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6 pros and cons of property investment

A common long term investment in Australia is buying a property and renting it out. However there are significant pros and cons of this investment option that can be important factors when deciding whether or not to invest in property.

Pros

Low risk

Because the property market is more stable than other options such as the stock market and because of the fixed rental come the risk of the investment is low.

Fixed long term Income

You receive fixed regular rental payments from tenants. If this income is high enough, it can be used to cover the mortgage repayment and other costs associated with managing the property. The more certain income also reduces risk and increases your ability to plan for the future.

Capital gain

If your investment property increases in value, you can benefit from the capital gain when you decide to sell the property, along any rental income you received.

Tax benefits

There are a number of costs associated with buying, managing and selling an investment property. Most of these property expenses can be claimed on tax and if you are losing money on your investment property, these expenses can be offset against your income.

Physical Asset

Property is a physical asset that you can see and touch unlike other investment options such as shares.

Special knowledge not required

Although it is important to have some knowledge on the property market, it is not essential to have specialised knowledge unlike other investments.

Cons

High buying and selling cost

The initial cost of the property is generally very high and may require a loan to purchase, whereas shares can be purchased for a much lower investment. There are also other costs associated with buying and selling such as stamp duty, legal fees and real estate agent fees.

Costs of managing and maintaining the property

Along with the buying and selling costs, there are a number of expenses associated with managing the investment property such as insurance, repairs and maintenance fees, water and council rates and mortgage repayments. These expenses may be greater than the rental income you receive

Vacancy and bad tenants

There may be a period of time where you don’t have a tenant. As a result you would be receiving no rental income and be forced to cover the cost of managing the property yourself. Bad tenants who don’t pay rent or cause damage can increase financial stress as well.

Loss of value

There is a chance that the value of the property may decrease over time. This could result in you owing more than what the property is worth and/or having to sell the property for less than what you bought it for.

Inflexible

You are normally locked into a contract with tenants for a fixed time and fixed rental payments. Therefore you wouldn’t be able to receive more rental income until the contract is finished, even if the value of the property increases during the contract.

Risk of the property being your only investment

Because of the high entry cost, it is common for a property to be an investor’s only investment. Therefore if the market changes and the investment doesn’t perform well you can be opened up to devastation. You should diversify your investments or grow your skills and specialise in the property market.

Sources: ASIC, On Property, Loan Market

Please contact Integrity One if we can assist you with any of your financial needs.

Phone: (03) 9723 0522

Suite 2, 1 Railway Crescent
Croydon, Victoria 3136

Email: integrityone@iplan.com.au

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This article is of a general nature and does not take into consideration anyone’s individual circumstances or objectives. Integrity One Planning Services Pty Ltd is a Corporate Authorised Representative No. 315000 of Integrity Financial Planners Pty Ltd ABN 71 069 537 855 (which is the holder of AFSL 225051). Integrity One Planning Services Pty Ltd and Integrity One Accounting and Business Advisory Services Pty Ltd are not liable for any financial loss resulting from decisions made based on this information. These articles are not owned by Integrity One Planning Services. We recommend that you seek personal advice from an advisor prior to implementing any of the information contained in this publication.

Sunday penalty rates cut – How are you impacted?

In December 2015, the productivity commission called for Sunday penalty rates to be reduced to the rates of Saturday payments. This approved reduction will gradually come into effect over the next few years. Workers in the retail, fast food, and pharmacy and hospitality industry are impacted by the penalty rate reduction.

Why there should be a reduction

Along with the productivity commission, small business wanted these changes because it improves their ability to operate and make profits on Sundays as well as their ability to hire more staff. They believe this will allow them to reduce prices on Sundays and create a better customer experience.

Why there shouldn’t be a reduction

However unions and the workers impacted by the penalty rate reduction argue that the reduction takes money directly from, money that they depend on for living expenses. This reduced income would also reduce spending in the economy. They believe that original Sunday rates were fair compensation for missing various social events including spending time with children at home. They also argue that there is no guarantee that these business will take advantage of the reduced rates to hire more staff and reduce their prices to create a better customer experience.

How retail workers are impacted

  • In the retail industry the Sunday penalty rate for full and part-time employees will be reduced from 200% to 150%
  • For casuals the rate will be reduced from 200% to 175%.

