Newcastle Financial Archives - Newcastle Financial Planners & Financial Advisors https://financialplanner-newcastle.com.au/category/newcastle-financial/ Financial Services and Advisory Firm Newcastle Mon, 05 Mar 2012 01:46:48 +0000 en-AU hourly 1 https://wordpress.org/?v=6.9.4 https://financialplanner-newcastle.com.au/wp-content/uploads/2019/11/favicon.png Newcastle Financial Archives - Newcastle Financial Planners & Financial Advisors https://financialplanner-newcastle.com.au/category/newcastle-financial/ 32 32 Understanding the benefits of tax deferred income https://financialplanner-newcastle.com.au/tax-deferred-income/ Mon, 05 Mar 2012 01:46:48 +0000 http://financialplanner-newcastle.com.au/?p=1134 Direct property funds pay income to investors in the form of distributions. These distributions include the rental income received from the properties and other income such as interest. Part of this income distribution may include a “tax deferred” component. Key benefits of tax deferred income for investors Tax is not applicable in the year in which income is received (thus the term “deferred”). The compound impact of reinvesting cash that has not attracted tax over many years is significant. Tax deferred income is brought to account when the investor sells the asset and is discounted by 50% (PAYE) or 33% (Super). Tax deferred income in a superannuation fund can be transitioned to an allocated pension, without triggering an income or capital gains tax event. Allocated pensions pay no tax.   Tax deferred component of a distribution affects an investor’s tax Commonly, an investor would pay tax on the income received from an investment at their marginal tax rate (MTR) in the financial year in which the income is received. The tax deferred portion of the income received from a property trust is treated differently. The tax deferred portion of the income received is deferred until the property trust investment is […]

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]]> Direct property funds pay income to investors in the form of distributions. These distributions include the rental income received from the properties and other income such as interest. Part of this income distribution may include a “tax deferred” component.

Key benefits of tax deferred income for investors

  • Tax is not applicable in the year in which income is received (thus the term “deferred”). The compound impact of reinvesting cash that has not attracted tax over many years is significant.
  • Tax deferred income is brought to account when the investor sells the asset and is discounted by 50% (PAYE) or 33% (Super).
  • Tax deferred income in a superannuation fund can be transitioned to an allocated pension, without triggering an income or capital gains tax event. Allocated pensions pay no tax.

 

Tax deferred component of a distribution affects an investor’s tax

Commonly, an investor would pay tax on the income received from an investment at their marginal tax rate (MTR) in the financial year in which the income is received.

The tax deferred portion of the income received from a property trust is treated differently. The tax deferred portion of the income received is deferred until the property trust investment is sold. At this time, the investor includes the tax deferred income as part of the capital gains tax (CGT) calculation.Tax is then paid at the investor’s MTR that applies when the investment is sold.

An investor (individual) may benefit from the CGT rule that only 50% of the gain is taxable if the investment is held for longer than 12 months. This benefit also applies to the tax deferred income.

Tax deferral can be of particular benefit to investors who redeem an investment when they retire and move into a lower income tax bracket. Commonly retirees have a low marginal tax rate compared to their marginal tax rate prior to retirement.


Case Study – Invest $20,000 in cash

Hayley has invested $20,000 in a one-year term deposit that pays her an interest return of 6% p.a. Her MTR is 39.5%.

Hayley receives interest of $1,200 ($20,000 x 6%) on her term deposit. She needs to include this income in her tax return for that financial year. Based on her marginal tax rate, Hayley is likely to pay tax of $474 on the interest from her term deposit ($1,200 x 39.5%).

 

Case Study – Invest $20,000 in unlisted property

John is two years from retirement and invested $20,000 in a direct property investment that pays an income distribution of 8% of which 70% of this distribution is tax deferred. His MTR is currently 39.5% and expects it to fall to 16.5% in retirement.

John will receive an income return of $1,600 p.a. of which $1,120 is tax deferred and only $480 is taxable in each financial year at his MTR. This equates to tax payable of $189.60 each financial year. The tax on the remaining income amount is deferred until the investment is sold.

John decides to redeem the direct property investment when he retires. To illustrate the potential benefits of the tax deferred component compared to an investment with no tax deferred component, it is assumed that the capital value of the direct property investment has not changed. When sold, the tax payable on the deferred component is:

Capital gain = Redemption price – (Acquisition price – Tax deferred income received during the time held) x MTR

As such, the capital gain in this example is: $2,240 = $10,000 –($10,000 – $1,120 x 2 years)

The CGT payable on this amount is: $184.80 = 50% x $2,240 x 16.5%

The total tax paid (income + CGT) on the distributions over the two years has been: $564.00 = ($189.60 x 2 years) + $184.80

If the income distribution did not contain any tax deferred components, then the total tax payable each year would amount to $632 ($1,600 x 39.5%) or $1,264 in two years. Over the two years the tax deferred component of the income distributions and the movement into the lower tax bracket saved John $700 ($1,264 – $564).


Case Study – Invest $20,000 in direct property via SMSF

Adrian is two years away from retirement and invested $20,000 in a direct property trust via his self managed super fund (SMSF). The trust pays an income distribution of 8%, of which 70% is tax deferred.

