May 2017 Statement by Philip Lowe, Governor: Monetary Policy Decision

At its meeting today, the Board decided to leave the cash rate unchanged at 1.50 per cent.

Interest rates on hold

There has been a broad-based pick-up in the global economy since last year. Labour markets have tightened further in many countries and forecasts for global growth have been revised up. Above-trend growth is expected in a number of advanced economies, although uncertainties remain. In China, growth is being supported by increased spending on infrastructure and property construction, with the high level of debt continuing to present a medium-term risk. The improvement in the global economy has contributed to higher commodity prices, which are providing a significant boost to Australia’s national income. Australia’s terms of trade have increased, although some reversal of this is occurring.

Headline inflation rates have moved higher in most countries, partly reflecting the higher commodity prices. Core inflation remains low. Long-term bond yields are higher than last year, although in a historical context they remain low. Interest rates have increased in the United States and there is no longer an expectation of additional monetary easing in other major economies. Financial markets have been functioning effectively.

The Bank’s forecasts for the Australian economy are little changed. Growth is expected to increase gradually over the next couple of years to a little above 3 per cent. The economy is continuing its transition following the end of the mining investment boom, with the drag from the decline in mining investment coming to an end and exports of resources picking up. Growth in consumption is expected to remain moderate and broadly in line with incomes. Non-mining investment remains low as a share of GDP and a stronger pick-up would be welcome.

Indicators of the labour market remain mixed. The unemployment rate has moved a little higher over recent months, but employment growth has been a little stronger. The various forward-looking indicators still point to continued growth in employment over the period ahead. The unemployment rate is expected to decline gradually over time. Wage growth remains slow and this is likely to remain the case for a while yet.

The outlook continues to be supported by the low level of interest rates. Lenders have announced increases in mortgage rates, particularly those paid by investors and on interest-only loans. The depreciation of the exchange rate since 2013 has also assisted the economy in its transition following the mining investment boom. An appreciating exchange rate would complicate this adjustment.

Inflation picked up to above 2 per cent in the March quarter in line with the Bank’s expectations. In underlying terms, inflation is running at around 1¾ per cent, a little higher than last year. A gradual further increase in underlying inflation is expected as the economy strengthens.

Conditions in the housing market continue to vary considerably around the country. Prices have been rising briskly in some markets and declining in others. In the eastern capital cities, a considerable additional supply of apartments is scheduled to come on stream over the next couple of years. Rent increases are the slowest for two decades. Growth in housing debt has outpaced the slow growth in household incomes. The recently announced supervisory measures should help address the risks associated with high and rising levels of indebtedness.

Taking account of the available information, the Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.

Enquiries

Media and Communications
Secretary’s Department
Reserve Bank of Australia
SYDNEY

Phone: +61 2 9551 9720
Fax: +61 2 9551 8033
Email:


Save early, save often

One of the underlying attributes of Australia’s superannuation system is that it starts young adults saving for retirement as soon as they join the workforce.

Without compulsory super contributions, many millennials – aged in their twenties to thirties and also known as members of Generation Y – may have second thoughts about saving for retirement early in their working lives.

Any reluctance to begin saving for retirement at a relatively early age is understandable given that their post-working days might be 40 years away or so.

A challenge, of course, is to convince millennials that saving for the really long-term is worthwhile. And part of that challenge is to persuade millennials about the value of adding to their superannuation guarantee (SG) contributions in such ways as making salary-sacrificed contributions.

A recent New York Times personal finance feature – For millennials, it’s never too early to save for retirement – comments that it is “perennially true” that most young adults don’t make retirement savings a priority.

However, its author tellingly adds, “millennials are in an ideal position to get started” because their perhaps seemingly modest regular savings have the opportunity to grow substantially over time.

The article is largely based on interviews with five people aged 28 to 32 about their attitudes towards savings and investing. The interviews produced some surprising and not-so-surprising responses.

For instance, a 28-year-old accountant interviewed has been saving for retirement since she was 17 and arranges with her husband for one of their salaries be saved each pay day. However, several of those interviewed recognise the need to properly save for retirement yet have never quite got around to it.

