At this time of year, when giving is particularly on our minds, some might turn their attention to how best share their wealth or an unexpected windfall with their loved ones­.

You might be thinking about handing over a lump sum to help them with a major purchase or business opportunity, or be keen to help reduce or extinguish their student loans. Alternatively, it might be about helping to solve a housing problem.

Whatever the reason there are some rules that it is worth being aware of to ensure both you and they are protected.

Giving a cash gift

You can give anyone, family or not, a gift of cash for any amount and, as long as you don’t materially benefit from the gift or expect anything in return, no tax is paid on the amount by either you of the receiver.

The same applies if you’re planning to pay out your child’s student loans.

However, be aware that if the beneficiary of your cash gift is receiving a government benefit, such as an unemployment benefit or a student allowance, there is a limit on the size of the gift they can receive without it affecting their payments.

They may receive up to $10,000 in one financial year or $30,000 over five financial years (which can not include more than $10,000 in one financial year).

Helping out with housing

Many parents also like to help their children get into the property market, where possible.

It’s been a difficult time for many in the past few years in dealing with the COVID-19 pandemic, the rising cost of living and interest rates, and a housing crisis.

A Productivity Commission report released this year found that while most people born between 1976 and 1982 earn more than their parents did at a similar age, income growth is slower for those after 1990.

With money tight and house prices climbing, three in five renters don’t believe they will ever own a home even though most (78%) want to be homeowners, according data collected by the Australian Housing and Urban Research Institute (AHURI).

Just over half of those surveyed (52%) were renting because they didn’t have enough for a home deposit and 42% said they couldn’t afford to buy anything appropriate, the AHURI survey found.

So, in this climate, help from parents to buy a home isn’t just a nice-to-have it’s becoming a necessity for many.

Moving home

Allowing your adult child, perhaps with a partner and family, to share the family home rent-free is common option, giving them the chance to save up for a deposit.

One Australian survey found that one-in-10 people had moved back in with their parents either to save money or because they could no longer afford to rent.

If it gets too much living under the same roof, building a granny flat in your backyard may be an option.  Of course there are council regulations to consider, permits to be obtained and the cost of building or buying a kit but on the upside, it may add value to your home.

Becoming a guarantor

Another way to help might be to become a guarantor on your child’s mortgage. This might be the best way into a mortgage for many but before you sign, think it through carefully, understand the loan contract and know the risks.

Don’t forget that, as guarantor, you’re responsible for the debt. You will have to step in and repay if the lender can’t afford to repay, and the loan will be listed as a default on your own credit report.

Any sign that you are being pressured to be a guarantor on a loan may be a sign of financial abuse. There are a number of avenues for advice and support if you’re concerned.

It’s vital that you obtain independent legal advice before signing any loan documents.

If you would like more information about how to provide meaningful financial support to your children, we’d be happy to help.

Recently, negative gearing has been making waves in the news and with rental affordability becoming a serious issue in Australia, various political parties have weighed in. 

While some argue that it’s a vital tool for encouraging investment in housing and fixing the housing crisis, others believe it fuels property price increases, contributing to housing affordability issues and making home ownership increasingly difficult for first-time buyers.

However, there are concerns that any reforms to this widely used tax concession might reduce the supply of homes for renters by making housing investment less attractive.

And while there are certainly arguments for and against tinkering with this tax law, a further consideration that is contributing to debate, is the increase in gearing claims over the last few years.

Some $8.7 billion in negative gearing claims were made in the 2020/21 financial year, according to the latest Treasury analysis, and this is anticipated to soar due to the change from record low interest rates to a climate of higher rates in record time.

Despite increases in rents, rental payments are still lagging behind loan repayments on properties that may have been bought at recent high prices, so the number of investment property owners who are negatively geared has increased.

To understand what all this means, it’s helpful to look at what negative gearing is and how it works.

What is negative gearing?

Negative gearing is an investment and tax minimisation strategy, primarily associated with property, where the costs of owning an investment property exceed the income it generates. This might sound like a strange way to invest, but it can be quite beneficial when you know how to play the game.

In simple terms, if you’re losing money on your property each year, that loss can be used to reduce your overall taxable income. For example, if you’re paying more in mortgage repayments, maintenance, and other expenses than you’re earning in rent, you can declare that loss on your tax return. This can lead to a smaller tax bill, which is appealing for many investors.

How does it work?

Let’s break it down with a quick example. Imagine you’ve bought an investment property for $600,000. Your annual expenses, which may include mortgage repayments, repairs, insurance, and property management fees, total around $40,000. If you’re only earning $30,000 from rent, you’re facing a loss of $10,000.