The MTR of his superannuation fund is 15%. Adrian’s superannuation fund will receive an income return from the property trust of $1,600 p.a. of which $1,120 is tax deferred and only $480 is taxable in each financial year at 15% MTR. This equates to tax payable of $72 each financial year. The tax on the remaining income amount is deferred until the investment is sold.

Adrian transfers the investment from his superannuation fund to allocated pension funds at retirement. This does not trigger an income or CGT event. Adrian decides to redeem the direct property investment after he retires. The deferred income amounts are included in the CGT calculation. Any CGT is taxed at the pension funds marginal tax rate, which is zero.

Effectively Adrian pays no tax on any capital gain made on the trust and the deferred tax income amounts of $2,240 ($1,120 each year) are tax free. If the income distribution did not contain any deferred components, then the total tax payable each year would amount to $480 ($1,600 x 15% x 2 years). Over the two years the tax deferred component of the distributions saved Adrian’s SMSF $336 ($480 – $72 x 2 years).


Buying direct property in a superannuation fund and selling it after retirement

Some investors may invest in a direct property fund through their superannuation fund. When the investor retires after age 60 and commences the pension phase, the marginal tax rate of the pension fund is zero.

This may mean that if the direct property trust is sold in the pension phase, the tax deferred portion of the income is received effectively tax free.

Speak with your financial planner about how the benefits of tax deferred income may apply to you.

Source: Charter Hall Direct Property, October 2011

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]]> Bankruptcy https://financialplanner-newcastle.com.au/bankruptcy/ Tue, 21 Feb 2012 05:13:26 +0000 http://financialplanner-newcastle.com.au/?p=1093 BANKRUPTCY – It's not so new for countries after all   • Ralph Waldo Emerson famously quoted in one of his 1844 essays "It is said that the world is in a state of bankruptcy, that the world owes the world more than the world can pay, and ought to go into chancery, and be sold."    With recent happenings, especially in some European countries, the issue of a country being bankrupt has been a constant matter for discussion.  Having recently read the history of the colour red and the importance of collection, ownership and the use of cochineal to the Spanish Empire (and others ), and that Phillip II declared Spain bankrupt four times, we wondered a little more about the history of countries declaring bankruptcy.   One assumes that in ancient times ancient law would have been harsh for a country which could not pay its debts, however this was not necessarily the case.   For an individual in Ancient Greece, bankruptcy did not exist. If a man owed and could not pay, he and his wife, children or servants were forced into "debt slavery" up to a period of five years, until the creditor recouped losses via […]

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]]> BANKRUPTCY – It's not so new for countries after all
 
• Ralph Waldo Emerson famously quoted in one of his 1844 essays "It is said that the world is in a state of bankruptcy, that the world owes the world more than the world can pay, and ought to go into chancery, and be sold." 
 
With recent happenings, especially in some European countries, the issue of a country being bankrupt has been a constant matter for discussion.  Having recently read the history of the colour red and the importance of collection, ownership and the use of cochineal to the Spanish Empire (and others ), and that Phillip II declared Spain bankrupt four times, we wondered a little more about the history of countries declaring bankruptcy.
 
One assumes that in ancient times ancient law would have been harsh for a country which could not pay its debts, however this was not necessarily the case.
 
For an individual in Ancient Greece, bankruptcy did not exist. If a man owed and could not pay, he and his wife, children or servants were forced into "debt slavery" up to a period of five years, until the creditor recouped losses via their physical labour.  Debt slaves had protection of life and limb, which regular slaves did not enjoy. However, servants of the debtor could be retained longer than the designated five years deadline by the creditor and were often forced to serve their new "owner" for a lifetime, usually under significantly harsher conditions.
 
In the Torah, or Old Testament, every seventh year is decreed as a Sabbatical year where the release of all debts that are owed by members of the community is mandated, but not of "foreigners". However the year following the seventh Sabbatical year (forty-ninth year) is when all debts are released, including those for foreigners.
 
 In Islamic teaching, according to the Koran, an insolvent person is to be allowed time to  pay off his debt, with the view that if someone is in hardship, postponing payment until the debtor can afford to pay is fair; and if you forgive the debt totally and no-one else knows about it then that is even better for the creditor.
 
Harsher laws were introduced – by the English in 1542 with the Statute of Bankrupts, and the laws introduced by Genghis Khan contained a provision mandating the death penalty for anyone who became bankrupt three times.
 
When it comes to the  failure of a nation to meet bond repayments, there have been many countries in this predicament, and not just in recent times. Philip II of Spain declared four state bankruptcies in 1557, 1560, 1575 and 1596.  Whilst the development of international capital markets was relatively limited prior to the 1800s,  according to economic history, there were still numerous defaults by France, Portugal, Prussia, Spain, and some of the Italian city-states. Outside Europe, Egypt, Russia, and Turkey also have histories of chronic default.
 
When looking at the total defaults by countries, the numbers are not just surprising but disturbing. Portugal has defaulted on its national debt  five times since 1800, Greece five times, Spain no less than seven times (and 13 times in all since 1500).  These countries have continued to exist and develop after their bankruptcies.
 
By contrast, Anglo-Saxon countries rarely, if ever, default. England has witnessed some close shaves in almost 1,000 years but have never defaulted. The same applies to Canada, Australia and the United States.
 
So, whilst there are commentators stating that the present economic situation is like no other, history tells us otherwise and shows us that many European countries find bankruptcy culturally acceptable. 
 