High in the reasons why young adults should begin saving and investing as early as possible is to reap the rewards of what is sometimes called “the magic of compounding”.

Compounding occurs when investors earn investment returns on past investment returns as well as on their original capital. And the compounding returns can really mount (or compound) over the long term – particularly the extremely long term.

Ways to get the most out of compounding include:

  • Start to save and invest as early as possible in your working life with as much as possible. Compounding needs plenty of time to produce its best results.

  • Invest regularly to keep building your investment capital and to accelerate the benefits of compounding.

  • Adhere to an appropriate long-term asset allocation for your portfolio – with enough exposure to growth assets.

A perhaps overlooked attribute of compounding is that disciplined investors who reinvest their earnings are less likely to be distracted from their long-term course by the latest market noise such as a bout of higher market volatility. Meanwhile, there returns keep compounding.

Current retirees who had recognised the value of compounding at the beginning of their working lives should now be enjoying its rewards.

If you would like to discuss, please call us on |PHONE| or email |STAFFEMAIL|.

 

Source:

Written by Robin Bowerman, Head of Market Strategy and Communications at Vanguard.

Reproduced with permission of Vanguard Investments Australia Ltd

Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer. We have not taken yours and your clients’ circumstances into account when preparing this material so it may not be applicable to the particular situation you are considering. You should consider your circumstances and our Product Disclosure Statement (PDS) or Prospectus before making any investment decision. You can access our PDS or Prospectus online or by calling us. This material was prepared in good faith and we accept no liability for any errors or omissions. Past performance is not an indication of future performance.

© 2017 Vanguard Investments Australia Ltd. All rights reserved. 

Important:

Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business, nor our Licensee take any responsibility for their action or any service they provide.


Explaining the upcoming $1.6m transfer balance cap

 

Of all the major changes to superannuation coming this year, probably the most confusing is the new “transfer balance cap”. In this article we’ve answered the most common questions to help you understand how it will work and to plan ahead.

What is the transfer balance cap?

The transfer balance cap is a new limit on the total amount of superannuation savings that can be transferred from an accumulation account to a tax-free retirement account. It’s a lifetime cap that applies on a per person basis, regardless of the number of superannuation accounts you have. It comes into force on 1 July 2016.

How much is the cap?

Initially it will be $1.6 million. It will increase in line with the Consumer Price Index in $100,000 steps. At the current rate of inflation the cap is expected to rise to $1.7 million around 2020-2021.

I already have more than $1.6 million in a tax-free pension. Am I affected?

Yes. You will need to remove the amount in excess of $1.6 million from your retirement account prior to 1 July 2017. You can either transfer it back into a super accumulation account, where earnings are taxed at the concessional rate of 15%, or remove it from superannuation entirely.

What happens if I don’t withdraw the excess or transfer more than the cap into a retirement account?

You will need to withdraw the excess, and until you do you will be liable to pay tax on the notional earnings on the excess amount. The tax rate is 15% for the first breach, and 30% on subsequent breaches.

There is one concession. If your retirement account value is less than $1.7 million on 1 July 2017 you will have six months from that date to withdraw the excess without penalty.

If my retirement account balance increases due to investment performance, will I have to withdraw amounts in excess of the cap?

No. The cap only applies to the amount transferred into the retirement phase account. It does not apply to subsequent earnings.

Can I make more than one transfer into the retirement account?

Yes, provided the available cap has not been exceeded. For example, if you transfer $800,000 in July 2017 you will use 50% of your cap. In a few years’ time, with indexation, when the cap rises to, say, $1.7 million, you will still be able to access 50% of this new cap, which means you can add up to $850,000 to your retirement account.

If you establish your retirement account with the maximum permissible amount (i.e. $1.6 million) you will use 100% of your cap and will not be allowed to contribute additional amounts.

Do transition to retirement income streams count towards the cap?

