Buying your first home.

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Abolishing stamp duty for first home buyer purchases under $600,000

Buying your first home is getting harder. House prices are rising and the upfront costs – a deposit, stamp duty and fees – can be a huge hurdle.

To help first home buyers, we’ll completely abolish stamp duty for both new and existing properties under $600,000. First home buyers purchasing a property between $600,000 and $750,000 will also receive a tapered discount.

With an average saving of around $8,000, it will give first home buyers an advantage, and more money to put towards the purchase of their home.

This measure will help more than 25,000 people each year at a time when they need it most.

It’s all about putting first home buyers on a level playing field with investors.

These savings are in addition to the existing First Home Owner Grant, and will cost an estimated $851 million over the next 4 years. These changes will apply from 1 July 2017.

Young farmers will continue to be eligible for Victoria’s unique stamp duty concession on the purchase of their first farm – a concession only available in Victoria.

This will be administered by the State Revenue Office.

First home buyers – new house

Jon and Anne are first home buyers purchasing a new two-bedroom house in the western suburbs of Melbourne for $575,000. They would have paid $14,785 in stamp duty, partly offset by their First Home Owner Grant. Under the Government’s proposal, they will pay no stamp duty at all – allowing them to put their savings towards paying off their new home.

First home buyers – existing house

Rashid and Emma are first home buyers purchasing an existing townhouse in the middle suburbs of Melbourne for $650,000. They would have paid $34,070 in stamp duty, equivalent to more than 5% of their home value. Under the Government’s proposal, their stamp duty will be reduced to $11,357 saving the couple $22,700.

2017 – a list of lists regarding the macro investment outlook

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Despite a terrible start to the year and a few political surprises along the way, 2016 saw good returns for diversified investors who held their nerve. Balanced super funds had returns around 7.5%, which is pretty good given inflation was just 1.5%. 2017 is commencing with less fear than seen a year ago but there is consternation regarding Donald Trump’s policies, political developments in Europe and the growth outlook. This note provides a summary of key insights on the global investment outlook and key issues around it in simple dot point form.

 

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Chewy ANZAC Biscuits

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    With ANZAC day upon us, here is a simple recipe for a delicious chewy biscuit to go with your tea or coffee.

 

         Ingredients

  • 1 cup rolled oats
  • 1 cup plain flour
  • 2/3 cup brown sugar
  • 2/3 cup desiccated coconut
  • 125g butter, chopped
  • 2 tablespoons golden syrup
  • 1/2 teaspoon bicarbonate of soda

    Method

  • Step 1
  • Preheat oven to 160°C/140°C fan-forced. Line 3 baking trays with baking paper.
  • Step 2
  • Combine oats, flour, sugar and coconut in a bowl. Place butter, syrup and 2 tablespoons cold water in a saucepan over medium heat. Stir for 2 minutes or until butter has melted. Stir in bicarbonate of soda. Stir butter mixture into oat mixture.
  • Step 3
  • Roll level tablespoons of mixture into balls. Place on trays, 5cm apart. Flatten slightly. Bake for 10 to 12 minutes or until light golden (see note). Stand on trays for 5 minutes. Transfer to a wire rack to cool completely. Serve.

Why banks & agents value your home differently

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Have you ever wondered why a home can be listed for one price, valued at another, lender-valued at yet another price and then sold for a figure that leaves everyone scratching their heads?

How can one property have umpteen different prices? How do you know which price is right? Let’s walk through a hypothetical home and see if we can shine a light on the price confusion.

A tale of five prices

Meet the Smith family. They own a home in the city, but are keen for a sea change and plan to buy a property on the coast.

They call their bank to arrange refinancing their home so they can release money to pay for a deposit on their next home.

They also phone their local real estate agent and ask for a price appraisal before deciding to take their home to market. It sells under the hammer at auction. Meanwhile their local council rates notice arrives in the mail and they must pay it before leaving their residence.

Mrs Smith is packing boxes for moving day when she realises her family home has five different ‘prices’, including her personal assessment of its real value. She wonders if she somehow sold for the wrong price.

Why do these variations exist?

