Assignment
Tier 1 Superannuation (924S-1v2.3)
Student identification (student to complete)
Please complete the fields shaded grey.
Student number INT######
Student name [name]
Telephone number [phone no.]
Assignment result (assessor to complete)
Result — first submission (Details for each activity are shown in the table below)
Parts that must be resubmitted:
Result — resubmission (if applicable)
Result summary (assessor to complete)
First submission Resubmission (if required)
Case study 1 Assignment questions Demonstrated
Not yet demonstrated Demonstrated
Not yet demonstrated
Strategy recommendations
Cash flow table
Case study 2 Assignment questions Demonstrated
Not yet demonstrated Demonstrated
Not yet demonstrated
Strategy recommendations
Cash flow table
Case study 3 Assignment questions Demonstrated
Not yet demonstrated Demonstrated
Not yet demonstrated
Strategy recommendations
Case study 4 Assignment questions Demonstrated
Not yet demonstrated Demonstrated
Not yet demonstrated
Feedback (assessor to complete)
[insert assessor feedback]
Before you begin
Read everything in this document before you start your assignment for Tier 1 Superannuation.
About this document
This document includes the following parts:
Instructions for completing and submitting this assignment
• Task 1: Superannuation contributions
– Case study with fact finder and risk profile
– Task 1 questions
• Task 2: Benefit payments
– Case study with fact finder and risk profile
– Task 2 questions
• Task 3: Death benefit payments
– Case study with fact finder and risk profile
– Task 3 questions
• Task 4: Engaging your clients
– Case study
– Task 4 questions
• Appendix 1: Full details about your clients in case study 1
• Appendix 2: Full details about your clients in case study 2
• Appendix 3: Full details about your clients in case study 3.
Saving your work
Download this document to your desktop, type your answers in the spaces provided and save your
work regularly.
How to use the study plan
Use your study plan for this subject to help you manage your time to complete the assignment within your enrolment period. Your study plan is in the KapLearn Tier 1 Superannuation subject room.
Instructions for completing and submitting this assignment
Completing the assignment
The assignment
Task 1: The Carlos and Rosa Alesi case study — Superannuation contributions
Read the case study and fact finder, then:
• answer the six (6) questions they have about superannuation contributions
• document the strategy you would recommend them
• complete a cash flow table documenting their financial position should they take your advice.
Task 2: The Sandra and Henry Blake case study — Superannuation benefit payments
Read the case study and fact finder, then:
• answer the six (6) questions your clients have about superannuation benefit payments
• document the strategy you would recommend them
• complete a cash flow table documenting their financial position should they take your advice.
Task 3: The Faraz and Aisha Gita case study — Superannuation death benefit payments
Read the case study and fact finder, then:
• answer the four (4) questions your clients have about superannuation death benefit payments
• document your recommendations.
Task 4: Select one (1) of the three case studies above – Engaging your clients
Reread the selected case study, then:
• answer the six (6) questions relating to client engagement at each stage of the financial planning process.
Statement of advice
Please note that the preparation of a statement of advice is not required for this assignment.
Submitting the assignment
You must submit your completed assignment in a compatible Microsoft Office Word document.
Do not save your completed assignment as a PDF.
The assignment must be completed before submitting it to Kaplan Professional Education (KPE). Incomplete assignments will be returned to you unmarked.
The maximum file size is 5MB. Once you submit your assignment for marking you will be unable to make any further changes to it.
You are able to submit your assignment earlier than the deadline if you are confident you have completed all parts and have prepared a quality submission.
The assignment marking process
You have up to 12 weeks from the date of your enrolment in this subject to submit your completed assignment.
Your assessor will mark your assignment and return it to you in the Tier 1 Superannuation subject room in KapLearn at the Assessment tab.
‘Not yet competent’ and resubmissions
Should sections of your assignment be marked as ‘not yet competent’ you will be given additional opportunities to amend your responses so that you can demonstrate your competency to the required level.
You must address the assessor’s feedback in your amended responses. You only need amend those sections where the assessor has determined you are ‘not yet competent’.
Make changes to your original submission. Use a different text colour for your resubmission. Your assessor will be in a better position to gauge the quality and nature of your changes. Ensure you leave your first assessor’s comments in your assignment so your second assessor can see the instructions that were originally provided for you.
Units of competency
This assignment is your opportunity to demonstrate your competency against this unit:
FNSASICU503A Provide advice in superannuation
FNSINC501A Conduct product research to support recommendations
FNSIAD501A Provide appropriate services, advice and products to clients
FNSCUS505A Determine client requirements and expectations
FNSCUS506A Record and implement client instructions
*These are pre-requisite units of competency for FNSASICU503A
We are here to help
If you have any questions about this assignment you can post your query at the Ask Your Tutor forum in your subject room. You can expect an answer within 24 hours of your posting from one of our technical advisers or student support staff.
Task 1: Superannuation contributions
The Carlos and Rosa Alesi case study — superannuation contributions
Carlos and Rosa Alesi have been doing their own research into superannuation contributions and have recently attended a client seminar covering superannuation contributions hosted by your licensee, EANWB Financial Planning. Following this seminar they spoke with you, a financial planner, about their concerns that they may not have enough money in superannuation to fund their retirement.
During your initial meeting with them, you provided them with some basic information including a fact finder for them to fill out and then organised a second meeting in which you collected more information on their current financial situation and their needs and objectives. You documented all this information in their fact finder and risk profile from page 6.
