Take advantage of the Federal Government’s Small Business Tax Incentive

Small businesses around Australia are taking advantage of the Federal Government’s Small Business Tax Incentive. If you operate a small business, you can immediately deduct the business portion of most assets that cost less than $20,000 each if they were purchased before 30thJune 2019 and your business turnover is less than $10 million.

 

This deduction can be used for each asset that costs less than $20,000, whether purchased new or second-hand. You claim an immediate deduction for the business portion of each asset through your tax return, in the year the asset was first used or installed ready for use.

 

Business assets include all fixtures and fittings on your practice premise, equipment, motor vehicle and other items, a full list is available on the ATO website.

 

How does it work? 

 

Say you need to purchase a medical equipment for your practice. You purchase the equipment from the supplier, finance approved and paid in full before 30th June 2019, even if the item is not installed and delivered before EOFY. At the end of the financial year you can then claim 100% of the cost of this asset as a part of your depreciation expenses. Ultimately this reduces company profits by the same amount and therefore, reduces total tax owed at the end of the financial year.

The $20,000 threshold applies from 12 May 2015 to 30 June 2019 and reduces to $1,000 on 1 July 2019.

How to budget your way to financial freedom

Talk to wealthy people and you will find most have one thing in common – they know how to manage their money. And that means having a budget. Boring, right? It might sound tedious, but the reality is you won’t get ahead without spending less than you earn.

Here’s our guide to budgeting so you can take charge and change your financial future.

Take stock

You won’t know where you can save if you don’t know what you’re spending. While it can be confronting, the first step to better budgeting is to find out where all your money goes.

Start by reviewing your past three months’ income and expenses. Categorise your costs into fixed essentials (mortgage, rent, insurances, phone), variable essentials (groceries, petrol, haircuts), unplanned essentials (new brakes, dental surgery) and nice-to-haves (Netflix, fashion, holidays).

You can use a traditional spreadsheet or a free budgeting app, such as Track My Spend, designed by ASIC.

Don’t fret if you find you don’t have enough income to cover your expenses. Better to discover this now than to keep heading in the wrong direction. If you’re spending more than you earn, or not saving enough, it’s time to make some changes.

Adjust spending

Time to decide where to cut back, keeping in mind even small changes can make a big difference. That take-away coffee before work tallies to about $850 a year. Starting with the nice-to-haves, decide what you can go without. Whether it’s eating out less, shying away from shoe sales or cancelling your wine subscription, sacrifices must be made! Your essentials also offer big saving opportunities. Budget less for groceries, shop around for a cheaper phone plan and talk to me about a mortgage review. There are plenty of costs you can adjust so don’t put it off and don’t make excuses!

Allocate funds

Once you know your essential costs, budget for those first. There’s no point splurging on a night out if you don’t have enough money to pay your electricity bill. If tempted to spend before you save, open separate savings accounts where you can allocate funds for bills and savings.

Add up the annual cost of your bills, such as insurances, electricity and rates, and divide the total by 12. Set up a monthly funds transfer for that amount so when bills are due, you have money on hand to pay them. You can then work out how much you need for weekly expenses, such as petrol and groceries, and even that daily coffee.

Now you know your essentials budget, set aside some savings. If you’re not sure how much to put away, start small and build to bigger amounts as you learn to live within your budget. A good savings goal is 20 per cent of your take-home pay. Once you’ve allocated funds for bills, weekly living and savings, the rest is yours to spend as you please. Just remember there’s a difference between desire and need, so try and save as much as you can. Remember, this is the bucket that rewards you down the track.

Stay on track

Everyone thinks about and manages money differently, so it’s important to find what works for you. The main thing is that you stay on track. It might take several months to notice a difference, but if you’re spending less than you earn, you’re heading in the right direction. Remember, budgeting needs to be part of your lifestyle not instead of it, so find ways to treat yourself from time to time without undoing your hard work.

Comprehensive Credit Reporting

Comprehensive Credit Reporting, or ‘Positive Reporting’ is here. And while the banks may not be happy about sharing their customers’ information with other banks, borrowers like you stand to benefit a lot more.

Comprehensive Credit Reporting is a new set of government-mandated rules for banks, where they have to share more detailed credit information about you. Some of you may initially be a bit concerned about the thought of more of your private information being known, but the important difference about this data is that it’s what’s called, positive information.

