There are more interesting articles, commentaries and analyst reports on the Web every week than anyone could read in a month.
Each Saturday morning I like to share some of the ones I’ve read during the week.
The weekend will be over before you know it, so enjoy some weekend reading.
FEDERAL BUDGET 2018: What you need to know
This week it was all about the budget – so who were the winners?
And what does this all really mean?
An article on Business Insider breaks down all the details you need to know.
The 2018 budget shifts tax brackets to bring small savings to many, gives lump sums to lower income earners, helps the ageing who want to live at home longer, and continues an infrastructure spending theme to create jobs.
Treasurer Scott Morrison’s election budget uses better than expected tax collection to take aim at low to middle income earners while still returning the budget to balance by 2019-20.
Morrison, who himself turns 50 this month, also offers up benefits to older Australians, including allowing pensioners to earn more without losing their pensions.
Almost half of all voters are aged 50 or older.
“You must not punish people for working hard and doing well,” says Morrison.
He’s giving back in the form of personal tax cuts but says he’s keeping taxes under the policy speed limit of 23.9% of GDP.
“Higher taxes to chase higher spending never ends well,” he says. “Australians always end up paying for it one way or another.”
He has a three-stage plan on taxes, spread over seven years.
The first stage will give just $11.25 a month or $135 a year as a personal tax saving starting from July this year.
The top of the 32.5% tax cut out level will be shifted to $90,000 from $87,000, starting July this year.
This will give a tax cut of up to $135 a year to 3 million people and will prevent about 200,000 from facing a marginal tax rate of 37% in 2018–19.
And low and middle income taxpayers will get a new tax offset worth up to $530 paid as a lump sum after lodging tax returns.
More than 10 million people will benefit and about 4.4 million of those with incomes between $48,000 and $90,000 will get the full $530 benefit starting next financial year.
Those earning up to $37,000 and paying 19 cents in the dollar will have tax reduced by up to $200.
The average tax paid in this tax bracket is $1900 per year.
Tax will be reduced up to a maximum of $530 per year for those being paid more than $37,000 and paying the 32.5 cents in the dollar tax rate.
The average tax in this tax bracket is $10,400.
Morrison says a middle income household with both parents working on average wages will see their combined incomes benefit by more than $1000 a year.
For those earning above $90,000 the tax relief reduces to zero at just over $125,000.
In 2022-23, more income tax bracket shifting will lift the $37,000 threshold to $41,000, keeping half a million from a marginal rate of 32.5%.
At the same time the $90,000 threshold will be raised again to $120,000, preventing 1.8 million paying 37 cents in the dollar.
And in 2024-25 the 37% tax bracket will be abolished, reducing the number of income tax brackets from five to four.
Those earning more than $41,000 will only pay 32.5 cents in the dollar all the way up to the top marginal tax rate threshold which will be adjusted to $200,000, to account for inflation and expected wage movements over the next seven years.
Underlying cash balances have improved by $20.2 billion over the forward estimates since the December mid-year budget update.
This financial year is expected to end with an underlying cash deficit of $18.2 billion, equal to 0.8% of GDP, down from $33.2 billion last year and the best result since the GFC.
The deficit is forecast to fall again to $14.5 billion in 2018-19 and then return to a modest balance of $2.2 billion in 2019-20 and increase to surpluses of $11.0 billion in 2020-21 and $16.6 billion in 2021-22.
“It has been a long road back from where we started in 2013,” says Morrison.
“We are close to our destination. We must stick to the plan.”
Exit fees on superannuation accounts will be banned and funds will be stopped from forcing those aged under 25 or with low balances to pay for life insurance policies they have not asked for or do not need.
Exit fees cost super fund members about $37 million a year. In 2015-16 there were 9.5 million super accounts with a balance of less than $6000.
The budget expands the Pension Work Bonus to allow pensioners to earn an extra $1300 a year without reducing pension payments.
