The POS Exemption : How Its Abolition will Affect Car Dealers

In 2019, the Australian Banking Royal Commission acted on the growing complaints against car dealers who sign up customers for loans they can’t afford to pay. In his final report, Royal Commissioner, the Hon Kenneth Hayne AC QC, who led the year-long probe of the faulty financial service practices, recommended the abolition of the Point of Sale (POS) Exemption.

Consumer advocates welcomed the Royal Commissioner’s report exposing the predatory selling practice. Many believe the POS exemption was a “loophole” that has allowed not a few car dealers to offer auto loans even without proper assessment of the customer’s financial capability. Amanda Storey, the Director of Legal Practice at the Consumer Action Law Centre remarked that when consumers are purchasing any products via financing deals, it’s important that they deal with the right financial experts.

As it is however, when a person goes to a car dealer or a car yard, he or she will be met by a dealer who is good at selling cars. The problem however is that in order to close a sale, some car dealers offer complex and expensive auto loans. Since their job is to sell cars, they simply close an auto financing contract even if buyers do not fully understand the financial obligations they face.

While the expected date of the POS Exemption abolition was estimated to have taken place last February 2020, there is still no legislative action ordering its removal. To date, no one can tell what the new rules will be, although some reports say that the new rules will limit the ability of car dealers to offer auto financing if they do not have an Australian Credit License.

What Exactly is the POS Exemption and What Made It Wrong?

Ironically, the Point of Sale Exemption came about in 2009, in relation to a consumer credit protection reform that required sellers to have a credit license to be able to offer consumers financing deals to purchasers. The reform however, excluded car dealerships, as it was deemed that the new rule will negatively impact the profitability of the car-selling industry.

At that time though, the so-called POS exemption for car dealerships was meant to be temporary, as there was no clear plan yet on how car dealers can sell cars without a financing product to offer a potential buyer.

As it is, whatever the outcome of auto financing deals, car dealerships are able to receive payment from banks or financing institutions for vehicles sold by way of auto loans. As a result, not a few servicing banks and financing institutions ended up dealing with bad auto loans. In order to recover the money paid to car dealerships, the lenders had to repossess the cars held as collaterals on consumers’ auto loans.

That being the case, many consumers ended up with huge debts and with no vehicle at all, despite the sums of money previously paid as car loan amortizations.

National Loans Australia Can Help Consumers Obtain Customised Auto Loans

Up to this day, the POS Exemption remains in place, despite the Royal Commissioner’s recommendation to abolish it. We can only assume that Australia’s policymakers have had their hands full since there have been more pressing economic and health problems caused by the pandemic.

In the meantime, National Loans Australia (NLA) gives advice for consumers not to readily sign-up for any auto financing deals being offered by car dealers. The financial experts at NLA recommend that before shopping around for a new vehicle, find out first how much money you’ll be able to borrow for a new car by filling up the online Loan Pre-Approval form at their website.

Obtaining an auto loan is not a trivial matter because the monthly amortizations, as well as the overall costs of car ownership can overwhelm your personal finances.

Nonetheless, the NLA team members can help as they’ve had more than 24 years of experience in brokering bespoke auto loans that best suit their customer’s needs and financial capability.

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Cut and Dried Wealth Managers Face Tough Financial Planning Challenges Starting 2021

Wealth managers handling the business assets of individuals with high and ultra high net worth, will face new challenges starting this tax year 2021 and onwards. Aside from tax policy changes being proposed by the Biden administration, a new bill aimed at changing the IRS’ audit behavior toward the tax returns of wealthy taxpayers will also be introduced. Given that Democratic party lawmakers now have the majority numbers in both lower and upper houses of Congress, all bills proposing such tax policy changes will likely be enacted.

Now more than ever, choosing the right financial advisor to handle one’s tax plans is of utmost importance.Most of the proposed changes will impact major tax investment strategies conventionally used by tax planners and wealth managers. That being the case the cookie-cutter approach in managing the business assets of high net worth individuals, particularly those with ultra high net worth will no longer be effective.

Customization of Financial Plans is the Key to Effective Wealth Management

The key to effective wealth management is by customizing tax plans and investment strategies in accordance with the actual business conditions and true circumstances of the wealth owners and their families. That way, the financial plans and strategies will be aligned not only with the short and long term financial goals of every wealthy family; but will also conform to their current personal needs.

