The Australian Taxation Office (ATO) is closing in fast on everyone who doesn’t properly declare their income and pay the correct amount of tax.

 

As your Tax Accountants, we want to help you be aware of what the ATO is doing and how you can protect yourself.

 

Click here for full article

The post The ATO – Don’t Say We Didn’t Warn You! appeared first on Wealth Definition.

Working Capital

Companies the world over are often faced with the costly requirement for staff cars. However, with the number of financing options on the rise, many business owners are turning to funding these purchases rather than paying cash.

Financing, rather than buying outright, enables businesses to take advantage of two key benefits: greater control of cash flow and working capital, as well as various tax benefits.

“The preservation of working capital is a key benefit for business owners when comparing financing against paying cash for staff vehicles,” says Cristian Fedrigo, National Sales Manager, Leasing and Personal Loans at AFG.

“A business owner needs to consider whether their working capital is better spent on other aspects of the business, such as paying debtors, advertising or even purchasing more inventory.

“Some businesses may even be able to invest working capital and achieve a rate of return that exceeds the interest charges associated with financing,” added Fedrigo.

Taxation Benefits

The taxation benefits associated with financing staff vehicles is another key reason why businesses are turning to financing options. Of course, there are many different types of finance, each offering different tax benefits, as well as the luxury tax threshold to consider, so expert tax advice is strongly recommended.

“In certain circumstances, the financing of business assets provides a business owner with an opportunity to claim various tax deductions, such as rental payments, interest payments and depreciation, thus minimising the amount of tax payable,” says Fedrigo.

Going down the financing route can be cost-effective, and with expert advice it can also be pain-free when it comes to paperwork. Fedrigo says that some businesses can arrange finance for a vehicle without the need for financial statements.

“With a standard application taking no more than 20 minutes to complete, we see motor vehicle finance as an integral component in providing a holistic, comprehensive service to our customers,” he says.

“What’s more, with interest rates at all-time lows, the decision between paying cash and financing business assets should be an easy one.”

The post Car finance for businesses appeared first on Wealth Definition.

There are plenty of different types of business finance. But before diving in and applying, it’s important to understand your requirements first. This is so that a loan can be matched to your needs, and so that you can potentially avoid the problem in the future. “Do your homework first, because if you don’t, you’re going to buy the wrong product,” says the finance broker. “There are hundreds of ways of getting the money, but you’ve got to match those with the purpose.”

The consequences of choosing the wrong finance product may mean you are paying too much for finance. Or it may be you are ending up with a loan that simply isn’t fit for the purpose – in this case it may make a problem worse, rather than solving it. “It comes down to finding out what your real issue is,” says the finance broker. Work out how long it will take to repay the amount you need to borrow.  Consider whether the repayments will impact the business, what has caused the shortfall and whether you need to take any other action. “A lot of people in need of short-term debt might not be invoicing properly or collecting their debts properly,” says the finance broker.

Finally, make sure you talk to someone experienced before talking to bank staff. Sometime these staff may not have specialist knowledge of small businesses, or a good understanding of your business and its needs. Rather than asking friends what they think, the finance broker suggests speaking to an accountant, financial planner or broker first. Let’s get you started with a new business loan!

The post How to choose the right business loan appeared first on Wealth Definition.

The bad news is that there is no one-size-fits-all answer.

The good news, however, is that a solid application is the key to keeping the approval time short.

The amount of time it takes for you to receive a response to your home loan application can vary. An answer is usually received between two days to two weeks, depending on a range of factors.

“For a reasonably straightforward application, it’s 48 hours to a final approval. But, depending on how complex the circumstances are, it can take longer than that,” explains the finance broker.

Before offering conditional approval, your potential lender will need to make an assessment of your application and conduct a valuation of the property. Of course, having a valuation that is acceptable to the lender done in advance will expedite the process.

“With valuations, the intention is to support an application rather than to make or break it,” the broker says. “There are a few things that can result in an application not being approved based on valuation, like zoning, property size, or if the condition of the property is poor enough that major repairs would be required before it could realise its market value.”

The lender will also assess your capacity to repay the loan amount you have requested. This is where all of the information about your salary and liabilities come into consideration, and where accurate and complete information is essential.

