Economist Dr Chris Caton is coming to Townsville to provide an economic update for our clients and friends.

This presentation will be held on Tuesday the 7th of February 2012 from 3:00 pm to 4:00 pm.

As Chief Economist of BT Financial Group, Dr Chris Caton advises clients on the financial implications of economic trends, policy pronouncements and major political developments.

A former head of the Economic Division of the Department of the Prime Minister and Cabinet, Chris is a leading analyst of the current and future state of both the Australian and international economies and their potential impact on individual industries.

Drawing on his international experience and with an impressive breadth of knowledge, Chris provides succinct and tailored advice to his clients in a wide range of industries, including many that are dominated by small businesses.

A brilliant communicator, Chris has a rare ability to make economics come alive for his audience and has received innumerable accolades for his highly accessible, meaningful, and entertaining presentations.

If you would like to attend and hear what Chris thinks of 2012 please register with our office before the 31/01/2012 to allow us to book you a place.

If you would like to hear what Chris’s view was for 2011 click the below link.

http://www.bt.com.au/bt-market-insights/bt-latest-updates/2010/12-december/20101210-chris-caton-webcast.asp

Below is an ABC news story from last week. Please have a read of this before reading further. 

Key fund's woes puts super at risk for thousands

Economics correspondent Stephen Long, On Wednesday 14 December 2011, 9:52 EST

A key scheme of one of Australia's biggest superannuation funds is short of money, leaving more than 100,000 people facing the prospect of having their super slashed.

At universities across Australia just about everyone from the boffins to the backroom staff is in a super scheme called UniSuper.

The fund has more than 450,000 members and about $30 billion in assets under management.

Its members thought they were in a scheme that was secure but that is no longer the case.

Continue reading... 

Could the failure of Uni Super really happen? Yes and it already has happened to other super funds!

Who pays for the failure of a Super Fund? You!

Following the collapse of Trio Capital, the Federal Government announced in April 2011 that it would provide a grant of approximately $55 million in financial assistance to benefit the members of four super funds that were formerly under the trusteeship of Trio Capital.

This grant of financial assistance has now been recovered by way of a levy on all regulated superannuation funds under the Superannuation (Financial Assistance Funding) Levy Act 1993. The levy is based on the total assets of each fund at 30 June 2010 multiplied by a rate of 0.0001347, with a maximum of $750,000 per superannuation trust. 

Commencing 21 November 2011, this levy will be passed onto members.  This will result in all members with an open super or pension account being charged a proportionate fee based on their account balance at 30 June 2011. The deduction will appear in members' accounts with the description 'Financial Assistance Levy'. 

When you receive your next statement from your Super Fund take a look, I bet you have a Financial Assistance Levy being charged to your account. As such you will pay for the failure of another person’s super fund. 

Anyone with a Self Managed Super Fund does not pay the Financial Assistance Levy.

With a new year approaching every house hold should sit down a quickly do the math on what they are worth and where they need to be in retirement.  Just jot down the following figures;

1. Value of your house less what you owe to the bank.
2. Value of your combined super.
3. Value of any other investments or investment properties less what you owe to the banks.
4. Value of any other assets being cars, home contents etc.

It has been my experience that your Superannuation is you largest asset, if not your second largest asset if you have paid off your house. 

My concern is that very few people give their Superannuation the respect it deserves. Most people are very house proud but find Superannuation annoying and frustrating. 

This New Year do yourself a favour; 

1. Pay a professional to explain your superannuation to you. We can help.
2. Take control of you Superannuation. 

From reading the above article by the ABC it has become more obvious that you need to be in control of your Superannuation.

You have a number of options in doing this, a Self Managed Super Fund or a product like the new Asgard Infinity which is cheaper then Industry Funds and you are in control. 

Let us know if we can help. 

For more information please call us on 4771 4577. 

By Jason Fittler

The Government has announced that it will also defer the introduction of a standard tax deduction for work-related expenses and the cost of managing tax affairs by 12 months until 1 July 2013. 

