Some lenders are currently prepared to finance 95% or more of the value of a home but is it really a good idea to borrow that much of a property’s value?

At the moment major and non-major lenders are prepared to finance as much as 97% of a property’s value. Such a high loan-to value ratios (LVRs) have not been available since before the onset of the GFC.

The criteria will differ between lenders but how do these loans work and how do you decide whether it is ever a good idea to borrow such a high percentage of a home’s value?

The vast majority of lenders are limiting home loans to 90% of the property’s value plus Lenders Mortgage Insurance, therefore they are not available across the board. Some lenders are prepared to go to 95% plus Mortgage Insurance which can take you to in excess of 97% and some lenders don’t even want to see 5% genuine savings (these are rare). In other words, it’s currently possible to qualify for a high-LVR loan with your 5% of the purchase price coming from a source other than genuine savings, including First Home Owners Grant (FHOG) or a gift. The only thing that will not be allowed to cover the 5% is another loan.

Lenders who are happy to finance up to 97% will look closely at your employment status & history.

There are postcode restrictions. Lenders will consider going as high as 97% for properties in metropolitan areas with a good potential for a quick resale. This is to ensure that if the loan goes bad they can offload the property in a reasonably short period of time.

Although not usually publicised, applicants approaching retirement age may have difficulty finding a lender willing to go to 95% or higher LVR.

Most lenders though want to see the genuine 5% savings if they are willing to have an LVR as high as 97%.

The other good news is that those lenders who do not require genuine savings are not penalising borrowers by charging a higher interest rate.

Recent deals include securing a loan with a 97% LVR and no genuine savings for between 6% and 6.5% fixed for three years. If you want a variable loan the most competitive recent rates have been around 6.4%.

The catch is that you will be required to pay for Lenders Mortgage Insurance (LMI) as part of the deal. On a $300,000 loan over 30 years with a 95% LVR, the LMI (depending on which insurer your lender uses) will cost 2.1% of the loan amount, paid at the start of the loan and put on top of the loan.

That turns your $300,000 loan into a $306,000 loan. The additional interest you pay over the life of the loan may end up costing you $12,000 instead of $6,000.

But if you hold off buying until you save the extra 5% it would not take long before the property values go up by more than $6,000.

It is mostly first home buyers who are taking up these 95-97% home loan offers and they will need to know how to negotiate a good price on the homes they are interested in.

By being a tough negotiator when dealing with real estate agents it is possible to reduce the asking price of a property by more than 5% and this is the best way to reduce your loan size and the overall cost of your mortgage insurance.

It’s also worth avoiding these loans if you don’t have a strong savings habit.

It would not be advisable for clients still living at home with their parents and who have no savings and who think they will use a gift as their deposit to enter into such arrangements.

Is a 97% Home Loan a Good Idea? 

If you are an employer (or group of employers) who pays $1,000,000 or more a year in taxable wages, you must pay payroll tax. You may however have to register for payroll tax even if your annual wages are under this amount.

You must register for payroll tax within 7 days after the end of the month in which you:

• Pay more than $19,230 a week in Australian Taxable Wages or; • Become a member of a group that pays more than $19,230 a week in Australian Taxable Wages.

You must register for payroll tax if you meet the above criteria even if you think that you will pay less than $1,000,000 in Australian wages in a year.

Any payments liable for payroll tax made to an employee for their services are called taxable wages.

In general, payments are liable for payroll tax if they are: • a reward for services rendered by an employee and/or director (Wages and Allowances) • payments to which the recipient has an enforceable right (e.g. 9% Superannuation Guarantee Payment) and include a cash salary which the employee elects to forgo in return for other benefits (e.g. Salary Sacrificed items such as Superannuation).

Example: The payroll records of XYZ Pty Ltd for November 2011 report

An employer or group of related businesses may be liable for payroll tax if the total taxable wages throughout Australia exceed the payroll tax threshold in that particular State.

eg. The payroll tax threshold in NSW is $678,000. If you pay $150,000 wages in NSW and $700,000 in Queensland, you may still be liable for NSW Payroll Tax (on a pro-rata basis) because your overall Australian Wages of $850,000 exceeds the NSW payroll tax threshold.

