Top 3 Advantages to having a Self-Managed Super Fund

When compared to a regular super fund an SMSF is a private fund that is managed by the owner and the trustees that are appointed by them. This offers the owner an extra amount of control over their money with the added flexibility to make their own financial decisions. Aside from this added freedom, there is a list of additional benefits to putting your super into an SMSF. Here are the top 3 Advantages of having a Self-Managed Super Fund.

Investment Choice 

 

Having an SMSF gives you the ability to invest your super into financial alternatives outside of the stock market, including property, art, collectables, term deposits and direct shares. Investing outside of the traditional stocks gives you the ability to hedge the risks to your savings by placing capital in different places and not relying exclusively on the unpredictability of the stock exchange to grow your funds.

Part of the benefits of having more investment choice is that you are able to borrow money to spend on an investment property, which can then be used to earn an additional income and provide an extra asset for the fund. However, when a property is purchased through an SMSF, those who own the fund, or anyone related to them are not allowed to live on the property, as it would be classed as a primary residence, thus removing the tax benefits that you gain from having an investment property.  

SMSF’s leasing a commercial property back to a related business is a common trend especially with Medicos who own or “want to own” the freehold where they run their practice out of.

Minimising tax 

An SMSF gives the holder more flexibility than other types of fund when it comes to when and how you contribute to it, while also minimising the amount of tax you pay on the fund per year. When it comes to tax, you are able to reduce your tax bill by allocating earnings to members of the fund. The amount of tax that the fund owner needs to pay is calculated by taking into account the fund owners circumstances from the past financial year and making decisions based off the contributions made to the fund, the amount of money left in the reserves and how the fund’s money was distributed during the year.  

If a SMSF is correctly managed the tax rate payable per year could reduce from 30-45% down to 0-15%. 

Transferring wealth to the next generation 

When you are thinking about your superannuation, you don’t often think about what is going to happen to the money that is left in the fund once you are gone, or how it will be distributed amongst your family members.  

SMSF’s offer security by ensuring that capital secured in the fund is safe and efficiently distributed upon the death of the fund’s owner. Unless you state in your will that your superannuation benefits are included as part of your estate, they are not included in your estate and need to be executed separately.  

When using an SMSF, you are able to leave clear and concise instructions that ensure that your superannuation benefits will be distributed according to your wishes. This can include leaving any taxable pensions that you have to dependents or non-dependents who will be able to receive them with little to no tax included with the gift.  

An SMSF will also let you set up your superannuation funds as a tax-effective stream of income for dependents such as spouses or children. There are 3 ways this is done, firstly you can set an amount to be paid to the dependent on a regular basis such as yearly. Secondly, you can have your fund paid out in a lump sum, which is probably one of the most common methods. Or, finally, you could have it set as a mix of both, with an initial lump sum being paid out and the rest being paid out on a regular basis.  

While there are a multitude of benefits to owning a Self Managed Super Fund, there are a few downsides that need to be considered before opening one. One of which is control. While control can be a positive for most people, owning an SMSF requires you to be extremely proactive in the management of your money, so it’s not a good fit for some people. Another crucial one is that it is a costly process. From set up to annual running expenses, there are a myriad of fees that come with managing your own super account.  

If you are interested in a Self Managed Super Fund or would like more information to help decide if it is right for you, contact your accountant or financial advisor. I am happy to give you advice surrounding what finance is possible within your fund.   

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3 Ways To Take The Pain Out Of Finance For Medical Professionals

I was working with a Doctor the other day that was struggling to find someone to help them review their current loans and help them save money on their repayments. This Doctor had multiple loans across different institutions from when they started their own practice and wanted to review the new loans available on the market to help find them a better deal and cut repayment and interest costs.

For medical professionals finding the time to manage their finances can be a challenge with their busy schedules. So when it comes to reviewing or refinancing their loans, it can get put off for a long time. Many medical professionals will turn to a broker to save time and money on the loans process, but if the broker is unfamiliar with the medical industry, it can actually end up taking longer to find and review loans and can cause more headaches in the process.

To help take the pain out of managing finance for medical professionals here are the top 3 things you need to know.

1 – Use a specialist broker – they know medical Professionals

While regular brokers are great for those in non-specialised industries, specialist brokers that are intimately familiar with the medical industry are a great asset for medical professionals. Those in the profession often have an extensive list of needs when it comes to finance, many of which can be quite complex.

During their working lifetime, those in the medical profession will often need to take out multiple loans from different lenders to fund the purchase of assets such as motor vehicles, office or medical equipment, and residential or commercial property.

Having a broker that specialises in the medical industry means that they are intimately familiar with the different deals, services and packs that are available from different lending institutions to help cut the cost of repaying these loans and get you the best deal for your money.

