Kevin Rudd

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Kevin Rudds First Budget

• What it means for you as an investor
• Nick Bruining CFP
• B.Com, Dip FP, FFPA, FAICD, APMESA
• Authorised Representative of N.C. Bruining
  Associates Pty Ltd AFSL 245514

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Warning

• The information provided in this presentation is
  of a general nature only.
• You should not
• Take any action.
• Dispose of any investments or assets
• Purchase any investment or assets
• Rely on the information contained in this
  presentation
• Without first seeking professional advice based
  on your own specific situation.

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Today

• How Tax Works
• Common Investment Strategies
• How these Strategies are affected
• Changing Opportunities
• First Home Saver Accounts
• Things to watch out for

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The Basic Tax Equation

• Assessable Income
• - Allowable Deductions
• Taxable Income
• Applied to Tax Scales
• Tax Payable
• - Tax Offsets Credits
• Tax Payable/Refund

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New Tax Scales
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Assessable Income

• Wages
• Interest
• Rent
• Dividends
• Grossing Up
• 2,000 Dividend Fully Franked
• 2000/ (1- 30) 2,857
• 2,857 - 2,000 857 Tax Credit (refundable)

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Assessable Income Continued

• Capital Gains
• 50 of the Gross Profit (providing held for more
  than 12 months)
• E.G. Paula sells Investment Property
• Sell Price 300,000 (net of selling costs)
• Purch Price 200,000 (total costs)
• Gross Profit 100,000
• 2 50,000 added to other income

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Reducing Assessable Income

• Deferring income
• Salary Packaging
• Redirecting Income Pre-Tax
• Cars, Travel, etc etc
• Otherwise Deductible all OK
• You get the money straight away
• Subject to Fringe Benefits Tax of 46.5
• Questionable for those on lower Tax rates
• Except FBT friendly Charities

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Reducing Assessable Income

• Salary Sacrifice to Superannuation
• EG. Income 45,000
• Current Tax (8,850)
• Take Home Pay 36,150
• BUT if Salary Sacrificed
• Income 45,000
• Redirected to Super (10,000)
• Assessable Income 35,000
• New Tax (5,850)
• New Take Home Pay 29,150

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Salary Sacrifice The Traps

• Contributions Tax 15
• Contribution Caps
• 50,000 (under 50)
• 100,000 (over 50)
• INCLUDES 9
• Relative Tax Benefits
• 34,000 same or lower tax rate (15)
• Money is Locked Up

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Double Dipping

• Superannuation Co-Contribution
• 1.50 for each 1.00 paid after tax
• Maximum of 1,000 1,500 Co-Cont
• 28,980 maximum, then reduces _at_ 5c/1
• Cuts out at 58,980
• Eg 38,980 gets you 1500-500 1,000
• If reduced, only need 2/3 of the amount
• Salary Sacrifice DOWN to 28,980
• Double Dip

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Double Dipping Dead

• 1/7/2009 Salary Sacrifice added back
• Also
• Centrelink Income Benefits
• Salary Sacrifice to get pension
• Centrelink Concession Cards
• (Claim required Low Income Card)

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Changed Tax Rates and Gearing

• Gearing Borrowing Money to invest
• Positive, when income from Investment gt Expenses
• Neutral, when income from Investment Expenses
• Negative, when income from investment lt Expenses
• Inject 90,000 borrow 10,000
• Better if borrow 90,000 and inject 10,000
• The Perfect Investment
• Borrow 100,000 inject 0

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Changed Rates and Gearing

• 4 Years Ago, Fred earns 75,000 pa
• 100,000 borrowed at 5.95
• Investment Generates 3
• Tax Rates 70,000 42
• So, 100,000 at 3 3,000
• Interest Expense 5.95 (5,950)
• Net Loss (2,950)
• Tax Deduction _at_ 42 1,239
• Net loss (1,711)

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Changed Rates and Gearing

• Today, Fred earns 75,000 pa
• 100,000 borrowed at 5.95 9.47
• Investment Generates 3 3
• Tax Rates 70,000 42 30
• So, 100,000 at 3 3,000 3,000
• Interest Expense 5.95 (5,950) (9,470)
• Net Loss (2,950) (6,470)
• Tax Deduction _at_ 42 1,239 1,941 (30)
• Net loss (1,711) (4,529)

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Other Changes

• Account Based Pension Income
• Superannuation converts into ABP
• Payment rate Acct Balance X
• Eg 700,000 X 10 70,000
• If Over 60, Exempt Income
• Commonwealth Seniors Health Card
• PBS Drugs, Pharm Benefit, Payments
• July 1, 2009 Assessable Income
• Add Back all investment losses not just R/Estate

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Home Saver Accounts

• 1st Home owners
• Starts October
• Contribute 1,000 for 4 years
• No Upper limit of contributions
• If contribute, Govt pays 17 Bonus
• Max 5,000 so max bonus 850
• Max tax on earnings 15
• Tax free on Withdrawal

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Home Saver Accounts BUT

• Can only be operated by APRA funds
• Balance cannot exceed 75,000
• If not used, transferred to superannuation
• Minimum 4 years

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In Summary

• Salary Sacrifice
• Generally a very good strategy
• Double Dipping to Cease 1/7/09
• Salary Packaging
• Do your sums, questionable benefits under 80,000
  due to marginal tax rate changes (exceptions,
  Nurses, Charitable workers)

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In Summary Continued

• Gearing
• Look at investment yields and net cost
• Seriously consider growth potential
• Dont get sucked in by past performance
• Changed Treatment of ABPs
• Changed Treatment of financial losses
• New Home Saver Accounts

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But wait, theres more.....

• Australias Tax System Review
• 4 reviews/enquiries into SMSF
• Welfare
• From July 2008 End 2009

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