Traditionally the banks have only shared the negative facts about your borrowing. These are things like credit applications, defaults, overdue payments of loans and bills, and bankruptcy. Now they also have to share the good news. Rather than being penalised for missed payments, you’ll be rewarded for paying on time, and demonstrating responsible money management like closing credit cards when they’re no longer needed.

A more comprehensive and balanced view means lenders can get a clearer picture of your finances and make assessments based on your individual financial behaviour.

IT’S A GAME CHANGER

The policy was announced by then Treasurer Scott Morrison in late 2017.

“This will be a game-changer for both consumers and lenders, and will lead to greater competition in lending and naturally provide better access to finance for Australian households and small businesses,” he said.

“For borrowers, this regime should lead to one thing – a better deal on your mortgage, your personal loan or business loan.

“If you have a good credit history – you’re paying down your mortgage, you haven’t missed a payment on your car loan and your credit cards are under control – you will be able to demand a better deal on your interest rates, or shop around, armed with your data.”

SO IS IT GOING TO BE THE ‘GAME CHANGER’ AS PROMISED?

There’s no doubt this new system will change the lending landscape in Australia, and lead to more responsible behaviour from the banks and other lenders. Ultimately it’s you, as an individual customer or a small business owner, that will benefit.

HOW WILL YOU BENEFIT?

As a borrower, the new regulations are designed to make it better for you. Needless to say, the more your credit rating score is, the more you stand to benefit.

When a lender can get a clearer picture of your individual financial situation, they can better calculate your risk, and potentially tailor an interest rate for you to give you a better deal.

They’ll look at your positive behaviour over a 24-month period, which can help balance any one-off blemishes like a missed payment.

If you haven’t had a long history of borrowing, lenders can now look at loan repayments to assess your general patterns of paying on time and credit worthiness. Lenders can also see how many credit facilities, including limits, that you have open. This may require you to close or reduce the limits if you apply for credit. Don’t worry, I can help you through this process.

And if you have a poor credit score you can still benefit. Greater transparency makes it much easier to see what you need to do to improve it, such as paying loans on-time and closing any credit cards that you don’t need.

HOW WILL LENDERS BENEFIT?

With more information at hand, lenders can better assess an individual’s risk. This will lead to more responsible lending and help them reduce bankruptcies and bad debts.

A better understanding of the market and individuals means more tailored solutions and less of a one-size-fits-all approach. This should encourage more innovation, competition and new products from banks.

INFORMATION IS POWER

At the individual level, when you’re more informed, you’re more empowered. When you understand your financial position and how you’re seen in the eyes of the bank, you can make the most of it – or make changes to improve your situation.

It does add another layer of understanding to borrowing that has to be considered. And improving your financial literacy is where I can help.

The adoption of more open banking practices is designed to promote more responsible lending, which is something mortgage brokers strive to achieve every day. It’s not in anyone’s interest to have an unaffordable mortgage – for you, the lender or the broker.

With a more challenging lending environment, making the most of your broker’s expertise is more important than ever.

Since April 2015 the number of individual products a broker could offer you has more than doubled, and now sits in the thousands. If you’re on your own, it’s not really possible to be across all your options.

Another important thing to consider with the new reporting guidelines is that making multiple credit enquiries can have a negative impact on your score. Using a broker as your one point of contact, and letting them shop around for you, is a smart way to avoid this potential pitfall.

And if your credit score is not what it should be, there are steps you can take to improve things.

So, to find out about your credit score and how it can affect your ability to borrow, it’s a good idea to have a chat with me. Even if you’re not in the market for a new loan right now, it’s good for you to understand how any changes may affect your current loans, and any potential advantages if you decide to refinance.

Let me know when you’re free to catch up. I’m available at a time that suits you.

Unsecured Loan

A faster way to access finance for everyday expenses.

 

Unsecured business loans are a relatively new option for businesses that need to get access to some extra funds. The obvious benefits of this type of finance is the speed in which access is granted to the finance, with simplified application process. This may allow you to quickly take care of cash flow, cover urgent expenses, or make the most of an opportunity.

In recent years, a number of agile, financial technology (fintech) lenders have entered the finance market in Australia. These more non-traditional lenders can turn around approvals and deposit cash into your account in as little as 24 hours. Because they are unsecured the application is simpler and the loan amounts are often smaller – usually anywhere from $5,000 to $250,000. It also means there is greater risk to the lender so the interest rates may be relatively higher and the loan terms a lot shorter, with principal and interest repayments generally on a weekly basis but sometimes even daily.

