The instant asset write-off, which was due to expire on 30 June 2024, was recently extended by another 12 months, which means eligible businesses can continue taking advantage of this tax benefit in the 2024-25 financial year.

Under the instant asset write-off, eligible businesses can immediately deduct the full cost of eligible assets under $20,000, as long as they are first used or installed by the end of June 2025.

To qualify for the scheme, a business must have an annual turnover of less than $10 million. 

The instant asset write-off can be used for both new and second-hand assets. It can also be used for multiple assets if the cost of each individual asset is less than the relevant threshold. 

When claiming the benefit, the business must apply the simplified depreciation rules (it can’t be used for assets that are excluded from those rules).

According to the ATO, assets valued at more than $20,000 (which cannot be immediately deducted) can continue to be placed into the small business simplified depreciation pool and depreciated at 15% in the first income year and 30% each income year after that.

How to capitalise on the instant asset write-off

The instant asset write-off incentivises businesses to invest in profit-generating machinery and equipment.

So the way to think about the incentive is for a business to identify which parts of its operations would become more profitable by investing in the right assets. For example:

Businesses should also speak to their accountant, to understand how much they could invest, and their broker, to understand their borrowing capacity.

One of the hardest parts of buying a property can be saving the deposit. A guarantor home loan could give buyers the chance to enter the market years ahead of schedule by using a guarantor (generally a parent or close relative) to cover some or all of the deposit. As a result, buyers could potentially qualify for a home loan with cash savings equivalent to just 5% of the purchase price or even 0%.

Guarantors contribute to the deposit not by paying cash but by using the equity in their property as security. So, potentially, the buyer might make a 5% cash contribution and the guarantor a 15% equity contribution, for a combined 20% deposit; or in some cases the buyer might make a 0% cash contribution and the guarantor a 20% equity contribution. As a result, the buyer would be able to qualify for a home loan and would also avoid paying lenders mortgage insurance (which is generally charged when a borrower has less than a 20% deposit).

Requirements for the guarantor

For someone to act as a guarantor, they need to own a property and that property needs to have sufficient equity. So, as part of the process, the lender will conduct a valuation of the guarantor’s property.

The guarantor also needs to accept legal responsibility for the repayment of the loan. In other words, if the buyer fails to keep up with their mortgage repayments, the lender may chase the guarantor for payment; it’s even possible the lender may seize and sell the guarantor’s property to recoup its debt.

But that doesn’t mean the guarantor needs to be tied to the mortgage for the entire loan term. After a few years, once the buyer has built 20% equity in the property (potentially through a combination of paying down some of the mortgage and having the home rise in value), the buyer can refinance and remove the guarantor from the loan contract.

Guarantors should proceed with caution

Acting as a guarantor, therefore, involves risk, which is why guarantors should get legal advice before proceeding. It’s important that both parties – buyer and guarantor – have a clear understanding of their responsibilities under the arrangement, to avoid a breakdown in the relationship.

Guarantors should also understand that their borrowing power will be reduced for as long as they’re tied to the mortgage, because lenders will have to factor in the possibility that the guarantor may be forced to cover the buyer’s mortgage repayments.

As you can see, guarantor home loans can be a wonderful finance solution, but are not suitable for everyone. Reach out to discuss your circumstances in a free, no-obligation chat.

It’s commonly said you need a 20% deposit to qualify for a mortgage. However, more than three in ten new home loans actually have smaller deposits, according to the latest data from APRA, the banking regulator.

There are five main ways borrowers can buy a property with less than a 20% deposit.

Lenders mortgage insurance

A common method is to pay lenders mortgage insurance (LMI), which lenders generally charge when a borrower has a loan-to-value ratio above 80%. Often, borrowers are able to add the LMI premium to their loan, so they don’t need to pay it upfront. 

While paying LMI results in higher borrowing costs, it can actually be cheaper in the long run, because in the extra time required to save a full 20% deposit, property prices might increase by more than the current LMI premium.

Guarantor home loan

Another way to enter the market with a small deposit is to use a guarantor – who would usually be a parent or close relative and who would own a home with a significant amount of equity.

The guarantor can pledge their equity to cover some or all of the borrowers’ deposit, which allows the borrower to reduce their own deposit contribution to as little as 5% or even 0%.