 

To discuss your financial objectives or investment strategies call Leenane Templeton today on (02) 4926 2300

 
 
 
 
 
 
 
 
 
 
 
 

Bankruptcy History

 

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]]> Have You Considered Crisis Insurance https://financialplanner-newcastle.com.au/crisis-insurance/ Tue, 07 Feb 2012 07:13:21 +0000 http://financialplanner-newcastle.com.au/?p=1006 Why consider crisis insurance? Most people wouldn’t dream of driving without car insurance, or living in a house without home and contents insurance, so it is remarkable that the majority of Australians do not think about protecting their families through life insurance, in the event of death, accident or illness 1. With the incidence of cancer increasing year on year 2 and the occurrence of cardiovascular diseases preventing many families from living a full life because of disability 3, it is becoming increasingly important to consider crisis cover as part of a life insurance portfolio. Many Australian families struggle, both emotionally and financially, when a family member is diagnosed with a life threatening or debilitating medical condition. By taking out crisis insurance cover you can help to ease the financial burden should you suffer a traumatic event. You might think ‘it’ll never happen to me’, but you may think again after considering these facts. Cancer Cancer is a leading cause of death in Australia with more than 43,000 people expected to have died from cancer in 2010. The most common cancers in Australia are skin cancer, cancer of the digestive organs, breast cancer, lung cancer and prostate cancer 4. 93,200 […]

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]]> Why consider crisis insurance?

Most people wouldn’t dream of driving without car insurance, or living in a house without home and contents insurance, so it is remarkable that the majority of Australians do not think about protecting their families through life insurance, in the event of death, accident or illness 1.

With the incidence of cancer increasing year on year 2 and the occurrence of cardiovascular diseases preventing many families from living a full life because of disability 3, it is becoming increasingly important to consider crisis cover as part of a life insurance portfolio.

Many Australian families struggle, both emotionally and financially, when a family member is diagnosed with a life threatening or debilitating medical condition. By taking out crisis insurance cover you can help to ease the financial burden should you suffer a traumatic event.

You might think ‘it’ll never happen to me’, but you may think again after considering these facts.

Cancer

Cancer is a leading cause of death in Australia with more than 43,000 people expected to have died from cancer in 2010.

The most common cancers in Australia are skin cancer, cancer of the digestive organs, breast cancer, lung cancer and prostate cancer 4. 93,200 new cases of cancer will be diagnosed in Australia this year, that’s 255 every day. Only 50% of these cancers are successfully treated 5.

 

Prostate Cancer

  • 1 in 6 men will get prostate cancer 6.
  • Almost 3,300 men die each year of prostate cancer and around 20,000 new cases are diagnosed every year 7.
  • Each day about 32 men learn news that they have prostate cancer – tragically one man every three hours will lose his battle against this insidious disease 8.
  • Breast Cancer
  • 1 in 9 women are at risk of being diagnosed with breast cancer by the age of 85 9.
  • 32 women were told yesterday they have breast cancer; 32 women will be told today…and tomorrow10.
  • 2,707 women die from the disease in a single year – making it the leading cause of cancer-related death in females11.

Skin Cancer

  • Over 480,000 Australians are treated for skin cancer each year – that’s over 1,000 people every day 12.
  • Over 1,700 Australians die from skin cancer each year 13.
  • Australia has the highest rate of skin cancer in the world. Skin cancers account for around 80% of all new cancers diagnosed each year in Australia. Each year Australians are four times more likely to develop a common skin cancer than any other form of cancer 14.

Cardiovascular disease (CVD)15

CVD is the term used for heart and blood vessel diseases and stroke.

  • CVD kills 1 Australian every 10 minutes and prevents 1.4 million people from living a full life because of disability caused by the disease.
  • CVD is one of Australia’s largest health problems.
  • CVD affects 2 out of 3 families 16.

So, what is crisis insurance cover?

Crisis insurance cover, also known as trauma cover, pays a lump sum should you be diagnosed or suffer one of the specified trauma illnesses or events, Some of the ‘illnesses’ are procedures and not illnesses e.g. Coronary By-Pass, Angioplasty, Aorta Surgery, Heart Value Surgery or Major Organ Transplant. Depending on your insurer, this lump sum payment may be up to $2,000,000 on diagnosis.

You can take out crisis cover between the ages of 16 and 64 and it covers you 24 hours a day, 7 days a week anywhere in the world, depending on your insurer.

How can crisis cover benefit you?

You should speak with your financial planner about the amount and type of cover that you need. Everyone’s circumstances and situations are different so discussing your needs with your adviser is a good first step when considering life insurance.

Should you be diagnosed with a life threatening or debilitating health condition, crisis cover may help you:

  • to pay for any additional medical bills or necessary treatment
  • to replace lost income while ill or recuperating
  • to pay for home care or auxiliary services while recuperating
  • to replace lost income of a family member who is caring for you
  • to pay for rehabilitation
  • to pay for a change in lifestyle, for example, access ramps, wheelchairs or manual car controls.

Speak to your financial planner today to find out about the most appropriate cover for you.

