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South Australia’s first home buyers are more confident in the housing market than they were 6 months ago, according to latest research from HomeStart.

The HomeStart Finance First Home Buyer Index, the most comprehensive measure of first home buyer sentiment ever produced in South Australia, shows that overall confidence has grown by 8.6% since October 2015.

The index measures five key factors including employment security, ease of market entry, property affordability, repayment affordability and whether now is the right time to enter the property market.

Despite an environment of rising house prices and economic uncertainty, the driving factor has been the increased positivity on the ease of market entry with a significant rise of 33.3%.

HomeStart Finance’s Chief Executive Officer, John Oliver, said the results were surprising given the obvious challenges first home buyers face breaking into the housing market.

“The results were unexpected because anecdotally the view is that it is more difficult than ever for first home buyers to break into the housing market,” he said.

“What these results tell us is that even though rising house prices and high upfront costs make buying your first home challenging, home buyers are growing in confidence about the prospect of achieving the great Australian dream. Some of this may be attributed to the current low interest rate environment”

 “Previous research has shown that the upfront costs, such as the deposit and fees, are one of the largest barriers to home ownership. However, the increased positivity expressed about the ease of market entry highlights that first home buyers are less concerned about these factors at the current time,” Mr Oliver said.

The HomeStart Finance First Home Buyer Index was created to fill a gap in knowledge in the market on the sentiment of first home buyers towards home ownership. The Index will be completed every six months to provide ongoing comprehensive data to measure and gauge the sentiment of first home buyers.

The key findings included;

  • First home buyer confidence about ease of market entry grew significantly (up 33.3%), indicating first home buyers are less concerned about potential barriers such as deposit size required, and other fees and charges.
  • There was an 8.6% increase in the perceived affordability of housing in South Australia.
  • There was a 4.9% increase in sentiment about now being a good time to buy a home.
  • Although not as confident about the security of their current employment, they were still more confident than they were six months ago (up 3.1%).
  • There was a marginal increase (3.8%) in first home buyer sentiment on how they were positioned to manage loan repayments and other living costs.
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It’s that time of the year to start thinking about preparing your tax return.  As a property investor it is important to understand what records you need to keep and what you can claim for your investment property to maximise your tax deductions. Here is list of the most important things to remember;

Keep Records

It is important to keep records of all your income and expenses related to your investment property to ensure you maximise returns.  These can include receipts for purchases, bank statements and property management documentation.

Property management fees

Most investors hire a property manager to manage their property. Other than conducting house inspections, they can also assist with paying expenses associated with that property. For example, advertising fees, council rates, water rates, repairs and maintenance, strata fees, cleaning, gardening, land tax, and insurance premiums. All these expenses will be listed on the monthly and/or annual statement and they are all tax deductible. Furthermore, the fees that you pay to your property manager are tax deductible too.

Interest on loan

The common misconception for this expense is that investors who have a principal and interest loan assume that the whole portion of the repayment is tax deductible. Only the interest portion of the repayment is tax deductible. Some banks send an annual statement of the total interest paid on the loan to customers. This makes it easier for investors to claim this expense. Those that doesn’t would have to collect the loan statement for the year and add up all the interest expense associated with the loan.

Capital works and depreciation

The amount of money you spend both inside and outside the property is tax deductible. However, the full amount is not immediately deductible in the year you spend it. Each item has a useful and effective life and the amount claimable is divided over those years. This is what we call depreciation. It can be challenging for individuals to determine what the useful life is for every single item in the building. Quantity surveyors are ATO approved professionals that visit your investment property, inspect the assets that are depreciable, and prepare a report that contains depreciation figures for you or your accountant to include in your tax returns. Remember that the fees you pay the quantity surveyor are tax deductible too.

PAYG Withholding Variation

If you have negatively geared properties, then you will be used to having to contribute more of your own personal funds into holding the property knowing that you will receive a nice tax refund from the ATO at the end of the financial year.  However, if you are receiving a lump sum tax refund it basically means that you have overpaid tax for the year and the ATO owes you money.

 Instead of waiting for this tax refund (and giving the ATO an interest free loan), you may be better off getting this tax refund paid to you throughout the year. You can do this by varying your withholding tax (ie. Reducing the amount of PAYG tax that your employer withholds each pay). 

Miscellaneous

These are the minor expenses that investors incur while holding the property, but often fail to realise are tax deductible. The first expense is travel expense. If you travel to collect rent or inspect your property, these travel expenses are tax deductible. However, you would need to keep a diary record for that trip (date and kilometres).

The next expense is stationery, telephone and postage expenses. For example, if you have made a phone call to your tenant or property manager in relation to the investment property, the amount of money spent on that phone call is tax deductible. However, again, you would need to keep a record of that. Any stationery that is used to manage the property, like pens, paper or folders, is also tax deductible.

