Tap into ADF Perks: HPSEA Explained! 🎉💼

Today, we’re diving into another key ADF housing entitlement: the Home Purchase or Sale Expenses Allowance (HPSEA). HPSEA is designed to support ADF members by reimbursing various expenses associated with buying, selling, and occupying a home during ADF postings.

Here’s how it works:

• If you’re serving full-time or have been in the ADF, you may be entitled to HPSEA.
• Reservists can qualify if they’re on continuous full-time service for a year or more.
• The scheme operates on a sell-purchase-sell cycle, starting with the eligible purchase of a home under HPAS or HPSEA.

Key points to note:

• You have two years from the date of official written notice of posting to sell your home.
• After starting duty at the new posting location, you have four years to purchase a new home.
• Reimbursement claims can be made after the purchase is completed.

Imagine this scenario: You’re living in your own home at your current posting, and then the ADF relocates you. You can sell your current home, purchase a new one at the new location, and claim reasonable expenses associated with both transactions. These expenses may include agent’s fees, conveyancing fees, mortgage fees, and some government fees, with certain limits in place.

The best part? Even if you’ve sold or purchased a property before while serving in the ADF, you may still be eligible to make a claim under HPSEA.
It’s crucial to seize this opportunity, as it can result in significant financial benefits. For instance, I personally claimed HPSEA for two properties and received $40,000 in reimbursements. Learning about this entitlement was a game-changer for me, and it could be for you or someone you know.

Turning ADF services into assets: DHOAS makes property moves easy! ⚓
Today, let’s explore the Defence Home Ownership Assistance Scheme (DHOAS) and how it can be a game-changer for ADF members like yourself. DHOAS offers both a loan subsidy payment and a lump sum payment, providing valuable financial support to eligible individuals. To access DHOAS, you must have served in the ADF within the last two years, completed a Qualifying Period of Service, and accrued a Service Credit. The qualifying period for permanent members is two consecutive years, while reservists need four consecutive years of “effective” reserve service.

Your DHOAS Service Credit is determined by your total years of ADF service minus the qualifying period. This entitlement allows you to receive DHOAS subsidy assistance as long as you have a Service Credit, a DHOAS home loan, and meet scheme conditions. DHOAS offers different subsidy tiers based on your total years of ADF service, with varying maximum monthly subsidy amounts and loan limits. The subsidy is calculated on 37.5% of the interest incurred on your eligible home loan amount over 25 years, with adjustments made monthly based on interest rate fluctuations.

For example, if you qualify for Tier 3, you could receive a monthly subsidy of up to $954, which can significantly enhance your investment property’s cash flow. Plus, DHOAS benefits increase with service length and warlike service, offering extended subsidy periods and additional financial support. Keep in mind that your tier may change based on your service status and years served. Understanding DHOAS and its potential benefits is crucial for maximising your ADF entitlements and optimising your property investment strategy.

Unlock your property pot of gold: DHOAS lump sum edition! 💰🔑
Today, we’re diving into another treasure trove of ADF housing entitlements: the Defence Home Ownership Assistance Scheme (DHOAS) Lump Sum. Strap in, because this is where things get interesting! Picture this: you’ve completed your service after the qualifying period, and voila! You’ve accrued entitlement to DHOAS. Now, cue the drumroll for the DHOAS Lump Sum. 🥁

Here’s the lowdown: You can convert up to four years of your hard-earned service credit into a lump sum payout. But here’s the kicker—it’s calculated at the Tier 1 subsidy rate, regardless of your eligible tier. Currently sitting at a sweet $539 per month, that’s a whopping $25,872 for the full four years.

Now, here’s the catch: you must be a first-time homebuyer, whether it’s for your own residence or an investment property. No sneaky property moves allowed before this! But hold onto your hats, because here’s where it gets juicy. With the FHOG potentially offering you between $10,000 and $30,000, add another $11,500 from HPAS, and top it off with that DHOAS lump sum, and you’re looking at a windfall of up to $67,000 in some states! 💸

But wait, there’s more! You’ve also got that monthly subsidy of up to $1,078, if you’re in the top tier. It’s like the gift that keeps on giving, month after month!

Now, here’s the golden nugget of advice: Don’t let these perks dictate your property moves. It’s not about rushing into a purchase just to cash in on these entitlements. Instead, stash them away like a secret weapon, waiting for the perfect moment—a booming property market in your next posting, perhaps? That’s when you strike!

Dead money dilemma 💸 A closer look at renting vs. buying.
Today, in our series on leveraging ADF housing entitlements, we’ll explore the Live-In Accommodation, Married Quarter and Rental Allowance. Ever pondered whether to rent or buy? Let’s dive into it! They say rent money is dead money, right? Well, if you reside in Live-In Accommodation (LIA), that’s about $6,000 a year in “dead money.” Opt for a Married Quarter or Rental Allowance? That’s around $15,000 a year down the drain. But wait, there’s more! Interest, rates, insurance, and maintenance for homeowners? Yup, all classified under “dead money” too. So, if you’ve got a $500,000 home with a $400,000 mortgage, you’re looking at approximately $23,000 annually in “dead money.”

Here’s the kicker: whether you rent or own, dead money is inevitable. The catch? With rental allowance or low-cost married quarters, renting might just be your cash-flow champion. Plus, owning means those property expenses become tax-deductible. Bottom line? Only cash in those ADF benefits when your posting syncs with a booming market. It’s all about making knowledgeable business decisions.

The BIG Secret: Property = Tax Savings! 💰
Ever wondered how owning an investment property could actually help reduce your tax bill? Let’s dive into the details and uncover the secrets behind this powerful strategy. Firstly, it’s essential to understand that while the rental income from your property adds to your taxable income, it’s the array of expenses associated with property ownership that work in your favour.

Let’s break it down with an example:
Imagine you own an investment property valued at $600,000, with a mortgage of $540,000. This property generates a rental income of $28,600 per year, or $550 per week. Now, the Australian Taxation Office (ATO) adds this rental income to your existing income. So, if you earn $100,000 per year, your total income becomes $128,600. At this point, if we had no deductions, we’d be liable to pay taxes on the additional $28,600 in rental income. However, we have plenty of deductions to offset this.

The deductions include:

Interest and Bank Fees: At 4.5% interest on the $540,000 loan, the yearly interest amounts to $24,300.
Management Fees: Let’s assume the rental manager charges 8.8% of the rent, totaling $2,517.
Insurance: This includes building insurance and landlord’s insurance, totaling $1,200.
Rates: Estimated at $2,000.
Maintenance: Budgeted at $500.
Depreciation: Taking a round figure of $20,000.
Adding these deductions up, we get a total of $50,517.

So, while the rental income increased our taxable income to $128,600, the deductions bring us back down to $78,083 on paper in the eyes of the tax office.
Now, someone earning $78,083 should pay tax as follows:

$18,200 at 0% = $0
$26,799 at 19% = $5,092
$33,084 at 32.5% = $10,752
The total tax should have been $15,844.

If we paid $22,967 (on $100,000) and should have paid only $15,844, the tax office owes us a $7,123 refund!
And this is just the beginning. With multiple properties, knowledgeable investors often find themselves paying little to no tax at all. Imagine the possibilities! However, it’s crucial to consult with your accountant before making any decisions based on tax benefits.

Stay tuned for more insights into maximising your wealth through property investment!

~Daimien Patterson
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