Each insurer differs, but most policies can cover you for a variety of crisis events such as:
 

  • Angioplasty
  • Cancer (female organs)
  • Cancer (general)
  • Cancer (male organs)
  • Coronary by-pass surgery
  • Heart attack
  • Stroke
  • Accidentally acquired HIV
  • Aorta surgery
  • Aplastic Anaemia
  • Benign brain tumour
  • Blindness
  • Cardiomyopathy
  • Kidney failure
  • Chronic liver disease
  • Chronic lung disease
  • Coma
  • Dementia & Alzheimer’s disease
  • Viral Encephalitis
  • Heart valve surgery
  • Loss of hearing
  • Loss of independent existence
  • Loss of limbs
  • Loss of speech
  • Major head trauma
  • Major organ transplant
  • Motor neurone disease
  • Multiple sclerosis
  • Muscular dystrophy
  • Parkinson’s disease
  • Primary pulmonary hypertension
  • Rheumatoid arthritis
  • Severe burns

Crisis Insurance Case Study *

Doug has been working as an accountant for the past eight years in Newcastle where he lives with his wife and three kids. Unfortunately for Doug and his family, he was recently diagnosed with bowel cancer. Doug’s diagnosis meant that he was required to undergo extensive chemotherapy, and as a result he was unable to work for six months. As you can understand, Doug and his family were extremely devastated when the doctor diagnosed the condition. As well as dealing with the emotional stress, they also had to consider how they would pay for the mortgage, school fees and other bills without Doug’s income.

Fortunately for Doug and his family, their financial adviser had recommended that both Doug and his wife take out crisis cover on top of their Term Life cover. When Doug received the news from his doctor, he called his adviser immediately who submitted a claim to his insurance company. His claim was assessed and Doug received a lump payment of $250,000. The payment enabled Doug and his wife to pay for his medical fees, mortgage and school fees all of which his income would normally have paid for.

The lump sum payment meant not only that Doug and his family’s bills were taken care of but also meant that Doug could focus all his energies on getting better instead of stressing about financial concerns.

* This is an example only to illustrate the potential benefit of taking out crisis cover, and should not be relied upon as indicative of benefits payable under any crisis cover products.

Crisis Insurance

Endnotes:
1.  http://www.lifewise.org.au/about-the-lifewisecampaign/underinsurance,-a-problem.aspx
2.  http://www.aihw.gov.au/cancer/data/acim_books/AllCancers.xls
3.  http://www.heartfoundation.org.au/HeartInformation/Statistics/Pages/default.aspx
4.  http://www.cancer.org.au/aboutcancer/FactsFigures.htm
5.  The Risk Store
6.  The Risk Store
7.  http://www.prostate.org.au/articleLive/pages/Prostate-Cancer-Statistics.html
8.  http://www.prostate.org.au/articleLive/pages/Prostate-Cancer-Statistics.html
9.  http://www.cancer.org.au/aboutcancer/cancertypes/breastcancer.htm
10.  The Risk Store
11.  http://www.cancer.org.au/aboutcancer/cancertypes/breastcancer.htm
12.  Australian Institute of Health and Welfare (AIHW) & Australasian Association of Cancer Registries (AACR). Cancer in Australia an overview, 2006. Cancer Series Number 37. Canberra: AIHW, 2007.
13.  Australian Bureau of Statistics (ABS). Causes of death 2007. 3303.0. Canberra: Commonwealth of Australia, March 18 2009.
14.  Australian Institute of Health and Welfare (AIHW) & Australasian Association of Cancer Registries (AACR). Cancer in Australia an overview, 2006. Cancer Series Number 37. Canberra: AIHW, 2007.
15.  http://www.heartfoundation.org.au/Heart_Information/Statistics/Pages/default.aspx
16.  The Risk Store

Source: AIA Australia Limited, September 2011
 

Need Crisis Insurance? 

Call Leenane Templeton today and speak with our team about personal insurance

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]]> More reasons to have a SMSF https://financialplanner-newcastle.com.au/more-reasons-to-have-a-smsf/ Thu, 26 Jan 2012 00:40:28 +0000 http://financialplanner-newcastle.com.au/?p=953 More Reasons to have your own Self Managed Super Fund The Superannuation Complaints Tribunal's latest annual report shows that more than half of the complaints they received for the 2010-11 year involved superannuation administration issues. Additionally, 33% involved the distribution of death benefits with a further 13% relating to the payment of disability insurance claims. Some of the administration issues included: delays in the time taken action switches between investment options; delays in rolling money over to another superannuation fund; insurance premium deductions; investment returns; delays between the date of resignation or retirement and the rollover or payment of the benefit "These are all further reasons why self managed super funds are a premium option for consideration" commented  Andrew Frith of the Self-Managed Super Specialists.  "When you are the trustee and the member of your self managed super fund the fund and the funds available for retirement are top of mind, not delegated to some large administration organisation which may or may not even be in Australia." Speak with our award winning Newcastle financial advisor and self managed super fund expert  Andrew Frith   Do you have, a self-managed super fund? or are you thinking about a SMSF?   Leenane Templeton are running […]

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]]> More Reasons to have your own Self Managed Super Fund

The Superannuation Complaints Tribunal's latest annual report shows that more than half of the complaints they received for the 2010-11 year involved superannuation administration issues.

Additionally, 33% involved the distribution of death benefits with a further 13% relating to the payment of disability insurance claims.

