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How will our children ever afford to buy a home?

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As families gather to celebrate Christmas it’s possible that the dinnertime conversation may turn to the latest leaps in property market prices.

For kids trying to save a deposit for their first home escalating prices can make a purchase seem like the impossible dream; and parents can find it frustrating to stand by and watch them struggling to take that first step.

While many parents may want to give their offspring a helping hand it’s something that should be considered carefully.

Here are six points to ponder before you declare the Bank of Mum and Dad open for business.

Can you afford it?

Before making any generous gestures it’s good to be clear about your own financial situation. How might assisting your children affect your retirement plans, superannuation savings, or the equity in your home?

It is worth considering the impact it may have on your pension or tax status too.

Perhaps you have the means to help one child. But will that decision create an expectation that you will help other children in the same way?

Why help?

Are you agreeing to help your children out of guilt, obligation, or fear? When the emphasis is on the child’s situation it can be easy to overlook your own financial and emotional wellbeing.

What is the best way to assist your children?

There are various ways you could assist your children. Some parents choose to cover the additional costs of purchasing a home such as stamp duty or conveyancing and moving costs.

Or they may agree to top up their child’s savings so that they can avoid the expense of lender’s mortgage insurance.

Agreeing to go guarantor for your child is another way that parents smooth the way for a first homebuyer.

It’s good to weigh up the implications of each method before making any decisions.

Is it a loan or a gift?

It can become tricky terrain if there is not clear communication upfront about whether the financial assistance is a loan or a gift.

Make sure any terms are clear. These should be documented in a written agreement indicating the loan term and any interest requirements including the interest rate.

Are they a good risk?

Parents can become the lender of last resort if their kids have had no luck getting a mortgage from a financial institution. Perhaps they have insufficient income to support a loan of the size they are seeking or they are lacking the ‘genuine savings’ built through the discipline of regular saving. In that situation the risks can be greater for parents seeking to fill the financial gap.

What happens if things change?

It’s not just about the financial impact. Things can get messy if your children are unable to repay the loan or they repay it more slowly than you anticipated. Or a loan arrangement can become unglued if they are buying with a spouse or partner and the relationship breaks down in the future.  And what could be the potential financial and emotional toll if the arrangement doesn’t go according to plan?

Helping your children buy a home is a significant financial decision so contact your financial adviser if this is something you are considering.

 

Intrigued by the possibility of cryptocurrencies?

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Intrigued by the possibilities offered by Bitcoin and other cryptocurrencies but wondering if they are worth a punt? As with any other potential investment it’s important to fully understand it before you put your money down.

Here are four things to understand about cryptocurrency:

The mechanics

Bitcoin was the first kid on the cryptocurrency block and others have followed in its wake including Ethereum, Dogecoin, and Ripple. Rather than being a physical note or coin, cryptocurrencies are a digital token created from code using an encrypted string of data blocks, known as a blockchain.

A blockchain is a decentralised database that can be accessed by all users. Users earn or create blocks (or units of a digital currency) by solving complex cryptographic puzzles and verifying transactions.

The blockchain keeps track of the ownership of the currency units and holds a history of every transaction ever made on the blockchain. Benefits of blockchain technology include accuracy, transparency, and speed.

Cryptocurrencies are held in a digital wallet and units can be bought and sold on an exchange platform using conventional money.

Purchasing power

You might expect you should be able to use an alternative currency to buy goods and services. But Coinmap.org shows there are limited places in Australia where you can pay for something with a cryptocurrency.

There are a couple of Bitcoin ATMs in Australia and some individuals will accept Bitcoin as an exchange for some other goods or service.

Investing firepower

People mainly buy Bitcoin and other cryptocurrencies because they think they’ve spotted an investment opportunity. But, as with any other emerging market, that means they’ve had to be prepared to hang on tight through periods of intense price volatility.

Transaction costs and times can also be concerns for people who have jumped into cryptocurrencies. For instance, as the Bitcoin blockchain grows the time needed to process a single transaction is lengthening (one of the reasons why other cryptocurrencies have appeared).