The measure, which was also first announced in the 2010 Federal Budget originally proposed to give people a standard deduction for work and tax management related expenses of $500 in 2012—13 and then $1,000 from 2013—14 onwards. 

Dependent Spouse Tax Offset Phase Out 

The Government has announced it will phase-out the dependent spouse tax offset for taxpayers with a dependent spouse born on or after 1 July 1952, from 1 July 2012. 

This measure extends on the 2011—12 Federal Budget announcement to phase-out the dependent spouse tax offset for taxpayers with a dependent spouse born on or after 1 July 1971. 

The Government has also announced that taxpayers who are eligible for the zone, overseas forces and overseas civilian tax offsets or whose spouse is an invalid, permanently disabled or a carer will not be affected by this change. 

Reform of Living Away From Home Allowances and Benefits 

The Government has announced it will amend the tax exemptions that apply to living-away-from-home allowances and benefits by: 

1. requiring individuals to substantiate their actual expenditure on accommodation, and food beyond a statutory amount; and 

2. Limiting access to the tax concession for temporary residents to those who maintain a home for their own use in Australia that they are living away from for work. 

This change will ensure that a level playing field exists between temporary residents and permanent residents. 

The Government has confirmed that these reforms will have no impact on permanent residents unless they are receiving living-away-from-home allowance in excess of their actual expenses. Employees who receive allowances for having to travel from their usual place of work for short periods will also not be affected by these changes. 

The reforms are proposed to apply from 1 July 2012 for both new and existing arrangements.

The Government is focused on having a budget surplus next financial year.

To do this they have taken some measures to cut costs and increase tax revenue.

Below are a couple of issues you should be aware of in regards to your superannuation.

1. Concessional Contributions Caps - starting 01/07/2012 the maximum concessional contribution you can make regardless of your age is $25,000. Previously, if you were over age 50 you could make up to $50,000. It is important to review your salary sacrifice if you have one to make sure you do not exceed the cap. If you do exceed the cap you will have to pay penalty tax. 
2. The Co-Contribution has been halved from $1,000 to $500 starting 01/07/2012. Again you should be aware of this prior to making any co-contributions to your super. 
3. Your annual Pension Payments have remained at 75% of the required minimum. This allows you to continue to take less out of your super fund for the 2012 year.”

There are also a number of changes in regards to your taxation and deduction claims allowable, which I will touch on next week. 

The ruling addresses two key issues:

• what is a single acquirable asset
• repairing versus improving an asset

The guidance is essential to ensure that trustees understand the limited recourse borrowing arrangement requirements. If an arrangement does not meet these requirements, it contravenes the borrowing prohibition and places at risk the SMSF's status as a complying super fund.

The key concepts are:

• what is an 'acquirable asset' and a 'single acquirable asset'
• distinguishing 'maintaining' or 'repairing' the acquirable asset from 'improving' it
• when a single acquirable asset is changed to such an extent that it is a different (replacement) asset

An SMSF can borrow money to acquire a single acquirable asset that is held on separate trust under a limited recourse borrowing arrangement. Multiple assets cannot be held under the arrangement. It is necessary to consider both proprietary rights and the object of those proprietary rights to determine if the asset is distinctly identifiable as a single object, even if it has two or more separate proprietary rights. For example, a factory built across two titles would be a single acquirable asset.

As the money borrowed can also be used to repair or maintain, but not improve, the single acquirable asset:

• an improvement substantially increases the value or functional efficiency of the asset
• a repair corrects something that is already there and that is damaged, has become worn out or dilapidated, or has deteriorated
• maintenance is preventative.

Borrowed money cannot be used to effect improvements. However, money from other sources can be used so long as the changes or improvements to the asset do not result in a different (replacement) asset. If a house is destroyed and another house is constructed from the insurance proceeds (so restoring the acquirable asset to land and a house) this would not result in a replacement asset. Thus the limited recourse borrowing arrangement can continue to operate.

