Month: October 2019

RBA Cash Rate Reductions – What it means for your Loan

When the Reserve Bank of Australia (RBA) sets the cash rate down (or up), Australia’s banks have a choice to pass on the new rate as a lower (or higher) interest rate to its customers with loans, including mortgages. With the new lower cash rate, a record low, of 0.75% in October, most banks did not provide the full rate cut to their customers’ loans.

This recent rate decrease is therefore good for people with a variable interest rate mortgage. Although a change in the cash rate would not normally affect those people with a fixed rate mortgage, all four major banks have lowered their fixed rate for new mortgage loans.

Currently, a home loan sees a fixed rate of approximately 2.8% - 2.99% on principle + interest repayments; an investment loan sees a fixed rate of approximately 3.19% on principle + interest repayments.

The RBA is closely monitoring the markets and it does not rule out a further reduction in the cash rate in the coming months or even as soon as this month, November 2019.

Take the time to review your loan/s and consult a qualified financial advisor for the best interest rate/s now available.

How can YML help?

Talk to our YML Finance Team today to see how YML Group can assist you with your mortgage refinancing. Contact us on (02) 8383 4400, or by visiting the Contact Us page on our website.

Gift or lend to your child?

Deciding how to help your child/ren with money warrants an exploration of two very different ways to provide them financial assistance. You might choose to gift them money OR you might prefer to enter into a loan agreement with them. Your options will depend upon your own personal financial circumstances at the time of the request for help. What will you do?

First, consider whether you can afford to give money to your child and not see it returned to you. This is a gift. A gift of money to an adult child is generous, requiring no repayment by your child but no financial benefit to you, the giver.

Now, let’s consider you lend an amount of money to your child, setting up a ‘payable on demand’ loan agreement. This loan of money can protect your financial future by ensuring that you may recall the loan at any time or at a time agreed, or you can forgive the loan at a later date, even include it in your Will.

Lending is preferential to gifting – Why?

Imagine your gift $100,000 to your child for the purchase of a home. In the event of your child marrying and subsequently divorcing, the $100,000 gift would be lost to you as part of your child’s divorce settlement with their soon-to-be ex-spouse.

Instead, if you draw up a legally-binding loan agreement with your child and lend them $100,000 towards their property purchase, should your child and his/her future spouse divorce, then the $100,000 contribution you made could be returned to you and not considered part of the marriage assets for distribution between the divorcing couple.

Lending, instead of giving, an amount of money to your child helps protect your money from a myriad of situations whereby the money might be lost. For example, your child could divorce, go bankrupt, suffer from an ongoing medical condition that prevents them from working, or even break off their relationship with you. Furthermore, you might need the loaned money should you fall ill or require it to maintain your retirement.

Formalising a Loan to your Child

It is important that you discuss a loan with your child and that you both agree terms of the loan agreement.

Create a formal written document, using a certified professional, to ensure that the loan will be honoured by the Family Court of Australia or any other legal body as may be the case.

So long as you choose to provide the loan interest-free, there will be no tax payable or tax gain. Include the statement ‘Interest rate as advised by the Lender’ and you may be able to raise the interest rate from zero, should there be a future need to do so, such as increasing the amount owed to you in the case of your child’s divorcing (thereby reducing the amount available for distribution in any divorce settlement).

Finally, at all times, consult a certified professional about lending money to your child and formalise a loan for the sake of your child and you. Ideally, never ‘gift’ money to you child. Providing financial assistance to your child can be a loving gift when done with the best intentions as a loan.

How can YML help?

Talk to our YML Super Solutions Team today to see how YML Group can assist you with creating a loan agreement. Contact us on (02) 8383 4400 or by visiting the Contact Us page on our website.

Proposed Superannuation Guarantee Amnesty – Have you correctly paid your staff super?

The Australian Government has proposed a Superannuation Guarantee (SG) Amnesty which has not yet been enacted by Parliament. What would it mean for you as an employer?

Proposed Superannuation Guarantee Amnesty

An amnesty would enable employers to self-correct any past non-compliance of their superannuation guarantee to employees. You would be asked to voluntary disclose superannuation guarantee shortfall and non-payment to potentially avoid being liable for: Also, superannuation guarantee amounts voluntarily disclosed and paid (in full or on payment plan) during an amnesty would be tax deductible.

Until such time as the proposed amnesty passes royal assent, under current existing law, an employer who has neglected to maintain accurate payment of superannuation to their employees is liable to the Australian Taxation Office (ATO) for outstanding staff superannuation.

When superannuation is not paid on time in to the correct fund or at the minimum amount by employers, the ATO is responsible for collection of unpaid superannuation under their Superannuation Guarantee Charge (SGC) arrangement.

SGC – How to pay?

If you have a superannuation guarantee shortfall to rectify, you are required to lodge a SGC Statement by the quarterly due date and pay any superannuation guarantee shortfall to the ATO. This statement enables you to report and calculate what is still owing to your employees and to the ATO (administration fee).

The SGC covers any unpaid or underpaid amounts due to employees, any interest on those amounts and an administration fee of $20 for each employee affected by your error. The SGC is a non-tax-deductible amount.

For the first quarter of the current financial year, 1 July – 31 October, the due date to lodge your SGC Statement is 28 November 2019.

SGC – How to avoid paying it?

Although the ATO ultimately will seek outstanding superannuation guarantee amounts for employees, it is important that all employers aim to pay and succeed in paying their obligatory superannuation guarantee to their employees in a timely manner.

Single Touch Payroll (STP), compulsory for all Australian employers from 1 July 2019, is the new reporting method of salaries, wages, PAYG withholding tax and superannuation to the ATO. By using STP-enabled software to report to the ATO, you will be able to keep informed of any miscalculations and revise staff superannuation payments immediately, thereby potentially avoiding the SGC.

Future Outstanding SG Payments – What will happen?

Recently, the proposed Superannuation Guarantee Amnesty was re-introduced in to Parliament for further consideration and debate. Whilst a SG Amnesty is not yet law, failure to pay the superannuation guarantee to employees may result in penalties under new legislation passed in December 2018: a fine of up to $10,500 or 12 months’ jail time.

All employers must abide by their obligation to pay their employees the superannuation guarantee. With STP-enabled software, businesses can face a future without penalty.

Avoid relying on the proposed SG Amnesty to stop you neglecting your SG obligation. Rather, it is important to seek professional advice about payment options now.

How can YML help?

Talk to our Accountants today to see how YML Chartered Accountants can assist you with your Superannuation Guarantee obligation. Contact us on (02) 8383 4400 or by visiting the Contact Us page on our website.