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Start with the cure. The cure for affluenza. 

Clarke McEwan recently attended a number of sessions with presenter  at the 2018 Byron Bay Writers Festival.   Richard is the author of Econobabble and Curing Affluenza, and co-author of Affluenza.  He is chief economist at the Australia Institute.

Richard's book takes an honest look at the economy we support. It's home truths can help us recognise the symptoms in ourselves of this modern disease.  He maintains that we have been trained to love things not for their material function, but for the symbolic act of acquiring and possessing them. 

Below is an edited extract from Curing Affluenza: How to buy less stuff and save the world

"Affluenza has not just changed the world, it has also changed the way we see the world. Short of money? Borrow some. Caught in the rain? Buy an umbrella. Thirsty? Buy a bottle of water and throw the bottle away.

Our embrace of "convenience" and our acceptance of our inability to plan ahead is an entirely new way of thinking, and over the past seventy years we have built a new and different economic system to accommodate it. There is nothing inevitable about this current way of thinking, consuming and producing. On the contrary, the vast majority of humans who have ever lived (and the majority of humans alive today) would find the idea of using our scarce resources to produce things that are designed to be thrown away absolutely mad.

But the fact that our consumer culture is a recent innovation does not mean it will be easy to change. Indeed, the last few decades have shown how contagious affluenza can be. But we have not always lived this way, which proves that we don't have to persist with it. We can change – if we want to.

I define consumerism as the love of buying things. For some, that means the thrill of hunting for a bargain. For others, it is the quest for the new or the unique. And for others still it is that moment when the shop assistant hands them their new purchase, beautifully wrapped, with a bow, just as though it's a present.

But the love of buying things can, by definition, provide only a transient sense of satisfaction. The feeling can be lengthened by the "thrill of the chase", and may include an afterglow that includes walking down the street with a new purchase in a branded carry bag. It might even extend to the moment when you get to show your purchase to your friends and family.

But the benefits of consumerism are inevitably short-lived as they are linked to the process of the purchase, not the use of the product. So while consumerism is the love of buying things, materialism is the love of the things themselves – and that's an important distinction. " 

Salespeople and psychologists are well aware of this phenomenon. The term buyer's remorse refers to the come-down that follows the thrill of buying something new. For many, the cold hard light of day takes the gloss off their new gadget, their new shoes or their new car. For some, this can be so overwhelming that they return the item. For a minority, the thrill of buying new things is so great, and the disappointment of owning new things so strong, that they make a habit of buying things they know they will return.

For those interested in the impact of consumption on the natural environment, it is crucial to make a clear distinction between the love of buying things and the love of owning things. While consumerism and materialism are often used interchangeably, taken literally they are polar opposites. If you really loved your car, the thought of replacing it with a new one would be painful. Similarly, if you really loved your kitchen, your shoes, your belt or your couch, then your materialism would prevent you rushing out and buying a new one.

But we have been trained to love the thrill of buying new stuff. We love things not for their material function, but for the symbolic act of acquiring and possessing them – the thrill of anticipating a new thing, of being handed it by a smiling shop assistant, of pulling up at the golf club in an expensive new car. For many, if not most, consumers, it is the symbolism of a new handbag or new car, its expensive logo proudly displayed, that delivers happiness, rather than twenty years of using a material object.
It makes no sense to conflate materialism and consumerism. Indeed, our willingness to dispose of perfectly functional material goods and gadgets is the very antithesis of a love of things. The process of buying new things and displaying new symbols might provide status or other psychological benefits, but the pursuit of such symbolic objectives is largely unrelated to the material characteristics of the products being purchased and disposed of.

Symbols matter, and psychological benefits matter. The fact that people are willing to spend their own time and money to show they fit in or to make sure they stand out should be of little or no concern to others.
But for those who are concerned with the impact of 7.5 billion humans' consumption decisions on the natural environment, the choice of such symbols matters enormously. Whether people choose to signal their wealth by spending money on huge cars or antique paintings is arbitrary, but that does not mean the environmental consequences aren't highly significant.

