Rent money increasingly becoming dead money
Rent money increasingly becoming dead money
With no end in sight to historically low interest rates, it is becoming increasingly more affordable to buy a house than rent in many areas.
New analysis shows renters with secure employment and access to a deposit are better off buying a house than paying someone else’s mortgage.
“When it comes to houses, the preferred dwelling option in most areas of the country, in many cases it is cheaper to buy than rent, and rent money is dead money. Whereas, if you buy a house you can start building equity straight away, particularly when you take a long-term strategic view, and if you are in a good position to negotiate well and buy a ‘Grade A’ property that will serve your family for many years to come”, RiskWise Chief Executive Doron Peleg said.
The research shows interest-only repayments for both owner-occupiers and investors are lower than the annual rental cost in most of the Australian Bureau of Statistics’ 88 areas at the statistical area level 4 (ie. SA4s). Therefore, funding costs are now lower than rental payments across all states and territories.
Further, in all states and territories – excluding Sydney and Melbourne – even the principal and interest repayments are lower than the annual rent, assuming the buyer has a 20% deposit and using interest rates on new loans funded in June 2020.
For example, in Brisbane the median house price is $559,975 and sees a median rental yield of 4.3% and rent of $23,995. According to the research, looking at the annual difference between rent and buy, an owner-occupier paying interest only would come out $10,915 better off. Meanwhile, an owner-occupier paying principal-interest would save $1,567.
For an investor, interest only repayments would save them $9,799, while principal and interest sees a saving of $1,447.
Buying a house in Darwin sees the biggest savings; a median house price of $473,861 with a rental yield of 5.4% and annual rent of $25,541, repaying principal and interest would save $6,557.
“No interest rate rises are expected in the foreseeable future and the intense competition between the banks is only going to intensify, meaning that buyers are in a very strong position to continue enjoying ultra-low interest rates,” Peleg said.
Further, in all capital cities interest-only loans were cheaper than rental payments which meant funding costs were simply lower than the rental payments.
In addition, in some areas, even when taking into consideration full mortgage repayments (principal and interest), the repayments were still lower than paying rent, RiskWise said.
Over the medium and long term, Peleg said solid price growth is highly likely for houses, particularly due to a systematic undersupply in the inner and middle ring suburbs, and more affordable outer areas of CBDs.
“What this all means is now is the time to buy if you are a first home buyer or an owner-occupier, as this current slowdown in the property market is only temporary, with houses in popular areas likely to experience solid capital growth in the medium to long term,” Peleg said.
“Once the COVID-19 issue fades, most likely in 2021, the traditional connection between low interest rates and an increase in dwelling prices is likely to reassert itself.”
Source: RiskWise (www.financialstandard.com.au, 28 September 2020)
First Home Loan Deposit Scheme (New Homes)
The National Housing Finance and Investment Corporation (NHFIC) have provided further information on the First Home Loan Deposit Scheme (FHLDS) for new homes.
The key features of FHLDS (New Homes) include:
- higher property price thresholds
- providing more support for off-the-plan purchases
- shorter contract, start and finish build times to assist with stimulating the residential construction sector.
Under FHLDS (New Homes), eligible properties include:
- newly constructed dwellings
- off-the-plan dwellings
- house and land packages
- land and a separate contract to build a new home.
As always, please contact us if you have any questions - we are here for you and can help with any of your finance needs!
Dan Cuthbert Kylie Charles
MB: 0419 784 727 MB: 0448 230 314
Budget 2020-2021 Update
The 2020-2021 Federal Budget is a road to recovery paved with cash.
Key initiatives include:
- Personal income tax cuts from 1 July 2020
- A $4 billion ‘JobMaker’ Hiring Credit to encourage businesses to take on additional employees aged 16 to 35 years old
- $110 billion in infrastructure investment over 10 years
- Immediate deductions for business investment in capital assets
- Changes to how companies can manage losses
- Access to generous tax concessions for a wider range of businesses
The Budget also contains two additional Economic Support payments to pensioners and other eligible recipients to drive money back into the economy.
For our full budget summary, click here.
As always, if you have any queries or require any further information, please do not hesitate to contact us.
Lachlan Hughes Foundation - Maranoa Grazier Awarded Inaugural Scholarship
Lachlan Hughes Foundation
Maranoa Grazier Awarded Inaugural Scholarship
The Lachlan Hughes Foundation Board is pleased to announce that Jack Groat of Lorraine Station, Roma has been selected as the Inaugural Foundation Scholar. An independent Selection Panel of three selected Jack from a very strong field of applicants from all over Australia.
