JUNE 2008


I’m not really a fan of fun parks, and after the last 6 months on the rollercoaster, I know why!

It’s been an intense period with a range of economic factors impacting investment strategy, including rising interest rates, surging oil prices, a strong Australian dollar, inflationary pressures, the continued fallout from the US property market and concerns about the economic outlook in that country.

I can’t predict that next 6 months will be any less turbulent.

As we run up to the end of the financial year, I’ve included a couple of timely reminders in this newsletter, some new opportunities for superannuation investment and note a couple of points from the Rudd Government’s first budget.

Best wishes
Chris Kiernan

 Worth Noting from the Budget
The Rudd Government’s first budget contained little change for investors and there was no change to the tax treatments of superannuation. However, it’s worth highlighting two areas where changes might affect you.

Salary Sacrified Contributions
From 1 July 2009, salary sacrificed contributions to superannuation will be treated as income. This measure closes the door on using salary sacrificing as a means of gaining access to additional Centrelink benefits. It also appears that we will no longer be able to use salary sacrifice as a strategy to reduce ‘total income’ for the purposes of the super
co-contribution.

Changes to the Commonwealth Seniors Health Card
The Government will change the income test for the Commonwealth Seniors Health Card to include gross income from superannuation income. So all income, regardless of the source, will be counted for the income test. The Seniors Health Card is available for people who don’t quality for the Age Pension but have an adjusted taxable income of less than $50,000 for singles or $80,000 for couples. The changes are due to come in effect from 1 July 2009.

For more analysis of the budget click here
Taking the Market’s Temperature
Sit tight! We could be entering another unsettled period, with some analysts predicting the Australian market could shed about 5% over coming months.

According to AMP Capital chief economist Shane Oliver, losses in late May indicate the rally since mid-March is over, and he predicts a period of turbulence.

With rapidly rising oil prices and consumer confidence at a 15 year low, according to the Westpac Melbourne Institute, households are very concerned about current economic conditions including mortgage rate increases.

We continue to advise caution, but there are buying opportunities in international shares and listed property trusts, especially.

For tailored financial advice, please contact our office.
Colonial the FirstChoice
Colonial First State’s FirstChoice has emerged as a clear winner in this year’s Wealth Insights Service Level survey.

The survey of 886 financial advisors found Colonial FirstChoice was the best fund manager and had the

best level of service in the industry.The Navigator platform was ranked third for level of service.

Kiernan Financial Planning is pleased to offer both investment platforms to clients.
New Opportunities for Super Investment
Changes to superannuation mean all funds (including self managed funds) can now borrow money for investment.

But before you start bidding at auctions, there are some restrictions to note:

  • As a general rule, super funds can borrow money to invest in property, listed shares and other securities, but the investment cannot be one the fund already owns. There are also restrictions on acquiring investments from related parties such as fund trustees, members, relatives of members or trustees.
  • A super fund can’t buy a property directly. It must be under an arrangement where the super fund has a beneficial interest in the asset but no legal ownership until the final instalment.
  • The asset must be held in trust for the super fund.  So a trust outside the super fund may need to be formally set up.
  • The investment has to continue to be at arm’s length so there can be no personal gain. (This is not an opportunity to buy a family beach house!)

We expect to see a proliferation of products promoting the benefits of borrowing in super. It is worthwhile to obtain advice as the rules can be complex and if you are close to retirement this may not be the best investment strategy.
Timely Reminders At Tax Time
In the lead up to the end of the financial year, it’s worthwhile to remind you about:

Superannuation
Make a personal contribution to superannuation by 1 July to quality for the government co-contribution scheme this financial year. If you are an employee or self employed with assessable income of $28,980 or less, and you contribute $1000 to superannuation, the government will contribute $1500. This scales down to nil at $58,980.

Don’t over contribute to superannuation.  Depending on your age, you may be taxed as much as 93%.

Consider contributing $3000 to your spouse’s superannuation to receive a $540 tax rebate to offset your personal tax. This applies if your spouse’s income is low.

Income Stream
Review your annual income stream pension requirements and plan to meet your cash flow needs for next year. Will you need extra cash for a planned holiday or other known expenses?

Salary Sacrifice
Review your salary sacrifice arrangements and adjust if necessary.

Capital Gains
Have you sold any assets or investments at a profit over the last financial year? To minimise capital gains tax, we advise you to make an appointment with us.
Australia Ranks Tops for Retirement
Australia is the country most workers and retirees around the work would like to be living in 20 years time, an international survey found.

The Retirement Scope Survey, conducted by AXA questioned 15,000 workers from 26 countries. Australia’s relaxed lifestyle and climate were its biggest attraction for retirees around the world, although Australians preferred New Zealand.

 

The survey also found the average income of Australian retirees was $1,917 a month, and the average cost of household expenses was $1,437.
contact

Tel 03 9816 9516 / Fax 03 9816 9416 / Address Level 27, 101 Collins Street, Melbourne Victoria 3000
Postal Address PO Box 690 Balwyn Victoria 3103 / AFS Licence 226143 / Email email@kiernan.com.au
www.kiernan.com.au

Disclaimer: Any advice contained in this newsletter is of a general nature only as it does not take into account your needs, objectives or financial situation. You should always take these matters into account before acquiring a financial product and obtain a copy of the Product Disclosure Statement (PDS).