Table 1 Personal details
Client 1 Client 2
Title Mr Mrs
Surname Alesi Alesi
Given & preferred names Carlos Rosa
Home address 1 Galbraith Grove, Stanhope Gardens, NSW. 1 Galbraith Grove, Stanhope Gardens, NSW.
Business address n.a. n.a.
Contact phone (02) 6655 4477 (02) 6655 4477
Date of birth 18 December 1961 12 June 1963
Sex ? Male Female Male ? Female
Smoker Yes ? No Yes ? No
Expected retirement age Age 65 When Carlos retires
Fact finder — Carlos and Rosa Alesi
This is a copy of the fact finder that you gave to Carlos and Rosa, which they completed to the best of their ability and brought along with them to your second meeting. During the course of that meeting you are able to fill in the remainder of the relevant sections, including ‘needs and objectives’.
Important notice to customers
Your planner must act in your best interest when making any superannuation and retirement recommendations. Therefore, before making a recommendation, the planner must ask you about your investment objectives, financial situation and your particular needs.
The information requested in this form will be used strictly for that purpose.
Warning
The planner could make inappropriate recommendations or give inappropriate advice if you fail to fully and accurately complete this form.
Personal and employment details
Personal details
Client 1 Client 2
Title Mr Mrs
Surname Alesi Alesi
Given & preferred names Carlos Rosa
Home address 1 Galbraith Grove, Stanhope Gardens, NSW. 1 Galbraith Grove, Stanhope Gardens, NSW.
Business address n.a. n.a.
Contact phone (02) 6655 4477 (02) 6655 4477
Date of birth 18 December 1961 12 June 1963
Sex ? Male Female Male ? Female
Smoker Yes ? No Yes ? No
Expected retirement age Age 65 When Carlos retires.
Dependants (children or other)
Name Date of birth Sex School Occupation
Emmanuel 18 April 1997 M Yes
Isabella 20 March 1999 F Yes
Employment details
Carlos Alesi Rosa Alesi
Occupation Sales Representative Marketing Consultant
Employment status Self employed ? Employee ? Self employed ? Employee
Not employed Pensioner Not employed Pensioner
? Permanent Part time Permanent Part time
Casual Contractor Casual ? Contractor
Other Government Other Government
Business status Sole proprietor Partnership ? Sole proprietor Partnership
Private company Trust Private company Trust
Notes
Any other person to be contacted? E.g. accountant, banker, solicitor, etc.
Rosa is primarily a self-employed sole trader but is also an employed contractor.
Income, tax and cash flow
Tax calculation Client 1 Client 2 Combined Comments
Income from employment
Salary or Income from employment $140,000 $70,600 $210,600 Rosa — $65,000 net business income and $5600 from employer
Salary sacrifice
Salary after salary sacrifice $140,000 $70,600 $210,600
Rental income
Unfranked dividends
Franked dividends
Franking (imputation) credits
Interest
Other income (e.g. taxable benefits, trust income, investment income)
Capital gains 1 yr
Capital gains 1 yr
Tax-free component of capital gains
Assessable income $140,000 $70,600 $210,600
Deductible expenses $150 $350 $500 Accountant’s fees
Donations $610 $610 $1,220 $1200 p.a. to the National Breast Cancer Foundation
$20 bucket donation
Income protection insurance $1,884 $420 $2,304
Business overheads insurance $972 $972
Other
Taxable income $137,356 $68,248 $205,604
Tax on taxable income $38,768 $13,727 $52,495
Non-refundable tax offsets (e.g. LITO/SAPTO)
Medicare levy $2,747 $1,365 $4,112
Medicare levy surcharge
Franking rebate
Refundable rebates and offsets
Total tax $41,515 $15,092 $56,607
Cash flow Carlos Rosa Combined Comment
Salary less any salary sacrificed amount $140,000 $70,600 $210,600 Includes for Rosa income net of business expenses and income from employment as above
Non-taxable income nil nil
Rental income n.a. n.a.
Unfranked dividends received nil nil
Franked dividends received nil nil
Interest nil nil
Other income (e.g. taxable benefits, trust income, investment income) nil nil
Total income received before tax $140,000 $70,600 $210,600
Investment expenses nil
Expenses
Mortgage nil nil
School fees $3,500 $3,500 $7,000
Utilities n.a. n.a. Paid as part of the expenses through
credit card
Personal insurance
$5,496
$3,564
$9,060
Carlos’ annualised premiums: $3612 trauma, $1884 income protection
Rosa’s annualised premiums:
$2172 trauma, $420 income protection, $972 business overheads
Car insurance $1,600 $1,600 $3,200
Home building and contents insurance $750 $750 $1,500
Health insurance $1,422 $1,422 $2,844
Living expenses $45,000 $45,000 $90,000 $7500 per month through credit card
Holidays $5,000 $5,000 $10,000
House maintenance n.a. n.a. Paid as part of the expenses through credit card
Motor vehicle n.a. n.a. Paid as part of the expenses through credit card
Other
$610 $610 $1,220 Donations
Cash flow Carlos Rosa Combined Comment
$150 $350 $500 Accountant’s fees
Total expenses $63,528 $61,796 $125,324
Total income received before tax less total expenses $76,472 $8,804 $85,276
Total tax payable from tax table above $41,515 $15,092 $56,607
Total net cash flow $34,957 –$6,288 $28,669
Assets and liabilities
Asset Owner Value Liabilities Net value Notes
Personal assets
Family home Carlos/Rosa $600,000 $0 $600,000
Home contents Carlos/Rosa $150,000 $0 $150,000 Insured value
Car Carlos/Rosa $11,000 $0 $11,000 2007 Ford Focus
Car Carlos/Rosa $16,000 $0 $16,000 2007 Ford
Falcon XR6
Total $777,000 $0 $777,000
Superannuation
Employer superannuation Carlos $270,000 n.a. $270,000
Employer superannuation Rosa $99,000 n.a. $99,000
Total $369,000 $369,000
Other Assets
Savings account Carlos/Rosa $350,000 Nil $350,000 Transaction account
Total $350,000 Nil $350,000
Net worth $1,496,000 $0 $1,496,000
Liabilities
Loan Current debt Percentage tax deductible Interest only Repayment
Home loan n.a. n.a.
