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8 tips to get a harder working home loan

It’s lucky Aussie homeowners are a pretty resilient bunch.

All the interest rate rises over the past couple of years have delivered a serious reality check, leaving variable rate home loans higher than they’ve been for a generation.

So you need to get your home loan working as hard as possible particularly if your fixed rate loan is about to reach the end of its term and you’re facing a sudden increase in repayments.

The good news is there are ways you can set up your home loan to pay less interest in the long run and take years off your mortgage. Here are a few quick tips to get your home loan working harder.

1. Set up an offset account 

If you haven’t already, check if you can link an offset deposit account to your home loan. An offset account operates like a transaction account but it reduces the interest you pay as interest is only charged on the mortgage balance less the offset balance.

You can set up offset accounts for big ticket items like holidays, a car purchase or renovations or even everyday necessities like shopping and bills.

The combined balance of all your offset deposit accounts will reduce the interest payable on your loan. You can also connect a visa debit card to your offset account that operates like an everyday account and makes it easy to withdraw your funds.

2. Take advantage of your redraw facility

Some home loans offer a redraw facility to access extra repayments you might have made. If you have unexpected expenses, it’s worth checking if you have available funds on your home loan that you could request to redraw. You’ll just need to remember this could extend the life of your loan so you end up paying more interest in the long run.

3. Consolidate other debt into your home loan

You’ll generally find the interest rate on your home loan is lower than the interest on your credit cards or personal loans. So if you have any debt, you could transfer this to your home loan so you don’t pay as much overall interest.

4. Change your repayment amount

Creating a budget could help you get across how much income you’ve got coming in, how much you need for the essentials and where the rest of your money might be going. This will help you identify if there’s any room for movement and if you could potentially repay a little extra. 

5. Change your repayment frequency

Paying fortnightly instead of monthly, for example, can make a big difference to the interest you pay in the long run.

6. Change your repayments to principal and interest

Making principal and interest (P&I) repayments can reduce your outstanding loan balance and lower the amount of interest you’ll pay over the life of the loan. But don’t forget switching to P&I can increase your regular repayments.

7. Renegotiate your interest rate

If you see a lower rate with another provider,  contact your current provider for a better deal.

8. Consider whether to refinance

If you’re having cashflow challenges, you could think about refinancing to reduce your repayments but bear in mind this could mean extending your loan term.

Source: AMP

How do Aussie women’s finances stack up?

Planning for retirement is a daunting task and many Australian women lack confidence in financial decision making. Fortunately, there are some small steps women can take today to make a positive difference to their future.

It’s probably no surprise to hear that Australian women often retire with less money than their male peers. New research* by Colonial First State (CFS) confirms that even in 2024, this is still the case. 

There are several reasons for this, including well documented wage gaps and the uneven burden of raising a family which often results in women taking breaks in their careers.

Not only do women end up investing less money through super over their careers but this means they’re also missing out on the compounding effects that future returns will have on their balances. 

And CFS found that while 78% of men have made plans for their financial future, only 67% of women had done similar. Women were also less likely to set financial goals*. 

All is not lost, though. Read on for some simple steps that will help women start to take control of their super and their future. 

Knowledge is power

It’s important to note that women care about their finances just as much as men do. In fact, women are more likely to feel worried about their finances or guilty that they’re not doing enough to manage finances compared to their male peers*. 

So, what’s holding them back? Our research shows one major hurdle is confidence – or more specifically, that women aren’t as confident with money and investing as men*. It’s hard to make good financial decisions when you don’t trust that you know what a ‘good’ decision looks like.

Luckily, financial confidence is strongly linked to knowledge. The more we know about super and investing, the more confident we can be in our decisions. 

What’s more, there are several easy ways for women to brush up on their financial knowledge and be able to back themselves.

Is there good news?

Australian borrowers breathed a sigh of relief with the double rate pause, while the announcement of Michele Bullock taking over as RBA governor was well received. She will become Australia’s first female central bank leader in the RBA’s 63-year history and will serve a 7-year term. 