No, because from 1 July 2017 these income streams will lose their tax exemption. However, once a condition of release has been met, the transfer balance caps will apply to the TTR pension as it will become a standard account based or allocated pension.

How are defined benefit pensions and other non-account based pensions treated?

The treatment of defined benefit pensions and other non-account based products is complex. It depends on the type of pension or annuity, the tax status of its components, and the annual income it pays. If your pension is valued at more than $1.6 million, you won’t need to withdraw the excess, but you may be subject to tax on annual payments of more than $100,000. You will need to contact your pension or annuity provider to find out how you will be affected.

What do I need to do right now? What do I do with the excess? Do I use up my entire cap now or keep some for later?

The answers to these questions all depend on your personal circumstances and long-term goals. Good advice is essential, so the sooner you speak to your licensed financial adviser, the better. 

If you would like to discuss, please call us on |PHONE| or email |STAFFEMAIL|. 

 

Sources:

Introducing a $1.6 million transfer balance cap available at http://www.treasury.gov.au/superreforms#transfer


Dollar-cost averaging for millennial investors

It’s hardly surprisingly that a personal finance article in Forbes magazine places the classic and straightforward investment practice of dollar-cost averaging high among a list of tips to help millennials become better, more disciplined investors in 2017.

Dollar-cost averaging simply involves investing the same amount of money into shares or other securities at regular intervals – whether prices are up or down.

Investors practising dollar-cost averaging automatically buy more, say, shares when prices are lower and fewer when prices are higher. In short, purchasing costs are averaged over the total period that an investor keeps on investing, thus the name dollar-cost averaging.

Yet the core attribute of dollar-cost averaging is not so much the price paid for securities; it is the adherence to a disciplined, non-emotive approach to investing that is not swayed by prevailing market sentiment.

Dollar-cost averaging can assist investors to focus on their long-term goals with an appropriately diversified portfolio while avoiding emotionally-driven decisions to buy or sell – in other words, trying to time the market. As Smart Investing repeatedly emphasises, investors would rarely succeed consistently at market-timing.

The Forbes article, Five tips to make you a better investor in 2017, reasons that dollar cost averaging strategy may be well suited to millennial investors given their long investment horizons and their perhaps relative inexperience in investment markets. As a financial planner quoted in the piece comments: “The logic here is, if you’re in your late twenties or early thirties, the fluctuations of the market on one given day are unlikely to have serious consequences to the retirement money you’ll need to withdraw 30 years from now.” Novice investors were “too easily” influenced by market movements.

And given their long investment horizons, millennial investors are well placed to benefit from the rewards of compounding as investment returns are earned on past investment returns as well as on the original capital. (See Save early, save often, Smart Investing, January 29.)

The use of dollar-cost averaging does not necessarily mean, of course that investments will succeed; nor does it protect investors from falling share prices.

Australian super fund members who have compulsory and/or voluntary contributions regularly paid into their super balanced accounts are practising a form of dollar-cost averaging. The higher the regular contributions, the greater the potential effectiveness of dollar-cost averaging over the long term.

The vast majority of investors practising dollar-cost averaging would invest regular amounts from their monthly salaries. Yet a related issue concerning dollar-cost averaging can occur when an individual has a large amount of money to invest, perhaps from an inheritance, a bonus from work or some other windfall.

Several years ago, a Vanguard research paper found that, given certain assumptions, investing a big lump sum all at once had a better chance of producing higher long-term returns than drip-feeding the money into the market using dollar-cost averaging. This finding was based on historic long-term returns from share and bond in Australia, US and UK. As the paper emphasises, investment of a lump sum gains exposure to the markets as soon as possible.

Another consideration is that dollar-cost averaging may address concerns of a risk-averse investor about investing a big sum into the market immediately before a possible sharp fall in prices. It is a way for such an investor to ease their way into the markets.

For most investors without a huge windfall to invest, a critical role of dollar-cost averaging is to help keep us focused on the long-term in a disciplined, non-emotional way. It is one of investment’s emotional circuit breakers.

