Rate Rises, Growth, Tax reform

Emma Cunningham of Platinum Finance has provided a run down on some pertinent issues currently relating to the property market.
Emma’s team at Platinum Finance provides long term financial strategies to investors with an ongoing focus on wealth creation.

Rate Rises, Property Growth and Henry Tax Reform

what a week!!….still more to come….Tuesday is budget night….
Below I have given you a break down of what it all means…

If you don’t read any of it. Just book a pre 30 June Investment appointment with me. Why? I want make your daily efforts work for you (and if we do it pre 30 June we might be able to get some money back into your pocket from this year’s tax return).

These are the most common problems, frustrations or causes for loss of sleep - I solve for clients:

1. Cash flow strapped - home lopping you from being able to get ahead and invest or your investments are straining your cash flow
2. Not enough super to retire - if you have a combined balance of $100,000 you need to book an appointment, if you are young and not interested I will show you how “super” this tax system is to accelerate our investment portfolio
3. Paying too much tax - want to reduce it without effecting cash flow or lifestyle - most of the investors I work with are not paying tax
4. Scared investing will hampen your lifestyle now

The RBA’s decision yesterday is the 6th increase in the last 8 months based on a strengthening economy locally and globally. The cash rate has moved from 4.25% to 4.5% this moves it closer to the target average rate. NAB, CBA and Westpac have already based on the full increase.

Economists are still tipping for more rate rises this year with the two contributing factors being growth in the Property sector and Resource sector. Both have had air play this week - Bureau of Statistics released the property growth statistics and the Mining Sector is at the focal point of the proposed tax changes from the Henry Tax Reform.

Property statistics released this week from the Bureau of Statistics show a rise of almost 5 per cent for the quarter, and 20 per cent for the year. It is the largest annual increase since the series began in the March quarter of 2002.
Melbourne led gains with quarterly prices rising 6.7 per cent and annual prices up 27.7 per cent.

The strongest growth came from established houses with relatively high prices.

Over the quarter the other capitals also experienced positive contributions: Sydney up 5.3 per cent, Perth 3.5 per cent, Brisbane 2 per cent, Adelaide 2.7 per cent, Canberra 5.4 per cent, Hobart 4.2 per cent and Darwin 3.6 per cent.

Annually, house prices rose in Melbourne 27.7 per cent, Sydney 21 per cent, Canberra 20.6 per cent, Darwin 17.5 per cent, Perth 15 per cent, Hobart 14.1 per cent, Brisbane 12.1 per cent and Adelaide 10.8 per cent.

But not everyone is convinced the figures give a true picture of the broader housing market. Senior economist with BIS Shrapnel, Jason Anderson, shared his caution on Monday despite the positive market indicators.

“I think we’ve got a view though that rates will head up and need to go higher, but it’s really not until they get above say 8 per cent, towards 8.5 per cent historically, that we’ve seen a really rapid and sharp slowdown in the property markets,”

George Tharenou economist for UBS says the reason for such big increases is plain.

“I think there’s clearly a structural under-supply of housing. We expect the supply of housing to improve over the next year but it’s just not enough to meet the sharply increasing population.”

Major tax changes proposed from Henry Tax Reform

- Lifing the superannuation contribution from 9% to 12% by 2020
- More Government payments for low-income workers into their superannuation
- Compulsory super payments for those over 70 and concessions on contributions for those over 50
- A reduction in company tax from 30% to 28% by 2015
- Small business to benefit from company tax cut from 2012
- Other write off concessions for small business
- Miners to be hit with a 40% tax on above normal profits
- An infrastructure fund to be paid to the states each year to start at $700 million in 2012

We work with clients to create simple plans, that are robust and enable them to invest with confidence in a rising or stagnate property market. If you have been wondering how others invest. Make an appointment and find out:

1. Get the tax you pay working for you to fund a property portfolio for the future
2. Work out how much income you will need to stop working
3. Find out how you can do it without hampering your lifestyle now - our clients still drink wine, have great holidays,
invest, save tax and sleep easy

Contact Emma on 1300 792 561 or email emma@platinumfinancing.com.au