Latest news with #NoahCapozza
Yahoo
17 hours ago
- Business
- Yahoo
Aussie with $60,000 HECS debt reveals why he isn't paying it off: 'Opportunity'
Australians with HECS debts are being urged to reconsider putting extra money towards their student loans. While it might make sense to chuck extra cash at your HECS to pay it off sooner, you could be in a much better position if you put your money elsewhere. That's what Noah Capozza has done with his $60,000 loan. The Link Wealth financial advisor told Yahoo Finance investing your cash can leave you better off, as HECS debts are hit with indexation every year. "The idea behind that is the average rate of return on the share market, which, over the last 100 years, is 9 per cent year-on-year," he said. Gen Z graduate with $50,000 HECS debt reveals degree she regrets Centrelink payment alert for 58,000 Aussies in caravans Couple's side hustle amid double redundancy secures $13 million fortune Comparatively, he said the rate of HECS indexation should be in the 2-3 per cent range. Capozza said it could be a better idea to make your money grow rather than fight against that yearly increase in your student loans. The average HECS debt is $27,600, and your employer has to send a percentage of your salary towards that loan every pay cycle, which is based on how much you earn. If you're on the average salary of $102,742 per year, 5.5 per cent of your pay, which is roughly $5,650 per year or $470 per month, would go towards HECS. If you put no additional money into that loan, it would take nearly 59 months, or close to five years, to pay it you put $500 per month on top of your employer's contributions, that loan would be paid off in a little more than 28 months or two and a third years. Those two time frames are tricky because they don't take into account the yearly indexation that hits in June, which can increase the loan by hundreds of dollars. In Capozza's case, his HECS went up by $1,800 recently thanks to this year's indexation. Compare that with the 8-10 per cent rate of return on the share market, Capozza said it made sense to him to invest his cash rather than put it towards his student loans. But the average rate of return and isn't guaranteed. However, even if you put it into a high-interest savings account, which was around the 5 per cent mark, your money could be growing more than the rate of indexation. Victoria University found recently that the average amount of time it takes to pay off a HECS debt is 9.9 years. If you directed that $500 monthly contribution towards a share portfolio, you would have $37,712 in your account after five years, based on a 9 per cent return. If you invested that same $500 over 10 years, you would have $96,757 in your portfolio. That money is purely from your investment and compound interest, and doesn't take into account any dividends you might earn on top. You can also take that money out of your portfolio at any point, whereas sending cash to your HECS debt means you say goodbye to that money forever. "You can just let it grow and compound over time," Capozza told Yahoo Finance. "It could provide you with the opportunity to either pay your HECS off or have other opportunities that will come up later down the track." Capozza sees plenty of clients worried about paying off their HECS and whether it will affect their borrowing capacity if they want to buy a home in the future. But lenders don't ever look at the size of the debt when assessing your suitability for a loan. Instead, they watch how much of your salary goes towards it. "You could have a million dollars, you could have $10. It actually has no difference," he said. Instead of seeing Capozza's $60,000 balance, a bank would only assess him on the $470 leaving his pay every month, if he were on the average salary. The financial advisor also said diverting your money towards investments could be a better idea as the government has been making huge strides in the HECS department recently. A poll of more than 1,600 Yahoo Finance readers found 46 per cent of people thought they would never fully pay off their HECS by themselves or without government support. Last year, the Albanese government changed how indexation worked, so that it would be whatever was lower out of the consumer price index and the wage price index. It changed the 7 per cent indexation rate in 2023 to just 3.4 per cent. Additionally, Labor promised to wipe 20 per cent of every person's student loans. "I dare say that will probably happen every time there's an election going on, I'm sure they'll push some sort of agenda to help out with HECS debt," Capozza said. But he insisted that anyone who is thinking about where to put their extra cash should speak to an expert beforehand to make sure it's the right direction for them. Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs. Therefore, you should consider whether the information is appropriate to your circumstances before acting on it, and where appropriate, seek professional advice from a finance nel recupero dei dati Effettua l'accesso per consultare il tuo portafoglio Errore nel recupero dei dati
Yahoo
16-03-2025
- Business
- Yahoo
$800,000 Centrelink warning as early inheritance trend risks cash boost