Some of the administration issues included:

  • delays in the time taken action switches between investment options;
  • delays in rolling money over to another superannuation fund;
  • insurance premium deductions;
  • investment returns;
  • delays between the date of resignation or retirement and the rollover or payment of the benefit

"These are all further reasons why self managed super funds are a premium option for consideration" commented  Andrew Frith of the Self-Managed Super Specialists.  "When you are the trustee and the member of your self managed super fund the fund and the funds available for retirement are top of mind, not delegated to some large administration organisation which may or may not even be in Australia."

Speak with our award winning Newcastle financial advisor and self managed super fund expert  Andrew Frith
 

Do you have, a self-managed super fund? or are you thinking about a SMSF?   Leenane Templeton are running a SMSF Trustee Seminar on 17 October 2012.  The SMSF Seminar aims to give the trustees or would be trustees an insight into the issues and strategies available in self-managed or family superannuation funds.  Guest speakers will include Paul Chin – Senior Investment Analyst at Vanguard Investments and Andrew Frith, CEO of The Self Managed Super Specialists.  For more details email events@leenanetempleton.com.au   

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]]> Winner of Best Practice Awards https://financialplanner-newcastle.com.au/winner-of-best-practice-awards/ Thu, 24 Nov 2011 09:42:14 +0000 http://financialplanner-newcastle.com.au/?p=892 Andrew Frith Wins Best Practice Award The Financial Planning Association of Australia  (FPA) was pleased to announce today that Andrew Frith of Leenane Templeton Wealth Management, based in Newcastle NSW,  is the inaugural winner of the Newcastle Chapter Associate Financial Planner Best Practice Awards 2011. Replacing the previous Value of Advice Awards, the FPA’s Best Practice Awards recognise the superior outcomes for clients when professional financial planning expertise is provided in line with the FPA Code of Professional Practice and Code of Ethics. For the first time, to recognise achievements at the grass-roots level, submissions for the Best Practice Awards have been awarded at Chapter level with Andrew Frith of Leenane Templeton winning the FPA Associate Financial Planner Best Practice Award. "This award demonstrates our high standards of professionalism and commitment to providing valuable advice and service to our clients, we believe in placing the clients interests first rather than our own" said Andrew Frith of Leenane Templeton Wealth Management Pty Ltd. Andrew, a Chartered Accountant and specialist in self-managed superannuation, has also been recognised in the past as one of the top 10 financial planners in Australia awarded by AFR Smart Investor.   For further details email wealth@leenanetempleton.com.au     […]

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]]> Andrew Frith Wins Best Practice Award

Financial Planning Best Practice Awards

The Financial Planning Association of Australia  (FPA) was pleased to announce today that Andrew Frith of Leenane Templeton Wealth Management, based in Newcastle NSW,  is the inaugural winner of the Newcastle Chapter Associate Financial Planner Best Practice Awards 2011.

Replacing the previous Value of Advice Awards, the FPA’s Best Practice Awards recognise the superior outcomes for clients when professional financial planning expertise is provided in line with the FPA Code of Professional Practice and Code of Ethics.

For the first time, to recognise achievements at the grass-roots level, submissions for the Best Practice Awards have been awarded at Chapter level with Andrew Frith of Leenane Templeton winning the FPA Associate Financial Planner Best Practice Award.

"This award demonstrates our high standards of professionalism and commitment to providing valuable advice and service to our clients, we believe in placing the clients interests first rather than our own" said Andrew Frith of Leenane Templeton Wealth Management Pty Ltd.

Andrew, a Chartered Accountant and specialist in self-managed superannuation, has also been recognised in the past as one of the top 10 financial planners in Australia awarded by AFR Smart Investor.   For further details email wealth@leenanetempleton.com.au

 

Newcastle Financial Planning Awards Andrew Frith

 

for more details visit our website at http://financialplanner-newcastle.com.au 

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]]> Newcastle Financial Planner Wins Best Practice Award https://financialplanner-newcastle.com.au/newcastle-financial-planner-wins-best-practice-award/ Wed, 16 Nov 2011 05:39:16 +0000 http://financialplanner-newcastle.com.au/?p=883   Newcastle local Andrew Frith wins Industry Association Best Practice Award       For information about Andrews "2012 Australia's Top 50 Financial Planner Award" please click here. Sydney, 16 November 2011:  The Financial Planning Association (FPA) is pleased to announce Andrew Frith, from Leenane Templeton Chartered Accountants & Business Advisors, as the Newcastle winner of the 2011 FPA’s Associate Financial Planner (AFP®) Best Practice Award. The Best Practice Awards are intended to encourage and highlight the achievements of financial planning professionals who demonstrate their commitment to excellence by providing advice in line with the industry’s leading benchmark standards, the FPA Code of Professional Practice and Code of Ethics.  More specifically, they recognise and highlight the achievements of financial planning professionals who achieve superior outcomes on behalf of their clients. This year marks the first time that the Awards will be awarded at Chapter level, in recognition of the diverse nature and needs of clients from different parts of the country. “Financial advice is far from a ‘one size fits all’ service and these Awards acknowledge the variety of skills and specialist understanding required to meet the personalised needs of clients from many different walks of life,” said FPA CEO, […]

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]]>  

Newcastle local Andrew Frith wins Industry Association Best Practice Award

 

 

 

For information about Andrews "2012 Australia's Top 50 Financial Planner Award" please click here.

