Are you managing your cash flow effectively?

A well-constructed budget is the key to good financial management.

Do you find it difficult to manage your money so that you have enough to pay your big bills when they are due?  Having a proper budget that you update regularly will make all the difference.

I hear you say ‘but I don’t know where to start’!

The first step is to find a tool to help, one you like using and find easy to use.  There are lots of free budgeting options available on the internet and the Money Smart website is a good place to begin.  Another really useful option are apps on your smartphone, there are many different options including; Pocketbook, YNAB (You Need A Budget), Mvelopes and Mint.

Find your last pay slip and record in your budget tracker the amount of each payment and the frequency that it comes in.  Record any other income and then begin on your expenses.  Start by identifying what are your needs and what are your wants.  Needs are things that just have to be paid e.g. rent, groceries, etc. and wants are the discretionary expenses like dining out, a morning coffee on the way to work.

Populate your spreadsheet with all of the needs for the current week and for the months ahead so that you know when the car registration bill is due and you can leave enough money to pay that bill when it arrives.  How much is left over each pay period after you have paid your necessary expenses?

That amount is all that you have left for the wants.

Do you want to plan for a holiday or a new car?

Identify what you want to do, how much it costs and when it is to be – say you have decided that you want to take a holiday that will cost you $2,000 and you want to go in 6 months’ time.  Look at your budget – you have allowed for the needs, and you know what is left after they have been paid.  Factor in an amount to save each pay as you are entering up your discretionary expenses, or wants. This will tell you if your savings expectation is achievable.  If it is not, then you have to adjust your budget – where can I trim something off the discretionary expenses so I can save what is needed, or do I have to wait longer for the holiday?

Once you are in the habit of watching and tracking what you spend, you will find a budget easy to work with and that you can achieve your goals because you have planned for them.

Please note the information provided in this article is general advice only. It has been prepared without taking into account any person’s individual objectives, financial situation or needs. Before acting on anything in this article you should consider its appropriateness to you, having regard to your objectives, financial situation and needs.

Happy New Year from all the team at The Investment Collective.

What is your New Year’s resolution? Is 2018 the year you achieve it? I’d like to say that the odds are on your side, however, statistics from 2016 show that only about 8% of people achieve their New Year’s resolutions.

Setting goals is always tricky. Many New Year resolutions are either financial or fitness related. Financial and fitness goals are challenging at the best of times, especially if sacrifices or a change in regular behaviour need to be made. Is there another approach?

Setting only one goal will allow you to focus all your energy on achieving a positive outcome. Your financial New Year’s resolution may, for example, involve paying off a credit card. Setting up a regular cash transfer from your spending account after each payday will gradually reduce the amount you owe. These small steps will help in the long run to pay off the credit card by the end of 2018.

Paying off your mortgage is a big hairy audacious goal (BHAG) and an unlikely achievement in one year. However, you can make some simple steps to reduce years of repayments and thousands in interest. Firstly, get your mortgage reviewed from one of our mortgage specialists. Our team will compare a range of lenders to find you the best offer. Secondly, set a monthly repayment amount that is above the minimum required mortgage payment.

Have you set a fitness goal? The same way you consult a financial adviser to help you reach your financial goals, I suggest talking to an expert who can assist you step by step to help you achieve your fitness goals.

Personally, I have only set one goal that is not a BHAG – I’m getting married next year! My goal is to save an additional $10,000 before the wedding. I have also stepped out how I’m going to achieve this goal. The wedding is in one year, so I have a definitive timeframe. My goal is $10,000 and I intend on saving an additional $200 per week. To help me reach this goal, I have taken on an additional job that is flexible and manageable.

As you can see, each step is measurable, time-based and realistic. 2018 is the year I will achieve my goal. Will you achieve your goals, whatever they may be?

Please note this article is prepared as general advice only. It has not taken into account your personal circumstances or financial goals. If you would like financial advice tailored to help you achieve your goals, please contact us and talk to one of our friendly advisers today.

As we head into the festive season, we must pause for thought for all of those who have tragically lost their lives or become seriously injured due to a horrific car accident. Did you know that on average, four people die and 90 are seriously injured on Australian roads every day! Those are some shocking statistics, and sadly the numbers aren’t decreasing. The three biggest contributors to these accidents are speeding, driver fatigue and alcohol and drugs.