2 –  Understand Medical Professionals are in a unique position 

Medical Professionals are in a unique position when it comes to financing. Jobs in the medical industry are some of the highest paying out there, but medical professionals can often be amongst the worst when it comes to saving their money.

While doctors have some of the lowest default rates on loans of any profession, making them ideal borrowers in the eyes of the bank, they are also saddled with a large amount of debt that they have to repay before they can start truly saving for retirement.

A good broker will be able to understand the challenges of working with medical professionals and assist you with loan options and services that will help you balance your books and ensure that you’ll have enough savings to maintain your lifestyle during retirement.

3 – Know banks like Medical professionals

When it comes to lending money to different professions, banks prefer to lend to medical professionals and doctors more than anyone else. Due to their high salary and the sense of reliability that comes with their career choice, those in medical professions have a reputation for being responsible and paying their loans back on time, making them ideal candidates to loan to.

Banks favour Medical Professionals to such an extent that they have made a series of exclusive loans and deals dubbed ‘Medico Packs’ which are offered only to those professionals via the services of specialised brokers. These deals can be applied to multiple different types of loans including capital equipment loans, home loans, investment loans, car loans, and various other asset loans for both personal and professional purchases.

For more information about how to manage your finances and take the pain out of the loans process, contact your local specialised broker. They will be able to help you find the right loan options for your needs at the best possible price as well as gaining you access to the exclusive Medico Packs as they are available only through brokers.

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Options For A Doctors Loan

I was speaking with a client recently who was confused about their options for gaining finance because of their profession as a doctor. What they didn’t know is if they got their loan through a specialised broker, they would qualify for what is known as a Medico Pack.

Doctors are seen as a safe investment for banks, so they now offer these packs for those in the medical industry, which gives them access to special discounts, packages and offers on their loans.

However, in order to qualify for these packs, you must be a member of one of the many professional organisations in the field and currently hold a position in the industry such as interns, registrars, residents, and specialists as well. Those in medical research, scientists, psychologists, or naturopaths may not be eligible due to limited income potential, and a higher loan risk.

There are multiple types of loans available in these Medico packs, but here are the 5 most common types.Home Loans

Home Loans

Taking out a home loan with a medico pack offers 2 main advantages, being able to borrow more, as the maximum amount you can borrow will be higher than the amount that is offered to those in a different field. Some lenders can offer up to $4.5 million for properties. And a variety of discounts including an interest rate reduction, lenders mortgage insurance waiver, or others may be available, which can end up saving you thousands of dollars.

Investment Loans

Investment loans can be taken out on a variety of different products and needs including construction of both private and office spaces. They also come with a number of advantages for medical staff including low rates and flexible terms.

Residential property investment loans also offer the benefits of a faster application and approval process for both building and buying property, a higher borrowing rate, and constructions loans, which are typically difficult for average buyers to obtain, are easily available to doctors with high incomes.

Car Loans

Cars are essential for both business and private usage in the medical industry. Utilising a broker to choose your loan may allow access to the medico pack discounts such as low car loans for those that operate their own practice, lease agreements, lower interest rates and easy qualification terms.

Other Asset Loans

Other Asset loans include luxury items such as boats and bikes. In nearly all cases, doctors can qualify for these types of investment purchases without complex paperwork or a long process. Medical professions can expect these loans to offer easier income qualification requirements (there’s less work to prove your income), higher borrowing limits, low-interest rates and easy repayment terms.

Refinancing

Like the general public, doctors are likely to have other loans in various places. Refinancing through a broker means that it is possible to secure a new loan to replace nearly any type of existing loan with relative ease, providing the opportunity choose between better/ discounted interest rates and waived lenders mortgage insurance. These refinanced loans are less expensive than what may have been paid previously and have the potential to save thousands of dollars over the lifetime of the loan.

There are many more different loan types available for those in the medical profession to choose from and many possible savings to be made if you decide to get your new loan via a broker. Medico packs are only available through brokers, so to get the best deal, speak to your local broker as they are also able to find a loan that is tailored to fit you and your business’s needs at the best possible price.

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Beneftis Of An Offset Account To Save You Money On Your Mortgage

I was speaking with a Doctor the other day that was struggling to make the decision on how to prioritise their finances. On one hand, they want to pay off their mortgage quicker, and on the other, they want to save money for holidays and retirement.

When you have a large loan like a mortgage, the main thing that people usually think about is how fast can it be paid off. Most of them go about speeding up their repayments, paying more than the minimum requirement, but there is another option. Using an offset account to reduce the time and money spent paying off the loan.

An offset account is a savings or transaction account that is linked to your home loan with the goal of saving you money on interest.

It works by reducing your mortgage’s interest by the same amount of money that is saved in the account. For example, if you have a $350,000 home loan balance and you have $25,000 saved in your offset account, you only have to pay interest on $325,000 of that balance.