By declaring that $10,000 loss on your tax return, you can reduce your overall taxable income. If your regular job pays you, say, $80,000 a year, you can effectively lower this amount by $10,000, which means you’ll pay less tax overall.

The potential upside

So, why would anyone want to invest in a property that’s losing money even if it means you get a bit of a tax break? The key here is capital growth. While you may be negatively geared in the short term, many investors bank on the property appreciating over time.

Let’s say over time that property you bought for $600,000 rises in value to $800,000. When you eventually sell it, you could make a tidy profit, far exceeding the losses you incurred along the way. Historically, property in Australia has appreciated in value over the long term, making it a popular investment choice.

Risks and challenges

While there are some certain benefits associated with negative gearing, investing in property isn’t without its challenges.

Property investment requires a substantial initial outlay, not to mention the ongoing costs such as maintenance, rates, and insurance. Investors considering this type of arrangement need to have the financial stability to fund the shortfall out of pocket until the property becomes positively geared (meaning your investment property rental return is higher than your repayments and other costs) or is sold.

Plus, the property market can be unpredictable. Prices can fluctuate based on a multitude of factors, including economic conditions, interest rates, and even local demand.

It’s worth noting that some proposed changes could affect the way negative gearing works, so staying informed is crucial for existing or potential property investors.

If investing in property is something you are interested in exploring, we are here to help you qualify for an investment loan that’s competitive.

Planning for what happens when you pass away or become incapacitated is an important way of protecting those you care about, saving them from dealing with a financial and administrative mess when they’re grieving.

Your Will gives you a say in how you want your possessions and investments to be distributed. Importantly, you should also establish enduring powers of attorney and guardianship as well as a medical treatment decision maker and/or advance care directive in case you are unable to handle your own affairs towards the end of your life.

At the heart of your estate planning is a valid and up-to-date Will that has been signed by two witnesses. Just one witness may mean your Will is invalid.

You must nominate an executor who carries out your wishes. This can be a family member, a friend, a solicitor or the state trustee or guardian.

Keep in mind that an executor’s role can be a laborious one particularly if the Will is contested, so that might affect who you choose.

Around 50% of Wills are now contested in Australia and some three-quarters of contested Wills result in a settlement.

The role of the executor also includes locating the Will, organising the funeral, providing death notifications to relevant parties and applying for probate.

Intestate issues

Writing a Will can be a difficult task for many. It is estimated that around 60% of Australians do not have a valid Will.

While that’s understandable – it’s very easy to put off thinking about your own demise, and some don’t believe they have enough assets to warrant writing a Will – not having one can be very problematic.

If you don’t have a valid Will, then you are deemed to have died intestate, and the proceeds of your life will be distributed according to a statutory order which varies slightly between states.

The standard distribution format for the proceeds of an estate is firstly to the surviving spouse. If, however, you have children from an earlier marriage, then the proceeds may be split with the children.

Is probate necessary?

Assuming there is a valid Will in place, then in certain circumstances probate needs to be granted by the Supreme Court. Probate rules differ from state to state although, generally, if there are assets solely in the name of the deceased that amount to more than $50,000, then probate is often necessary.

Probate is a court order that confirms the Will is valid and that the executors mentioned in the Will have the right to administer the estate.

When it comes to the family home, if it’s owned as ‘joint tenants’ between spouses then on death your share automatically transfers to your surviving spouse. It does not form part of the estate.

However, if the house is only in your name or owned as ‘tenants in common’, then probate may need to be granted. This is a process which generally takes about four weeks.

Unless you have specific reasons for choosing tenants in common for ownership, it may be worth investigating a switch to joint tenants to avoid any issues with probate.

Having a probate is favourable if there is a refund on an accommodation bond from an aged care facility.

Rights of beneficiaries

Bear in mind that beneficiaries of Wills have certain rights. These include the right to be informed of the Will when they are a beneficiary. They can also expect to hear about any potential delays.

You are also entitled to contest or challenge the Will and to know if other parties have contested the Will.

If you want to have a final say in how your estate is dealt with, then give us a call. 

The retirement living sector is growing rapidly in Australia as the population ages and demand increases for a spot in a retirement village.

For many people, the idea of having someone on site to help with property and garden maintenance is enough for them to make what can be a major change later in life. For others it is about the ready-made community and the easy access to social activities and a network of friends. And, as developers seek to entice younger and younger residents, they are dialling up the luxury and add-ons.