The bonus will be extended to the self-employed who can now earn up to $7800 a year with affecting their pension.
Age Pensioners will be able to earn up to $300 each fortnight, which is an additional $50 each fortnight, without reducing pension payments.
Morrison also ruled out any change to franking credit rebates, as proposed by the Labor Opposition, calling this is an “unfair” tax grab on retirees and pensioners.
“We will stand up for older Australians to keep them safe and prevent elder abuse, with new support services and a national online register for enduring powers of attorney,” says Morrison.
The government will expand the Pension Loans Scheme, where the retired use the equity in their homes to boost their incomes, to include full rate pensioners and self-funded retirees.
These retirees will be able to increase retirement income by up to $17,800 for a couple without impacting on their eligibility for the pension or other benefits.
And the number of home care places, allowing the ageing to stay in their homes longer, will rise by 14,000 over four years at a cost of $1.6 billion.
The $20,000 instant asset write off for businesses with a turnover of up to $10 million is being extended to next financial year.
New anti-phoenixing measures will ensure small businesses don’t get ripped off by other businesses who deliberately go bust to avoid paying bills.
And the black economy will be attacked with an increase in the enforcement of illicit tobacco and an economy-wide cash payment limit of $10,000 to reduce money laundering and tax evasion.
The government is also imposing a cap of $4 million on cash refunds for research and development tax offsets.
The government is funding $24.5 billion in new major transport projects, part of a $75 billion investment in transport program from 2018–19 to 2027–28.
The Roads of Strategic Importance initiative includes $1.5 billion for a Northern Australia Package for Queensland, the Northern Territory and Western Australia, $400 million for Tasmania, $220 million for the Bindoon Bypass in Western Australia, $100 million for the Barton Highway Upgrade benefiting NSW and the ACT, and $1.3 billion for future national priorities.
The federal government is also establishing a $1 billion Urban Congestion Fund to tackle urban congestion in cities.
In Victoria, there is $7.8 billion for new major projects, including a commitment of up to $5 billion for the Melbourne Airport Rail Link.
In New South Wales, there is $1.5 billion for new major projects, including $971 million for the Pacific Highway Coffs Harbour Bypass, $400 million for the Port Botany Rail Line Duplication and $155 million for the Nowra Bridge.
Read the full article here
Home loan arrears tick higher
According to a report home loan errands are on the rise.
Home loan arrears up
Home loan arrears are just beginning to creep a bit higher on weak income growth.
So reports Commonwealth Bank (ASX: CBA) in its trading update.
The market was unhappy with the trimmed unaudited cash profit of $2.35 million.
The result is 2.1 per cent lower than the unaudited figure for the prior year’s corresponding period.
Read the full article here
Majority of first-home buyers now use ‘Bank of Mum and Dad’
When it comes to first home buyers, it would seem that finding finance to get into the property market it just getting tougher.
According to this article on Domain.com.au all roads lead to the ‘Bank of Mum and Dad’.
The majority of first home buyers now borrow from the so-called “Bank of Mum and Dad”, which accounts for more than $20 billion in property loans after shooting 25 per cent higher in the past year.
The shift toward family lending has sped up in the wake of immense pressure on the traditional banking sector, which has been forced to lift rates and minimum deposit requirements as it scrambles to adhere to new regulations and expected future tightening.
The Bank of Mum and Dad now ranks as the 10th largest lender in the country, behind Bank of Queensland and ahead of ME Bank, research carried out by Digital Finance Analytics show.
Overall, 55 per cent of first-time buyers are said to now receive financial assistance from their parents, according to 52,000 interviews conducted over the past 12 months, and where a cash injection is involved the average amount is $89,000.
The news comes amid immense pressure on the traditional bank lenders, with the royal commission uncovering widespread breaches of responsible lending and ethical behaviour.