For Jack (pictured with Philip Hughes), his journey to learn more about regenerative agriculture began in 2012 when he first saw television advertisements saying fossil fuels, deforestation and cattle were the 3 biggest threats to the planet. “This message didn’t sit well with me and from my experience, I couldn’t see how cattle could be bad but I didn’t know how to express that. Since then I have been searching and learning how cattle and people can actually work together for the benefit of the environment and this scholarship was the perfect opportunity for me to learn more about regenerative agriculture to do this”, said Jack.
Jack had been looking at trying new things on his property “Lorraine” north of Roma with his wife Emma and their children. Together they have been trialling practices on farm that they have researched and learned about to date but realise there is much more to learn. Through the scholarship, Jack will be provided with support to attend training at the Mulloon Institute to learn more about natural sequence farming methods as well as opportunities to be mentored and connected with people who have been working successfully to integrate regenerative agriculture principles in their business.
The Hughes Family were planning a Natural Sequence Farming Information Day at Dulacca Downs in April, where Jack would present his project outline for the next twelve months but have decided to postpone this to a later date.
Jack said, “The opportunity provided by the Lachlan Hughes Scholarship will allow me to give back to the regenerative agriculture movement as well. My project will focus on implementing rotational grazing management, contours and leaky weirs to reduce run-off, soil erosion and keep ground cover. I have already started and hope that with the additional support through the scholarship I can do this successfully and see how regenerative principles can be applied to conventional agricultural landscapes, better for the environment and better for business."
For further information regarding the Lachlan Hughes Foundation, please visit https://www.lachlanhughesfoundation.org.au/
New Gift Card Laws from 1st November 2019
Amendments have been made to the Australian Consumer Law (ACL) to provide protections for gift card consumers across Australia. These national changes apply to gift cards supplied to consumers on or after 1 November 2019.
Cards and vouchers sold before 1 November 2019 continue to have the same expiry period and applicable fees as at the time of purchase.
Fundamentals of gift card legislation
With some exclusions, the fundamental changes relating to gift cards sold on or after 1 November 2019 are:
- a minimum three year expiry period for gift cards;
- gift cards must display expiry dates; and
- most post purchase fees on gift cards are banned.
Three-year minimum expiry period
The new legislation requires most gift cards or vouchers be sold with a mandatory minimum expiry period of three years.
The three year requirement does not apply to gift cards that are:
- able to be reloaded or topped up
- for a good or service available for a limited time where the card or voucher expires at the end of that period (eg. entry to a concert or museum exhibition)
- supplied to a purchaser of goods or services as part of a temporary marketing promotion (eg. a wine voucher valid for one month that is mailed to a consumer as a free bonus with a purchased item and was not part of the purchase offer)
- donated free of charge for promotional purposes (eg. a local shopping centre has a one-day marketing promotion where each visitor to the centre on that day is handed a $20 gift card that is valid for use at any store in the centre for that day only)
- sold for a particular good or service at a genuine discount (e.g. $50 card for salon service valued at $100)
- supplied as part of an employee rewards program
- given as a bonus in connection with a purchase of a good or service for use in the same business (customer loyalty programs)
- second-hand gift cards.
- part of a temporary marketing promotion (e.g. customers buy a certain product from Business A, which provides a $50 voucher to use at Business B)
The period begins from the date a gift card is sold to a consumer. Businesses can choose to apply an expiry period longer than three years, and no maximum expiry period applies.
Expiry details must displayed on cards
Gift cards must prominently display the expiry date as either the full date or as a period of time. For example:
- Supply date: March 2020. This card will expire in 3 years
- This card expires 5 years after supply. Supply date 15/8/20
- Valid for 3 years from 11/19
If the expiry date is shown as a period of time, it must also include the date it was supplied or purchased so the expiry date can be determined.
A gift card must also state if there is no expiry date.
Ban on post-purchase fees
Once a gift card has been issued, there is a ban on charging any post-purchase fee, including:
- activation fees
- account keeping fees
- balance enquiry fees
The ban does not cover fees that a business can charge as part of a sale to cover the cost of processing a payment. Post purchase fees do not include:
- overseas transaction fees
- booking fees
- payment surcharge fees
- fees charged for the reissue of a lost, stolen or damaged card
Businesses are able to charge an upfront fee when a consumer purchases a gift card.
