This will be the last email you get from me before you see 3 of us. (No, it’s not Santa)

I’m excited to bring in the New Year with my loved ones, family and our clients.

This email isn’t about 2024 highlights, summaries or “this is what I’ve achieved”…

Whether you were:

• Buying your first home in a market that seemed impossible,

• Restructuring lending to fix your ex brokers mistake,

• Finally, getting your debt recycling strategy going…

• Or simply looking for guidance on where to go next,
  

I hope you felt that I stood by you every step of the way.

Helping you achieve what you thought wasn’t possible was what has always fuelled me at Real Knowledge, Diverse Solutions.

However, things will look a little different in 2025.

I want to continue advising you for the rest of our lives, truly become Australia’s best Money Friend, build a strong business, be an amazing partner, look after my elderly parents, work on myself to ensure I’m the best dad, and add 20 hours of study per week for a year…

You’ll see some changes to achieve this, and they’re for the better.

For you and me.

If you want to read my personal short stories and anecdotes, you can follow them here.

Every year, we uncover unmatched opportunities between now and February.

Over the past 8 years, we’ve consistently helped clients secure properties at 10%-20% below market value during this quieter season.

Why? Because sellers right now are motivated.
Desperation creates opportunity.
If someone is selling during this period, they shouldn’t be.
It’s time for you to capitalise on their mistake.

Ready to position yourself for this buying opportunity?

Schedule an online session with me here.

When I visit my parents, my mum usually complains about a lot of things. Lately, it's been a constant refrain of, "I wish I didn’t buy this unit and just saved the money or invested it. I would have had more money."

But did she really make the wrong choice? Let’s take a closer look.

I shared a story on our Instagram about my parents purchasing their home in 2001 for $105,000, which is worth $420,000 now, and I received the below response. 

This prompted me to do the math so that you can understand why we’re constantly preaching good property investment, and more importantly, so that my mum stops stressing.

Here’s the historical data on mortgage rates to provide context:

My parent's property was acquired on the 14th of February in 2001, and the mortgage was paid off on the 14th of February, 2013.

This graph is the St George Principal & Interest Graph for this period. I have used the 7.55% interest rate for the loan's lifetime, even though the average rate was significantly lower throughout.

The column on the right shows the total cost of their loan.
$159,959.

My parents increased their repayments, and this is why they were able to pay the loan in 12 years.

This is based on repayments of $1,111 per month.

If they decided to sell their property in 2013, they would have sold it for $294,000.
This is based on an average value, as per Core Logic's average sales for identical units from Feb  – Dec 2013.

Minus the agent fee of 2% $5,800, let's say $10,000 if they got ripped off.
Minus the total loan cost of $159,969.

That's a profit of $124,031.

Wait for it. 
Tax Free.

Prior to purchasing their property, they were renting something identical for $640 per month. Rents went up over a 12 year period. For this exercise, we'll just say that theirs didn't.

So, what happens if they invest their mortgage repayment of  $1,111 per month minus the rent of $640. (Because they need somewhere to live).

This would mean they have a monthly savings capacity of $471.

3.92% Interest rate based on RBA average of Savings/Term Deposit accounts for date range Feb 01" - Feb 13"

$18,883 Profit.
Before Tax.

There isn't much more to say.

We have identified that they would have a monthly investment capacity of $471.
It's hard to identify where they would have invested, so in this case, I have selected a commonly used, low-cost retail fund.

The Vanguard Balanced Index Fund. 

I subtracted the GFC year, during which we saw a loss of 22.21%, from the calculation because I'd prefer to underestimate. 

$39,374 Profit.
Before Tax.

Profit

Property = $124,031
Savings = $18,883
Investment = $39,374

You tell me.

Unfortunately, my mum didn’t have a team like us guiding her through wealth during her working life.

If I had been my parents’ adviser at the time, I would have transitioned their only asset into a larger asset and kept the unit as a future downsizer. They could have run the loan interest-only and debt-recycled the funds into a portfolio to create even more wealth.

But even without that guidance, my parents are okay—and they will continue to be okay. This situation serves as a great lesson in understanding the true value of professional advice.

We could have been a wealthy family, but there was no one to show them how.
Now, it’s my responsibility.

