Small business forms a significant part of the Australian economy. You may recall that one of the focuses of the 2016-17 Federal Budget included a raft of initiatives to simplify tax and compliance, encourage investment and increase the level of economic activity in our economy.

Australian small businesses employ over 3 million workers and added over $340 billion in 2013-14 to the Australian economy[1] it is therefore crucial for all levels of government to support small businesses, however, ultimately the buck stops with you.

So what can you do to make your business more successful?

1. Review your business.

Taking the time to stop and analyse your current business and areas of improvement, could lead to new ideas, new revenue streams and a reduction in costs.

Reviewing market trends and other factors affecting your business will help you to innovate and be a step ahead of your competitors.

2. Overstocked?

Business owners are enticed to buy in bulk and save, failing to recognise that excess stock will have additional costs, including the requirement for additional storage space, the increased likelihood of perishables, and in many cases, increases in the funding costs required to pay suppliers.

Implementing a policy of buying stock when needed will keep stock refreshed, reduce the need for storage space and improve cash flow.

3. Keep a close eye on your debtors.

It’s great making sales or providing a service on credit, but not chasing up money owed will lead to greater losses. Have a look at your outstanding debtors right now, did you realise that there was so much money outstanding? You should be looking at this weekly; if your customers think they can get away with not paying you, they will!

The information provided is general advice only. It has not taken into account your objectives, financial situation or need. If you would like to learn more or receive more tailored advice, uur business consulting team are experts in the small to medium enterprises (SMEs). If you would like to have a free consultation regarding your business needs, contact The Investment Collective today.

Funding your children’s education expenses can be costly. The money you spend on your kids’ education could be one of your family’s biggest expenses.

Research conducted by The Australian Scholarships Group (ASG) on education costs, provides some context. The research is based on a child starting pre-school today and suggests that opting for the private school route from Prep – Year 12, will set you back a cool $367,569 per child. Even if you decide on a government school for primary years and private for secondary, you will still need to come up with $244,822. Ouch!

For most families, at the time when kids are starting out at school, household budgets are already stretched with mortgage repayments, bills and living expenses proving challenging enough. What this means is that some careful forward planning is required to make sure you have enough money to give you, and your children, the full array of options for education.

Here are 5 tips to consider:

1. Plan for your children’s education.

It is important to have the discussion with your partner, do your research and estimate how much it is going to cost you. Open up dialogue with your better half about what you want your children’s education to look like is the number one priority. Is it through Private or Government schooling? Do one of you want to send them to the school you attended as a child? Does your child have any special needs? The sooner you have these conversations the better.

All schools have websites. Check out those that you’re interested in. Most should include information about fees and advise you whether there is a waiting list.

There is a heap of great resources out there to help you on your way. The ASIC Money Smart website and the Australian Scholarship Group’s online calculator are a couple to try out.

2. Start saving early!

Like any other long-term savings goal, the sooner you start, the better! The best time to start saving is when your child is born or possibly even earlier. Make a budget and decide how much you can put aside each week. Look to increase the amount each year to ensure you’re keeping pace with inflation.

To get you started there are a few ways you can go about it. It could be as simple as setting up a direct debit from your everyday account into your savings. You could also make a lump-sum contribution, such as your annual tax return or end of year bonus.

The sooner you start, the longer you reap the rewards of compounding interest.

3. Structuring things right and invest in the name of the parent earning the lower income.

If one member of a couple isn’t working and staying at home to look after young children, or working part-time, chances are their marginal tax rate is low. Therefore, holding investments or savings accounts in their name may be of benefit. Keep in mind any future plans of that person returning to full-time work.

4. Once you have a little bit of savings behind you, look to get that money working harder for you.

An investment in blue chip Aussie shares and managed funds can be a great way to accelerate your savings. Bear in mind that these investments are riskier than leaving your money in the bank and that you won’t get rich overnight. A 5 year plus time frame is appropriate.