“The credit review by the lender can include a bit of to-and-fro between the customer, the broker and the lender due to the lender’s request for further information as that credit review takes place,” the broker says.

Your potential lender makes an overall judgement of you as a borrower and the complexity of your financial history will affect how long this takes.

“It’s best to be full and frank in disclosure from a borrower’s perspective. The biggest red flag is non-disclosure of liabilities or adverse information on a credit history, whether it is included in documentation or not,” the broker says.

“The complexity of the application process is a great reason why you would sit down with a reputable broker, as they can just explain all of that to you.”

Following the submission of an application, you can expect your finance broker to be in touch with you to update you on progress, and to notify you of the outcome. If your application is approved, your broker will also advise you of when to expect a formal letter of approval from your lender.

Speak to our lending team about how they can simplify the home loan application and approval process, and create the strongest application for you.

When Would I Refinance My Mortgage?

Whenever it makes financial sense to do so.

Heard about mortgage refinancing? In the past, most people who took out a mortgage doggedly continued with it until they had paid it off. These days, people refinance their mortgage much more frequently. The average duration of a home loan in Australia now is just 4-5 years. Here we look at some of the reasons people in Australia refinance their home loan.

Mortgage refinancing reasons: lower rate

The most common reason for people to refinance their mortgage is to get a better deal. But be careful you don’t become interest rate-fixated. When you refinance your home loan, you need to consider fees and charges as well as the interest rate. You often have to pay charges for exiting your current home loan, plus charges for taking out the new mortgage. You need to be sure that in refinancing your home loan that you’ll be better off in the long run after taking into account all costs.

Mortgage refinancing reasons: more flexibility

Many people only discover the full details about their mortgage when it’s too late. They try to do something and get told by their lender that either they can’t do it, or they will incur a hefty charge if they do. An example is a redraw facility – the ability to pay extra money into a mortgage and then redraw it later. This feature is not possible with a basic home loan, so many people refinance their mortgage to give themselves this sort of increased flexibility.

Mortgage refinancing reasons: renovation

If you carry out renovations, it often makes sense to refinance your mortgage and take out a construction loan so you only pay interest as building progresses. Once construction is over, it might make sense to refinance your home loan again so that you consolidate the total amount you owe into a loan that minimises your interest bill, while giving you a degree of liquidity.

Mortgage refinancing reasons: home equity

Over recent years in the property market houses have appreciated at a significant rate. e.g. a home you bought for $300,000 five years ago, might now be worth $500,000. Refinancing your mortgage with a home equity loan might let you tap into that extra $200,000 equity.

Mortgage refinancing reasons: defaulting

Some people find they have borrowed more than they can comfortably repay, and they’re in danger of defaulting. There’s no shame in that. But don’t suffer in silence. If you’re having trouble making your mortgage repayments, talk to your MFAA member about refinancing your home loan to make it more manageable.

The post The home loan approval process & when to refinance appeared first on Wealth Definition.

As the home loan market becomes increasingly complex, more people are turning to finance brokers. Here are some of the reasons.

Finance brokers can save time

The choices now available in the mortgage market can seem limitless and completely overwhelming. You can choose to research the subject, the lenders and their products yourself, or work with a finance broker who already has that knowledge.

Finance brokers give you choice

All finance brokers have a panel of Lenders from which they recommend a loan. They have to become accredited with the lender to offer their product, and are required to keep up-to-date with their latest offers.

Finance brokers can help find the right loan

The best deal is not necessarily the cheapest rate. A good finance broker will examine your circumstances and future plans to recommend a loan that is right for you. Having an appropriate loan which works for you can help you build wealth.

Most finance brokers don’t charge you

Most finance brokers don’t charge a fee for their service as the lenders pay them a commission for the loans they write. There lenders offer the same rate via the finance broker as they would directly, and a finance broker could save you money in other ways.

Finance brokers can help you avoid pitfalls

Many products seem to offer a great deal but they could have penalties, fees and charges you may not be aware of. Or, they may not offer the flexibility you require in the future. A finance broker can help you avoid taking out a loan you might later regret.

