Part of the ongoing investment process at The Investment Collective is the management of client portfolios. As a team, we are always tending to client portfolios and we see it as being similar to the process of maintaining a healthy garden. Investments without future prospects are weeded out, whilst new investments that we foresee as having a bright future are included. Existing investments are managed, trimming or adding to the investment depending on ensuing market valuations.

We employ a ‘catch all’ methodology to maintaining portfolios, and these portfolios are reviewed in a variety of ways. The most common being the six monthly review where our Portfolio Administration System (‘PAS’) alerts us of portfolios due for review after a six month period. We will also schedule a review when alerted to the fact that the portfolio has either a high cash balance or low cash balance. As we are striving to operate portfolios as efficiently as possible, any excess cash will be deployed if necessary and shortfalls in cash for future drawdowns will also need to be managed.

Lastly, we will occasionally action a change in the portfolio when we decide it is in our client’s best interest to exit from an investment. We initiated this recently whereby we recommended our clients withdraw their investments in the company. In this case, a sales recommendation is made and we then review the portfolio to make a subsequent recommendation for the cash that is raised. Given our high-quality benchmark criteria for inclusion into our Approved Products List, this event is generally quite infrequent.

Maintaining efficient portfolios is a vital cog in the investment process, similar to watering a garden. We are continually fine-tuning this process with the aim of extracting the maximum benefit from limited capital.

Please note the above article has been prepared for general purposes only. It may not be exactly how your investment portfolio is managed. It has not taken into account your personal information or investments. If you would like more about how might review and maintain your current or potential investments, please contact one of our skilled and friendly financial advisers today.

As with every aspect of our business, there is no greater importance than the opportunity to strengthen our relationships with clients by helping them navigate towards their financial goals.  Quite a number of our clients are business owners and it has been an exciting year for our business consulting team, which provides business advisory services for all sorts of challenges faced by owners and managers.   Current projects have drawn us into the agriculture, digital media sharing, solar power, consulting, and construction industries.

Late last year we were approached to establish and raise capital for a start-up engineering firm in Brisbane.  The first few months of the project involved us working with the Managing Director conducting a thorough analysis of expected future costs and revenue.  We analysed the industry’s dependence on broader macroeconomic factors such as commodity prices and Government expenditure. Once we had a clear picture of the expected performance of the firm, we prepared an Information Memorandum ready to present to potential investors.  We are now assisting the client in finding investors.

Some time ago, we were engaged to facilitate the sale of an extremely successful building materials manufacturer.  The business’s directors have spent over a decade growing the business in a rapidly growing market and are ready to reap the rewards of their hard work.  We built a financial model for the business and prepared an accompanying Information Memorandum ready for presentation to potential purchasers.  We also prepared a contingency plan, in case we could not find a buyer willing to commit to suitable terms.  In that case, we will look to recapitalising the business and installing new management.  The processes take time – you have to be tenacious to see it through, and not panic when faced with various setbacks.  Our personal and professional experience is completely aligned with these requirements and we are confident of achieving an excellent outcome for all involved.

A successful grain and oilseed farming enterprise required our assistance after separating from the previous ownership structure.  Our responsibilities broadened as the enterprise began to encounter financing restrictions and flooding of their crops.  Luckily, we had already built a detailed financial model that facilitated the preparation of contingency plans including seeking additional financing.  Our consulting team also investigated and completed an application to receive “cheap” funding from the NSW Rural Assistance Authority Farm Innovation Fund to build a much-needed machinery shed.  Now, eight months into their new cropping season, our clients’ business is completely stand-alone and this year’s crops are looking very promising.

As with our financial planning work, our help for businesses is hands-on.  We do our homework properly, and we get involved.  We are a professional resource, a trusted advisor and a friend to lean on.  We do not give up and our team is always available.

The above are just some examples of what The Investment Collective can do for you and your business. It has not taken into consideration your business or your business’ needs. Contact us today for a consultation where your personal financial circumstances and business goals will be discussed in more detail and advice will be customised to your current situation.

It’s winter, the mornings are cold and day looks grim. Dark clouds are brewing and now it’s raining. Everyone around you has an umbrella and scarf and you are wearing a straw hat that makes everyone look as they walk past.

Is standing out from the crowd such a bad thing?

To be a successful investor, you cannot constantly be swayed by changing the opinions of outsiders. Our Investment Committee is not distracted by short-term trends in the financial markets or the constant headlines and negative press we are exposed to in mainstream media commentary. Being able to maintain a long-term focus and not overreact to optimism or pessimism is critical for investing success.

Warren Buffett once said,

“The most important quality for an investor is temperament, not intellect. You need a temperament that neither derives great pleasure from being with the crowd or against the crowd.”

At The Investment Collective, we choose Australian companies that exhibit some form of “economic moat” to help protect the business against competitors.  This may include:

• Strong branding
• Efficiencies of scale
• High barriers to entry
• Switching costs

Our Investment Committee seeks out opportunistic investments where we view market pricing as not being representative of future predicted returns.

Markets will continue to rise and fall. Working alongside you to manage your investments, we help you make more informed decisions and seek to minimise your emotional burden.

If you would like to know more about how The Investment Collective can help you with your investment strategy, contact us to make an appointment today.

Concessional superannuation contributions are contributions made by (or on behalf of) a person that is included in the assessable income of the fund.

As such, they attract tax of up to 15%. However, for those individuals’ earning more than $300,000 per year, the applicable tax rate is 30%.

The term ‘concessional’ reflects the fact that someone is claiming a tax deduction or tax ‘concession’. That is either the employer or the individual, depending on the type of contribution being made.

Paying tax at 15% (or 30%) may be a ‘concession’ if the individual’s marginal tax rate is higher than this. For example, if you’re earning over $37,000 per year, your marginal tax rate is 32.5%. For every $1 you salary sacrifice to superannuation (salary sacrifice is a type of concessional contribution), this will save you 17.5 cents in tax. Of course the money is inside superannuation now and you may not be able to access it until retirement (over the age of 60). Compulsory preservation is, if you like, the ‘price’ of the tax concession.

In view of these tax concessions, the Government places a cap, or limit, on the amount that can be contributed to superannuation on this basis.

For the current 2017 financial year (ending 30 June 2017), the concessional superannuation caps are as follows:

Coming into the end of the 2017 financial year, you may wish to consider optimising the amount you contribute to superannuation on a concessional basis. Particularly in view of the fact that from 1 July 2017 (that is, the start of the 2018 financial year), the concessional contribution cap will reduce to a flat $25,000 regardless of age.

Please note, this article is for general advice purposes only. It has not taken into account your personal circumstances or financial goals. If you wish to access more personalised advice tailored to your circumstances and financial objectives, please contact our friendly staff today.

When do you need some super tax tips? When we are hurtling towards the end of another financial year. The perfect time to get your house in order! After recent legislative changes, super remains a low-tax savings environment designed to fund your retirement.

We have put together a useful checklist that will help you maximise your entitlements.

1. Do a “Lost Super” search

With more than $17 billion in lost super, there’s a chance a few of these dollars might be yours. Google ‘superseeker’ and it will take you to the ATOs Super search tool. Simply enter your name, date of birth and tax file number in the search filters and you’re set.

2. Consolidate your super funds

Make sure you have undertaken step 1 and have a flick through your past statements. Use this opportunity to consolidate your funds into one account to make life simple. Ensure you’re not missing out on any insurance or other benefits before you close any accounts. Rolling over existing accounts into one account is a simple process with many superannuation funds providing this service.

3. Salary sacrifice

You’ve probably heard the term before but what does it actually mean? Salary sacrificing is when you ask your employer to redirect a portion of your pay as a contribution to super. By ‘sacrificing’ some of your before-tax salary into your super, you are taxed at the concessional tax rate of 15%. These before-tax contributions reduce your taxable income so you pay less tax at a marginal tax rate.

4. Non-concessional contribution

If you’ve recently sold an asset, received an inheritance or received a bonus from work, then a non-concessional or after-tax contribution might be worth considering. It is referred to as a ‘non-concessional’ contribution because you don’t receive a tax deduction. Non-concessional contributions are the simplest way to add to your super as you simply deposit your personal money into your super fund.

5. Co-contribution

If you earned less than $36,021 during the 2016-17 financial year and make a non-concessional contribution of $1,000 towards your super, the government will also contribute $500. That’s a guaranteed 50% return on your money!

6. Spousal contribution

If your spouse earns less than $10,800 and you make a $3,000 non-concessional contribution to their super, you may be eligible for a tax rebate of up to $540.

7. Super splitting

If you or your partner take time off work or reduce working hours to look after the kids, keep the super contributions rolling by splitting. It allows the working spouse to have up to 85% of their super contributions placed into the account of the non-working spouse. It helps keep a couple’s accounts evenly balanced and is simple to implement.

8. Transition to retirement

If you’re aged between 57 and 64, a Transition to Retirement (TTR) strategy might be right for you. Despite recent budget announcements, TTR remains a solid strategy that lets you draw tax-effective funds from your super while you’re still working. You can then use your normal income to make concessional contributions to super. The simplest way to think about it is that you’re recycling your retirement benefits to reduce tax and boost super.

9. Set up a self-managed super fund

For those of you with more than $250,000 in accumulated super, a self-managed super fund might be the way to go. The Australian Tax Office has helpful videos click here and search for “SMSF videos”. It’s very important to get the right advice before proceeding.

10. Seek advice from a professional

Financial advice can help you identify and plan to achieve your financial goals so you can enjoy the lifestyle you want. A financial adviser will help you assess your current circumstances, identify your goals and priorities, and recommend financial strategies and products that will help you reach your goals.

So there you have it: the essential 10-point super checklist to tick-off before the end of the financial year. If executed consistently every year, it can make a big difference over the long-term. It is never too late to start!

Please note, this article is for general advice purposes only. It has not taken into account your personal circumstances or financial goals. If you wish to get more personalised advice tailored to your circumstances and financial objectives, please contact our friendly staff today.

Can I give my kids some money?

I hear this question quite often from my clients.  There are several answers to the question.  Underlying it all is the normal parental need to be able to assist our family while they are juggling the usual expenses of home and children, from an income that doesn’t always stretch quite as far as they would like.

The first part of the question is – can I afford it, and your answer to that may be that you think you can.

The next part of the question is – are there consequences for me?

There may be – for instance if you receive a Centrelink age pension there is a limit as to how much you can gift to your children.  The current limit is $10,000 per year up to a maximum of $30,000 over a three year period.

If you are a fully self-funded retiree the consequence could be that your ability to maintain your own lifestyle in retirement is compromised, so it is a question that needs careful thought.  It is recommended that you seek advice from your advisor.

Is giving cash the best way to help?

It is debatable as to whether straight out cash gifts are really the best way to help – you can’t direct where the cash is spent, and it may not be put to its best use.  What if we paid an essential expense instead?  Examples might be to contribute to the grandchildren’s school fees or to pay the life insurance premium for your son or daughter?

Paying a life/TPD (total and permanent disablement) insurance premium for an adult child may mean the difference between them being properly insured, or having little or no life or TPD insurance.  This not only protects your child and his/her family, but it protects you too, as you may be called upon for support should your child become ill or disabled.

I would like to start an investment for my child/grandchild.

This is also an excellent way to give your family a helping hand as it is a long-term solution that will provide some passive income and capital growth in the future.

A small investment in the Capricorn Diversified Investment Fund, with distributions set to be reinvested, is one way you can achieve this, and it is even better if you add extra contributions from time to time.  By the time the newest grandchild is old enough to attend university or wants to buy a car for example, there will be a tidy little nest egg they can draw from.  You can view details of the Fund here or contact us for information and assistance.

Want to learn more about helping out your children/ grandchildren? For your free initial consultation with one of our friendly advisers, contact us today! One of our advisers would be delighted to assist you.

The information provided in this article is general advice only. It is prepared without taking into account your objectives, financial situation or needs. Before acting on the advice in this article, please consider the appropriateness of the advice, whether the advice is appropriate to you, your objectives, financial situation and/or needs, before following this advice.

Financial scams are not uncommon in Australia. You may think that this will not happen to you or your family, but it could.

Scams come in all shapes and sizes from investment schemes, inheritance scams, betting and sports investment schemes to dating and romance scams.

Recently, a client was phoned by someone claiming to be from the Australian Tax Office who advised they were following up amounts owing for previous tax years. For the client, there was some credibility for this as previous tax returns were outstanding. Once the caller realised they had an ‘’in’’ they were incredibly persistent and even threatening to the point that they persuaded the client to go and purchase iTunes cards to pay the supposed debt. They obtained the numbers of these cards over the phone and were quick to cash them in.

The client became suspicious when they rang for more money, and she then rang us. We advised that it was a scam, and to be sure she should phone the tax office, who confirmed they had not called.

Not giving up, they phoned again and this time advised they were from Centrelink and provided a contact number to call in Canberra for verification. On talking to us, she rang the general number for Centrelink (not the number the caller provided) who again confirmed that they had not called.

If you ever have a phone call from someone claiming to collect money from a government agency, please be aware of this scam. A government agency will not collect money over the phone and are unlikely to make contact by phone unless responding to a call. They will also not use urgency tactics for payment.

If in doubt call the agency back on a general number, or call your adviser and if they are unavailable talk to another adviser. Scams can also be checked at scamwatch.gov.au and acorn.gov.au.

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.

There have been a lot of questions from clients lately about why they need all the different types of personal risk insurance; Life, Total & Permanent Disability (TPD), Trauma and Income Protection.  Each insurance covers something different and it is important to understand how all of these insurances work together.  Below I’ve detailed a brief summary about the different types of insurance and how they work together.

Life

Life insurance is pretty straightforward.  A lump sum amount will be paid out in the event of death or terminal illness.  The purpose of life cover is to pay down any debts, provide an income to your surviving spouse or children, contribute to future education expenses if you have children, and assist with funeral expenses.

Total & Permanent Disability

Total and Permanent Disablement (TPD) is payable in the event you become totally and permanently incapacitated due to sickness or injury, and it is unlikely that you will ever be able to return to work.  Again, this cover will provide a lump sum to reduce or extinguish debts, and provide an income to you and your family.  It may also help with home and car modifications following your disability and can assist with ongoing medical bills.

Trauma

Trauma cover also pays a lump sum should you be diagnosed with a serious medical condition, or if you suffer from an event covered under the contract. Trauma insurance covers a wide range of conditions such as Heart attack, Heart surgery, Cancer, Stroke and other neurological conditions, organ failure and various blood disorders.  Benefits can assist with the costs of specialist treatment and medication which are not covered via Medicare or private health cover.  Trauma protection can help with every day costs of living, and offer support financially should you or your partner need to take time off work to assist in recovery.

It is important to note that some people who suffer from a trauma event return to work before they can claim on their Income Protection policy.  Due to advances in medical technology, and less invasive treatment for many of the diseases covered via a Trauma policy, there is also a reduced likelihood of becoming totally disabled and a much higher survival rate.

Income Protection

Income Protection (IP) covers you for partial or total disability based on a waiting period and a benefit period.  If you suffer an injury or illness that leaves you unable to work for longer than your waiting period, you will be eligible to claim on your policy.  Income Protection typically provides a monthly payment whilst you are unable to work.  Your claim will continue until you are able to return to work, or you have reached the end of your benefit period.  It is important you know what your waiting and benefit periods are. The maximum entitlement for IP insurance is 75% of your taxable income, and you may also be able to cover ongoing superannuation contributions under some contracts.

As always, if you have queries or concerns about your insurance you should speak with your friendly adviser. We are here to help.

Are you interested in getting your current insurance reviewed or wanting to get the right cover for you and your family? Contact us today for your free initial consultation, one of our friendly advisers would be delighted to speak with you.

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.

It’s an exciting time when you find the property you want, and finally, have approval for the money required to buy it!  Because that’s the reality now, most of us rely on loans to fund our property purchases.

There are significant differences between Variable and Fixed-rate mortgages. There are also some hidden traps to look out for when comparing those loan offers, especially within this low-interest rate environment when Fixed Rate offers are being heavily promoted by lenders.

Always ensure you read the Terms and Conditions before signing on the dotted line, so you know exactly what you are getting yourself into, especially if you are thinking of paying your mortgage off sooner than the contract states.

You might think you’re protected should you need or want to get out of the loan contract. But when the federal government stepped in and banned exit fees on all new variable rate mortgages in 2011, fixed-rate mortgages were not included in the ban.

