Upfront costs when buying a home and how you could save

When buying a home many people focus solely on saving for the deposit. While your deposit is likely to be your biggest financial outlay, it’s only part of the cost of buying a home. We detail the other costs and fees you need to consider and how you could save.

Stamp duty:
Stamp duty is a charge applied by the State and Territory Governments in Australia and relates to the transfer of land or property. In some states/territories there are concessions available to certain purchasers e.g. if you are building a new home. It’s wise to check out the government website for your state or territory to understand the rules and exceptions that apply to your individual circumstances.

Borrowing costs:
When taking out a home loan there may also be a number of fees payable to your lender including loan establishment fees, valuation fees and settlement fees. However in today’s competitive lending market some lenders will offer cash-back incentives. The amount offered will vary, but could be up to $2,000 and can be used to cover some of your fees. Talk to a YML Finance specialist to find out how you could receive cash-back on your home loan.

Insurance:
There are a few types of insurance that you may require when buying a home including:

• Mortgage insurance: covering the lender for losses if a mortgage defaults and usually between 1-3% of the loan amount. Mortgage insurance is only applicable for home loans over 80% of the purchase price & this is a cost that you can avoid by saving up 20% or more for your deposit.
• Building insurance: is usually a condition of your mortgage and covers you if your home is damaged in the event of theft, fire, storm and flood.
• Contents insurance: covers you if your contents are stolen or damaged, some policies even provide new for old replacement of goods.

Legal costs:
Conveyancing is the process of transferring the property from the seller to the buyer. You can engage a solicitor or conveyancer to do this, or you can do it yourself. A licenced conveyancer will review your contract, perform checks on the title and draft the settlement documents. They basically guide you through the complex process of buying property and do the paperwork for you.

Inspection costs:

• Building Inspection: checks structural soundness and lists any visible defects and necessary repairs.
• Pest Inspection: checks for any signs of past or present pest infestation.
• Strata Inspection: examines and reports on the written records of the owners’ corporation.

Council, water and strata rates
When you purchase a property you are required to pay the vendor the remaining yearly or quarterly water and land rates. If you are moving into a strata title development, you will also be up for strata fees.

Utility connection
When moving into your new home you will need to pay connection or transfer fees to connect water, electricity and gas.

Moving costs
Finally, don’t forget that there will be removalists costs and possibly storage costs to consider as well.

There are a number of costs associated with buying a home, which can differ depending on the type of property you are buying and your individual circumstances. A YML Finance expert can provide professional advice and help reveal not only the costs you need to consider but also the savings available to you.

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5 Reasons for Cash Flow Problems in Small Businesses

Many small businesses run into cash flow issues. Here are five common reasons for cash flow crises, and what can be done to avoid them in your small business.

Key man insurance, who do you need to insure?

The most valuable asset for any business is the key people who run it. Loss of staff with essential skills or years of knowledge can impact revenue, profit, goodwill and ultimately the value of the business. Key man insurance compensates for financial losses should the unexpected arise and having adequate insurance in place is an important part of succession planning.

Can better inventory management improve business performance for Manufacturers?

Any manufacturing business has to grapple with two major variables, namely, the demand for its products and the supply of the raw materials required for the manufacturing activity. While on the demand front the quantity of the product demanded and the time of delivery can be uncertain, on the supply front, the timely availability of the raw materials and their prices can be uncertain also.

5 Top Causes Of Stress for Small Business Owners Open page Preview for 5 Top Causes Of Stress for Small Business Owners

Buying a business is a big investment, and it can be a nerve-wracking process – especially for a first timer. If you’re thinking of taking the plunge and becoming a business owner, here are five obvious warning signs that an enterprise might be a bigger risk than you’re prepared for.

7 Useful Web-Based Software Programs for SMEs

• Office Time – time-tracking software that records billable time worked, calculates costs, and generates invoices and reports. It may suit service businesses that bill by the hour. There is a 21-day free trial available and a one-off cost of around $68 to purchase, which includes upgrades.

• Office 365 for Business – this software comes with Microsoft programs including Word, Excel, Outlook, Publisher, OneNote and others. Plans start at $7 per user per month.

