Tax Office Getting Tough

We are seeing increasing activity from the Taxation Office around clients who are consistently late in lodging their quarterly business activity statements and their annual taxation returns.

The tax office is adopting the approach with clients that are tardy in the area of meeting their lodgement deadlines that there is an increased possibility they are not maintaining proper records or being truthful in their disclosure to the authorities.

Therefore, we urge all clients to meet their lodgement deadlines meticulously if they wish to remain above scrutiny from the tax office.

If you require advice regarding the timeframes you need to meet, or you require assistance in improving your bookkeeping arrangements so that you can meet your reporting obligations, please contact our office on 07 5482 2855 and we will readily assist.
Since we have commenced our finance operation we have written a large amount of finance for vehicles and machinery. In both instances we would like to take this opportunity to share six helpful facts with you for when you look to finance your next purchase in this area.

1. The legislation in regards to tax benefits, including Fringe Benefits Tax, is constantly changing and will impact upon the affordability and tax savings associated with your purchase. As professionals in this area we will be able to assist you to insure you gain every tax benefit possible from the transaction and across the life of the finance agreement.

2. Always structure your finance arrangements so that you gain full tax benefits associated with ownership of the goods. In previous years, companies sought to utilise lease
agreements such as Notated Leases, which do not enable the lessee to take advantage of full ownership. In these instances, the tax benefits of owning the goods remain with the financier.

3. In more recent times, Chattel Mortgages have become more useful as they allow for GST to be claimed back upon purchase, provided both the seller and buyer are GST registered. This form of finance also enables the buyer to take full advantage of the tax benefits associated with the ownership of the goods.

4. Always balance your repayments with your cash flow. Different instances may require different repayment periods to be structured into your finance agreement and this can be done where necessary.

5. In the instance of a "balloon repayment" at the end of your finance agreement, always insure that the goods can be sold for more than the outstanding amount. Having to
repay the difference upon the sale of the goods or the finish of the finance agreement can cause cash flow issues. We have some rules of thumb here that will assist in assuring you are adequately covered when it comes to selling your asset.

6. When it comes to getting the best rate always utilise the services of a broker. Vehicle, machinery and equipment finance are constantly changing in relation to rates and terms. In a market place with over 20 different lenders, it pays to check for the best rates and terms through a broker as these will change from month to month. In addition, brokers are aware of the best lender to place your loan, dependent upon your terms and your time frame.

In summary, there are a number of ways to insure your next vehicle or piece of machinery is purchased in the most beneficial matter to your business and personal situation. Your full financial situation would need to be reviewed prior to acceptance of any offer or product.

Prior to the purchase of your next vehicle, please contact Peter Flemming at out office directly on 07 3878 8889 or email for assistance with the tax implications of your purchase, along with David Schuh by email or direct telephone 07 5480 4808 to provide you with an indicative quote.

How Much Income Do You Need To Retire?

 How much money should you withdraw in retirement? Anyone who is getting closer to retirement needs to think seriously about how much income they will need in the years the?y are not working.
This is a crucial decision for two reasons. The first is that it will dictate how much income you will have after your finish work. The second is that for those who are planning for retirement, this figure will dictate the level of assets you need to accumulate for any given level of income.

Let's use the example of a couple who retires with $1.3 million in investment assets. They are trying to work out what this means for them in retirement. Should they be
planning to spend $40,000 a year, $60,000 a year or $100,000 a year?

Spending investment income 
A simple but very legitimate approach to this problem is to suggest that a retiree with a range of investments might choose simply to spend the income that their investments earn. With a well-balanced portfolio, this is reasonably sound thinking.
Let's assume that our couple with $1.3 million in investment assets 
decides that they are going to leave one-third in cash, one-third in Australian shares and one third in residential property. At the moment they should be able to get at least 3.5% income on their cash investments, find a residential property with an after-cost yield of 4% and receive income (including franking credits) of 5.5% on a portfolio of Australian shares.

Their total income: $56,290. What is wrong with just spending this amount each year? The answer would be not much. It is a reasonable way to look at your retirement situation. Over time you would expect the income from the Australian shares and property investment to increase, providing an important buffer against inflation and effectively increasing the income that you have to spend. 

Having $433,000 in cash style investments provides a great deal of liquidity for any cash needs. Spending the income of the portfolio preserves the underlying investments (although inflation will eat away at the $433,000 invested in cash), meaning the portfolio will be well placed to fund a retirement over many years.
The biggest risk in this situation would be an economic shock that saw very low interest rates and decreased share dividends and rental income. If you were prepared to cut your spending to cope with such an outcome, then this approach to funding your retirement is certainly sound.