Put simply, if we want to reduce the impact on the natural environment of all of the stuff we buy, then we have to hang on to our stuff for a lot longer. We have to maintain it, repair it when it breaks, and find a new home for it when we don't need it any longer. If we want to cure affluenza, we have to get more satisfaction from the things we already own, more satisfaction from services, more satisfaction from leisure time, and less satisfaction from the process of buying new things.

If people loved their things, cared for them, maintained and repaired them and then handed them on to others who did likewise, the global economy would be transformed, as would the impact of human activity on the natural environment.
But if people continue to embrace the benefits of "convenience" and pursue the symbolic appeal of novelty then, as billions more people emulate the consumption patterns of today's middle-class culture, the impact on the natural environment will be devastating. "  

We hope you enjoyed this extract from Curing Affluenza: How to buy less stuff and save the worldIf you would like assistance with setting up a budget or a financial plan, contact us now.    

New restrictions have been imposed by the ATO on travel expenses and depreciation as part of the 2017-18 Budget relating to claims made by taxpayers owing residential rental property.



Travel undertaken in relation to a rental property is a legitimate expense and has been claimed by many property owners, however the Government is concerned that some taxpayers have not been correctly apportioning their travel expenses when the travel was combined with another activity, such as a holiday. As a result of this exploitation of the rules, new legislation will now disallow any travel related to visiting rental properties. 

Deductions such as the cost of repairs conducted while onsite may still be claimed, or a visit to the tax agent.  The Government also makes the point that inspection costs undertaken by third parties will be permissible, meaning that inspection costs are seen as legitimate, but only if genuinely incurred for pure inspection purposes.   


Depreciating assets in a residential rental property, such as carpets, blinds, a hot water system, a cook top, an oven, furniture, were previously eligible for depreciation under Division 40 of the ITAA 1997.  These claims will no longer be deductible under new criteria.  Any deduction claim is essentially dependent upon the acquisition date of the relevant asset, and whether the asset is new or "previously used" i.e. second hand.

From 1 July 2017, the Government will limit plant and equipment depreciation deductions to outlays actually incurred by investors in residential real estate properties. Plant and equipment items are usually mechanical fixtures or those which can be 'easily' removed from a property such as dishwashers and ceiling fans. Investors who purchase plant and equipment for their residential investment property after 9 May 2017 will be able to claim a deduction over the effective life of the asset. However, subsequent owners of a property will be unable to claim deductions for plant and equipment purchased by a previous owner of that property.

Top 6 things you need to know about how the 2017 plant and equipment depreciation changes will affect you (Source: )

  1. If you've purchased a brand new residential construction, you're not affected by the changes to depreciation deductions on plant and equipment items.
  2. If you've purchased a commercial property, you are not affected by these changes.
  3. If you've bought a residential property after 9 May 2017, from a previous owner, you are affected by these changes. You can now only claim capital works related depreciation deductions.
  4. If you've bought a residential property after 9 May 2017, from a previous owner, and you've had to buy new fixtures and fittings, you'll be able to claim depreciation deductions on any fixtures and fittings you've bought yourself.
  5. If you've bought a residential property before 9 May 2017, from a previous owner, you are not affected by these changes.
  6. If you've bought a pre-1987 residential investment property after 9 May 2017, you can only claim capital works deductions on renovation work, not on the original structures.


The purpose of this article is to provide a brief overview of how recent tax changes may affect residential property investors. It is not intended to be relied on instead of professional advice.  Contact us so that we can determine how these changes may affect your specific situation.

SMSFs get inactive low-balance account concession

The bill enacting the 2018 federal budget proposal to have all inactive low-balance (under $6000) superannuation accounts transferred to the ATO has taken into account the concerns of SMSFs running deliberate multiple-fund strategies.

The measure had the potential to jeopardise SMSF trustees who strategically retain a small asset balance in a public offer fund to maintain the risk insurance cover they received via the larger fund.

Speaking at the 2018 SMSF Professionals Day, co-hosted by SuperConcepts and selfmanagedsuper, in Adelaide yesterday, SuperConcepts technical services and education general manager Peter Burgess told delegates: "The [Treasury Laws Amendment (Protecting Your Superannuation Package) Bill 2018] that has now been introduced into Parliament had a new section inserted which said if the account is being used to maintain insurance cover, then that will not be considered to be an inactive low-balance account.