“It is possible that lending standards in Australia will be tightened further in the context of the current high level of public scrutiny,” he told a Reserve Bank board dinner in Adelaide on Tuesday, echoing concerns several big-name economists, including those at UBS and JP Morgan, have been expressing over the past few weeks.
Is the Bank of Mum and Dad fast-tracking inequality?
The practice of parents lending to their adult children for the purpose of property buying has grown out of necessity, as property prices soared, and the mortgage lending sector is now experiencing a crackdown.
“Saving for a deposit is very difficult, at a time when many lenders are requiring a larger deposit as loan to value rules are tightened,” Digital Finance Analytics principal Martin North said.
“The rise of the importance of the Bank of Mum and Dad is a response to rising home prices, against flat incomes, and the equity growth which those already in the market have enjoyed.”
But the opportunity is only available to first-home buyers whose parents have the wealth and generosity to help their kids, Mr North points out.
“Those who do not have wealthy parents are at a significant disadvantage.”
The rise of the Bank of Mum and Dad also earned a warning in the Grattan Institute’s major report into housing affordability, published in March.
The practice will increase the divide between rich and poor, according to CEO John Daley and fellow Brendan Coates.
“If home ownership relies more on the ‘bank of mum and dad’, then getting a home relies more on the success of one’s parents than on one’s own endeavours,” the report reads.
“Patterns of inheritance means that more intergenerational inequality tends to lead to more inequality within the generations.”
First-home buyer activity has sharply increased in Sydney and Melbourne since state governments moved to erase or discount stamp duty obligations for first-time buyers, up to a set amount.
At the same time, rules introduced by the banking regulator to limit interest-only and investor loans – some of which have now been changed – caused a slowdown in investor lending, which is also thought to have boosted first-home buyer activity.(Source: ABS, ANZ Research)
Read the full article here
What happens if your property passes in?
Auctions can be extremely nerve-wrecking – will it sell? will you get the price you want? will people even turn up?
But what happens when your property gets passed in?
In this article for Switzer, John McGrath looks at the steps to take.
The biggest fear among vendors going to auction is that their property will be passed in on auction day.
With auction clearance rates in both Sydney and Melbourne in the 60% range, this is a very real risk.
The biggest myth about properties that sell after auction is that they go on to sell for a ‘bad’ price.
That is not the case.
It’s important to remember that fresh buyers are coming into the market every week.
We see properties that have passed in go on to sell at their reserve price or better all the time.
It’s important to remember that the auction process unearths the best buyers in the market at a particular point in time.
If your property passes in, the first step is your agent following up with these buyers and potentially negotiating a sale that way.
In cooling markets, buyers can be particularly cagey at auctions.
They’re finally getting some power back after years in a seller’s market.
Sometimes they won’t bid if no one else does – they’ll let it pass in and contact the agent afterwards because they feel more comfortable negotiating privately.
In my experience, most properties passed in at auction will sell within 14 days.
If your property still doesn’t sell, you need to take stock of what’s gone wrong.
Sit down with your agent and have a look at the variables.
In my experience, there are only three reasons why properties don’t sell – unrealistic price expectations, poor presentation and/or poor marketing.
If a property struggles, usually one of these are off-track.
In 80% of cases, price is the culprit.
This is particularly so in today’s market conditions, with many vendors struggling to accept that boom prices might not be achievable in their suburb anymore.
Review any offers that were made prior to auction.
You might have been expecting $1.5M and the offer was $1.45M.
You might have been dismissive of this offer at first, but if no one else put an offer forward, then maybe you need to consider if that is today’s true market value for your home.
Another possibility is that the market has shifted since you listed.
This is often a factor in markets that are moving (either up or down).
A neighbour might have sold for $1.5M six months ago but that’s not necessarily what you can achieve for your own home today because the market has changed.
Ask your agent what else has hit the market since you listed your property for sale.
Have any comparable properties sold during this time?
Subtle fluctuations in the local market and sales of similar homes during your campaign will influence how buyers value your home.
Once you and your agent have debriefed, you can consider how to move forward.