For the person thinking about the amount of money that they need for retirement, a drawing rate of 4% suggests a withdrawal rate of  $400,000 for every $100,000 invested, up to a withdrawal rate of $5,000 for every $100,000 invested if you use a 5% figure.
In Australia, we have factors that might support a higher portfolio withdrawal rate, including franking credits that provide a tax return for most Australian share investments and an age pension system that provides a safety net for people, even with levels of assets of $1 million.

These factors might lead to someone being comfortable drawing at a higher rate for different reasons - franking credits because of the extra source of returns, and the age pension because of the safety net it provides if portfolio funds are depleted too quickly. With this in mind, an Australian investor may be able to withdraw 5.5% or 6% and still be reasonably comfortable with preserving their capital.

There are other non-financial factors that might cause a person to decide to withdraw at a higher rate early in their retirement including the assumption that they will spend decreasing amounts of money on things like entertainment and travel as they get older.
In conclusion, the rate at which you draw from your portfolio is a crucial personal finance decision. It will determine the type of lifestyle you will be able to enjoy in your retirement years.
If you would like a no obligation review of your retirement plan and your investment structures, please contact Dominique Schuh on 07 5480 4877 or at





Who Is Responsible For Checking ABNs?

Whose responsibility is it to ensure the accuracy of ABNs?

In general, if the ABN quotation looks reasonable, you can accept it. However, if you have reason to suspect that it might not be genuine, it does not belong to the supplier who quoted it, or the supplier has incorrectly charged GST, then you should check the Australian Business Register (ABR) to verify that the ABN is valid and if the business is registered for GST

The ABR lists entities that have ABNs whether or not they have GST registration. Those that have GST registration show an effective date. If an enterprise is not registered for GST, then it cannot charge GST on its supplies and consequently will not (or should not) issue a tax invoice including GST.

You can only claim GST credits on purchases from suppliers who are registered for GST.

If the ABN quoted on the invoice is not valid or the details do not match the supplier, you should withhold 46.5% of the payment.
There are some specific circumstances where you do not need to withhold and you are able to obtain an 'ATO Statement by Supplier' declaration as an alternative.
This is an area that can cause headaches if it is not handled correctly, so if you have questions please contact Peter Flemming on 07 3878 8889 or

Beware Bad Returns In Good Times

Markets have been having a pretty good run again this year with many major indices recording gains of 10-20% so far.
This is fantastic news if you're invested in those markets because the returns are much better than bank interest.

Despite those healthy returns, the reality is a rising tide doesn't lift all boats (even some of the harbour's most impressive boats).
There have still been many companies around the world under-performing against the market.

Computer giant IBM is one. Valued at around $200 billion, IBM has had a lacklustre year, down 6.5%, while it's benchmark, the Dow Jones Industrial Average is up over 19%.
Caterpillar is another example of a large, well known company dragging against the Dow Jones, it is down over 10% this year.

Across the border in Canada, you can see the benefit of diversifying beyond just one country as the Toronto Stock Exchange (TSX) lags US markets with a 7.3% return for the year. The TSX is home to the world's largest gold miners, Goldcorp and Barrick Gold, who have both lost around 50% of their value this year and combined with oil companies, form part of the reason the TSX is lagging.

It is a similar story back here in Australia. Gold miner Newcrest has fallen 60% while it's benchmark the ASX 50 is up 15%. Other notable companies diverging from the index are Worley Parsons, down 8% (pre a 25% fall last week), Orica, down 7%, and Coca Cola down 8.5%.

This proves that a portfolio full of good looking companies in good times can still give bad looking returns. Real diversification comprises a variety of different funds full of hundreds of companies from Australia and around the world.

If you would like to discuss your own diversification and investment options in detail, please contact Dominique Schuh on 07 5480 4877 or at

Beware The Cash Flow Grinch This Christmas

The GFC and post-G FC era has, and will continue to claim victims. Most business owners accept the risk of failure as part of the 'game' but that knowledge doesn't ease the pain, suffering and stress when it actually happens. Unfortunately business failure can also have a domino effect and lead to relationship breakdowns,divorce, extreme financial hardship and division of families.

In many cases, the failure is a direct result of poor decision making or a lack of capital. Poor service, inferior products, small margins and high debt can all be business killers but the most common cause of business failure is inadequate cash flow. When the economy deteriorates, the business does not have the reserves to see through the tough times and when the banks lose confidence in the business the outcome is inevitable.

Banks certainly have their own issues to deal with at these times, but the inevitable consequence of a credit squeeze is that they will call in debt where they fear a deteriorating position. Banks often appear to lack the patience and foresight to see a business through a tough period but significant damage is done to the economy when a business is closed and its capital value and intellectual property is extinguished.

Make no mistake, poor cash flow can even bring a profitable business to its knees. Cash flow is not just a means of keeping a business afloat, it is also the foundation of your future growth plans.
With the Christmas trading season upon us here are 6 tips to improve your business cash flow.