While the access to funds can be handy, it’s important to weigh up the repayment terms and amounts to make sure this short-term cash injection helps your business over the short and medium-term.

Self Managed Super Fund Loan

Have you considered using the funds in your Self Managed Super Fund to invest in commercial property?

 

The savings you’ve built up in your Superannuation Fund can be used to make investments in a range of asset classes. By transferring your super to a new or established Self Managed Superannuation Fund (SMSF) the opportunity to use gearing to purchase property may become available.

Using your SMSF funds as a deposit, some lenders will approve loans starting at just $100,000 to purchase property, and the income generated from the rental can help meet your repayments.

With commercial property, it may be possible for your SMSF to purchase a property that will be occupied by your business, as long as the rent is at market rates.

Essentially this type of finance is a Term Loan with features such as flexible terms up to 30 years, the choice of principal and interest or interest only repayment, and the options of fixed or variable rates, or a combination of both.

There are many rules and regulations governing your SMSF so it’s important you get the advice of a financial professional, like your accountant or financial planner to assist you to make the right choices.

 

Contact us for more information!

Invoice Finance

Looking for an effective way of unlocking cash that’s already been invoiced to your clients?

 

Sometimes called Invoice Finance, Debtor Finance or Accounts Receivable Finance, this is like a cash advance based on the sales you’ve already made to your customers, without having to wait for the traditional 30, 60 or even 90 day payment periods.

In simple terms, a lender considers the invoices or monies you have owing as an asset. They’ll lend you a percentage of the money that’s owed to you, then pay you the remaining balance once they’ve collected the invoice, less a small percentage.

As an example, the lender could pay you 80% of a single invoice or the total balance of your combined invoices. The remaining 20% is paid to you once your client has paid the invoice, less a percentage ‘factor fee’.

This type of financing is a relatively quick and flexible way for your business to maintain cash flow, and can have many benefits when compared to other bank loans or lines of credit.

These can include:

  • Gives you almost immediate access to funds once an invoice has been issued
  • No other collateral or security is required
  • There are no repayment schedules
  • You don’t waste time chasing unpaid debts
  • Helps you manage cash flow and plan for seasonal and day-to-day fluctuations

Debtor Finance, Invoice Finance and Accounts Receivable Finance.
What’s the difference?

Essentially, they are all the same thing with one slight difference. Accounts Receivable Finance lends you money based on the total balance of all your invoices. Debtor or Invoice Finance is a loan based on one or several invoices.

 

Contact us today for further information!

Ways to slash your mortgage and get ahead

mortgage

The trick is there is no trick. Unless you strike it rich, debt reduction always takes financial discipline and usually some sacrifice. But if you are prepared to prioritise your spending and adopt a long-term focus, there are ways to slash your mortgage and get ahead.

Get the right loan

Apart from possibly paying for features you don’t need or missing out on a lower rate, you need to think beyond the here-and-now and consider your debt if interest rates climb.
Look for a loan that suits your circumstances. If you plan to make extra payments, consider a redraw facility that allows you to tap into the buffer you have built up, with no penalties or restrictions.

Securing the lowest possible rate is important, but make sure the offer is not a honeymoon rate, which will expire in six or 12 months and may leave you paying a higher rate for the life of the loan than if you had borrowed elsewhere.
If switching lenders or to a new type of loan, make sure you weigh up the cost of any switching or early exit fees against what you expect to save before signing on the dotted line.
A mortgage broker can help you navigate and compare the hundreds of loans available to find the right one for your situation.

Make extra payments as soon as possible

You pay the most interest in the first few years of a loan when the principal is at its highest. The sooner you can start reducing your principal, the better.

Let’s say, for example, you start out with that average new home loan of $444,000, taken out for 30 years at 5.5 per cent per annum. And say you tip an extra $100 a month (a modest $23 a week) into the repayments. You would knock $84,951 or 2.7 years off your debt. Pay an extra $200 a month and save $147,930 or 4.89 years. Super-size that to $300 extra per month and you will slash a massive $203,054 or 6.71 years off your mortgage.

You should also pay any windfalls, such as tax returns or work bonuses, into your mortgage to chip away at the principal faster.