Investment property n.a. n.a.
Investment loan n.a. n.a.
Personal loan n.a. n.a.
Other n.a. n.a.
Total $0 $0
Needs and objectives
Details Comments
Save for retirement Concerned that their current savings may not have enough funds to finance their retirement
Use excess income for retirement
Invest $350,000 tax effectively Excess from an inheritance and not have access until retirement
Reduce overall tax liability
Other
Estate planning
Do you have a will? ? Yes No
When was it last updated: October 2009
Do you have powers of attorney? ? Yes No
Current superannuation, rollovers, insurances and investments
Superannuation
Member Carlos Rosa
Fund name ASSF Super Fund CISF Super Fund
Date of joining fund 1 July 1992 (service date) 1 July 1992 (service date)
Type of fund ? Accumulation Defined benefit ? Accumulation Defined benefit
Pension Pensioner Pension Pensioner
Contribution (e.g. 5% of salary) SG By employer By yourself SG By employer By yourself
Current value of your superannuation fund $270, 000 $99,000
Amount of death and disability cover $720,000 $720,000
Is there provision for you to top up or salary sacrifice? ? Yes No Yes ? No
Superannuation taxation details
Carlos Rosa
Current value $270, 000 $99,000
Tax free component $0 $0
Taxable component:
Taxed element $270,000 $99,000
Untaxed element $0 $0
Preservation:
Preserved $270,000 $99,000
Unrestricted non-preserved $0 $0
Restricted non-preserved $0 $0
Previous years’ contributions:
Non-concessional contributions:
Year 1 $0 $0
Year 2 $0 $0
Year 3 $0 $0
Year 4 $0 $0
Concessional contributions:
Year 1 SG only SG only
Year 2 SG only SG only
Year 3 SG only SG only
Year 4 SG only SG only
Other contributions:
Small business CGT Exempt contributions: $0 $0
Personal injury payments $0 $0
Nominated Beneficiaries:
Name Binding Non-binding
(Yes/No) Trustee discretion
(Yes/No)
Yes/No Amount
Carlos – Beneficiary is Rosa Yes 100% No No
Rosa – Beneficiary Carlos Yes 100% No No
Is there any current flags or splits on a superannuation benefit of yours following a marriage breakdown? Yes/No N Details
Are you a beneficiary of any current flags or splits of a superannuation benefit following a marriage breakdown? Yes/No N Details
Life insurance details
Life insured Owner Policy type Company Policy number Death benefit Comments Annual premium
DOES NOT WISH TO BE REVIEWED
Disability insurance details
Life insured Owner Policy type Company Policy number Death benefit Comments Annual premium
DOES NOT WISH TO BE REVIEWED
Income protection insurance details
Life insured Owner Policy type Company Policy number Benefit amount Waiting period Benefit payment period Annual premium
DOES NOT WISH TO BE REVIEWED
General insurance details
Item covered Owner Policy type Company Combined policy number Cover amount Other benefit Annual premium
DOES NOT WISH TO BE REVIEWED
Investment details
Investment type Company Purchase date Units held/fixed rate Current value Owner
Savings account East Antipodean National Wealth Bank n.a. $350,000 Carlos and Rosa
Acknowledgment
The information provided in this financial fact finder is complete and accurate to the best of my knowledge.
I understand that a policy purchased without the completion of a fact finder, or following a partial or inaccurate completion, may not be appropriate to my needs. I also understand that a policy purchased that differs from that recommended by the planner may not be appropriate to my needs. I acknowledge that planner has provided me with the completed financial fact finder, signed by me.
Customer(s) signature(s)
Planner’s name
Planner’s signature
Date
Task 1 questions
Carlos and Rosa had a number of questions in regard to superannuation contributions following their research and the seminar they attended. You are to answer the questions, as their financial planner, taking into account their personal details. Remember, many clients may not be familiar with the superannuation system and may ask questions that are technically incorrect. You are to determine if the question asked is incorrect and if it is you are to correct Carlos and Rosa, providing the correct information and an answer to their question.
Note: Full details of their financial situation are in Appendix 1. You will need to refer to that data to answer the questions for this task.
Carlos and Rosa Alesi’s questions
Question 1
Carlos and Rosa appear confused concerning the tax deductibility of superannuation contributions. They ask,
‘Why is it that Rosa may be entitled to a tax deduction for her contributions to superannuation but Carlos is not, considering they are both employees?’