Some economists are suggesting that interest rates have now reached their peak. Others remain uncertain, however it certainly signals a slowdown in pace and lessening rate hike pressures.

• Regularly check up on your super

Many people approach their super with a ‘set and forget’ mindset but this attitude can leave you in the dark when it really matters.

Aim to regularly check in on your super, making sure your contact details are right (so you’re receiving all the important information and notices) and that you’re happy with the performance of your investment option. 

• Bring it all together

Most Australians have more than one super account and are paying multiple sets of fees as a result. Consolidating all your super into one account can help you save on fees and make your super easier to manage. 

What’s more, you may even have super money that you’ve forgotten about. According to the ATO, there was more than $16 billion in ‘lost’ super as at 30 June 2023 – accounts which have stopped receiving regular deposits, typically after someone has changed their job, name or address. 

• Top up

We know most women have lower super balances than men^ but the power of compounding (where you earn interest on your money and on the interest it has earned), means you can start making a difference today.

Summing up

Taking hold of your financial future is easier than you think. Here’s a summary of our tips to get you started:

• Check your super balance. 
• See if you have any lost super or multiple accounts you might like to consolidate.
• Look at topping up your super. Even a small amount could make a difference.
• Learn more about super.

* Source: CFS commissioned survey of 2,966 Australians and research was completed in March 2023. Findings and statistics in this article are based on this research.   

^ Source: Australian Families Then & Now: Income and wealth (aifs.gov.au)

Source: Colonial First State

Making the most of your retirement finances

You’ve waited a long time to reach retirement, so how do you make sure your hard earned savings go the distance with you?

There are a range of steps you can take before and after retiring to make the most of your retirement income.

Getting in training

For many people, switching to retirement can mean adjusting to a lower annual income. This is often estimated as two thirds of your salary at retirement (source: MoneySmart) but can be more or less depending on your circumstances and lifestyle.

If you are nearing retirement, it can be helpful to start training. That is, set your living budget according to the annual income you expect to have in retirement. There are a few benefits to doing this:

1) Understanding whether your retirement income covers your needs and wants.

If it doesn’t, you may be able to consider your options, like continuing to work, even in a part- time capacity to supplement your retirement savings.

2) The potential for extra savings.

Adjusting your budget early means you might have a surplus from your current income and a range of options for using this surplus. Some options for this increase to your savings might be to pay off debts, contribute extra to your superannuation or even purchase specific items that might be important for your retirement plans.

3) Time to adjust to different spending habits.

Studies have shown it can take 66 days to form a new habit1. Your spending habits and accompanying lifestyle are also a habit. Learning how to live to a new budget before you reach retirement gives you time to retrain your behaviour while you still have the financial flexibility to manage budget blow outs.

If you need help planning your budget, speaking to a financial counsellor may be a valuable option. Alternatively, if you are comfortable with your budget but would like to understand your retirement investment options, speaking to a financial adviser may help you with a strategy, including transition to retirement options like living on a part pension and moving more of your working salary into superannuation (if eligible and suitable).

Pension vs super

Your superannuation doesn’t automatically convert to a pension when you reach retirement age. You generally need to instruct your superannuation provider on what you would like to happen and you have a range of options for this. Some Australians may choose to take their superannuation savings as a lump cash sum for their bank account, while others transfer their money to retirement products like an account-based pension (also known as an allocated pension) to provide a regular income stream from the money saved in their superannuation. Retirement phase products are tax-free compared to the superannuation environment. There are pros and cons to each phase and the style of products in each so you may consider discussing it further with a financial adviser.

A recent Organisation for Economic Co-operation and Development (OECD) report Preventing Ageing Unequally suggested that taking a lump sum at retirement increases the risk of falling into poverty as it crystallises your gains or losses at a particular date, leaving you with a set sum to live on. By contrast, options like account-based pensions mean your superannuation money continues to be invested in the market so you may have more flexibility with your finances. By the same token though, you may still be exposed to market movements, including downturns. In either scenario, it helps to look at the complete picture of your assets and likely lifespan to assess how best to manage your superannuation savings in retirement.