Building a granny flat can be used to get around having your Age Pension cut if older Australians decide to give their children or grandchildren an early inheritance. You may not realise that gifting large sums of money can reduce the amount you will receive in your Centrelink payment, even if it was years before. Gifting early inheritances has increased in popularity as younger generations of Australians struggle to enter the property market. Lawyer Suzanne Jones urged people to "do their homework" as cash gifting can backfire if you don't consider the financial implications over the next five years. "Say you gave a child $250,000 and then unexpectedly had to go into care within five years of making that gift, then that $250,000 is still treated as part of your assets for the assets test for residential care or the Age Pension," the head of estate planning at Coote Family Lawyers told Yahoo Finance. However, there is an interesting way around the asset calculation right in your children's backyard. Bank of Mum and Dad warned early inheritance cash boost for struggling kids could impact pension Rare new gold 50c coins for Australians worth $20: 'Beauty' Tax deductions for high-income earners to pocket $50,000: 'Most people miss' Deeming (find out more here) is used by Services Australia to assess the income of your financial assets, which would be added to your other income to determine your rate of Age Pension. But Link Wealth Group financial adviser Noah Capozza said Centrelink has a test to consider how reasonable a gift is, which can help you offer your family money without compromising your pension payment in the future. He said this was possible by building a granny flat. Adult children have been building granny flats on their parents' lots to escape the rental and housing crisis, but some might not be aware of the benefits of doing it the other way around when it comes to retirement. Interestingly, terms specifically relating to granny flats and units skyrocketed on search engines in 2024 by more than 50 per cent compared to the year prior, showing how popular the property trend has become."When you [build a granny flat], what you're allowed to do is gift your children a large sum of money," Capozza said. "This could be $100,000, it could be $500,000, it could be $700,000, maybe even more. "This will shelter the amount of assets you have for Centrelink, therefore this can minimise the amount of assets you hold, and therefore get full Age Pension." According to Services Australia, if you build a granny flat, you are transferring assets to family members in return "for a life interest or right to accommodation for life". The reasonableness test is a calculation that Centrelink does to work the granny flat interest. It uses a conversion factor based on the person's age of their next birthday and the maximum partnered pension rate at the time the granny flat arrangement is entered into. Centrelink gave an example of 69-year-old Janice, who gives her son $800,000 for the right to live in a granny flat that will be built in his backyard. The construction will only cost $150,000, and because what's gifted is far above that amount, the reasonableness test kicks in. Janice's next birthday is 70, so the conversion rate is 17.36, and the annual combined maximum partnered rate at that time is $44,855.20. When you multiply the partnered rate with the conversion rate, you get $778,686.27, and that's the value of the granny flat interest. Once you subtract that from the initial $800,000 gift, you're left with $21,313. That will be the amount that's considered a gift under Centrelink's rules, rather than the $800,000. That's just an example of how it works, but it's worth speaking to a financial advisor for how it might play out for you as there are a few factors that need to be taken into consideration. You can see what the conversion rates are for each age here. Services Australia general manager and agency spokesperson Hank Jongen told Yahoo Finance that if you just want to hand over cash to your kids, you can. But there is a limit before it will affect your pension. "The value of the gifting free areas are the same if you're a single person or a couple," he said. "They are both: $10,000 in one financial year and $30,000 over five financial years - this can't exceed $10,000 in a single financial year." He also warned about parents trying to be tricky to get around the rules. "If you're thinking of selling your property to your child at a discounted price as a way of circumventing this rule, it won't work," he added. "For example, if you own a property worth $780,000. But you sell it to your child for $600,000. We would assess the $180,000 difference as a gift." Jones told Yahoo Finance that the government body will look into your accounts as far back as five years to tally your asset income. They will be able to see it and it can cause your payments to drop substantially if you've given any large gifts. You can access the Age Pension on 67 and Jones recommended considering any early inheritance gifting if it was within five years of you reaching that age. In addition to financial gifts, you'll also be checked for: savings accounts and term deposits interest on bank accounts, shares, managed funds, and super managed investments, loans and debentures income streams like account-based pensions or allocated pensionsSign in to access your portfolio