And while I might be biased, I think her greatest investment was in raising me.

This video of Kiril speaking at our How to Buy Property event has now reached over a million collective views, and we’ve seen everything from praise to extreme negativity, including death wishes.

Let’s examine the psychological factors that might be at play to understand why people react so strongly.

Getting some sun increases your serotonin, helping stave off Seasonal Affective Disorder (SAD), and it can even help with anxiety and depression.

Are the negative comments coming from frustrated south-facing property owners or renters?

Want to avoid SAD?
Buy a north or easterly-facing living space.

We cover this and more at our ‘How to Buy Property’ event.
Tickets are available here.

You don't acquire property by just saying that you want one.

SCHEDULE A CALL

If “they”, and you know exactly who I’m talking about, told you to jump off the Harbour Bridge, would you?

Whether it be the crypto gain train, the micro-cap Reddit growth posts or the buying in another state due to a BOOM location for capital growth.
You’re going to get burnt.

Why?

Not because the investment will plummet (that’s a given).
It’s because you’ll miss out on putting together the pie you’re actually interested in.

You’re chasing money. That is all. MONEY.
Read that again.

If you’re genuinely interested in and believe in any of these sectors, GO HARD. It’s your dough and your belief.

Just remember that every day you’re chasing money in the investments “they” are telling you to buy means another day that you’re not pursuing or growing in what you’re genuinely interested in.

You are NOT going to miss out.

You are not GETTING LEFT BEHIND.

Opportunity is everywhere in everything that exists in this world.
And, If you think about it, there will be bigger opportunities elsewhere when everyone else focuses on the same thing. 

Ie, if everyone is buying out of state. Imagine if you had bought that place in Sydney.

So, Stick your thing in the pie you want.
Stick a call in your calendar.

Let’s get to work.

You don’t know what to do with your superannuation, and the advice or sales pitch you receive is…

"Set up a SELF-MANAGED SUPER FUND (SMSF).”

Set up an investment platform that you have to manage yourself.
It doesn’t make sense, does it?

I’m writing this email to help you understand that the advice that gets the best results is usually simple.

Sexy for no reason or confusing just to be confusing is usually a sign that an adviser, accountant, or salesperson is trying to take your money.

I’m not against complex advice, but there’s a time and place.
I’m well seasoned in complex advice, so when you receive simple advice from our team, know that it could be complex, but we want you to get the best results.

A doctor (let’s call him Dr. Drake Ramoray) and his wife (Rachel Green) have owned their medical practice for 22 years.

Dr. Ramoray wants to retire within five years and is old enough to cash out of his super. Rachel is also eligible to transition into retirement.

They own the commercial real estate from which their medical practice operates.

The value of the commercial real estate is $1,200,000.

They’ve just finalised the sale of the medical practice.

The new medical practice owner pays rent to Dr. Ramoray and Rachel as they still own the physical commercial real estate.

This rent is taxed, and the tax itself will cost them $63,600 per year.

Their residential property is owned in both names and is worth $2,600,000.
The debt on the property is $1,400,000.

They want to be debt-free in retirement but are unsure how to do this.
Other advisers have advised them to sell investment properties or shares.

They have a collective balance of $3,600,000 in their Superfunds.
(Over 50% in term deposits and cash)

Transfer the $3,600,000 super into an SMSF.
SMSF buys the $1,200,000 commercial asset from Dr. Ramoray & Rachel.

Setup cost: $4000
Stamp Duty: $51,005
Professional & Conveyancing Fees: $3700
Total cost of transaction: $58,705

Benefits:

• $63,600 of rent tax-free for as long as they hold that property in the SMSF.
  (No tax due to retirement phase)

• The $1,200,000 from the property sale can be used towards their $1,400,000 loan via an offset account to stop repayments via I/O structure, or they can even pay off most of their home loan.

• Interest savings in the first year alone are $32,160.

Cost in year 1 = $58,705 (stamp duty + setup & professional fees)
Gain = $95,760 (tax-free rent + mortgage interest savings)
Profit = $37,055

Cost in year 2 = $6500 (advice/management fees + accounting costs)
Gain = $95,760 (tax-free + mortgage interest savings)
Profit = $89,260

This is suitable and appropriate SMSF advice.