The only finance brokers to deal with: MFAA members

A good finance broker can save you time and money, and give you peace of mind. But, remember, only work with finance brokers who are members of MFAA – they are the Essentials of Borrowing..

 An MFAA Approved finance broker is not your average mortgage broker.

Talk to us today to get immediate assistance with any finance needs!

Why speak to a finance broker now!?

When saving a deposit to buy a home, many people have a goal amount in mind that they need to save before they meet with a finance broker who will help them secure the finance.

If this is you, you’re doing it wrong. From day one, when you first think ‘I could maybe buy a house if I worked hard and saved a lot’, you’re ready to have a finance broker on your side.

A finance broker’s knowledge of the loan and property market will help you work out how much you will be able to borrow, which determines the size of the deposit you will need to save.

They will also be able to help you develop a realistic timeline to save your deposit and find ways to pay down debts faster, and provide creative solutions that will help reach your goals sooner.

You may also be pleasantly surprised to find that you are closer to your goal than you thought. The tools in a finance broker’s belt that can help you realise your dreams more quickly and efficiently include lender’s mortgage insurance, specialist lending products, land loans and, for investors predicting significant rises in property prices, interest-only loans.

The post Why should I use a finance broker? appeared first on Wealth Definition.

As property prices continue to rise, purchasing in a centrally-located or sought-after area is out of reach for the average working millennial. Instead, many are opting to rent rather than buy as it means not having to compromise their inner city or beachside lifestyle. But for those who are still eager to enter the market, there is a way to get the best of both worlds.

‘Rentvesting’ is the term coined for when you purchase a property for investment purposes in an affordable location and continue to live and rent in the area of your choice. An example of how the market is evolving, it is a wealth creation strategy that is popular among the younger generation due to the flexibility it offers in comparison to being an owner-occupier.

“Millennials aren’t interested in purchasing a property in the outer suburbs and then having to commute into the CBD,” says  an MFAA accredited finance broker. “Rentvesting allows your rental income to cover the mortgage expenses, so you can keep living the lifestyle you want without it costing you any money.”

For this strategy to work, you’ve got to be a good saver and there needs to be a focus on delayed gratification, advises the broker. “It’s all about living within your means. Don’t spend big at the start while you’re building it up. Step away from the mentality of negative gearing and tax minimisation and buy neutrally, or ideally, a positively geared property as this provides higher rental yields.”

A recent Mortgage Choice survey highlighted an increase in ‘rentvesting’  from 21 per cent of investors to 37 per cent over the past twelve months alone. But while this strategy may appear ideal to many, it’s not suited to everybody.

“It’s still a foreign way of thinking,” says the finance broker. “In the past, the great Australian dream was to buy a home on a quarter acre block and then do everything you can to pay that down as fast as possible in the hope of living debt-free. ‘Rentvesting’ is quite the opposite. It says we’re okay with good debt as long as we stick to our budget and keep using the money to invest further. You’ve got to have an open mind and be comfortable with debt.”

To ensure you have the means to make ‘rentvesting’ work for you, contact us for advice on good debt and other strategies that will allow you to maintain your current lifestyle.

The post ‘Rentvesting’ – enter the property market without sacrificing your current lifestyle appeared first on Wealth Definition.

Asking how long it takes to get a loan approved is like asking how long a piece of string is. Every application is unique! So the time between your first contact with your bank or broker and approval can never be predetermined. There are, however, some things you can do to help hurry your application along to get your home loan in place.

Although very rare, same-day loan approvals are possible depending on the lender’s criteria, the complexity of the deal and turnaround time. “In my experience, this has been possible when the client’s lending position is fairly straightforward. This is in terms of employment, asset and liability position,” says an MFAA accredited finance broker. “Also, if a valuation wasn’t required due to a low LVR and both parties were happy with the contract price.”

If not prepared, it could take up to a month! The most common reason for a delay is a lender’s turnaround time to assessment. Especially when some lenders have competitive offerings and experience larger application volumes. However, a lack of preparation can cause this delay to snowball. “When there are such delays and then a lender must organise a valuation or request further information, this can lead to a lengthy process time,” the broker says.

A good finance broker will help you take all the necessary steps to ensure fast home loan approval. Although, there are simple ways you can help hurry the process along before your first meeting with your broker.