 

Source: 

Written by Robin Bowerman, Head of Market Strategy and Communications at Vanguard.

Reproduced with permission of Vanguard Investments Australia Ltd

Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer. We have not taken yours and your clients’ circumstances into account when preparing this material so it may not be applicable to the particular situation you are considering. You should consider your circumstances and our Product Disclosure Statement (PDS) or Prospectus before making any investment decision. You can access our PDS or Prospectus online or by calling us. This material was prepared in good faith and we accept no liability for any errors or omissions. Past performance is not an indication of future performance.

© 2017 Vanguard Investments Australia Ltd. All rights reserved.

Important:

Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business, nor our Licensee take any responsibility for their action or any service they provide.

 


Your next holiday destination - why not swap?

You might remember the movie, “The Holiday” starring Kate Winslet and Cameron Diaz. Two women are experiencing relationship problems so they exchange their houses for a holiday away from men. Kate swaps her quaint English cottage for Cameron’s LA mansion. Both love the extreme differences but, of course, there are men everywhere they go! (It ends happily ever after.)

In the ten years since that movie debuted, house swapping has taken the world by storm. It’s no longer a way to escape from our problems, but a wonderfully affordable accommodation option – and there are now thousands of homes of all shapes and sizes across the world to swap.

As the name suggests, house swapping is an exchange of homes, for an agreed period, at no cost to either party.

Swapping has many advantages over traditional holidays, including:

  • the cost savings make it possible to travel to destinations you might not ordinarily afford, or to stay for longer that you normally could;

  • being able to enjoy the privacy, space and comfort of a real home (you might even have a swimming pool to yourself);

  • the option to swap vehicles – save money by not hiring a car; or having to rely on public transport;

  • access to local knowledge about the best places to eat, shop and visit;

  • staying in locations away from the noise and cost of tourist areas.

Other advantages include:

  • the security of having your house occupied while you’re away, and

  • the opportunity for someone to take care of your pets at home saving you money on kennel fees and making your pets happier too.

Of course, there are downsides. In particular, you are entrusting complete strangers to use your home while you are absent. However, with the growing number of registered websites that allow users to be rated or reported, this risk may be reduced. Doing sound research and getting to know your potential swapper early is crucial. Leaving your holiday contact details with neighbours is always a good idea. And for more peace of mind, lock away or remove any precious or valuable items such as jewellery.

To find a website to best suit your needs, simply type “house swapping” into your favourite search engine.

House swapping is by no means new – it “officially” began 60 years ago in the US – and with the explosion of websites catering for this growing demand, the only problem now is deciding where to go!

 


Preparing for your family's future

No-one wants to think about death in the prime of life. But it’s important to decide what will happen to your assets when you die. Find out how you can give instructions to your family about your legal and medical preferences should you fall ill or lose the capacity to make those decisions yourself.

Estate plans

An estate plan includes your will as well as any other directions on how you want your assets distributed after your death. It includes documents that govern how you will be cared for, medically and financially, if you become unable to make your own decisions in the future.

You must be over 18 and mentally competent when you draw up the legal agreements that form your estate plan. Key documents might include:

  • Will

  • Superannuation death nominations

  • Testamentary trust

  • Powers of attorney

  • Power of guardianship

  • Anticipatory direction

If you have made a binding nomination in your super or insurance policies, the beneficiaries named in those policies will override anyone mentioned in your will. If you have a family trust, the trust continues and its assets will also be distributed according to the trust deed, no matter what is written in your will.

You should ask a legal professional to check your estate plan. A good estate plan should minimise the tax paid by your heirs, and help avoid any family squabbles.

Wills

A will takes effect when you die. It can cover things like how your assets will be shared, who will look after your children if they are still young, what trusts you want established, how much money you’d like donated to charities and even instructions about your funeral.

Your will can be written and updated by private trustees and solicitors, who usually charge a fee. Some Public Trustees will not charge to prepare or update your will, but only if they act as the executor of your will. Other Public Trustees may only exempt you from charges if you are a pensioner or aged over 60. Check with the Public Trustee in your state or territory.

