A relation aged 25 is earning $150,000 a year in a construction job. He and his partner will be paying for a new house-and-land package next year. He asked me if he should be salary sacrificing to save tax. I told him I did not think that was wise in light of his proposed house purchase and all the costs associated with that. Your often mention salary sacrificing to superannuation rather than paying off a home loan, but am I correct in thinking this would only be applicable to somebody approaching retirement?
You are spot on. It would be crazy to be piling money into super at such a young age when they are planning to buy a house in the foreseeable future.
In any event, salary sacrifice into super is not a massive tax saver in his situation. His employer should already be paying $15,000 a year into super, which leaves only $12,500 available to be salary sacrificed.
The sum of $12,500 in his pay packet would lose tax of $4937, whereas money contributed to super would lose $1875. The tax saving of $3062 is relatively small.
It is a different matter entirely for someone aged 50 or more who wants to pour money into super, to make sure they retire with no mortgage.
My partner and I live in Melbourne and bought a house on the south coast of NSW for my daughter to live in, and for us to use for holidays. She owns 40 per cent of the house and we own 30 per cent each. I plan to leave my 30 per cent to my daughter in my will and my partner plans to leave his 30 per cent to his daughter. Will my daughter need to pay Capital Gains Tax (CGT) when I die? Would it be better to transfer my share to her before I die?
If you give it to her now, you would be liable for CGT.
However, if you leave your share to her in your will, no CGT would be payable and until she disposes of the property. This could be many years in the future.
Furthermore, provided the property continues to be her principal place of residence, the impact of CGT should reduce over time.
Your daughter should be thinking about ways to buy out your husband’s share, because the situation could be unsatisfactory if he dies and 30 per cent of the property is then owned by somebody else.
I am aged 60 and work full-time. I am trying to plan my finances for retirement in six years. I have recently come into an inheritance of $170,000 and am in a quandary as to where to invest it. I would like to be able to grow the funds but also to be able to access the money relatively easily after my retirement. The money is for travel and possible small renovations, as my husband’s defined-benefit super scheme generates payments of $2415 per fortnight, which covers our living expenses. We own our home and have a $300,000 mortgage on an investment property, valued at $850,000. I am thinking about either buying and renting another property – although would need to get a large loan – or perhaps buying shares or putting the money into my super, which is now just $60,000. I am also not sure about the tax implications of shares vs super. I welcome your comments on how best to invest the money.
I do not think taking out a large loan at your age is wise.
Super is the perfect place for you to invest the money, as accessibility would not not be an issue.
You have turned 60, which means you can withdraw money from your fund as soon as you retire from your job, or at age 65 – whichever is earliest.
The money could be contributed as a non-concessional contribution and there would be no tax on it or on any withdrawals.
Keep in mind that shares are a type of asset, whereas super is a vehicle that lets you hold assets in a low-tax area.
You could have each way bet by having your money in super, with a large part of the selected fund asset mix in shares.
I have been reading with interest your comments on what happens if a couple are on the age pension and one of them dies, leaving the surviving spouse over the single asset cut-off means test of just $593,000. Does replacing worn carpets and blinds come under allowable ways of spending money on renovations?
Yes, there are a number of allowable ways for a pensioner to spend money. These include renovations, replacing household items and travel.
- Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
Article Source: www.brisbanetimes.com.au
How the house price boom could threaten business start-ups
Whenever the topic of rapidly rising house prices is raised, there are always concerns about what the future will look like for younger generations when it is time for them to try and buy the roof over their head.
There are fears of financial insecurity, rising wealth inequality and, eventually, a group of people retiring with a rental bill hanging over their head or a mortgage yet to be paid off. For those unable to get onto the property ladder early enough, the outlook is bleak.
But during the federal government-introduced inquiry into housing affordability and supply in Australia this month another concerning outcome of rapidly rising prices was raised that doesn’t get talked about enough.
Independent economist Saul Eslake recently told a public hearing for the inquiry price booms and a market unfairly weighted towards property investors could soon affect the number of start-ups launched across the country.
“It’s very common for someone who starts a small business to have their house on the line in order to get the finance they require,” Eslake said.