Overview of Payroll Tax 

The Clean Energy Act 2011 and eighteen associated Acts became legislation on 8 November 2011. The cornerstone of this legislation is the concept of a carbon price and from 1 July 2012, Australia will have such a carbon price, which for the first year has been set at a fixed amount of $23/tonne. The carbon tax is payable by liable businesses on each tonne of carbon pollution they emit. It is believed that the most effective and economical way of reducing carbon pollution is by putting a price on carbon as it will encourage businesses to reduce their carbon pollution and thereby reduce the amount of carbon tax they must pay. Businesses can achieve this by investing in clean technology and finding more efficient ways of operating. The government have assured the public that the money raised from the carbon tax will not be used to reduce government debt, but instead will be used to:

assist households with price impacts they face from the imposition of the carbon tax by cutting taxes and increasing payments;

support jobs and competitiveness in industries affected by the carbon tax;

So What Does the Carbon Tax Mean for You?

In order to answer this it is necessary to look at the impact of carbon tax under the following 4 broad categories:

 Households are expected to see little impact from the carbon tax as it is not a direct tax on individuals as they will not emit sufficient carbon pollution to be liable for the tax. Whilst the price of certain goods that are reliant on carbon pollution for their production will go up, the government has promised that the majority of Australians will be compensated for this cost, and this cost increase will be relatively small for most items. Nine in 10 households will receive some combination of tax cuts and increased payments to help them with the cost of living impact of the carbon price.

 It is expected that 99% of businesses will fall into this category meaning that after 1 July 2012, their day to day operations will not vary significantly. These business will not be buying or selling carbon credits, will not need to report to government on their energy consumption and will not have to purchase licences to emit. The only real impact on these businesses (similar to households) is that they will likely incur a small increase in the cost of their inputs. The main issue they will have to deal with however is in relation to ensuring that they appropriately “pass on” the increase in the cost of their inputs as a result of the carbon price. The Australian Competition and Consumer Commission (ACCC) will be closely monitoring business behaviour in the lead up to the introduction of the carbon tax on 1 July 2012 in relation to claims the business (and it’s employees) are making about the impact of the carbon price on their business.

Basically, if businesses want to advise customers that the reason for a price increase is the carbon tax, they need to be able to justify that claim.

The ACCC has indicated that statements such as “Beat the Carbon Tax — Buy Now” or “Buy now before the Carbon Tax bites” will be monitored and any statement that exaggerates possible savings by purchasing before the carbon price takes effect will be investigated and prosecuted where appropriate. Similarly, businesses that wish to increase prices after 1 July 2012 and attribute the price increase to the carbon tax will need to ensure that they have a reasonable basis for doing so.

 The new legislation requires entities that emit or consume energy to report to government on their emissions or consumption. This means that whilst a business may not exceed the carbon emission limits, they may consume sufficient energy in the form of fuel, gas and power and will be required to report on this for the first time post 1 July 2012.

As a broad guide, any entity that uses 100 terajoules or energy is required to report. This translates to around 2.5 million litres of fuel — including gasoline, diesel, LPG and LNG — or up to 25 000 megawatt hours of electricity, or some combination of the two.

There will be some businesses in transport, manufacturing, waste management and other industries that may be required to report under the new measures.

It is estimated that there are about 500 of the biggest polluters in Australia who will fall into this category and thus will be required to pay for their pollution under the carbon pricing system. These businesses who are directly emitting more than 25,000 tonnes of carbon a year will be forced to pay the tax and also purchase carbon licences from 1 July 2012.

The introduction of the carbon tax system is a contention issue, but as Australians are the highest carbon polluters per person in the developed world it has been argued that action must be taken. It is hoped that the tax will encourage Australia’s largest polluters to move to cleaner energy solutions and will be the first step in ensuring Australia remains competitive in the global economy whilst minimising environmental damage caused by pollution for future generations.

What does the Carbon Tax mean for you and your business?