  • ACT – Public Trustee and Guardian for the ACT
  • NSW – NSW Trustee and Guardian

  • Northern Territory – Office of the Public Trustee

  • Queensland – The Public Trustee of Queensland

  • South Australia – Public Trustee South Australia

  • Tasmania – Public Trustee Tasmania

  • Victoria – State Trustees Victoria

  • Western Australia – Public Trustee Western Australia

You can buy will kits online but it’s a good idea to ask a solicitor to review your will to make sure everything is in order. If a will isn’t signed and witnessed properly, it will be invalid.

Keep your will valid and up to date as your legal rights change, specifically if you marry, divorce or separate; have children or grandchildren; if your spouse or beneficiaries die; or if you have a significant change in financial circumstances.

If you die intestate or your will is invalid, an administrator appointed by the court pays your bills and taxes from your assets, then distributes the remainder, based on a pre-determined formula, which may not be how you intended your assets to be distributed.

If you die intestate and don’t have any living relatives, your estate is paid to the state government.

Testamentary trusts

A testamentary trust is a trust set out in a will that only takes effect when the person who has created the will, dies. Testamentary trusts are usually set up to protect assets.

Here are some reasons why you would create a testamentary trust:

  • The beneficiaries are minors (under 18 – 21 years old)

  • The beneficiaries have diminished mental capacity

  • You do not trust the beneficiary to use their inheritance wisely

  • You do not want family assets split as part of a divorce settlement

  • You do not want family assets to become part of bankruptcy proceedings

A trust will be administered by a trustee who is usually appointed in the will. 

A trustee must look after the assets for the benefit of the beneficiaries until the trust expires. 

The expiry date of a trust will be a specific date such as when a minor reaches a certain age or a beneficiary achieves a certain goal or milestone, like getting married or attaining a specific qualification.

Powers of attorney

Appointing someone as your power of attorney gives them the legal authority to look after your affairs on your behalf.

Powers of attorney depend on which state or territory you are in: they can refer to just financial powers, or they might include broader guardianship powers. You will need to check with your local Public Trustee.

Generally speaking, there are different types of power of attorney:

  • A general power of attorney is where you appoint someone to make financial and legal decisions for you, usually for a specified period of time, for example if you’re overseas and unable to manage your legal affairs at home. This person’s appointment becomes invalid if you lose the capacity to make decisions for yourself.

  • An enduring power of attorney is where you appoint a person to make financial and legal decisions for you if you lose the capacity to make your own decisions.

  • A medical power of attorney can make only medical decisions on your behalf if you become unable to do so yourself.

You can prepare a few other documents to help your legal appointees and family as you grow older, including:

  • An enduring power of guardianship that gives a person the right to choose where you live and make decisions about your medical care and other lifestyle choices, if you lose the capacity to make your own decisions.

  • An anticipatory direction records your wishes about medical treatment in the future, in case you become unable to express those wishes yourself.

  • An advance healthcare directive (or living will) documents how you would like your body to be dealt with if you lose the capacity to make those decisions yourself.

The documents you choose to draw up will depend on your situation, and the responsibilities you are happy to entrust to others. Get legal advice if you are not sure.

Choosing your powers of attorney

Nominate people that you know are trustworthy, if possible financially astute, and likely to be around when you need them.

Your legal and financial housekeeping

Once your paperwork is in order, it will help your executor and family if you list the legal documents you have and where they are kept.  

Keeping a record of your personal information and notes on how your legal documents, assets and investments are arranged can also help you.

Here is a list of key documents to keep:

  • Birth certificate

  • Marriage certificate

  • Will

  • Enduring power of attorney

  • Advance healthcare directive (also called a living will)

  • Personal insurance policies

  • House deeds

  • Home and contents insurance

  • Deeds and insurance policies for any other real estate you own

  • Bank account details

  • Superannuation papers

  • Investment documents (securities, share certificates, bonds)

  • Medicare card

  • Medical insurance details

  • Pensioner concession card

  • Any pre-payments of funeral investments

A good will and estate plan can help make sure your wishes are carried out after you die, or if you are no longer able to make your own decisions.