How fast food workers are impacted

  • Full-time and part-time level 1 employees rates will be reduced from 150% to 125%
  • Level 1 casual employee rates will be reduced from 175% to 150%
  • No change for level 2 and 3 employees

How pharmacy workers are impacted

  • Full-time and part-time employees working between 7:00am and 9:00pm will have their rates reduced from 200% to 150%
  • Casual Sunday rates reduced from 200% to 175%

How hospitality workers are impacted

  • Full and part-time penalty rates will be reduced from 175% to 150%
  • Casual Sunday rates will stay at 175%

Source: ABC news

Please contact Integrity One if we can assist you with any of your financial needs.

Phone: (03) 9723 0522

Suite 2, 1 Railway Crescent
Croydon, Victoria 3136

Email: integrityone@iplan.com.au

This article is of a general nature and does not take into consideration anyone’s individual circumstances or objectives. Integrity One Planning Services Pty Ltd is a Corporate Authorised Representative No. 315000 of Integrity Financial Planners Pty Ltd ABN 71 069 537 855 (which is the holder of AFSL 225051). Integrity One Planning Services Pty Ltd and Integrity One Accounting and Business Advisory Services Pty Ltd are not liable for any financial loss resulting from decisions made based on this information. These articles are not owned by Integrity One Planning Services. We recommend that you seek personal advice from an advisor prior to implementing any of the information contained in this publication.

5 reasons why it’s worth paying an accountant to do your tax return

Paying an accountant vs doing your own tax is a much debated issue. Although there are arguments for doing your own tax, there are significant benefits of hiring a professional.

They can save you time

Yes it costs more to pay for an accountant, however the value of your time should be taken into consideration when deciding if you want to pay an accountant or do your own tax. By paying for a professional you can maximise your time to focus on your own interests. Depending on how complicated your tax situation is, the cost of a professional may be very small when compared to the time saved by not doing it yourself.

Reduced risk of errors

This is important if you own or have sold shares, if you don’t understand capital gains tax, if you are unclear on what deductions you’re eligible for and if you have a complex tax situation. Hiring a professional reduces the risk of mistakes and fines from the ATO.

Higher tax return

Accountants may be able to find deductions that you didn’t realise you’re eligible for, therefore reducing your tax liability. The deductions that they find for you may outweigh the fee for the accounting service.

It is tax deductable

On top of finding deductions you may not have been aware of, the accounting fees are also tax deductable

They can help plan for the future

As well as maximising your tax return for a previous period, accountants can also help organise and maximise your finances in a safe and legal manner. What sets Integrity One apart is that we focus on planning for the journey ahead.

 

Source: Savings guide

Please contact Integrity One if we can assist you with any of your financial needs.

Phone: (03) 9723 0522

Suite 2, 1 Railway Crescent
Croydon, Victoria 3136

Email: integrityone@iplan.com.au

This article is of a general nature and does not take into consideration anyone’s individual circumstances or objectives. Integrity One Planning Services Pty Ltd is a Corporate Authorised Representative No. 315000 of Integrity Financial Planners Pty Ltd ABN 71 069 537 855 (which is the holder of AFSL 225051). Integrity One Planning Services Pty Ltd and Integrity One Accounting and Business Advisory Services Pty Ltd are not liable for any financial loss resulting from decisions made based on this information. These articles are not owned by Integrity One Planning Services. We recommend that you seek personal advice from an advisor prior to implementing any of the information contained in this publication.

End of financial year tax tips for small business

Buy a business asset that costs less than $20,000

If you purchase a business asset and it is ready for use before June 30 2017 you could qualify for an instant deduction

For more on the small business tax write off visit https://www.integrityclients.com.au/news/20000-small-business-tax-break-explained/

Prepay expenses this financial year

Eligible small business can claim deductions this year if they pay taxable expenses in advance such as next year’s professional subscription, insurance policy or accounting fees.

Write off bad debts

If you have customers that are unlikely to pay their accounts in the new financial year, these accounts should be written off as a bad debt before June 30 so a deduction can be claimed. Have a record of the debt and the actions taken to recover the debt to ensure you meet tax office requirements.