Answer here
Assessor feedback:
Question 2
Carlos asks,
‘As Rosa’s income from employment is $5600 what do I need to do to claim the spouse contributions tax offset?’
Answer here
Assessor feedback:
Question 3
Rosa comments that as Carlos is the main salary earner they should consider using Carlos’s income to make contributions and asks,
‘How does Carlos make tax-effective contributions to superannuation from his income if he cannot claim the contributions as a tax deduction?’
Answer here
Assessor feedback:
Question 4
Rosa asks,
‘If we can each make a contribution from our own money how is it possible for Carlos to split his contribution to my superannuation?’
Answer here
Assessor feedback:
Question 5
Carlos is concerned about the excess funds they received from the inheritance and asks why would they contribute this if it is to be taxed at the highest marginal tax rate?
Answer here
Assessor feedback:
Question 6
Carlos asks,
‘What would be the outcome if I salary sacrifice an amount equivalent to our excess income?’
Answer here
Assessor feedback:
Your strategy recommendations
As part of a statement of advice (SOA) a financial planner must justify their strategies by showing how they meet their clients’ needs and objectives.
In this case study Carlos and Rosa have the following needs and objectives:
• save for retirement as they are concerned that their current savings may not be adequate to meet their retirement needs
• to use excess income for retirement planning purposes
• invest the $350,000 excess from the inheritance from Rosa’s mother’s estate tax effectively and not have access to these funds until retirement
• reduce their overall tax liability.
You must provide a detailed report to Carlos and Rosa addressing each one of the needs and objectives, and justifying the strategies used. A field for your report is below.
In addition, you need to provide a tax and cash flow statement illustrating your clients’ financial position if your strategies were adopted. A template for the cash flow statement follows the report field.
Note: Full details of their financial situation are in Appendix 1. You will need to refer to that data to answer the questions for this task.
Use the space provided below to communicate to your clients your strategy recommendations.
Make sure you have addressed all their needs and objectives and that you have provided a rationale for your recommendations.
Answer here
Assessor feedback:
To support your recommendations you will need to provide a cash flow statement that shows your clients financial position should they decided to take your advice.
Use the cash flow template provided below.
Financial position after implementation of strategy
Note: The items listed in this template are indicative only and must be adapted to your clients’ personal circumstances. There may be other relevant income or expense items that are not included in this template. You should add, delete or substitute items where appropriate.
Accurately completed cash flows are essential in the financial planning process to support recommendations. They are key to demonstrating your competency.
Tax calculation Client 1 Client 2 Notes
Income from employment
Salary 140000 70600
Salary sacrifice 28000 12000 (state % if applicable)
Salary after salary sacrifice 112000 58600
Other income
Bank account interest (state % return if applicable)
Interest from other investments (state % return if applicable)
Share dividends (state % return if applicable)
Imputation credits (state % return if applicable)
Other income liable for tax (e.g. rental income)
Assessable capital gains
Total assessable income 112000 58600
Deductable expenses 150 350
Donations 610 610
Income protection insurance 1884 420
Business overheads insurance 972
Other
Taxable income 109356 56248
Income tax on taxable income 28593 9827 (state tax rates and year applied)
Less non-refundable tax offsets (e.g. LITO/SAPTO)
plus Medicare levy 2187 1125
plus Medicare levy surcharge
less Imputation credits
less refundable tax offsets 540
Net tax payable 31320 10951
Family cash flow
Client 1 Client 2 Combined Comment
Salary less any salary sacrificed amount 112000 58600 170600
Non-taxable income (e.g. income from a superannuation pension for a person aged over 60, Family Tax Benefits, etc.)
Interest income
Dividends received (excluding franking credits)
Other income
Total income received before tax 112000 58600 170600
Investment expenses
Expenses
Mortgage
School fees 3500 3500 7000
Utilities
Personal insurance 5496 3564 9060
Car insurance 1600 1600 3200
Home building and contents insurance 750 750 1500
Health insurance 1422 1422 2844
Living expenses 45000 45000 90000
Holidays 5000 5000 10000
House maintenance
Motor vehicle
Other
610 610 1220 donations
150 350 500 Accountant fee
3000 NCC Contribution
Total expenses 66528 61796 128324
Total income received before tax less expenses 45472 -3196 42276
Net tax payable from tax table above 31320 10951 42272
Total net cash flow 14151 -14174 4
Asset Owner Value Liabilities Net value Notes
Personal assets
Family home Carlos/Rosa $600,000 $0 $600,000
Home contents Carlos/Rosa $150,000 $0 $150,000 Insured value
Car Carlos/Rosa $11,000 $0 $11,000 2007 Ford Focus
Car Carlos/Rosa $16,000 $0 $16,000 2007 Ford
Falcon XR6
Total $777,000 $0 $777,000
Superannuation
Employer superannuation Carlos $468,800 n.a. $468,800 27000+175000+23800
Employer superannuation Rosa $277,000 n.a. $277,000 99000+175000+3000
Total 745800 745800
Other Assets
Savings account Nil Nil Nil Transaction account
Total Nil Nil Nil
Net worth $1522000 $0 $1522,000
Liabilities
Loan Current debt Percentage tax deductible Interest only Repayment
Home loan n.a. n.a.
Investment property n.a. n.a.