Your circumstances are probably not this complex, and you might not need access to SMSF flexibility.

This means we can get you into the most cost-effective and high-performing passive investments for now.

Our advice would include a one-off implementation engagement and no ongoing advice fees to get you to $500,000+ in super ASAP.
At that point, it might… make sense to bypass an industry, retail, or platform as you could buy the passive funds directly, and management fees are reduced.

Should you buy property inside an SMSF?

Outside of the above example and similar PTY LTD/ SMSF advice we have provided to our clients or seen. We’ve yet to see one beneficial long-term strategy in which the accountant, adviser, or salesperson isn’t lining their pockets with kickbacks and fees.

Complete this short form if you’d like to review your super, receive simple or complex (only if you need it) options, and begin the roadmap for tailored advice.

Request Review

Have you been thinking about how to get the taxman to work for you instead of against you? This is your chance to discover how investing in property, shares, and super can boost your tax bill.

We're one week into the new financial year and we’ve been celebrating Christmas boosting tax returns in July.

Last week, we held two face-to-face events covering strategic loan positioning, depreciation, estate planning, and insurance.

We’ve also held multiple online events to cover WFH, car deductibility and more.

Missed out?
Register for our Complimentary Tax Kit Event here.
We'll cover the highlights so you can still enjoy the best of our pro tips!

Welcome to the 25’ Financial Year.

Let’s grow together.
Arkadiusz - RKDS

If you don’t understand it, not sure if you should use it or haven’t even heard about it.
This email is for you.

If the FHSSS doesn’t apply to you, share this email with a loved one, friend, or co-worker.
They will appreciate you showing them how to save $1000’s, if not tens of thousands.

The FHBG allows first-home buyers to buy with a 5% deposit and no LMI.
How to qualify?

• Earning up to $125,000 as an individual

• Earning up to $200,000 as joint applicants

As shown on the Notice of Assessment (issued by the ATO) 

Here are two client examples to show you how we are saving clients 10’s of 1000’s in LMI and assisting them with their Financial Planning, Lending, and Purchasing Strategies.

Client Strategy One

• Couple earning $221,800

• Salary Sacrificing $15,000 each = $30,000 for FHSSS

  • Income Pre Strategy for 24FY $221,800 (Does not qualify for FHBG)

  • Income Post Strategy for 24FY $191,800 (Does qualify for FHBG)

The Strategy Result is shown below

• $60,000 Potential Purchase price increase

• $26,139 in saved LMI

• $11,579 in reduced deposit needed

• 1.05% sharper interest rate

• Repayments $208.11 cheaper per month even with the higher purchase price

• $12,198 in additional tax savings due to FHSSS

This reflects an immediate $23,777 saving due to the FHSSS and lower deposit needed.

Client Strategy Two

• Individual earning $162,500

• Salary Sacrificing $15,000 for FHSSS

• Using Carry Forward to Salary Sacrifice an additional $22,500

  • Income Pre Strategy for 24FY $162,500 (Does not qualify for FHBG)

  • Income Post Strategy for 24FY $125,000 (Qualifies for FHBG)

The Strategy Result is shown below

This strategy is slightly different.
You’ll notice the client is adding $22,500 to their super account, which they can’t withdraw because it’s over the FHSSS limit.

They are investing $22,500 in their super rather than paying $25,658 in dead LMI.
However, this contribution will not be completely lost as it will boost their tax return.

• $19,510.50 increase in tax return due to Salary Sacrifice + FHSSS

  • The client is only $2,989.50 worse off after their $22,500 non-FHSSS Sal Sac.

• $25,658 in saved LMI

• $31,431 in reduced deposit needed

• .75% sharper interest rate

• Repayments $344.27 cheaper per month

The client is still immediately $28,441.50, better off.

As mentioned, the FHSSS provides tax benefits.

SOURCE: Benefits are even greater if done over 3-4 years.

The above is just free money, even if you use the FHSSS before and After July 1.

Why is this my last email regarding the FHSSS?

We’ve created an FHSSS Course, so we never have to explain FHSSS again.
It’s complimentary.

Access the FHSSS Course

We know that if we solve your simple problems and save you thousands, we’ll become your unfair advantage and help you save/make tens if not hundreds of thousands.