1. Plan and Forecast Now

This is probably the most important part of managing your cash flow. You need to understand your businesses cash flow cycle and prepare a cash flow forecast that takes into account your best and worst case scenarios. This process is designed to establish if you have sufficient cash reserves to get you through the troughs and identify when and how much additional funding is required. They say, "forewarned is forearmed" and there is no point running to the bank when your overdraft is about to hit the limit. If your cash flow forecast identifies the need for additional funds, contact your financiers now because finance applications are viewed more favourably when they are lodged before you run out of cash. If you don't get a positive response from your existing financier, look elsewhere.

2. Debt Collection

In some cases your customers or clients are using you to fund their business (interest free) while you're possibly paying interest on your overdraft. Clearly outline your terms of trade from the outset to avoid any mis-under­standing when you have to chase any outstanding debts. A clear system and process is required where customers stretch your trading terms and never extend credit to customers with a poor credit history.

3. Inventory Management

Remember, your stock is really your money tied up on your shelves. There is a fine line between having enough stock and having enough working capital to meet your ongoing financial obligations. Often, 80%of sales come from 20% of business' product line so knowing what stock items and what level of stock to carry is a vital management issue. Run down the level of slow moving stock in favour of your best selling items and consider a clearance sale to move some of your slow moving items to free up some cash.

4. Equipment Purchases

Where you need to acquire new equipment or capital items consider financing the equipment by lease or chattel mortgage rather than purchasing the item with your available cash reserves. This may have an impact on your profitability but it will free up cash that would otherwise be tied up in plant and equipment or motor vehicles. Most importantly, consult with us first regarding the finance options so you also understand the taxation and cash flow consequences.

5. Monthly not Annually

By simply rearranging annual payments for items like insurance into smaller monthly payments you can take the pressure off your cash flow. Sure, you might pay a small premium for the adjustment but you don't need to worry about paying lump sums during your slower months. If your insurer doesn't offer monthly payments you might need to shop around.

6. Use Surplus Cash

Understand your cash flow cycle so that short term cash surpluses are not seen as 'excess cash'.Where required, isolate these funds to support future cash requirements. Ideally, place the funds in an interest bearing account, an offset account or your overdraft that you can re-draw at a later period. Understanding your cash flow cycle and then implementing a cash management system can be critical. Cash is the lifeblood of your business and planning can mea n the d iff erence between just surviving a nd potentially thriving. Strategic business planning can prevent business failures and if you need any help with your cash flow projections or if you are looking to fund new plant and equipment call our office on 07 5482 2855 today.
Many employers want to be able to show their staff their appreciation with gifts at Christmas, but there are a few laws you need to be aware of.

If the gift to employees and family members is under $300 and is for non-entertainment items, e.g. gift certificates and hampers, you are able to claim a tax deduction and the GST with no Fringe Benefits Tax (FBT) being payable.

For entertainment expenses such as movie tickets and is under $300, then for employees you cannot claim a tax or GST deduction and no FBT is payable. If over $300 then you can claim a tax deduction and FBT applies. If your entertainment gift is for clients then you cannot claim a tax or GST deduction, however, neither is FBT payable.

Christmas Parties

If you are not claiming FBT under the 50/50 rule, which is the most common method then the following rules apply. If the party is under $300 per head then no FBT is payable. However, you are unable to claim GST or the expense as a tax deduction. If over $300 per head, then FBT is payable however you are able to claim a tax deduction.

As you can see the rules that apply in the Christmas season can be over complex. If you have any questions when it comes time to claim these expenses feel free to contact our office on 07 5482 2855 to discuss your situation.

Saving For Your Child's Education

Finding the money to pay the soaring costs of education is a battle for many Australian families. With no relief in sight, it's time for some serious planning.
Raising a child in the new century looks is more costly than ever. A recent report indicates the basic cost of raising two children to the age of 21 now exceeds $500,000. Add private education fees and the figure soars. Make no mistake, alongside the mortgage, education is becoming a substantial and sobering cost for families.

Choice magazine regards the cost of education as one of the fastest growing life costs in the Australian community, growing at around 6 per cent a year. To put this into perspective, consider that $1,000 in today's dollars, will be close to $1,800 in 10 years time.
And it's not just for the growing number of children attending private schools.

Contrary to common belief, public education is not free. Increasingly, costs at government schools are being passed on to parents who can expect to pay around $800 to $1,200 per child each year on school levies, uniforms, books and excursions. And while the cost of non-government education varies enormously depending on which state and which
school, on today's figures, parents can expect to pay between $5,000 and $17,000 per child each year at secondary level.

Planning for future expense

Education is one cost that can be planned for a long time before children even step foot in the playground. Given the long lead times associated with bearing and raising children, the opportunity is there to plan ahead.