Review your inventory

Check to see whether you can write off or write down the value of any of your stock to claim a deduction.

Small business restructure roll-over

Small businesses under $2m in aggregated turnover have the option to restructure their affairs without incurring any capital gains tax liability.

This may allow an entity the opportunity to genuinely restructure to a corporate entity to take advantage of a lower tax rate. Alternatively, the restructure can be reversed from a company back to a sole trader/partnership without any capital gains tax liabilities.

Delay sales to next financial year

Subject to cash flow considerations and anti-avoidance rules, income could be deferred to the following year, particularly if:

– Income in the following year is likely to be lower, or
– Tax rates for the following year are expected to be lower

High income earners will also have to factor in the effect of the 2% “budget deficit levy” applying in 2016/17. This is the final year in which the temporary budget repair levy will apply.

For cash businesses – deferral of income can be risky, especially when the deferral puts them outside the ATO small business benchmarks

When possible defer:
– Sales
– Contract dates for the sale of CGT assets
– Insurance recovery claims

Superannuation

Ensure that contributions for the June quarter are paid to a complying fund by June 30 2017 (otherwise the deduction is delayed until 2017/18).

Do not leave payment processing until late June as funds have different processing cut off dates. Check with your funds

April to June 2017 quarter contributions must be paid no later than 28th July 2017

Cap limits of concessional contribution a member can make before June 30 2017:
– $35,000 for members aged 49 or over
– $30,000 for members aged 48 or under

In the 2017/18 financial year the cap will be cut to $25,000 for all ages

For more on the changes to superannuation as of July 1 2017 visit https://www.integrityclients.com.au/news/superannuation-changes-july-1-2017/

 

Sources: Commonwealth Bank, Finder, ATO

For any advice on these issues please contact the Integrity One office

Phone: (03) 9723 0522

Suite 2, 1 Railway Crescent
Croydon, Victoria 3136

Email: integrityone@iplan.com.au

This article is of a general nature and does not take into consideration anyone’s individual circumstances or objectives. Integrity One Planning Services Pty Ltd is a Corporate Authorised Representative No. 315000 of Integrity Financial Planners Pty Ltd ABN 71 069 537 855 (which is the holder of AFSL 225051). Integrity One Planning Services Pty Ltd and Integrity One Accounting and Business Advisory Services Pty Ltd are not liable for any financial loss resulting from decisions made based on this information. These articles are not owned by Integrity One Planning Services. We recommend that you seek personal advice from an advisor prior to implementing any of the information contained in this publication.

$20,000 Small Business Tax Break Explained

What is the $20,000 tax break?

Businesses with an annual turnover under $2 million can claim immediate tax deductions for as many less than $20,000 purchases they make before June 30, 2017, rather than having to claim those purchases as deductions spread over several years.

This is a huge increase from the current instant asset write-off threshold of $1,000.

The Federal Government has allocated $1.75 billion to fund the scheme, which will run for the next two years.

Who is eligible?

The $20,000 tax break applies to businesses that can demonstrate ongoing activity via quarterly Business Activity Statements, Small Business Minister Bruce Billson said.

The business must be actively trading to be eligible for the break.

What’s covered?

“If you run a cafe, it might be new kitchen equipment, or new tables and chairs,” Mr Hockey said in his budget night speech

“If you’re a tradie, it might be new tools or a computer for the home office.”

“Cars and vans, kitchens or machinery … anything under $20,000 is immediately 100 per cent tax deductible from tonight.”

In other words, any asset involved in running a business is covered by the scheme

What’s not?

Assets over $20,000 are not eligible for the instant tax write-off, but can be fully written off over a longer period.

Any assets over $20,000 can be added together and depreciated at the same rate. These assets are depreciated at 15 per cent in the first income year, and 30 per cent per year thereafter.

If the value of the pool is below $20,000 until the end of June 2017 it can be immediately deducted too.

There are a few items not deductible, including some horticultural plants and any software developed in-house by a business.

Software purchased for business use, for example, an account-keeping program, can be claimed.

Accountants have also warned they expect the ATO to closely monitor the number of Australian Business Number (ABN) applications, to keep an eye on any attempt to rort the scheme.

What else do you get?