(Guarantor home loans are covered in greater detail later in the newsletter.)

First Home Guarantee and Regional First Home Buyer Guarantee

The First Home Guarantee is a federal government scheme that supports first-home buyers to purchase a property with a 5% deposit without paying LMI.

Criteria apply, including:

The Regional First Home Buyer Guarantee is almost identical, but the property being purchased must be in a regional location.

Family Home Guarantee

The Family Home Guarantee is a federal scheme that supports eligible single parents or single legal guardians of at least one dependent to purchase a property with a 2% deposit without paying LMI.

Applicants do not have to be first-home buyers, but they must be owner-occupiers and earn less than $125,000 per year. Property price caps also apply.

Equity

If you own property with sufficient equity, you can borrow against that equity and use it to fund the deposit on an investment property.

That way, although you might still put down a 20% deposit, you could potentially cover the whole thing with equity (if you have enough equity in the property); in other words, you might not need to contribute any cash.

The federal government’s Stage 3 tax cuts will take effect from 1 July, which will benefit the borrowing power of the average home loan customer.

Starting from the 2024-25 financial year, the new tax thresholds will be:

The current thresholds are:

For a family on a combined income of around $130,000 – with one partner earning $80,000 and the other $50,000 – their combined tax cut will be over $2,600 per year or about $50 per week, according to government modelling.

Good news for borrowing power

Depending on your household income, these tax cuts could increase your borrowing power by tens of thousands of dollars.

That’s because the higher your post-tax salary, the more money you have to service a mortgage – and, therefore, the more that banks are generally willing to lend you.

PropTrack senior economist Paul Ryan said borrowers on lower incomes would particularly benefit.

“There’s a lot of people who are really constrained by borrowing capacities at the moment, particularly first-home buyers,” he said.

“First home-buyers in particular are doing it tough with higher interest rates and are the ones most constrained with borrowing capacities. I think it will give a bit of a boost to the market, particularly at the lower end of the market.”

Get in touch if you’re wondering what your borrowing power will be like from 1 July. I’ll compare lenders on your behalf (as borrowing power can vary significantly from lender to lender), so you know how much you can borrow and what kind of property you can afford.

The Australian Taxation Office (ATO) has flagged three key areas of concern at tax time – one of which is tax returns by property investors.

The reason the ATO is focusing on investors is because, in previous years, 90% of investors have made mistakes on their tax returns.

“This year, we’re particularly focused on claims that may have been inflated to offset increases in rental income to get a greater tax benefit,” ATO Assistant Commissioner Rob Thomson said.

“We often see landlords making mistakes when it comes to repairs and maintenance deductions on rental properties, so we’re keeping a close eye on this.”

There are tax implications when major renovations are incorrectly reported as minor repairs, because general repairs and maintenance can be claimed as an immediate deduction, whereas expenses that are capital in nature can only be claimed over time.

“You can claim an immediate deduction for general repairs like replacing damaged carpet or a broken window. But if you rip out an old kitchen and put in a new and improved one, this is a capital improvement and is only deductible over time as capital works,” Mr Thomson said.

“We encourage rental property owners to carefully review their records before lodging their return and take care to ensure they are claiming deductions correctly.”

Don’t rush to lodge, says ATO

The ATO’s second area of concern is taxpayers failing to include all income when filling in their tax return.

This can happen when people rush to lodge on 1 July, before all their sources of income have been pre-filled in their tax return.

“We see lots of mistakes in July where people have forgotten to include interest from banks, dividend income, payments from other government agencies and private health insurers,” Mr Thomson said.

For most people, these income payments will be pre-filled by the end of July.

“By lodging in early July, you are doubling your chances of having your tax return flagged as incorrect by the ATO.”

Remember the three golden rules for work deductions

The ATO’s third focus area is the incorrect claiming of work-related expenses.

The ATO has three golden rules for claiming a deduction for work-related expenses:

  1. You must have spent the money yourself and weren’t reimbursed.
  2. The expense must directly relate to earning your income.
  3. You must have a record (usually a receipt) to prove it.

“Copying and pasting your working-from-home claim from last year may be tempting, but this will likely mean we will be contacting you for a ‘please explain’. Your deductions will be disallowed if you’re not eligible or you don’t keep the right records,” Mr Thomson said.