A regular investment plan is a good way to prepare for future education costs. It has the benefit of longterm investing and the simple but effective powers of compound interest. A family with a baby due later in the year, for example, might start a regular investment plan using any gifts of money intended for the baby, and then continue to contribute a
monthly amount. Over this sort of timeframe, using a cash management trust or managed fund can be better than putting the money into a traditional savings bank account - or the piggybank.

If you've already got children, it's not too late either. The power of compound interest simply warrants getting started as soon as possible.

Start small, now

There's a misconception that people have to start with a large amount when they're investing money. This is not the case. Even with a small amount, the key is to start now and not put it off, to benefit from long-term investing. A survey conducted by Newspoll discovered that about half of all parents use their general savings to pay for school fees. Of the other half, around a third use savings from a special education saving account, 28 per cent tap income from specific investments, while 21 per cent take a part-time job to pay the fees and 14 per cent use a personal loan or draw down on their flexible mortgage to meet the cost.

Only 40 per cent of parents are saving for education in advance but almost all admit that their savings fall short, with half of the savers putting aside less than $100 a month.
So like any long term goal, when saving to pay for your children's education it can be as simple as ensuring you start as early as possible.

As always, Dominique Schuh can assist you to devise an appropriate strategy to start saving for your children's education.
1AMP.NATSEM Income and Wealth Report, 2007

How To Pay Off Your Mortgage Faster

We've all grown accustomed to having the idea of a large home loan looming over us. But if you get a bit smart and a little like Scrooge, you can pay it off a lot sooner. Here
are some suggestions:

1. Do your numbers
Do you even know how much you're paying off each week, fortnight or month? Sometimes we can get so overwhelmed by the sheer size of our debt that it all seems too hard and we lose interest. So get out a calculator, a pen and some paper and work out how much you have left to pay on the loan, and confirm your interest rate.

2. Pay more regularly
Let's say you owe $300,000 over 20 years, at an interest rate of 6.5 per cent. This means you should be paying $2237 monthly, or $1031 fortnightly. Now, the first trick is to start paying half of your monthly repayment fortnightly. This is a mind game, but it means you could close out your debt four years sooner and save $55,937 in interest.

3. Offset account
You are much better off using an offset account to park your savings. Every dollar that goes into the account is, in effect, earning you the same rate of return as your mortgage rate. Money in an offset account comes off the amount of the loan, so the interest paid will be on the loan amount, less the balance of your offset account.

4. Big banks
If you're with one of the big banks, chances are you could be getting a much better interest rate. If you were on a rate of, say, 5.9 per cent and refinanced a 20-year $300,000 home loan to 5.62 per cent, you would save over $11,600 in interest and pay that debt off much earlier.

5. RBA cuts
If your rate fell from 6.25 to 6.00 per cent, after a 25 basis point cut by the RBA, and you didn't change your repayment, you would save nearly $10,000 interest and shave eight months off your loan period. If rates were cut another 25 basis points, this strategy would save you $17,000 in interest and one year and five months on the loan period.

6. Doubling up
We know times are tough and not many people have too much spare cash in the kitty but did you know that doubling the repayments on that loan with an interest rate of 6.25 per cent would make it possible to pay off the debt in seven years instead of 20, and save more than $163,000 in interest. That's food for thought.

7. Just $100
We know it won't be possible for most people to double their repayments but even increasing your fortnightly payment by just $100 would allow you to pay off the loan in our example three years and two months early and save $43,790. Boost that amount to $150 and it's four years and five months early and $59,829 in interest saved.

Your full financial situation would need to be reviewed prior to acceptance of any offer or product.


When Should You Exit Your Business?

Knowing the right time to exit your business is more important than the decision to start one up.

When you start a business it's often with an idea, a limited amount of capital, and a load of enthusiasm. By the time the business has grown and developed, it is likely to be worth far more than at the start. But, a lot of business owners get the exit decision wrong and pay the price for it.

While you might hand your business on to your kids, most businesses either fail, or are sold. Timing your exit is about understanding:

1. The best time to realise that value.
2. Whether your business has outgrown you.
3. Whether the business model is changing (for the worse).
4. Whether you have outgrown the business.

A strong business with good prospects is always easier to sell and a buyer is likely to pay a premium for their expectation of the future value to be created. Smart owners monitor not only the value of their business but also the expectations for the future. You need to have a good sense of where you are on the value curve.

Some businesses outgrow their owners. Some people are great at running micro businesses, some are great at running small businesses and some excel at mid size businesses. Success at one level is not an automatic guarantee of success at the next level. The skills sets required are different at each level. Normally, the smaller the business the more
important it is for you to be skilled at what the business does. The larger the business, the more important it is that you are a good manager. Strong in finance, strategy and business planning.