 

The bank value

If your home is or will be mortgaged, your lender will almost certainly need to value it. This gives the lender confidence your asset offers ample security against the borrowed amount if, for some reason, you cannot pay your mortgage and the lender must sell the property to recoup its debt.

It is therefore unsurprising that a bank valuation will usually be conservative, sometimes 10%-20% less than the current selling prices of comparable homes.

A bank valuation will usually be conservative.

In this case, the Smiths’ bank assesses their home and decides its value is $500,000.

The selling agent’s price appraisal

Real estate agents are commonly asked to assess the market value of your property. This will often help a vendor decide who to engage to sell their home.

Before being chosen to act on a vendor’s behalf an agent will typically inspect the home and research comparable sales in the local suburb or town before producing written feedback and a sale price estimation such as “between $X and $X” or “from $X”.

This price guide is useful to a vendor when deciding what price to advertise.

The Smiths’ agent conducts his inspection of their home and, based on current strong demand for three-bedroom sandstone homes under 1km from the local primary school, estimates it will sell for $550,000 to $600,000.

The sale price

Regardless of whether the property is sold via private sale or auction, the price the successful buyer is prepared to pay, and the vendor is willing to accept, on the day the contract is signed is the property’s legally binding sale price.

Hot markets, high demand in certain areas and a big turnout on auction day can all have an effect on the final sale price for a property.

In our scenario a big crowd attends including eight enthusiastic buyers. Bidding is active right from the start and the price quickly surpasses even the agent’s optimistic appraisal. The hammer falls on a bid of $630,000.

 

The final sale price of a property can depend on a number of factors, including a big turnout on auction day.

The local council’s valuation

Every year when a property owner gets their local municipal rates bill they will see on the notice a Capital Improved Value (CIV), site value, net annual value (NAV) and/or gross rental value (GRV).

These figures are calculated using varied methodology including comparable sales data and the bi-annual figures from the State Valuer-General’s offices.

Councils, and water and fire authorities, use these figures to work out how much homeowners owe them for using their infrastructure and services.

According to the Smiths’ rates notice, their property has a CIV of $480,000 – the value of the land and any capital additions such as a house – and a Site Value of $280,000 – land value excluding buildings.

The homeowners’ price

Every property owner will have a ‘wish price’ in their minds when they come to sell.

They usually also have a ‘this-is-the-lowest-I-will-go’ price and usually both of these price points are based on a home’s location, aspect and features, but sometimes vendor price expectations are also influenced by emotion rather than facts.

Mr and Mrs Smith really didn’t know how to price their much-loved family home when they came to selling it.

Every property owner will have a wish price in their minds when they come to sell.

They had been studying price data for their neighbourhood, which showed a median price of $510,000 for three-bedroom houses in their suburb over the past 12 months.

Mrs Smith thought their home’s sale price should reflect the median price figure, but Mr Smith thought the new pool they’d installed last year should add at least another $50,000 to their home’s sale price.

In the end the market will usually decide a property’s value by what a buyer is willing to pay for it at auction or through private sale.

Seven tips to travel on a budget

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Careful planning can help you enjoy a great holiday, whatever your budget.

Does it feel like ages since your last holiday? Maybe with responsibilities like paying off your credit card, saving for your first home, or paying back your university fees, your next holiday still seems a long way off…

Well, don’t despair. There are plenty of ways to take a break without breaking the budget.

  1. Go social—Check out travel hubs like Trip Advisor and The Savvy Backpacker to decide where to go, what to look for and how to get the best bargains once you arrive.
  2. Keep your eye on the exchange rate—Before booking an overseas holiday work out what your Aussie dollar is worth in other currencies. Why? The recent fall in the value of our dollar means holidaying overseas may be more expensive than you realise. It may be worth looking at local holiday options too.
  3. Get the best deal—Compare prices using online aggregators like Skyscanner, Webjet and Wotif and sign up for e-newsletters from travel providers to find out about specials. Check out Channel Nine’s hottest Getaway travel deals, which feature different holiday deals on a weekly basis.
  4. Go at the right time—Take advantage of earlybird deals and avoid school or public holidays.
  5. Travel with friends or family—More people can mean more savings on tours, car hire and hotel rooms.
  6. Package it up—Combine airfares with accommodation, day tours and even meals to save money ahead of time and avoid nasty surprises if the exchange rate changes.
  7. Start saving—Become savvy at saving by looking at how successful savers go about it. Then why not use some handy tools to help you along, like AMP’s savings calculator, MoneySmart’s TrackMySPEND app or check out MoneyBrilliant, all of which can help you organise your personal finances.