There’s been a welcome reduction in properties being urgently listed for sale, which usually occurs due to financial difficulty on the part of the vendor.

There were 5,100 ‘distressed listings’ across Australia in May, which was 2.5% less than the month before and 8.5% less than the year before, according to SQM Research.

That said, there are some borrowers struggling to meet their repayments.

Research from Moneysmart, the website managed by ASIC, the financial services regulator, found that 47% of survey respondents with debt had struggled to make repayments in the past 12 months. The main reasons for this were cost-of-living pressures, reduced income and unexpected expenses.

Nevertheless, 30% of respondents said they would not seek hardship assistance from their lender, with 42% of those saying they would rather sell belongings / assets and 40% get a second job before applying for assistance.

“Customers in hardship are entitled under the law to request assistance,” ASIC Commissioner Alan Kirkland said.

“The message for Australians experiencing financial stress is that banks or lenders have a responsibility to support customers.”

How lenders support struggling borrowers

If you’re finding it hard to keep up with your mortgage repayments, please contact me immediately, so we can discuss the situation and plan how to move forward.

Generally, it’s best to let lenders know sooner rather than later, because they tend to be more flexible if you get ahead of the problem.

Lenders can offer a range of support, including:

Many people experience financial difficulty from time to time, so this is not something to be embarrassed about. 

Federal Treasurer Jim Chalmers last night presented the federal budget for 2024/2025. The Budget comes amidst a cost-of-living crisis, high inflation, struggles in the construction sector and an income election. 

The challenge was always going to be around helping Australians cope with rising costs without further fuelling inflation. The Labor Government said it focussed on building more homes and easing cost-of-living pressures among other bolstering measures. It forecasts that with this Budget, inflation will drop to 3.5% by the end of June and to 2.75% by the end of the next financial year.

Here are some of the key measures that may impact you.

Housing

Improved infrastructure: the Budget includes $1 billion to go to states and territories to build and improve infrastructure that can support housing developments. This includes roads, sewers, energy, eater and community infrastructure (including improved public transport).

Boosting the construction sector: nearly $89 million will create 20,000 new fee-free TAFE training spots to encourage more workers into construction and housing.

Rent assistance: Commonwealth Rent Assistance will see maximum rates increase by 10%, on top of the 15% increase that came into play in September 2023.

Social and crisis/transitional housing: a $9.3 billion investment is dedicated to building and repairing social housing to address homelessness across states and territories. $1 billion will go to crisis and transitional accommodation for women and children escaping domestic violence. Nearly $2 billion will also help community housing providers access concessional loans to deliver more social and affordable homes.

Student housing: There will be a cap on the number of international student enrolments for universities each year. If a university wants to exceed this limit, it will be required to build purpose-built student accommodation to be used by both international and domestic students.

Budgeting

Energy bill rebate: every Australian household will receive a total of $300 rebate with $75 applied automatically each quarter. 

Tax cuts: announced in January, the stage 3 tax cuts apply to Australians earning more than $18,200 per year. This calculator can help you understand how much you may save with the tax cuts.

Student fees: annual HELP/HECS/VET and Australian Apprenticeship Support Loans indexation is proposed to change from being based on the Consumer Price Index (CPI) to be the lower of the CPI or the Wage Price Index. This would be backdated to 1 June 2023, meaning a credit may be applied to debts. This Government calculator can show you how much you may save.

Nursing, midwife, teaching and social work students will be eligible to receive a weekly payment during their prerequisite practical placements from July 2025

Apprentices and trainees in fields with skill shortages, such as construction, will receive a boost in payment ($5,000 up from $3,000). Employers will also receive an additional $1,000 incentive to hire and train more people in these sectors.

Superannuation for new parents: from 1 July 2025 Superannuation will be paid during the government’s paid parental leave for 20 weeks.

Medication: PBS-listed medications will remain capped at $31.60 for Medicare card holders for the next year, or $7.70 for concession card holders and pensioners for five years.

Small businesses

Extending instant asset write-off scheme: this scheme allows small businesses with an annual turnover below $10 million to claim a tax dedication on new equipment (such as a vehicle or machinery) up to the value of $20,000. Speak to your accountant for more information.

Energy bill rebate: Eligible small businesses will receive a total of $325 rebate on energy bills, applied quarterly.