If you would like to discuss, please call us on |PHONE| or email |STAFFEMAIL|.

 

Source:

Reproduced with the permission of ASIC’s MoneySmart Team. This article was originally published at www.moneysmart.gov.au

Important:

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, we do 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, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.  

Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business, nor our Licensee take any responsibility for their action or any service they provide.


Your first SMSF portfolio: Don't overlook fundamentals amid super changes

New SMSF trustees face something of a double challenge in 2017-2018: Coming to terms with the long-standing fundamentals of having your own fund together with the biggest changes to super in a decade.

It is critical for new trustees not to neglect any of the fundamentals of self-managed super in their efforts to understand the changing super system from the beginning of July. (See A critical time for specialist advice, Smart Investing, December 2, 2016.)

The first few months of a new financial year are among the most popular times to establish an SMSF. Often, investors aim to begin their self-managed approach to super with a fresh start for a new financial year and to spread their administration costs over the entire 12 months rather than part of a year.

And in many cases, members switching from large APRA-regulated funds would time their setting-up of their SMSFs with their retirement at the end of a financial year or relatively early in a new financial year.

If you are aiming to setup an SMSF from the beginning of 2017-18, preparations obviously should begin well in advance.

Fundamentals for would-be SMSF trustees to begin thinking about now include:

Setting a compulsory investment strategy

SMSF trustees are legally required to prepare, implement and regularly review an investment strategy that has regard to the whole circumstances of their fund. These circumstances include: investment risks, likely returns, liquidity, investment diversity, risks of inadequate diversity and ability to pay member benefits. (The SMSF Association offers a free course for SMSF trustees.)

Investing within the rules

Trustees must maintain a super fund for the sole purpose of providing member retirement benefits; not provide loans or financial assistance to members or their relatives; separate SMSF assets from their own personal or business assets; conduct transactions on an arm’s length basis; and adhere to the investment restrictions under the in-house asset rule*.

Choosing an SMSF’s strategic asset allocation

A portfolio’s asset allocation – the proportions of its total assets that are invested in different asset classes of mainly local and overseas shares, property, fixed interest and cash – spreads risks and opportunities. Research has long found that a diversified portfolio’s strategic asset allocation is responsible for the vast majority of its return over time.

Selecting investments within an SMSF’s strategic asset allocation

SMSFs often adopt a “core-satellite” approach to invest in accordance with their asset allocation. With this strategy, the core of their portfolio is held in low-cost traditional index funds or exchange-traded funds (ETFs) tracking selected indices with smaller “satellites” of favoured direct securities and/or actively-managed funds. As the Vanguard/Investment Trends 2016 Self Managed Super Fund Report shows, SMSFs are among the biggest and longest supporters of ETFs.

Deciding whether to take specialist SMSF advice

Most SMSF trustees receive some professional guidance ranging from administration services up to full financial planning. And specialist SMSF advice can be particularly valuable when a fund is being established.

For the past 16 years or so, Vanguard analysts have studied “adviser’s alpha“. This is the value that advisers can add through their wealth management and financial planning skills – guiding their clients in such areas as asset allocation, cost and tax efficiency, and portfolio rebalancing – and as behavioural coaches.

Skilled advisers can add considerable value by using skilful wealth-management practices together with personally encouraging their clients to adopt disciplined, long-term approaches to investing.

New SMSF trustees in 2017-18 will be joining a force of around 600,000 SMSFs with more than $600 billion in assets.

* Under the in-house asset rule in superannuation law, an SMSF is generally prohibited from making loans, providing leases or having investments with related parties and entities that exceed 5 per cent of its total asset value. Certain exceptions apply including business property.

 

Source: 

Written by Robin Bowerman, Head of Market Strategy and Communications at Vanguard.

