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Checking the Fine Print of your Home Loan

Checking the fine print of your home loan

If a home loan is too good to be true, odds are it is. Due to the lengthy time commitment of a home loan and the costly investment, what may seem like small oversights can add and cost you thousands. A guide to reading the fine print of your home loan is attached below.

Introductory rates

Low-interest rates on loans may not be for the entire borrowing period. These types of rates offer a very competitive interest rate that many don’t realise is for a limited period, usually 12 months. The interest rate will rise to a lender’s standard variable rate, which may not be the most competitive rate you sought on the market. It is vital to know how long the introductory rate on your home loan is available for before signing the agreement.

Don’t forget about LMI

If you borrow over 80 percent of the value of your property, you are required to pay lender mortgage insurance. The higher percentage amount of the value of the property you borrow, the higher this fee will become.

Restrictions on additional payments

In some variable rate loans and fixed-rate loans, additional payments at any time or within the fixed rate period are not permitted. A cap may be placed on additional payments. You should check your terms and conditions to make sure that if you receive an inheritance, a bonus at work or win the lottery, you can pay your home loan down when the opportunity is presented to you.

3 Ways to Maximise your Super

Superannuation is more critical than it has ever been. If having an ageing population has taught us anything, it is how managing money now can have substantial ramifications for your retirement plan.

3 Ways to Maximise your SuperMerge your super

Every super account you have comes with a set of fees. It is worth your while chasing down inactive accounts and putting all your super into the one account to reduce fees and maximise the investment benefits.

Salary sacrifice

If you can budget putting more of your salary away into a super account every month, you can reap multiple rewards. First, you can use the extra super payments to offset your pre-tax payments up to the current concessional contribution cap of $25,000 per year and after-tax contributions of $100,000. You can also build up your super while you can afford to.

Strategise

Your investment strategy should depend on the amount of risk you are willing to take. This will vary on where you are in your career. A growth investment option, which is high risk, might suit you if you are in the early stages of your career development. However, as your income stabilises to your goal amount, it might be wise to change super funds to a lower risk option that will protect your growing retirement nest egg.

Changes to FBT for Utes

Changes to FBT for Utes

The Australian Tax Office (ATO) has released draft guidelines changing its previous stance on Fringe Benefits Tax (FBT) for utes. Amendments originated from reports that dodgy tax returns were responsible for a loss of $8.7 billion in income tax due to wrongful claims. Failure to comply with the new requirements listed below may result in a 20 percent FBT imposed on the cost of the vehicle.

The requirement of a logbook

New rules require employers to ensure their workers using these vehicles keep detailed logbooks. Whether the logbooks are the electronic or hard copy, it is vital that the process be effective for returns lodged in the 2019 FBT year, when the law takes effect. Employers receive confirmation via email from employees using the vehicles at the end of the 2019 FBT year with their logbook including all regulated diversions and private use.

Diversions and private use rules

The guidelines introduce capped limits for the log books to comply with. Professional travel means that the vehicle must not deviate more than 2km from its usual route. However, 1000 km of non-work related travel is allowed, provided that there is no single trip exceeding 200 km. Such regulations provide greater flexibility than previous guidelines. What the ATO deems “minor” or “irregular trips” like carpooling the children to and from school or an occasional trip to visit relatives will not render you non-compliant so long as it is recorded as non-professional use.

Cash-only business? Consider making the switch

The Tax Office has released further findings that reveal cash-only businesses could be missing out on a significant chunk of revenue simply by not offering customers the option of electronic payment.

An ‘inconvenience’ was the most popular word consumers surveyed in the study used to describe when a business does not provide the option to pay via card.

Cash-only may also be having a direct effect on the business’s reputation. The results determined that Australian customers are twice as likely to perceive ‘cash-only’ as negative rather than positive – with many respondents questioning whether the business is honest and paying less tax (regardless of whether this may be fact or fiction).

While change may be difficult, cash-only businesses might like to consider the benefits that exist with no longer operating in cash. For instance, electronic tap-and-go payments take less time and cost around 9 cents less than payments made in cash.

By providing electronic payment only, a business can find it easier to keep more accurate record-keeping as well as help them to meet their tax and super obligations.

Hiring temporary residents: employer super obligations

Glance ConsultantsEmployers are being reminded by the Australian Tax Office (ATO) not to forget that along with permanent residents; temporary residents are also entitled to super guarantee (SG).

In most cases, an employer will be required to pay SG on top of their employee’s wages (temporary residents included) if they pay them $450.00 or more before tax in a calendar month.

Providing the temporary resident has met all the requirements, they can submit their claim for the super that their employer has paid as a ‘department Australian superannuation payment’ (DASP) once they have left Australia.

The ATO is encouraging employers to notify their temporary resident workers of the DASP application as it will be easier for these individuals to get the required supporting documents certified in Australia and then lodge once they have left the country.

Cents per kilometre rate rises for work-related car expenses

Tax accountingThe Tax Office has confirmed the rate for work-related car expenses will rise to 68 cents per kilometre for the income year beginning 1 July 2018.

The new rate will affect those eligible individuals who elect the cents per kilometre method when calculating the income tax deductions for their work-related car expenses for the 2018-19 income year. This rate also applies to the following income years until the Commissioner of Taxation deems it should be varied (these rates are reviewed each year).