But before you commit to doing anything, it’s a good idea to pause for a breather.
After passing your home in, it’s natural to feel a bit flat due to lost momentum.
You need to recover your positive energy or your lack of enthusiasm can negatively impact the sale.
Sometimes after passing in, vendors will choose to immediately convert their campaign to private treaty and remain on the market as is, or with a revised price guide.
Another option is to ‘rest’ your property for a few weeks.
Take it off the market altogether while you consider pricing.
It’s also worth asking your agent what else you can do to improve your chances of a good sale.
For example, were your photos good enough?
Should you pay for a few more, or re-do them after some new styling?
If you did online-only marketing in the first campaign, perhaps you might consider some DL cards, print ads and social media to reach more buyers.
When you re-launch your property, you can set another auction date or choose private treaty.
You might feel reluctant to try auction again but I’ve actually had huge success re-auctioning properties myself, so don’t be afraid to try it.
Auctions set a deadline for buyers and this can be extremely helpful in bringing about a sale.
Following a failed auction campaign, if you’ve responded to the issues that caused it (price, presentation and/or marketing), there is no reason to think your property won’t sell.
Read the full article here
Dark Chocolate Really Does Reduce Stress, Says New Research
Good new for dark chocolate lovers everywhere!
This articles from the Huffington Post shares research that dark chocolate, does in fact reduce stress.
New research has confirmed what those of us who keep emergency cookies in the freezer already know.
Dark chocolate really does reduce stress, according to two new studies from Loma Linda University in California.
The findings were presented this week at the Experimental Biology 2018 annual meeting in San Diego, and show that eating dark chocolate with a high concentration of cacao (at least 70 per cent) also has positive effects on inflammation, mood, memory and immunity.
(We’ve been conducting similar research for years).
Although the benefits of the flavonoids found in chocolate are already well known, this is the first set of studies to look at the effects in humans “to determine how it can support cognitive, endocrine and cardiovascular health,” according to a news release.
“For years, we have looked at the influence of dark chocolate on neurological functions from the standpoint of sugar content — the more sugar, the happier we are,” lead investigator Lee S. Berk, associate dean of research affairs at the School of Allied Health Professions and a researcher in psychoneuroimmunology and food science from Loma Linda University, said in a news release.
“This is the first time that we have looked at the impact of large amounts of cacao in doses as small as a regular-sized chocolate bar in humans over short or long periods of time, and are encouraged by the findings.
These studies show us that the higher the concentration of cacao, the more positive the impact on cognition, memory, mood, immunity and other beneficial effects.”
Chocolate is the best
Not only is it delicious, but dark chocolate already has a number of health benefits.
It’s rich in fibre, iron, magnesium, copper, manganese, and other minerals, according to HealthLine.
It’s also full of antioxidants, may lower blood pressure, can improve some risk factors for heart disease, is good for your skin, and might even improve brain functioning, HealthLine added.
A Canadian study of nearly 45,000 people even found that eating chocolate could lower your risk of a stroke.
“The higher the cocoa content, as in dark chocolate, the more benefits there are,” noted Medical News Today.
But don’t stuff your face in the name of health just yet.
Medical News Today points out that there are negative effects to eating chocolate, too.
These can include weight gain and tooth decay due to the sugar and fat content, migraine risk, lower bone density, and there are high levels of heavy metals found in some chocolate (which are toxic to kidneys and bones).
“All in all, eating chocolate can have both health benefits and risks.
As ever, moderation is key,” Medical News Today writes.
The two new studies both looked at chocolate containing at least 70 per cent cacao.
One found that eating this type of chocolate regulates cellular immune response, neural signalling, and sensory perception.
The other study found that 70 per cent cacao “enhances neuroplasticity for behavioral and brain health benefits.”
However, the authors noted that further research was needed in larger study populations.
Read the full article here
Weekend video: THE EVOLUTION OF THE DESK
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