It is very important to know that strategies to maximise returns usually increase investment risk. I need to consider risk
profile and whether a particular strategy is right for my situation.
1. Reinvest distributions - simple strategy
2. Invest regularly - pay your self first - set aside certain amount of my pay packet
3. Borrow to invest - Gearing
Spend money to make money
4. Make the most of Superannuation - the most tax effective way to save for retirement. It is not just 9% of my salary. This is my money!!
Sunday
Retirement Strategies
1. The re-contribution strategy
This involves cashing out some of your super, paying any lump sum tax, and re-contributing it into either your super account or your spouse’s super account. If you are over 55 and under 60, you can cash out up to $150,000 of your taxable component and pay no tax. This may sound a little strange, but it may save you significantly in tax. When you re-contribute the money back into your super account, it is classified as non-concessional (after-tax) contribution, which increases your tax free income in retirement.
This strategy may not be worthwhile if you intend to retire after age 60. However, it still may be useful as it may save your non-dependant beneficiaries (eg adult children who are not financially dependant on you) a significant amount of tax later on. Additionally, if you retire before age 60, this strategy may provide you with a tax effective income stream, so speak with your financial adviser to find out more.
2. Claiming personal deductions
You might use this strategy if you sell an asset which triggers a capital gain. If you are eligible to make a personal concessional contribution (eg you are self employed), you can offset any assessable capital gains up to your concessional cap.
If you are under age 50 on the last day of the financial year your concessional cap is $25,000 pa (indexed). If you are 50 or over you are entitled to a $50,000 pa cap until 30 June 2012.
3. Access your super while you’re still working
If you’re over 55 and under 60 you can now access your super in the form of a pre-retirement pension while you’re still working.
source: www.colonialfirststate.com.au
This involves cashing out some of your super, paying any lump sum tax, and re-contributing it into either your super account or your spouse’s super account. If you are over 55 and under 60, you can cash out up to $150,000 of your taxable component and pay no tax. This may sound a little strange, but it may save you significantly in tax. When you re-contribute the money back into your super account, it is classified as non-concessional (after-tax) contribution, which increases your tax free income in retirement.
This strategy may not be worthwhile if you intend to retire after age 60. However, it still may be useful as it may save your non-dependant beneficiaries (eg adult children who are not financially dependant on you) a significant amount of tax later on. Additionally, if you retire before age 60, this strategy may provide you with a tax effective income stream, so speak with your financial adviser to find out more.
2. Claiming personal deductions
You might use this strategy if you sell an asset which triggers a capital gain. If you are eligible to make a personal concessional contribution (eg you are self employed), you can offset any assessable capital gains up to your concessional cap.
If you are under age 50 on the last day of the financial year your concessional cap is $25,000 pa (indexed). If you are 50 or over you are entitled to a $50,000 pa cap until 30 June 2012.
3. Access your super while you’re still working
If you’re over 55 and under 60 you can now access your super in the form of a pre-retirement pension while you’re still working.
source: www.colonialfirststate.com.au
Term Deposits
Fixed term deposits are a secure cash investment that only requires a minimum opening balance of $5,000 to get it started.
With a term deposit i have the peace of mind of knowing exactly what your interest rate will be for the fixed duration of the term
Westpac Term deposits
- no set up , monthly service or management fees
- fixed investment terms ranging from 7 days - 60 months
- special rates on selected terms
- options to reinvest or access funds at maturity
Rates:
With a term deposit i have the peace of mind of knowing exactly what your interest rate will be for the fixed duration of the term
Westpac Term deposits
- no set up , monthly service or management fees
- fixed investment terms ranging from 7 days - 60 months
- special rates on selected terms
- options to reinvest or access funds at maturity
Rates:
Managed Funds
The Wilson HTM Priority Growth fund is an actively managed fund of up to 40 primarily small and mid cap Australian companies with strong growth prospects. The Fund is the No.1 ranked Australian Equity fund based on 3 year returns1, and has returned over 30% p.a.since its inception in 2005.
Latest Fund Performance:
- positive one year return of 99.8% and the highest 5 star morningstar rating
- no.1 out all of Australian equity managed funds based on its 3 year return of 14.16%p.a.
- a return of over 30% p.a. since inception in July 2005.
Wilson HTM priority growth fund returns VS market indices
Latest Fund Performance:
- positive one year return of 99.8% and the highest 5 star morningstar rating
- no.1 out all of Australian equity managed funds based on its 3 year return of 14.16%p.a.
- a return of over 30% p.a. since inception in July 2005.
Wilson HTM priority growth fund returns VS market indices
Sophisticated Estate Planning Strategies
key point
- consider tax efficient strategies for gifting and estate planning
Gifting strategies
1. Qualified personal residence trust
A QPRT allows the transfer of a residence into trust for gift purposes, while retaining the right to live there for a period of years. At the end of the term, the residence is transferred to the beneficiary.
