With the New Year upon us, this is a look at the important financial resolutions Australian expats or property owners should consider. Steve Douglas tells you the real 2016 goals you should be setting.
1. Make Sure Your Taxes Are Up to Date
This isn’t just a wish, it’s a legal requirement. Many Australian property owners don’t realise that they must lodge an annual income tax return in Australia even if their property rental doesn’t cover their expenses. Failure to lodge can cost you A$850 per person, per year, so it is an expensive exercise if you forget to fulfil your obligations. But it’s a simple process to lodge your annual returns and ATS’s professional team is available to assist and take the burden off your shoulders.
2. Stop Paying Off Your Loan
If you have an Australian property, it is always a strong temptation to reduce the loan. That is a great idea on the day you move in or if the property isn’t rented, but paying the loan down prior can be a big problem. Not only is it likely to increase your tax cost, which starts at 32.5 percent, but it can diminish your overall return on investment. Worst of all, it could mean you are trapping your cash in a property that is purely for investment, which means you may be stuck with a higher personal mortgage on your eventual home. If you do insist on debt reduction, make sure it’s targeted at a property you intend to live in rather than one in which you never will. This could make a huge difference to your financial position on your eventual return to Australia.
3. Save Harder for Your Future Home
Never lose sight of the importance of being debt-free on your home in Australia. Take full advantage of your position as an expat and save as much as possible in order to pay out or acquire your home on return. There’s no need to reduce the loan until the day you move in, but make sure you get yourself in a position of being able to pay it off wherever possible.
4. Review Your Loan Interest
There have been a few changes to interest rate policy from Australian banks, increasing the rate for investors. This obviously impacts all expatriates, as being abroad means we can’t live on our property at the moment. There are a number of special discounts that may be available to you and it is also worth considering fixing your interest rate, as interest rates are currently at 50-year lows. Most people make the mistake of waiting until rates are rising to fix their interest, which usually means they lock in a higher cost. Fixing when rates are low or falling usually assures you of the lowest, or near lowest level of cost, which can be enjoyed through the fixed period. Find time for a quick review of your loan or talk to a member of our Specialist Mortgage team for assistance.
5. Make Your Property Work Harder
Many properties in Australia have risen in value in recent years, especially in Sydney and Melbourne. So you may find that you have built up some additional equity in your property that can be used to assist with your next purchase. This means little or no cash outlay on the property you have been thinking of buying. It is well worth checking the value with your property manager and seeing what your budget may be; It might be a very pleasant surprise and will allow you to acquire your next Australian property sooner than you thought. This may also help your overall financial performance and tax position, so it is well worth considering.
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Steve Douglas is the Co-Founder and Managing Director of Australasian Taxation Services (ATS). ATS provides specialist taxation services for anyone looking to invest in Australian property, including Australian expatriates living overseas. Areas of specialisation include the Australian taxation aspects of property investment, as well as expatriate and migration planning.