“Indeed, among the longer term adverse consequences of the decline in homeownership rates in Australia is that it may be more difficult for people to start and operate small businesses because fewer of them will have homes that they can use as security for business loans.”
Could this be yet another unexpected and adverse outcome of the latest property market boom? Time will tell.
But there is some research suggesting that Eslake’s concerns that the dynamism of the small business sector is uniquely at risk from changing levels of homeownership is a fair analysis. A Reserve Bank research paper from 2015 by Ellis Connolly, Gianni La Cava and Matthew Read found households who own small businesses are more likely than employee households to owe residential-secured debt. This was typically second mortgages or property investor loans.
And for newer small businesses this was even more evident, with these households owning a young start-up less likely to owe business debt but just as likely to owe home debt or credit card debt.
“This could be consistent with these households finding it harder to raise business debt and instead relying on personal lending products to fund their young business,” the researchers said. In other words, it’s tricky to get lenders to put up the money at reasonable interest rates to launch a risky new venture.
And when founders look for other ways to fund their small business start up, the value built up in their home is often one of the more common sources they tap into. If you don’t have a home, this is not an option available to you. If you have taken on a bigger mortgage than you can afford to get onto the property ladder, this might also no longer be an option.
On the other hand, rising home values could actually spur on small business creation for those who own property already.
A 2013 European Central Bank paper from Stefano Corradin and Alexander Popov examined the relationship between entrepreneurialism, home prices and home equity in the United States where homeownership rates are relatively high. It’s arguable how much this would apply to Australia, but it’s possible these trends are similar here.
The research noted that those who might otherwise launch a business could be discouraged from becoming a founder if they have low levels of wealth or other borrowing constraints, but owning a property in a rising market was found to help provide the funds to become an entrepreneur.
“A 10 per cent increase in home equity increases the probability that a non-business owning household will switch to entrepreneurship in the future by up to 14 per cent,” the research says. Conversely, a fall in home values and a drop in equity could have the opposite effect.
As homeowners and home buyers know, the housing boom in Australia is still underway, but there is evidence of a slowdown on the horizon.
The Commonwealth Bank is forecasting national property prices to increase 7 per cent in 2022, followed by a 10 per cent decline in 2023 should interest rates rise.
But determining whether the double-digit property price rises seen this year have been good for the small business sector now and into the future is tricky.
While there is a risk those who have failed to get onto the property ladder will be unable to launch new start-ups, the price rises have helped some existing small businesses weather through the coronavirus-driven economic storm. The outlook was grim when the pandemic initially hit the world and economists were steeling for sky-high unemployment rates alongside a tidal wave of insolvencies that would leave the nation in a mess not seen since the Great Depression. Instead, there has been record levels of government support, the relatively rapid development of vaccines and a spending and hiring spree post-lockdowns.
We might need to thank house prices for some of that. The RBA’s October Financial Stability Review says small and medium businesses were provided significant amounts of government support to keep them afloat during the pandemic-induced recession, but it wasn’t the only source of protection.
“One potential mitigating factor from a financial stability perspective is that around 30 per cent of bank lending for small and medium enterprises (those with an annual turnover of less than $50 million) is secured by residential property, meaning that the recent increases in housing prices will likely help some businesses avoid insolvency,” the review says.
This benefit, at least, should not be understated.
Article Source: www.brisbanetimes.com.au
What residents get at the full-floor La Mer, Main Beach apartments
The goal for developer Polites Property Group was to create a luxury tower than residents wouldn’t have a need to leave.
Residents of the new luxury Main Beach apartment development, La Mer, will have the ultimate Gold Coast lifestyle on their doorstep when the whole-floor apartments are finished in late 2023.
Across the road from the beach on Main Beach Parade, La Mer comprises just 29 apartments across its 34 levels. Only a handful of apartments remain, with high demand for a higher level of luxury continuing to sweep the Gold Coast.
It’s just a stroll to the bustling Tedder Avenue, one of the most well-known strips on the Gold Coast for high-end fashion shops, convenience stores, restaurants and cafes.
A little further along the path is the Southport Yacht Club, which hosts live music, and the Marina Mirage, one of the most popular fresh fish eateries in the area.
