Monthly Archives: May 2015

Budget age pension changes bad news for some retirees

The big news this month was the 2015 Federal Budget.

Small business will be happy with the news of immediate write-offs for equipment purchases up to $20,000. However that is about as far as the good news went. While the much feared changes to superannuation tax rates didn’t happen (that is a debate that will continue though) the budget was bad news for retirees with assets of more than $450,000.

While it has been phrased in many different ways, the simple explanation is that there will be a change in what is called the ‘taper rate’.

This is the rate at which your age pension entitlement reduces, once you have assets above a certain threshold. The threshold depends on whether you are single or partnered, and whether you are a homeowner or non-homeowner.

In the past, the pension entitlement phased out at $1.50 per fortnight, per $1,000 that you had above the threshold. For a homeowner couple, once their assets exceeded $286,500 the rate of pension started to reduce at $1.50 per $1,000.  

Psychology of ‘bricks and mortar’ property investment for SMSFs

Australians love property and our high level of (expensive) property ownership is one of the reasons we are ranked as one of the wealthiest countries in the world. Not only do we desire our own block of paradise, we also love to invest in property with 1.9 million individuals declaring rental income (or more likely a rental loss) in their annual tax returns.

But do we every stop and ask why? Why do we love property so much, and why is a large chunk of the population obsessed with becoming property millionaires?

In this article I will delve into some of the psychology that drives bricks and mortar investment. My goal is not to change behaviour or even judge whether the desire to invest in property is right or wrong. I simply want to hold up a mirror so we can better understand our own decisions and biases.


Property is a physical asset

Property is a physical thing.  

BrickX versus limited recourse borrowing – which is better for SMSF property investors?

Earlier this year real estate investment start up BrickX launched their platform which enables investors – including SMSFs – to buy a piecemeal interest in individual residential properties.

Utilising a unit trust structure to provide multiple investors with ‘shares’ in an underlying property is not new.  Listed and unlisted unit trust structures have been around for many years and we’ve also recently seen a fractional property investment solution launched by DomaCom.

The real point of difference that BrickX provides investors is that they are effectively creating a market where the shares (or ‘bricks’) in the individual properties can be bought and sold openly with very little cost (2% purchase cost, $0 sale cost).  The transparency and liquidity this can provide is something residential property investors can’t currently access.

But would SMSF investors be better off buying an entire property via a limited recourse borrowing arrangement, or should you buy a number of bricks across a number of properties?