"That seems to have been inserted to get around the situation where we've got self-managed super fund members who have these low balances that they maintain in these APRA (Australian Prudential Regulation Authority) [regulated] funds to keep insurance."

Burgess did, however, point out SMSF trustees using this strategy still needed to perform one task to ensure their inactive low-balance account would be left alone.

"The one thing to note though is that in order to trigger this clause, SMSF members, if they've got these low-balance accounts in APRA funds, still need to opt in for insurance in that APRA fund," he said.

The onus for this procedure, though, was not entirely upon SMSF trustees, he noted.

"The way we understand it's going to work is in the lead-up to 1 July 2019, APRA funds will be writing to their members who have low-balance inactive accounts alerting them to the fact that they're going to need to opt in if they want insurance," he said.

#compliance #superannuation #insurancecover


If you intend to claim a tax deduction for personal contributions you make to your superannuation, don't forget this one crucial step: 

You will need to advise your superannuation provider of your intention BEFORE lodging your 2018 tax return.

This includes people who get their income from:

  • salary and wages
  • a personal business (for example, people who are self-employed contractors, or freelancers)
  • investments (including interest, dividends, rent and capital gains)
  • government pensions or allowances
  • super
  • partnership or trust distributions
  • a foreign source.

The contributions that you claim as a deduction will count towards your concessional contributions cap. When deciding whether to claim a deduction for super contributions, you should consider the super impacts that may arise from this, including whether:

  • you will exceed your contribution caps
  • Division 293 tax applies to you
  • you wish to split your contributions with your spouse
  • it will affect your super co-contribution eligibility.

If you exceed your cap, you will have to pay extra tax and any excess concessional contributions will count towards your non-concessional contributions cap.

Plenty of lucrative deductions available for investors

New legislation,  New opportunities for investors

Changes announced as part of the 9th of May 2017 federal budget have now been legislated after being passed by the Senate on the 15th of November 2017.

For many property investors the new rules, outlined in Treasury Laws Amendment (Housing Tax Integrity) Bill 2017, have made what was already a complex topic a little more difficult to understand.

The new rules do not affect capital works deductions at all. The amended legislation only restricts property investors from claiming depreciation deductions for the decline in value of 'previously used' depreciating assets (plant and equipment) within second-hand residential investment properties.

An incorrect assumption some property investors have made after hearing about the changes is that they are no longer eligible to make a claim.

***  It's important to note that the new legislation only applies to investors who exchange contracts on a second-hand residential property after  7:30 pm on the 9th of May 2017. Even in cases where investors are affected by the change, there are still thousands of dollars to be claimed, particularly as capital works deductions typically make up between 85 to 90 % of the total claim. The new legislation provides opportunities for investors in the following scenarios as it does not impact them:

Investors who purchase a brand-new residential property

Investors who exchanged contracts on a residential property prior to 7:30pm on the 9th of May 2017

Investors who add new plant and equipment assets to their property after purchase and directly incur the expense

Investors who purchase properties which are considered to have been substantially renovated by the previous owner

Non-residential and commercial properties

Any deductions that arise in the course of carrying on a business

Any residential property held in a superannuation plan (other than Self-Managed Super Funds)

Investors who hold residential property in corporate tax entities, including company entities

  Home owners who turned their primary place of residence into a rental property prior to the 1st of July 2017 ***

 For affected investors, it's important to note that the changes only impact the existing plant and equipment depreciation deductions found within a second-hand residential property.  These are the easily removable fixtures and fittings such as carpets, hot water systems and air conditioners. Any brand-new plant and equipment assets added to the property after purchase are depreciable.

The capital works allowance, which is the component investors can deduct for the building structure, is unchanged. Examples include walls, the roof, doors, kitchen cupboards and more. These deductions can be claimed at a rate of 2.5 per cent per year for a maximum of forty years for any property in which construction commenced after the 15th of September 1987.

