This article explains three major changes to expense section in the CRM occurring on 14 March 2020.
Terminology
LIXI - is an Australian, member-based not-for-profit company that develops data message transaction standards for the Australian mortgage processing industry, and promotes efficiency improvements.
HEM - household expenditure measure recorded by the Melbourne Institute
Expenses Categories
We have recategorised expenses into 33 categories (up 1 from previous 32), to ensure they map to new LIXI 22 categories.
All major lenders are committed to adhering to LIXI 22 categories to ensure standardised expense recording and analysis
We have more categories than LIXI to ensure users and clients better understand where to record their expense.
Our expense categories
Food Expenses
Food Expenses
Food & supermarket
Food & supermarket
Groceries (food and non-alcoholic beverages), toiletries and cleaning products. In HEM.
Coffies, lunches takeaway
Coffies, lunches takeaway
Take away food, coffee/tea and lunches. In HEM.
Cigarettes & alcohol
Cigarettes & alcohol
Cigarettes and alcohol purchases. In HEM.
Discretionary expenses
Discretionary expenses
Entertainment
Entertainment
Dining and outings, gambling and other entertainment. In HEM.
Domestic holidays
Domestic holidays
Domestic holidays related travel and accommodation. In HEM.
Clothing, shoes & accessories
Clothing, shoes & accessories
Clothing, footwear and accessories (including travel goods, handbags, umbrellas, wallets, baby-goods) for men, women, children and infants, including purchases, repairs and alterations. In HEM.
Hairdressing & grooming
Hairdressing & grooming
Personal care items such as hairdressing, manicure, tanning, inc personal care products, cosmetics, hair services. In HEM.
Phone, internet & pay TV
Phone, internet & pay TV
Fixed and mobile phone, home and mobile internet, Pay TV subscription. In HEM.
Media streaming & subscription services
Media streaming & subscription services
Streaming services such as Spotify, Netflix, Kayo, sport streaming. In HEM.
Gifts & celebrations
Gifts & celebrations
Gifts and expenses related to birthdays, milestones and other celebrations. Not in HEM.
Other discretionary expenses
Other discretionary expenses
Overseas holidays related travel and accommodation; Other ongoing or recurring items not included within the other categories. Not in HEM.
Pets
Pets
Pet food, grooming, minding services, care products, health products, veterinarian fees. In HEM.
Children & education expenses
Children & education expenses
Public education costs
Public education costs
Public or government, primary and secondary school tuition, school and sports fees including compulsory kindergarten/reception/pre-primary/prep. In HEM.
Private education costs
Private education costs
Private education fees, private education uniforms. Not in HEM.
Tertiary & vocational education
Tertiary & vocational education
Higher education and vocational training fees (including TAFE, business college, drama, music, dance) excluding HECS, and professional fees (union dues, professional association subscriptions, legal, accountant and tax agent fees). In HEM.
Childcare
Childcare
Childcare including nannies and non-compulsory pre-school. In HEM.
Health & wellness expenses
Health & wellness expenses
Gym fees, sport, other health & wellness
Gym fees, sport, other health & wellness
Gym and sport club memberships, yoga, pilates, health clubs and other wellness. In HEM.
Private health insurance
Private health insurance
Health insurance including hospital, medical and dental insurance. Not in HEM.
Doctor, dentist, farmacy, glasses
Doctor, dentist, farmacy, glasses
Medical and health care services including GPs, specialists, physiotherapists, chiropractors, and opticians. Medicines, pharmaceuticals, prescriptions, glasses, purchase or hire of therapeutic appliances and equipment, hospital charges, nursing home charges. Excludes health insurance and ambulance insurance. In HEM.
Life, trauma, income insurance
Life, trauma, income insurance
Life insurance, TPD, Trauma insurance, income insurance, mortgage protection insurance. Not in HEM.
Transport expenses
Transport expenses
Recreational vehicle running cost
Recreational vehicle running cost
Motorbike, boat, caravan insurance. Not in HEM.
Essential vehicle running cost
Essential vehicle running cost
Running costs for essential vehicles including fuel, servicing, repairs, parking, tolls (excludes insurance) and registration of motor vehicles (excludes recreational vehicles such as caravans, trailers, motorcycles, boats and aircraft). In HEM.
Public transport, taxis & ride share, commuting airfares
Public transport, taxis & ride share, commuting airfares
Public transport, commuting airfares, taxi, ride share and care share. In HEM.
Essential vehicle insurance
Essential vehicle insurance
General basic insurances include ambulance, car (not recreation vehicles), travel, and personal belongings insurance. Excludes property (house and contents), health, sickness and personal accident, life, income protection and pet insurance. In HEM.
Property expenses
Property expenses
Primary residence running costs
Primary residence running costs
Costs associated with the primary residence, either owned or rented. Includes rates, water, sewage, repairs and maintenance, electricity, gas, heating oil and wood for fuel, purchase, hire and repair of household and outdoor furnishings and equipment, furnishings, floor coverings, linen, tableware, gardening tools, power tools, electrical, lights, trees, shrubs, plants, pool chemicals, home insurance, contents insurance and appliance insurance. Excludes body corporate fees, strata fees and land tax. In HEM.
Primary residence body corp
Primary residence body corp
Body corporate fees, strata fees and land tax on owner occupied principal place of residence. Excludes investment properties, secondary residences, and properties maintained for other purposes such as holiday properties or residences maintained for parents or children. Not in HEM.