Preparing for the changes
In readiness for the changes, businesses should:
- update gift card terms and conditions on their website and other promotional material, including on physical gift cards
- update internal systems, training and compliance manuals
- place signage on gift card displays and at the point of sale
- make note of the changes on any receipt issued when a gift card is purchased.
After 1 November 2019, if terms and conditions of a gift card do not comply with the new legislation, they will be void and the new requirements will be applied regardless of what is written on the gift card.
Penalties for non-compliance
A breach of the laws could attract a $30,000 fine in the case of a body corporate, or $6,000 for individuals.
In addition, the ACCC has the ability to impose infringement notices. Each infringement notice is 55 penalty units (currently $11,500) for a body corporate and 11 units (currently $2,420) for persons other than a body corporate.
Further information can be found in the Explanatory Memorandum to the Treasury Laws Amendment (Gift Cards) Act 2018 and the Explanatory Statement to the Treasury Laws Amendment (Gift Card) Regulations 2018. The regulations set out exemptions to the arrangements and a small list of allowable post-purchase fees.
Small Business Digital Grants Program 2018
SMALL BUSINESS DIGITAL GRANTS PROGRAM 2018
Round 5 Applications Close 8 October 2018
Do you have plans / ideas for utilising digital technology to help you grow your market share / sales / gross profit / employee numbers?
Are you considering digital improvements in your business to take it to the next level?
Are you a small business with Queensland based headquarters?
What funding is available?
- Matched funding of up to $10,000 (excl GST) – minimum funding of $1,000 (i.e. project spend from $2,000 and up, but business must self-fund any project spend over $20,000).
- The business must show how the digital technology or service purchased and adopted will enhance the digital capabilities of their business, becoming more competitive and able to employ more staff.
What can funds be used for?
- Purchase of hardware, software and services (eg digital coaching)
- The digital technology or service must fall under one of four identified priority areas:
- content development (web pages, mobile apps, visual and audio media etc.);
- receiving payments or selling online;
- specialised digital technology or software (business specific);
- digital planning, marketing strategy development, and training.
What does the grant application need to include?
Due to the competitive nature of this grant (in addition to the usual requirements - such as detailed quotes, information on your financial contributions etc.), successful grant applications will need to clearly demonstrate:
- the impact the digital technology or service will have on the business including revenue growth, increase in gross profit, time savings, employment outcomes;
- the extent to which the digital technology or service will enhance the digital capabilities of the business to make the business more competitive;
- how the proposed digital activity is likely to achieve jobs growth.
Eligibility criteria to apply:
- Cannot have received funding under any previous Round of the Small Business Digital Grants
- Small businesses with Queensland headquarters and less than 20 employees;
- Turnover of $2m or less in last financial year;
- Have an ABN, registered for GST and not be insolvent.
For more information and to get your application started, please contact our Grants team at Power Tynan at firstname.lastname@example.org. We will be able to assist with the application for a fee of $500 (+GST).
Taxation of Cryptocurrencies - What You Need to Know
Initial ATO coverage of cryptocurrencies centred on Bitcoin, however their stance applies to the entire cryptocurrency universe. The ATO deems cryptocurrencies as CGT assets, which are defined as:
(a) any kind of property; or
(b) a legal or equitable right that is not property.
Therefore, the disposal of any cryptocurrency would give rise to a CGT event. A capital gain will be made where the proceeds of any sale exceed the cost to acquire the cryptocurrency. Similarly, like most CGT assets, if you have held the cryptocurrency for greater than 12 months, you will be eligible for a 50% discount on the gain.
If the currency is used or kept only for your personal use and enjoyment, the capital gain can be disregarded if the purchase cost is $10,000 or less. Cryptocurrency kept or used primarily to acquire items for personal use or consumption will satisfy the exemption. An example of where cryptocurrency would be considered to be a personal use asset is where an individual purchases cryptocurrency from a cryptocurrency exchange and uses the cryptocurrency to make purchases for their personal needs, such as food or clothing.
Cryptocurrency kept or used mainly for the purpose of profit-making or investment, or to facilitate purchases or sales in the course of carrying on business,
will not satisfy the exemption. An example of where cryptocurrency would not be a personal use asset is where an individual taxpayer mines Cryptocurrency and keeps those Cryptocurrency for a number of years with the intention of selling them at opportune times based on favourable rates of exchange.
The ATO's proposed tax treatment of cryptocurrencies is as follows:
- Investment - if you are holding cryptocurrency as an investment, you will pay capital gains tax on any profits when you dispose of them
- Trading - if you are trading cryptocurrency for profit, the profits will form part of your assessable income
- Carrying on a business - if you are using or accepting cryptocurrency as payment for goods or services, the goods or services will still be subject to GST
- Mining cryptocurrency - if you are mining cryptocurrency, any profits you make will be included in your assessable income
- Conducting an exchange - if you are buying and selling cryptocurrency as an exchange service, you will pay income tax on the profits
- GST - sales and purchases of digital currency are not subject to GST from 1 July 2017. This means that you do not charge GST on your sales of digital currency and similarly, you are not entitled to GST credits for purchases of digital currency.
SMSF Compliance Issues
If the cryptocurrency is held in your SMSF, there are additional aspects you need to consider:
- Trust deed – trustees should check that their SMSF trust deed does not prohibit investments in cryptocurrency
- Investment strategy – cryptocurrency is a relatively new investment class. SMSF trustees should ensure that if wanting to invest in cryptocurrency, the investment strategy is up to date and specifically permits investment in that class.
- Sole purpose test – SMSF trustees need to be prepared and able to demonstrate that the sole purpose test of investing for retirement has not been breached by cryptocurrency investment (some parties may be concerned that it is a purely speculative investment, or gambling).
- Ownership – crucial to compliance with superannuation legislation is evidence that all investments are appropriately registered in the name of the fund trustees, as trustee for the superannuation fund. This is to ensure that the SMSF has a legal enforceable right to all of its assets (including cryptocurrency). There may be difficulties in achieving this, depending on the cryptocurrency type. Taking Bitcoin as an example, storage of Bitcoin is in a digital wallet. The SMSF name must be noted on the wallet, but fund members should also avoid linking their personal credit cards to Bitcoin wallets. Linked personal credit cards create compliance nightmares, as it is a breach of the rules that require SMSF assets to be kept separate from personal ones. A separately documented declaration of trust may help with attesting ownership. Cryptocurrency must be purchased using existing cash from the SMSF bank account to avoid related party issues (see point below).
- Transactions with related parties – cryptocurrency cannot be used as an in-specie contribution to the SMSF, nor can a SMSF purchase cryptocurrency from members or related parties (related party acquisitions are limited to listed securities and business real property).
- Valuation – trustees need to ensure appropriate records are available to confirm holding quantities and cryptocurrency prices on 30 June each year, since the SMSF financial statements are by law required to show all investments at their market value.
If you need further guidance on any of the above, please contact your Power Tynan adviser.
Power Tynan wins prestigious industry awards
Power Tynan has taken out two of Australia’s most coveted SMSF awards.
The firm won both Community Engagement Program of the Year and Small Business Adviser of the Year, while team members Gilda Brisotto and Kymberlee Naumann were named as finalists in the SMSF Professional of the Year (Regional) category.
The SMSF and Accounting Awards is a new initiative which has been launched in partnership with Super Concepts to recognise individuals and businesses that are making their mark in SMSF and accounting advice by championing professionalism, quality advice and innovation.
Power Tynan Executive Director Brad Hancock said the firm were humbled by the wins.
“These awards would not have been possible without our incredible team” said Brad.
“Being recognised for our contribution to the industry also reinforces the strength of our brand in connecting with our clients and our community,” he added.
The winners were announced at a gala dinner at Brisbane Convention and Exhibition Centre on Thursday 26th October.
“Congratulations also to all the finalists, who came up against incredibly tough competition to secure a spot amongst the best in their locale,” said Terry Braithwaite, head of partnerships for SMSF Adviser.
“You are setting benchmarks for professionalism and quality which are helping your clients prepare for retirement, and protect and manage their hard-earned savings.”
Power Tynan receives national recognition for scholarship program
Power Tynan has been recognised at the 2017 AccountantsDaily Australian Accounting Awards.
Power Tynan was awarded Graduate Program of the Yearfor the second year in a row, acknowledging the firm’s scholarship program run in conjunction with the University of Southern Queensland (USQ). Based on graduate development initiatives, this award considers how the firm develops and retains quality staff through a structured development program.