The type of accommodation varies widely between villages from apartments, villas and houses. Some retirement villages have a resort-style feel with a range of onsite amenities on offer including swimming pools, fitness centres, cinemas and cafes and there are often different dining and cleaning options available for residents.

Research released last year by the Property Council of Australia shows that retirement village residents are 41% happier; 19%less likely to require hospitalisation after only nine months; 15% more physically active; five times more socially active; twice as likely to catch up with family or friends and have reduced levels of depression and loneliness.

One important factor that sets retirement villages apart from residential aged care facilities is that retirement village living is considered independent living, generally without medical or personal care available through the village itself.

Different laws

Some residential retirement complexes include both independent living homes and aged care facilities. This set up can make the transition to aged care, if needed, less stressful especially if one member of a couple needs greater care.

However, the two operations are regulated quite separately under different laws and there are no guarantees that you can move smoothly from one to another when you want to.

Unlike assisted living or residential aged care, retirement villages are not regulated by the Federal Government but are governed under state and territory retirement villages acts. As such, the rules can vary between jurisdictions and villages.

Considering the costs

Buying into a retirement village can be a significant expense, making it important to understand the legal implications and ensure you carry out a thorough check to see if it is affordable.

In most cases you don’t own the village residence. A common arrangement is for a lease or loan type arrangement, where residents buy the right to occupy a home within the village for a specific period.

The level of fees and how they are set is a private commercial arrangement and not governed by any laws. The costs could be roughly what would be incurred if you owned your home. As well as an upfront price, there could be ongoing maintenance fees and deferred management fees, which reduce the amount you receive when you leave the village.

Knowing your rights and obligations, as well as the initial costs and ongoing fees and expenses are key considerations to a successful transition.

Financial and legal advice is highly recommended to ensure clear understanding of the purchase arrangements and contracts. Their level of complexity is not to be underestimated.

Extra services and support

It is most people’s aim to remain living independently in their own home for as long as possible.

For people living in retirement villages, this could mean accessing government subsidised home care services – for example, through the existing Home Care Packages Program. Depending on a person’s health, these services could include cleaning and domestic assistance as well as personal care, such as assistance with showering or the delivery of pre-cooked meals.

Following the introduction of recent reforms, a new Aged Care Act aims to increase the subsidies for services and equipment to assist people staying at home.

A new Support at Home Program will replace the Home Care Packages Program from 1 July 2025. The Commonwealth Home Support Program will transition after 1 July 2027.

The reforms also include significant changes to the funding arrangements for residential aged care.

For both home care and residential aged care, the focus will be increasing the quality of services and the rights of individuals, while at the same time looking for greater contributions from people accessing the services.

Retirement villages are largely lifestyle considerations, but you also need to consider your current and future care needs to ensure that the village you choose will remain suitable for at least the medium term.

Contact us to discuss your plans for retirement.

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Money sure can stir up a lot of emotions in relationships. From arguments over who spent too much on takeout to disagreements about saving for a house, finances can be a major stressor for couples. So, let’s dive into why money can be a relationship minefield and how you can navigate those financial trenches with ease.

Here’s a hint: it’s not just about the money, but about what money represents to you both.

How common are money issues?

You’re not alone if you find money a hot topic in your relationship. Research shows that financial disagreements are more common than you might think. A recent survey showed nearly a third of couples frequently argue about finances.Additionally it was revealed that one in four people hide financial information from their partner.

These statistics highlight that financial disputes are not only prevalent but also impactful. But don’t worry—there are plenty of ways to turn these potential powder kegs into opportunities for deeper understanding and cooperation.

More than money

When thinking about money as a point of conflict, it’s important to remember that conflict comes from our big emotions about what money represents to us: security, power, control, status, acceptance.

We all have different attitudes to money that come from our past experiences. While one person may see money as the freedom to do what they want, their partner may prefer to save every penny because they value the security that comes with having savings.

Tips for financial harmony

It’s important when it comes to resolving money issues to dig a little deeper and figure out the underlying issues and consider the strong emotions behind money issues. Here are some tips to manage money matters with grace and cooperation:

Keep the lines of communication open

Given how everyone’s relationship with money is quite different, it’s unlikely you’ll always be on the same page when it comes to your finances, and that’s where open and honest communication comes in.

Think of financial discussions as regular tune-ups for your relationship. It’s not just about big financial decisions; it’s about checking in with each other’s financial goals, concerns, and spending habits. Set aside time for regular financial chats, whether it’s a monthly budget meeting or a quick conversation over coffee. Keeping the lines of communication open can help catch small issues before they become big problems.