There are two types of accounts that are commonly used for mortgages, partial and 100%.

A 100% account is considered the most effective type as 100% of the balance in the account is applied to the loan, reducing the amount of interest you have to pay. Partial accounts are still useful but are less beneficial when paying off loans quickly, as only the interest earnt from the account goes towards reducing the amount of payable interest on the loan.

Using an offset account can help you save thousands of dollars over the life of your loan, but there are a few things that you can do to help you save more. Here are our top 4 ways to use your offset account to save money on your mortgage.

Directly depositing into your offset account to build interest.

Your offset account has a higher interest rate than your regular savings account, this interest is usually compounded on a more regular basis than a normal savings account, and that interest is compounded daily, you can earn more.

Connecting your debit account to your offset account, effectively turning it into your daily transactional account, then having your salary deposited directly into it can help you earn more even if the balance fluctuates.

Using your offset account to pay off credit cards

If you are dedicated to saving money and are focused on building the amount of money in your account, the less likely you are to spend that money. To help build your savings, you can strategically defer expenses daily expenses to a credit card which has a decent interest free repayment period on purchases. When you make your monthly mortgage, repayment, you fully pay off your credit debt at the same time. This gives you more time to build interest and clears your credit debt for the month.

Make your savings work harder by putting them directly into your offset account

Most people have a separate savings account that they use to put money away for holidays, emergencies, etc., however, if you were using a high-interest savings account, the interest earned from that account would be automatically be classed as an earning and taxed. Offset accounts, however, aren’t subject to tax meaning that you could save more and pay less on your loan.

As a safety buffer

If something bad happens that changes your income drastically such as sickness, injury, unemployment, etc., or you need to make a large one-off payment to cover an emergency, the money you have saved in your offset account can be used to cover it.  Using your account like a safety net is a good way to ensure that you are covered if something goes wrong and your situation changes, while still paying off your mortgage at the same time.

In March of 2017, Australian Prudential Regulation Authority (APRA), the governing body responsible for overseeing the finance industry, found that 37% of all loans had some form of offset account attached to them, a 2% rise from the year before.

The use of offset accounts is on the rise in Australia, if you would like to know more about them and how having one could help you pay off your mortgage, contact your local mortgage broker.

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What Options Do Physiotherapists Have For Loans?

I was speaking with a Physiotherapist recently who was confused about his options for gaining finance. What he didn’t know is that as a Physiotherapist, he had additional options available to him.

Physiotherapists and medical professionals are seen as a safe investment for banks, so banks offer a range of special discounts, packages and offers on their loans.  There are multiple types of loans available in these offers, but here are the 5 most common types.

 

Home Loans 

Taking out a home loan as a Physiotherapist has 2 main advantages. One is being able to borrow more, as the maximum amount you can borrow will be higher than the amount that is offered to those in a different field. They offer a variety of discounts including an interest rate reduction, lenders mortgage insurance waiver, or others may be available, which can end up saving you thousands of dollars.

Investment Loans 

Investment loans can be taken out on a variety of different products and needs including construction of both private and office spaces. They also come with a number of advantages for allied health professionals including low rates and flexible terms.

Residential property investment loans also offer the benefits of a faster application and approval process for both building and buying property, a higher borrowing rate, and constructions loans, which are typically difficult for average buyers to obtain, are more easily available to allied health professionals.

Car Loans 

Cars are essential for both business and private usage in the allied health industry. Utilising a broker to choose your loan may allow access to the  discounts such as low car loans for those that operate their own practice, lease agreements, lower interest rates and easy qualification terms.

Other Asset Loans 

Other Asset loans include luxury items such as boats and bikes. In nearly all cases, physiotherapists can qualify for these types of investment purchases without complex paperwork or a long process. Allied health professionals can expect these loans to offer easier income qualification requirements (there’s less work to prove your income), higher borrowing limits, low-interest rates and easy repayment terms.

Refinancing 

Like the general public, Physiotherapists are likely to have other loans in various places. Refinancing through a broker means that it is possible to secure a new loan to replace nearly any type of existing loan with relative ease, providing the opportunity choose between better/ discounted interest rates and waived lenders mortgage insurance.

These refinanced loans are less expensive than what may have been paid previously and have the potential to save thousands of dollars over the lifetime of the loan.

There are many more different loan types available for those in the allied health professional to choose from and many possible savings to be made if you decide to get your new loan via a broker.

Some options are only available through brokers, so to get the best deal, speak to your local broker as they are also able to find a loan that is tailored to fit you and your business’s needs at the best possible price.

Sarcia is a Medical Lending Specialist at MediPro Capital. She provides lending solutions tailored to medical professionals.

To see if and how Sarcia can help call 0432 344 311 or email her at sarcia@mediprocapital.com.au.

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Are Interest Only Loans Right For Doctors?