If your business is outgrowing you, then it might be time to exit before the next stage of growth puts pressure on both you and the business. Don't believe that your business model will be forever constant. Business models change. The owners can drive this change or it might be driven by changes in the industry, or evolution. For most business owners, the danger is that their business model is changing and they don't realise it. If you are in an industry where the business model is changing you need a good radar system to detect this, and then be able to assess whether it is for the better or worse. If your model is changing you need to be at the front end of the change or to exit the industry
before the change takes over. You can get squashed in the middle.

And, in the same way that your business can outgrow you, you may be outgrowing it. This does not apply to everyone but some business owners lose their enthusiasm once the business has grown to a certain stage. Where they relished the challenge of growing the business they are bored with the sameness of a mature model.

Doing a periodic health check on your business strategy and forward direction might tell you when your time is up. You can arrange a consultation with Cos on 07 5482 2855 to assess your position and decide the best exit strategy for you.

Where motor vehicle expenses are being claimed, one method supporting a claim to the Tax Office is to complete a log book. The log book contains details of the business use over a period of at least 12 consecutive weeks. The 12 week period will represent the whole year's business travel.

Once you have completed a log book we can use the business percentage for 5 years at which time a new log book must be completed. If you are unsure if your log book is current or compliant you can send it into our office and we will review it for you to make sure it meets Taxation Office requirements.

If you have not kept a compliant log book in the past 5 years, please contact us and we will send you a new log book in the mail.

To be an effective log book that meets strict Taxation Office requirements, the log book must contain:

1. The date of the business trip commences and the opening odometer reading.
2. The date the business trip concludes and the closing odometer reading.
3. The number of business kilometres travelled in the business trip.
4. Purpose of journey (do not just say "work"). eg. client meeting, seminar attendance, property inspection.
5. Records must show the make, model and registration number of the car.
6. You must record the 30 June odometer reading every year. This does not have to be documented in the log book.

Complete the log book as above at least every five years, provide it to our office and pass the ATO inspections. Sometimes completing the log book is an inconvenience however, having an up to date log book could save you in tax if kept up to date.

If you have any questions regarding the vehicle log book please feel free to contact our office on 07 54822855 or
It can be difficult to think about retirement savings when you're in your 20's. Retirement seems a very long way away!
Most people in this age bracket are scrambling madly to get together a deposit for a home or savings for holiday, but here are some numbers that Gen Y should take note of.

A 25-year-old on a salary of $50,000 with a $5000 superannuation balance would have a balance of $358,394 at age 65 in today's dollars. If that 25-year-old salary sacrifices just an extra $20 a week, that balance would grow to $422,242 according to the MoneySmart superannuation calculator. That's almost $70,000 for just over $40,000 laid out in pre-tax dollars.

With those numbers as a reference, here are four reasons Gen Y should pay attention to their super:

1. The magic of compound interest and salary sacrificing. 

Albert Einstein called it "magic" but compound interest is just the basic premise that the longer you have money saved, it doesn't matter how small that amount is, the more interest it will collect. For example $1000 earning just 4.5 per cent will grow to $1480.24 in 10 years and if you add $520 a year, or just $10 a week, you would have $7973.15 at the end of the same period. The ability to salary sacrifice up to a cap of $25,000 (including the superannuation guarantee) for most superannuants, means that you have pre-tax dollars working for you too.

2. The benefits of consolidating accounts.

Another area Gen Y needs to be diligent in is the monitoring of the number of their super funds. No one wants a myriad of tiny accounts across a range of different funds, dating back to their very first part time jobs. Each employer you work for may have a preferred fund, but if you exercise your choice and remain with the same fund your retirement savings have a much better chance of growing. This is because fees have a bigger impact on the smaller balances. A balance of $500 minus a flat annual fee of $50, has got a better chance of growing than five different balances of $100 with the same flat fee taken out of each of them.

3. Gen Ys are in a good position to take advantage of the Government Co-Contribution.

Under this scheme, for after-tax contributions you make of up to $1000 a year, the government will match every dollar with a 50¢ contribution for those on salaries up to $31,920. For salaries between that amount and $46,920 the amount matched is gradually scaled back. This means that for someone earning up to $31,920, an amount of $500 will be added to their super fund by the government if a $1,000 personal contribution is made.

4. Asset allocation.

Gen Y has a unique opportunity to invest in higher growth assets like shares, as they don't need to be so concerned about conserving capital. Because they have time on their side, they can afford to be quite aggressive with their investment choices. With the help of compounding, this can literally make thousands of dollars difference at retirement.

If you fall into the Gen Y category or know any family members who do, please don't hesitate to contact Dominique Schuh on 07 5480 4877 or for an obligation free consultation.