“The Power Tynan Scholarship Program offers final year high school graduates the opportunity to study a business or commerce degree part-time at USQ while working for our company on a full time basis. We offer between one and four scholarships each year, and have done so for the last ten years,” said CEO Paul Hilton.
“We are extremely proud of this program. In regional areas such as Toowoomba and Stanthorpe, it can be difficult to entice the younger generation to stay in town after graduating from high school; however we have retained all scholarship recipients upon graduating and, due to this program, are a significant employer within our district.”
Zac Bichel is currently completing his final year of study via the University of Southern Queensland while working full time with Power Tynan, after being named as a scholarship recipient in 2013.
“Working in the industry has obviously helped in my studies but has also shown me the importance of practical knowledge”, said Zac. “I have gained a wide range of experience from my time at Power Tynan, moving from tax to superannuation and now to financial planning.”
Power Tynan were named as a finalist in three categories at the Australian Accounting Awards, being Graduate Program of the Year, Community Engagement Program of the Year and Young Accountant of the Year (Peter Rowe).
Members of the Power Tynan team attended the five-star gala dinner at The Sofitel Sydney Wentworth, where the winners of the fourth annual Australian Accounting Awards were announced to a crowd of 500 people.
Young accountants and the future of our profession
Are we equipping the next generation of accountants to thrive over the next 20 to 30 years? I fear not.
The future of our profession depends on the young people coming into accounting and developing their skills and capabilities both to be able to operate in our current work environment and to be able to adapt to change.
Some of the young people starting work in your firm over the next 12 months will be taking your place around the boardroom table in 10 or 15 years. What are you doing to equip them for that leadership responsibility?
Our universities have developed courses to train young people as accountants, yet are they simply turning out number crunchers because that is what gets a person employed in an accounting firm?
Do universities teach leadership skills in their accounting courses? Of course not. But that is not their fault. They are training young people for what they understand the profession requires.
Our profession continues a discussion about the enviroment in which we work. Understanding and being able to interpret the ever-changing tax laws is a key part of an accountant's capability, yet I do not believe it is anywhere near enough. We no longer simply provide our clients with advice about how best to manage their tax obligations. We are more involved in their business and financial decisions, and those conversations require a new set of skills.
A recent report by Deloitte Access Economics entitled "Soft skills for business success" forecast that soft skill-intensive occupations will account for two-thirds of all jobs by 2030, compared to half of all jobs in 2000. The good news for those of us who want our profession to grow is that accounting falls into that category. The number of jobs in soft-skill intensive occupations is expected to grow at 2.5 times faster than jobs in other occupations.
So what are soft skills? Simply, they are vital intangibles. To quote Deloitte Access Economics Report: "Soft skills are also referred to as employability skills, enterprise skills and they are transferable between industries and occupations. They include things like communication, teamwork, and problem solving, as well as emotional judgement, professional ethics and global citizenship."
Accounting is a rapidly increasingly "soft skill" profession. And that is not tax law.
So how much responsibility are firms taking in recruiting and training young people for our fast-changing profession? How much are we communicating with the universities about change? Not enough, from my observation.
But we cannot rely on universities alone. As accountants and leaders in our profession, we must take responsibility for the next generations.
But do we understand the skills that will be necessary for this new generation to be successful?
We will always need formal qualifications and technical skills, but they are only part of the skill mix needed for the future. Soft skills and personal attributes are just as important.
The World Economic Forum has identified 10 of the 16 "crucial proficiencies in the 21st century" as non-technical.
According to a report by the Commonwealth Department of Employment in 2016, a quarter of employers report having difficulty filling entry-level vacancies because applicants lack "employability" skills.
The Deloitte Access Economics Report found that the difference between demand and supply is "as large as 45 percentage points for communication skills alone" and, "despite the value that businesses place on soft skills, data from LinkedIn profiles reveals that less that one per cent of Australians report having any soft skills on their profiles."
The report suggests that, far from not having these skills, people under-report soft skills perhaps because we are uncomfortable with claiming skills without formal credentials or because we underestimate the relative importance of soft skills.
Young accountants need to embrace their profession, to learn and become the leaders of the future.
But simply throwing dollars at the issue won't create great leaders in the profession. That will come from the way that we as current owners and leaders interact with team members and clients so that younger members can see us leading by example.
It is the responsibility of the current leadership in the accounting profession to prepare the next generation and also to educate our clients about our changing role and capabilities.