If you are looking for ‘greener’ alternatives to a certain product and are not sure where to start, go to 

. There is a function to search by keyword or category to help you find suppliers and products that are known to have green attributes.

Environmental Tip

The recent Budget announcements by our current government may have happened in the blink of an eye, but can serve to have far reaching consequences on many. Overall the Federal Budget was a solid effort, with the focus on getting the country to live within its means by cutting $34 billion and returning to surplus. However, if you are in small business, or big business, or approaching retirement, you have been slugged.

Superannuation, in this budget, has been used as a ‘cash cow’ to be milked to meet deficits. The government has again confirmed that it is willing to use retirement savings to pay for other political objectives. This is the ninth time since 2008 the government has changed the rules, equating to $7.8 billion less in retirement savings. These are the same politicians that have avidly stated that our superannuation system is wonderful and allows us to save for our own retirement so as to take the pressure off government age pensions. The message is being sent that super savings are at risk from constant government tinkering.

The budget announced that the start date of the higher concessional contributions cap measure would be deferred by two years, from 1 July 2012 to 1 July 2014. This two year deferral means that Australians will only be able to make concessional contributions of up to $25 000 per year. The original proposal would have allowed individuals aged 50 and over, with an account balance less than $500 000, to contribute up to $50 000 in concessional contributions. It is worth remembering that three years ago this contributions cap was $100 000 for an individual aged 50 or over. The cap has effectively been reduced by 75%. This reduction, and subsequent deferral, could be a huge disadvantage to Australians aged over 50 who are trying to save for retirement.

Although disappointing, such a deferral is understandable based on the administrative complexities of introducing the new cap in the original time frame. The government has estimated that the savings resulting from this amended cap are worth $1.46 billion over two years, which equates to approximately $8.5 billion less in savings for retiring Australians.

The message from this budget announcement to everyone, especially those aged 50 and over, is to carefully watch your salary sacrifice arrangements. The $25 000 contribution limit includes superannuation contributions your employer makes on your behalf as part of their 9% Super Guarantee obligations, together with any salary sacrifice arrangements in place. The table below shows how much you can salary sacrifice at various income levels after taking into consideration employer super guarantee:

Before considering any salary sacrifice strategy, it is important to take into account other income, if any, to ensure you meet your objectives for income and tax. If you are expecting a salary increase or a change in employment during the year, this could affect the total amount you contribute.

Standard excess penalty tax will apply for concessional contributions exceeding the $25 000 per annum limit. That is, 31.5% tax will be payable in addition to the 15% contributions tax on all concessional contributions made during the year. This could negate any tax benefits you may receive via your salary sacrifice strategy.

The government also announced that from 1 July 2012, the tax on superannuation contributions by individuals with income greater than $300 000 will double from 15 per cent to 30 per cent, excluding the Medicare levy. Although this is only designed to impact on a little over 1% of the population, it can act as a further disincentive to save for retirement.

Legislated superannuation changes announced prior to the budget but mentioned in the budget include:

* Superannuation Guarantee (SG) contributions and eligibility. Currently employers are obliged to make contributions of 9% of an employee’s salary to superannuation where the employee is under age 70. Legislation has now passed to increase the SG rate from 9% to 12%, in incremental stages, by 2020, effective 1 July 2013. The eligibility age for employer SG contributions will be abolished from 1 July 2013. In other words, SG contributions will extend to all workers regardless of age. The intention of this change is to provide an incentive for older working Australians to remain in the workforce longer.

* Effective 1 July 2012, a contribution rebate of up to $500 (not indexed) will be payable to workers with adjusted taxable income of less than $37 000.

* Individuals may be eligible for a refund of excess concessional contributions of $10 000 or less in a year, commencing this financial year 2011/12. This relief is available as a ‘once-off’ option and only where the individual has not previously exceeded the concessional cap.