I was speaking with a doctor the other day. This particular doctor was telling me he wanted to pay less in terms of repayments on his loan. He wanted to use the extra money to pay off other business loan.

I suggested an interest only loan. This type of loan is becoming increasingly popular in the Australian market.

An interest only loan is different from a regular loan because as the name suggests, the repayments you make only cover the interest on the loan you take out. It’s a unique type of loan because for the agreed upon period (usually up to 5 years) the borrower only has to pay the interest on the loan they took out. At the end of the period, it falls back to the traditional repayments of both the principal amount and the interest together.

In 2015 $153.8 billion dollars’ worth of interest only loans were taken out, making it one of Australian’s fastest growing loan types. However, like its traditional counterpart, it has both advantages and disadvantages to it.

In terms of advantages there are three major ones:

1. Smaller Repayments: Your repayments are smaller at first, which is a plus for those with other high-interest loans to pay off, or those who are looking to buy an investment property or business space.
2. Maximised Tax Deductions: It can help maximise tax deductions on investment properties. Interest paid on home loans can be tax deductible, by paying interest only on the property it maximises the deduction for the investor.
3. More cash for other things: It can free up cash to put towards other expenses. For businesses, this means that the money that would be spent on paying back the principal amount could be funnelled into operating costs for the business or upgrades on equipment or facilities.

There are also 3 main disadvantages to interest only loans. These are:

1. The principal amount doesn’t decrease: So, while you are still making repayments on the property, your debt doesn’t reduce. Many investors who take out interest only loans rely on the value of the property increasing during the loan period and then selling the property off at the end of it to repay the principal amount borrowed. The risk in this strategy is that if the property value doesn’t increase or decreases the mortgage you could be left paying would be worth more than the property itself.
2. Overspending: While only paying, interest frees up cash flow it could end up tempting you to spend more than you can afford at the time. Using the extra cash to cover day to day and run of the mill costs instead of paying down other debt could be wasting money and spending more than you can afford.
3. More expensive in the long run: Interest only loans can end up more expensive in the long run as you end up making more payments on the loan as a result of the 5-year buffer. This extends the life of the loan taking more time and payments to pay it off.

Interest only loans are an invaluable resource for certain people like investors, but they are also considered one of the riskier type of loans. If you are considering one, ask yourself if the short-term benefits outweigh the long-term ones, and if you will be able to afford the larger payments once the interest-only period ends. If you are unsure, ask your broker for advice and see what they can do for you.

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How To Effectively Utilise An Offset Account With Your Mortagage To Attract Greater Savings

A mortgage offset account is a combination of a transaction account or a savings account used in conjunction with your home loan. The balance in the account is offset on a daily basis against the loan balance. The lender acknowledges that you have paid extra savings to your loan, with the lender charging you less in interests because they are not charging you interest on the full remaining balance. The actual offset account can be associated with your variable rate loan or a fixed rate loan.

Typically, the home owner will not earn any interest in their offset account. The balance in this account is to displace the interest charges to your linked home loan. In these scenarios, it is best to be illustrative to showcase how offset accounts can be connected with your home loan and how they can help offset interest rates.

For example, if you had a loan for $450,000 and you have already repaid $100,000 of that balance, you would be paying interest on the remaining $350,000. However, if you have an offset account to pay that $100,000, you will only be paying the interest on $250,000 of the remaining balance. The more money that you have in your mortgage offset accounts, the less interest you will pay during the life of your home loan. Many homeowners may prefer earning interest from a savings account over saving interest on the mortgage. However, saving interest on your mortgage is better for these reasons:

The interest rate is actually higher. The interest rate charged on the loan is going to be greater than the rate the bank pays out on a savings account. Simply put, a mortgage offset account will save you more money than a savings account will ever earn you.

Offset mortgages mitigate risk. Mortgage offset accounts and a savings account are categorised as cash accounts. Utilising an offset account will provide room for you to increase returns without increasing your risks.

You will save on taxes. Interest earned on a savings account will be taxed. There is no tax on the interest you will save on your mortgage offset account.

Using an Offset Account With Your Mortgage Effectively

Direct deposit into your offset account. You can connect your debit card to your offset account and use it as your transaction account, then tell your employer to make direct deposits into your offset account. Interest is accumulated on a daily basis on the offset account, so even if the balance changes on a regular basis, you’ll still be able to save on interest.

Offset account and credit card payments. The more money that is in your offset account, the more you will save in the long run as long as it is relatively untouched. If you are disciplined, you can use a credit card to defer expenses by strategically using their interest-free payment period. It is important that the balance is paid in full when due since you do not want to incur interest charges on the credit card.

Savings go directly into your offset account. Extra savings will work harder for you in a offset account. The interest rate on your home loan will most likely be higher than the rate on your savings account, allowing you to pay income tax on the interest earned and allocating additional funds into the offset account.

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