讲解 BAFI 1014 PERSONAL WEALTH MANAGEMENT Semester 2, 2024 Practical Assessment 3 - part 2辅导 留学生Matlab

BAFI 1014 PERSONAL WEALTH MANAGEMENT

Semester 2, 2024

Practical Assessment 3 - part 2 (Individual)

Due date: Friday 25/10 11:59 pm (AEST).

Weighting: Case Studies (Weighting: 40%)

The assessments in this course complement each other. The assignments require research and application to further enhance the content provided throughout the course. Financial advisors are responsible for aggregating all relevant information available and translating it into an actionable plan for their clients. The challenge for the individual and the financial planner, while investigating solutions in the financial planning space is to stay abreast of the relevant information that is available online and from other sources. The focus should also be on the client’s circumstances and continuous self-initiated study of the developments in the fields of Economics, Politics, Taxation, Regulations, etc.

Students are expected to utilise solely the tax and formula sheet that has been made available throughout the course.

This Assessment consists of four case studies and five questions. The total marks in this paper total 80. The examination is worth 40% of the marks available in this course.

Attempt ALL Case studies, All questions, and ALL parts of questions.

Case Study 1: Lau Family

You are a financial adviser, and the following information is an extract of data you gathered during an initial fact-finding consultation with your clients, a married couple, Peter (aged 54) and Candice Lau (aged 36). The couple was recently married, after knowing each other for about 4 years. This is Candice's first marriage and Peter's second. Peter lost his wife 10 years ago.  Peter  has  two  daughters  from  his  previous  marriage.  Both  are  married,  financially dependent, and live in nearby suburbs.

•     Candice works as an interface designer for the government, and Peter works as a nurse for a private hospital.

•     Peter plans to retire in 6 years, at the age of 60.

•     Peter and Candice would like to know how much money they will have after paying tax and expenses for the year ending 30th June 2024. They are also seeking advice on how to reduce their tax liability in the future.

•     Candice and Peter are expecting their first child next month. They would like financial advice on how to manage childcare. Peter is considering whether he can switch to part-time work to care for their child. He has two options:

-             Continue to work full-time, earning a salary of $64,000 p.a., but incur daycare fees of $24,220 per year (after the Child Care Rebate).

-             Return to work part-time, earning a salary of $32,000 p.a., with daycare fees of $6,344 per year (after the Child Care Rebate).

•     Peter is considering purchasing a rental property using proceeds from his superannuation to finance their expenses during retirement. He is also, contemplating contributing a minimum of $20,000 into his super account, which includes the employer’s compulsory contributions. However, this is just a consideration; they may or may not pursue any of these strategies. Peter  is  exploring  how  much  combined  superannuation  funds  they  will  accumulate  for retirement, assuming a real rate of return of 4% on savings.

•    While Candice has not drafted her will, Peter has a will that was executed during his first marriage. Peter nominated his sister as an executor of his estate and wishes his estate to be equally distributed between his two daughters.

•    The couple pays net reduced premiums throughout the income year for the private health insurance.

•     PAYG Candice for the year ending 30th June 2024; $37,000

Income for year ended 30th June 2024:

                Income type                                          Amount

Gross Salary income- Candice Lau                           $125,000

Gross Salary income- Peter Lau                               $64,000

Interest –Savings Account                                       $250

Dividend- ANZ Shares                                             $504 (Imputation Credit $216)

Distribution- UBS Bond Fund                                    $1,250

Expenses for the year ended 30th  June 2024

Current Assets and Liabilities 30th  June 2024

REQUIRED:

The questions are independent of each other. Question 1

A. Calculate Peter and Candice’s after-tax income for the year ended June 2024. (5 marks)

B. Salary Sacrifice and Carry-Forward Super Contributions

I.        Define salary sacrifice to superannuation and explain how it works as a tax-effective strategy to boost retirement savings. (less than 110 words).

II.        Provide calculations to demonstrate how a salary sacrifices of $10,000 reduces Peter’s taxable income and increases his superannuation contributions compared to only employer guarantee contribution i.e. pre-salary sacrifice.

III.        Explain carry-forward (catch-up) super contributions and determine which member of the couple is eligible or ineligible to use them, providing reasons for your determination.  (less than 110 words).

Note: Salary sacrifice cannot be applied retrospectively. This question aims to assess your understanding of the salary sacrifice strategy. Please keep in mind that this is purely an exploration of the concept and may not be intended for actual implementation.

(2 + 2 + 3 = 7 marks)

C. Using the income and expense figures for the year ending June 30th, 2024, calculate Peter and Candice’s cash surplus or deficit for both childcare options outlined earlier. Discuss with Peter the impact part-time work would have on his superannuation and retirement savings. (6 marks)

D. Calculate the amount of combined funds Peter will accumulate in his superannuation account if he contributes $20,000 for their retirement in next 6 years, including employer compulsory contributions. This is a potential strategy they may or may not adopt. Peter is exploring how much they can accumulate for retirement in their superannuation accounts. For this calculation, assume a real rate of return of  4%, and for simplicity, assume  that contributions are made at the end of each year. (5 marks)

Financial formula from the tax and the formula sheet

Savings ratio =      (savings (or cash surplus)/(net income after tax)

Future value FV = PV(1 + i)n

Annuity (Future value) FV =  PMT([(1 + i)n – 1])/ i)

(Question 1: 5 + 7 + 6 + 5 = 23 marks)

Question 2

A. Explain to the couple the consequences of dying without a valid will. Given their recent marriage, assess the validity of Peter’s current will, particularly in relation to his daughters from his previous marriage. How can Peter best safeguard the interests of all his children upon his death? Consider any relevant future circumstances in your advice. (less than 180 words). (6 marks)

B. Peter is considering withdrawing his superannuation funds when he turns 60 to purchase an income stream from Colonial First, starting at age 65.