The price volatility means that investors can potentially pay a lot more than they intend or cash out for less than they hope when they decide to buy or sell.
Unlike traditional investments there are no dividends or cash payments associated with cryptocurrencies.

Other risks

Apart from the impact of price volatility there are other risks that need to be considered before jumping into cryptocurrencies.
Unlike traditional currencies, cryptocurrencies are not backed by major governments or developed economies and the market is largely unregulated.

Market conditions can make it difficult to liquidate your holding in a timely manner.

Another risk is related to cryptocurrency exchange platforms. Because these are not regulated if the platform fails or gets hacked, investors are not protected and will have no legal recourse.

Likewise, if your digital wallet is hacked or an incorrect debit is made, you have no protection.

Another thing: don’t assume that cryptocurrencies are escaping the attention of the taxman. As with any other investment, trading in cryptocurrencies could result in a capital gains or income tax liability.

New ID numbers now compulsory for company directors

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All company directors – including those linked to Self-Managed Super Funds – must now obtain Director Identification Numbers under a new requirement from the Australian Business Registry Services (ABRS).

Directors who were appointed before 31 October 2021 have one year to apply to the ABRS for their Director Identification Number – also known as a Director ID or DIN, while directors appointed after 1 November 2021 must apply within 28 days of their appointment.

The Director ID is a unique 15-digit number that verifies the identity of an individual company director. The number stays with a director for life, even if they stop being a director, change companies, change their name or move interstate or overseas. Directors receive a single ID number, even if they are a director of multiple companies.

The new mandatory requirement aims to combat fraud by preventing the use of false director identities, stopping unlawful activity such as phoenixing and making it easier to trace directors’ relationships with companies over time.

Who needs a Director ID?

You need a Director ID if you’re a director (or alternate director) of a:

  • company
  • Aboriginal and Torres Strait Islander corporation
  • corporate trustee, e.g. of a self-managed super fund
  • charity or not-for-profit organisation that is a company or Aboriginal and Torres Strait Islander corporation
  • registered Australian body, e.g. an incorporated association that is registered with the Australian Securities and Investments Commission and trades outside the state or territory in which it is incorporated
  • foreign company registered with ASIC and carrying on business in Australia.

When to apply for a Director ID

  • If you became a director on or before 31 October 2021, you must apply before 30 November 2022.
  • If you become a director between 1 November 2021 and 4 April 2022, you must apply within 28 days of your appointment.
  • If you become a director from 5 April 2022, you must apply before your appointment.

How to apply for a Director ID

Go to the ABRS website.

Applying for a Director ID is free.

Directors must apply personally, as they need to verify their identity. No other person can apply on a director’s behalf.

You can apply online, over the phone or using a paper form.

The fastest way to receive your Director ID is online, following a three-step process that begins with setting up your mygovID using the app (not the same as your mygov account).

Read more about how to apply on the ABRS website.

Need help?

Please visit the ABRS website, contact the ABRS, visit the ATO website or ask your accountant for assistance.

2021: The year in review

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As the rollercoaster ride of 2021 nears an end, let’s take a look back at the key events that shaped the year.

While COVID-19 continued to have repercussions at home and overseas, humanity gave us plenty of highlights over the past 12 months that (thankfully) had nothing to do with pandemics, variants, borders or vaccines.

Here’s a look back at some memorable moments of 2021: the year of the Ox and the UN’s International Year of Peace and Trust.

NEWS

In January, Donald Trump was banned from social media and in February, Facebook became a black hole for Aussies one strange Tuesday when all Australian news websites were blocked from using the platform. In October, a six-hour outage affected Facebook, Instagram and WhatsApp, and Facebook changed its name to Meta.

Billionaire space-racers Elon Musk, Jeff Bezos and Richard Branson launched separate human spaceflights in 2021. Who won? Bezos probably. He did have Captain Kirk (William Shatner) on board.

US troops withdrew from Afghanistan, China placed new restrictions on Australian imports and the climate emergency intensified with wildfires in Greece and California, snow storms in Texas and floods in Germany and China.

In Australia in November, four-year-old Cleo Smith was found alive and well, three weeks after disappearing from a WA campsite. And police examined new leads in the William Tyrrell case.

