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Strategies to fix the superannuation imbalance

Posted on September 19, 2016 by admin

Those living in households where one spouse has a much lower super balance may want to start considering their options as to how to even up the superannuation imbalance. In Australia, many couples and families have at least one member with limited finances due to taking time off work to raise a family. But there are steps many couples can take themselves to help fix the imbalance, including:

Salary sacrificing involves forgoing part of your salary today to obtain greater financial security in the future. It is an arrangement that must be put in place with an employer, who is then required to make the sacrificed payment to an individual’s super fund before they pay tax on it. Women who salary sacrifice into super in their 20s can put themselves ahead financially, so if or when they take time out of the workforce, they are no worse off. For example, salary sacrificing $20 a week extra into super can help build a healthy buffer ahead of a career break.

Some couples may like to take advantage of being able to make contributions of up to $3000 a year on behalf of their spouse to claim a tax offset of up to $540. However, couples must meet certain conditions for this strategy to work, for example, the receiving spouse’s assessable income (including employer super contributions) must be less than $13,800. Contributions of more than $3000 are also allowed, but couples won’t receive the tax offset for amounts above $3000.

The government gives a 50 per cent tax-free return to eligible individuals who make a non-concessional (after-tax) contribution to their superannuation as long as they meet the relevant work, income and age tests. Some super fund accounts could get a $500 tax-free contribution.

Under current superannuation rules, an individual can split up to 85 per cent of their taxed superannuation contributions to a spouse’s account once a year. This type of strategy could be more useful for those nearing the proposed $1.6 million balance cap (which takes effect on 1 July 2017).

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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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