 

These measures may relieve some pressure for some people saving for a deposit to purchase a house, or for households with a mortgage. You can also reach out to discuss your situation to see if we could save you money. This could be help to set a plan to get you into your first home sooner, refinance to a loan better suited to your needs and goals or building your investment portfolio.

Non-bank lender Firstmac has become the largest major organisation to be hacked, following high-profile cybersecurity breaches at Optus and Medibank.

If a lender or any other organisation that holds your personal details has been hacked, you should change all your online passwords – particularly those for your bank, email and social media accounts – and set up two-factor authentication.

It would also be smart to ask the three major credit reporting bureaus, Equifax, Experian and Illion, to place a ban on your credit report, which is free and simple to do. During the ban period, the credit bureaus won’t use or disclose any information from your credit report, which means fraudsters won’t be able to open accounts in your name or gain access to your personal details.

Secure your devices, check your accounts

For further protection, take steps to secure your devices, including phones, laptops and smart TVs. That includes installing high-quality antivirus software, protecting your phone with a PIN or biometrics, and making sure your phone automatically locks after a short period of inactivity.

Check your bank, email and social media accounts for suspicious activity – if any is found, report it to cyber.gov.au. Also, notify your contacts so they know to be wary of messages being sent in your name.

Finally, monitor announcements from the affected organisation and the authorities, so you understand the situation and can make informed decisions about how to respond.

Securing finance for your business is part of a broader strategy to help your business achieve a particular goal. Your broker’s role is to design a finance package and loan structure to help take your business to the next level.

The first step in your asset finance journey is to think about the goals you’re trying to achieve. 

These may include:

Next, with the help of your accountant, make sure you understand your financial position, including your cash flow and balance sheet.

From there, your broker will work with you to create a personalised solution that aligns with both your goals and financial position. Options include:

These different options come with different costs, risks and tax implications, which your broker and accountant will explain to you.

Solution first, rates second

You’ll notice we haven’t mentioned interest rates and fees. That’s not because those things aren’t important – they are – but because they shouldn’t be the first thing you consider.

Instead, the focus should be on designing an asset finance solution that will help you achieve your goals. Once that’s been done, your broker will look for the most cost-effective way to implement the solution, which is when attention turns to rates and fees.

Finally, once you’ve secured your asset finance, it’s important to review it on a regular basis – because if your financial position or goals change, you might need to alter your loan structure or refinance to a different finance package. Again, your broker and accountant will help you with this review process.

Please reach out if you’re interested in increasing sales, expanding capacity or boosting efficiency. I’ll explain your options so you can make an informed decision on how to proceed.

When you buy a property, your initial ‘equity’, or ownership stake, is whatever deposit you put down to qualify for the loan, which is often 20%.

Typically, your equity rises as the years advance, through a combination of you paying down your mortgage and your property increasing in value, as this hypothetical example shows:

So, after eight years, your equity has increased from 20% to 52%, or $200,000 to $650,000. At this stage, your equity gain is paper wealth. But there are two ways it can be turned into actual cash.

The first is to sell your home, repay the mortgage and pocket the difference – but you would need to find somewhere else to live.

The second is to borrow against the equity and use that money, including to fund the deposit on an investment property.

How to grow your asset base

To continue the hypothetical example, you decide to leverage $160,000 of the equity into a new $640,000 loan, and use those funds to purchase an $800,000 investment property. 

So your equity in your home falls from $650,000 to $490,000, or 52% to 39%, while your equity in the investment property is $160,000, or 20%.

Generally, when you ‘cash out’ equity in this way, lenders want you to retain at least 20% equity in the first property – which has been done in the hypothetical example.

The downside of your hypothetical investment property purchase is that your overall debt has increased from $600,000 to $1.24 million.

However, your asset base has jumped from $1.25 million to $2.05 million. Also, your debt level is still conservative, because your overall loan-to-value ratio is just 61%. 

Refinancing made easy

‘Cashing out’ equity is a popular wealth-building strategy that many Australians have used over the years to create property portfolios.

As part of the strategy, you’ll need to refinance your existing home loan, which means going through the standard mortgage application process once again.

I’ll help you with the entire process, from comparing home loans and shortlisting the leading options to structuring your loan and managing your application, to make it as smooth and stress-free as possible.