So, if you are planning on paying your mortgage off sooner than expected, a variable rate mortgage may be a more appropriate loan structure for you, or even better you could split the loan so you have the portion you know you can’t pay back for a period in the fixed portion of your loan, and the amount you believe you can pay back faster in the variable portion.

Fees to watch out for with Fixed Rate Mortgages:

Establishment fee

An establishment fee is a one-off payment when you start your loan. Usually ranging from $600 – $1,000.

Ongoing fee

An ongoing fee is charged every month or year for administering your loan – and this is usually around $10 a month.

Break cost fee 

Break cost fees, also known as exit fees, early repayment adjustment fees or prepayment fees, are charged if you make extra repayments on your loan, pay your loan off in full or decide to switch to another loan type such as a variable rate loan.

Most lenders will allow you to pay a small amount off your loan each year without being charged, this can range from $10,000 to $30,000, however, if you pay more than this amount you may incur a hefty fee.

How are break cost fees calculated?

They are essentially based on three factors: the length that remains on your loan, what interest rate you are paying (compared to your current lender’s current fixed rate), and the amount you initially borrowed. Break costs can run into the tens of thousands of dollars depending on how much interest rates have changed.

Discharge Fee 

A discharge fee, also known as a termination fee or settlement fee, will be charged when you pay your mortgage in full. This is normally $150 and covers the lender’s legal costs.

Purchasing property and using borrowed funds is a big financial commitment and therefore it is incredibly important that you seek independent legal and financial advice.

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. If you would like more tailored advice, please contact us to speak with one of our mortgage brokers today.

With interest rates at historical lows, investors now have to work extra hard to achieve a decent return on their money. But don’t forget that it is the after-tax return that counts – which is why investors with money invested in Australian shares can benefit from gaining an understanding of the Dividend Imputation System and how Franking Credits work.

Dividend imputation was introduced in July 1987, one of a number of tax reforms by the Hawke/Keating Government. Prior to that shareholders suffered double taxation on their dividends. That is, first the companies paid tax on any profits they had made, then the shareholders were taxed again at their marginal tax rate when they received these tax-paid profits in the form of dividends. This double taxation was overcome through the introduction of the Dividend Imputation System.

The word “impute” means to “give credit for” and this is exactly what the imputation system does. It allows shareholders to receive credit for the tax already paid by the company at the 30% company tax rate, and pay tax only on the difference between that and their own tax rate. This means for an individual on the top marginal tax rate of 49% (including Medicare & Budget Repair Levy) will only pay the difference which is 19%.

Since 2000, provisions have been made to receive franking credits back as a tax refund where the tax rate is less than the company rate. Therefore, for a super fund in pension phase, where the tax rate is nil, the full franking credit will be refunded by the tax office.

Let’s take a look at this concept in more detail by using an example.

The Beauty of Franking Credits

Company XYZ Holdings Pty Ltd makes a profit from its business activities of $10,000 which is fully taxable. It pays tax at the current company tax rate of 30% which equates to tax paid of $3,000, leaving a $7,000 after-tax profit. The company can either reinvest some or all of this money back into the business or pay out some or all to shareholders as a dividend. In this example, XYZ Holdings Pty Ltd decides to pay out all profits to shareholders.

If there are 10 equal shareholders, each receives an after-tax dividend of $700, with a $300 franking credit attached (the tax paid by the company). Since the profits associated with the dividends have been fully taxed, the after-tax dividends are said to be 100% franked or fully franked.

The grossed-up dividend amount is $1,000 ($700 plus the $300 franking credit) and is included in the shareholder’s assessable income. Tax is then payable at the shareholder’s applicable marginal tax rate. The tax paid by the company (franking credit) is then used to offset the shareholders tax payable.

The table below shows the effects of taxation by comparing 5 individuals, all on different individual and superannuation tax rates:

*The above rate does not include the Temporary Budget Repair Levy; which is payable at a rate of 2% for taxable incomes over $180,000 to 30/06/2017.

Individuals 1, 2 and super fund members in accumulation or pension phase all receive tax refunds due to the tax rates being less than the company tax rate of 30%. The higher income earners, individuals 3, 4 and 5 have to pay tax on their $1,000 dividends but they have both reduced the tax payable due to the franking credits.

If you are interested in learning more, please contact us today. One of our friendly advisers would be delighted to speak with you.

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.