Ready to work with us now?
Contact us here

We cover all of the above and more at our How to Buy Property Event.

Why are tickets $79?
We have nothing to sell you. The event is designed to educate you.
The video below will help you understand what usually happens at a “Free Event.”

During the face to face event, we explain Structure and Strategy in detail.

We’ll walk through loan structures and how to ensure they suit your risk appetite.
We cover Interest Only vs Principal and Interest.
You will receive tailored options showing you both options.
Here’s an example.

We will share client examples and stories to assist you with your journey.
During the event, we will show you how to position your current/future loan to ensure you are building wealth.

The video below shows how a $6808 repayment became $3774.
The event includes a 1on1 call with our team to work through your options.

Struggling with Real Estate Agent conversations? Watch the video below.

We have partnered with Strategic Investor Group to help you understand how to buy and ensure you don’t make any mistakes.
The face to face presentation includes a breakdown of 53Invest and how to use the tool in your search.

The best part?
During the Face to Face Event, you will receive a budget based on your circumstances.
You will then receive a property sheet where you will input properties based on what you learned from the first session.
The following week, you will receive access to our online Property Search Session.

The How to Buy Property Event has been designed to ensure you are successful in your property search.

No.

I understand that many advice offices LOVE putting together budgets and charging ongoing fees to help you “budget”, but I could not think of anything worse.

We have helped thousands of clients save for a property, get out of debt, position multiple purchases, and invest portions of their salary every paycheck.

Yet, we’ve never had to work through a detailed budget on an ongoing basis.

Why? Because you should know what your expenses are and if you don’t, that’s an exercise you can do yourself.

I could not think of anything worse than calling my clients every paycheck, filtering through transactions and calling them if they spend too much at a store they love or restaurant due to a celebration. 🤮

We have a simple solution. A solution that has helped thousands of individuals manage their money simply yet efficiently.

Illustrations by @furrylittlepeach

FUTURE YOU

If you have a mortgage.
Use an offset account linked to your highest interest-charging debt.
Please note that you are not earning interest with an offset but saving interest instead.
Although unlikely, if your savings account rate is higher than the interest charged by your bank, use that instead.

If you don’t have a mortgage.

Find an account that;

• pays a high compounding interest rate

• has no fees

• has no penalties if you don't deposit or withdraw

To begin, you will transfer 10% of your total after-tax income into this account.

In this newsletter, we'll use $2000 per week as the working example.

Replace this with your numbers and payment frequency.

We'll use a %

10% of $2000 = $200

$200 gets deposited into this account every week.

This money should not be used for anything apart from long terms savings.

1 year = $10,801 ($201 interest)

3 years = $33,316 ($1916 interest)

5 years = $57,703 ($5503 interest)

10 years = $127,915 ($23,715 interest)

20 years = $318,316 ($110,116 interest)

Based on a 4% return.

These funds are for future you.

BACK YOURSELF

Building an emergency fund is useful as it ensures that you do not have to touch your long terms savings in the event of an emergency, loss of income or unexpected expenses.

If you have a mortgage, use an offset. If you don’t, you should use an accessible savings account for this.

To begin you will transfer 5% of your total after tax income into this account.

We'll use a %

5% of $2000 = $100

$1000 gets deposited into this account on a weekly basis.

We are working towards acquiring 3 months of income.

Once you've acquired three months of income.

Allocate the 5% towards long-term, investing or treating yourself.

This is the best bit.
If you use any of your Emergency Fund, you don't have to try and pay it back.

Next paycheck, you just continue doing the 5%.

The same applies if your emergency fund isn’t full yet.

MAKE MONEY MOVE

You should be investing some of your income in a regular investment strategy.

Even if you don’t have a large amount to begin. There are micro-investing options such as Raiz, Spaceship, Commsec Pocket, Superhero & Stake to start allocating your money into shares, index funds, managed funds and ETF's from the palm of your hand.

To begin, you will transfer 5% of your total after-tax income into your investment platform of choice.

We'll use a %

5% of $2000 = $100

$100 gets deposited into this account on a weekly basis.

This is an example of using an aggressive allocation based on an average 7% return.