I.   Explain  the  rationale behind  waiting  until  age  60  to  make  a  lump  sum withdrawal, particularly from a tax planning perspective. (less than 80 words).

II. Additionally, briefly outline the main differences between account-based and non-account- based income streams for Peter’s understanding. (less than 150 words). (2 + 6 = 8 marks)

C. Outline one problem with the couple’s current insurance arrangement and suggest a solution. (less than 40 word). (3 marks) (Question 2: 6 + 8 + 3 = 17 marks)

Case Study 2: Jordan Family

Michael and Karen Jordan have shared their plans for their upcoming retirement. Michael is above the superannuation preservation age, but is under 60. He is considering withdrawing a lump sum from his superannuation account to purchase a rental property that will provide income during retirement.

The details of Michael’s superannuation balance are as follows:

                                  Michael

Tax-free component                       $206,500

Taxable component                        $383,500

Total balance                                 $590,000

Michael intends to withdraw a lump sum of $400,000, which he wishes to allocate as follows:

•    The full tax-free component of $206,500

•    $193,500 from the taxable component.

REQUIRED: Question 3

A. Explain to Michael whether he can withdraw the full $206,500 tax-free component and $193,500 from the taxable component, as he plans. Provide a rationale for your explanation based on superannuation withdrawal rules. (less than 120 words). (4 marks)

B. Calculate the tax implications, including the Medicare Levy, on Michael’s $400,000 lump sum superannuation withdrawal, based on the relevant rules for the financial year 2024. (4 marks)

C. Explain the purpose of a power of attorney in estate planning. Distinguish between a general power of attorney and an enduring power of attorney, providing examples of when each might be used. (less than 250 words). (4 marks)

(Question 3: 4 + 4 + 4 = 12 marks)

Case Study 3: The Smith Family

John (32) and Sarah Smith (30) are a married couple living in Sydney, Australia. They have a 3-year-old daughter, Lily, and own a house with a $450,000 mortgage. John works as an engineer, and Sarah is a part-time marketing consultant. Both have modest superannuation balances, and their combined household income is $120,000 per year. The couple is planning a family holiday to Bali in 12 to 18 months. John has been considering direct investments in shares, while Sarah is more conservative and prefers putting their savings into a bank term deposit.

In addition to their investment discussions, the couple is reassessing their insurance coverage after recently learning about the medical expenses incurred by a close family friend due to an accident.  They  want  to  ensure  they  have  adequate  life,  income  protection,  and  health insurance in place, considering their mortgage and child-rearing responsibilities.

REQUIRED: Question 4

A. John is considering a direct investment of $10,000 in shares to fund their travel plan to Bali. Sarah, on the other hand, wants to invest this in a bank term deposit, even though the expected return  is  lower than from shares. What would your advice  be, considering the investment timeframe. of 12 to 18 months? (less than 60 words). (3 marks)

B.

I. Discuss the principle of dollar cost averaging (DCA). (less than 60 words).

II. John decides to invest $1,000 into purchasing some shares every month for the next 6 months. The share acquisition price for each of the months is as follows:

1st Month share acquisition price:                          $20.00

2nd Month share acquisition price:                         $12.00

3rd Month share acquisition price:                          $8.00

4th Month share acquisition price:                          $35.00

5th Month share acquisition price:                          $40.00

6th Month share acquisition price:                          $25.00

Determine the average price of the stock and the number of shares John would own at the  end of the period. What difference would it have made if he had purchased $6,000 worth of shares at the end of the 6 months? (3 + 3 = 6 marks)

C.  Explain why the correlation of returns is important to consider when building an investment portfolio. (less than 80 words). (3 marks)

D.  Explain 2 factors that can affect the price of a bond. (less than 100 words). (3 marks)

E. Comment on the Smiths’ insurance situation. (less than 60 words). (3 marks) (Question 4: 3 + 6 + 3 + 3 + 3 = 18 marks)

Case Study 4: The Carlos Couple

Paul and Rosy Carlos are both aged 68. The couple has retired and owned the following assets jointly. They have approached you to determine their eligibility for the age pension, and their monetary entitlement under the age pension from you.

REQUIRED: Question 5

A.     Calculate and assess the Carlos’s eligibility to the age pension under the Assets Test. (3.5 marks)

B.     Calculate and assess the Carlos’s eligibility to the age pension under the Income Test. (3.5 marks)

C.     Under which test would the Carlos’s receive a CentrelinkAge Pension? (1 mark)

D.     Provide strategies you can suggest that may assist the Carlos’s in maximizing their age pension entitlement. (2 marks) (Question 5: 3.5 + 3.5 + 1 + 2 = 10 marks)