Set your savings to work

Another way to make big dents in your mortgage debt is to leverage any savings via an offset account. Basically your savings work for you because they are offset against your loan balance to reduce the amount of interest you pay. If you have a $200,000 loan, for example, and $20,000 in a savings account linked to your mortgage account, your interest repayment will be calculated on $180,000. To maximise your savings balance and cash flow management, have all of your income paid directly into the account and all of your expenses paid out of it. Hopefully, your cash in is greater than your cash out, so there are savings to offset against your loan. Maximise your savings further by putting as many of your expenses as possible on a 55-day interest-free credit card and pay the full balance by the due date. That allows you to maintain as much in your savings account for as long as possible each month, with interest on your home loan calculated daily but charged monthly. The example above is a very neat one to illustrate the concept. Your savings account will fluctuate depending on your monthly cash flow, and so will your interest repayments. As long as month on month, the savings are growing and the loan balance shrinking, you are heading in the right direction.

If you struggle to save or be disciplined with credit cards, this strategy may not be right for you. You might be better off setting up a direct debit straight from your pay for extra repayments on your loan.

Instead of an offset account your lender may offer you a line of credit, where all of your income and debt run in and out of the same account, so your mortgage basically becomes your transaction account. The more funds that go in – and stay in – the lower your interest repayment each month and the faster you pay down the debt. The problem is many borrowers find they are not disciplined enough to keep reducing the debt and tend to treat the available balance as disposable income. While they can work for shrewd owner-occupiers, lines of credit are generally better suited to property investors who are looking to negative gear and rely on capital gain over time.

Cash flow is king

You may be wondering where to find funds for extra loan repayments or how to stockpile savings in an offset account. It comes down to how you manage your cash flow, which is essentially how you prioritise your spending. Make an honest appraisal of your expenses each month and look for discretionary costs you can get rid of or cut back. It may mean eating out less, taking your own lunches to work, cleaning your own home, taking cheaper or fewer holidays or buying less expensive clothes. Most people who have made significant inroads on their mortgages faster than others have made sacrifices along the way. Think of it as short-term pain for long term gain, which is ultimately a better financial future.

Cash in on deductions

You still have time to make any tax deductible purchases before June 30. Check with the ATO what you can claim for your specific job if you are a PAYE employee.
Small business owners have until June 30 this year to cash in on the $20,000 instant asset threshold. This allows you to immediately deduct the business use portion of a depreciating asset that costs less than $20,000.

Now is also the time to make tax-deductible donations to a registered charity of your choice.
If you are cashed up, you may be able to pre-pay some tax deductable expenses, such as accountant fees, interest costs on investments and some work-related expenses, for the next financial year. Check with your financial advisor to ensure you are eligible for pre-payments and they suit your situation.

How to cure the Christmas debt hangover

The festive season might be a distant memory but many of us will still be paying for it well into the future. According to the Australian Securities and Investment Commission (ASIC), more than a third of us put our Christmas gifts on plastic, racking up an average individual debt of $1,666.

 

The Christmas splurge adds to our mounting household debt, already among the world’s highest, with $30 million owed on credit cards2.

Our penchant for plastic even has the banks taking steps to help curb our habit. Late last year the Australian Bankers Association proposed a new code of conduct to ban unsolicited credit card limit increases, make it easier for consumers to cancel cards, and improve transparency on interest-free periods3.

The reality, however, is the buck stops with each of us when it comes to personal debt. Here are Haven’s tips to get on top of credit card debt in 2018 before it gets on top of you.

Take stock

The first step to crunching debt is knowing how much you owe. It can be easy to lose track of credit card debt, especially if you have more than one card. Take note of what you owe, and the interest rate, on each card.

Now take a look at the bottom of your latest statement where it spells out how long it will take to pay off your credit card and how much interest you will fork out in that time if you just pay the minimum due each month. Warning – the figures might alarm you.

If you just make the minimum monthly payment on a $5,000 balance at 15 per cent (starting at $102 per month and decreasing over time, with an absolute minimum payment of $20), it will take you almost 24 years to rid yourself of the debt and you will end up paying more than $12,000 with interest! Notch the repayments upto $246 per month until the balance is cleared, and you knock the debt over in two years and save more than $6,000 in interest.4

The key take-out here is always repay more than the minimum due.