Here's what makes this strategy effective: The value of the transfer for gift tax purposes is calculated as the present value of the remainder interest. The right to stay in the house has value, and that value is deducted from the gift. What’s more, any future appreciation after the transfer to trust is not included in the grantor’s estate. The grantor may also arrange to stay in the house at the end of the term at fair market rent.
There are a couple of caveats here. First, the QPRT strategy works better when interest rates are higher, because a higher discount rate (the IRS determines the discount rate) means the present value of the portion of the home subject to gift tax is lower. Also, the longer the term of the QPRT, the smaller the gift will be for tax purposes. But, the grantor must outlive the trust’s term or the value of the home will be brought back into the gross estate, so you’ll need to plan accordingly for this trade-off.
2. Grantor retained annuity trust
With a GRAT, the grantor transfers assets to a trust for a period of years. During the term, the grantor receives an annuity from the trust and at the end of the term the remaining assets pass to the beneficiary.
The annuity payments reduce the gift’s value for gift tax purposes, which is determined at the time of transfer into the trust. As long as the assets in the trust perform better than the discount rate, this can be an extremely effective transfer strategy. A low interest rate environment is better for GRATs because the assets will have a better chance of outperforming the hurdle rate. Additionally, GRATs work especially well with assets that are currently depressed in value but have the potential for significant appreciation.
Warning: Even though a GRAT can be set up for a relatively short period of years, if the grantor dies during the trust’s term the assets are brought back into the gross estate.
3. Crummey power trust
One of the tax principles of gifting is that in order for the gift to qualify for the annual $13,000 exclusion ($26,000 for spouses), it must be a present interest—in other words, the recipient must have present use of the gift, not some future interest.
However, there are some exceptions to this rule when it comes to children. With a minor’s trust (under section 2503(c) of the Internal Revenue Code) or a custodial account (UTMA or UGMA), the gift counts for purposes of the annual exclusion even though the minor doesn’t get control of the assets until age 21.
The Crummey power trust (named after the taxpayer who first utilized the strategy) provides more flexibility. Transfers to the trust qualify as a present interest, and you can write in your own rules about when and how the beneficiary ultimately receives control of the assets.
The beneficiary of a Crummey power trust gets a limited period of time during which he or she can withdraw the annual contribution to the trust, after which the contribution becomes subject to the provisions and terms of the trust. As long as this "Crummey power" is available, the gift qualifies for the annual exclusion, whether the power is exercised or not (if the beneficiary hopes to enjoy future contributions to the trust, he or she would typically not exercise the power). Crummey powers are often utilized with irrevocable life insurance trusts.
4. Irrevocable life insurance trust
Life insurance is often used in estate planning to provide liquidity in the case of closely held or hard-to-sell assets (a family business, family farm, significant real estate holdings, etc.) or as a wealth replacement vehicle to provide for family members in the face of estate tax liabilities or charitable bequests.
However, even though life insurance proceeds are generally income tax free to the beneficiary, they’re included in the decedent’s gross estate as long as the decedent owns the policy.
The most effective way to avoid this problem is with an irrevocable life insurance trust. As long as the trust owns the policy, the proceeds are outside the estate and will pass free of both income and estate taxes. The best strategy is for the trust to purchase the policy, because the transfer of an existing policy within three years of death will bring the proceeds back into the estate.
5. Family limited partnership
An FLP can be an effective way to manage and control family assets while providing for the tax-effective transfer of wealth to others.
In the typical arrangement, mom and dad gift the majority of the partnership to family members in the form of limited partnership interests. Because limited partners have no say in running the partnership and usually can’t sell or borrow against their interests, valuation discounts arising from lack of liquidity and marketability will apply for gift tax purposes. Additional valuation discounts may apply to the assets themselves (for example, illiquid small business, undivided interests in real estate, etc.).
Structured correctly, FLPs can be a valuable planning tool. However, overly aggressive structures that seek unreasonable valuation discounts or run afoul of the rules in some other respect may invite unwanted scrutiny from tax authorities. For this reason, it's very important to work with a reputable expert when considering a family limited partnership.
Source: www.schwab.com
- consider tax efficient strategies for gifting and estate planning
Gifting strategies
1. Qualified personal residence trust
A QPRT allows the transfer of a residence into trust for gift purposes, while retaining the right to live there for a period of years. At the end of the term, the residence is transferred to the beneficiary.
Here's what makes this strategy effective: The value of the transfer for gift tax purposes is calculated as the present value of the remainder interest. The right to stay in the house has value, and that value is deducted from the gift. What’s more, any future appreciation after the transfer to trust is not included in the grantor’s estate. The grantor may also arrange to stay in the house at the end of the term at fair market rent.
