Elevate Capital

Over the weekend two factually incorrect articles were published in the Australian Financial Review (AFR).

While some of the information was correct, these articles also contained significant errors. I'd like to help shed light on the inaccuracy, and help the industry set the record straight.

The AFR articles incorrectly assert that:
❌ Mortgage broker earnings are exorbitant, misrepresenting broker revenue as personal income ignoring business expenses
❌ Advice brokers give has not changed since the Royal Commission, overlooking the increased complexity and costs due to Best Interests Duty.
❌ Assertion that commissions are opaque and not transparent
❌ Client recommendations are driven by commissions, unfairly suggesting Finance Partners and Brokers prioritise commissions over clients’ best interests.

A response on LinkedIn page to address these inaccuracies.

I'm proud to be part of the industry and the reputable service finance partners/ brokers deliver, which is backed by significant proof points:
✅ Over 71% market share, and is driven by word of mouth.
✅ Brokers' NPS consistently exceeds +90, contrasting banks' scores of 0 to 30.
✅ Only 0.3% of financial complaints are against brokers.

The misconceptions about finance partners and brokers earnings needs correction:
✅ Broker business revenue is not the same as a brokers personal income
✅ Average Sydney broker does NOT earn $400k in upfront fees.

Brokers operate with transparency on commissions:
✅ Brokers disclose commissions by law to every client.
✅ Detailed documentation accompanies every client recommendation.

Brokers drive competition:
✅ Delivering better pricing and services for Australians

I will keep advocating the work we do, and the standard of our industry (which was well in place before a royal commission was conducted in 2018) as competition, accuracy and fairness prevail in our industry.

I encourage all to help us, the industry (already highly regulated and compliant) and your finance partner to:
- Keep sharing the awesome work we do for you or your clients on your social channels
- Record a video and share it on your socials
- Use the hashtag so we can continue to create positive groundswell.



MFAA

8 smart ways to reset your finances and boost your wealth, Source AFR, date 15 Jan 2024.

Using the summer holidays or a slower time at work to reset your finances could double your super, save you $5000 in student debt or cut almost $17,000 from your home loan.

This is an ideal time to review personal and family finances, set new goals and take the first steps to refresh or reset, say finance specialists.

“The calm of a holiday away from your work desk is an opportunity to reflect and plan,” says Naomi Mitchell, KPMG’s national managing partner enterprise.

“It’s a psychological point,” adds Chris Balalovski, a partner with consultancy BDO. “Even though it might have been better to do some of these things on July 1 last year, there is no time like the present.”

That could mean making better use of tax breaks to boost super, increasing savings by locking in top fixed-term rates or talking to mortgage lenders about a cheaper rate and improved terms.

For others, it might involve beginning the complex process of tax-effectively selling a small business or plotting the best way to use long-service leave before quitting a job.

Using the summer holidays or a slower time at work to reset your finances could double your super, save you $5000 in student debt or cut almost $17,000 from your home loan.

“The calm of a holiday away from your work desk is an opportunity to reflect and plan,” says Naomi Mitchell, KPMG’s national managing partner enterprise.

“It’s a psychological point,” adds Chris Balalovski, a partner with consultancy BDO. “Even though it might have been better to do some of these things on July 1 last year, there is no time like the present.”

That could mean making better use of tax breaks to boost super, increasing savings by locking in top fixed-term rates or talking to mortgage lenders about a cheaper rate and improved terms.

For others, it might involve beginning the complex process of tax-effectively selling a small business or plotting the best way to use long-service leave before quitting a job.

Maximise your super
A 50-year-old earning $200,000 a year with $650,000 in super could increase their balance to around $1.3 million by salary-sacrificing $5500 annually for the next 15 years, according to analysis by KPMG. This assumes a growth rate of around 6.5 per cent.

A 30-year-old earning $150,000 who salary-sacrificed $5000 every year would be $240,000 better off by retirement, while taking only a $2975 hit to their annual take-home pay, according to Moneysmart’s superannuation calculator.

Generous tax concessions provide plenty of opportunities for building super savings. The cap for concessional contributions – made by a taxpayer or their employer with pre-tax income – is $27,500 a year (including compulsory super).