Investment loan n.a. n.a.
Personal loan n.a. n.a.
Other n.a. n.a.
Total $0 $0
Asset Owner Value Liabilities Net value Notes
Personal assets
Family home
Home contents
Car 1
Car 2
Other
Total
Superannuation
Client 1 superannuation
Client 2 superannuation
Total
Investment assets
Investment property
Savings account
Term deposit
Shares
Other
Total
Net worth
Liabilities
Loan Current debt Percentage deductible Interest only Repayment
Loan
Home loan
Investment property
Other
Total
Task 2: Benefit payments
The Sandra and Henry Blake case study — Superannuation benefit payments
Henry and Sandra Blake have decided that they need some financial planning advice as Henry has recently had to commence a new job at a much reduced income level. As their financial planner they have told you that they are concerned that the new income may not be adequate to meet their current lifestyle requirements. Henry has taken on this new job so that he can look after Sandra. Sandra has been diagnosed with a serious but not terminal illness and will need to be cared for, for a period of time. Following due protocol, you met and provided them with the information they needed, and then in a second meeting you collected information on their current financial situation and their needs and objectives. Table 2 records your clients’ personal details.
Note: Full details of their financial situation are at Appendix 2. You will need to refer to that data to answer the questions for this task.
Table 2 Personal details
Client 1 Client 2
Title Mr Mrs
Surname Blake Blake
Given & preferred names Henry Sandra
Home address 20 Bannockburn Dr, Beaumont Hills, NSW. 20 Bannockburn Dr, Beaumont Hills, NSW.
Business address n.a. n.a.
Contact phone (02) 5544 7766 (02) 5544 7766
Date of birth 18 December 1951 12 June 1956
Sex ? Male Female Male ? Female
Smoker Yes ? No Yes ? No
Expected retirement age When Sandra reaches age 65 Age 65
The cash flow tables
Based on the information they provided, you completed a fact finder and then developed the two (2) cash flow statements on the following pages to document the couple’s change in financial situation.
Note: You can verify the accuracy of the two (2) cash flow statements by referencing the full details of your clients’ financial situation in Appendix 2. You will need to refer the data presented there to answer the questions for this task.
Accurately completed cash flows are essential in the financial planning process to support recommendations. They are key to demonstrating your competency.
Income, tax and cash flow — Henry’s previous employment
Tax calculation Client 1 Client 2 Combined Comments
Income from employment
Salary or Income from employment $145,000 $71,000 $216,000
Salary sacrifice
Salary after salary sacrifice $145,000 $71,000 $216,000
Rental income
Unfranked dividends
Franked dividends $5,022 $5,022 $10,044 Distribution from tax effective share fund
Franking (imputation) credits $1,663 $1,663 $3,326
Interest
Other income (e.g. taxable benefits, trust income, investment income)
Capital gains 1 yr
Capital gains 1 yr
Tax-free component of capital gains
Assessable income $151,685 $77,685 $229,370
Deductible expenses $250 $250 $500 Accountant’s fees
Donations $610 $610 $1,220 $1200 p.a. to the National Breast Cancer Foundation
$20 bucket donation
Income Protection Insurance
Business Overheads Insurance
Other
Taxable income $150,825 $76,825 $227,650
Tax on taxable income $43,752 $16,515 $60,267
Non-refundable tax offsets (e.g. LITO/SAPTO)
Medicare levy $3,017 $1,537 $4,554
Medicare levy surcharge
Franking rebate $1,663 $1,663 $3,326
Refundable rebates and offsets
Total tax $45,106 $16,389 $61,495
Cash flow — Henry’s previous employment
Cash flow Henry Sandra Combined Comment
Salary less any salary sacrificed amount $145,000 $71,000 $216,000
Non-taxable income nil nil
Rental income n.a. n.a.
Dividends received $5,022 $5,022 $10,044
Interest nil nil
Other income (e.g. taxable benefits, trust income, investment income) nil nil
Total income received before tax $150,022 $76,022 $226,044
Investment expenses nil nil
Expenses
Mortgage nil nil
School fees nil nil
Utilities n.a. n.a. Paid as part of the expenses through credit card
Personal insurance nil nil
Car insurance $1,600 $1,600 $3,200
Home building and contents insurance $750 $750 $1,500
Health insurance $2,520 $2,520 $5,040 $420 per month
Living expenses $51,000 $51,000 $102,000 $8500 per month through credit card
Holidays $10,000 $10,000 $20,000
House maintenance n.a. n.a. Paid as part of the expenses through credit card
Motor vehicle n.a. n.a. Paid as part of the expenses through credit card
Other
$610 $610 $1,220 Donations
$250 $250 $500 Accountant’s fees
$12,000 $12,000 $24,000 $2000 per month investment
$6,720 $6,720 $560 per month out of pocket medical expenses
Total expenses $78,730 $85,450 $164,180
Total income received before tax less total expenses $71,292 –$9,428 $61,864
Cash flow Henry Sandra Combined Comment
Total tax payable from tax table above $45,106 $16,389 $61,495
Total net cash flow $26,186 –$25,817 $369
Income, tax and cash flow — Henry’s new employment
Tax calculation Client 1 Client 2 Combined Comments
Income from employment
Salary or Income from employment $73,000 $71,000 $144,000
Salary sacrifice
Salary after salary sacrifice $73,000 $71,000 $144,000
Rental income
Dividends $5,022 $5,022 $10,044 Distribution from tax effective share fund
Franking (imputation) credits $1,663 $1,663 $3,326
Interest
Other income (e.g. taxable benefits, trust income, investment income)
Capital gains 1 yr
Capital gains 1 yr
Tax-free component of capital gains
Assessable income $79,685 $77,685 $157,370
Deductible expenses $250 $250 $500 Accountant’s fees
Donations $610 $610 $1,220 $1200 p.a. to the National Breast Cancer Foundation
$10 bucket donation
Income Protection Insurance
Business Overheads Insurance
Other
Taxable income $78,825 $76,825 $155,650
Tax on taxable income $17,165 $16,515 $33,680
Non-refundable tax offsets (e.g. LITO/SAPTO)
Medicare levy $1,577 $1,537 $3,114
Medicare levy surcharge
Franking rebate $1,663 $1,663 $3,326
Refundable rebates and offsets
Total tax $17,079 $16,389 $33,468
Cash flow — Henry’s new employment
Cash flow Henry Sandra Combined Comment
Salary less any salary sacrificed amount $73,000 $71,000 $144,000
Non-taxable income nil nil
Rental income n.a. n.a.