Each draw-down (for example, for repairs) under a limited recourse borrowing arrangement is a separate borrowing but satisfies the limited recourse borrowing arrangement provisions as long as the arrangement as a whole satisfies the provisions. However, borrowings solely to fund repairs to an asset that the SMSF already owns would not satisfy the limited recourse borrowing arrangement provisions.

For more information please call us on 4771 4577. 

Overview

The Education Tax Refund (ETR) aims to help families, with children undertaking primary or secondary school studies to meet the costs of school education through assistance with certain education expenses.

• Under the Government’s ETR, eligible families will be able to claim:

−− a 50 per cent refundable tax offset every year for up to $750 of eligible expenses for each child

undertaking primary school, (that is, a refund of up to $375 per child, per year); and

−− a 50 per cent refundable tax offset every year for up to $1,500 of eligible expenses for each child

undertaking secondary school (that is, a refund of up to $750 per child, per year).

Eligibility

• Those entitled to Family Tax Benefit (FTB) Part A in respect of children undertaking primary or secondary school studies for the relevant financial year are eligible for the ETR.

• Generally, eligibility is also extended to parents with school children undertaking primary or secondary school studies who would be an eligible child for FTB Part A purposes, but for the fact that they, on the child’s behalf, or the child receives certain payments or allowances, for example:

−− Youth Allowance;

−− Disability Support Pension;

−− ABSTUDY Living Allowance;

−− payments under the Veterans’ Children Education Scheme; and

−− payments under the Military Rehabilitation and Compensation Act 2004.

• School children undertaking secondary school studies and who are independent of their parents may also be eligible.

• For families who share the care of a child, the ETR entitlement for the child will be shared similarly to the way FTB Part A is shared.

• The families of students who enter or leave school in any school year will be eligible to claim the ETR for the half of the financial year that the student attended school.

• For students who transition from primary to secondary school in a single financial year the full ETR, based on the secondary-school rate, can be claimed.

• Families with home-schooled students can also claim the ETR. To be eligible, students must be registered with the relevant State/Territory Government.

Eligible expenses

For the purposes of the ETR, eligible educational expenses are:

−− laptops, home computers and associated costs (including repair and running costs of computer

equipment, lease costs, printers and paper),

−− home internet connection;

−− education software;

−− school textbooks and material (including prescribed textbooks, associated learning materials, study

guides and stationery); and

−− prescribed trade tools.

• Eligible expenses that have been incurred by a parent or guardian with more than one child with an ETR entitlement can be pooled and claimed against the children’s combined ETR entitlement, provided that the children all have access to the purchased items.

• Education expenses in excess of what can be claimed in a financial year (that is, expenses over $1,500 per annum for a secondary school student or $750 for a primary school student) are able to be carried over in the following financial year. Eligible expenses that are not utilised for the purpose of claiming the ETR in the financial year that they occurred or the subsequent financial year will automatically lapse.

• The ETR cannot be claimed for educational expenses if a tax deduction is allowed or a Commonwealth Government payment/subsidy is payable in respect of that expense.

Commencement of the ETR

• The refundable tax offset applies to eligible expenses incurred from 1 July 2008. Parents cannot claim the offset in their 2007-08 income tax returns, but they should start keeping records after 1 July 2008 to enable their ETR claim to be made in their 2008-09 income tax return.

Claiming the ETR

• Parents can simply claim the refund against eligible education expenses incurred from 1 July 2008, when they complete their 2008-09 income tax returns.

• Parents and eligible independent students who do not ordinarily lodge an income tax return can also claim the refund through the Australian Taxation Office.

– For those who are not required to complete an income tax return, a separate form will be available

from 1 July 2009 to allow the refund to be claimed for the 2008-09 financial year.

Evidence to support an ETR claim

• Claimants are expected to retain receipts for the purchases of items for which they intend to claim the ETR.

Below is an article regards property in Australia written by David Collyer.

Given the current economic conditions I feel he is on the money with this view. 