Those who have not used all their concessional caps may be eligible to carry forward any unused amounts and increase their cap in future years.

The non-concessional (or after-tax) contribution cap is $110,000. Those with a super balance greater than $1.9 million are not eligible to make these contributions.

Depending on your total super balance, if you’re under 75, you may be able to bring forward up to two years of contributions, giving you a total maximum non-concessional cap of $330,000 for the three years, says KPMG’s Mitchell.

Balalovski says the decision whether to focus on concessionary or non-concessionary contributions depends on individual circumstances. “The non-concessionary cap is higher and enables you to get more into your super. But it is tax neutral. Concessionary contributions can be more tax-effective,” he adds.

Get savvy on student debt
Graduates and higher education students have until June 1 to pay off their HELP (Higher Education Loan Program) debt or face a likely increase in their borrowing of about 5 per cent.

That’s on top of last year’s increase of 7.1 per cent and means a debt of $9000 in 2022 will have increased to about $10,100 by July 1, while a debt of $40,000 will be around $45,000, according to estimates by Adrian Raftery, principal of Mr Taxman chartered accountants.

The increase of about 5 per cent is based on the estimated annual inflation rate.

Anyone with a student loan who earns more than $55,550 has a percentage of their salary automatically deducted to pay back the loan. This will likely rise from July 1 after payment thresholds are revised to match inflation.

Raftery says: “A decision to pay down depends on individual circumstances, such as income, debt and capacity to repay.”

Unlike bank debt, interest does not accrue daily and there is no expiry date. Average debt is around $25,000 with the majority of loans between $20,000 and $50,000.

Time the sale of your business
A sole trader selling their business after 15 years could potentially reduce a capital gain of $2 million to nil by using a combination of generous capital gain discounts, according to KPMG.

They could also get up to an extra $1.705 million into their retirement savings – even if they’ve already reached the $1.9 million total super balance.

“But selling a small business is a complex venture, so it’s important to prepare for the sale as early as possible – preferably a year or two ahead of time,” says KPMG’s Mitchell.

Small businesses that qualify for these concessions must have net assets of no more than $6 million and less than $2 million annual turnover.

“Preparation will help improve financial records and the business structure and strengthen the customer base to make the business more profitable and ensure consistent income figures,” says Mitchell.

Under the 15-year exemption, the capital gain is disregarded, and up to $1.705 million of the sale proceeds can be contributed into your superannuation fund tax-free, adds Tracey Scotchbrook, head of policy and advocacy at the SMSF Association. To qualify, the business needs to have been owned for 15 or more years, you must be 55 years or over and the sale must be connected with your retirement.

Other CGT concessions include a 50 per cent “active asset” reduction, the small business rollover and the small business retirement exemption – the third point means you could contribute up to $500,000 of the capital gain tax-free into superannuation and despite the name, does not have to be in connection with your retirement and access is not limited by age, adds Scotchbrook.

“Active assets” are income-earning plant, equipment or intellectual property, says Balalovski.

The general CGT discount, which applies to any assets owned for more than 12 months, also applies.

Be strategic about leave
There could be big tax savings and super benefits in carefully planning the timing of long service leave and retirement.

Someone taking long service leave as a payment, typically on leaving a job, will have no entitlement to super on the payment and the lump sum will be subject to withholding tax and included in assessable income on the date of payment, according to Peter Bardos, a tax director at HLB Mann Judd.

But those taking long service leave as time off before retiring will continue to be paid a salary, super and accrue holidays, adds Bardos.

For example, an employee with a three-month leave balance should accrue at least one week of additional leave and pay if they take the leave as opposed to cashing it out, says Nathan Hamilton, a KPMG partner.

Entitlements vary between states and long service accrued before August 17, 1993 is taxed at a maximum of 32 per cent.

The final payment might also differ depending on whether it is paid before or after the end of the tax year.

For example, the lump sum for someone retiring before the end of the tax year will be included in their salary for the year and subject to their top marginal rate. Take it after July 1 and it might have a substantially lower tax cost if it is the only income earned the following tax year.