Dividends received $5,022 $5,022 $10,044
Interest nil nil
Other income (e.g. taxable benefits, trust income, investment income) nil nil
Total income received before tax $78,022 $76,022 $154,044
Investment expenses nil nil
Expenses
Mortgage nil nil
School fees nil nil
Utilities n.a. n.a. Paid as part of the expenses through credit card
Personal insurance nil nil
Car insurance $1,600 $1,600 $3,200
Home building and contents insurance $750 $750 $1,500
Health insurance $2,520 $2,520 $5,040 $420 per month
Living expenses $51,000 $51,000 $102,000 $8500 per month through credit card
Holidays $10,000 $10,000 $20,000
House maintenance n.a. n.a. Paid as part of the expenses through credit card
Motor vehicle n.a. n.a. Paid as part of the expenses through credit card
Other
$610 $610 $1,220 Donations
$250 $250 $500 Accountant’s fees
$12,000 $12,000 $24,000 $2000 per month investment
$6,720 $6,720 $560 per month out of pocket medical expenses
Total expenses $78,730 $85,450 $164,180
Total income received before tax less total expenses –$708 –$9,428 –$10,136
Cash flow Henry Sandra Combined Comment
Total tax payable from tax table above $17,079 $16,389 $33,468
Total net cash flow –$17,787 –$25,817 –$43,604
Current superannuation, rollovers, insurances, etc.
Superannuation
Member Henry Sandra
Fund name EANWB Retail Super Fund EANWB Retail Super Fund
Date of joining fund 1 July 1992 (service date) 1 July 1992 (service date)
Type of fund ? Accumulation Defined benefit ? Accumulation Defined benefit
Pension Pensioner Pension Pensioner
Contribution (e.g. 5% of salary) SG By employer By yourself SG By employer By yourself
Current value of your superannuation fund $567,000 $332,000
Amount of death and disability cover $710,000 $520,000
Is there provision for you to top up or salary sacrifice? ? Yes No ? Yes No
Superannuation taxation details
Henry Sandra
Current value $567,000 $332,000
Tax free component $175,000 $178,000
Taxable component:
Taxed element $392,000 $154,000
Untaxed element $0 $0
Preservation:
Preserved $567,000 $332,000
Unrestricted non-preserved $0 $0
Restricted non-preserved $0 $0
Previous years’ contributions:
Non-concessional contributions:
Year 1 $0 $0
Year 2 $0 $0
Year 3 $0 $0
Year 4 $0 $0
Concessional contributions:
Year 1 SG only SG only
Year 2 SG only SG only
Year 3 SG only SG only
Year 4 SG only SG only
Note: The fund rules of the EANWB Retail Super Fund will allow a member to be in accumulation and pension phase at the same time.
Life insurance details
Life insured Owner Policy type Company Policy number Death benefit Comments Annual premium
Henry EANWB Retail Super Fund Life EANWB 234u024 $710,000 Within superannuation $8400
Henry EANWB Retail Super Fund TPD EANWB 234u024 $710,000 Within superannuation any occupation $18,000
Sandra EANWB Retail Super Fund Life EANWB 45276 $520,000 Within superannuation $1440
Sandra EANWB Retail Super Fund TPD EANWB 45276 $520,000 Within superannuation any occupation $3060
Nominated beneficiaries:
Name Binding Non-binding
(Yes/No) Trustee discretion
(Yes/No)
Yes/No Amount
Henry — Beneficiary is Sandra Yes 100% No No
Sandra — Beneficiary is Henry Yes 100% No No
Is there any current flags or splits on a superannuation benefit of yours following a marriage breakdown? Yes/No N Details
Are you a beneficiary of any current flags or splits of a superannuation benefit following a marriage breakdown? Yes/No N Details
Needs and objectives
Details Comments
Maintain previous net income level To maintain their net income levels at the level prior to Henry commencing his new role.
Maintain superannuation balances If possible, to try and maintain superannuation balances. However, willing to reduce superannuation balances to maintain previous net income level.
Reduce taxation
Implications on TPD If Sandra becomes TPD due to her current illness, both now and in the future.