Often older properties have been renovated and qualifying capital works completed by a previous owner can be claimed by the new owner for any years that remain in the forty year period.

The table below provides an example of common capital works items which the owner of a second-hand residential investment property could claim.

Capital works deductions



Capital works rate

Remaining effective life (years)

First full financial year deduction

Five year cumulative deductions

Original structure and fixed items





Kitchen cupboards

(replaced 5 years ago)









Kitchen benchtop

(replaced 5 years ago)









Outdoor pergola

(installed 7 years ago)









Plumbing (updated 5 years ago)





Tiling (updated 5 years ago)









In this scenario the investor exchanged contracts on a fifteen year old, four bedroom, two bathroom house after 7:30pm on the 9th of May 2017.


The previous owner of the property had completed renovations which included updating the kitchen through installing new cupboards and benchtops five years ago and adding an outdoor pergola seven years ago.


As the example shows, the investor would be eligible to claim $7,049 in capital works deductions in the first full financial year, or $35,245 in cumulative deductions over five years.


The investor would also be eligible to claim depreciation for any brand-new plant and equipment assets they chose to purchase and add to the property themselves.


Any plant and equipment assets that were installed by the previous owner can be excluded from the depreciation schedule and included in a capital loss schedule. This schedule can be used by the owner to offset any Capital Gains Tax liabilities should they choose to dispose of any assets or sell the property in future.


There are still substantial deductions available for any investors affected by the new legislation. It's always worthwhile consulting with a Quantity Surveyor to discuss what deductions can be claimed.


If you are venturing into the investment property mine-field, be sure to consult our practice for further advice.




Smart saving for your household

 Imagine always having spare income to add to your investment so that your money is constantly working harder for you? According to Simple Savings' Jackie Gower, it's not a pipe dream with these common sense tips for cutting expenses.

Curtailing your spending is no easy feat, especially if you have a family. But there are some simple ways to cut back that may mean a bigger investment portfolio.


Usually the biggest bill in any household, but luckily, it's one of the easiest to diminish. As the TV chefs always say, cooking at home is the key. "We know of families who've reduced their weekly food bill by as much as 50% as a result of menu planning," Jackie reveals. Also, look beyond the supermarket. "Taking the time to shop around your local butcher and greengrocer can result in valuable savings.


The answer to saving here, Jackie says, is to review and compare. Do your research and check out deals from different providers. This is not the most exciting task, but Jackie estimates one to two hours on the phone or online could save you several hundred dollars a year.


Potentially another large household expense. "The best way to cut-back on petrol is not to use it. Walk, ride or use public transport whenever possible. Car-pooling is also a great cost-saver. Make a list of your errands over a fortnight and try to get them done in the same area at once.


Everyone automatically reaches for their wallet here, but fun can be reasonably priced, or even free. Check out exhibitions, markets, walks and local fairs. Host a movie or games night, or pack a picnic and head to the beach or a national park. And, instead of buying new toys, join the local library or toy bank if available. The kids can play with exciting 'new' toys as often as they like - for free," she adds.

More thrifty hints...

If you're terrible with money, downloading an app to track spending could be your salvation. "One tried-and-true app is Track My Spend" our expert says.

Finally, if you really struggle with self-control, many banks offer accounts with online-only access, or require you to go in to make a withdrawal. This can prevent you going on mad sprees with your EFTPOS or credit card.

The important thing is to take the first step, as Jackie affirms, "Aim as big or small as you like. Any saving is a good saving."


Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.

Should you use a trust to buy a property

Many people have only a vague understanding of how trusts work .  Janet Schier's story shows one way that an investor established herself in the property market through a tax minimisation strategy.

"When Janet Schier purchased a block of land earlier this year, she didn't name herself as the title holder.

Rather, she bought the property via a trust, subsequently building two sets of duplexes via additional trust structures.

For Ms Schier, the use of multiple trusts was the right choice because of tax minimisation and asset protection;  but in reality, it's a complex process.

And while most people are aware of trusts and the general reasons for their use, many have only a vague understanding of how they work, and under which circumstances they become beneficial.

