Tuesday June 29, 2010

Director's Fore

What an interesting few months in the world of financial markets. We Australians have been through the Global Financial Crisis with the rest of the world and have come out of it relatively unscathed, largely thanks to the strong rebound by China and its demand for our minerals.
Our Government is still keen not to allow high inflation creep into our country and as a result we have seen interest rates continue to climb since late last year.
We have been waiting anxiously for the Henry review and just how our taxation system was going to be simplified – sadly the whole report seems to be a bit of a non-event, unless you’re a large mining company!!  So far it looks like the Government is accepting just 4 out of 138 proposed reforms – I’m sure Ken Henry is pleased with this!!

We hope you find these newsletter articles of interest and useful for your ‘financial world’.

Best Wishes

Ross Hennig
 

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Legal

 Enduring Power of Attorney – Some Facts
An enduring Power Of Attorney is a practical and useful legal solution for times when you are unable to make decisions for yourself, either because you are not physically available to negotiate or sign documents, or because you no longer have the capability to make decisions about your finances or medical treatment.
It is a legal document that enables someone you trust to make decisions about your finances - for example pay your bills, make investment decisions (perhaps in conjunction with your financial advisor) on your behalf usually when you no longer can.
An enduring Power Of Attorney is valid even if you lose your mental capacity and therefore can be used more as a planning tool for the future. You may specify that the Power of Attorney is not to be used until you become incompetent.

For more information on Wills, Estate Planning or Powers of Attorney please contact
Suzanne Jones on 9510 0788

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Finance

Loan structures – a better way
In this ever changing market, it’s now (more than ever) crucial to get the right mortgage for your needs. Whilst this certainly pertains to obtaining the best product, and lowest interest rates and fees, there is another issue at hand which could save you thousands of dollars - DEBT STRUCTURING.
By splitting your loans into separate loan accounts, not only can you avoid confusion at tax time for yourself and your accountant, but in the future, if you’re not aware of the purposes of your debts, you could end up paying thousands of dollars extra in tax every year!

Account 1 – Home Loan (non-deductible debt)

Account 2 – Investment  Loan (deductible debt)

Account 3 – Other 

 Want to know more? Call Kate or Troy on 03 9510 0788 today for a free analysis of your current lending.

As mentioned, as well as looking after your loan structures, it is also important to have the best product, rate and fees available in the marketplace. What we currently find is a trend towards Brokers so that this may be achieved – ‘Currently, 40% of all New Home Loans are introduced through Brokers, and in 3-5 years it will be 50%’ (FUJITSU/JP Morgan Mortgage Industry Report – Vol 11).
The main difference between dealing with a Bank or Lender directly vs a Broker, is that the Bank/Lender can only offer their own 4-5 products. Brokers can go to a variety of different banks and lenders and source 100’s of different loan options. By utilising the knowledge of our Brokers, not only can you be assured you’re getting the right structural advice, but you will also be offered the most competitive products, rates and fees.

Example – A new client was referred to us from one of our existing clients. They had lending of $250k, and had gone directly to their existing bank to obtain an increase on their lending to $850k total. The bank offered the client the same discounted interest rate that they were already receiving (0.60% off the Standard Variable Rate).
After hearing this, we enquired with the same bank what discount we, as a Broker, would be able to obtain for the client on their behalf, and they confirmed an interest rate discount of 0.90% off the Standard Variable Rate – SAVING OF $2,550 PER ANNUM!

It certainly pays to ask – call Kate or Troy today on 03 9510 0788 for a free analysis of your current lending.
 

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Insurance

 Tax Effectiveness with Insurance

Questions to ask yourself........

*Are you aware of how you can maximise your tax deductions this year?
*Are you looking for tax deductions?
*Are you paying your life insurance premium from ‘after tax’ dollars?

Before the financial year end (June 30) is a great time to review your existing risk insurance to check whether what you have is structured as well as it could be. It can also be a good time to take out, or increase your Income Protection, and pay premiums annually to get a tax rebate on the premiums paid.
Many of our clients are paying their Life and TPD Insurance from their Superannuation monies, as this is far more tax effective than paying from their own cash flow and ‘after tax’ dollars.

Contact our office on 03 9510 0788 to discuss this further, and learn how your policies may be better structured if not already. This can also apply for Trauma Insurance in some cases, where premiums can be made more affordable.

Some Insurance Facts:

* In Australia last year $3 Billion in Risk Claims paid

* (99.5% of death claims were paid)

* (92% of Income Protection Claims paid)

* Australians are under-insured by $1.4 Trillion (Source: ‘Wealth Management Update 2007, CBA March 2007)

* Nearly 10% of Australian full-time workers are unable to work due to chronic illness

* Almost 1 in 5 Australians will experience a mental disorder

* The average Australian consumes 7.8 litres of pure alcohol; 1,915 cigarettes and 18 litres of ice cream a year

* 7.4 million Australian adults are overweight – one third being obese. (Source: ‘GenRe Life Health, March 2009’)
 

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Financial Planning

Watch out for the superannuation contribution caps!

When it comes to excess contributions, prevention is better than cure. As we move into the Super contributions season, many of you will be keen to maximise the amount you can contribute. Therefore, it is important that you are prepared so you do not receive an Excess Contributions Tax Assessment (ECTA) in the future.

The Super contribution caps for the 2009/10 year are as follows:

* Under 50 on 30/06/10  - $25,000 (Concessional)

* Age 50 or over on 30/06/10 - $50,000 (Concessional)

* Under 65 at any time throughout 2009/10  - $150,000 (or up to $450,000 over a 3 year period) (Non-concessional)

* Age 65 or over for all of 2009/10  - $150,000 (Non-concessional)

By focusing on the following areas, you should go a long way towards ensuring you do not breach these contribution caps this financial year:

Take into account contributions made to ALL Super funds - Ensure you alert your Lakeside adviser if you have made contributions to funds that we may not be aware of.

Understand how the contribution caps work - A common misconception is how the ‘bring forward’ rule works. Those who are under 65 at any time in the financial year are entitled to use the higher $450,000 non-concessional contribution (NCC) over three years. However, if you are over 65 years of age for the whole financial year, the contribution is subject to the lower NCC cap of $150,000.

Transition to retirement and salary sacrifice strategies - Concessional contributions incorporate salary sacrificed contributions AND your Super Guarantee Contributions (usually 9% of salary). You should ensure that the SGC is considered when assessing the level of salary sacrifice in the financial year.

Bonuses -  You may receive bonus payments that you opt to salary sacrifice to your Super fund. This may sound harmless enough, but if other contributions are made in the same financial year and have not been accounted for, it could prove to be costly.

Failure of personal deduction notices - You may be eligible to make a personal deductible contribution if no more than 10% of your total assessable income for the year is attributable to employment. If you fail this ‘10% rule’ and you have maximised your NCC cap, the disallowed deductible contribution would subsequently be classified as a NCC, thus impacting the level of non-concessional contributions you can make.

Call one of our experienced Financial Planners on 9510-0788 for further information and to discuss your options.
 

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