in the same way as you would a bill. Committing to a savings plan is more effective than running up debt that takes you the whole year to pay off.

  • The earlier you start saving, the less you need to put aside. Even a small amount over a few months will make a huge difference. For example, putting aside $10 per week adds up to over $520 in one year, enough to cover Christmas lunch, or dinner.
  • Put aside loose change throughout year. You’ll be surprised at how much you’ll have tucked away which can be put towards gifts, or a tax-deductible charity donation.
  • Open a high interest savings account and contribute a small amount to it every pay. For example, saving $100 a month from the start of the year will allow you $1,200 to spend at Christmas — enough for all those Christmas gifts!

4. Future of Christmas savings
While all the family is enjoying the savings while spending time together, why not plan ahead for next Christmas to ensure the festive season is even better:

  • Pool all savings and take advantage of compound interest. If every family member [averaging 5 adults] contributed just $10 a week into a high-interest account [4%] by the end of the year there’d be $2700 to put towards Christmas lunch, dinner and Secret Santa pressies.
  • Reinvest any cash you receive at Christmas back into that high-savings account.
  • Put aside lottery winnings, or any winnings into your high-savings Christmas account.
  • Buy gift cards regularly and put them aside to use as presents or to buy presents, especially during Boxing Day and mid-year sales, or to purchase food prior to Christmas.
  • Pre-plan larger gifts (especially for the kids) and lay-by three to six months in advance so you can pay them off before Christmas.

Christmas is just one day in a year, so there’s another 364 days to budget and spend smart. If your aim is to have all bills paid before Christmas so you don’t have any surprises in the New Year, Allied Investment Group advisers can help you set up a budget or savings plan so that Christmas is stress-free, fun and affordable year after year. Call 1300 886 149 to put your festive season plans in place.

How Gearing Can “Turbocharge” Your Retirement

How Gearing Can "Turbocharge" Your RetirementPeople often ask our firm about the most important advice for people who want to build wealth through their super.

Here it is…

Understand (and use) the power of gearing.

What’s gearing?

Using other people’s money to get ahead.

Used carefully and wisely, borrowing money can “turbocharge” returns on an investment.

With other people’s money, you can increase the value of the total pool of investments that your returns are generated by putting down a smaller deposit and borrowing the money from someone else—normally a bank.

The Key to Gearing

The key is to make sure the total return (income and growth) is greater than the cost of borrowing. This chart illustrates the power of using other people’s money.

SMSF Property and Gearing

With any investment there is risk…and when you rely on other people’s money to increase your return on investment, there’s a risk. However, when you manage the risk responsibly and carefully, you can benefit from using the power of gearing along with your SMSF to acquire investment property.

If you have questions about SMSF and gearing  Go here  or call 1300 886 149. You can speak directly with an SMSF specialist…with no obligation. We’ll show you how to use gearing…prudently.

To Your Financial Future

Your Friends at SMSF Property Services Australia

P.S. Even if you’re new to gearing, it’s important you understand why so many investors are using gearing. Speak with us now about gearing. We’ll answer your questions with no obligation. Go here or call 1300 886 149.

Valuers. Valuations. And Your Property.

Valuers. Valuations. And Your PropertyThe property valuation. It’s one of the most important factors in the equation when you want to acquire property.

But…can you rely on a property valuation?

It depends…let me explain the answer by sharing a somewhat crazy story.

A client recently purchased a property in an area I considered a sound investment. In fact, I was so confident, I bought property in the same area as well.

Strangely, the valuations for the two properties fell short of the purchase price.

To check the logic, I obtained 6 other valuations of similar properties with similar values. Licensed valuers completed all the valuations.

You’d think the valuations would be similar but they weren’t even close.

One came in at $20,500 more than the purchase price and another came in a staggering $57,500 short of the purchase price.

Same number of bedrooms and bathrooms. Same sizes. Same locations. All valuations requested for the same purpose: “for mortgage security”. The two highest and lowest valuations above came from two valuers who worked for the same prominent firm; in fact, they both worked in the same office!

What Explains the Wild Discrepancy in Valuations?