An alternative investment vehicle is the use of Investment Bonds or Tax Paid Bonds as they are sometimes referred too. They provide a variety of investment options such as shares, property and fixed interest. The reason why investment bonds are referred to as a tax paid investment is because any earnings get taxed at the company tax rate of 30% within the investment.  As long as money remains invested for 10 years, the investment provider pays the tax on the investment earnings so you don’t have to report the earnings in your tax return.  If you withdraw before 10 years, then you would need to include earnings in your personal income tax return.

Note – minimum investment amounts and costs such as brokerage, or entry and ongoing management fees will apply with the above-mentioned investments.

5. An alternative – saving in an offset account against your home loan.

Another simple, but potentially a very effective way of saving for education costs is through your home loan. An offset account allows you to make extra repayments into a bank account attached to your home loan. It operates much like a normal bank account with some special features. Namely, the amount you have in the offset account effectively reduces the loan balance the bank uses to work out your interest payable on your home loan. For example, if you have a home loan of $300,000 with $100,000 in an offset account, the bank calculates interest based on only $200,000.

The money you have in an offset account is generating an after-tax return equal to the interest rate of your home loan. For instance, if your bank is charging you 5.00% interest on your loan, the funds in your offset account save you this rate of interest being charged. If you compare this to saving money in an ordinary bank account, the bank may (if you’re lucky) pay you 3.00% interest on your savings, from which you still need to pay tax.

The key to using this option is discipline. Money in an offset account can often provide a temptation to use the money for other purposes; renovations, car upgrades, holidays etc. If you plan to use these funds in the offset account to save for education costs, then you must resist temptation.

My advice is to start early, work out how much you will require for education costs, how much you will need to save to get there and then select the appropriate savings vehicle. Seek the help of a good financial planner to set you on the right path.

Are you interested in planning for your children’s education? Are you currently juggling education costs and need a plan yesterday? Contact our office for your free initial consultation. Call our office today, toll free on 1800 679 000 for our Rockhampton office and 1800 804 431 for our Melbourne office.

Please note: The information provided in this article is general advice only. It has been prepared without taking into account any person’s Individual objectives, financial situation or needs.  Before acting on anything in this article you should consider if it is appropriate for you, having regard to your objectives, financial situation and needs.

Buying an investment property continues to be one of Australia’s favourite ways to invest. An investment property should be about increasing your wealth and securing your financial future, which is something our mortgage broking team can help you with.

Here are 10 tips to assist in purchasing an investment property:

1. Choosing the right property at the right price

Investing in real estate is usually all about capital growth, so choosing a property that is more likely to increase in value is the most important decision you will make, therefore buying at the right price is absolutely critical.

The key is to do your research, work out what properties are selling for in and around the area and you’ll soon discover you’ll become very good at working out a property’s worth. Never consider purchasing real estate in an area you are unfamiliar with.

You probably aren’t aware but lenders and mortgage insurers have valuable data on different locations and property developments, you should try and access this information to assist in avoiding the wrong investment property.  Whatever you do, never make a decision to buy an investment property based on a tax deduction – always focus on making the right investment choice.

Ensuring you have a steady rental income stream is also vital.  This cash flow will make the holding of the property more affordable and provide a reliable income.

Different classes of residential property – home units, houses and land – can outperform each other over time.  For example, vacant land will provide no rental income but may appreciate more quickly if purchased in an area with limited supply.  Investing in a home unit might mean less maintenance costs than investing in a freestanding weatherboard house.  You may also find, some areas offer higher rental yields, but it is important to do your homework as often these properties provide lower capital growth opportunities.

2. Crunch the numbers

Investing in property is a proven path to long-term wealth, however you should consider it a medium to longer term type of investment.  You’ll want to make sure you can afford to maintain your mortgage repayments over the long term.  You will not want to have to sell your investment property until you are good and ready and if you were to encounter some financial stress, this could force you to offload the property at the wrong time.

Once you own an investment property it can be quite inexpensive to keep and service the loan.  This is because you should be earning rent and claiming tax deductions on the expenses associated with owning the property.  Remember, rent payments tend to increase as does your own income – so expect things to get easier over time.