There are a couple of caveats here. First, the QPRT strategy works better when interest rates are higher, because a higher discount rate (the IRS determines the discount rate) means the present value of the portion of the home subject to gift tax is lower. Also, the longer the term of the QPRT, the smaller the gift will be for tax purposes. But, the grantor must outlive the trust’s term or the value of the home will be brought back into the gross estate, so you’ll need to plan accordingly for this trade-off.
2. Grantor retained annuity trust
With a GRAT, the grantor transfers assets to a trust for a period of years. During the term, the grantor receives an annuity from the trust and at the end of the term the remaining assets pass to the beneficiary.
The annuity payments reduce the gift’s value for gift tax purposes, which is determined at the time of transfer into the trust. As long as the assets in the trust perform better than the discount rate, this can be an extremely effective transfer strategy. A low interest rate environment is better for GRATs because the assets will have a better chance of outperforming the hurdle rate. Additionally, GRATs work especially well with assets that are currently depressed in value but have the potential for significant appreciation.
Warning: Even though a GRAT can be set up for a relatively short period of years, if the grantor dies during the trust’s term the assets are brought back into the gross estate.
3. Crummey power trust
One of the tax principles of gifting is that in order for the gift to qualify for the annual $13,000 exclusion ($26,000 for spouses), it must be a present interest—in other words, the recipient must have present use of the gift, not some future interest.
However, there are some exceptions to this rule when it comes to children. With a minor’s trust (under section 2503(c) of the Internal Revenue Code) or a custodial account (UTMA or UGMA), the gift counts for purposes of the annual exclusion even though the minor doesn’t get control of the assets until age 21.
The Crummey power trust (named after the taxpayer who first utilized the strategy) provides more flexibility. Transfers to the trust qualify as a present interest, and you can write in your own rules about when and how the beneficiary ultimately receives control of the assets.
The beneficiary of a Crummey power trust gets a limited period of time during which he or she can withdraw the annual contribution to the trust, after which the contribution becomes subject to the provisions and terms of the trust. As long as this "Crummey power" is available, the gift qualifies for the annual exclusion, whether the power is exercised or not (if the beneficiary hopes to enjoy future contributions to the trust, he or she would typically not exercise the power). Crummey powers are often utilized with irrevocable life insurance trusts.
4. Irrevocable life insurance trust
Life insurance is often used in estate planning to provide liquidity in the case of closely held or hard-to-sell assets (a family business, family farm, significant real estate holdings, etc.) or as a wealth replacement vehicle to provide for family members in the face of estate tax liabilities or charitable bequests.
However, even though life insurance proceeds are generally income tax free to the beneficiary, they’re included in the decedent’s gross estate as long as the decedent owns the policy.
The most effective way to avoid this problem is with an irrevocable life insurance trust. As long as the trust owns the policy, the proceeds are outside the estate and will pass free of both income and estate taxes. The best strategy is for the trust to purchase the policy, because the transfer of an existing policy within three years of death will bring the proceeds back into the estate.
5. Family limited partnership
An FLP can be an effective way to manage and control family assets while providing for the tax-effective transfer of wealth to others.
In the typical arrangement, mom and dad gift the majority of the partnership to family members in the form of limited partnership interests. Because limited partners have no say in running the partnership and usually can’t sell or borrow against their interests, valuation discounts arising from lack of liquidity and marketability will apply for gift tax purposes. Additional valuation discounts may apply to the assets themselves (for example, illiquid small business, undivided interests in real estate, etc.).
Structured correctly, FLPs can be a valuable planning tool. However, overly aggressive structures that seek unreasonable valuation discounts or run afoul of the rules in some other respect may invite unwanted scrutiny from tax authorities. For this reason, it's very important to work with a reputable expert when considering a family limited partnership.
Source: www.schwab.com
Mortgage payments
Tips to pay off mortgage:
1. Pay mortgage fortnightly.
2. Pay lump sum twice a year.
3. Increase repayments
4. For my current situation - START SAVING MONEY.
5. Offset loans with a savings account - mortgage offsetting
Finding Best Loan
1. Income can be paid directly into home equity loan
2. Make interest only payments
3. No early payout/ exit fees
4. Fully transferable to other properties
5. Same interest rates for personal & investment debts.
6. Receive monthly statements
1. Pay mortgage fortnightly.
2. Pay lump sum twice a year.
3. Increase repayments
4. For my current situation - START SAVING MONEY.
5. Offset loans with a savings account - mortgage offsetting
Finding Best Loan
1. Income can be paid directly into home equity loan
2. Make interest only payments
3. No early payout/ exit fees
4. Fully transferable to other properties
5. Same interest rates for personal & investment debts.
6. Receive monthly statements
Investment banks see bright future in the equity market
Sydney Morning Herald - 5th Feb 2010 - Jessica Irvine ECONOMICS WRITER
INVESTMENT banks are getting a makeover. After the testosterone charged days of the global financial crisis and the sharemarket bubble that preceded it, more banks are seeking to hire women to balance out their male-dominated trading floors.