And don’t forget wherever you’re going next—planning makes perfect!

Important information

© AMP Life Limited. This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, AMP does not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, AMP does not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.

What’s worth more – your belongings or your livelihood?

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At least one in five of us will be unable to work due to injury or illness in our lifetime, yet we’re still more likely to insure our car than our most important asset–ourselves.

You might have the attitude ‘she’ll be right’ but looking at the statistics, there is more chance of something going wrong than you might think.

Over 80% of Australians insure their car but less than a third of us have income insurance should we have an accident and be unable to work1.

How invincible are we really?

It’s estimated that at least one in five Australians between the ages of 21 and 64 will be incapable of working at some point due to an unforeseen accident, injury or illness2.

Despite this, almost 95% of the population is underinsured, meaning we could be setting ourselves up for real financial difficulties should something happen3.

 

Here are some national figures to put it into perspective:

  • Every year 236,000 people of working age suffer a serious injury or illness4
  • 18 families in Australia lose a working parent every day of the week5
  • 50,000 Australians have heart attacks every year6
  • One third of women and a quarter of all men are diagnosed with cancer7
  • More than 1,600 people die on Australian roads every year, most aged 26 to 598
  • A stroke occurs every 12 minutes across the country9.

Debunking the myths

The national Lifewise campaign set the record straight on a number of misconceptions believed to be part of the reason behind why Australia is underinsured as a nation. These include:

  1. The government will look after me if something happens Centrelink pays benefits, but it might not be enough to cover your current lifestyle.
  2. Workers’ compensation will cover me This only covers incidents that occur during work hours or illnesses that are a direct result of your employment.
  3. Life insurance is not affordable For most Australians insurance is affordable and can be paid via monthly premiums. If you want a quick estimate, AMP’s online calculator can help you crunch the numbers.
  4. Life insurance companies don’t pay claims Insurers pay out almost $10 million every working day in claims.
  5. I’ve already got enough insurance Research shows 60% of families with dependent children don’t have enough insurance to cover household expenses for a year if the family bread winner were to pass away.

What types of cover are available?

Insuring yourself and your income can allow you to maintain your lifestyle and living arrangements, and give you comfort in knowing you can still meet your financial commitments—things like mortgage, rent, card repayments, bills, kids’ education fees, and treatment and rehabilitation costs should you need it.

You can buy different forms of personal insurance through your super fund or via an insurance company. Here’s a rundown of the four main types of cover available:

  • Life insurance pays a lump sum on your death or the diagnosis of a terminal illness
  • Trauma insurance pays a lump sum on the diagnosis or occurrence of a specific illness
  • Income protection provides a replacement income of up to 75% of your regular income if you’re unable to work due to illness or injury
  • Total and permanent disability (TPD) pays a lump sum if you become disabled and are unable to ever work again.

What AMP’s doing in this space?

In 2014, AMP paid more than $887.6 million in claims across its life, trauma, income protection and TPD policies. The age range of those making a claim varied from six years old to 88 years old.

The important thing to understand is why insurance might be necessary for your situation, whether that includes a partner or children, and how much you need so you are not under or over insured.

Need help?

Speak to us today.

 

1 www.lifewise.org.au/facts-research#sthash.fSaAIgeC.dpuf
2 www.lifeinsurancefinder.com.au/post/compare-life-insurance-australia/the-impacts-of-underinsurance-in-australia/
3 www.lifeinsurancefinder.com.au/post/compare-life-insurance-australia/the-impacts-of-underinsurance-in-australia/
4 www.lifeinsurancefinder.com.au/post/compare-life-insurance-australia/the-impacts-of-underinsurance-in-australia/
5 www.lifeinsurancefinder.com.au/post/compare-life-insurance-australia/the-impacts-of-underinsurance-in-australia/
6 www.lifewise.org.au/insurance-101/understanding-the-risks
7 www.lifewise.org.au/insurance-101/understanding-the-risks

Changes to your Super

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While the government will reduce the amount of money you can put into super from 1 July 2017, the good news is that you could still take advantage of opportunities before the financial year ends. The Australian Government’s May 2016 Federal Budget proposals and several subsequent modifications to its plans around super reform passed through both houses of parliament at the end of November. With new regulations set to become part of Australian superannuation law, some of the rules around super contributions and the tax breaks available will change from 1 July 2017.