TOO MUCH IN OFFSET, SAVINGS OR EMERGENCY?

Many of our clients transition their long-term and emergency savings into an investment strategy once they have hit an amount that suits their personal and future goals, needs and objectives.

Here is an example of a 20% allocation into an investment strategy over 20 years.

GOALS OUTSIDE OF THIS

If you are saving for your first property, consider the FHSSS.

If you want to save for things like travel, gifts or a puppy.
Open separate accounts or offsets.

The short story is, if you’re earning more than $93,000, it’s a no-brainer.

You might be paying a Medicare Levy Surcharge if you don’t have private health cover and your annual taxable income is over $93,000 as a single or $186,000 as a couple or family.

This surcharge hurts. A LOT.

The surcharge is payable for each day you don’t have private health insurance within a financial year. That means if you don’t purchase a policy before the 1st of July 2023, but buy one on the 24th of November 2023, you’ll pay a charge for each day you weren’t covered between those dates.

If you're not earning more than $93,000, it might make sense to take on health cover for other reasons.

If you're under 30, some funds will give you a discount of up to 10%.

The reward benefits can also outweigh the cost if you plan well and claim benefits such as discounted gym memberships or flights.

Why does a health insurer offer these rewards?

The healthier you are, the less likely you are to claim.

It's a win-win.

How to avoid the Surcharge

Ensure you have the appropriate level of cover.

Below is a recording of our Private Health Cover Masterclass made for the SIS Club a few years back. However, the content covered is still relevant today.

Tristan was a Private Health Expert for the Advice Industry, and he joined SIS Club as a member, so we had the opportunity to create this. It's a deep dive, but it's everything you need to know.

You can access the slides here.

Obtain a complimentary quote.

Over 90% of our clients benefit from our Private Health provider.

You could too.

Here’s our definition.

Good Debt adjective/noun
Debt that is working for you

Why would it be considered Good Debt?

HECS / HELP Debt is essentially an education tax. It is repaid through the PAYG withholding system, just like income tax. Thresholds determine the percentage rate and when repayments begin. Thresholds may change with legislation.

HECS/HELP debt doesn't accrue interest daily. Instead, it undergoes annual indexation on the 1st of June, based on the Consumer Price Index (CPI) data from the past two years, to keep up with inflation.

7.1% this year. Hence the email. We haven’t seen HECS/HELP this high since the 90’s.

The problem

Nobody knows what indexation will be in 2024, 2025, let alone 2033.
If you pay off your HECS/HELP to avoid the 7.1% increase, this may not be as attractive in the long term if you are being hit with or not earning compounding interest somewhere else when/if the indexation rate drops.

The Catch

Every time you see HECS/HELP repayments on your payslip, guess what? They don’t come off your debt straight away.

The good news? A bigger tax refund as all repayments on your payslip will return to you after tax time if your balance is paid in full pre-June 1.

What do you do?

HECS/HELP, in our opinion, affects the following in order of intensity.
Borrowing Capacity, Other Debt Costs, Cashflow / Investment Potential.

Borrowing Capacity

Whether your HECS/HELP is $10,000 or $100,000, it affects capacity the same. Banks will look at the % repayment rate based on your income.

HECS/HELP affects borrowing capacity due to it affecting your serviceability.
When we assist clients in obtaining Finance Options / Pre Approval, we always present capacities with and without HECS/HELP.
When applying for loans, we can apply for the loan with HECS/HELP paid off in principle. This allows our clients to understand their range.

Example.
The client’s HECS / HELP is $50,000.
Borrowing Capacity with HECS/HELP = $1,000,000
Without = $1,150,000.
If we apply for $1,000,000, the client’s only option is to add cash at the time of purchase if they find a property over $1,000,000.
If we apply for the loan with HECS/HELP paid off in principal the strategy allows flexibility and options based on the property the client is trying to buy.

When buying a property as an investment, capacity is further reduced as the rental income is added to your repayment threshold, which usually increases the HECS/ HELP repayment % rate.

What do you do? - Use us for finance. We get it.

I have a mortgage

If you have money sitting in an offset account, your rate may not exceed 7.1%.
If you cash out of your offset account, the bank will calculate interest daily based on your current rate. The risk is that the inflation rate drops below your interest rate in future years, and you won’t recoup that offset balance in time.

