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Strategies to boost retirement savings for low-income earners

Posted on January 26, 2016 by admin

Here are four valid strategies low-income earners can use to boost their retirement savings for the future.

Co-contributions
Under the co-contribution strategy, the government matches the non-concessional contributions made by a super member who earns less than $34,454 a year. Super members who earn up to $50,454 a year are eligible for a partial benefit. The maximum amount a low-income earner can receive is $500, and part thereof for those who earn up to a $50,454 in taxable income.

Even though members don’t receive the money until they lodge their tax return, it is a beneficial strategy to undertake, as it is essentially money for nothing.

Spouse contributions
The spouse contribution allows individuals to make a non-concessional contribution of up to $3000 to their spouse’s super account if the spouse earns less than $10,800. The contributing partner receives a tax rebate of up to $540 for the contribution. If a receiving spouse earns up to $13,800, the contributing spouse is then entitled to a portion of the $540 rebate.

Low-income super contributions
Individuals who earn less than $37,000 a year can use the low-income super contribution. The strategy is a rebate of contributions tax. For example, the employer of an individual who earns $35,000 must pay a super guarantee of 9.5 per cent of their salary ($3325) into the individual’s super fund. The fund is then required to pay 15 per cent tax on that amount, which equates to $498.75. That amount ($498.75) is refundable to the fund in the following tax year, thereby boosting the individual’s super and reducing their tax.

Super-splitting
Super splitting allows individuals to split part or all of their super contributions into their partner’s superannuation fund. This boosts the balance of the receiving partner, who may have taken time out of the workforce for reasons, such as raising the children. The limits on super contributions remains the same ($30,000 or $35,000 a year) depending on the contributing partner’s age. Since 15 per cent of contributions tax is deducted, the amount moved to the partner’s super fund is 85 per cent of the contributions.

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Avoiding mortgage default

Posted on August 26, 2020 by admin

As individuals struggle with cash flow through the coronavirus, the Australian Bankers Association records that repayments on almost 500,000 mortgages have been deferred for six months. While repayments can be delayed, they cannot be avoided altogether.

Lenders can send you a default notice the day your repayment is overdue. However, they could also wait until your repayment is overdue by 90 or more days. When you receive a default notice, you are given 30 days to repay the amounts you have missed in addition to the regular repayment on your loan. Individuals who are struggling with their home loan repayments can avoid mortgage default by considering the following.

Contact your lender
Lenders are generally willing to work with you through financial hardship. Don’t be afraid to contact your lender to discuss your situation and find out what options are available for you. Lenders are often willing to negotiate short-term variations to repayment schedules that both parties can agree to. However, make sure that you do not agree to unrealistic repayment conditions that cannot be met.

Many Australian banks are offering a six-month deferral on mortgage repayments (including interest) for customers who are experiencing financial hardship as a result of COVID-19. If this is you, contact your bank to see if this is an option.

Apply for a hardship variation
Mortgage holders may be able to change the terms of their loan or temporarily pause or reduce their repayments under a hardship variation. A hardship variation can still be requested after you receive a mortgage default. To apply for one, contact your lender’s “hardship officer” and tell them that you wish to change your loan repayments due to financial hardship. This will usually require you to explain why you are struggling to make payments and to estimate how long your financial problems will continue to determine how much you can afford to repay.

After submitting a hardship variation request, your lender must contact you within 21 days with the outcome of your request. They may ask you for more details regarding your request; in this case, they must contact you again within 21 days from when you provide the additional information.

Consider selling your home
Selling your home is a tough decision, but in some cases this may be the better option if your circumstances are unlikely to improve. If you get to the point where your lender takes possession of your home and sells it, it’s likely that you won’t make as much as if you sold it yourself. When you sell your house on your own terms, chances are you will get a better price and avoid having to pay the legal fees passed on by your lender. Inform your lender if you decide to sell your home; they may ask for proof, such as a copy of the contract with your real estate agent or property advertisements.

Renting out your home until you can afford to make repayments again may also be an option if you are able to live somewhere else during this period.

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