A few reasons…

  1. Valuations are traditionally “backward” looking: they look at historic comparable sales personally chosen by the valuer. The valuation rarely takes into account future demand or supply.
  2. Lenders can influence the valuation: they provide the valuation criteria. This can affect the valuation.
  3. With limited comparable sales in this particular area, valuers had to use personal judgement; an objective process became somewhat subjective.
  4. Valuers are human and, when provided with limited data, they tend to be conservative.

How This Affects You

Yes—property valuations are important but they’re just one factor when looking for properties with strong upside potential. If you’re looking to acquire a property, consider areas with:

  • Strong, solid demand and supply fundamentals.
  • Good employment prospects nearby.
  • Good rental yield.

Check these three boxes and you’re on the way to acquiring a solid property with your SMSF.

If you have questions about SMSF property, or a valuation, Go here or call 1300 886 149. You can speak directly with an SMSF property specialist…with no obligation.

To Your Financial Future

Your Friends at SMSF Property Services Australia

P.S. Even if you’ve seen a low valuation for a property and you’re thinking, “this has great upside potential”, speak with us first. We’ll answer your questions about the property, the location, the real upside potential…and more. Go here or call 1300 886 149.

 

How to Avoid SMSF Property Scams

How to Avoid SMSF Property ScamsSadly, there are scammers (aka criminals) who are targeting Australians by trying to steal money from their super. The scammers often gain access to the super by promising to help set up SMSF property investments. So here’s some tips on how to avoid SMSF property scams.

You may have read about SMSF property scams.

As a legitimate company that aims to help hard-working Australians reach their retirement goals faster through SMSF property investing, the scammers give the industry a bad name.

One of our goals is to help investors avoid scams.

If you’re worried about an individual or group right now, contact the Australian Competition and Consumer Commission, or go to the government website Scam Watch.

 In this article, we’ll detail:

  • The type of scams that take place.
  • How to spot a scammer.
  • How to protect yourself…and your super.

3 Types of Scams

SCAM NO. 1 – THE INVESTMENT SEMINAR

According to the government regulator, the Australian Competition & Consumer Commission, many seminars have a sting in the tail. You may have received a letter to attend a seminar or you might have seen an advertisement online or in a newspaper. Free tickets to see motivational speakers or an investment “expert” are often used to promote these events.

Seminar promoters “make” their money by charging you a ticket fee to attend…or by selling books, education services, or expensive reports. They might even make misleading or deceptive claims or pressure you into signing up for an investment “on the night”.

SCAM NO. 2 – EARLY RELEASE OF YOUR SUPER

The promoters of these schemes offer easy and early access to your super, often through the use of your SMSF…or for a fee. Here’s the truth: there is no easy way to access your super until you reach your preservation age, which can range from 55 to 60 years old, depending on your year of birth.

Of course, there are exceptions around financial hardship, but the restrictions, rules, and regulations to get access to the money are extraordinary. Your super is for your retirement years…not now.

SCAM NO. 3 – COLD CALLING

You receive a call you didn’t expect. The person making the call is offering you investments with high returns, possibly located overseas. You might be offered free financial advice.

Common investments touted are cheap or foreclosed property deals in the USA or properties in exotic locations such as Bali. The caller might recommend using your super to engage in high risk investments such as Foreign Currency Trading (FOREX), options trading, or dubious stocks.

Remember…if anyone recommends any investment product or products, they must be licensed and provide a written Statement of Advice (SOA).

Warning Signs of a Potential Scam

  • Anything that promotes something as free…without a good reason.
  • The promise of big returns on your investment—with little or no extra risk.
  • Seminars that are free but demand you pay hefty fees for education at the end of the first day or night.
  • Investment seminars that offer to teach you “secret” or “exclusive” techniques for building riches.
  • High pressure sales people who expect a decision on the spot.
  • Companies that claim to be approved by a government body or regulator…without making their licence details available in writing.

6 Ways to Protect Yourself—And Your Super

  1. Use the common sense approach: when something is free or sounds to good to be true, there is likely something wrong.
  2. The only people who “get rich quick” in these promotions are the scammers.
  3. Be careful when friends tell you about a scheme: they (innocently) believe it’s real too.
  4. Avoid spam email where you did not sign up.
  5. Check with the appropriate regulator to make sure the promoter is licensed to offer the advice.
  6. Always make sure you get any financial advice in writing.