* The Government has announced it will reduce the matching rate and maximum payment of the co-contribution payment from 1 July 2012. The matching rate for the existing co-contribution is to reduce to 50%, with the maximum co-contribution payment reducing from $1000 to $500 for those people who earn less than $31 920. The cut out threshold will also reduce to $46 920 from $61 920. Accordingly, this is the last financial year to access the higher $1000 payment.

Australians are arguably becoming wary of the superannuation system given the myriad of changes over the past five years. While the changes to superannuation have been widely discussed over recent years, three out of four people still do not fully understand the changes, nor what impact these changes will have on their personal situation. The amendments to superannuation are far reaching. They affect not just pre-retirees and retirees, but a wider age group of people who may be thinking about how superannuation could suit them, or even whether they should make additional contributions to superannuation at all.

To make sure you fully understand how these changes can impact on you personally, feel free to make an appointment with one of our specialist staff to discuss your situation.

Superannuation - Keeping the Faith with Kymberlee Naumann - Power Tynan Superannuation Solutions 

The 2012/2013 Budget was handed down on 8 May. The Budget was fiscally tight, designed to return the Budget to surplus. The budget contained many anticipated changes to superannuation, however the inclusion of some surprises along the way made for some interesting reading. The following is an overview of some of the major changes:

From the 2012/13 financial year, the tax-free threshold increases to $18,200. With the inclusion of the low income tax offset of $445 means you will be able to earn up to $20,542 before any income tax is payable.

• Net medical expenses tax offset has been amended to introduce a means test. Currently a 20% tax offset is available for net medical expenses in excess of $2,060. From 01 July 2012 individuals earning more than $84,000 and families earning more than $168,000 will have to incur more than $5,000 net medical expenses in order to qualify and the tax offset rate will reduce to 10%. • Mature age workers tax offset will be phased out for taxpayers born on or after 01 July 1957. • The Education Tax Refund will be replaced from 1 January 2013 by the ‘Schoolkids Bonus.’ The new Schoolkids Bonus will pay eligible families (receiving Family Tax Benefit Part A) $410 per primary student and $820 per secondary student. The bonus will be paid as a lump sum in January and July each year. • In relation to the above, the Education Tax Refund for June 2012 will be paid in full as a lump sum to eligible families in June (no receipts are required). • Standard deduction for work-related expenses announced in the 2010/2011 Budget will not proceed.

• The proposal to reduce company tax rates from 30% to 29% will not proceed. • From 30 June 2013, companies will be entitled to carry back up to $1 million in tax losses incurred in the 2012/2013 financial year to be offset against tax paid in the 2011/2012 financial year. From 30 June 2014, companies will be entitled to carry back and offset against tax paid in the previous two years. Essentially there will be a refund of tax paid in those previous years.

• The threshold for the small business asset instant write-off will increase from 1 July 2012 from $1,000 to $6,500. • Small business will be eligible for an immediate write-off of $5,000 on new motor vehicles purchased from 1 July 2012. The balance of the motor vehicle will be depreciated with other small business assets in the pool at 15% in the first year and 30% after that. • The entrepreneurs tax offset has been removed from 1 July 2012.

• For the budget changes relating to superannuation please consult Kymberlee Naumann’s article entitled ‘

If you have any questions in regards to any budget changes or announcements, please feel free to contact the office and one of our staff will be able to assist.

2012/2013 Federal Budget with Brad Hancock 

Given the world, and even some local events, that have occurred during 2011 it is probably little wonder that when it comes to business and financial matters many people are feeling less than confident. The United States economy has been struggling and the sovereign debt issues that have been plaguing Europe combined with the natural disasters that have rocked Japan and New Zealand mean that from a global perspective, 2011 has certainly been a challenging year. At a domestic level there have been the natural disasters of last summer, a State government that has been less than convincing and a minority government at Federal level. It seems that around every corner there is another testing situation that shakes both our resilience and our confidence.

Is a 97% Home Loan a Good Idea?

Overview of Payroll Tax

What does the Carbon Tax mean for you and your business?

Environmental Tip

Superannuation - Keeping the Faith with Kymberlee Naumann - Power Tynan Superannuation Solutions

2012/2013 Federal Budget with Brad Hancock

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