Sydney, 16 November 2011:  The Financial Planning Association (FPA) is pleased to announce Andrew Frith, from Leenane Templeton Chartered Accountants & Business Advisors, as the Newcastle winner of the 2011 FPA’s Associate Financial Planner (AFP®) Best Practice Award.

The Best Practice Awards are intended to encourage and highlight the achievements of financial planning professionals who demonstrate their commitment to excellence by providing advice in line with the industry’s leading benchmark standards, the FPA Code of Professional Practice and Code of Ethics. 

More specifically, they recognise and highlight the achievements of financial planning professionals who achieve superior outcomes on behalf of their clients. This year marks the first time that the Awards will be awarded at Chapter level, in recognition of the diverse nature and needs of clients from different parts of the country.

“Financial advice is far from a ‘one size fits all’ service and these Awards acknowledge the variety of skills and specialist understanding required to meet the personalised needs of clients from many different walks of life,” said FPA CEO, Mark Rantall.

“Our FPA members are often active members of their local community and when they achieve excellence they deserve to be recognised as providers of a vital and valuable service that supports their fellow community members,” said Mr Rantall. 

Mr Rantall congratulated Andrew Frith on his outstanding entry, which included practical examples of advice given in a variety of client situations.

“In any profession it is vital to recognise ‘the best of the best’, those who upon objective analysis display high standards of professionalism, integrity and expertise,” said Mr Rantall.  “Andrew’s entry showcased the way his skill, knowledge and integrity translate into high quality advice and positive outcomes for his clients.”

“I’m delighted to receive this award.  It’s a real honour to be recognised for my commitment as a professional financial planner, especially because it relates to the results gained for clients, said Award recipient, Andrew Frith. “Because when it comes down to it, is what we can do for our clients – many of whom are our friends and neighbours – that lies at the heart of what the FPA is all about.”

Newcastle Financial Planner wins award

 

~ Ends ~

 

 

For all media enquiries, please contact:

Harlan Marriott, Leenane Templeton Chartered Accountants & Business Advisors 


P: 02 4926 2300 | E: www.leenanetempleton.com.au  W: www.financialplanner-newcastle.com.au

Note to journalists

The Financial Planning Association of Australia (FPA) is the peak professional body for financial planning in Australia. It has a network of 32 Chapters across the country, which provides business and professional development activities for more than 10,000 members. This includes around 8,000 practitioner members who manage the financial affairs of more than 5 million Australians whose investments are valued at $630 billion.

 

For further information on the FPA visit www.fpabestpractice.com.au. 

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]]> Risk Insurance https://financialplanner-newcastle.com.au/risk-insurance-2/ Tue, 25 Oct 2011 10:09:55 +0000 http://financialplanner-newcastle.com.au/?p=850 Do You Have Adequate Risk Insurance? Many people go through enough pain and grief when dealing with their illness or injury, let alone the stress that comes along with not having an income to support their family. That’s why it is important to ensure you have the appropriate risk insurance or risk cover in place.   Risk Insurance A Claimant's Story Geoff and his adviser David’s real names have not been used to protect their privacy. Geoff thought the world was at his feet as he prepared himself for retirement, until he was diagnosed with a life threatening illness. The following is an extract from a letter Geoff’s insurance provider received from him… Six weeks ago I was diagnosed with bowel cancer and secondary liver cancer. My initial diagnosis was three to six months and I was facing the possibility of a major operation to remove the cancer in my bowel. By the afternoon, after my second visit to the specialist, my life expectancy had been reduced to between six weeks and three months. I phoned my insurance adviser David, who I had known for 19 years and who had originally assisted in putting my insurance cover in place. Within three […]

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]]> Do You Have Adequate Risk Insurance?


Many people go through enough pain and grief when dealing with their illness or injury, let alone the stress that comes along with not having an income to support their family. That’s why it is important to ensure you have the appropriate risk insurance or risk cover in place.

 

Risk Insurance A Claimant's Story

Geoff and his adviser David’s real names have not been used to protect their privacy.

Geoff thought the world was at his feet as he prepared himself for retirement, until he was diagnosed with a life threatening illness.

The following is an extract from a letter Geoff’s insurance provider received from him…

Six weeks ago I was diagnosed with bowel cancer and secondary liver cancer.

My initial diagnosis was three to six months and I was facing the possibility of a major operation to remove the cancer in my bowel. By the afternoon, after my second visit to the specialist, my life expectancy had been reduced to between six weeks and three months.

I phoned my insurance adviser David, who I had known for 19 years and who had originally assisted in putting my insurance cover in place. Within three days of submitting a claim, I received my first payment of $653,535 and then another payment which brought the total payment to over $1.2 million.

Although I have not met the people who have been involved, David kept me informed of everyone’s efforts to ensure that my claim was processed in the most efficient manner. I am sure this has a lot to do with the excellent relationship that he has with my insurer and the fact that the right advice was given in our situation.

I would like to express our thanks for relieving me of the financial burden and worry that I would have faced if I did not have this cover.

The payments from his insurance enabled Geoff to obtain an expensive medical treatment from Japan, only available to a few patients around the world. After taking this medication for over six months, Geoff was recently informed that his once-inoperable cancer is now operable.