Here are some tips to help reduce the likelihood of becoming another victim:

Speeding

We all know what we need to do here, slow down! By lowering your speed by 5km/h on urban roads or 10km/h on highways you will reduce your risk of an accident by half.

Driver fatigue

Ensure you stop every 2 hours for a rest. If you’re not in a location where you can stop for long, pull over to the side of the road and run a few laps around your car. This will get your blood pumping and your alertness up!

Try to avoid heavy meals while driving. Light snacks will keep your body satisfied while a large meal may have adverse effects on your driving ability.

Alcohol and drugs

Again, this one is very simple, don’t drink and drive. Don’t take drugs and drive. This has been pounded into us all since a very young age and yet, we are still having tragic losses because of people under the influence.

Unfortunately, all we can do is control our own actions and decisions, and not those of the other drivers on the road.

However, I do know for certain that every individual who passed away or became seriously injured, didn’t plan for their lives to change. These tragic events could happen to anyone, and it’s more than likely we know someone who has been affected by a road accident, I know I do.

Do yourself and your family a favour and contact us to make an appointment with one of our friendly Risk Advisers today. They will help to assess your need for life insurance and ensure your family is covered should something unexpected occurs.

In recent times, the debate regarding the merits of active versus passive investing has escalated on the back of phenomenal inflows into ETFs (exchange-traded funds) and other low cost passive funds. But is the growing preference for passive investing justified?

Passive investing simply aims to replicate the return of the market. The prime example of the passive approach is through the use of index funds that follows one of the major indices, e.g. the S&P/ASX 200. Whereas active investing adopts a hands-on approach to outperform the market and take full advantage of price fluctuations.

US based news service Bloomberg recently reported that in the first half of 2017, flows out of active and into passive funds reached nearly $500 billion. Looking at the current landscape it’s not hard to see why, passive funds are historically known to perform well when a market is raging forward and poor in a market downturn. Passive ETFs offer low fees, simplicity and transparency while active funds are more complicated and charge higher fees for the additional analysis completed. So when passive outperforms active, it’s not hard to see why passive is currently favoured.

Secondly, when a sector begins to rally forward to the point it becomes overvalued, active funds begin trimming positions to maintain asset allocation. Passive funds, however, continue to buy pushing stock prices up higher which, on the surface, exasperates the underperformance of active funds.

The US index, as measured by the S&P500, is performing superbly since the crisis of 08’. What is concerning, however, is that much of its gains can be attributed to the funds flowing into five particular companies: Amazon, Google, Microsoft, Apple and Facebook. The majority of those funds can be traced back to “in fashion” technology-based ETFs.

This situation really supports the idea that the immense growth of passive index funds is resulting in a far more volatile and less rational market where certain stocks and sectors are being stretched to dangerous levels. This begs to ask what happens when the stock market falls and investors look to exit their position when their capital is invested in  ETFs that are over-weight in overvalued stocks that are the most susceptible to fall.

Even our own stock index, the ASX200,  shows that our market is weighted toward large, mature companies offering high payout ratios (higher dividends and less money put aside for new growth projects). A high payout ratio leaves little room for reinvesting back into the company to provide for future growth. Buying into an overvalued company that lacks the ability to grow is concerning but a passive index fund will continue to buy, as the company is part of the index.

Warren Buffet has promoted index funds and their suitability for the uninformed investor – the investor who has no interest in understanding or valuing a business. What this outlines is the appeal of ETFs as they are seen as “safe” and “easy”; in comparison to active investing which is viewed as complex and expensive. What investors fail to realise are the limitations and risks associated with index funds.

The debate of passive versus active will likely go on forever, as markets rally investors will reap the benefits of following the index as a result of lower fees and strong performance. Whereas active investors will outperform in times of uncertainty as they use discretion and analysis to avoid “losers” and pick “winners”. It is our view that active will always win out over passive in the long term as investing is a marathon, not a sprint.

At CIP Licensing Limited, our active investment philosophy allows us to position clients’ portfolios in stocks/securities that we believe have the most promise and brightest future prospects. When the market is roaring, this can sometimes result in underperformance versus the passive investing, but when the market is slow and uncertain this is when we excel. With our focus on the future, we’ve adopted this philosophy to ensure efficient growth and protection of our client’s wealth in good times and bad.

This article has been produced as general advice only, and has not taken into account your personal circumstances or financial situation. If you would like to talk about the suitability of your investments, passive or active, please contact one of our offices and set up an appointment today.

Small business forms a significant part of the Australian economy. You may recall that one of the focuses of the 2016-17 Federal Budget included a raft of initiatives to simplify tax and compliance, encourage investment and increase the level of economic activity in our economy.

Australian small businesses employ over 3 million workers and added over $340 billion in 2013-14 to the Australian economy[1] it is therefore crucial for all levels of government to support small businesses, however, ultimately the buck stops with you.

So what can you do to make your business more successful?

1. Review your business.

Taking the time to stop and analyse your current business and areas of improvement, could lead to new ideas, new revenue streams and a reduction in costs.

Reviewing market trends and other factors affecting your business will help you to innovate and be a step ahead of your competitors.

2. Overstocked?

Business owners are enticed to buy in bulk and save, failing to recognise that excess stock will have additional costs, including the requirement for additional storage space, the increased likelihood of perishables, and in many cases, increases in the funding costs required to pay suppliers.

Implementing a policy of buying stock when needed will keep stock refreshed, reduce the need for storage space and improve cash flow.

3. Keep a close eye on your debtors.

It’s great making sales or providing a service on credit, but not chasing up money owed will lead to greater losses. Have a look at your outstanding debtors right now, did you realise that there was so much money outstanding? You should be looking at this weekly; if your customers think they can get away with not paying you, they will!

The information provided is general advice only. It has not taken into account your objectives, financial situation or need. If you would like to learn more or receive more tailored advice, uur business consulting team are experts in the small to medium enterprises (SMEs). If you would like to have a free consultation regarding your business needs, contact The Investment Collective today.

Funding your children’s education expenses can be costly. The money you spend on your kids’ education could be one of your family’s biggest expenses.

Research conducted by The Australian Scholarships Group (ASG) on education costs, provides some context. The research is based on a child starting pre-school today and suggests that opting for the private school route from Prep – Year 12, will set you back a cool $367,569 per child. Even if you decide on a government school for primary years and private for secondary, you will still need to come up with $244,822. Ouch!

For most families, at the time when kids are starting out at school, household budgets are already stretched with mortgage repayments, bills and living expenses proving challenging enough. What this means is that some careful forward planning is required to make sure you have enough money to give you, and your children, the full array of options for education.

Here are 5 tips to consider:

1. Plan for your children’s education.

It is important to have the discussion with your partner, do your research and estimate how much it is going to cost you. Open up dialogue with your better half about what you want your children’s education to look like is the number one priority. Is it through Private or Government schooling? Do one of you want to send them to the school you attended as a child? Does your child have any special needs? The sooner you have these conversations the better.

All schools have websites. Check out those that you’re interested in. Most should include information about fees and advise you whether there is a waiting list.

There is a heap of great resources out there to help you on your way. The ASIC Money Smart website and the Australian Scholarship Group’s online calculator are a couple to try out.

2. Start saving early!

Like any other long-term savings goal, the sooner you start, the better! The best time to start saving is when your child is born or possibly even earlier. Make a budget and decide how much you can put aside each week. Look to increase the amount each year to ensure you’re keeping pace with inflation.

To get you started there are a few ways you can go about it. It could be as simple as setting up a direct debit from your everyday account into your savings. You could also make a lump-sum contribution, such as your annual tax return or end of year bonus.

The sooner you start, the longer you reap the rewards of compounding interest.

3. Structuring things right and invest in the name of the parent earning the lower income.

If one member of a couple isn’t working and staying at home to look after young children, or working part-time, chances are their marginal tax rate is low. Therefore, holding investments or savings accounts in their name may be of benefit. Keep in mind any future plans of that person returning to full-time work.

4. Once you have a little bit of savings behind you, look to get that money working harder for you.

An investment in blue chip Aussie shares and managed funds can be a great way to accelerate your savings. Bear in mind that these investments are riskier than leaving your money in the bank and that you won’t get rich overnight. A 5 year plus time frame is appropriate.

An alternative investment vehicle is the use of Investment Bonds or Tax Paid Bonds as they are sometimes referred too. They provide a variety of investment options such as shares, property and fixed interest. The reason why investment bonds are referred to as a tax paid investment is because any earnings get taxed at the company tax rate of 30% within the investment.  As long as money remains invested for 10 years, the investment provider pays the tax on the investment earnings so you don’t have to report the earnings in your tax return.  If you withdraw before 10 years, then you would need to include earnings in your personal income tax return.

Note – minimum investment amounts and costs such as brokerage, or entry and ongoing management fees will apply with the above-mentioned investments.

5. An alternative – saving in an offset account against your home loan.

Another simple, but potentially a very effective way of saving for education costs is through your home loan. An offset account allows you to make extra repayments into a bank account attached to your home loan. It operates much like a normal bank account with some special features. Namely, the amount you have in the offset account effectively reduces the loan balance the bank uses to work out your interest payable on your home loan. For example, if you have a home loan of $300,000 with $100,000 in an offset account, the bank calculates interest based on only $200,000.

The money you have in an offset account is generating an after-tax return equal to the interest rate of your home loan. For instance, if your bank is charging you 5.00% interest on your loan, the funds in your offset account save you this rate of interest being charged. If you compare this to saving money in an ordinary bank account, the bank may (if you’re lucky) pay you 3.00% interest on your savings, from which you still need to pay tax.

The key to using this option is discipline. Money in an offset account can often provide a temptation to use the money for other purposes; renovations, car upgrades, holidays etc. If you plan to use these funds in the offset account to save for education costs, then you must resist temptation.

My advice is to start early, work out how much you will require for education costs, how much you will need to save to get there and then select the appropriate savings vehicle. Seek the help of a good financial planner to set you on the right path.

Are you interested in planning for your children’s education? Are you currently juggling education costs and need a plan yesterday? Contact our office for your free initial consultation. Call our office today, toll free on 1800 679 000 for our Rockhampton office and 1800 804 431 for our Melbourne office.

Please note: The information provided in this article is general advice only. It has been prepared without taking into account any person’s Individual objectives, financial situation or needs.  Before acting on anything in this article you should consider if it is appropriate for you, having regard to your objectives, financial situation and needs.

Buying an investment property continues to be one of Australia’s favourite ways to invest. An investment property should be about increasing your wealth and securing your financial future, which is something our mortgage broking team can help you with.

Here are 10 tips to assist in purchasing an investment property:

1. Choosing the right property at the right price

Investing in real estate is usually all about capital growth, so choosing a property that is more likely to increase in value is the most important decision you will make, therefore buying at the right price is absolutely critical.

The key is to do your research, work out what properties are selling for in and around the area and you’ll soon discover you’ll become very good at working out a property’s worth. Never consider purchasing real estate in an area you are unfamiliar with.

You probably aren’t aware but lenders and mortgage insurers have valuable data on different locations and property developments, you should try and access this information to assist in avoiding the wrong investment property.  Whatever you do, never make a decision to buy an investment property based on a tax deduction – always focus on making the right investment choice.

Ensuring you have a steady rental income stream is also vital.  This cash flow will make the holding of the property more affordable and provide a reliable income.

Different classes of residential property – home units, houses and land – can outperform each other over time.  For example, vacant land will provide no rental income but may appreciate more quickly if purchased in an area with limited supply.  Investing in a home unit might mean less maintenance costs than investing in a freestanding weatherboard house.  You may also find, some areas offer higher rental yields, but it is important to do your homework as often these properties provide lower capital growth opportunities.

2. Crunch the numbers

Investing in property is a proven path to long-term wealth, however you should consider it a medium to longer term type of investment.  You’ll want to make sure you can afford to maintain your mortgage repayments over the long term.  You will not want to have to sell your investment property until you are good and ready and if you were to encounter some financial stress, this could force you to offload the property at the wrong time.

Once you own an investment property it can be quite inexpensive to keep and service the loan.  This is because you should be earning rent and claiming tax deductions on the expenses associated with owning the property.  Remember, rent payments tend to increase as does your own income – so expect things to get easier over time.

You probably aren’t aware but lenders and mortgage insurers have valuable data on different locations and property developments and you should try and access this information to assist you to avoid picking the wrong investment property.

Whatever you do make yourself aware of taxes involved in property investing and add these into your calculations.  Advice from your accountant is vital in this regard as these can change.  Stamp Duty, Capital Gains Tax and Land Tax all need to be taken into account.  Remember that interest rates can vary over time but the good news for property investors is that in times of rising interest rates you can normally expect to be able to increase the rent.

You should also know that banks only take 80% of the rental income into account when working out whether you can afford an investment loan.  This is due to costs like letting fees and vacancy rates, consider using this as a rule of thumb for you too.  If you need help working out the cost of holding an investment property you can contact us.

3. Find a good Real Estate Property Manager and let them do their job

A property manager is usually a licenced real estate agent that is a professional in their field, and their job is to keep things in order for you and your tenant.  They can help you with ongoing advice, help you manage your tenants and get you the best possible value from your property.  A good agent will let you know when you should review rents and when you shouldn’t.

The property manager should be able to give you advice on property law, your rights and responsibilities as a landlord – as well as those of the tenant.  They’ll also take care of any maintenance issues, although you should approve all incurred costs (other than certain emergency repairs), in advance.

The property manager will also help you find the right tenant, conduct reference checks and make sure they pay their rent on time.  It is important that you don’t interfere too much with tenants because there are laws that give them rights, so always try to respect them.  You should, however, make regular independent inspections of your property to make sure that the tenant is looking after your investment but always go through your agent and give plenty of notice.

The good news is that the cost you pay to your managing agent is usually a percentage of the rent paid this is deducted from the rent you receive and is tax deductible.

4. Understand the Market and the dynamics of where you are buying

Consider what other properties are available in the immediate area and speak to as many locals and real estate agents as you can.  They may let you know if one side of a street is considered superior to the other.  Make sure you do the legwork and consult professionals you can trust.

It is also a good idea to find out what changes may be happening in your suburb and the local council can often help here.  For example, a major construction next to your property could make it harder to find a tenant at the right price or a planned by-pass may mean traffic will be reduced and this may increase the value of your property quicker than expected.

5. Pick the right type of Mortgage to suit you

There are many options when it comes to financing your investment property, so get sound advice in this area as it can make a big difference to your financial well-being.

Interest on an investment property loan is generally tax deductible, but some borrowing costs are not immediately deductible and knowing the difference can make a big difference.  Structuring your loan correctly is critical and this should be done with the help of a trusted financial adviser.  It is recommended to avoid mixing up investment property loans with your home loan. Each loan needs to be separate so you can maximise your ongoing taxation benefits and reduce your accounting costs.

Whether you choose a fixed rate loan or a variable rate loan will depend on your circumstances, but consider both options carefully before you decide.  Over time variable rates have proven to be cheaper, but selecting a fixed rate loan at the right time can really pay off.  Remember that rates usually rise in line with property prices, so increasing interest rates are not always bad news for property investors as they have more than likely had a win on the capital gains front.

Most investment loans should be set up as Interest Only (rather than Principal and Interest) as this increases the tax effectiveness of your investment, particularly if you have a home loan.  You may also want to seriously consider an investment loan that gives you the opportunity of paying interest in advance, a redraw facility or an Offset Account

6. Use the equity from another property

Leveraging equity in your home, or equity from another property investment, can be an effective way to buy an investment property.  Equity is the amount of money in your home that you actually own.  It can be calculated by working out the difference between what your property is worth and what you owe on the mortgage.  Utilising the existing equity within your home can allow you to borrow more money against your investment property purchase, which will increase your tax deductions.

7. Negative Gearing

Negative gearing can offer property investors certain tax benefits if the cost of the investments exceeds income it produces.  Australian law allows you to deduct your borrowing and maintenance costs for a property from your total income.  However, you can only get a tax benefit if you earn other taxable income in the first place.  So, while you are actually making a loss on the property, the advantage is that the loss can be used to reduce the amount of tax on your other earnings.  However, as stated earlier, do not buy an investment property just to get a tax deduction.

8. Check the age and condition of the property and facilities

Even with negative gearing, needing to replace the roof or hot water service in the first few months of ownership could make a significant difference to your profits and really damage your cash flow.

It is therefore advisable to engage a professional building inspector before you purchase to conduct a thorough inspection of the property to find any potential problems.

It is also wise to use a qualified tradesperson who is licensed to carry out the work and who has adequate insurance to protect you against poor workmanship.

It’s not always a bad thing to buy a property that is not in peak condition because you get the opportunity to improve the value of the property by renovating and this can increase your returns for both capital growth and rental income.

9. Make the property attractive to renters

Go for neutral tones and keep the kitchen and bathroom in good condition.  Kitchens and bathrooms often make a property more saleable.  You’ll find that you will attract better quality tenants if you have a well-presented property.  The last thing you want is a bad tenant.

10. Take a Long-Term view and manage your risks

Remember that property is a long-term investment and you should not rely on property prices rising straight away.  The longer you can afford to commit to a property the better As you build up equity you can then consider purchasing a second investment property.

Finally, it is also paramount that your personal risk insurance cover is reviewed to ensure that if anything unforeseen was to occur that you and your family will be adequately covered.

If you have any questions or would like to learn more about investing in property, please contact our mortgage broking team today.

Please note the information provided in this article is general advice only. It has been prepared without taking into account any person’s individual objectives, financial situation or needs. Before acting on anything in this article you should consider its appropriateness to you, having regard to your objectives, financial situation and needs.

Business owners are usually aware of the need to protect assets such as the business premises, plant & equipment, vehicles and stock via general insurance.  However, few owners consider the risks to the future of the business by not appropriately covering its most important asset – the people within the business!

Business owners should also contemplate the financial loss if personnel responsible for the equity, credit or ongoing revenue exit the business unexpectedly due to sickness, accident or death.

Business risk protection strategies for key personnel within a business include:

Buy/sell protection; Also known as partnership protection.  Allows shareholders in a business to insure for the value of their equity to cover death, total & permanent disability or serious medical conditions such as heart attack, cancer stroke etc.  If a partner suffers from an insurable event and exits the business, the proceeds of a claim will be paid to the disabled owner, or their family in the event of death.  The cover will ensure that the departing owner or family receive fair value for their share.  In addition to the insurance, a legally binding buy/sell agreement should be completed by the shareholders.  The buy/sell agreement or ‘business will’ provides the legal mechanism by which the shares of the deceased/disabled owner can be acquired by the surviving shareholder.  Buy/sell cover is a vital part of your business succession planning, as it ensures that the ongoing ownership and control of the business remains in the hands of the original shareholders.

Business Loan cover; In order to obtain a loan or credit facilities from a bank, business owners will need to provide guarantees, and may use business &/or personal assets to secure the debt.  The debts are usually ‘at call’ and the bank can request payment in the event of the death or incapacity of the guarantor.  By obtaining adequate cover, their guarantees/securities are protected, and the surviving business owner(s) &/or family will not have to sell off assets to clear the debt.

Revenue protection cover; Also known as key person cover. The loss of a key person due to disability or death may create costs to locate, recruit and train a replacement, and result in a loss of revenue until the new staff member is operating at the capacity of the disabled or deceased employee.  This cover will offset the replacement costs and the expected reduction of revenue until the business can recover from the loss of the key person.

Business overheads cover; Provides the replacement of the fixed operating costs of a business if the owner is unable to work due to sickness or injury. Overheads which are covered include loan repayments, rent, utilities and salary costs.

Please note that this has been prepared as general advice. It has not taken into account your personal or business circumstances, insurance needs or current coverage. If you would like to learn more about business insurance, contact one of our Risk Advisers today.

Breast Cancer has maintained its deadly position as one of the top four estimated cancer deaths for 2017. It is predicted that an average of 48 people every day will be diagnosed with this horrible disease. With the average age of the first diagnosis is at 61 years*. Although 61 years is the average, there is commonly diagnosis at much earlier ages.

However, there is some good news at last! The survival rate for breast cancer has slowly been on the incline for the last few years. Recent statistics show the five-year relative survival rate has increased from 72% (between 1984-1988) to 90% (between 2009-2013)*. It is important to note that many people live a long and happy life beyond this as well.

I could go on and on about the statistics of getting breast cancer, treatment, survival rates etc. However, what you don’t see in any statistics or research is the impact a diagnosis will have on the loved ones connected to those with the deadly disease. As a Risk Insurance Adviser, I have witnessed firsthand the devastating toll it takes on loved ones not only emotionally, but also financially.

Thankfully, you can do something about it. By taking out trauma protection, you will receive a tax-free lump sum payout on the diagnosis and treatment of breast cancer. Clients who receive the benefit may wish to use the money for a number of things, some include:

• Paying for lumpy medical bills associated with treatment
• Providing a lump sum to reduce level of debt
• Living expenses so you and your spouse can take some time out of the workforce
• Capital available to take a holiday or not return to work immediately – even if you are physically able

The last thing you want to think about while going through this trying time is money. Here at The Investment Collective, we have a dedicated Risk Insurance team to help you through every aspect of obtaining, maintaining and claiming your life insurance.

October is Breast Cancer Awareness month I feel it’s imperative to remind everyone (yes, you too fellas!) the importance of self-examinations as early detection is important for full recovery. Everyone should be familiar with the size, shape, look and feel of their breasts and underarms so that if changes occur, you can be proactive and seek advice/treatment immediately.

You will commonly hear that someone ‘felt a lump’ which lead to their diagnosis. But, there are many other symptoms or warning signs to look out for, these include; irritation or dimpling of your breast skin, redness or flaky skin in your nipple area or breast, pulling in of your nipple or pain in your nipple area and many more. I would encourage everyone to become familiar with the early warning signs and to seek medical advice if they have any concerns.

Please note this is prepared as general advice. It has not taken into account your personal circumstances, your insurance needs or current coverage. If you would like to learn more about how the above advice can be customised to your personal situation, please contact one of our experienced and knowledgeable insurance advisers today.

Small businesses are vital to our economy and their sale can help fulfil their owners’ retirement dreams.  Since September 1999, there have been a number of Small Business Capital Gains Tax (CGT) Concessions available to allow business owners to cash in on years of hard work, blood, sweat and tears.  However, it is important that these concessions are correctly navigated; otherwise, there is a good chance that the “Taxman” will walk away with a big chunk of your hard work.

Business and Active Assets

The CGT provisions give a number of concessions to clients who sell a business or active business assets.  An active asset is:

• an asset the taxpayer owns and uses or holds ready for use in carrying on a business and has been active for the lessor of 7.5 years or 50 percent of its life;
• an intangible asset inherently connected with the business (e.g. goodwill); or
• an interest or shares in a resident company or trust where the market value of the underlying active asset is up to 80 percent of total assets for at least half of the ownership period of the interest/shares.

Eligibility

To be eligible for the concessions the following conditions must be met:

• you are an individual, partnership, company or trust;
• you are carrying on a business;
• you are a small business, defined as having an aggregate annual turnover of less than $2 million; and
• your net assets value plus the net asset value of the client’s associates must be less than $6 million (excluding home, personal use assets, life policies and superannuation.

The Concessions

15-year Exemption

If the business or active asset was owned continuously for 15 years, and you are over age 55 and retiring, you can sell the asset or business without being assessed for capital gains.  In our example above, the Smiths would be able to take home $270,000 each.

50% Active Asset Reduction

There is a 50 percent reduction on the capital gain from the sale of an active asset or business.  This is in addition to the 50 percent CGT discount if the asset has been held for 12 months or more.  If Mr and Mrs Smith implement this strategy they would incur a $43,875 tax bill and take home $496,125.

Retirement Exemption

A client can elect to have a capital gain of up to $500,000 from the sale of an active asset or business treated as a superannuation benefit payment.  If you are under 55, then this amount must be contributed into a superannuation fund and will add to the tax-free component. Once you reach the age of 60, all superannuation benefits are exempt from the tax, provided you meet the conditions of release.  This strategy can be applied after the CGT discount and would allow the Smiths to contribute $135,000 to each of their superannuation accounts.

50 percent Asset Reduction + Retirement Exemption

If you have multiple business assets that you wish to sell to fund your retirement, you may be at risk of exceeding the $500,000 limit.  To circumvent this limitation, it is possible to apply the 50 percent asset reduction as well as the Retirement Exemption.  This strategy allows the Smiths to contribute $67,500 to each of their superannuation accounts, providing breathing room for an additional contribution of $432,500 to each down the track.

Rollover

If you sell an active asset, you can defer all or part of the capital gain for two years.  You can defer this even longer if you utilise the proceeds to acquire a replacement asset, or if you spend money to improve an existing asset.  This concession can also be applied after the 50 percent asset reduction.

It is vital that your personal financial position is carefully analysed when considering these concessions, as the above is provided as general advice only and should not be taken to be personal advice. Even if your circumstances are similar one of the above examples, please speak contact us to a business consultant today.

The last thing you want is to see the proceeds of your hard work end up at the ATO when you had access to professionals that could have navigated you through this tricky process.  So if you are a small business owner with an eye on retirement, please come in to see one of our helpful Consultants or Financial Advisers to get a plan specifically tailored to your financial goals and objectives.