Reproduced with permission of Vanguard Investments Australia Ltd

Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer. We have not taken yours and your clients’ circumstances into account when preparing this material so it may not be applicable to the particular situation you are considering. You should consider your circumstances and our Product Disclosure Statement (PDS) or Prospectus before making any investment decision. You can access our PDS or Prospectus online or by calling us. This material was prepared in good faith and we accept no liability for any errors or omissions. Past performance is not an indication of future performance.

© 2017 Vanguard Investments Australia Ltd. All rights reserved.

Important:

Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business, nor our Licensee take any responsibility for their action or any service they provide.


To rent or own: retirement living options

Ownership & legalities

In Australia there are both ownership and rental opportunities for retirement living options. Generally the deciding factor of whether you rent or buy is subject to your financial situation.

Ownership & legalities

Property ownership in retirement villages comes under slightly different legislation to normal home ownership. They have different forms of legal title and occupancy rights, and other costs such as stamp duty may or may not apply.

Types of tenure

The various forms of occupation or ownership rights of retirement villages are referred to as ‘tenure’. They will include provisions for resident consultation about the management of the community and the use of the village facilities.

The legal forms of tenure for buying into retirement villages are:

Leasehold estates: The owner/developer continues to own the property, however you pay the market value of the unit in exchange for a period of time (49 – 199 year lease). This is generally the most common form of tenure used by ‘for profit’ developers.

Licences to occupy: The village developer or owner gives you a licence to occupy your unit which means you are permitted to stay under certain conditions such as not altering the property or surrounding gardens. This form of tenure is generally the most common used by ‘not-for-profit’ developers.

Company share arrangement: The village is still owned by the retirement village developer who sells you shares which entitle you to live in your unit. Although some retirement villages do use this tenure, it is not a common form.

Strata title ownership: Similar to regular strata-title schemes where the property is divided into units, this operates as a direct ownership structure. You pay the agreed purchase price, are registered on the title deed and become a member of the owners’ corporation. However unlike regular strata, the retirement village operator may have to approve you as a resident and you sign a management contract with the village owner.

This is not a common form of tenure for retirement villages.

NB: In South Australia, while Strata Title does still exist, divisions no longer occurred after June 2009. Community Title was bought in to replace it. Existing Strata Corporations were not affected by the change.

Community title ownership: This is a very rare form of tenure for retirement villages and operates on a direct ownership structure similar to strata, except in community title, the land is divided into ‘Lots’.

If you would like to discuss, please call us on 9830 1754 and ask for Emmett Wilkinson.

Source:

This article was originally published on AgedCareGuide.com.au. Reproduced with permission of DPS Publishing.

Important:

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, we do 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, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person. 

Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business, nor our Licensee take any responsibility for their action or any service they provide.


The perfect property at an affordable price - it’s not a myth

 So you’ve found your dream home, but it’s in need of a little TLC. While others may see this as a deterrent, this is actually a great opportunity to nab the house of your dreams at a price tag that’s within your means. Here’s how to tactfully negotiate the price without ruining your chances of securing the property.

Tip #1: Never enter a negotiation empty-handed

Whether it’s hiring inspectors for a building and pest report, or obtaining quotes from tradespeople, obtaining facts and figures will give you ammunition when requesting a price reduction.

“Even if it costs you extra, it’s worth getting all the information before making your offer. People often underestimate how much repairs will cost,” says a real estate agent.

Tip #2: Separate your emotions

The most tactful way to negotiate is to eliminate all emotions, advises the agent. “Try to separate yourself from the outcome and present your side logically. The owner is under no obligation to accept what you offer, no matter how well you present your points. So if things don’t go your way, being negative won’t do you any favours.”

Tip #3: Remember this is someone else’s house

Negotiation is a two-way street, so in order to come to an agreement, concessions will have to be made on both sides. “Try to understand what is important to the owner,” advises the agent. “What can you offer to counteract the price reduction you’re after? Perhaps a longer settlement period so they can find a new home? It’s little enticements like this that can often be much more valuable than a couple of extra dollars.”