• Sales Force – this is a Customer Relationship Management (CRM) platform for businesses of all sizes. It comes with analytical tools, sales forecasting, reports, data sharing and other features. Plans start at $35 per user per month and come with free trials.

• Box – online data storage and secure file sharing software that provides 5GB of free storage. Prices start at $6 per user per month.

• Xero – excellent full accounting program that includes bank feeds, invoicing, reconciliations, payroll, inventory, reports, depreciation, multi-currency capacity and other features, plus compatible add-ons for specialist solutions. There is a 30-day free trial, with prices starting at $25 per month.

• Sprout Social – this software pulls all your social network activities onto the one dashboard. It can also be used to schedule posts, collect messages from all your social media accounts from the one inbox, and measure marketing campaigns using analytical tools. Starts at $59 per month.

• Hootesuite – includes post scheduling, analytics and other features for all your social media accounts with the capacity to connect with popular apps. There is a free version for up to three networks. Paid versions start at $11 per month.

Finance options for buying a car

If you’re looking to purchase a vehicle for your business, there are a number of different finance options available. Before you enter into a finance agreement it’s important to do some research to determine which finance is suitable for your business structure, as well as understanding the implications for cash flow and tax liability. We explain three of the most common types of vehicle finance for businesses:

Finance Lease

Finance leases are a common form of finance for businesses that update their vehicles on a regular basis. The financier purchases the vehicle on your behalf; you then lease the vehicle from the financier and pay a fixed monthly rent for an agreed period. At the end of the lease many businesses will trade in the vehicle and start a new lease, but there is also the option to pay a residual (final instalment) on the lease and take ownership of the car, or re-finance the residual and continue the lease.

Benefits of a Finance Lease:

• Monthly rental payments are fixed for the lease period so you can avoid Interest rate fluctuations and budget accordingly.
• You can continue to upgrade your vehicle at the end of each lease as new models/features become available.
• GST on the car purchase is claimed back by the financier, so the finance is exclusive of GST, lowering monthly repayments.
• Depending on the lease structure rental payments may be tax deductible.

Commercial Loan (Chattel Mortgage)

A commercial loan or chattel mortgage generally suits businesses that wish to retain ownership of the vehicle at the end of the loan period. With a commercial loan you source and own the vehicle and the financier lends you the money secured by the asset. With this type of finance arrangement the vehicle is an asset of your business even while you’re paying it off. At the end of the loan period (assuming there is no balloon final payment) you own the vehicle outright.

 Benefits of a Commercial Loan:

• Opportunities for income tax deductions through depreciation and interest charges.
• Interest rate is fixed over the finance term, plus you can make additional payments that reduce the total interest payable.
• Ability to reduce monthly payments by making a balloon final payment to free up business cash flow (although there may be fees associated).

Commercial Hire Purchase

Commercial hire purchase finance arrangements suit companies that are registered for GST. You can claim the GST on the purchase price upfront and GST on any Interest charges can be claimed over the life of the loan. With commercial hire purchase the financier pays for the vehicle on your behalf with an offer to hire it back to you in return for regular payments over an agreed time frame. You are hiring with intent to purchase and when the final payment is made the title passes to you.

 Benefits of Commercial Hire purchase:

• Ownership of the asset after the final payment.
• Opportunities for income tax deductions through depreciation and interest charges.
• GST on purchase price can be claimed up-front.

If you’re considering purchasing a vehicle for business use, talk to a YML Finance Specialist today.

Should you register for GST?

By law you are required to register for GST if:

• Your business or enterprise has a gross business income of $75 000 or more.
• Your non-profit organisation has a gross business income of $150 000 per year or more.
• You provide taxi or limousine services (both owner drivers or if you lease or rent a taxi) regardless of your gross business income.
• You want to claim fuel tax credits for your business or enterprise.

If your business income is under the legal threshold you’re not required to register for GST, however you may want to consider the following:

Advantages of registering for GST:

• You can claim back the GST on all your business expenses, this may be particularly helpful when purchasing expensive items such as computers or work vehicles.
• If the annual income of your business is less than $2 million you may be able to access GST concessions including:
  • Accounting for GST on a cash basis, meaning you are only required to account for GST once payment is received.
  • Paying GST by instalments, which you can vary on a quarterly basis.
  • Annual apportionment of GST input tax credits, meaning if you are using some items for private use you can claim the full GST credits and make one single adjustment for the percentage of private use at the end of the financial year.
• GST registration can provide a small business with credibility and you may find that some businesses also prefer to purchase from GST-registered businesses because they can claim back the GST.

