ANIG Wealth Management provides specialist advice to our millennial clients and investors and below are some of the frequently asked questions by them.
36% is the maximum you can spend on servicing total household debts, including housing and other loans such as cars, personal loans and credit card debts. Most lenders apply these rules in assessing investors borrowing capacity on the assumption that anything outside these parameters can be difficult to sustain by an individual or a household.
Super investing can provide superior tax savings over other investment vehicles and family trusts. However, the investment will not be accessible until the investor reaches a condition of release (for example, their preservation age) making super investing a long shot for investors in their 20s and 30s. With wealth generated through a family trust, the investments are easily accessible and the beneficiaries of the family trusts can easily access income from such investment. In the right circumstances, a family trust can be a tax-effective vehicle for investing or operating a business.
Before making any decision, note that there may be alternative structures suitable for your circumstances. A specialist adviser can help you evaluate the pros and cons attached to each vehicle, and a good adviser can help you navigate through this. Talk to us and see how we can help.
The Institute of Managed Accounts Professionals (IMAP) estimates that about $60 billion is invested via managed accounts but acknowledges this may understate the true figure. Even so, IMAP estimates that growth will run at about 40 percent a year for at least the next two years, suggesting the managed account industry will grow to more than $115 billion by 2020. This could bring more innovation and competition in an environment where the retail clients get to benefit and be the judge.
The modern superannuation system was introduced in 1991 with the introduction of the Super Guarantee, which is a compulsory contribution system. Superannuation is defined by the ATO as a system where the money is placed in a fund to provide for a person’s retirement.
Yes. An SMA can be used similarly to how you can use a traditional superannuation product. Similar to a self-managed super fund, your regular employer contribution can go into your SMA account. An SMA can be used as a superannuation vehicle or an investment vehicle or both. Where an SMA is treated as a superannuation vehicle, investors must note its purpose is to serve your retirement and is subject to the same treatment as super. Investors cannot access their funds for personal consumption until reaching a condition of release on their funds.
As an insurance advisory group, we can also provide advice in regards to insurance. If you have a
mortgage, any significant debt, and you’re working and earning an income, then
insurance is a necessity. If you have no mortgage, no asset, not expecting an
inheritance or family support of any form, and do not want to be dependent on
government support to get by in any critical event, then insurance is a
necessity. Do not say you have mortgage insurance as such covers are structured
differently from personal protection covers such as life/death, TPD, income
protection, and trauma insurance.
in a unique position when it comes to insurance. Most reservations most
experienced investors have about insurance are often associated with its higher
premium cost as the insurers risk is based on the insureds age and health
circumstance when determining their insurance cost and health risk exclusions
and premium loading. Younger investors are often considered healthy. Buying
personal insurances at this stage can be very cheap. Millennials can lock their
covers and premiums at a reasonable price.
items for millennials are often related to first mortgages, credit card debts,
and lifestyle possessions such as cars and others. Most younger investors are
not yet at their peak earnings. When you consider their lifestyle and financial
commitments, insurance is a necessity for them.
For an extra
level of protection, it is always advisable to go through an insurance process
under a personal advice basis where your circumstances, health, and existing
insurances through super all get considered. There are four main personal
insurances namely life/death, TPD, income protection, and trauma. By default,
you may have your superannuation come with a life/death and TPD insurance at
lower levels. It is a good start but, there are some associated features to
such superannuation policies that may not be suitable for your needs. Given
that you are young and potentially healthy, an insurance review and advice at
this stage can have long term financial benefits. ANIG can help you with your
insurance review and also help educate you about insurance and also structure
them in the most cost and tax-effective manner.
The property ladder is one of the most difficult to climb in Australia. There are limited options for people wanting to get into the market. For a start, there is the First Homeowner Grant (FHOG) scheme available to Australian citizens and people with residency status. There are certain eligibility criteria to meet and there is more information provided on this under our Home & Investing page.
There are a few options available which include increasing your concessional superannuation contribution, borrowing to invest or using tax structures such as a family trust or an SMSF where possible.
Salary sacrifice is a form of concessional contribution additional to the standard 9.5% employer super guarantee contribution made on your behalf by your employer upon the investor’s instruction. Salary sacrificing is generally the first tool to consider when thinking to boost your super savings. There are caps on the concessional contributions you can make each financial year as there is a penalty tax to pay when you go over.
Borrowing to invest is possible if there is savings or equity than can be applied to support additional borrowing for investing. If the asset to be purchased is used for income-producing purposes then income to be generated on the asset will be tax deductible against your marginal tax rate if the investment is held in your personal name or to a super fund if purchased through a SMSF. You can apply borrowed funds to invest in direct property-based investments, shares, and other assets. If you’ve ever heard of negative gearing, you may understand the often-promoted idea about high borrowings for tax purposes. ANIG WM approaches borrowing for investing differently and we are happy to guide you through the process where an investor has the resources and is qualified to do so.
Trust vehicles such as family trust (FT) and SMSFs can also be used for tax-effective investing. FT generally have beneficiaries receive the income associated with the investment. The taxes are paid by the beneficiaries at their marginal tax rate upon receipt of a family trust income. There is more to a family trust and there are several reasons for it to be appropriate or inappropriate for an investor. ANIG WM can guide you through that process when necessary.
If the objective is to reduce personal income tax, insurance such as income protection can be used to reduce an investor’s marginal tax rate if the investor has the cash flow to support it.
There are other tax-effective investment bonds and also vehicles such as a self-managed superannuation fund and even SMAs. There are more materials on SMSFs under our over 50 & investing page for your reference. ANIG WM provides tax-effective investment strategies and recommendations and we are able to help you explore further where it is identified such advice could help improve your finances.
There is no right age to start thinking about your long-term financial wellbeing. An investor’s only constraint is money or resources and time. Where there are sufficient resources to consider SMSF and investing it’s always advisable to explore the possibility.
The minimum balance ANIG WM will consider for an SMSF advice is $200,000. At such balance, it can be cost-effective to run the vehicle. It can be combined or be for one investor. A self-managed super fund (SMSF) is a tax vehicle that allows investors to invest in a tax-effective environment. Currently, an SMSF is the most tax-effective structure in the country.
It offers investors total control of their superannuation assets, and you can have exposure to direct assets classes of fixed interest, shares, and property-based investment. It can be used for ETFs, managed funds, and other opportunities. In the right situation, an SMSF allows you to hold direct real estate investment. Where it is used for investing in Australian equities, SMSF can help reduce the amount of tax paid by the fund as they receive franked dividends and offsetting the attached imputation credits against the fund’s taxation liability.
An SMSF is a lower tax vehicle that operates on a fixed cost basis. The highest tax applied to an SMSF is 15%. Capital gains tax (CGT) is capped at 10% for assets held over 12 months. The services of a qualified adviser can play a key role in guiding you to understand what the vehicle is, how that could potentially benefit you, and also your trustee obligations to ensure your SMSF remains compliant.
Contact ANIG Wealth Management and see how we can help.
To focus on paying down a mortgage quicker, we first have to understand your cash flow and budget to have a clear indication of where your money goes. This exercise can reveal to homeowners’ insights about your finances that can be managed and used to create some surpluses that can be reapplied to the mortgage or investing. Investors should be discriminating between bad debt and good debts and should try not to use home equity for non-capital and non-income producing purposes.
There is no right age to start planning and safeguarding your assets.