And as regulators worldwide seek to clamp down on high risk investments by banks, studies suggest a shift to a more gender neutral workforce could assist.
A study by US finance professors in 2001 found male investors tended to suffer overconfidence, which led them to trade more often in search of profit. Females traded less, but made more money in the long run because of the costs incurred by men in trading.
But life's not all perfume and pearls for women in investment banking. In a recent panel discussion with the Herald, nine young female bankers at UBS said that while the "boys' club" of investment banking was dead, it takes a certain type of woman to cut it.
"Women can be aggressive in their own way," said Janelle Manchee, an equities trader at UBS's Sydney Office. "You do have to shout, but there's nothing wrong with shouting."
UBS has teamed up with seven other banks, including Deutsche Bank, Goldman Sachs JB Were, and Macquarie Group, to encourage year 12 female students to consider a career in finance.
UBS's head of recruitment, Emilie Everett, said women accounted for just 40 per cent of applications for graduate positions at the bank. From that, UBS will interview a 50:50 split of men and women, from which only 35 per cent of new recruits last year were ultimately women. She said there was no clear reason for the drop-off.
"Thirty or 40 years ago when it was a boys' club it was different," she said.
But "it is still very competitive. It is an aggressive industry. It tends to attract more men".
But Lisa Zhou, a fixed income trader, said women could be just as easily suited to the trading floor. "I don't think it matters. We're the type of person who, you're not a soft sort of person. You have got to be thick-skinned. That's part of the fun of the job, taking risks every day."
This sort of risk-taking has earned investment bankers public scorn overseas. But Liya Wu, a cadet in finance at UBS, says she hasn't noticed any backlash against the industry in Australia.
"I don't think there's that much of a perception change. We weren't here when it was supposed to be glamorous when people were going out to lunch all the time. Those days are gone."
INVESTMENT banks are getting a makeover. After the testosterone charged days of the global financial crisis and the sharemarket bubble that preceded it, more banks are seeking to hire women to balance out their male-dominated trading floors.
And as regulators worldwide seek to clamp down on high risk investments by banks, studies suggest a shift to a more gender neutral workforce could assist.
A study by US finance professors in 2001 found male investors tended to suffer overconfidence, which led them to trade more often in search of profit. Females traded less, but made more money in the long run because of the costs incurred by men in trading.
But life's not all perfume and pearls for women in investment banking. In a recent panel discussion with the Herald, nine young female bankers at UBS said that while the "boys' club" of investment banking was dead, it takes a certain type of woman to cut it.
"Women can be aggressive in their own way," said Janelle Manchee, an equities trader at UBS's Sydney Office. "You do have to shout, but there's nothing wrong with shouting."
UBS has teamed up with seven other banks, including Deutsche Bank, Goldman Sachs JB Were, and Macquarie Group, to encourage year 12 female students to consider a career in finance.
UBS's head of recruitment, Emilie Everett, said women accounted for just 40 per cent of applications for graduate positions at the bank. From that, UBS will interview a 50:50 split of men and women, from which only 35 per cent of new recruits last year were ultimately women. She said there was no clear reason for the drop-off.
"Thirty or 40 years ago when it was a boys' club it was different," she said.
But "it is still very competitive. It is an aggressive industry. It tends to attract more men".
But Lisa Zhou, a fixed income trader, said women could be just as easily suited to the trading floor. "I don't think it matters. We're the type of person who, you're not a soft sort of person. You have got to be thick-skinned. That's part of the fun of the job, taking risks every day."
This sort of risk-taking has earned investment bankers public scorn overseas. But Liya Wu, a cadet in finance at UBS, says she hasn't noticed any backlash against the industry in Australia.
"I don't think there's that much of a perception change. We weren't here when it was supposed to be glamorous when people were going out to lunch all the time. Those days are gone."
top 10 superannuation & tax strategies
I have downloaded an E- book from the internet which outlines top strategies on superannuation and tax.
1. Save tax by adding to spouse's super
2. Get government to top up my super
3. sacrifice salary and save tax
4. make personal deductible super contributions
5. offset capital gains tax with super
6. purchase insurance through your super fund and save
7. delay withdrawing super benefits to save lump sum tax
8. defer asset sales to manage capital gains tax
9. pay 12 months interest in advance on an investment loan
10. pay for 12 months income protection insurance premiums in advance
Subscribe to:
Comments (Atom)