Rising costs of living, increasing interest rates and high prices have all combined to create the imperfect storm for struggling first-home buyers. However, if every cloud has a silver lining then the ray of light this new financial year is the boosted array of government assistance schemes.

The First Home Owner Grant was introduced back in 2000 and has gone through many versions since, with supplementary add ons. As the buyer bonuses change almost annually, it can be difficult to keep up because the helping hand your friend, neighbour or cousin got when entering the market, isn’t necessarily what you’ll be eligible for just months down the track.

Unsurprisingly, first-home buyer affordability was on the table at the recent Federal election and now with a change of government there will likely be more amendments. To get your head around what is on offer from July 1, 2022 here is an updated overview of schemes.

First Home Owner Grant (FHOG)

Although the FHOG is a national scheme, it’s funded by the states and territories and is therefore administered under their own legislation with independent eligibility requirements. While some still offer a one-off payment for the purchase of newly built homes or vacant land, others now only have stamp duty (also known as transfer duty) concessions available. To find out what is available in the state or territory you are buying in, visit firsthome.gov.au.

First Home Guarantee (FHG)

Formerly known as the First Home Loan Deposit Scheme, the FHG is a low-deposit loan initiative allowing first timers to buy a home with a 5% deposit, with the Federal Government guaranteeing the remaining 15 per cent. Without the scheme, banks expect first-home buyers to provide a 20% deposit or pay pricey lenders mortgage insurance (LMI).

Originally providing for just 10,000 places per financial year, from July 1, 2022 until June 30, 2025 there will be 50,000 spots annually including 35,000 allocated for the FHG and 15,000 set aside for the Family Home Guarantee and the Regional Home Guarantee (see below).

There are eligibility requirements for the FHG starting with the buyers’ income. Singles can earn up to $125,000, or $200,000 for couples combined. Property price limits also apply with purchase thresholds differing depending on location. To find out local thresholds visit the National Housing Finance and Investment Corporation.

Property price caps

Region Price cap from 1 July 2022

New South Wales—capital city and regional centre $900,000 – other $750,000
Victoria—capital city and regional centre $800,000 – other $650,000
Queensland—capital city and regional centre $700,000 – other $550,000
Western Australia—capital city $600,000 – other $450,000
South Australia—capital city $600,000 – other $450,000
Tasmania—capital city $600,000 – other $450,000
Australian Capital Territory $750,000
Northern Territory $600,000

Help to buy scheme

New Prime Minister Anthony Albanese has promised to assist struggling buyers (and not just first-timers) with a shared equity scheme. The initiative means the Government will effectively co-purchase a property with a homebuyer, however first-time investors are not eligible.

Buyers who meet requirements could put down a deposit of as little as 2% and access a government contribution of up to 40% towards the purchase of a home. Just like the FHG, the Help to Buy scheme means buyers can avoid paying LMI. Homeowners can then either buy the additional portion of the home (which was co-purchased by the Government) during the loan period or sell the property and give back the portion of equity and a share of any capital gain.

Individuals with a taxable income of up to $90,000, or couples earning up to $120,000, can apply for 10,000 spots each year, but be sure to check the purchase price thresholds in your area.

Regional First Home Buyer Support Scheme

The new Government is also introducing an initiative tailored to buyers in the regions. This initiative is the first of its kind solely devoted to the regions where dwelling prices have skyrocketed since the pandemic and outpaced capital city growth. Under the offer, the Government will pledge up to 15% of the home’s value so local first-home buyers (who have already lived in the area for at least 12 months) can buy with a 5% deposit and avoid paying LMI. Income thresholds are the same as the FHB and again be sure to check purchase price caps in your area.

Family Home Guarantee

Single parents with at least one dependent child, who meet the eligibility requirements, can access the Family Home Guarantee regardless of whether they are a first home buyer or not.