Are You Aware Of The Changes In Workcover?

As an employer, it's important you know who you should cover for workers' compensation. Changes to Queensland's definition of a worker for workers' compensation purposes came into effect on 1 July 2013. New legislation aligns the 'worker' definition with the PAYG test applied under Australian Taxation Office (ATO) laws.

Workcover Changes

It is important that you understand how to determine who is a 'worker' versus who is a contractor and therefore understand who needs to be covered under your Workcover policy. Firstly a 'worker' can only be an individual. If the agreement for work is between you and the employees private company, trust or partnership there is no requirement for you to cover them under your workcover policy.

Workers who are specifically included and are to be covered include:

Share farmers if they do not provide farming machinery and receive no more than 1/3 of the farm proceeds.
Salesperson paid entirely or partly by commission.

Many people work under a 'contract of service'. A contract of service refers to the contract between an employer and an employee. A large part of the workforce work under a contract of service eg the PAYG system.

To determine whether a worker is an employee (PAYG) or a contractor you need to consider the whole working arrangement and look at specific terms and conditions. The ATO have developed and online decision tool to help you.

If you use this decision tool we recommend that you keep a copy of the result in your records to support your position in the event of a claim by the work or an audit by Workcover. A small variance in the particular circumstance can give a completely different result.

As you can see determining if your staff member is an employee or a contractor is not straight forward. If you are unsure please contact Peter Flemming on 07 3878 8889 or

The biggest financial asset for most people is not their family home, their superannuation or a car but the ability to earn an income. But while most Australians have car insurance, only 39 per cent have life insurance and even fewer (23 per cent), have income protection.
Insuring your salary will provide a monthly income if you are unable to work due to sickness or injury.

In the past, policies typically paid 75 per cent of a salary for two years. These days, many products offer longer benefit periods up to age 65, with up to 75 per cent of your salary paid monthly (80 per cent of your salary if superannuation guarantee payments are covered).

A 35-year-old male on the average wage can expect to earn $2.5 million up to retirement age. But if he suffers a prolonged illness or disability that prevents him from working, who will pay his mortgage and support his family?

The Federal Government provides a limited safety net in the form of the disability pension but this would not meet more than the most basic of living costs. On such a pension, a permanently incapacitated 35 year old would receive a total of just $700,000 until he retired compared with up to $2 million if he had bought income protection.

One way to work out how your family would cope with the loss of the main breadwinner's income is to add up your cash savings and holiday and sick leave entitlements. It is estimated that 19 per cent of Australians could only manage to get by for a month and 11 per cent would not last a week!

Workers' compensation insurance may come to the rescue if you are an employee and are injured at work, but it does not cover accidents or illnesses unrelated to your job.
Plus, it is difficult to predict the amount you might receive even if you do succeed with a claim. Workers' compensation is designed to provide weekly payments in lieu of wages or a lump sum to compensate for permanent impairment. The exact payout amount depends on the state you live in and often involves a lengthy claims process or legal intervention.

To preserve your family's way of life at a guaranteed level of income, it is crucial to have an income protection policy. Some superannuation funds offer this cover but the benefits can be limited. However, if you are short of cash, the premiums for an income protection policy can be paid through your super fund with the money in it.

Income Protection Offers Tax Advantages

Income protection benefits are taxable, but premium payments for cover outside super are personally tax deductible. Say you earn more than $80,000 and pay a tax rate of 37 per cent, you could save the equivalent of 37 per cent of your insurance premiums after claiming a deduction.

You can also reduce the cost of premiums in other ways. You can extend the waiting period before claims are paid, reduce benefits or reduce the maximum period that benefits are payable. The cost of cover also depends on your age, gender, occupation, health and smoking status.

Martin's Story

Martin, 35, was a product manager at a major retail chain earning $65,000 a year. His wife, Melissa, had recently returned to work part time when their youngest child started school. The couple had a mortgage of $300,000 and hoped to send their two daughters to a private secondary school.

Then one day, their lives were turned upside down when Martin came off his motorbike and injured his
spine. He spent six weeks in hospital and was unable to return to work for nearly 12 months while he had intensive rehabilitation.

Luckily, Martin had taken out income protection insurance when Melissa gave up full-time work to care for their girls. Under his policy, Martin received 75 per cent of his pre-injury salary, or $4000 a month after a waiting period of 30 days. His insurer paid him $48,000 in one year and he could have continued receiving payments until age 65 if he was unable to work again.

You can imagine the peace of mind this afforded the family at what was already an incredibly stressful time.

If you'd like a free consultation about your insurance needs, please contact Dominique Schuh on 07 5480 4877 or
According to The Australian newspaper, Aussies are losing out on a whopping $7.3 billion (that's right, billion) in tax rebates due to lost tax receipts. The survey conducted by CBA
found that it was costing 1 in 2 Aussies $1000 ($7.3billion) in total on tax rebates, with men being 3 times as likely to misplace receipts ($5.5billion) than women ($1.8billion).