A trust is an arrangement where a person or company (the trustee) holds assets (property) in trust for the benefit of others (the beneficiaries).

"So before you purchase a property via a trust, you need to establish a trust deed," says chartered accountant Brett Hetherington."The deed sets out the rules for establishing and running of the trust. Once the trust has been established then the trustee can go about including or stating the trust will be the owner of the property."

According to Mr Hetherington, there are a number of reasons for utilising a trust to purchase property, such as asset protection, holding assets for the benefit of children or other family members and avoiding capital gains tax and stamp duty within families.

There are various forms of trusts including unit trusts, discretionary or family trusts as well as hybrid trusts.

A unit trust is where beneficiaries – or unit holders – purchase a fixed interest in a trust by purchasing units.

"A unit trust is useful where parties desire fixed ownership, and the ability to claim interest on a loan to purchase units as a tax deduction," says Mr Hetherington.

In a family or discretionary trust the trust has the discretion to distribute income and capital to beneficiaries. Beneficiaries do not have a fixed interest but a right to trust assets depending on the trustees desire to distribute income or capital or both.

"A discretionary or family trust is a great investment structure for families as an intergenerational tool, assets can be handed down to children or grandchildren without incurring capital gains tax or stamp duty.

"The trustee has the discretion as to what family members can receive income and/or capital distributions.

"The fact you are a beneficiary of a trust does not mean you have any ownership in trust assets."

A hybrid trust has the workings of both.

While trust structures do offer benefits, Mr Hetherington says there are some common mistakes to be aware of, such as thinking that you can distribute losses and not structuring the investment to take advantage of tax benefits.

It's also important to be aware that tax or legal changes might require an amendment of the trust deed.

"Interestingly, professionals agree a trust structure could be an appropriate vehicle to save for retirement other than superannuation," says Mr Hetherington.


There may be hidden traps for family trusts owning personal use assets and holiday homes under recent ATO rulings.  It is imperative you seek advice before entering into any trust arrangement. "

Clarke McEwan has been providing investment advice for over 20 years, guiding investors in the use of tax structures and how they can impact your tax position.  

 Call us for an obligation-free meeting.


In the 2017-18 Federal Budget the Government announced a number of significant changes that potentially impact on property investors and owners. Some of the key changes likely to have the widest impact are discussed below.

Travel deductions

Treasury Laws Amendment (Housing Tax Integrity) Bill 2017 contains amendments aimed at preventing rental property owners from claiming a deduction for travel expenses.  These changes are now law and apply to travel expenses incurred from 1 July 2017.

The rules prevent a deduction from being claimed for a loss or outgoing if it relates to travel and the expense is incurred in gaining or producing assessable income from the use of residential premises as residential accommodation.  The term "residential premises" takes its meaning from the GST system.

The purpose of the travel is not really relevant under these rules.  They simply prevent a deduction from being claimed if the travel is undertaken in connection with a residential rental property, which could include travel to inspect the property, undertake repairs, collect rent or meet with real estate agents.

The restriction would apply to transport costs (regardless of the mode of transport used), meals and accommodation expenses incurred in relation to a residential rental property.  

There are some exceptions to these changes.

Firstly, the rules will not prevent a deduction from being claimed if the expense is necessarily incurred in carrying on a business.  This means that if a client carries on a business of renting properties they can still claim a deduction for travel expenses that relate to their rental activities.  Also, the rules do not apply to certain entities including:

·         Companies

·         Superannuation funds, except SMSFs

·         Managed investment trusts

·         Public unit trusts

·         Unit trusts or partnerships, but only if all unit holders or partners fall within one of the categories above.

In addition to the rules that will prevent a deduction from being claimed, the changes will also ensure that these travel expenses cannot be included in the cost base or reduced cost base of a property.

Depreciation deductions

The changes apply to depreciation deductions that would otherwise arise in the 2018 income year onwards.  However, the new rule should only apply if:

·         The asset was acquired at or after 7.30pm on 9 May 2017; or

·         The asset was acquired before this time, the asset was first used or installed ready for use in the 2017 income year or an earlier year and the asset was not used at all for a taxable purpose in the 2017 income year.

In broad terms the rules prevent depreciation deductions from being claimed in relation to these assets if any of the following apply:

·         The asset has been used by another taxpayer (other than as trading stock) before the taxpayer started the hold the asset;

·         The asset was used in the current year or a prior year in residential premises that were a residence of the taxpayer at that time (doesn't need to have been their main residence); or

·         The asset was used for a non-taxable purpose in the current year or a prior year, unless that use was occasional.

Presumably in response to concerns raised by stakeholders as part of the consultation process around these new rules the Government has introduced an exception which is intended to apply to off the plan purchases.  That is, someone who acquires a newly developed property may still be able to claim depreciation deductions for the assets that were sold to them with the property if certain conditions can be met.


Main residence exemption


In the 2017-18 Federal Budget the Government announced that the main residence would no longer be available to foreign residents or temporary residents.  While exposure draft legislation and explanatory materials were released in July 2017, we have not yet seen any legislation entered into Parliament in relation to this proposed change.


The way the rules are set out in the exposure draft legislation is that a taxpayer will not generally be able to claim any exemption under the main residence rules if they are a non-resident at the time of the CGT event, even if they were a resident for some (or even most) of the ownership period.  On the other hand, if the taxpayer is a resident of Australia at the time of the CGT event then the normal main residence exemption rules apply, even if they have been a non-resident for some or most of the ownership period.


Interestingly, while the original Budget announcement indicated that the exemption would no longer be available to temporary residents, there was no mention of temporary residents in the exposure draft legislation. It is not clear whether this means that the Government has changed its approach or whether this was merely an oversight.


Special amendments are also being introduced to deal with deceased estate scenarios and special disability trusts.


As announced in the Budget, it is expected that someone holding property at 9 May 2017 can apply the current rules if the CGT event occurs on or before 30 June 2019.  This gives non-residents some time to sell their main residence (or former main residence) and obtain some tax relief under the main residence rules.


Further details will be released in relation to these changes. 


From 1 July 2018, the Australian Government will introduce the option of contributing the proceeds of downsizing your home into superannuation.

If you are considering the sale of your dwelling which is or has been your primary residence, the new measure will apply where the exchange of contracts for the sale occurs on or after 1 July 2018. 

But before you decide to make a downsizer superannuation contribution you should check your eligibility for making the contribution . There are a number of considerations to weigh up and the devil is in the detail.  The member must be over 65 years of age.  The property itself had to be the member's residence at some time prior to disposal of the home and it must have been owned for at least 10 years.  Capital gains tax may apply if the property was rented at any time during the ownership.  For more details about the new measure see the ATO's website

The second thing to check is your Self Managed Superannuation Fund Deed and the Deed's Provisions. The Deed will need to have express working that allows its members to make these contributions. Age of the member and employment status may preclude the contribution, depending on your individual Deed.  It is important that you seek advice if you are uncertain about the wording of your Deed's provisions, or if you wish to update your current deed to take advantage of the new SMSF downsizer measure.

In addition, the Deed must provide for appropriate reporting to the Australian Taxation Office as the SMSF will need to receive advice from the SMSF and report those contributions to the ATO by submitting a downsizing contribution form.  The ATO will be running verification checks on eligibility and on the amounts contributed.  Those amounts could potentially be re-allocated as a non-concessional contributions, or may cause a member to exceed their contribution cap. The Downsizer contribution cap is the lesser of $300,000 per person or the sum of the capital proceeds. Any debt outstanding on a mortgage over the relevant property is not considered for the purpose of determining the capital proceeds.  The Downsizer contributions will not be tax deductible.

The third concern is the Age Pension.  Members who may be receiving benefits should note that any contributions and disposal of their primary residence may have an impact on their existing or future Centrelink entitlements.  You may in fact be boosting your super but reducing your benefits.  Again, we urge any super members contemplating this downsizer contribution to first see a planner or contact Centrelink for advice about their specific circumstances.    





Shares Versus Property

What is the best investment? Property and shares are the 2 most common ways of building wealth in Australia outside of superannuation.