Proposed superannuation balances Estimate of Henry and Sandra’s superannuation balances when Sandra reaches age 65.
Task 2 questions
Henry and Sandra had a number of questions in regard to superannuation benefit payments. You are to answer the questions, as their financial planner, taking into account their personal details. Remember, many clients may not be familiar with the superannuation system and may ask questions that are technically incorrect. You are to determine if the question asked is incorrect and if it is you are to correct Henry and Sandra, providing the correct information and an answer to their question.
Note: Full details of their financial situation are in Appendix 2. You will need to refer to that data to answer the questions for this task.
Henry and Sandra’s questions
Question 1
Sandra asks,
‘What are our options for accessing our superannuation if we are still working?’
Sandra comments,
‘We would also like the flexibility of being able to take a lump sum now or in the future’.
Answer here
Assessor feedback:
Question 2
Sandra then asks,
‘How much can we take out of our superannuation to supplement our income?’
‘What is the difference if we take our superannuation as an income stream or lump sum?’
Answer here
Assessor feedback:
Question 3
Henry asks,
‘As I understand it, if we are able to withdraw our funds from superannuation we will be heavily taxed. What are the tax implications for Sandra and I for receiving a one off payment?’
Answer here
Assessor feedback:
Question 4
Sandra asks,
‘If Henry and I both commence income streams why are they different in the amounts of income we can receive and the tax payable?’
Answer here
Assessor feedback:
Question 5
Henry has noticed on his and Sandra’s superannuation statements that they have taxable and tax-free components. Henry asks,
‘If Sandra and I can take any amounts from our superannuation from the tax free portions, and not pay tax on them, what happens to the taxable portions’.
Answer here
Assessor feedback:
Question 6
Henry asks,
‘If we are able commence an income stream part way through the year how does the minimum income stream amount work?’
Answer here
Assessor feedback:
Your strategy recommendations
As part of a statement of advice (SOA) a financial planner must justify their strategies by showing how they meet their clients’ needs and objectives. In this case study Henry and Sandra have the following needs and objectives:
• maintain their previous net income level
• if possible to maintain their superannuation balances
• reduce taxation
• proposed superannuation balances when Sandra reaches age 65
• implications if Sandra becomes TPD now or in the future
• the flexibility of being able to take a lump sum from their superannuation benefits in the future.
You must provide the following information to Henry and Sandra addressing these objectives:
(a) How to maintain their previous net income level.
(b) If possible, how to maintain their superannuation balances.
(c) How to reduce taxation.
(d) What are the proposed superannuation balances for Henry and Sandra when Sandra reaches age 65?
(e) How this strategy maintains flexibility of achieving what they require from their superannuation fund in the future.
Use the templates on the following pages to provide your responses.
Additional information:
Each one of these needs and objectives must be addressed and justified in the strategies used. Further, if it is recommended that these can be satisfied by using the superannuation benefits of one member of the couple, the report must also include why the second member of the couple’s superannuation benefit is untouched or retained as is.
For the projections of their superannuation balances when Sandra reaches age 65 you are to assume a realistic rate of return of a balanced fund based on your recommendations as if your strategies were adopted.
Current and previous tax and cash flow statements have been provided as part of the case study. For your discussion with Henry and Sandra, you must also produce a similar cash flow statement that shows their tax and cash flow situation if your strategies were adopted.
Given the state of Sandra’s health, she is interested in finding out what the implications would be if she received the superannuation benefit as a lump sum and an income stream now or in the future as a disability superannuation benefit. You can give her this information and include it as an appendix to your recommendations.
This information will include all calculations and taxation implications based on the current benefits Sandra has within her superannuation fund. You will need to make sure you have considered her insurance benefit as well.
Note: Full details of their financial situation are in Appendix 2. You will need to refer to that data to answer the questions for this task.
(a) Use the space below to communicate to your clients how they can maintain their previous net income level.
Answer here
Assessor feedback:
(b) Communicate to your clients how they might be able to maintain their superannuation balances.
Answer here
Assessor feedback:
(c) Explain to your clients how they might be able to reduce their taxation including the taxation implications for Sandra if she receives her superannuation benefits now, or in the future, after satisfying a condition of release, including if she receives her benefit as a disability superannuation benefit as a lump sum or income stream.
Answer here
Assessor feedback:
(d) What the proposed superannuation balances might be for when Sandra reaches age 65.
Answer here
Assessor feedback:
The cash flow table
Financial position after implementation of strategy
Note: The items listed in this template are indicative only and must be adapted to your clients’ personal circumstances. There may be other relevant income or expense items that are not included in this template. You should add, delete or substitute items where appropriate.
Accurately completed cash flows are essential in the financial planning process to support recommendations. They are key to demonstrating your competency.
Tax calculation Client 1 Client 2 Notes
Income from employment
Salary
Salary sacrifice (state % if applicable)
Salary after salary sacrifice
Other income
Bank account interest (state % return if applicable)
Interest from other investments (state % return if applicable)
Share dividends (state % return if applicable)
Imputation credits (state % return if applicable)
Other income liable for tax (e.g. rental income)
Assessable capital gains
Total assessable income
Deductable expenses (e.g. rental repairs)
Taxable income
Income tax on taxable income (state tax rates and year applied)
less tax offsets (e.g. LITO/SAPTO)
15% superannuation and annuity tax offset
plus Medicare levy
plus Medicare levy surcharge
less Imputation credits
less refundable tax offsets
Net tax payable
Family cash flow
Client 1 Client 2 Combined Comment
Cash flow calculation:
Salary less any salary sacrificed amount
Non-taxable income (e.g. income from a superannuation income stream for a person aged over 60, Family tax benefits, etc.)