Considerations when registering for GST:

• GST registration results in more administrative tasks, including lodging Business Activity Statements (BAS) on a monthly or quarterly basis. Additional reporting can be time consuming and may outweigh the cost benefit.
• If your planned annual income is below the $75,000 threshold, not registering for GST means your prices will effectively be 10% cheaper than your GST-registered competitors. Conversely, if you charge the same as your GST-registered competitors, you may benefit from a greater profit margin.

Every business and their circumstances are different, talk to a YML Tax accountant today to find out whether registering for GST will suit your individual situation.

Matters to Consider Before Setting Up an SMSF

A Self-Managed Superannuation Fund (SMSF) is essentially a do-it-yourself super plan that can have up to four members. One of the main motivations for setting up an SMSF is to be in control of your own fund and how investments are made. As well as the development of a sound investment strategy, running a fund also requires certain skills in terms of administrative, financial and legal matters.

If you are thinking about setting up your own SMSF, here are some of the factors to consider.

Skills and responsibilities

• Your role – with an SMSF, you need to take on the role of trustee or director, which comes with legal obligations and considerable responsibilities, including personal responsibility for compliance.
• Investment skills – you will need to have the time and skills to research investment options, to understand how investment works and to develop a sound long-term strategy.
• Administration – there is a considerable amount of administration required in running a fund, including record-keeping, taxation, compliance, keeping up with government legislative changes regarding super and tax, and so on. You also need to be able to engage directly with the ATO.

If you wish to set up your own fund but lack the skills or time required to run it, you may of course be able to hire someone else to do the work for you.

Financial matters

• Enough money to invest – it’s usually recommended you should have at least $200,000 to invest to make an SMSF worthwhile in terms of the fees involved. Investment options may include property, shares, term deposits, managed funds, artworks, or even antiques.
• Fees – these are likely to include payments for independent audits, annual returns, asset valuations, legal matters, insurance, and professional advice. You need to bear in mind that the fees involved may be proportionally higher than for an industry fund.
• Borrowing to invest – since 2007, it has been possible for SMSFs to borrow to invest in assets such as property, shares, and land. There are however some stringent rules around this that you need to be aware of – such as the single-asset rule per borrowing arrangement, and restrictions on asset improvements.

Insurance

• Life insurances – super funds generally offer insurance to members in terms of life, disability, accident and income protection cover, and also usually have the advantage of group buying power which can lower the premiums for members. SMSFs are obliged to offer life insurance to members, and in this case you would need to purchase your own insurance cover.
• Other insurance – cover should also be taken out for assets such as property to provide financial protection.

General questions to ask yourself before going ahead

• How well will your SMSF be able to outperform other funds?
• Do you have the skills, time and motivation required (or alternatively the means to pay someone else) to administer the fund?
• What other options are available? For instance, if you are not happy with the performance of a fund you are a member of, you might be able to switch to a more suitable one. If it is more control over investments you want, some funds allow you to have input into how your money is invested.

If you enjoy investing and have strong skills in financial management and a good grasp of legal matters, an SMSF may be a good option for you. On the other hand, if you lack the skills and time but would still like to set up your own fund, consider utilising the expertise of an SMSF accounting firm in Sydney to administer the fund on your behalf.

Does your super fund provide enough life insurance cover?

According to research by Lifewise.org - 50% of Industry Super Fund members are under-insured by $100,000 for life insurance. While insurance through super can be cheaper and have certain tax advantages, many funds only provide the basic level of cover, which may not necessarily reflect your individual circumstances.

• Life Insurance - which can help provide for your loved ones if you die.
• Total & Permanent Disability Insurance (TPD) - which can replace your income if you are injured and can’t ever work again.
• Income Protection Insurance - which can pay you a percentage of your salary if an injury or illness results in you not working for a period of time.

• How much money will my family require to cover household expenses and immediate bills such as funeral expenses?
• How much money will my family require to pay off all debts – including credit cards and mortgage?
• What lifestyle aspirations do I have for my family and what support do I want to provide for my dependents?