CBA lowers its home loan assessment rate

Jonathan Chancellor | 25 June 2015 CBA lowers its home loan assessment rate CBA lowers its home loan assessment rate The Commonwealth Bank has surprised the market in lowering its home loan assessment rate. The interest rate used to work out whether a customer can service the debt of the home loan if rates rise was 7.4%; but now that rate is 7.25%, according to Sophie Elsworth, the News Ltd personal finance writer. The analysis from mortgage broking firm homeloanexperts.com.au showed the drop to assessment rates applied to owner occupiers and investors. However CBA has recently tightened other serviceability requirements including only allowing maximum loan-to-value borrowings of 95% for owner occupiers. It had previously allowed borrowings of up to 97% including the cost of mortgage insurance. All home loan lenders assess a loan application using their own mortgage assessment rate, which is a buffer they add into the interest rate. Both the lender and the borrower can have confidence that the loan repayments can be made without undue hardship. The mortgage assessment rate varies between each lender, though typically from 1.0% to 2.5% above the variable rate. This allows the lender to assess the borrower's ability to repay the loan, should the Reserve Bank cash rate rise during the term of the loan. ============================= Australian Tax Office to target investment property owners in 2015 DateJune 7, 2015 Mark Chapman Some holiday-home owners are claiming their properties are available for rent when they are not. Photo: Jessica Shapiro The Australian Tax Office is targeting the 1.8 million people – or about 8 per cent of the population – who own an investment property in 2015. With interest rates remaining at a record low, evidence suggests the current boom in property investment is not about to end any time soon. Investment property ownership throws up particular challenges for the ATO, both in making sure that they know exactly who owns what and also in making sure that taxpayers aren't rotting the system. Mark Chapman. The latest ATO figures reveal that investment property owners claim on average $25,717 in deductions covering interest on loans, the write-off on capital works and other items. In more than two-thirds of cases, that's enough to produce a net loss which taxpayers are then offsetting against their other income. Given that the amounts at stake are increasing every year, it's not surprising the ATO is worrying about the loss of revenue. Whether it's a commercial property, a city pad rented out long term or a holiday retreat for family, friends and holidaymakers, the ATO has signalled a big push to check that people aren't over-claiming tax deductions. At the forefront of the campaign, the ATO has recently stated that it will be writing to property investors who own properties in popular holiday areas to remind them to claim only the deductions to which they are entitled. Rental property owners should only claim for the periods the property is rented out or is genuinely available for rent. Periods of personal use cannot be claimed. This is particularly important for holiday homes, where the ATO regularly finds evidence of home-owners claiming deductions for their holiday pad on the grounds that it is being rented out, when in reality the only people using it are the owners, their family and friends, often rent-free. Also, the costs to repair damage and defects existing at the time of purchase or the costs of renovation cannot be claimed immediately. Instead, these costs are deductible over a number of years. Expect to see the ATO checking such claims and pushing back against claims which do not stack up. The ATO is concerned that husbands and wives are in some cases splitting income and deductions so the bulk of the tax benefit goes to the higher-earning spouse, even though the property is actually owned 50:50. Importantly, the ATO now has access to numerous sources of third party data, including popular rental listing sites for both long term and holiday rentals, so it is relatively easy for them to establish if a claim that a property was "available for rent" is correct. In all cases, be careful – don't claim what you're not entitled to and make sure you have records to support and justify every item. Mark Chapman is director of Tax Communications, H&R Block. ========================