In the video above, Shane Oliver, Head of Investment Strategy and Chief Economist, AMP Capital provides an overview of the key changes and what these could mean for investors.

Four things that are changing

The after-tax super contributions cap will be reduced

Initially, the government planned to introduce a $500,000 lifetime cap on after-tax (non-concessional) super contributions, which it will no longer be implementing.

Instead, an annual after-tax contributions cap of $100,000 will be put in place, replacing the current cap of $180,000. Those under age 65 will still have the ability to bring forward three years’ worth of after-tax super contributions, with a maximum of $300,000 under the bring-forward rules.

The before-tax super contributions cap will also be lowered

The before-tax (concessional) contributions cap will decrease from $30,000 (or $35,000 if you’re turning 50 years of age or older this financial year) to $25,000 per year for everyone, irrespective of age.

A pension transfer cap of $1.6m will be introduced

If you’re converting your super into a pension to derive an income in retirement you’ll be restricted to a limit of $1.6 million in your tax-free pension account, not including subsequent earnings.

If you already have a balance above that, the excess will need to be placed back into the super accumulation phase, where earnings will be taxed at the concessional rate of 15%, or taken out of super completely.

Transition to retirement pensions will lose their tax exemption

Investment earnings on super fund assets that support a pension are currently tax free. However, this will no longer apply to transition to retirement (TTR) income streams.

Earnings on fund assets supporting a TTR income stream will be subject to the same maximum 15% tax rate that applies to accumulation funds.

 

Super opportunities this financial year: two things you can do now

Contribute more in before-tax super contributions

The before-tax super contributions cap will be reduced from $30,000 per year (or $35,000 if you’re turning 50 or over before 1 July 2017) to $25,000 per year, for everyone, irrespective of age.

This means, depending on your circumstances, there is an opportunity to contribute an additional $5,000 (or $10,000 if you’re turning 50 or over) in before-tax super contributions than what will be possible before the cap is lowered at the end of the 2016 financial year.

Contribute more in after-tax super contributions

The after-tax super contributions cap will decrease from $180,000 per year to $100,000 per year. This means you could contribute $80,000 more in after-tax super contributions than what will be possible when the after-tax super contributions cap is reduced on 1 July 2017.

If you’re under age 65, you could also bring forward three years’ worth of after-tax contributions up to a maximum of $540,000, which is much higher than the $300,000 limit that will apply from the 2017 financial year.

Why super matters

Australians are living longer and with many needing to fund a longer retirement as a result, adding to your super could make a difference to the lifestyle you lead in the years after you finish working.

To put it into perspective, September 2016 figures, provided by the Association of Superannuation Funds of Australia, show individuals and couples, around age 65, who are looking to retire today, need an annual budget of $43,372 and $59,619 respectively to fund a comfortable lifestyle – that’s assuming they own their home outright and are in relatively good health.

By comparison, the maximum annual Age Pension rate for a single and couple is currently $22,804 and $34,382 respectively, keeping in mind not everyone is eligible for government assistance.

Other considerations

  • If you contribute money to super that exceeds the super cap amounts, it will be taxed at a higher rate and an interest penalty will apply. You can find out more at the ATO website.
  • The value of your investment in super can go up and down. Before making extra contributions to your super, make sure you understand and are comfortable with any risks associated with your chosen investment option. Learn more.
  • The government sets general rules about when you can access your super. Generally you can access it when you’ve retired and reached your preservation age, which will be between 55 and 60 depending on when you were born. Learn more.
  • There are other ways to help boost your super. Learn more. There may also be benefits to making spouse contributions. Learn more.

More information

To find out how reforms to the superannuation system could affect you, speak to your financial adviser.