Imminent Recession Forecast By Kavanagh-Putland Index

Posted on Wednesday, October 26th, 2011   

Author: David Collyer   

Melbourne:- The Kavanagh-Putland Index, which examines the ratio of property sales to GDP, has fallen to a 12-year low. A fall in market turnover precedes a fall in land values by one to two quarters, which then foreshadows recession.

“The ratio of property sales to GDP has suffered its biggest year-on-year fall since the recession we ‘had to have’,” Dr Gavin Putland of the Land Values Research Group said yesterday. According to the precedents, “there will be recession in 2011-12.”

“The recession will be quite severe due to our very high debt burden and the fact the housing market was more overvalued in 2010 than at any other time in the last 41 years.

In 2010-11, the index fell by the third biggest percentage on record. The biggest fall was in 1974, which preceded the 1975 recession. The second biggest was in 1989-90, and was followed by recession in 1990-91. The fourth biggest was in 1981-82, which was a recession year, and was followed by a worse recession in 1982-3.

On the basis of sales figures for the second half of 2008, the fall in the index for 2008-9 was initially expected to be very large – perhaps worse than in 1989-90. However, the First Home Owners’ Boost persuaded many potential buyers to purchase, so the actual fall in the index was smaller than in 1981-2. A standstill in borrowing that would have led to recession — as happened in so many other countries — was averted for the time being.

It is twenty years since Bryan Kavanagh started calculating the total annual value of property sales in Australia, using records dating back to 1972.

It is ten years since he first published this measure that shows when a downturn in property prices would cause a recession. The index now comprises forty years of data.

Dr Putland said that governments can, but won’t, act to avoid recession. “They need to cut taxes on current income or expenditure, so that people can more easily service their current debts, and replace the revenue by increasing taxation of capital gains, so that people have less incentive to borrow and speculate in future.”

“Governments just don’t do that sort of thing,” Dr Putland concluded.

Insurance is something we all have but most will never use.

When it comes to Life, Trauma, Temporary and Permit Disability (TPD) and Income Protection insurance it makes sense to obtain the maximum insurance at the cheapest price.

By having your Life, Trauma, TPD and Income Protection insurance within your super fund there are two benefits.

First, the premiums are deductable to the super fund, if you have a Self Managed Super Fund then this will help reduce the cost of the insurance to you. If you are in a retail super fund this allows the super fund to provide you with the cover at a cheaper price as they can pass the benefits of the deductibility of the premiums on to you.

Second, the super fund is able to obtain group rates from insurance companies again allowing you to obtain the cover at the best possible price.  We all need to have Life, Trauma, TPD and Income Protection cover, but if you speak to your Financial Planner they can structure it so you have the maximum cover for the minimum price. With the extra benefit of having your superannuation pay for the cover instead of having to pay for it out of your take home pay.

Who said you have to wait to retire before you can access you superannuation, with the right advice your superannuation can benefit you right now. 

For more information please call us on 4771 4577. 

This week was a big week for industry in Australia.

The Carbon Tax passed in the lower house and will be considered in the Senate in November. It looks all but certain to come into law on the 01/04/2012.

Tony Abbott has advised that he will repeal the tax if he wins office at the next election. So what does big business do now?

Queensland Nickel has announced that they expect job losses; Xstrata has already flagged that they will close down refining in Townsville in the next 5 years. The rumours are out that Sun Metals is also considering a shut down. Who knows if these businesses are serious or not, what we do know is that uncertainty for business brings uncertainty for employees and our city.

I wrote about the Carbon Tax back when the legislation was first released. My information comes directly from the government documents. This debate has become one more of idealism than facts.

I for one am all for reducing pollution but this legislation does not do that. So it is simply a tax to fund the over spending of the Labor government.

I encourage everyone to make up their own mind. Below is a link to my initial comments on the tax, please read but then make sure you read as much as you can from as many different sources you can. (Carbon Tax What is it Good For?)

I would also recommend Dr Robert Carters book “Climate: The Counter Consensus” which can be purchased on Amazon.com.