Under this Scheme, which works much like the FHG, buyers will only need a 2% deposit because the Government will guarantee up to 18% of the property’s value. Purchase price and income thresholds apply.

First Home Super Saver Scheme

Given that the deposit can be the biggest barrier to getting onto the property ladder, there’s a way first-home buyers can beef up savings by tapping into their superannuation. In the right circumstances, the First Home Super Saver Scheme can help first timers save for a home faster, but they will essentially be dipping into their retirement to get there.

It should also be noted that only the voluntary contributions made to the super fund can be withdrawn, not the mandatory contributions made by an employer. First-home buyers can release up to $15,000 each financial year and from 1 July 2022, the maximum accessible amount will jump from $30,000 to $50,000. Further details of the scheme can be found on the ATO website.

With so many schemes on offer across the country with varying caveats regarding purchase prices, taxable income and eligibility requirements, the first-home buyer landscape can be a little overwhelming. To find out which initiatives you can claim, give us a call.

New rules that came into force on July 1 will create opportunities for older Australians to boost their retirement savings and younger Australians to build a home deposit, all within the tax-efficient superannuation system.

Using the existing First Home Super Saver Scheme, people can now release up to $50,000 from their super account for a first home deposit, up from $30,000 previously.

Another change that will help low-income earners and people who work in the gig economy is the scrapping of the Super Guarantee (SG) threshold. Previously, employees only began receiving compulsory SG payments from their employer once they earned $450 a month.

But the biggest potential benefits from the recent changes will flow to Australians aged 55 and older. Here’s a rundown of the key changes and potential strategies.

Work test changes

From July 1, anyone under the age of 75 can make and receive personal or salary sacrifice super contributions without having to satisfy a work test. Annual contribution limits still apply and personal contributions for which you claim a tax deduction are still not allowed.

Previously, people aged 67 to 74 were required to work for at least 40 hours in a consecutive 30-day period in a financial year or be eligible for the work test exemption.

This means you can potentially top up your super account until you turn 75 (or no later than 28 days after the end of the month you turn 75). It also opens potential new strategies for making big last-minute contributions using the bring-forward rule.

Extension of the bring-forward rule

The bring-forward rule allows eligible people to ‘’bring forward” up to two years’ worth of non-concessional (after tax) super contributions. The current annual non-concessional contributions cap is $110,000, which means you can potentially contribute up to $330,000.

When combined with the removal of the work test for people aged 67-75, this opens a 10-year window of opportunity for older Australians to boost their super even as they draw down retirement income.

Some potential strategies you might consider are:

• Transferring wealth you hold outside super – such as shares, investment property or an inheritance – into super to take advantage of the tax-free environment of super in retirement phase
• Withdrawing a lump sum from your super and recontributing it to your spouse’s super, to make the most of your combined super under the existing limits
• Using the bring-forward rule in conjunction with downsizer contributions when you sell your family home.

Downsizer contributions age lowered to 60

From July 1, you can make a downsizer contribution into super from age 60, down from 65 previously. (In the May 2022 election campaign, the previous Morrison government proposed lowering the eligibility age further to 55, a promise matched by Labor. This is yet to be legislated.)

The downsizer rules allow eligible individuals to contribute up to $300,000 from the sale of their home into super. Couples can contribute up to this amount each, up to a combined $600,000. You must have owned the home for at least 10 years.

Downsizer contributions don’t count towards your concessional or non-concessional caps. And as there is no work test or age limit, downsizer contributions provide a lot of flexibility for older Australians to manage their financial resources in retirement.

For instance, you could sell your home and make a downsizer contribution of up to $300,000 combined with bringing forward non-concessional contributions of up to $330,000. This would allow an individual to potentially boost their super by up to $630,000, while couples could contribute up to a combined $1,260,000.

Rules relaxed, not removed

The latest rule changes will make it easier for many Australians to build and manage their retirement savings within the concessional tax environment of super. But those generous tax concessions still have their limits.