You probably aren’t aware but lenders and mortgage insurers have valuable data on different locations and property developments and you should try and access this information to assist you to avoid picking the wrong investment property.

Whatever you do make yourself aware of taxes involved in property investing and add these into your calculations.  Advice from your accountant is vital in this regard as these can change.  Stamp Duty, Capital Gains Tax and Land Tax all need to be taken into account.  Remember that interest rates can vary over time but the good news for property investors is that in times of rising interest rates you can normally expect to be able to increase the rent.

You should also know that banks only take 80% of the rental income into account when working out whether you can afford an investment loan.  This is due to costs like letting fees and vacancy rates, consider using this as a rule of thumb for you too.  If you need help working out the cost of holding an investment property you can contact us.

3. Find a good Real Estate Property Manager and let them do their job

A property manager is usually a licenced real estate agent that is a professional in their field, and their job is to keep things in order for you and your tenant.  They can help you with ongoing advice, help you manage your tenants and get you the best possible value from your property.  A good agent will let you know when you should review rents and when you shouldn’t.

The property manager should be able to give you advice on property law, your rights and responsibilities as a landlord – as well as those of the tenant.  They’ll also take care of any maintenance issues, although you should approve all incurred costs (other than certain emergency repairs), in advance.

The property manager will also help you find the right tenant, conduct reference checks and make sure they pay their rent on time.  It is important that you don’t interfere too much with tenants because there are laws that give them rights, so always try to respect them.  You should, however, make regular independent inspections of your property to make sure that the tenant is looking after your investment but always go through your agent and give plenty of notice.

The good news is that the cost you pay to your managing agent is usually a percentage of the rent paid this is deducted from the rent you receive and is tax deductible.

4. Understand the Market and the dynamics of where you are buying

Consider what other properties are available in the immediate area and speak to as many locals and real estate agents as you can.  They may let you know if one side of a street is considered superior to the other.  Make sure you do the legwork and consult professionals you can trust.

It is also a good idea to find out what changes may be happening in your suburb and the local council can often help here.  For example, a major construction next to your property could make it harder to find a tenant at the right price or a planned by-pass may mean traffic will be reduced and this may increase the value of your property quicker than expected.

5. Pick the right type of Mortgage to suit you

There are many options when it comes to financing your investment property, so get sound advice in this area as it can make a big difference to your financial well-being.

Interest on an investment property loan is generally tax deductible, but some borrowing costs are not immediately deductible and knowing the difference can make a big difference.  Structuring your loan correctly is critical and this should be done with the help of a trusted financial adviser.  It is recommended to avoid mixing up investment property loans with your home loan. Each loan needs to be separate so you can maximise your ongoing taxation benefits and reduce your accounting costs.

Whether you choose a fixed rate loan or a variable rate loan will depend on your circumstances, but consider both options carefully before you decide.  Over time variable rates have proven to be cheaper, but selecting a fixed rate loan at the right time can really pay off.  Remember that rates usually rise in line with property prices, so increasing interest rates are not always bad news for property investors as they have more than likely had a win on the capital gains front.

Most investment loans should be set up as Interest Only (rather than Principal and Interest) as this increases the tax effectiveness of your investment, particularly if you have a home loan.  You may also want to seriously consider an investment loan that gives you the opportunity of paying interest in advance, a redraw facility or an Offset Account

6. Use the equity from another property

Leveraging equity in your home, or equity from another property investment, can be an effective way to buy an investment property.  Equity is the amount of money in your home that you actually own.  It can be calculated by working out the difference between what your property is worth and what you owe on the mortgage.  Utilising the existing equity within your home can allow you to borrow more money against your investment property purchase, which will increase your tax deductions.