SPORT

Tennis’ Australian Open was held in February – not January – after being postponed due to COVID-19. Novak Djokovic and Naomi Osaka claimed the titles. Novak also won the French Open in May and Wimbledon in July, where Aussie world number one Ash Barty also tasted victory.

In May, Chelsea beat Manchester City 1-0 in the UEFA Champions League final and Spain’s Jon Rahm won golf’s US Open. Tampa Bay won the Super Bowl, the Penrith Panthers defeated South Sydney in the NRL final, Melbourne claimed the AFL flag and Verry Elleegant won the Melbourne Cup. NSW triumphed in a memorable State of Origin series, with COVID-19 forcing game one to be played in Townsville.

The Tokyo Olympics and Paralympics ran in August and September, featuring 2020 branding after a pandemic postponement. Australia finished sixth in the Olympic medal tally, eighth in the Paralympics.

POLITICS

Joe Biden became the new US President in January. He was inaugurated just weeks after Donald Trump supporters stormed the Capitol building to disrupt the election.

Here in Australia, Dominic Perrottet took over from Gladys Berejiklian as NSW Premier in October and tensions rose between Australia and France over a cancelled $90 billion submarine contract.

THE ENVIRONMENT

The federal government set a net zero emissions by 2050 target. Scott Morrison attended the UN Climate Change Conference in Glasgow where nations pledged measures to address global warming.

POP CULTURE

Italy won Eurovision, Squid Game was a Netflix hit, Nomadland was the toast of the Oscars and Oprah interviewed Meghan and Harry.
And the Collins Dictionary declared “NFT” as the 2021 word of the year.

Wishing you a safe and happy holiday season and we look forward to seeing what 2022 holds in store!

Finding more meaning this Christmas

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Overseas supply chain issues and congested online delivery systems could make it harder for Santa to deliver his gifts on time this year.

Never fear: that doesn’t have to be a negative.  It could actually be the very excuse we need to make Christmas 2021 more about meaning and less about the material.

As we get together with family and friends during the festive season what can we do to make every moment count?
For starters throw away that gift catalogue and concentrate on things that will make people laugh and feel loved.

Here are 10 ways to make this Christmas that most wonderful time of the year.

Write a love message

In the days of email, text, messages, and tweets the hand-written message can seem like something special. Take the time to express your love or appreciation for a friend or family member in a card. Or simply share a favourite memory with them.

Enjoy an experience

Simple pleasures are often the best. Pack a Christmas picnic and have it at the beach or in a park. Decorate the Christmas tree together or string up some special lights. Sing some carols or make eggnog and watch a favourite Christmas movie.

Club together 

Instead of exchanging gifts make a pact with friends or family to club together to support a charity. Discussing which charity to support and why could be a great bonding experience over Christmas pud. Or you could agree to buy a present for someone in need in the community instead of each other.

Be playful

Who hasn’t got some standout memories of backyard cricket matches or board game tournaments in their Christmasses past? Bring play back into the present this year by reviving your favourite games, sports, or jigsaw puzzles.

Swap your Christmas

Maybe you come from a family of music-lovers or book-lovers. Could you agree to wrap a favourite CD or book and share them with your loved ones?

Host an open house

Usually spend Christmas with family? Begin a new Christmas tradition by opening your doors to friends, neighbours, or ‘Christmas orphans’ in the community.

Spend time

Volunteering to help serve at a charity Christmas lunch could be another way to add some meaning to Xmas 2021.

Create presents

Sharing your talents with each other could be a fun way to create a different kind of Christmas. Sing, play guitar, bake something, paint, write a poem, share a favourite photo.

Second-hand challenge

Have some festive fun by opting to buy second-hand gifts instead of new ones. Raid your local op shop and see just how much your family can keep out of landfill this year.

Start a new Christmas tradition

Try celebrating Christmas in a different way. You could adopt the Icelandic tradition of gifting books to each other and spending Christmas Eve reading and eating chocolate. Or do a walk or a drive around the neighbourhood to see the Christmas lights. Or give everyone a rest from Christmas cooking and book a table in a restaurant.