The reason for this? According to the article this was because men tend to be 'less meticulous' in storing receipts in one place. We're not only losing out on rebates but it's also
costing us time to find misplaced receipts. We apparently spend 2.2hrs looking for receipts to support our tax returns.

So as a nation, we are spending more than 1800 years looking for lost receipts!

With this in mind it is certainly worth while maintaining an organised system to store your receipts for the year to gain the maximum deductions possible come tax time.
Investing in any shares, fixed interest or real estate comes with the obvious risks of the fluctuations of those markets. At some time prices will fall and so will the value of your investment; this is a given as no investment consistently provides positive returns year on year.

However, an often forgotten risk factor is the order of your returns and whether you are adding money to your investment or withdrawing from it. This is known as sequencing risk and can play havoc with retirement expectations. Two investors can start out with $100,000 and over 30 years' time arrive at final balance of $600,000, but the sequence of returns that led them to that point may be very different.

Investor A may start off with a sequence of negative returns, severely decreasing their investment balance, while Investor B starts with a sequence of positive returns, significantly increasing their balance. Nearing retirement there may be a large difference between those investment balances, but consecutive positive returns for Investor A would grow their investment considerably. Similarly, consecutive negative returns will shrink Investor B's investment substantially.

The average rate of return across those 30 years may be exactly the same for both investors and they still retire with $600,000, but retirement expectations for Investor B would be given a jolt. Sequencing risk suggests the lowest return is more preferable when you have the smallest account balance and the best return when you have the highest account balance. The sequence of returns is also a significant factor when adding or drawing from an investment.

You inevitably do better if you add after a bad year and draw after a good year.

Avoiding sequencing risk comes back to the old favourite diversification; lessening volatility and maintaining emergency cash levels to draw from.

Adjusting asset allocation when approaching retirement can protect gains, but an investor will still need to be mindful of their longevity before totally abandoning risk assets.
If you would like to talk more about this or any investment related issue, please contact Dominique Schuh on 07 5480 4877 or
Recently, we highlighted the need to maintain a compliant log book for your car if you are to claim the business portion of the vehicles expenses.
Maintaining the log book takes time and effort however, you will be rewarded with a reduced tax bill or increase refund at the end of the year.

We have found there are now a number of log books you are able to download onto your iPhone, iPad, tablets or other smart phones that are compliant with the Australian Tax Offices requirements.

You are able to send the log book electronically directly to our office at the end of the financial year saving you time and effort.

Try to find an app to help you to save time.

How Accurate Are Your Business Costings?

With ever decreasing margins and business conditions being very tight, it can be hard enough to win contracts. Whilst the purpose of being in business is to generate a profit, other issues that affect your tender price include the need to keep the business ticking over, retaining staff, maintenance of a long term or significant customer, etc.

As with any tender, you need to be acutely aware of the real cost of all of your inputs, including labour. Remember, paying staff costs a lot more than "just the wage you pay
them". Workcover (say 3%), compulsory superannuation of 9.25%, annual leave loading, 10 public holidays and provision for 10 sick leave days per year all increase the real cost of employment.

Consider the following example:

An employee is paid for 38 hours per week at $28 per hour. If the employee does 38 hours chargeable hours work for the week, the real cost per hour is $37.65. Should the recoverable time drop to 90%, the real cost for each chargeable hour becomes $41.85. A further 10% drop of recoverable time increases the real cost of employment for the business to $47.10 per hour.

When preparing your quote, consider your staff down time - will you be paying your employees from the time they leave the depot until the time they return? Travelling time of 2 hours per day automatically increases the real cost per hour of chargeable time by $12.56 per hour, given the payment to the employee is $28 per hour.

And labour rates are only one variable that affects business profitability. We can assist you in other areas also; e.g. calculate your break even labour charge rate given a set overhead figure and chargeable employee hours. Getting these calculations right is integral to enjoying a healthy bottom line. 
These are important calculations that can cause a great deal of confusion for time poor business owners. We are very happy to assist you deal with this potential headache and improve your business profitability.

Please contact Peter Flemming 07 3878 8889 or email if you would like professional assistance in this area. 

September Economic Overview

Economic Overview

The dominant theme in the global economy during the September quarter continued to be the prospect of the US Federal Reserve's tapering of its stimulus program. With US economic signals still mixed, 'The Fed' surprised markets in September by postponing its monthly $US85 billion bond buying program.

The Fed expressed it was disappointed with the speed of improvement in the job market and downgraded its economic growth forecasts.