7. Negative Gearing

Negative gearing can offer property investors certain tax benefits if the cost of the investments exceeds income it produces.  Australian law allows you to deduct your borrowing and maintenance costs for a property from your total income.  However, you can only get a tax benefit if you earn other taxable income in the first place.  So, while you are actually making a loss on the property, the advantage is that the loss can be used to reduce the amount of tax on your other earnings.  However, as stated earlier, do not buy an investment property just to get a tax deduction.

8. Check the age and condition of the property and facilities

Even with negative gearing, needing to replace the roof or hot water service in the first few months of ownership could make a significant difference to your profits and really damage your cash flow.

It is therefore advisable to engage a professional building inspector before you purchase to conduct a thorough inspection of the property to find any potential problems.

It is also wise to use a qualified tradesperson who is licensed to carry out the work and who has adequate insurance to protect you against poor workmanship.

It’s not always a bad thing to buy a property that is not in peak condition because you get the opportunity to improve the value of the property by renovating and this can increase your returns for both capital growth and rental income.

9. Make the property attractive to renters

Go for neutral tones and keep the kitchen and bathroom in good condition.  Kitchens and bathrooms often make a property more saleable.  You’ll find that you will attract better quality tenants if you have a well-presented property.  The last thing you want is a bad tenant.

10. Take a Long-Term view and manage your risks

Remember that property is a long-term investment and you should not rely on property prices rising straight away.  The longer you can afford to commit to a property the better As you build up equity you can then consider purchasing a second investment property.

Finally, it is also paramount that your personal risk insurance cover is reviewed to ensure that if anything unforeseen was to occur that you and your family will be adequately covered.

If you have any questions or would like to learn more about investing in property, please contact our mortgage broking team today.

Please note the information provided in this article is general advice only. It has been prepared without taking into account any person’s individual objectives, financial situation or needs. Before acting on anything in this article you should consider its appropriateness to you, having regard to your objectives, financial situation and needs.

Business owners are usually aware of the need to protect assets such as the business premises, plant & equipment, vehicles and stock via general insurance.  However, few owners consider the risks to the future of the business by not appropriately covering its most important asset – the people within the business!

Business owners should also contemplate the financial loss if personnel responsible for the equity, credit or ongoing revenue exit the business unexpectedly due to sickness, accident or death.

Business risk protection strategies for key personnel within a business include:

Buy/sell protection; Also known as partnership protection.  Allows shareholders in a business to insure for the value of their equity to cover death, total & permanent disability or serious medical conditions such as heart attack, cancer stroke etc.  If a partner suffers from an insurable event and exits the business, the proceeds of a claim will be paid to the disabled owner, or their family in the event of death.  The cover will ensure that the departing owner or family receive fair value for their share.  In addition to the insurance, a legally binding buy/sell agreement should be completed by the shareholders.  The buy/sell agreement or ‘business will’ provides the legal mechanism by which the shares of the deceased/disabled owner can be acquired by the surviving shareholder.  Buy/sell cover is a vital part of your business succession planning, as it ensures that the ongoing ownership and control of the business remains in the hands of the original shareholders.

Business Loan cover; In order to obtain a loan or credit facilities from a bank, business owners will need to provide guarantees, and may use business &/or personal assets to secure the debt.  The debts are usually ‘at call’ and the bank can request payment in the event of the death or incapacity of the guarantor.  By obtaining adequate cover, their guarantees/securities are protected, and the surviving business owner(s) &/or family will not have to sell off assets to clear the debt.

Revenue protection cover; Also known as key person cover. The loss of a key person due to disability or death may create costs to locate, recruit and train a replacement, and result in a loss of revenue until the new staff member is operating at the capacity of the disabled or deceased employee.  This cover will offset the replacement costs and the expected reduction of revenue until the business can recover from the loss of the key person.

Business overheads cover; Provides the replacement of the fixed operating costs of a business if the owner is unable to work due to sickness or injury. Overheads which are covered include loan repayments, rent, utilities and salary costs.

Please note that this has been prepared as general advice. It has not taken into account your personal or business circumstances, insurance needs or current coverage. If you would like to learn more about business insurance, contact one of our Risk Advisers today.