PLUS…get a second opinion before making any decisions or signing anything.

If you have questions about SMSF property investing contact us here or call 1300 886 149. You can speak directly with an SMSF specialist…with no obligation. This will give you peace of mind.

To Your Financial Future

Your Friends at SMSF Property Services Australia

P.S. Scammers can look extremely professional and legitimate. But it’s vital to be careful. Speak with us to double check you’re working with a firm that’s real and legal. We’ll answer your questions with no obligation. Go here or call 1300 886 149.

 

 

8 Facts You MUST Know Before Taking Out SMSF Loan

8 Facts you Must Know Before Taking out an SMSF LoanIn Australia, due to recent legislation, SMSF loans have become extremely popular. You can use an SMSF loan to acquire property using funds in your Super.

Because so many people are now interested in SMSF loans for their retirement planning, we’re happy to provide information about SMSF loans. Before we detail the “8 Facts” please know you can contact one of our SMSF loan specialists at any time for additional information.

Fortunately, it’s become much easier to get an SMSF loan. However, it’s important to understand that SMSF loans are different from other loans. The SMSF loan is a specialised product.

Here’s what you need to know to get started…

1. Great news for investors—interest rates are more competitive. To get the lowest rates, it helps to have someone on your side who is constantly monitoring the rates. Interest rates for SMSF loans are typically close to standard variable—rather than the discounted rates available to a personal investment property loan.

2. The SMSF loan is a highly specialised loan so be patient and have a specialist on your side. A bank credit officer with specialised training will review your loan and this may take longer than a ‘normal’ review. The loan officer may have questions that a specialist in SMSF loans needs to answer.

3. Understand your obligations before you commit. Lenders want to ensure that investors fully understand their obligations before entering into an SMSF loan. Remember…this loan is complex so it’s important to have a specialist explain precisely how your loan will work.

4. Line of credit and redraw are not options for SMSF loans. However, a specialist can still help you structure the loan to help you achieve your long-term objectives…with maximum flexibility.

5. You must have an SMSF structure in place before property contracts are created then signed. You’ll need an ABN number; this can take up to 28 days. If you’re moving your existing superannuation from a retail or industry fund, a rollover may take up to one month. Once the rollover is complete, funds will be available for the deposit. Again, the SMSF loan specialist can help with the details.

6. You will need a bare (security) trust in place so you meet your legal obligations and meet the requirements of the bank. You will need a bare trust for each property you acquire.

7. There’s a TON of documentation and it must be professionally prepared. The SMSF loan is a complex instrument with multiple parties. Bank staff are only human. An experienced SMSF mortgage broker will check the documentation before settlement or exchange to ensure the transaction is legally watertight.

8. It’s VITAL to have a specialist on your side to you get the best rate…and make sure you’re legally compliant.

Yes—the SMSF loan is complex. However, using your SMSF to acquire property can help you achieve your financial and retirement goals.

If you have questions about SMSF loans go here or call 1300 886 149. You can speak directly with an SMSF specialist…with no obligation.

P.S. Even if you’re not ready to move forward immediately with an SMSF loan, it’s valuable to speak with a specialist. We’ll answer your questions and let you know how the SMSF loan can boost your retirement.

Reviews

Robert was patient and spent time explaining everything. We felt we could trust him to do a good job. Now some 12 months on, I can say we are very happy with our new investment property, and very thankful we decided to go ahead.

Robert was patient and spent time explaining everything. We felt we could trust him to do a good job. Now some 12 months on, I can say we are very happy with our new investment property, and very thankful we decided to go ahead.

Allison & Chris - Blacktown, NSW

When I first spoke with Allied Investment, my wife and I had been thinking about property investing for a while. We did need someone to help us with advice and guidance in this area. We can highly recommend Robert & Michael from Allied Investment Group if you are looking at buying an investment property.

When I first spoke with Allied Investment, my wife and I had been thinking about property investing for a while. We did need someone to help us with advice and guidance in this area. We can highly recommend Robert & Michael from Allied Investment Group if you are looking at buying an investment property.

Chris & Sam - Holsworthy, NSW
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