China appeared to be emerging from its slowdown, with improvements in retail, industrial output and exports. India, however, found its currency at record lows as inflation soared and growth hit a 10-year low.The Eurozone emerged from a two-year recession, yet its banking system remained weak. While in the UK, The Bank of England upgraded its growth forecasts for the rest of the year.

Australia grew at an annual pace of around 2.5% and unemployment rose to a 4-year high of 5.8%. Mining investment showed signs of peaking, consumer spending remained soft, yet interest rate cuts were beginning to be felt in the housing sector.

Market Overview

The benefits of international diversification were highlighted in the September quarter with divergent performances by Australian, developed and emerging equity markets.

Having lagged the world in the previous quarter, Australia recorded its best quarterly performance in four years. The gain of over 10% doubled that of developed markets broadly and tripled the return from emerging markets.

The Australian market also took encouragement from early indications of a lift in domestic demand as the RBA's rate cuts and lower Australian dollar fed through. This news boosted sectors linked to the economic cycle, like consumer discretionary and industrials. In contrast, the less defensive mood left sectors like healthcare, utilities and REITs lagging.

In Europe, the easing of Eurozone concerns helped fuel strong equity gains by Spain and Italy, while over in the US the market hit record highs after the Federal Reserve decided not to taper its bond buying program.

Emerging markets again slipped behind their developed counterparts, this reflected the ongoing belief of reduced capital flows if the Federal Reserve had tapered its bond buying. There were divergences though; while India and Indonesia underperformed, Korea and Russia had solid gains.

Gold continued its volatile run, racing to an almost yearly high in late August, before erasing virtually all of those gains as it plunged during September.

In fixed interest, term and credit premiums narrowed, again as a result of the Fed's change on tapering. Longer dated bonds outperformed shorter dated, while corporate debt beat government debt.


The randomness of returns chart remained random. Once again it reveals no discernible pattern over the previous three years of quarterly returns, showing there's no better choice than diversification. After a poor June quarter Australian small companies pulled themselves off the canvas this quarter to lead the pack, followed by the Australian large cap sector. Global equities showed more modest returns after a strong June quarter, while Global REITs (the only negative asset class this quarter) finally slipped into the red with a 2.12% loss after seven consecutive quarters of growth.

                                                                        Investment Strategy Recognised


We've long strived to find the best investment options available. This means ignoring fads and focussing on rigorous research. Currently, much of the investment strategy we implement comes with the benefit of consistent historical data and decades of academic backing.

So it gave us great pleasure recently to see one of the pioneers of that academic research, Eugene Fama, awarded the 2013 Nobel Prize in Economic Sciences. Fama's research is the reason we emphasise the futility of picking stocks and making predictions. It's also the reason we encourage investment discipline over guessing what the market will do next.

"Fama's research at the end of the 1960s and the beginning of the 1970s showed how incredibly difficult it is to beat the market, and how incredibly difficult it is to predict how share prices will develop in a day's or a week's time," said Peter Englund, professor in banking at the Stockholm School of Economics and secretary of the committee that awards the Nobel Prize in Economic Sciences. "That shows that there is no point for the common person to get involved in share analysis. It's much better to invest in a broadly composed portfolio of shares."



She'll be right, mate!

Finally, an interesting comparison of central bankers and possibly cultures. As debate again began to rage over the prospect of low interest rates fuelling a property bubble in Australia, the RBA's Head of Financial Stability, Luci Ellis said the following:

"I think there are a lot of people, the minute housing prices start to pick up they say, 'Oh my goodness, we'll all be rooned.' The minute housing prices start to pick up they imagine it's a bubble."

In contrast, the German Central Bank sounded a note of caution in its monthly report after an 8.25% rise in German property prices over the past three years, saying:

"Housing prices in German cities have been rising so strongly since 2010 that a possible overvaluation cannot be ruled out."

And to give the statements a little context, according to The Economist:

Australian property prices, 46% overvalued against rents and 24% overvalued against incomes.

German property prices, 15% under-priced against rents and 18% under-priced against incomes.

With thanks to DFA Australia.

This material is provided for information only. No account has been taken of the objectives, financial situation or needs of any particular person or entity. Accordingly, to the extent that this material may constitute general financial product advice, investors should, before acting on the advice, consider the appropriateness of the advice, having regard to the investor's objectives, financial situation and needs. This is not an offer or recommendation to buy or sell securities or other financial products, nor a solicitation for deposits or other business, whether directly or indirectly. Mancell Financial Group is an Authorised Representative No. 226266 and Credit Representative No. 403187 of FYG Planners Pty Ltd, AFSL/ACL No. 224543. ABN  29 009 541 253 This information is general in nature and readers should seek professional advice specific to their circumstances.

*Your full financial situation would need to be reviewed prior to acceptance of any offer or product. 


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