This surgery will hopefully extend Geoff’s life expectancy significantly, enabling him to spend more time with his family.

Speak with your financial planner today to ensure you have adequate risk cover in place.

Source: AIA Australia Limited, June 2011

 



 

Our Newcastle Financial advisors are happy to help discuss your risk cover needs and risk insurance options.

Risk Insurance

 

 

 

 

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]]> Testamentary Trusts https://financialplanner-newcastle.com.au/testamentary-trusts/ Tue, 18 Oct 2011 00:45:44 +0000 http://financialplanner-newcastle.com.au/?p=839 Testamentary Trusts – Take control and gain peace of mind By creating a testamentary trust, your long term plans for your estate can be fulfilled. The process is simple and the peace of mind is priceless. These are just some of the many benefits of Testamentary Trusts: benefits of estate tax reduction strategies. restriction of access to the assets and income of the estate by your beneficiaries. ability to provide care for the mentally disabled. Testamentary Trusts Case Study Mark and Rebecca loved travelling and often took their children Jessica and Michelle on day trips along the coast on weekends and holidays. Unfortunately, on one of the weekend holidays, the family was in a serious car crash, killing Mark and Rebecca. Although both children survived, Jessica’s back was broken and her hospital bills and ongoing care turned out to be far more costly than Michelle’s. In their Wills, both Mark and Rebecca had equally divided their money and assets left to their children. However, the executor of Mark and Rebecca’s estate, Rebecca’s mother, felt that with Jessica’s ongoing care, her financial needs were far greater than Michelle’s. Rebecca’s mother feared that if she gave Jessica a greater share than what […]

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]]> Testamentary Trusts – Take control and gain peace of mind

By creating a testamentary trust, your long term plans for your estate can be fulfilled. The process is simple and the peace of mind is priceless.

These are just some of the many benefits of Testamentary Trusts:

  • benefits of estate tax reduction strategies.
  • restriction of access to the assets and income of the estate by your beneficiaries.
  • ability to provide care for the mentally disabled.

Testamentary Trusts Case Study

Mark and Rebecca loved travelling and often took their children Jessica and Michelle on day trips along the coast on weekends and holidays. Unfortunately, on one of the weekend holidays, the family was in a serious car crash, killing Mark and Rebecca.

Although both children survived, Jessica’s back was broken and her hospital bills and ongoing care turned out to be far more costly than Michelle’s.

In their Wills, both Mark and Rebecca had equally divided their money and assets left to their children. However, the executor of Mark and Rebecca’s estate, Rebecca’s mother, felt that with Jessica’s ongoing care, her financial needs were far greater than Michelle’s. Rebecca’s mother feared that if she gave Jessica a greater share than what was outlined in the Wills, she may be held liable by Michelle when she was older.

If Mark and Rebecca had seen a professional financial planner, they would likely have been advised to arrange testamentary trusts for Jessica and Michelle as well as another trust to provide for unseen or unequal needs.

 

It is extremely important to seek professional financial advice first. This advice will assist you make the best decisions for you and your family’s circumstances and establish an estate plan that fulfils your wishes.

Your financial planner can help you take control of your assets and income – while capitalising on your tax efficiency – to ensure your estate is distributed according to your wishes.

By being in control, you and your family can enjoy peace of mind. Talk to your financial planner about testamentary trusts today.

Source: Lonsdale Financial Group Limited
 

 

Speak to our Newcastle financial advisors about your estate strategies and

Testamentary Trusts

 

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]]> Living Longer – Making Your Retirement Savings Last https://financialplanner-newcastle.com.au/living-longer-making-your-retirement-savings-last-2/ Tue, 11 Oct 2011 00:13:50 +0000 http://financialplanner-newcastle.com.au/?p=826 Will Your Retirement Savings Last? It’s no secret we are all living longer: female baby boomers have a 50% chance of living beyond age 90, and males a 34% chance. But before you start planning how many more overseas trips or rounds of golf you can squeeze into these extra post retirement years, there is the small matter of how to pay for it with your retirement savings. It is a serious issue to know about longevity risk; longer living means taking extra measures to ensure an appropriate income to maintain your desired lifestyle for those 25-odd post retirement years. The key to managing longevity risk is to boost earnings, manage drawdowns, accelerate returns and time taxation accurately (see Figure 1). However many Australians are not conscious enough of longevity risk and ways to mitigate this risk. For example, in the aftermath of the global financial crisis many people flooded money too heavily into term deposits which they perceived as safer. In fact, term deposits increase longevity risk because the average term deposit interest of around 6%, as well as no capital growth, is not going to be enough to provide a decent income in retirement without having to sell […]

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]]> Will Your Retirement Savings Last?

It’s no secret we are all living longer: female baby boomers have a 50% chance of living beyond age 90, and males a 34% chance. But before you start planning how many more overseas trips or rounds of golf you can squeeze into these extra post retirement years, there
is the small matter of how to pay for it with your retirement savings.

It is a serious issue to know about longevity risk; longer living means taking extra measures to ensure an appropriate income to maintain your desired lifestyle for those 25-odd post retirement years. The key to managing longevity risk is to boost earnings, manage drawdowns, accelerate returns and time taxation accurately (see Figure 1).