The topic of whether to invest in property, shares (or both) often leads to heated debate. The 67% of Australians who own the house they live in are usually passionate about they believe is their best investment decision.

Shares and real estate have both generated reliable income and capital returns for Australians over the long-term.

 Source: Corelogic, Housing Market and Economic Update March 2016 

Property and shares are rarely out of the news, with weekly predictions about Australian property bubbles and busts fuelling speculation and creating confusion for the majority of investors. Against this tide of information overload, it is important to remember there are advantages and risks associated with both property and share ownership.

Property ownership

Historically there has been a belief in Australian culture that home ownership leads to an improvement in living standards, representing a symbol of success and security. Therefore people think it is the best investment for the long-term.

Since 1961, home ownership has been relatively stable at around 70%, with a decline in recent years to 67% due to stretched affordability. Home ownership tends to increase with age, alongside general increases in wealth.

However, recent analysis shows a rise in the proportion of renters, as buying a home become less affordable due to rapidly increasing prices.

Both Sydney and Melbourne property prices have enjoyed strong price growth between 2012 and 2016, however despite recent price rises, there are significant risks associated with taking on a large mortgage including interest rate risk and lack of diversification.. 


Sources: CoreLogic RPData; RBA

Share ownership

Australia has one of the world's highest share ownership rates, with around 36% of adults owning shares outside of their superannuation.

Owning shares doesn't typically have the same level of personal attachment when compared to property, as the part-ownership of a business is less tangible than a physical house. Notwithstanding, shares have generated reliable income and returns for Australians over the long-run.

Over the 30 years to 2015, Australian shares have generated an average return of 10.8% per year including dividends.


 Sources: ASX

 Factors to consider

There are many factors to consider before deciding what is the best investment for you.

  • Your budget for living and investing has limits. Look at what you can afford and test different interest rate scenarios before making a major investment decision.
  • Compare whether you would be better to buy or rent.
  • What is your attitude to share market movements? Would you have the discipline to stay invested even during periods of market volatility?
  • How stable is your income? Would you be able to continue paying a mortgage if something changed to you or your partner's work situation?
  • How much of your decision is impacted by tax? Tax law changes regarding property (negative gearing) and shares (franking credits and capital gains tax) could occur at any point in time.
  • Consider your lifestyle, whether or not you have dependents and the kind of area that would be best to live in. Buying a property in an area with access to desired facilities such as public transport and schools may not always be immediately affordable.
  • Can you commit the required time to maintain a property?
  • Personal values and situations affect your decisions about opportunity costs and risk appetite for investing decisions. Social pressure can push individuals into making choices that are not best suited for them, even though these choices may have worked out well for others.
  • Rather than buying property to live-in, some people buy property as an investment to rent out. This brings another whole other set of potential advantages and disadvantages. Two of the most common are negative gearing and landlord costs.

Property vs shares

Investing in property or shares both have advantages and disadvantages. Below are some factors to consider before making a decision to invest in either.





– Peace of mind and stable place of residence.
– Flexibility to renovate.

– Lack of liquidity and unable to quickly change mind after the initial commitment.

– Easily bought and sold.
– Regular income from dividends.

– Not a physical asset.
– Generally more volatile in the short-term.


– Lack of correlation with other asset classes and good protection against inflation.

– Poor diversification and highly concentrated in a single asset.

– Easy to gain exposure to the entire index of thousands of companies to reduce risk.

– The entire market can also have periods of weak performance.

Leverage risk

– Able to borrow more and leverage returns which can be great during times of low interest rates.

– Higher repayments if interest rates rise.
– Leverage magnifies losses so you can lose more than you invested.

– No leverage means you can't lose more than you invested.
– Interest rates typically have less impact on share prices.

– No benefits of higher leverage during periods of high growth.

Taxes and transaction costs

– Potential for negative gearing benefits.

– Relatively high transaction costs associated with buying, selling and property maintenance.

– Potential for franked dividend benefits.
– Transaction costs and fees can be low.
– Involves very little ongoing effort after an initial investment.

– Capital gains tax when shares are sold.



Contact Clarke McEwan