 

Four tips for an easier Christmas

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By planning ahead, you’ll be able to relax over the holidays rather than teetering under the pressure

Joy bells may ring out from the speakers, but many of us experience stress during the Christmas period. According to Relationships Australia, 93.5% of people celebrate Christmas. And more than 30% experience high levels of stress and anxiety1.

Family and financial pressures

Many people report family relationships as highly stressed due to financial worries and work-life balance factors, while the pressures of buying gifts and entertaining2 also add to the strain. With food and presents being the main expenses, 25% of people worry about covering the costs3.

Four tips for easing into Christmas

While for many families Christmas is a time of giving, it’s important not to give to others at the expense of your own peace of mind. But it’s true that finding the balance can be challenging.

Whether you’re involved in family celebrations or gatherings with friends or colleagues, use our tips to find the right balance for you:

1. Make plans with a birds-eye view

Before all is said and done, create a timeline so you don’t end up doing your shopping or entertaining all at once. Writing down commitments or objectives can go a long way towards relieving the overwhelming feeling that Christmas can bring. Start with a list of bullet points and expand your plan to include dates and action items.

If you feel pressured by family arrangements, visualise the things you’d like to be doing and aim to find a way to achieve them. Sometimes a tactful conversation with family members can help more than you might think.

2. Work out where your Christmas spending money will come from

It’s important to live within your means at Christmas time, even if the lure of giving or family expectations urge you to spend.

  • Work out whether you’re able to allocate money to your Christmas budget. Remember to factor in any unexpected costs that may come your way.
  • Use AMP’s Budget planner calculator to work out how much you may be able to allocate for Christmas spending, and consider whether opening an account like the AMP Bett3r account is right for you—it can help you to plan to pay, save and spend this Christmas.

3. Be a calculated shopper so you’re not tempted to overspend

Once you’ve decided how much you can afford to spend, avoid impulse buying by being financially organised.

  • Set a budget and stick to it.
  • Make a Christmas gift list and include a budget for each person you’ll buy a present for. Keep it handy for next year to save yourself time—you can always tweak it if you need to.
  • When it comes to shopping for food, be sure to find the cheapest prices in the supermarket. You could save more than you think.
  • Shop online before buying and compare prices—the earlier you plan ahead the more time you’ll have for things to arrive by post. You’ll keep your stress levels down by avoiding crowded shopping zones too.
  • Don’t shop with your credit card unless you can pay the balance in full within the interest-free period—20% of Australians paid for Christmas presents with a credit card4 and the average amount owing after festivities is $1,668 per card5.

4. Get creative and have fun in the process!

Can you make gifts and decorations this year? You may decide to make homemade food or other things to give away. Maybe your family members would like to be involved. Can you start a new tradition and have a Christmas making day and spend creative time together?

Enjoy a restful break

In the lead up to Christmas you still have time to get organised and make the most of any time off you have. Use our tips to start planning now so you can keep your costs down, enjoy yourself and welcome in a happy and prosperous 2017!

1, 2 Relationships Australia, December 2015: Christmas stress
3 Survey results reported in The Sydney Morning Herald, One-quarter of people fret about festive season expenses
4 ASIC’s Money Smart, Australia’s Christmas spending
5 Finder.com.au: How Aussies can repay their $286 million credit card interest Christmas debt with a balance transfer

7 trips where you’ll pay next to nothing for accommodation

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You don’t always need lots of money to venture to new places.

One of the most expensive parts about travelling is typically what you’ll spend on accommodation.

To reduce or even eliminate your lodging costs, we’ve pulled together seven ideas that could open you up to a world of possibilities.

1. Bunk with mates or relatives

If you have friends and family that live interstate, overseas or places you haven’t been before, get in touch and see if they have a room free at their place at a time when you’re both available.

It’ll give you a chance to catch up as well as having an in-house tour guide who can show you the sites, the local attractions, the hidden gems, not to mention the best places to eat.

2. House-sit your way around the globe

Minding someone’s place for free can be a win-win for all parties involved, particularly when the homeowner has pets or various odd jobs that need attending to, which can often be the case.

If you can’t find anyone in your immediate network, you could pay a small subscription fee to register your profile on a relevant house-sitting website like HouseCarers or TrustedHousesitters.