Upsize retirement wealth
Empty-nesters from 55 can use generous federal government concessions to top up their super by $300,000 for individuals and $600,000 for couples.

Downsizer contributions don’t count towards regular concessional and non-concessional contribution caps, and can be made regardless of your total super balance – that means you can do this even if you’ve got more than $1.9 million in super.

But the transfer balance cap means only $1.9 million can be transferred from accumulation phase into tax-free retirement income. The balance could be left in accumulation phase.

The property being sold must have been a primary residence at some point and been owned by the claimant for at least 10 years.

According to the Australian Taxation Office, about 60,000 downsizers have sold their homes and contributed about $14.5 billion to super during the past five years.

“The money needs to be transferred into super within 90 days of settlement,” adds Raftery. “The scheme assumes people will downsize, but there is nothing to stop them from upsizing.”

If you’re intending to make non-concessional contributions the following year, be careful because the downsizer contribution may push you over the thresholds, cautions Meg Heffron, managing director of SMSF specialist Heffron. “One option would be to delay settlement so that the downsizer contribution can be made the following year – the same year as you make the non-concessional contribution,” she suggests. This is important because the caps are based on the balance at June 30 the previous year and not at the time of the contributions.

Cut mortgage costs
“Owner-occupiers should set a ‘stretch’ target and adjust monthly repayments to this amount,” suggests Sally Tindall, research director at RateCity, which monitors interest rates.

“Make sure it covers at least one more rate hike and aim to keep your repayments at this amount for the remainder of the year, even if interest rates start to fall,” Tindall says.

RateCity’s Sally Tindall says be persistent about asking the bank for lower mortgage rates.

An owner-occupier with a $1 million debt and 25 years remaining on their mortgage who sets their monthly repayments at $500 more from January through to December could shave four months off their loan term and save nearly $16,895 in interest over the mortgage terms, according to RateCity analysis.

“That’s 12 months of heavier lifting for four months mortgage-free at the other end,” says Tindall.

This is based on the current rate of 6.5 per cent and assumes the cash rate changes in line with Westpac’s forecast (which includes cuts in August and November this year).

“But locking in higher monthly repayments does not mean you should set and forget your rate,” she says. “Haggling with your bank periodically throughout the year will turbocharge the interest you save and slash even more time off your mortgage.”

Set a reminder in your diary to call them once every four months – that’s a diary note for January, May and September – to ask for a lower rate, she says.

“While you might not be successful with each call, the more pressure you apply, the better results you’re likely to get,” she says.

Those granted a rate cut can accelerate getting rid of the mortgage by keeping repayments the same.

For example, the same owner-occupier securing a 0.25 percentage point rate cut in January and again in September, could save more than $106,000 over the life of their loan, and pay it off six months early, by keeping their higher mortgage repayments for the full 12 months.

Search out best rates
A saver with a $100,000 deposit can earn up to 5.3 per cent for a 12-month fixed rate, according to analysis by Canstar, which monitors savings rates.

But savers need to check out any terms and conditions. Some higher rates go to new rather than existing savers; apply only to some accounts; or only offer the biggest increases for short-term promotions.

The accompanying table shows the best fixed rates from one month to five years.

Steve Mickenbecker, group executive of Canstar financial services, says term deposit rates are lower than the highest bank savings accounts but “come without the complication of bonus conditions that attach to most high-rate savings accounts”.

He says: “A cut in interest rates during 2024 is widely expected. Term depositors can potentially lock in a favourable rate. Locking up savings for a fixed period is not for everyone. But splitting savings between a couple of different terms and between term deposits and savings accounts can make them viable even for borrowers who may need to dip into their savings.”

Beat $3m super cap
The prospect of a new tax on total super balances above $3 million has increased interest in contribution splitting between spouses and long-term partners, says Balalovski.

The contribution is initially paid into the account of the contributing spouse. They then “give” some of it to the partner and the amount is transferred out of their account.

This is different from spouse contributions where the contribution is made directly to the receiving partner’s super.

The advantage is it allows couples to share concessional contributions, which is particularly useful where one partner earns more money – and pays more tax – than the other.