Tip #4: If you don’t ask, the answer is always going to be no

“I’ve heard a lot of weird and wonderful requests when it comes to purchasing a house, so really you can ask for anything. Whether or not it will be accepted is another thing,” advises the agent.

From wanting certain fixtures included in the sale price, to extra inspection requests, you won’t know what the owners are happy to give if you don’t voice your desires. However, before you go wild with requests, think about what is most important to you, as realistically the owners aren’t likely to budge on everything.

“In theory, you can inspect a property as many times as you like. In practice though, it will depend on your agent’s availability and whether or not the owner is currently living in the property,” says the agent. “You might put off the owner if you are constantly disrupting their day, so as an alternative I’d suggest visiting the street at different times during the week. You don’t have to enter the actual home to get a vibe of what the neighbourhood is like.”

A house that requires a bit of repair work is a great bargaining tool and generally an opportunity to secure a good price. 

Source:

Reproduced with the permission of the Mortgage and Finance Association of Australia (MFAA) 

Important:

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, we do 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, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.

Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business, nor our Licensee take any responsibility for their action or any service they provide.


Having an estate plan is more than just having a will

Having an estate plan is more than just having a will

There seems to be a common misconception that having an estate plan is for wealthy people. Wrong. Having an estate plan is for everyone. It is about being prepared, minimising risk and making sure your loved ones receive the benefit of your estate.

Today, there are many factors which influence an estate plan. Simply having a will may not be enough for your estate to pass to your loved ones. Often, the starting point is to determine what estate assets and non-estate assets you own. It is common for mum and dad to think they own a particular asset, only to learn that their family trust in fact owns the asset.

What is an estate asset?

An estate asset is an asset held in your own personal name. Examples of estate assets include real property held in your personal name or an interest as tenants in common, bank accounts, vehicles and shares.

Estate assets are dealt with in accordance with your Will.

What is a non-estate asset?

A non-estate asset cannot be dealt with in accordance with your Will. Non-estate assets may be assets owned:

  1. as joint tenants;

  2. by your self-managed superannuation fund;

  3. by your family discretionary trust;

When dealing with a non-estate asset, your estate plan can often be tailored so that the control of any non-estate assets is passing to your loved ones.

What happens to property owned as joint tenants?

The right of survivorship applies to property held among individuals as joint tenants. This means that upon the death of one of the owners, full ownership of the property will automatically revert to the surviving owner. The property will not form part of the deceased owner’s estate.

In your estate plan, if you do not wish for the right of survivorship to apply, steps can be taken to sever a joint tenancy, so that the property is held as tenants in common. This will ensure that your interest in the property flows to your estate.

What happens to your superannuation?

Superannuation is separate to your estate, therefore, it is not automatically distributed in accordance with your will. Without an estate plan, the trustee of your superannuation fund will decide which dependents to pay your superannuation to. However, with a plan, you can control which dependents your superannuation is paid to, via a binding death benefit nomination. There are strict compliance issues which impact whether a binding death benefit nomination is valid.

What happens to assets held by a discretionary family trust?

Trust property will not form part of your estate as the assets are owned by the trust itself. Without an estate plan, assets held by these separate legal entities may not pass to your loved ones. With a plan, you can transfer the control of these assets to a specific person. If you are concerned about assets held in a separate legal entity, it is imperative that you have your trust and company documentation reviewed and seek advice on how the transfer can be incorporated into your estate plan

What happens to life insurance?

If you have taken out a life insurance policy to ensure that your loved ones continue to enjoy their lifestyle in the event of your passing, it is important to consider how this policy has been established. If a beneficiary has been nominated on the policy, the life insurer must pay the beneficiary directly, which means that the proceeds will not form part of the insured’s estate.

An effective estate plan means considering and appreciating all aspects of a person’s life. 

Source:

Written by Chloé Kopilovic, Lawyer at Ferguson Cannon Lawyers. Reproduced with permission of Chloé Kopilovic. This article was originally published at www.australianestatelawtoday.com.au

Important:

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, we do 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, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.

Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business, nor our Licensee take any responsibility for their action or any service they provide