3. Swap accommodation

It’s simple—you go to theirs, they come to yours and it’s free. Another bonus is size doesn’t matter. You can swap your apartment for a beach house in Mexico or even a small studio in New York City.

A few websites where you can check out places to stay and create an online profile for a monthly fee include Love Home Swap and HomeExchange.

4. Volunteer your skills overseas

Getting involved in a humanitarian, environmental or wildlife project abroad is another way you can see the world, offer your services and play a part in something you’re likely to never forget.

Such expeditions will come with varying price tags, but depending on the program you choose there will be a variety of inclusions which may involve flights, meals, accommodation and cultural activities.

Whatever you choose, like most things it’s a good idea to do your research and read the fine print. Websites you may want to check out include International Volunteer HQ and Projects Abroad.

5. Barter your time and hard work

If volunteering isn’t your thing, but you’re open to a working holiday and taking a position where you exchange your services for free or cheap food and accommodation, there’s something for you too.

The types of positions and industries you can work in vary a lot—think fruit picker in outback Australia, bartender in Ireland, tourist operative in a Canadian ski resort.

The amount of hours you work will differ, so again it’s worth doing your research and seeing what’s available. Look at websites like Global Work and Travel and Willing Workers On Organic Farms.

6. Have a stay-at-home vacation

A holiday in your own hood could open you up to possibilities you previously didn’t have time for, or knew existed. It may involve local attractions, coastal walks, a road trip, camping—anything you don’t do day-to-day. The point is breaking away from your usual routine.

Other things to consider

Remember that not everything that’s fun and life changing comes with an unrealistic price tag. And, with 211,000 Australian travellers taking 12 months to pay off their holiday credit card debt1, hopefully some of these money-saving travel ideas have given you some food for thought.

1 https://www.finder.com.au/press-release-debt-lag-2015

Cash is king over the counter at Christmas

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See how you can keep your shopping habits in check.

By Paul Clitheroe

The festive season is just around the corner, and plenty of us will be hitting the stores to stock up for Christmas. Research shows we’ll collectively splurge $9.77 billion on gifts alone this year – that’s about $539 for each of us, and this doesn’t include turkey and all the trimmings. So it’s worth thinking about how you’ll manage the cash squeeze to avoid hitting the New Year strapped for cash or weighed down by debt.

Christmas is a wonderful time of year but it can also put extra demands on our finances. Getting in early for festive shopping lets you stagger spending over time, which can make things more manageable.

Some very enthusiastic shoppers are doing just that. Research by Finder shows more than five million Australians started their Christmas shopping in October 2016 or earlier. The real shopping frenzy is expected to peak in early December.

The usual rules of smart shopping apply at Christmas – shop around for a good deal; draw up a purchase list to avoid impulse buys; and hold onto receipts in case Aunty Ethel isn’t so keen on the power tools you’re planning to put in her Christmas stocking this year.

Important rules also apply to the way we make purchases. In particular, aim to pay with cash or a debit card. It’s easy to get caught up in all the pre-Christmas sales and go overboard with spending, however sticking to cash wherever possible means you shouldn’t get into too much trouble.

If you don’t have the cash, consider lay-by. It may be old fashioned but it’s a perfectly acceptable way of buying, and with most retailers you’ll pay no extra charges.

A big incentive to choose cash over a credit card is that you’ll avoid interest costs – an extra expense that can take the shine off a bargain very quickly.

Figures from the MoneySmart website show last year the majority of Australians dipped into savings to pay for Christmas buys. However one in five of us relied on credit cards. The majority (80%) of these people paid the purchases off within three months, but the rest took as long as six months to pay down the card debt. Who wants to still be paying off Christmas in June?

If you need to reach for a credit card think about whether it’s really the right purchase for you – especially if you’re already juggling ongoing card debt. Aim to rely on the folding stuff instead, and don’t be afraid to ask if a cash sale will score an extra discount.

Paul Clitheroe is a founding director of financial planning firm ipac, Chairman of the Australian Government Financial Literacy Board and chief commentator for Money Magazine.

Paul Clitheroe is a founding director of financial planning firm ipac, Chairman of the Australian Government Financial Literacy Board and chief commentator for Money Magazine.