For example, one partner might have $3.5 million and the other $1 million. The member with the higher balance could withdraw $500,000 and contribute it to the account with the lower balance. (This assumes they are over 65 or have met other conditions of release, such as retiring from full-time employment.)

The couple’s combined super balance of $4.5 million has not changed but the $500,000 avoids the proposed extra 15 per cent tax.

Under the planned tax changes, due to start on July 1, 2025, a total super balance above $3 million will face an additional 15 per cent tax.

I strongly suggest you speak with your advisor to ensure if these are appropriate for you. If you do not have one, find one.

Elevate Capital

Non-bank lending worth $74b, could double in five years Non-bank lenders could account for almost a quarter of the commercial real estate debt market by 2028, Foresight Analytics says.

House price growth to soften as listings rise faster than demand Market conditions are now in favour of buyers as higher stock levels provide more choice, less urgency and greater opportunities to negotiate.

The below data confirms well that more and more property owners understand and trust the value proposition their finance broker/ partner brings to the equation of saving on admin and interest cost throughout their lending journey.

Research group Comparator have revealed that brokers wrote 71.5 per cent (seven out of 10) of all new residential home loans during the September 2023 quarter, marking the second-highest mortgage broker market share figure the industry has recorded to date.

An increase of 4.3 percentage points on the previous quarter and was only 0.2 percentage points lower than the record high of 71.7 per cent recording during the same quarter last year.

Great news.

Roy Morgan is the only company that measures 'mortgage stress' every month and the latest Roy Morgan 'mortgage stress' figures are out for July 2023. 29.2% of all mortgage holders are now 'At Risk'. This figure equates to an estimated 1.5 million mortgage holders 'At Risk' of mortgage stress – a new record high.

Roy Morgan Update August 29, 2023: Consumer Confidence, Mortgage Stress & Artificial Intelligence - Roy Morgan Research In this week's Market Research Update, we present the latest data on Consumer Confidence, Mortgage Stress & Artificial Intelligence.

Government Lowe warns that not enough homes are being built to house an influx of migrants, predicting that rents will further rise, putting upward pressure on inflation.

Philip Lowe’s housing market warning Philip Lowe has warned that not enough homes are being built to house an influx of migrants, predicting that rents will further rise.

Very interesting read highlighting the real drivers behind the increase cost of living and current crisis for many.

This is what's really behind Australia's cost of living crisis, according to new research In the same week that Qantas, Woolworths and Coles posted soaring profits, a new report says business profits, and not workers' wages, are driving higher prices.

The best locations for investors to secure a house with a deposit less than $100,000.

Report reveals best locations for property investors on less than $100k deposit With rentvesting set to be a major 2022 trend, new data explains where they should be putting their cash

National housing values end the year 22.1% higher with the pace of gains continuing to soften as multi-speed conditions emerge.

Access all details in CoreLogic's Home Value Index report https://www.corelogic.com.au/sites/default/files/2022-01/2101_CoreLogic_homevalueindex_Jan42022_FINAL_0.pdf

www.corelogic.com.au

We are in a, what I call, "FOMO frenzy" property market. Avoid making errors irrational buyers have made.

Warning – Avoid these FOMO errors investors make in a hot property market Our property markets have been surging this year with double-digit growth insight for all our capital cities. And now that more Australians feel secure...

A new Family Home Guarantee, will form part of the federal government’s upcoming Budget. The Treasury revealed that it would launch a new measure to help more single parents purchase family homes.

Government announces new home ownership scheme Three measures targeting home ownership, including a new Family Home Guarantee, will form part of the federal government’s upcoming Budget. Over the weekend, the Treasury revealed that it would

Reviving our CBD's

"Reimagining our economic powerhouses: How to turn CBDs into central experience districts", the results of the many surveys found that CBD workers expect to be on-site for an average of only 3.3 days. Not surprising to know that Mondays and Fridays are the least preferred days to attend the office.

How to rethink and revitalise our CBDs Most Australians are confident their CBDs will bounce back, according to EY Sweeney research, but our opportunity is to “lean into disruption” and make them better than before, says EY’s Selina Short.