Living expenses on APRA radar

A speech by APRA's Wayne Byres last week highlights the increasing focus on serviceability and moving away from using HEM to assess living expenses.

An article in The Adviser this week delves into the issue, and includes commentary from our General Manager, Clive Kirkpatrick. He said that lenders should be doing more to track expenses.

"Banks already hold a whole bunch of information around their transactions, but they expect the broker to actually provide that information. For example, they ask brokers for bank statements, even if they already hold them. They ask brokers for living expenses, but they would already know what they are if the borrower is already a customer of that bank.

"If you apply for a loan with Westpac and you are already a Westpac customer, they can see your spending habits and where your money is going, but they just don't look. Why do they ask the broker that, then?

"If the underlying lender gets better at understanding what information they have, it should make a much better process for the customer and result in more truth in applications."

The article also quotes the executive director of the Finance Brokers Association of Australia (FBAA).

Peter White said: "The whole HEM issue is something that has been challenging for a while. Since the NCCP came out, ASIC gave quite succinct direction that when you are calculating serviceability for a borrower, you need to take into consideration their real expenses for living and that might be a lot more than an ABS stat that is used in the HEM."

You can read the whole article here https://www.theadviser.com.au/breaking-news/37109-living-expenses-draw-sharper-focus

Vow Conference Video Highlights

Check out the best two-and-a-half minutes of the Vow Conference and Altitude Awards, in this showreel. (And the rain has been edited out).

Sixty seconds on Vow Home Loans - more solutions for more customers...

Vow Home Loans has competitive solutions for a wide range of scenarios. From straightforward loans through to customers with complex borrowing requirements. This includes being a specialist in residential construction lending.

Loans are assessed on their merits and don't just get churned through a credit scoring engine. With access to four different funders we have the range of solutions to help your clients and grow your business.

Check out our key features below.

Name

Role

Phone

e-mail

Craig Herden

Partnership Manager

0478 537 841

Craig.herden@grouplending.com.au

Tony Wakim

Head Office Based BDM

1800 737 448, press option 1 for `Scenarios'

Tony.wakim@grouplending.com.au

Protect your business from email scams

Macquarie has reported a recent fraud case involving attempts to access a client's redraw account. For those of you who attended the PD Days earlier this year, Macquarie's presentation on this issue there were several examples of how sophisticated these crooks have become.

Below are several articles with practical tips for avoiding these types of scams. Please read and share with your team.

http://static.macquarie.com/dafiles/Internet/mgl/global/advisers/expertise/sh-articles/how-to-protect-yourself-from-email-scams/

https://www.macquarie.com/au/business-banking/business-management/expertise/is-that-email-really-from-your-boss

http://static.macquarie.com/dafiles/Internet/mgl/global/advisers/expertise/sh-articles/7-ways-to-help-prevent-workplace-fraud/

Can you insure against ATO investigations?

The Tax Commissioner has predicted that almost 30% of SME businesses will be subject to the ATO's compliance program, including some form of tax audit.

The processes can be lengthy to prepare, and response times to audit findings can also be time consuming. In addition, the costs can run to thousands of dollars.

In response, Vero has designed Tax Probe Plus Insurance, which offers cover for professional fees associated with audits and other official investigations such as:

  • ATO Income Tax Audit, Fringe Benefits Tax Audit and Capital Gains Tax Audits,
  • WorkCover Authority Audit of WorkCover returns, and
  • Payroll Tax Audits

There are four cover options to choose from:

  • Business Audit Only (with investigation cover); or
  • Business AND Directors Audit (with investigation cover); or
  • Individual cover (only for insureds that are not a corporation); or
  • Self Managed Superannuation Fund cover

See below premium options for a Mortgage Broker consisting of one (1) Director with a business turnover of $500,000:

Cover Type

Insured Amount

Total Premium

Business AND Directors Audit

$100,000

$461

Business AND Directors Audit

$50,000

$381

Business Audit Only

$100,000

$296

Business Audit Only

$50,000

$231

Broker Fee: A broker servicing fee of $80 + GST is in addition to the above quotes.

If you would like a quote on the above insurance, please contact Fetima Abes, Angelica Pan or Mark Esperida from the insurance team, with the following:

  • Insured Name
  • Business Address
  • Annual Turnover
  • Insured amount ($10K, $15K, $20K, $50K, $100K)

For Business AND Directors Audit

  • Names of Directors

For Self-Managed Superannuation Fund

  • Funds Under management (Annual Turnover)
  • No. of SMSF Members

As a bonus & for a limited time Vero are offering bonus Qantas rewards points on binding of your Tax Probe insurance policy.

Don't forget, you will earn 20% back in commission for every policy sold (either for yourself or for clients you refer)

We encourage you to send this offer on to your clients, especially accountants!

Tax Probe Plus Brochure.pdf

Vero Tax Probe Insurance Quote.pdf

Vero Tax Probe Plus Policy Wording.pdf

Are low interest rates costing your clients?

Melbourne Cup Day wasn't just about the races and the champagne. It was also the day when the Reserve Bank once again announced that interest rates would stay on hold. While good news for borrowers, savers were not so happy.

In addition, with share markets and property prices on a high, not everyone is looking to invest - many people still want the lower risk options of cash.

But whereas cash management accounts were once a viable option, many are now paying at or below the cash rate. Meanwhile, the cash rate of 1.5% isn't keeping up with inflation of 1.8% (source: rba.gov.au).

In practice, this means that having their funds in an at-call cash account could actually be costing your clients money.

If you have clients who want daily liquidity - i.e. access to their money when they need it - as well as competitive returns well above the cash rate, it's time to look at Smarter Money Investments.

The Smarter Money Active Cash Fund returned 3% after fees in the 12 months to October 2017, while the Higher Income Fund returned 3.7% in the same timeframe (source: smitrust.com.au).

Moreover, these returns were generated in a low-risk, low-volatility investment in Australian bank bonds and deposits.

If your clients need their cash to work harder, get in touch with the team:

Luke Bouris

Business Development Manager

Ph 0414 549 400

luke.bouris@smitrust.com.au

Cosimo Vallelonga

Investment Specialist

Ph 0402 895 072

Cosimo.Vallelonga@smitrust.com.au

www.smitrust.com.au