Investment Advice

Did you know that just by putting aside $20 a week earning only a basic cash rate of 2.50% p.a. in 10 years you would have saved $11,940.64! Regular saving is a great way to build up a lump sum from nothing.

Salary packaging is an alternative way of being paid your annual remuneration and to optimise the take home benefits that you receive. It is an arrangement between you and your employer where you pay for some items or services straight from your pre-tax salary. This can reduce your taxable income and put more money in your pocket.

Borrowing to invest is also called “gearing”. Borrowing to invest can reduce your tax bill as the borrowing costs (interest and fees) are tax deductible. Lending institutions can provide finance for a wide variety of assets ranging from direct property to equities.

This can be an ultimate starter strategy for a person that does not have a large amount of initial capital to invest. You can start with a small initial investment that is matched by the lender and the combined amount is invested in shares or a managed fund. Both you and the lender continue to contribute and invest on a regular basis. This type of gearing is often referred to as instalment gearing. In other words, a monthly savings plan structure with a bit of gearing or debt underneath. A significant benefit of instalment gearing is a technique called dollar-cost averaging. As you are contributing a fixed dollar amount at regular intervals as opposed to throwing your money in all at once there is a better probability that over a period of time that the average purchase price of the investment will be less.

A margin loan is a form of gearing that lets you borrow money to invest in approved shares or managed funds using your existing cash, shares or managed funds as security.The amount that you can borrow is determined by the securities in your portfolio, their Loan to Value Ratio and a credit limit based on an assessment of your financial position.

Negative gearing occurs when the cost of owning a rental property outweighs the income it generates each year. This creates a taxable loss, which can be offset against other taxable income, for example, your salary and wage, to potentially provide tax savings.

This is the difference between the value of your home and how much you owe the bank against it. You can use the equity in your home as security with the bank and borrow against it, for example, to buy an investment property.

Whether it be;

• salary sacrificing to superannuation to reduce tax;
• transferring listed securities personally held into superannuation to take advantage of the concessional tax rates on investment earnings and capital gains ;
• taking advantage of the government super co-contribution;
• contributing super on behalf of a low income earner spouse so you may qualify for the spouse super contribution; or,
• implementing a transition to retirement strategy
  There are many superannuation strategies that could be an answer to kick start your financial plan.

There are strategies for wealth creation through opportunities not available through an industry or retail super fund. One example is direct property acquisition and borrowing in a Self-Managed Superannuation Fund

The ownership of an asset is a significant consideration in wealth accumulation. Personally owning an asset may not be the best vehicle if your taxable income from other income sources is high. Investment earnings from this asset could be potentially taxed at a higher rate, thereby depleting the earnings compared to ownership in a different tax vehicle. Restructuring ownership for asset protection purposes is also an important consideration.

When it comes to investing there are many strategies you can utilise to minimise the amount of tax you pay.  For example, salary sacrificing, tax effective investments, prepaying loan interest in advance etc.