In addition to the instant asset write-off, companies with annual turnover of less than $2 million will have their tax rate lowered, from 30 per cent to 28.5 per cent.

This is the lowest small business company tax rate in almost 50 years.

Unincorporated businesses, such as sole traders, partnerships and trusts, will also get a 5 per cent tax discount from July 1 up to $1,000 a year.

What does this mean for you?

If you currently run or you are thinking of starting a small business, now is the time to act, according to ABC’s AM program host Michael Brissenden.

“The small business package is extraordinarily generous. If you were ever thinking about opening a cafe, do it now,” Brissenden wrote last night.

“Buy as many espresso makers, fridges, photocopiers and lawn mowers as you like, and claim an immediate tax deduction until 2017.”

However Australia Institute executive director Richard Denniss has warned small business people to be cautious of taking advantage of the scheme before it passes Parliament — if it does at all.

“The scale and generosity of this proposal is unprecedented and, while the Treasurer has announced that it will begin [on budget night], history suggests he shouldn’t take the Senate for granted,” Mr Denniss said.

Author
Tegan Taylor – ABC News, August 2016

This article is of a general nature and does not take into consideration anyone’s individual circumstances or objectives. Integrity One Planning Services Pty Ltd is a Corporate Authorised Representative No. 315000 of  Integrity Financial Planners Pty Ltd ABN 71 069 537 855 (which is the holder of AFSL 225051). Integrity One Planning Services Pty Ltd and Integrity One Accounting and Business Advisory Services Pty Ltd are not liable for any financial loss resulting from decisions made based on this information. These articles are not owned by Integrity One Planning Services. We recommend that you seek personal advice from an advisor prior to implementing any of the information contained in this publication.

How much will you need to retire?

Retirement is a time of life when you should be relaxing and enjoying the fruits of your labour, rather than stressing about how to make ends meet.

Planning for retirement is crucial, and if you want to be financially secure, you should think about all avenues to adequately fund your retirement, including superannuation and the Age Pension.

For that reason, it’s a good idea to seek professional financial advice in order to achieve your goals.

Determining the Size of your Nest Egg

How long you live and the type of lifestyle you desire will determine how much you’ll need to retire.

If you are an above-average income earner, generally you will require two-thirds of your pre-retirement income to maintain the same standard of living.

The Association of Superannuation Funds of Australia (ASFA) estimates how much money people over the age of 65 need to support a modest or comfortable retirement.

A modest retirement means being able to afford basic activities, while a comfortable retirement would give you perks such as a range of recreational pursuits, private health insurance, international holidays, a mid-range car and electronic equipment.

Assuming an average life expectancy of about 85 and that you own your own home, couples wanting a comfortable retirement would have annual living costs of $59,619, or $1,143 per week. ASFA estimates singles wanting a comfortable retirement would have annual living costs of $43,372, or $832 a week.

For a modest retirement, couples would have annual living costs of $34,560, or $663 a week, while for single individuals the estimate is $23,996, or $460 a week.

Far from the $1 million figure that’s often bandied about, a comfortable nest egg for a couple would start at $640,000, or $545,000 for an individual, depending on your income needs and assuming you receive a partial Age Pension to assist with ongoing funding of your retirement.

At present, the costs associated with a modest retirement are mostly met by the Age Pension, so ASFA estimates a couple would need $35,000 in savings at retirement, while singles would need $50,000 in savings at retirement.

It’s important to note that the Age Pension should not be relied upon as a retirement plan, especially given recent changes.

For further estimates, see the Australian Securities and Investments Commission’s retirement calculator.

Author
LDB Group – January 2017

This article is of a general nature and does not take into consideration anyone’s individual circumstances or objectives. Integrity One Planning Services Pty Ltd is a Corporate Authorised Representative No. 315000 of  Integrity Financial Planners Pty Ltd ABN 71 069 537 855 (which is the holder of AFSL 225051). Integrity One Planning Services Pty Ltd and Integrity One Accounting and Business Advisory Services Pty Ltd are not liable for any financial loss resulting from decisions made based on this information. These articles are not owned by Integrity One Planning Services. We recommend that you seek personal advice from an advisor prior to implementing any of the information contained in this publication.

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