Moreover, in the event that IRS audit examiners put extra attention to the income tax returns filed by taxpayers who derive most of their income from investing their assets, the customized solutions will be proven legal and valid. .

Tax Policy Change On Sale of Investments Will Impact Conventional Tax Reduction Strategy

In general, America’s super rich are categorized based on their asset holdings, the wealthiest group being the high net worth individuals and the ultra high net worth individuals. Mainly because most of their earnings come from sale of long term asset investments, which under the U.S. taxation system is subject to Capital Gains Tax. When compared to the ordinary Income tax rates applied to revenues earned by business proprietors and employed individuals, the Capital Gains Tax rate is lower, of which 20% is the highest.

The Capital Gains Tax rate could even be whittled down to 0% if after deducting capital losses the taxable income for the year falls under the lowest tax bracket.

However, this is about to change under the Biden administration when the tax policy that aims to make equal, the tax treatment on revenues earned as compensation by salaried workers and revenues earned by wealthy investors. Taxable income on investment gains, if exceeding $1 million, will be subject to the tax rate applicable to the ordinary Income Tax Rate That is regardless of whether the assets sold (e.g.: bonds, precious metals, real estate or stocks) were held for more than a year by the wealthy investor.

This denotes therefore that gains from sale of investments exceeding $1 million will be subject to the top individual tax rate of the highest tax bracket. For the year 2021, the top tax bracket has been adjusted to $523,600 and $628,300 for single taxpayers and jointly filing married couples, respectively.

Actually, what has bee cited above is only one of the major tax policy changes under the new government administration In fact another significant change is the reversal of the top individual tax rate of 37% back to the 39.6%, which was the tax rate before the Trump administration enacted the 2017 Tax Cuts and Jobs Act.

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Tesla’s $1.5 Bitcoin Investment Sparked Greater Interest for Bitcoin Mining

In an SEC filing last Feb. 08, Elon Musk’s Tesla stated investing $1.5 billion in bitcoins, in line with the company’s future plans of accepting BTC payments. Naturally, Tesla’s move had further boosted bitcoin’s price, bringing it to a record high of $46,800. This new development has sparked greater interest in bitcoin mining, being a more affordable approach to increasing one’s crypto assets. However, those new to bitcoin are unaware that such development is also expected to further increase difficulty in mining the world’s most popular cryptocurrency.

While learning to mine bitcoins may be easy, there is more to understand about cryptocurrency mining since the industry has grown more complex in all aspects. Given that there are now ASICS bitcoin machines powerful enough to carry out 1012 conjectures per second in solving a block of bitcoin hashes, the machine will be working amidst a greater level of mining difficulty.

Increased Participation in Bitcoin Activities Impact Mining Difficulty

First off, one should understand that mining difficulty indicates a measure of toil and struggle that miners face when looking for blocks that can earn them a unit of bitcoin as reward. The current bitcoin mining difficulty currently stands at an estimated 20,823,531,150,111 or 20.82T. A high difficulty measure denotes that it is taking bitcoin miners to find and subsequently solve a block of hashes related to a particular bitcoin in circulation.

That being the case, one’s bitcoin mining activities will use a greater amount of electricity, which equates to higher costs; not unless mining is being done in a hydro-powered location where the cost of electricity is relatively lower.

The point is, the greater the difficulty, the lesser the chances of earning a reward. Once related costs are taken into consideration. the lower the profitability of a bitcoin mining business. Besides, ASICS bitcoin mining machines have become more expensive due to increased demand that cannot be met with an immediate supply.

Now there’s another option, called Mining-as-a-Service or MaaS being offered as an alternative approach to bitcoin mining. This option gives smaller scale bitcoin mining operators a chance to grow their business, by having one or more ASICS bitcoin miners at their disposal in exchange for a fee.

A Quick Look at Mining-as-a-Service (MaaS) of the ElevateGroup

The Elevate Group had foreseen that as bitcoin mining becomes more difficult, the small scale bitcoin miners will have fewer opportunities to participate in the cryptocurrency industry’s mining sector. As opposed to cloud mining platforms, the Elevate Group offers customers their pool of bitcoin miners. That way, customers can build their own mining team without having to worry about electrical costs, thermal-controlled environments and equipment maintenance.

According to this MaaS provider, their contract is finite since the duration will be tied to the life of the bitcoin miner (mining machine) working for the customers. The Elevate Group in turn, earns from MaaS contracts by collecting a 20% share of profits earned by each customer.

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