Each investment property is unique so talk to your accountant today to find out what you can claim.

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Buying an investment property can be a daunting task; where do you start?  Do you need to save up a deposit or do you use the equity in your existing home?  We help you understand the basics to assist you on your way to your first investment property.

The first thing you need to do is evaluate your current financial position.  Write a list of what you own versus what you owe and how much you currently earn.  This will give you a guide to how much you have available to invest.

Once you have done this, make an appointment to see a Rise High Financial Solutions mortgage broker.  They will be able to calculate your borrowing power and also give you advice on the best way to finance your investment. 

A Rise High broker will also be able to advise you if you need to continue saving, reduce existing debt or if you have enough equity in your home to finance an investment property.

Depending on your existing equity you may be able to purchase an investment property without requiring any physical deposit, however, the lender may still require you to show some form of genuine savings.

The next step is to develop a plan.  Work out how much you are going to spend, the sort of property you want to purchase and where you want to buy.  Have your Rise High broker arrange pre-approval for your finance so you can shop with confidence.

Now it’s time to start shopping.  Remember to stay focused on your plan, stick to your budget and don’t lose sight of the big picture, your first investment property!

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The federal election has thrown negative gearing into the spotlight.  If you hadn’t heard of it before, you would have by now. 

So what is negative gearing?  From a real estate perspective, negative gearing occurs when you buy an investment property and the income generated from the investment is less than what it costs to own and manage the investment.  The main benefit associated with negative gearing is that the losses can be offset against income, thereby reducing taxable income and, as a result, the amount of tax you have to pay.

So what do the proposed changes mean to property investors if Labor wins the election?

Labor proposes to restrict negative gearing to new properties only and also slash the Capital Gains Tax (CGT) discount from 50% to 25%.  This means that as of 1 July 2017 negative gearing would no longer be available for established houses or apartments.

This reform will affect every investor.  In particular, it will affect investors looking to buy old houses on big blocks of land or established houses in areas where land is at a premium.

In the short term, this could mean house sales go through the roof as investors buy up existing properties with good capital growth potential before the 30 June 2017 cut-off date.  This is because the properties will have the CGT exemption for the life of the purchaser’s ownership and will not be affected by any future changes.

In the long term, the reform could discourage investors from purchasing established houses and drive up the demand for new builds.  This means rent prices will increase in established areas as the supply of rental properties are reduced.  The tenant will also need to pay extra rent to cover the increased costs passed on by the landlord who will no longer be able to write off the losses incurred on the investment.

The negative gearing policy is supposed to be Labor’s solution to Australia’s housing affordability crisis.  The policy is aimed at encouraging investment in new housing and therefore increasing the supply of housing into the market and drive down prices to help first home buyers secure property.  

Unfortunately, the main barrier for young people being able to afford a home is not the purchase price of the property but the upfront deposit and the hefty stamp duty fees required.  So even if house prices were lower the property market will still be out of reach for many young people.

First-time homeowners will also have to compete with investors in a market traditionally targeted at first home buyers, such as housing estates, in order for investors to gain access to negative gearing. This will drive demand and increase pricing of these properties.

The reform will ultimately lead to fewer rental properties, higher rents, less affordable housing for low-income earners and an increase in house prices.   This means that every Australian will lose. 

Whether you are a tenant, homeowner or just wanting to build your wealth for a more comfortable retirement, Labor’s negative gearing policy will affect you.

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It’s almost that time of the year again when you are either excited about getting your tax done or fearing the tax man. Below we help you understand what information you need to get organised and make the process as smooth and pain-free as possible.

The first thing you need to do is get all your paperwork together.   The more records you have the more accurate your tax return will be and this means you might get a bigger tax refund.

Below is a list of the documents you will need to take along to your accountant;

  • PAYG Summaries from your employers
  • Bank statements that show interest earned over the year
  • Year-end summary report of your shares or managed fund investments
  • Logbook for car expenses
  • Receipts for work related expenses
  • Home office expenses (Rates, levies, insurance, telephone, internet, interest paid on home loan)
  • Last accounting fees invoice
  • Donations receipts or end of financial year statement
  • Income protection insurance invoice
  • Private Health Fund Policy Statement

If you have an investment property you will also need;

  • Investment Property Income,
  • Property Agent statement
  • Settlement statement
  • Any other expenses incurred that do not appear on Property Agent Statement

It is important to note that if you as an individual earned over $90k this year or as a couple you and your partner have earned in excess of $180k then you will be subject to the Medicare Levy Surcharge.  If you are over that threshold and you haven’t already done so, consider taking up private hospital cover with an approved health fund.