Taxpayers working out their car expenses for the 2015-16 year, 2016-17 year and the 2017-18 year should remember that the previous rate of 66 cents per kilometre still applies to their calculations.

When selecting the cents per kilometre method, eligible individuals:

  • are not required to supply the ATO with written evidence of how many kilometres they have travelled;
  • may need to show how they worked out their business kilometres calculations;
  • cannot claim more than 5,000 business kilometres per car;
  • and cannot make a separate claim for depreciation of the car’s value.

It is also important to note that the amount will take into account all the vehicle running expenses.

Ins and outs of funeral insurance

Ins and outs of funeral insurance

Before purchasing funeral insurance, it is essential to check whether it is the right choice for you. Specifically, if it will be worth the expense, you will pay in premiums.

Take a look at these considerations.

Benefits

Can help you save
It is a handy way to make sure you save enough funds to cover your funeral expenses.

Instantly covered (with exclusions)
You can be covered immediately.

Disadvantages

Exclusions apply
Only accidental death is covered for the first two years in most policies. Should you die from another cause, you may find that you are not covered.

Rising premiums
More than likely your premiums will increase over time. A policy that may seem initially like the best cost-effective solution could, in reality, be expensive in the long run.

Premiums can exceed the cost of your funeral
As Australians continue to live longer, you could end up paying more in premiums than the cost of your funeral.

Your beneficiaries must wait for payouts
Your family members may have to wait to receive an insurance payout to cover your funeral costs.

Non-refundable premiums
Should you cancel your policy or find you can no longer afford to pay the premiums, you generally can not receive a refund on the premiums you have already paid.

It is always important to check the terms and conditions of a policy before making your final decision.

How the new super measures will apply to SMSFs

The Government has introduced new measures to allow SMSF members to access their super for their first home or make contributions to their super from the sale of downsizing their home. SMSFs should be aware of the following:

Downsizing

From 1 July 2018, SMSF members who are 65 or over and exchange a contract of sale of their main residence may be eligible to make a down sizer contribution of up to $300,000 into their super without affecting their total super balance or contributions cap for the year.

This contribution will count towards the transfer balance cap and be taken into account for determining eligibility for the age pension.

SMSF members do not have to purchase another home to access this measure. However, the contribution can only be made once; it cannot be used for the sale of a second main residence.

The First Home Super Saver Scheme

SMSF members looking to get into the property market can now use some help from their SMSF under the First Home Super Saver Scheme.

As of 1 July 2018, SMSF members over 18 years of age can apply to release their voluntary concessional and non-concessional contributions made from 1 July 2017, along with associate earnings to purchase their first home.

Voluntary contributions made since 1 July 2017 of up to a maximum of $15,000 from any one financial year or a total of $30,000 across all years can be applied for.

Focus on Work-related Car Expenses

Focus on Work-related Car Expenses

The Tax Office has flagged work-related car expenses as a concern this tax time.

The ATO is targeting those who make mistakes or deliberately lodge false claims. Examples include:

  • Claiming things they are not entitled to, i.e., private trips such as work to home travel
  • Making claims for trips that did not occur
  • Claiming expenses that their employer has already reimbursed them for.

Advancements in data-matching technology allow the ATO to match individuals with peers in similar occupations, earning similar amounts of income. Analytics is also used to identify claim patterns, i.e., over 800,000 people claimed exactly 5,000kilometres under the cents per kilometre method last year.

The best way to avoid making a mistake include:

  •  only making a car claim if you paid for the expense yourself and were not reimbursed;
  •  it was directly related to earning your income; and,
  •  you must have a record to support the claim.

An example of a legitimate car claim is travelling between work sites or between jobs as part of your job.

Before you submit a car claim, consider if your employer would agree you needed to undertake the trips as part of your job. Employers may be contacted if your claim raises a red flag.

Attracting Millennials to work for your business

Millennials are encompassing around a quarter of the workforce now and bringing along withthem diverse needs and challenges.

Employers must understand these needs and challenges to better attract more Millennials to work for them as their skills are in high demand.

Firstly, Millennials (born between 1980-2000) are the first generation to understand technology possibly more so than their senior coworkers. They also tend to value flexibility and diversity more than older generations.

Millennials are also likely to have a desire for rapid career progression within a company and are not afraid to switch companies if their needs are not being met. This means fewer Millennials are likely to stay loyal to only one company for their total working life.

Employers must consider these unique needs and adapt if they are looking to appeal to Millennials. The following tips can help your business become more attractive to Millennial talent:

Opportunities to progress

Millennials want opportunities for personal and career development, otherwise, they will look elsewhere. Ensure your business has training and development opportunities available and staff are encouraged to progress their careers within your business.

Incentives

Along with competitive salaries, Millennials look for added perks such as flexible working conditions, bonuses, free insurance, greater vacation leave and so on. This is important to note as you might not be able to offer the highest salary for your industry but you can entice Millennials with other more budget-friendly incentives.

Purpose

Meaningful work comes out on top for Millennials. Many want to give back and contribute to society in an ethical and sustainable manner. Millennials will take into consideration the reputation of your business, your business’ practices and your overall vision for the business. To appeal to this generation it is important to consider whether your business is operating in its best possible condition and if improvements need to be made.

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