Note that there are restrictions on how much you can transfer to retirement style products from superannuation. The maximum amount you can hold in a retirement phase product like an account-based pension is $1.9 million. For some, this may mean that you retain much of your savings within the superannuation environment instead and transfer amounts over time to your pension product.

Many Australians may also be eligible for the Age Pension – in full or in part. This is determined by a means test which looks at your income, real estate and other assets, investment and superannuation. If you have a partner, their details will also form part of assessing your eligibility. You can find out more and how to apply at Services Australia.

Living for the year

For those who continue to have their savings invested in some form, such as through an account-based pension, flexible spending on luxuries can make a difference to their finances. In fact, your own grandparents probably took this approach too.

For example, you might choose to have an overseas holiday in a good financial year where your retirement investments may generate additional returns to buffer you from needing to dip too much into your savings.

Or you might adjust how much you spend on luxuries in a tough financial year. You might still take a holiday for example, but it might be a camping trip in a holiday park or a short driving holiday instead.

Alternatively, some retirees also continue some form of paid work to supplement their income and allow for the occasional luxury and to give them flexibility in tougher financial years. There can be social, mental and physical benefits to continued work too.

Getting older has some benefits

It’s not just about wisdom and a lifetime of memories. Australian retirees have access to a range of benefits to help them spread their money further.

A great starting point is obtaining a Seniors Card. The benefits can vary across states and can include discounts on state transport, tourist attractions and even dining at some restaurants. 

Some retirees may also be eligible for the Commonwealth Seniors Health Card which can assist with your healthcare costs. 

Look out for seniors' events and specials too. A range of places from restaurants to galleries offer special events or discount days for senior citizens – typically on dates that the average weekday worker wouldn’t go. There is an additional bonus to this, being that you can often enjoy a quieter atmosphere than in busier periods.

Retirement can be an exciting phase of your life and being prepared with a flexible approach can make a difference – not just to your finances but your stress levels too. 

If you need help with the transition, speaking to a financial adviser can help you with your strategy.

1. Grohol, J. (2009). Need to Form a New Habit? 66 Days. Psych Central. Retrieved on November 19, 2017.

Source: BT 

Get 2024/25 off to a great start

The beginning of the financial year is a great opportunity to review your financial situation, to make sure you’re on track and on top of changes happening across tax and superannuation. Here are five areas that you may wish to review early this financial year.

1: Make your tax savings work for you 

The personal tax cuts commenced on 1 July 2024 which may mean you pay less tax and have extra cashflow, and it’s important to think about the best way to make the extra dollars work for you. 

If you are an employee, you may have already noticed an increase in your take home pay as less tax is withheld each pay period by your employer. 

You may need the savings to meet regular household expenses and manage cost of living increases but if you have capacity, there are ways you may be able to use the tax savings to improve your financial position, such as reducing debt, increasing your cash reserve, investing for the future or boosting your super balance. 

Even small amounts can make a difference over time. If you’re able to reduce your debt, you’ll have indirect savings by reducing the amount of interest you are paying. If instead you choose to build up your savings, the right option to do this depends on a number of things including: 

• whether your investment goal is short term or long term 
• based on how long you have to invest, what you would like to invest in (e.g. term deposits, shares and/or property) 
• whether you need access to these funds at a particular time (e.g. super savings can generally only be accessed once you retire after age 60). 

The key is to make a conscious decision to put your tax savings to work in a way that suits you best. 

To estimate your tax savings for this financial year, check out the Government’s calculator at taxcuts.gov.au. 

2: Review your concessional super contributions strategy 

Concessional contributions include: 

• contributions that your employer must make for you (Super Guarantee or ‘SG’ contributions) 
• salary sacrifice contributions (which are contributions from you pre-tax salary), and 
• personal contributions that you claim as a tax deduction. 