Tax time is also an important time to consider your investments.  If you are considering selling any shares, managed funds or investment properties this financial year, consider what impact that might have on your taxable income.  If you have earned income from your investments, they might bump you up into another tax bracket meaning you might have to pay more tax.

If you have been considering selling an investment that has been underperforming, then this may be a good time to do so to reduce your overall tax bill.

If you need any other information to ensure you are ready to tackle tax time do not hesitate to contact your Rise High Broker.

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Tip #1 – Teach kids to budget

Budgeting is one of the best skills a child can learn which they can continue to use throughout their lives.  Giving children pocket money in return for completing chores can be a great way to help them better understand the value of money.  It allows them to take control of their money and how they spend it.  Help them develop a simple visual budget that shows them what they are saving for, what their contribution is and how long until they will reach their target.

Tip #2 – Needs v Wants

It is important to teach kids the difference between needs and wants and encourage them to think about this before spending.  You can help your kids avoid impulse purchases by setting goals to make them think about whether or not they want an item before parting with their hard earned money.

Tip #3- Lead by example

As a parent you have a great deal of influence on your children so it’s important to set a good example from an early age.  Get your kids involved in your financial decisions and processes.  Take them with you when you see your accountant or do your banking.  The more exposure your child has to money the more they will learn. 

Tip #4- Teach kids that the ATM machine is not an endless cash machine

The ATM is a great starting place to teach your children about money. By explaining to your child that the ATM keeps safe the money you have made from working hard and saving they can learn that it is not just a hole in the wall with a never ending supply of cash.

Tip #5- Teach kids that it’s not how much they earn but what they do with it

It is important to teach kids that it’s not how much money they make that counts but rather what they do with that money which will determine their financial success in life.  Children need to understand that wealth is not a result of luck or necessarily having a highly paid job, that most adults have worked hard and made smart decisions to end up in a good financial position.

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We all know the saying “money doesn’t grow on trees”... but wouldn’t it be good if it did?  While we can’t go into our backyards and pluck some 100’s off our apple tree, there are things we can do to help strengthen your money.

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Superannuation. You know it’s important, but you don’t worry too much about it – that’s your employer’s job, right?

Well, yes, it is… but if you’re thinking of investing in property, you might like to consider a Self Managed Super Fund (SMSF).

Over 1 million Australians use a SMSF superannuation fund.

That’s 1/20th of our entire population - some big numbers. A lot of people ask me, what is the attraction to an SMSF? Are they just a fashionable term for superannuation? What are the real benefits of SMSF, and most importantly, are they worth it?

Today you’re going to find out. Here are 4 reasons why you should consider an SMSF for your next property purchase.

  1. Greater control of your assets

    Forget about relying on the government for an age pension. You can self-fund your own retirement, so you know exactly what you’re going to have once you retire. Your future is in your own hands.

  2. More investment choices

    An SMSF provides more flexibility in investment choices than any other superannuation fund. As a trustee, you can invest in anything from property (residential or commercial), shares (public or private), derivatives, and collectibles – or just about anything you can think of investing in. Use your superannuation as a deposit to purchase property, because your superannuation income is assessed separately. Now that’s flexibility.

  3. Greater flexibility

    With an SMSF you get to choose how and when to you’d like to draw your benefits at retirement. You have the ability to make lump sum payments as an asset transfer. There are lots of other cool things you can do with an SMSF.

  4. Attractive tax structure

    Ah, tax! It’s inevitable. But what’s not is the ability to control your tax. With an SMSF you can take ownership over the timing of tax matters on your retirement assets – to potentially save you thousands for your retirement ‘nest egg’.

In a traditional (industry/retail) super membership it’s the fund manager’s role to maximise the investment returns for its members, having little regard for the timing of sales, distributions and other tax affected matters. In an SMSF you, as the trustee, are in control of this.

There are many more benefits of SMSF – including transferring assets into an SMSF, including family members on your SMSF, and leveraging your superannuation through gearing. The list goes on…

So there you have it – some of the reasons why an SMSF might be right for you if you’re investing in property. Still not crystal clear? No worries! Speak to the team at Rise High before deciding if you want to pursue this investment strategy. Make sure you get the right advice upfront – call us on (08) 7131 1149.

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Check out Marissa's acceptance speech after receiving the 2015 SA Telstra Business Women's Entrepreneur Award last night! 
We are so proud of Marissa and her amazing achievement!! ‪#‎RiseHigh‬

https://youtu.be/boyaXlIBwyE

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04 Aug

RBA Announcement - Aug 2015

RBA ANNOUNCEMENT
The Reserve Bank of Australia has today decided to leave the official cash rate unchanged at 2.00%.
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