Secondary residence running costs
Secondary residence running costs
Costs associated with any secondary residence, either rented or owned for non-investment purposes, such as a holiday property that is not rented to generate income, or a property that family members (parents or children) are allowed to live in rent-free. Includes property management fees, rates, water, sewage, repairs and maintenance, electricity, gas, heating oil and wood for fuel, purchase, hire and repair of household and outdoor furnishings and equipment, furnishings, floor coverings, linen, tableware, gardening tools, power tools, electrical, lights, trees, shrubs, plants, pool chemicals, landlords insurance, home insurance, contents insurance and appliance insurance. Not in HEM.
Secondary residence body corp
Secondary residence body corp
Body corporate fees, strata fees and land tax on secondary residence. Not in HEM.
Investment property running costs
Investment property running costs
Costs associated with any property owned for investment purposes. Includes property management fees, rates, water, sewage, repairs and maintenance, electricity, gas, heating oil and wood for fuel, purchase, hire and repair of household and outdoor furnishings and equipment, furnishings, floor coverings, linen, tableware, gardening tools, power tools, electrical, lights, trees, shrubs, plants, pool chemicals, landlords insurance, home insurance, contents insurance and appliance insurance. Not in HEM.
Investment property body corp
Investment property body corp
Body corporate fees, strata fees and land tax on investment property. Not in HEM.
Other commitments
Other commitments
Child or spousal maintenance
Child or spousal maintenance
Maintenance for either dependent or non-dependent children, and spousal or de facto partner maintenance. Not in HEM.
Current rent expense
Current rent expense
Current rent paid. Not in HEM.
Ongoing board expense
Ongoing board expense
Ongoing board paid. Not in HEM.
To see the meaning of each category, simply click on the '?' icon next to the category field of the Expenses tab:
Expenses Frequency
Frequency for all categories is auto-selected to 'Monthly'. Broker can manually select another frequency from dropdown.
Clients can also manually change the frequency from their Client Portal.
The field next to the 'Frequency' dropdown option will calculate each expense category on a monthly basis, no matter the previously selected frequency.
Expenses Comments
Lastly, we offer a comment box where broker or client can enter any remark or observation for each expense category.
Likewise, the comment field will populate client expenses pulled from their Bankstatements.
Completed bankstatemtns requests will not auto-populate expense amounts into each category amount field.
The amounts will be shown in the expense comment boxes and can be manually entered into the amount field for each category.
Multiple Households
Users can now enter separate expense groups for multiple households. This is an important feature, required to improve mapping to lender gateways and maximum borrowing calculations.
Maximum 2 contacts can be linked to one household.
If there are more than 2 contacts in one household, then another household should be added and linked to remaining contact.
Expense amounts should be divided accordingly, per household.
How to add a household
To add a household and then complete its expenses, simply click on 'Add Household' button in top right corner of the Expenses page and associate contacts from the deal with that household (by selecting the contact(s) from first dropdown field).
To complete the process, where more than one household, click 'Add Household' again and associate the remaining contacts.
Once all contact in deal have been linked to their household, the 'Add Household' button will grey out (become locked).
Clients that are part of the same household and share expenses, will not be able to link their significant other to their own household when entering expenses in Client Portal.
For this reason it is advisable to share the portal to the first applicant only, and have them complete the spouse's details, leaving out the spouse's expenses and and entering them under their own expenses.
Expense Buffer
All ACL holders (and their representatives) are obliged to perform own servicing calculation, independent of that competed by the lender.
Buffers are visible in the third/right column of the Monthly Position Table.
Our Expense buffer calculation follows LIXI guidelines on expense items that are in and out of HEM.
Table A: Our expense categories that are included in HEM
Table B: Our expense categories that are not included in HEM
The practical consequence is that when expenses are collected, only Table A will be compared to HEM, and if the sum of items in Table A is less than HEM, then the HEM figure will be used in the buffer calculation. In such a case, the total buffer expenses will be HEM + sum of items in Table B (out of HEM items).
The consequences is that in majority results, Expense buffer will be above actual HEM figure for that scenario, i.e. out of HEM items will increase the total expense figure.
In and out of HEM item monthly sums can be viewed at the bottom of the expense tab
The total monthly expenses are broken down into following parts:
A - Total sum of all 33 expense items
B - Table A expenses (expenses that are in HEM)
C - Table B expenses minus other commitments (expenses that are not in HEM minus Rent, Board, Child or Spousal maintenance)
D - Other commitments (Rent, Board, Child or Spousal maintenance)
Switching Expense Buffer
Admin in Enterprise main organization can go to Settings > Financial Position Buffers and switch these on or off.
Lenders will have own decisions on expense items that are in and out of HEM. For more detail on how major 4 are categorising their expenses and treat expense items in relation to HEM see this article from LIXI.
For the purpose of Maximum Borrowing calculation, we will map each lender expense categorisation specific to their own policy.
Example
In the example below, both Family 1 and Family 2 have their expenses in Table A total figure below the HEM figure (both have the same HEM figure).
As a result total Expense buffer is above the recorded (actual) expense figure.
The only scenario where the buffer expense figure will be the same as the actual expense if the Table A total is equal or above the HEM figure for that scenario.
Expense Merge Table
New expense merge tables are:
{@dealTablesExpensesByHousehold} for Expenses by household and
{@dealTablesExpensesByHouseholdWithComments} for Expenses by household with comments.
These merge keys it needs to be used in all documents.
Old expenses can still be produced with the old merge table for deals created before the new expense categories were introduced.
Old Deals - Expenses are Archived
Old deals with the previous expense categorisation will still have them, as Archived expenses.
These can be produced using the old merge table {@dealTablesExpenses}
Old expenses will not map to ApplyOnline or LoanApp. While the old deals are running out, we recommend for expenses to be manually entered into lender gateways.
Maximum Borrowing requires new expenses by household to be populated. Where only old expenses are present in deals, Maximum Borrowing figure will show $0 for all lenders.
Video Example
See this video for a demo of new expense categorisation: