Autumn 2024

Quarterly property update

Slowly but surely: Home values are on the way up

Home values across the country have largely settled into positive territory despite interest rates remaining elevated. Perhaps it’s the talk of impending rate cuts and easing inflation that has caused prices to inch up in every capital over the quarter, except for Melbourne and Hobart.

Values gaining momentum

In the three months to February 29, CoreLogic’s Home Value Index (HVI) reported national values had risen by 1.3%. Over the same period, the combined capital cities increased by 1.2% and the combined regions were up by 1.3%.

During the quarter, Perth surged ahead jumping 5.2% in three months taking the 12-month hike in the West Australian capital to an incredible 18.3%.

CoreLogic research director Tim Lawless said ongoing financial challenges haven’t overwhelmingly dampened the Australian demand for bricks and mortar.“Housing values have been more than resilient in the face of high interest rates and cost of living pressures,” he said. “The ongoing rise in housing values reflects a persistent imbalance between supply and demand which varies in magnitude across our cities and regions.”

Home values moving forward

Historically, the major capitals of Sydney and Melbourne do a lot of the heavy lifting when it comes to housing values. The HVI demonstrated that Melbourne values had just come out of a “three-month slump” to record a modest 0.1% rise in February and in Sydney values returned to positive territory by February after recording declines late last year.

“Potentially we are seeing some early signs of a boost to housing confidence as inflation eases and expectations for a rate cut, or cuts, later this year firm up,” Mr Lawless added.

However, Mr Lawless said multiple factors are holding the domestic housing market back from a “significant rebound”.“Affordability constraints, rising unemployment, a slowdown in the rate of household savings and a cautious lending environment, are all factors likely to keep a lid on value growth over the near term.”

Eleanor Creagh, senior economist at REA Group’s data business PropTrack, was more optimistic. “Housing demand is being buoyed by population growth, tight rental markets, resilient labour market conditions and recent home equity gains. Meanwhile, the sharp rise in construction costs and labour and materials shortages have slowed the delivery of new builds, hampering the supply of new housing,” she said.

Rents still on the rise

The start of the calendar year has always been a strong period for rental growth and the beginning of 2024 has been no exception. CoreLogic figures show national rental values had risen by 0.9% in February, the highest reading since March 2023. As a result, the rolling quarterly change in rents rose to 2.4%, the highest since May last year.

Dwelling values over the quarter

Melbourne

The Victorian capital has once again recorded a median dwelling value below Brisbane at $778,941 – sitting close to the national median of $765,762. The city saw negative growth across the quarter with a -0.6% change in dwelling values, however, this last month figures moved into positive territory, up 0.1%. The annual increase for Melbourne was 4%.

Sydney

Maintaining its place as the country’s most expensive city, quarterly figures show that the Harbour City had a very subtle movement in dwelling values rising only 0.6% to $1.128 million. The annual figure demonstrates a more impressive number having jumped 10.6% in 12 months.

Brisbane

Brisbane’s median home price is now $805,593 after a quarterly increase of 2.9%, but it is a longer term picture that showcases the Queensland capital’s impressive year in property. During the 12 months to February 29, median dwelling prices jumped 15.6%.

Canberra

Sitting in its relatively new position as Australia’s second priciest city for property, Canberra had a quarterly home price movement of just 0.3% taking the current median to $840,103. Over the past year, the nation’s capital rose by 1.6%.

Perth

Often proving to be a city that dances to the beat of its own drum, Perth has leapt streets ahead over other capitals with an annual home value surge of 18.3% to a median of $687,004. It has also been a strong quarter with a local home value growth of 5.2%.

For more information about how you might be able to purchase a property in the current market, get in touch with us today.

Note: all figures in the city snapshots are sourced from: CoreLogic’s national Home Value Index (March 2024)

Tax Alert March 2024

New controls for ATO Online and tax charges non-deductible

Following the use of stolen personal data to access ATO Online accounts, the federal government has tightened the access rules to online tax accounts as part of an increased focus on the vulnerability of small and medium businesses to cyber incidents.

ATO interest non-deductible

From 1 July 2025, taxpayers will no longer be able to claim tax deductions for ATO interest charges.ⁱ

Although not yet law, the government made the announcement in its 2023-24 Mid-Year Economic and Fiscal Outlook.

Since deductions for general interest charges (GIC) and shortfall interest charges (SIC) will not be permitted after July 2025, any GIC or SIC later remitted by the ATO need not be included in assessable income.

New fraud controls

Tighter controls for taxpayers’ ATO online accounts will make it more difficult for criminals to commit identity fraud using stolen personal information such as bank and ATO statements and tax file numbers.

The changes mean taxpayers who use their myGovID to log into the ATO will need to use myGovID for all future logins, leaving criminals unable to access the account without it.

The government is urging Australians to upgrade to myGovID when interacting with government agencies online and has released its new Cyber Security Strategy to support small and medium businesses vulnerable to cyber incidents.

Holiday home claims

The ATO is continuing its crackdown on tax deductions for holiday homes by encouraging tax professionals to check how clients are using their property and if they are correctly apportioning deductions in line with the time period the property is producing income.ⁱⁱ

Some holiday homeowners are not reducing deduction claims if they are reserving their property during peak periods or are placing unreasonable conditions restricting the likelihood the property will be rented.

We have been requested to check the number of days the property is blocked out for the owners, how and where the property is being advertised, whether family or friends used the property, and if any parts of the property are off-limits to tenants.

Checking R&D claims

Working in conjunction with the Department of Industry, Science and Resources, the ATO will be undertaking random reviews of companies taking advantage of the government’s R&D tax incentive.

The reviews will be assessing the eligibility of company’s R&D tax incentive activities and expenditure, with companies selected for review being contacted directly.

If common errors are identified during the review process, the ATO will share them with all program participants.

Tough times may mean a payment plan

With some small businesses facing difficult trading conditions, the ATO is reminding taxpayers in financial distress they may be eligible to set up a payment plan if they are unable to pay their tax bill in full and on time.

Eligible taxpayers who have a tax bill of up to $200,000, may be able to set up their own payment plan using the ATO online or self-help phone services.

Payment plan eligibility requires the business to be viable and able to make an up‑front payment with completion within the shortest possible timeframe to minimise accruing GIC (currently 11.15 per cent).

Medicare safety net thresholds increase

Thresholds for the Medicare safety nets rose from 1 January 2024, resulting in an increase taxpayers need to spend on out-of-hospital medical expenses before qualifying for a higher rebate.

The increase is in line with indexation based on inflation and rose to $560.40 on the original Medicare safety net for concessional and non-concessional individuals and families.

The extended Medicare safety net increased to $811.80 for concessional individuals and families and $2,544.30 for non-concessional.

Translated cybersecurity guides available

The government’s Australian Cyber Security Centre has released five popular cyber security guides in more than 20 languages to help business owners from non-English speaking backgrounds to improve their cyber security knowledge.

The five free guides include a small business cyber security guide, personal and top tips for cyber security, easy steps to securing devices and accounts, and a seniors guide to securely using the internet.

i https://www.ato.gov.au/about-ato/new-legislation/in-detail/businesses/deny-deductions-for-ato-interest-charges
ii https://www.legacy.ato.gov.au/Tax-professionals/Newsroom/Income-tax/Do-your-clients-have-a-holiday-home-/

Considerations for refinancing your home or business loan

While inflation peaked at 7.8 per cent last year, cost of living pressures are still being felt by consumers and small businesses alike. In the current environment it’s important to look at your outgoings, whether it’s your personal financial situation, or your businesses’ bottom line, and see if there are any areas you could possibly cut costs and create savings. One way to reduce personal, or business costs is to review your current borrowing arrangements.

A new record has been set for external refinancing, with more than $19.5 billion of loans changing lenders in November, new data has shown.ⁱ

Refinancing your home loan

When it comes to our personal finances, mortgage repayments are likely to be one of, if not the biggest expense we incur so it can make sense to review your loan and maybe replace it with one that offers better terms.

While the most obvious reason to refinance is to obtain a more competitive interest rate and reduce the amount you are paying, it’s important to consider other factors like whether you’d prefer fixed or variable, the term of the loan, the fees involved, as well as the features associated with any options you are considering (e.g. the capacity to pay the loan off sooner or offset your interest with your savings).

Before you go to refinance, check out what rates your lender is offering to new customers. Often, you may be able to negotiate a lower interest rate or more favourable loan features with your existing lender.

Refinancing can also make your life easier if you’re juggling a number of debts (e.g. personal loans, car loans and credit cards). Debt consolidation can help you by streamlining debt under your home loan, often at a lower rate of interest.

Benefits of refinancing for small businesses

For businesses it also might be time for a review of your borrowing situation to avoid paying more interest than necessary. This can help free up cash flow within the business, and it may even be possible to access the equity you have built up in your business, enabling you to invest the extra funds into hiring more staff, buying new equipment or other business needs.

You also might be using a loan product that no longer meets the needs of your business. For many small businesses, the funding arrangements they put in place early in the businesses’ development are still in place, even though they might not be the best fit a few years down the track.

If you offered a personal asset as collateral for a loan when you first started your business, the business may now have its own assets that can be offered and if so, refinancing might offer the opportunity to release the security over your personal asset. You may even find that refinancing can allow you to access the equity you have built up in your business over the years to fund expansion.

Business loan refinancing considerations

Costs involved in refinancing a business loan can include exit fees, valuation fee, settlement fee, government fees and more, which may offset the savings you would have earned with refinancing so make sure you weigh up the possible savings against the fees you’ll need to incur.

Be mindful that lenders will look at your credit history and score, and sometimes also your personal credit history as well as that of your business so prioritise your credit management. Applying for refinance will be recorded on your credit file, which can accrue if you make several applications that are not approved so be sure you meet the criteria for approval before putting in applications.

Processes and facilities to support your business cashflow and lending

Of course, in a time of inflationary pressure its more important than ever to have in place processes to manage your businesses’ cashflow effectively.

If you need greater assistance with your businesses’ cashflow there are also debt facilities that can operate in addition to a business loan. These include:

• Business overdrafts
• Business credit cards
• Invoice finance (which allows businesses to borrow money based on their unpaid invoices)
• Merchant cash advance (where a lump sum is provided upfront in exchange for a percentage of future credit or debit card sales)

Managing your lending can be challenging and there can be tax implications associated with business borrowing, so please get in touch if we can be of assistance.

i https://www.theadviser.com.au/broker/43888-all-time-high-november-housing-refinancing-hits-19-5b-abs