But the goal for developer Polites Property Group was to create a luxury tower than residents wouldn’t have a need to leave.
Archidiom, the local Gold Coast architecture firm who handled the design, said the development takes the opportunity for the design of a contemporary, innovative subtropical building to provide a ‘relaxed beachfront’ living.
“The development will contribute positively to the character of the area by replacing the existing tired low rise building with a project displaying fresh, simple architectural lines to create modern urban living,” Archidiom says.
“The large liveable apartments which maximise natural light and cross ventilation through the provision of spacious living and balcony areas will be appealing to a large demographic of potential buyers.”
Just whole-floor apartments, starting from 307 sqm, La Mer is pitching itself as the ultimate downsizer development. “Transitioning from a house to an apartment has never been easier,” NPA Projects, who are marketing the development, suggest.
Cris Edwards, at Mannigan Interior Design, a boutique design house with offices in California and on the Gold Coast, handled the interiors of the luxury apartments.
Each apartment features at least three bedrooms, two ocean-view balconies and a luxury kitchen with a large walk-in pantry.
Each apartment also has the convenience of a dedicated storage cage and two parking spaces.
Communal recreational facilities also sprawl across an entire floor, a blend of physical wellbeing and entertainment facilities.
There’s a 13-metre pool, which is cleverly designed to be private, while also being open plan to take advantage of the consistent Gold Coast climate and the views to the beach.
There’s private sun lounges, a yoga lawn, and a number of dining areas with barbecue facilities.
The two-level penthouse in La Mer was snapped up by a Gold Coast local for just short of $6 million earlier in the year.
Why Aperture, Broadbeach apartments are attracting the local and interstate buyer: Five minutes with Little Projects Director Leighton Pyke
“We wanted to put a slightly different spin on what the Gold Coast usually offers – giving it an injection of an outside perspective,”.
The Melbourne-based Little Projects has sought to meet the ever-growing demand for high-end apartments at their latest Gold Coast apartment development, Aperture.
The Broadbeach tower will be home to just 29 apartments across its 35 levels when it is completed in mid-2023, with buyers already showing interest due to the 200 sqm plus of living space across each apartment.
Leighton Pyke, director at Little Projects, said that after the sell-out success of Signature around the corner, the team wanted to create something a little different.
“Signature was obviously higher density with 245 apartments, a project of that scale takes considerably longer to move,” Pyke said.
“We saw there was a good level of demand for that larger product and wanted to take something to the high-end owner-occupier market quickly to try and meet that demand.”
Pyke and the Little Projects team engaged the Melbourne-based architect, Elenberg Fraser, to create the 120 metre tower, having worked with them previously on the design phase of a development of around 1000 apartments in Fishermans Bend in Melbourne.
It’s only the second time the architecture firm has designed an apartment project on the Gold Coast. The only other is the mixed-use hotel and apartment development Mondrian at Burleigh Heads, currently in market.
“We wanted to put a slightly different spin on what the Gold Coast usually offers – giving it an injection of an outside perspective,” Pyke says.
“Their involvement certainly sets us apart, potentially bringing a few new ideas to the Gold Coast.”
Pyke says there’s already been a big wave of Sydney residents enquiring on Aperture.
With house prices rocketing in the Harbour capital, some downsizers and retirees are happy to take advantage of current market conditions and cash in on their longtime family homes and buy something smaller as a city base, freeing up money to secure a more expensive holiday home that they will spend a significant amount of time at.
Pyke however added that the same sentiment is felt with the local market, where there’s also windfall house sales.
House prices in Broadbeach – Burleigh experienced the highest annual growth in the Gold Coast in the 12 months to August 2021, with gains of over 38 per cent, according to data from the data-driven buyer’s agency, InvestorKit.
Apartments in the same area grew by 15.7 per cent over the same period.
“It’s speeding up that transition to downsize, which is why we are seeing huge levels of owner-occupiers wanting to buy something that might be toward that higher price point.”
Pyke says the team have a firm belief in the longevity of the Gold Coast apartment market, and are working towards securing more development sites heading in to 2022.
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