Exit Costs When Refinancing
Aug 7th, 2018 • Industry NewsAt its meeting today, the Board decided to leave the cash rate unchanged at 1.50 per cent.
Aug 3rd, 2018 • Vehicle Finance
Aug 1st, 2018 • InvestmentsOwning two properties is a great financial ambition and with Australian house prices on the rise, doing so has great potential to improve your financial situation in the long term. But please don’t be fooled - just because you have done it once before doesn’t mean it will be easy! Buying a second property also requires hard work, discipline and effort. Here are some financial pointers to help with the process of buying your second property.
If you live and work in one of Australia’s major capital cities, you are probably finding this task increasingly difficult in your local market as both prices and competition continue to increase.
Jul 23rd, 2018 • Industry NewsHow to Negotiate the Best Property Price
Jul 17th, 2018 • Industry NewsExplainer: Fixed-Rate Loans
Travel expense deduction scrapped
As of July 1, 2017, property investors can no longer claim a tax deduction for travel to maintain, inspect or collect rent for their rental property. Likewise, you can no longer claim travel expenses for preparing the property for new tenants, or for visiting a real estate agent to discuss your property.
Investors who own property interstate will probably be the most affected by this change. If these changes do affect you, perhaps consider employing a property manager to perform some of these tasks for you, as their costs are usually still tax deductible. Talk to your accountant to find out more.
Depreciation deductions tightened
Depreciation is the decline in value of an asset with a limited life expectancy. Depreciating assets include carpets, furniture and appliances like water heaters and cookers (also known as plant and equipment).
Residential property investors can now only claim depreciation deductions for plant and equipment expenses if they purchased them. Previously, investors could claim plant and equipment depreciation on assets that were installed by a previous owner.
This “integrity measure”, introduced in last year’s Budget, was intended to prevent multiple property owners from depreciating the same assets, exceeding their actual value. The changes apply to second-hand plant and equipment acquired after last year’s Budget night (May 9, 2017). You also can’t claim a deduction for plant and equipment installed on or after July 1, 2017 if you have ever used it for private purposes.
If you owned or entered into a contract to buy your investment property before May 9, 2017, you will not be affected by these changes. You can still claim deductions for depreciating plant and equipment assets that were in the rental property before that date.
You can find more information about the expenses you can claim for residential rental properties on the ATO website, available here. You’ll find details about expenses that are deductible immediately, such as management, maintenance and interest; and expenses that are deductible over several years, such as capital works and borrowing costs.
Your tax time checklist
Here are some tips to prepare for tax time:
- Update your Depreciation Schedule. You can find a Guide to depreciating assets 2018 here. If you’re confused, seek advice from your accountant. If it’s a new property investment, you may need to have a quantity surveyor prepare a Depreciation Schedule report.
- Understand what you can claim (refer to the ATO website for clarification).
- Get your documents together and organise your receipts.
- Tally up your deductions. It’s a good idea to create a spreadsheet with all your income and expenses listed. That way, you can save on accounting fees (rather than giving them a shoe box of receipts to go through).
- Book in with your accountant (they are flat out at tax time, so the sooner the better).
Jul 10th, 2018 • Industry NewsWhat is a credit report?
Credit providers like banks, utility companies and telecommunications carriers provide details about your credit habits to credit reporting bodies. These agencies use this information to compile your credit report.
Among other details, your credit report contains your credit rating. This is a numerical value between zero and 1200 that represents your creditworthiness and how reliable you are as a borrower. The higher the score, the better.
What is your credit report used for?
When you apply for a home loan or another type of loan like a car loan, the lender will use your credit report to help them decide whether to approve the loan. They’ll consider details like your repayment history when assessing your ability to repay. Only licensed credit providers can access the repayment history information contained in your credit report.
From July 1, Comprehensive Credit Reporting (CCR) became mandatory for the big four banks. In the past, banks may have only shared negative financial information about you with other lenders, but under the new CCR regime, they’ll have to pass on positive information about you as well. Technically CCR has been in place since 2014, but the Australian Government recently made it compulsory for the big four banks to participate in the program to use credit reporting information to assess lending risks.
Here are some examples of the type of information that may now be shared:
Negative financial information:
- Payment defaults
- Overdue payments
- Declined credit applications
- Bankruptcy situations
The new credit reporting system will give lenders a more complete picture of your credit position. What that means is that they’ll have access to a more comprehensive set of data when assessing loan applications, so it will be easier for them to assess if you can afford to take on more debt.
If you have a positive financial track record, it’s likely your credit score will improve following the changes. Consequently, it may be easier for you to be approved for a home loan. You may even be able to negotiate a better deal (or have us do it for you).
How to keep your credit report healthy
Here are some tips to keep your credit report in check:
- Pay your bills and make loan repayments on time
- Pay your credit card off in full each month
- Lower your credit card limits
- Consider consolidating debt (speak to us about this)
- Limit your credit enquiries, as frequent applications can look bad on your credit report
- Remove your name from utility bills if you move
- Be cautious about identity theft.
You can access a copy of your credit report for free once a year from credit reporting bodies. The main ones are Equifax, Dun and Bradstreet, Experian and Tasmanian Collection Service. Simply visit the ASIC MoneySmart website to find out more here.
Like to know more?
Your mortgage broker will be happy to explain how the changes to credit reporting may affect your eligibility for a home loan. Remember, for a lot of borrowers, mandatory CCR is likely to be a good thing, as it may improve your chances of being approved for a loan. It’s also expected to increase competition between lenders in future, which is a win for borrowers. Whatever your finance needs, we can assist, so please get in touch today.
This article provides general information only and has been prepared without taking into account your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances and your full financial situation will need to be reviewed prior to acceptance of any offer or product. It does not constitute legal, tax or financial advice and you should always seek professional advice in relation to your individual circumstances. Subject to lenders terms and conditions, fees and charges and eligibility criteria apply.