Demolish your debt

Make a plan to crunch your card debt. You may consider socking all your spare cash onto the card with the highest interest rate and pay it off first, but remember to pay the minimum due on your other cards. You could also investigate consolidating all your plastic debt to one card with a low rate. Just make sure you take full advantage of any introductory low-rate window by repaying more than the minimum due each month.

Cancel cards as you transfer balances from them, or once paid off, so you are not tempted to rack up debt on them again.

If your cards are getting the better of you, consider speaking with a financial adviser or visit ASIC’s MoneySmart website www.moneysmart.gov.au for further information.

Track your spending

Run through at least six months of card statements to get a handle on your plastic purchases and look for ways to cut discretionary spending, such as entertainment, clothes and holidays. Create a budget and sink leftover funds into your credit card balance to pay it off sooner.

Purge the plastic

Exchange your credit card for a debit card so you can only spend what you have in your savings account. You will avoid deepening your debt and hopefully develop better shopping habits.

Choose the right card

Think about avoiding cards offering rewards such as frequent flyer points as they usually attract a higher rate and require years of high use to accrue decent rewards. It may make more sense to opt instead for a low-rate card with an interest-free period, and make the most of it by paying off any new debt before you accrue interest charges.

Set aside the Christmas savings

Start saving now for next Christmas. If you put aside $10 a week from April 1 until December 1, you will squirrel away $340, enough to cover a few Secret Santas. Add to your stash by dropping your gold coins into a jar at the end of each work week. You won’t miss them and your little pot of gold will lighten your wallet.

Any small steps you take to save consistently throughout the year can make a big difference come spending season.

Why you can bank on a Broker

One in two Australian home buyers1 now borrow via a broker. A dip in sentiment towards traditional banks, tighter lending criteria for investors and better-educated consumers have all helped boost mortgage brokers’ popularity over the past decade. There are, indeed, a raft of reasons to turn to a broker for your next home loan. Here are eight to get you started.


Freedom of choice

Brokers generally give you access to multiple loans from multiple lenders. Compare that with the loan options you might be presented with by a single lender. At the end of the day, competition and choice are the most powerful benefits a broker brings to the table and it’s the reason so many Australians have one onside.


You don’t pay a fee

Most brokers don’t charge their clients an up-front fee to use their services (and if they do, they need to give you a Credit Quote for your agreement). Brokers receive payment from lenders in the form of a commission and are required by law to disclose the details of these payments under the National Consumer Credit Protection Act to ensure transparency and to give you the peace of mind you’re after. Ask your broker to provide an overview of his or her commissions when you meet.


Save time

Why spend your valuable time researching home loans when a broker can do it for you? It’s the broker’s job to do the hard yards when it comes to your homework. A broker will make the most of your appointment time to get the necessary information to narrow down and present you with easy-to-understand options, saving you hours of online research and hard-to-translate comparisons.


It’s all about you

A mortgage broker aims to find a loan that’s right for you. Brokers are not salaried bank staff, and that means they focus on finding a loan that is right for your unique circumstances. Brokers also take the time to understand your financial situation and goals. Such as if you are planning to start a family, take a study break or save for an overseas trip.

A mortgage broker can recommend a loan that makes financial sense for you.


More accessible finance

Stricter credit rules have prompted some traditional lenders to avoid borrowers with poor track records or less predictable incomes. While no magic wands are waved, and higher interest rates might apply, a broker may be able to suggest an alternative option that’s right for you.


Smooth sailing

Buying a home and taking out a loan is an exciting and momentous milestone, but also a stressful process. Brokers ease many of the pain points by dealing with the lender and managing your application process through to approval. Brokers can also arrange after-hours appointments to fit your schedule, rather than the schedule of just one bank or lender.


The latest legislation

It’s also a broker’s job to stay up to date with legislation so they can make the right recommendations for customers and ensure they meet lending requirements, which have tightened in recent years to reduce the risk of loan defaults and help maintain a stable economy. Brokers stay across industry, economic and regulatory shifts to avoid unexpected roadblocks for borrowers.


Home loan health checks

Just like you get a check-up with your GP, your broker can run a regular health check on your home loan to see if it’s still right for you. Competition remains high in the mortgage market so it’s always worth asking your broker to reconsider your options. You could be paying off your loan sooner and saving thousands on interest repayments with a product that is better suited to your needs.