Disclose all information

To avoid back and forth requests, which can delay your application, ensure your lender has a thorough understanding of you as an applicant including appropriate identification of all borrowers. Provide all the supporting and necessary documents upfront to your broker. Convey as much detail as possible in relation to your requirements and objectives and have good, current information on your financial position. The broker will need to not only have your full financial details but will also need to take reasonable steps to verify it.

Skip the valuation queue

Not all applications require a valuation! Depending on the property and lending institution, forgoing this step can save a considerable amount of time. Time can be saved by having a valuation completed prior to your application. That is as long as it’s accepted by the chosen lender – but check with the broker first.

To ensure your application avoids any unnecessary delays, speak to us today!

The post How to speed up your home loan approval appeared first on Wealth Definition.

Know your budget

Before considering refinancing, you need to have a clear idea of your budget. If you underestimate your budget, you run the risk of getting knocked back from your lender.

“I know a lot of homeowners who have estimated a budget of say $100,000 to do renovations. Only to discover it will cost a lot more,” an MFAA broker asserted.

“This means you may have to reapply for the loan, which banks generally don’t like.”

“Be conservative with your projection. If you think you need $100,000, I’d recommend to apply for $150,000 just in case, if you can afford it. The key is stick to your budget,” adds the broker.

The next step is to speak to your broker to determine which loan will suit your needs and objectives.

Line of credit loan (Home equity loan)

Line of credit loan is also known as an equity loan. To be eligible, one must be looking to make upgrades to the cosmetic domain of their property. Installing a new bathroom or kitchen, painting the interior or exterior of the house and other basic construction falls under a line of credit loan.

These renovations, more often than not, do not supersede the costs of structural changes. So homeowners can call on up to 80 per cent of their Loan-to-Value Ratio (LVR).

A line of credit loan is a “revolving door” of credit. It combines your home loan, daily spending and savings into one loan.

To calculate the value you can borrow, subtract your current loan balance from your property value. Then multiply by 80 per cent. For example, if your property is worth $500,000, and you have $250,000 left on your loan, your home equity is $250,000. You then multiply this total by 80 per cent. If you’re uncertain of your home value, contact us so we can assist you to arrange for an appraisal or valuation.

If you choose a line of credit home loan, it essentially works as a large credit card. You can use it to purchase cars, cosmetic renovations and other investments. However, the interest-only charge starts when the equity is drawn down.

Keep in mind, line of credit loans provide you with money that can gather interest quickly, so if you are ill disciplined with repayments or money, speak to us today for a plan that matches your unique circumstances.

Construction loans

Construction loans are suitable for structural work in your home, for example, if you’re adding a new room or making changes to the roof.

These loans give homeowners the opportunity to access larger sums of money, with the amount dependent upon the expected value of the property after renovations are completed.

The advantage of a construction loan is that the interest is calculated on the outstanding amount, not the maximum amount borrowed. This means you have more money available in your kitty, but only pay interest on the money you choose to spend. For this reason, the broker may recommend that you apply for just one loan, but leave some leeway in your borrowed kitty.

When applying for a construction loan, council approval and a fixed price-building contract are required. We can assist with to reduce the paperwork and stress!

Your lender will appoint an assessor to value your construction at each stage of the renovation. This will happen before you pay your instalment. When construction is complete, speak to your mortgage broker as you may be able to refinance back to the loan of your choice.

When looking at both these loans, the broker says consumers can call on other property they own to boost their overall borrowing amount if they wish.

“Depending on the client, they can use other property to get a line of credit and a construction loan. Or they might get a typical construction loan if there is going to be an extensive framework change on the building,” the broker says.

Broker advice

If you speak to a broker they will be able to determine which loan will give you the options you seek.  This advice is essential, as a poorly planned construction loan could cost you more down the road.

“Consumers should ask their broker, ‘What type of loan am I eligible for?’, because if you don’t get your construction loan right, you may be jeopardising your bank security,” the broker says.

While these specific options can be discussed with your broker, if they aren’t suitable, there may be other options available.

Speak to us to make your grand renovation plans a reality!

The post How to Refinance to Renovate? appeared first on Wealth Definition.