Currently, there’s a $1.7 million limit on the amount you can transfer into the pension phase of super, called your transfer balance cap. Just to confuse matters, there’s also a cap on the total amount you can have in super (your total super balance) to be eligible for a range of non-concessional contributions.

Combining downsizer and bring-forward contributions

Australians aged between 60 and 74 now have greater flexibility to downsize from a large family home and put more of the sale proceeds into super, using a combination of the new downsizer and bring-forward contribution rules.

Take the example of Tony (62) and Lena (60). Tony has a super balance of $450,000 while Lena has a balance of $200,000. They plan to retire within the next 12 months, sell their large family home and buy a townhouse closer to their grandchildren. After doing this, they estimate they will have net sale proceeds of $1 million.

Under the new rules from 1 July 2022:

• They can contribute $600,000 of the sale proceeds into their super accounts as downsizer contributions ($300,000 each)
• The remaining $400,000 can also be contributed into super using the bring-forward rule, with each of them contributing $200,000.

By using a combination of the downsizer and bring-forward rules, Tony and Lena can contribute the full $1 million into super. Not only will this give their retirement savings a real boost, but they will be able to withdraw the income from their super pension accounts tax-free once they retire.

As you can see, it’s complicated. So if you would like to discuss how the new super rules might benefit you, please get in touch.

Source: ATO

Rising interest rates are almost always portrayed as bad news, by the media and by politicians of all persuasions. But a rise in rates cuts both ways.  

Higher interest rates are a worry for people with home loans and borrowers generally. But they are good news for older Australians who depend on income from bank deposits and young people trying to save for a deposit on their first home.

Rising interest rates are also a sign of a growing economy, which creates jobs and provides the income people need to pay the mortgage and other bills. By lifting interest rates, the Reserve Bank hopes to keep a lid on inflation and rising prices. Yes, it’s complicated.

How high will rates go?

In early May, the Reserve Bank lifted the official cash rate for the first time since November 2010, from its historic low of 0.1%. The reason the cash rate is watched so closely is that it flows through to mortgages and other lending rates in the economy.

To tackle the rising cost of living, the Reserve Bank expects to lift the cash rate further, to around 2.5% . Inflation is currently running at 5.1%, which means annual wages growth of 2.4% is not keeping pace with rising prices.

So what does this mean for household budgets?

Mortgage rates on the rise

The people most affected by rising rates are likely those who recently bought their first home. In a double whammy, after several years of booming house prices the size of the average mortgage has also increased.

According to CoreLogic, even though price growth is slowing, the median home value rose 16.7% nationally in the year to April to $748,635. Prices are higher in Sydney, Canberra and Melbourne.

CoreLogic estimates a 1% rise would add $486 a month to repayments on the median new home loan in Sydney, and an additional $1,006 a month for a 2% rise.

While the big four banks are not obliged to pass on the cash rate changes, in May they passed on the Reserve Bank’s 0.25% increase in the cash rate in full to their standard variable mortgage rates which range from 4.6 to 4.8%. The lowest standard variable rates from smaller lenders are below 2%.

Still, it’s believed most homeowners should be able to absorb a 2% rise in their repayments.

The financial regulator, APRA now insists all lenders apply three percentage points on top of their headline borrowing rate, as a stress test on the amount you can borrow (up from 2.5% prior to October 2021).

Rate rise action plan

Whatever your circumstances, the shift from a low interest rate, low inflation economic environment to rising rates and inflation is a signal that it’s time to revisit some of your financial assumptions.

The first thing you need to do is update your budget to factor in higher loan repayments and the rising cost of essential items such as food, fuel, power, childcare, health and insurances. You could then look for easy cuts from your non-essential spending on things like regular takeaways, eating out and streaming services.

If you have a home loan, then potentially the biggest saving involves absolutely no sacrifice to your lifestyle. Simply pick up the phone and ask your lender to give you a better deal. Banks all offer lower rates to new customers than they do to existing customers, but you can often negotiate a lower rate simply by asking.