However many Australians are not conscious enough of longevity risk and ways to mitigate this risk. For example, in the aftermath of the global financial crisis many people flooded money too heavily into term deposits which they perceived as safer.

In fact, term deposits increase longevity risk because the average term deposit interest of around 6%, as well as no capital growth, is not going to be enough to provide a decent income in retirement without having to sell assets.

Tax considerations are always important for investors but in retirement the benefits can be even greater. The money you save by being smart about tax can help combat longevity risk.

A tax deferred income fund, for example a direct property fund, normally pays distributions to investors. The tax on this income is deferred until the property trust investment is sold, at which point an investor pays tax at their marginal tax rate. The advantage for an investor in or near retirement is this rate could be much lower than their working tax rate. Also capital gains tax rules mean only 50% of the gain is taxable if an investment is held for more than 12 months – this is also relevant to tax deferred income funds.

According to a report Charter Hall recently commissioned with Strategy Steps, a leading provider of technical and investment services, investors need to construct their portfolios carefully to avoid falling into such traps. An example of how a portfolio might be structured using these principles is in Figure 2.

How to longevity-proof your savings: the investment risk/return conundrum

We have established that boosting income and not allocating too much to overly defensive assets like term deposits is important, so the question now is which investments are appropriate for those in or nearing retirement?

It can be difficult to identify income producing investments without taking on too much investment risk near retirement as any major losses can leave an investor with a big hole in their savings and little or no time to recover.

Figure 1 – The four keys to managing longevity risk

 Retirement Savings

 

Income Tax rate Tax deferred amount Taxable amount Tax payable Year 1 $1600 15% $1,120 $480 $72 Year 2 $1600 15% $1,120 $480 $72 Redeem investment 0% $2,400 $0


Figure 2 – Structuring the pension portfolio


Strategy 1: Draw pension from a cash bucket

Aim: Protect against market volatility in the early years by ensuring growth assets do not need to be sold to make pension payments

• Separate the portfolio into cash and growth portfolios and draw the income only from the income portfolio

• Income portfolio will hold secure investments e.g. cash. Place 2-3 years of income in the income bucket/portfolio
• Remainder of the portfolio is in growth based diversified portfolios

 

Strategy 2: Draw pension from balanced/growth portfolio

Aim: Select a portfolio to balance the growth potential and maintain diversification

• The portfolio is constructed based on a strategic asset allocation that fits with the client’s risk profile. This often relies on the use of model portfolios for a balanced or growth risk profile

• Income drawn proportionally from all assets to maintain asset allocation

 

Combating longevity risk by minimising tax

Tax considerations are always important for investors but in retirement the benefits can be even greater. The money you save by being smart about tax can help combat longevity risk.

A tax deferred income fund, for example a direct property fund, normally pays distributions to investors. The tax on this income is deferred until the property trust investment is sold, at which point an investor pays tax at their marginal tax rate. The advantage for an investor in or near retirement is this rate could be much lower than their working tax rate. Also capital gains tax rules mean only 50% of the gain is taxable if an investment is held for more than 12 months – this is also relevant to tax deferred income funds.

Case study:

Adrian is two years away from retirement and invests $20,000 in a direct property trust via his self managed superannuation fund (SMSF). The investment pays an income distribution of 8%, of which 70% is tax deferred. The tax rate of Adrian’s super fund is 15%.

Adrian’s super fund will receive an income return from the property trust of $1,600 p.a. of which $1,120 is tax deferred and $480 is taxable in each financial year. This equates to Adrian paying $72 in tax each financial year as the tax on the remaining income amount is deferred until the investment is sold.

At retirement, Adrian transfers the investment from his super fund to allocated pension funds. This does not trigger an income or capital gains tax (CGT) event.

Adrian decides to redeem the direct property investment after he retires. The deferred income amounts are included in the CGT calculation. Any CGT is taxed at the pension funds marginal tax rate, which is zero. Effectively Adrian pays no tax on any capital gain made on the trust and the deferred tax income amounts are tax free.

Newcastle Financial Tax

Thanks to the tax deferred component and zero capital gain tax payable, Adrian’s SMSF is $336 better off (i.e. tax payable – tax paid x 2 years, or $480 – $72 x 2 years).

Figure 3 – Comparison of strategies
 

The good news is there are some retirement savings solutions for those wanting high income and capital growth without the risk of volatility and investment losses that may come with higher growth assets.

For instance, direct property funds provide high, tax effective income and capital growth. Direct property is less dependent on the investment cycle, less volatile and has low correlation to the share market. See Figure 3 for a graph comparing the returns on various portfolios including direct property, which shows those that include direct property can perform better.

As outlined in Figure 3, over a ten year period, including the global financial crisis, Strategy 1 with the provision of up to 3 years cash for pension payments, provides greater preservation of capital and a higher portfolio balance. Where direct property is included in both Strategy 1 and Strategy 2, better investment results are produced.

With this in mind, investors should be aware of longevity risk and work with their adviser to help manage this risk. Speak with your financial planner about how to increase the longevity of your retriement savings.

Source: Richard Stacker, CEO Charter Hall, Direct Property


Disclaimer

 

For further information about your retirement savings please speak with your Newcastle Financial advisors also see the Self Managed Super Funds website.

 

 

 

click the following link for further retirement planning examples

Retirement Savings

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