Sharing financial goals and respecting individual aspirations

Having common financial goals can be like having a shared GPS for your money. Whether you’re saving for a dream vacation, a new home, or a renovation, setting mutual goals provides direction and motivation. Create a plan that includes both short-term and long-term objectives, this way, both partners feel invested in the financial journey.

While working towards shared goals is important, it’s also essential to respect each other’s individual financial aspirations. This might mean each partner having some freedom to manage their personal finances and make individual financial decisions.

Budget is not a dirty word

Budgets might sound boring, but they’re actually a fantastic way to manage your money and work together to achieve your financial goals. Sit down together and create a budget that covers all your expenses, savings, and fun money. Tools like budgeting apps can help you track your spending and stay on target. Remember, a budget should be a flexible guide, not a strict rulebook and make sure both partners have a say in how the budget is structured.

Be transparent about finances

Transparency is key to building trust. Share information about your income, debts, and financial goals with each other. If you’re planning a big purchase or making a financial decision, discuss it openly. Remember, financial transparency is about more than just sharing numbers; it’s about understanding each other’s financial mindset and values.

Money may be a common source of stress in relationships, but with the right strategies it’s possible to turn financial challenges into opportunities for growth and collaboration. Remember, it’s not about avoiding money issues but about managing them in a way that acknowledges the strong emotions often associated with your finances and strengthens your relationship. So, take a deep breath, and tackle those money matters together—you’ve got this!

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Changes to aged care fees are coming, and they will impact both home care and residential care. After a long wait and lots of speculation, the government has released details of the proposed changes. While some people will see their fees increase, the good news is that aged care remains heavily subsidised, and fees will continue to be based on your financial situation to help with affordability.

Here’s what we know so far:

• The government will continue to cover 73% of the cost of residential care and 89% of the cost of home care.
• These changes are designed to improve the quality of aged care and help providers meet growing demand.
• Most changes will only apply to people starting home care or entering residential care from 1 July 2025.

If you or a loved one need care soon, it might be worth getting advice to see if moving before the changes take effect could save you money and understand how you will be affected. While there’s still a lot to unpack, here’s a quick overview of what’s planned.

Proposed residential care changes

1. Room price cap: From 1 January 2025, some room prices might start to rise. Providers who want to charge more than $550,000 currently need approval, but this cap will increase to $750,000, making it easier for providers to increase prices.

2. RAD retention amount: You can pay for your room with a lump sum (Refundable Accommodation Deposit or RAD) or as a daily fee. Currently, RADs are fully refundable when you leave care, but from 1 July 2025, you may lose up to 10% of the RAD you paid.

3. Indexing rent: If you choose to pay a daily fee instead of a lump sum, this “rent” (called the Daily Accommodation Payment or DAP) will be indexed over time, meaning the amount could increase as time goes on.

4. Living expenses: Your contribution to daily expenses like food, laundry, and electricity could rise by up to $12.55 per day, depending on your financial situation. Some providers may charge more for higher standards or quality, so it’s important to check prices before deciding on a place to live.

5. Care expenses: Depending on your finances, you may be asked to contribute more to your care costs, which could include services like entertainment, bathing, and mobility assistance. The government will still cover most care costs, but your portion could go up by around $10 per day, with the lifetime cap rising from approximately $80,000 to $130,000.

6. Assessment of your home: No changes are planned for how your home is assessed when determining what you can afford to pay. If a spouse or “protected person” lives there, it remains exempt; otherwise, only approximately $208,000 of its value (indexed) will be included in financial assessments.

Proposed home care changes

1. New Support at Home program: A new program will combine the current home care options into 10 levels of care packages to better meet the specific needs of individuals.

2. Higher contribution fees: While clinical care will be fully covered by the government (up to the available budget of your care package), you may have to pay more for services like cleaning and gardening.

3. Means-testing: Your contributions to home care will now become means-tested, picking up assets as well as income, according to Centrelink rules.

The higher costs will mostly impact self-funded retirees and some part-pensioners but everyone could face higher costs (and bigger decisions), making it essential to carefully choose care providers and understand accommodation costs. The changes may simplify some of the confusion we’ve seen under the current system, but now, more than ever, it’s important to get advice to understand what you’ll need to pay and how these fees might change as your financial situation evolves.

Planning ahead is key, and some decisions can feel overwhelming. If you have any questions or need help planning for aged care, call us at 03 9723 0522, and we can guide you.