If your bank won’t budge, then consider switching lenders. Just the mention of switching can often land you a better rate with your existing lender.

The challenge for savers

Older Australians and young savers face a tougher task. Bank savings rates are generally non-negotiable, but it does pay to shop around.

The silver lining is that many people will also see increased interest rates on their savings accounts as the cash rate increases. By mid-May only three of the big four banks had increased rates for savings accounts. Several lenders also announced increased rates for term deposits of up to 0.6%.

High interest rates traditionally put a dampener on returns from shares and property, so commentators are warning investors to prepare for lower returns from these investments and superannuation.

That makes it more important than ever to ensure you are getting the best return on your savings and not paying more than necessary on your loans. If you would like to discuss a budgeting and savings plan, give us a call.

There is a saying ‘a fool and his money are often parted’ but with scammers becoming ever more devious and sophisticated in their methods, it pays for everyone to be aware of the latest tricks being employed.

According to Australian Competition and Consumer Commission (ACCC) data, last year was the worst year on record for the amount lost to scammers, with a record $323 million lost during 2021. This represents a concerning increase of 84% on the previous year.

And with Australians spending more time online than ever before, predictably the area of most growth is cybercrime.

Incidences increasing

Cybercrime increased over 13% during the 2020-21 financial year, with data revealing one attack occurs every 8 minutes.

Police records indicate that as the number of house break-ins and burglaries decreased through COVID, the amount of digital scams increased as criminal activity found an alternative outlet and moved online. Scammers also exploited the pandemic environment by targeting an increasing reliance on online activity and digital information and services.

Most common scams

Phishing, where scammers try to get you to reveal information that enables them to access your money (or in some cases steal your identity), is one of the most common scams. Last year Scamwatch, a website run by the Australian Competition and Consumer Commission (ACCC), received more than 44,000 reports of phishing, costing Australians $1.6 million. While some phishing scams are obvious, like free give-aways, you can also be directed to sites that masquerade as financial providers or government departments and they can look pretty official.

The trick to not be taken in is to be very wary of clicking on a pop up or unknown site and do an independent google search or verify the site is secure. Before submitting any information, make sure the site’s URL begins with “https” and there should be a closed lock icon near the address bar. It’s also a good idea to keep your browser and antivirus software up to date.

Scams that cost us the most

Investment scams are becoming ever more sophisticated and the amounts associated with these scams are significant. Investment scams accounted for $177 million in 2021.

In one of the most disturbing trends of the year, the Australian Securities and Investment Commission (ASIC) said some investment scammers were presenting impressive credentials, including their funds ‘association’ with highly regarded domestic and international financial services institutions.

Those doing their diligence on the funds were met with professional-looking prospectuses offering very high returns and claiming investor funds would be invested in triple A rated or government bonds, offering protection under the government’s financial claims scheme. Scammers even cleverly honed in on those most likely to be tempted by these investment products by gathering the personal and contact details potential ‘investors’ entered into fake investment comparison websites.

While the rise in, and increasingly compelling nature of investment scams is certainly of concern, we are here to help if you have any opportunities you’d like to explore that need thorough investigation.

Staying scam-proof

Be alert, not alarmed – always consider the fact that the ‘opportunity’ you are being presented with or the fine or fee you are being asked to pay may be a scam. Don’t be swayed by the fact that it looks like it is coming from a well-known company or source.

Keep your personal details and passwords secure. Be careful how much information you share on social media and be wary of providing personal information.

Beware of unusual payment requests. Scammers will often ask for unusual methods of payment which are untraceable like iTunes cards, store gift card or debit cards, or even cryptocurrency like Bitcoin.

The best way to avoid scams, is to be aware of the tactics being employed and maintain a sceptical frame of mind. If something seems too good to be true, or if your alarm bells are ringing take your time and do your due diligence before taking any action.