Remember, once HECS/HELP is paid off, you receive an instant difference between the indexation rate increase / your bank rate, ie. 7.1% > 5.5%.
You will have more cash flow which will increase your capacity/investment potential, and you will receive your withheld repayments back at tax time.

The large majority of our clients with balances under $40,000 that have significant cash outside of their HECS/HELP debt balance are repaying HECS/HELP, but you must ensure you are doing the right thing for your circumstances.

What do you do? - Use us for financial advice. We get it.

Saving for a home - FHSSS - Watch this video

This pays a higher rate of return than the HECS/HELP debt.
If you’re saving for your first home, FHSSS is something you should consider instead of or alongside paying off HECS/HELP debt.

What do you do? - If you have the funds and are not limited due to your deposit because you have a guarantor. Consider - Porque No Los Dos.

Bad Debt - Personal Loans, Credit Cards etc.
If the rate is higher than the indexation rate, you need to consider paying off the bad debt first; if the rate is lower, you need to take the time to work out if the extra cashflow after paying off your HECS/HELP will pay off your debt that has interest calculated daily before the potential of the indexation rate dropping below the interest you are charged.

What do you do? - We usually tackle “Bad Debt” first, especially if the rate is higher than a savings rate or HECS/HELP indexation.

Cashflow / Investment Potential

Nothing in life is guaranteed except for;
Death - where HECS/HELP dies with you
Taxes - which have nothing to do with HECS/HELP
FHSSS - Guaranteed return
The Guy without Shoes - not providing in-depth considerations to his extremely large and heavily influenced audience.

Suppose you are paying off your HECS/HELP to increase your cash flow to save. Your savings will probably work harder somewhere else long term, as indexation will not always be this high.

If you’re paying off your HECS/HELP to increase your investment potential, you have to be confident that you’ll beat the 7.1% rate of return.

What do you do? - If you’re only considering and reviewing this right now - You’re more than likely not ready to make a decision.

Summary

HECS/HELP debt is neither good nor bad.
The strategy you employ will determine how it works for you.
Review your circumstances in detail, make an appropriate decision or seek advice.

The Deadline

If you’re planning on paying off the debt. You should consider the ATO delays.
The ATO is slow, so you must get the money in ASAP.
Two weeks before June 1 is considered “safe”, but we would stress today or tomorrow being your cut-off.

Your Next Steps

If you’d like to equip yourself with a team of professionals that understand how to position you with the best Structure & Strategy for your circumstances, reply to this email or contact support@rkds.com.au

First-home buyers in NSW can now choose between paying an annual land tax or an upfront stamp duty on their property, covering all properties bought by first-home buyers up to $1.5m.

Opting into a land tax? You will pay an annual levy of $400 plus a 0.3% tax on the value of your land, significantly lowering the upfront costs of purchasing a home, meaning:

• It’s easier to save for a deposit (If you don’t have a guarantor)

• Your borrowing capacity could potentially increase

The change in legislation was made in an attempt to combat declining levels of home ownership and rising property prices to “allow people to save more”.

NSW premier Dominic Perrottet stated, “For the first time, we will provide first home buyers with a choice, helping thousands of people to shave around two years off the time needed to save for a deposit”.

But why is this a bad thing if it’ll take 23 years before reaching the value of Stamp Duty on a $1 million house?

Labour opposed the reform, labelling it a “forever tax” and a “trojan horse” created by the government, allowing future governments to “jack up the land tax rate” over time and leaving those who opted in with no choice but to pay.

What do you think? Trojan Horse or the best thing since this new newsletter?

Pros of opting in:

• Lower upfront costs. It’s likely more manageable for you to pay significantly lower recurring tax than a hefty upfront fee

• Lower deposit needed

• Increased borrowing/buying capacity

Cons:

• Locked into paying a yearly tax

• Subject to further reform and increases to the tax in the future

The government has already mentioned that “tax rates will be indexed each year so that the average property tax payment rises in line with average incomes.”, which is on average a 3.2% yearly increase. Perrottet has promised that this yearly increase would not exceed 4% per year, 

Could this be negatively manipulated in the future?
Remember when we were promised no interest rate hikes…