A limit applies to the concessional contributions that you can make without having to pay extra tax. This is known as the concessional contributions (CC) cap. From 1 July 2024, the annual CC cap increased from $27,500 to $30,000. In addition, the rate of SG contributions that employers must make increased from 11% to 11.5%. 

Therefore, the beginning of the financial year is a good time to review your super contributions strategy to ensure it continues to be right for you. This includes taking into account the increased CC cap and SG rate to ensure you do not exceed your CC cap. It could also mean starting or reviewing a salary sacrifice arrangement with your employer if you’re able to direct some of the additional income from the 1 July tax cuts towards saving for retirement. 

Your CC cap may be limited to the annual cap or may be higher if you have unused concessional contributions from the last five financial years and meet other eligibility rules. These are called unused carried forward contributions. See ato.gov.au and search ‘concessional contributions cap’ for more information.

3: Could you benefit from the increase in the non-concessional contribution cap? 

Non-concessional contributions are contributions you make from after tax income or existing savings. 

The non-concessional contribution (NCC) cap increased from $110,000 to $120,000 on 1 July 2024. If you’re eligible, you may be able to ‘bring forward’ some of your NCCs from the next one or two financial years, meaning you could make even larger contributions today. The increase to the annual cap also means that the maximum amount under the bring forward rule increased from up to $330,000 to $360,000. 

Like CCs, eligibility rules apply to NCCs. This includes limits on your total super balance, NCCs you may have made in previous financial years and your age. 

Remember that investing in super has the benefit of earnings being taxed at 15% compared to your marginal tax rate which could be up to 47% (including Medicare levy). However, access to these savings is restricted generally until you are retired after age 60. 

4: Submit your notice of intent to claim tax deduction for personal super contributions 

If you made personal contributions in 2023/24 and intend to claim a tax deduction, don’t forget to give your super fund your notice of intent and receive an acknowledgement before you lodge your tax return for 2023/24. You must lodge your notice of intent no later than 30 June 2024 if you haven’t lodged your tax return by that point. 

You also need to lodge your notice of intent before you commence a retirement phase income stream, rollover or make a withdrawal from your super account. This includes personal contributions you have made since 1 July 2024 that you wish to claim as a tax deduction. 

The timeframes are very specific and there is no discretion if these are missed, which means it could impact the tax deduction you are able to claim from these contributions. 

5: Review your estate planning goals 

Just like many aspects in your life, your estate planning needs to be reviewed on an ongoing basis. Your Will and Enduring Power of Attorney should be updated to reflect any changes to your finances, investments, family and goals. Reviewing your estate plan ensures that it: 

• aligns to your goals, and 
• directs your assets to the right beneficiaries at the right time. 

Some key life changes that may impact your estate planning include: 

• getting married 
• having children 
• a change in relationship, such as separation or divorce 
• acquiring or selling assets
• building your savings (including superannuation). 

Superannuation doesn’t automatically form part of your estate, which means unless you take certain action, you can’t rely on your Will to determine who’ll receive your superannuation balance when you pass away. Your super fund may allow you to make a death benefit nomination to people who are eligible beneficiaries under superannuation law. Eligible beneficiaries include your spouse, children and certain other dependants. You can also nominate your estate if you want to make provision in your Will to distribute your super balance. 

Each super fund has rules about the types of nominations that you can make and other requirements for the nomination to be valid. If you make a binding nomination, the trustee of your super fund must follow your instruction if the nomination is valid and hasn’t lapsed at the time you pass away. However, if your nomination isn’t binding or isn’t valid (e.g. because the person you’ve nominated isn’t an eligible beneficiary or you haven’t followed the requirements of your fund when making your nomination), your super fund will decide what to do with your superannuation if you pass away.

Next steps 

To find out more and to understand steps you could take to help your financial wellbeing, speak to your financial adviser.

Source: MLC