Interest Rate Cut Passed On by Major Banks

Following the Reserve Bank lowering the Cash Rate by 0.25% to 1.75% it is interesting that some of the major banks have made announcements of a rate reduction but for others we will have to wait for the Banks to implement such rate reductions.

They take their time because every week the delay means millions of dollars to their bottom line. For example, the ANZ are only reducing their rate by 0.19% but will be effective as of 11^th May. The NAB, CBA and Westpac have all agreed to pass on the full interest rate cut of 0.25%. NAB will be next Monday on the 16^th May, the CBA next Friday the 20^th and Westpac not until Wednesday week on the 25^th.

Now to the election

I believe that there is a real chance of Labour winning the Federal Election, bringing in their own mini-budget and changing the rules for to-restrict-advantages-of-negative-gearing/”>Negative Gearing for Residential Investments.

How will this affect my clients?

Firstly the law of supply and demand kicks in. If there are fewer investors, there will be a shortage of rental properties and rents will increase. So for my existing clients, it will be a bonus.

What about Super?

Most people now realise that they will not get their Super in a lump sum on retirement but the Government will give it back to them as a form of pension.

How can this be avoided?

If you have a minimum of $200,000 in your combined Super, you can buy a brand new $500,000 home that will require no outlay by yourself as your employer Super contributions will totally pay it off for you, principal and interest.

What is the situation with Capital Gains Tax if you sell it later?

Under the current rules, you only pay 10% Capital Gains Tax if you sell it before retirement. However, the rules could change after the election.

If you are thinking of negative gearing in the normal manner or setting up a Self Managed Super Fund (SMSF) please see me for a cost-free, no obligation meeting as soon as possible BEFORE the election.