Interest income
Dividends received (excluding franking credits)
Other income
Total income received before tax
Investment expenses
Living expenses
Other expenses
Total expenses
Total income received before tax less expenses
Net tax payable from tax table above
Total net cash flow
Asset Owner Value Liabilities Net value Notes
Personal assets
Family home
Home contents
Car 1
Car 2
Other
Total
Superannuation
Client 1 superannuation
Client 2 superannuation
Total
Investment assets
Investment property
Savings account
Term deposit
Shares
Other
Total
Net worth
Liabilities
Loan Current debt Percentage deductible Interest only Repayment
Loan
Home loan
Investment property
Other
Total
Task 3: Death benefit payments
The Faraz and Aisha Gita case study — Superannuation death benefit payments
Faraz and Aisha Gita have decided that they need some financial planning advice following the death of a close family friend. As their financial planner they have told you that they are concerned that their superannuation benefits may not be going to the right people most effectively.
Following due protocol, you met and provided them with the information they needed and then in a second meeting you collected information on their current financial situation and their needs and objectives. Table 3 records your clients’ personal details.
Table 3 Personal details
Client 1 Client 2
Title Mr Mrs
Surname Gita Gita
Given & preferred names Faraz Aisha
Home address 22 Culcreuch Cres, Kellyville, NSW 22 Culcreuch Cres, Kellyville, NSW
Business address n.a. n.a.
Contact phone (02) 7765 5544 (02) 7765 5544
Date of birth 1 August 1951 20 November 1955
Sex ? Male Female Male ? Female
Smoker Yes ? No Yes ? No
Expected retirement age When Aisha reaches age 65 Age 65
Based on the information you collected from the couple over your meetings with them, you populated the tables on the following pages in relation to their superannuation.
Current superannuation, rollovers, insurances, etc.
Superannuation — Transition to retirement
Member Faraz Aisha
Fund name AI Retail TTR Super Fund EANWB Retail Super Fund
Date of joining fund 1 July 1992 (service date) 1 July 1992 (service date)
Type of fund Accumulation Defined benefit Accumulation Defined benefit
? Pension Pensioner ? Pension Pensioner
Contribution (e.g. 5% of salary) By employer By yourself By employer By yourself
Current value of your superannuation fund $510,000 $308,000
Amount of death and disability cover
Is there provision for you to top up or salary sacrifice? Yes ? No Yes ? No
Superannuation taxation details — Transition to retirement
Faraz Aisha
Current value $510,000 $308,000
Tax free component $150,000 $179,000
Taxable component:
Taxed element $360,000 $129,000
Untaxed element $0 $0
Preservation:
Preserved $510,000 $308,000
Unrestricted non-preserved $0 $0
Restricted non-preserved $0 $0
Nominated beneficiaries — Transition to retirement
Name Binding Non-binding
(Yes/No) Trustee discretion
(Yes/No)
Yes/No Amount
Faraz No No Yes
Aisha No No Yes
Is there any current flags or splits on a superannuation benefit of yours following a marriage breakdown? Yes/No N Details
Are you a beneficiary of any current flags or splits of a superannuation benefit following a marriage breakdown? Yes/No N Details
Superannuation — Accumulation
Member Faraz Aisha
Fund name EANWB Retail Super Fund EANWB Retail Super Fund
Date of joining fund 1 August 2006 (service date) 1 July 1992 (service date)
Type of fund ? Accumulation Defined benefit ? Accumulation Defined benefit
Pension Pensioner Pension Pensioner
Contribution
(e.g. 5% of salary) ? By employer ? By yourself ? By employer ? By yourself
Current value of your superannuation fund $107,000 $25,000
Amount of death and
disability cover $640,000 $480,000 (death only)
Is there provision for you to top up or salary sacrifice? ? Yes No ? Yes No
Note: It is assumed that the respective superannuation funds are claiming a tax deduction for the insurance premiums.
Superannuation taxation details — Accumulation
Faraz Aisha
Current value $107,000 $25,000
Tax free component $30,600 $9,600
Taxable component:
Taxed element $76,400 $15,400
Untaxed element $0 $0
Preservation:
Preserved $107,000 $25,000
Unrestricted non-preserved $0 $0
Restricted non-preserved $0 $0
Previous years’ contributions:
Non-concessional contributions:
Year 1 $5,000 $9,600
Year 2 $5,000 $4,000
Year 3 $5,000 $4,000
Year 4 $5,000 $4,000
Concessional contributions:
Year 1 $25,000 $25,000
Year 2 $25,000 $25,000
Year 3 $25,000 $25,000
Year 4 $25,000 $25,000
Nominated beneficiaries — Accumulation
Name Binding Non-binding
(Yes/No) Trustee discretion
(Yes/No)
Yes/No Amount
Faraz No No Yes
Aisha No No Yes
Is there any current flags or splits on a superannuation benefit of yours following a marriage breakdown? Yes/No N Details
Are you a beneficiary of any current flags or splits of a superannuation benefit following a marriage breakdown? Yes/No N Details
Needs and objectives
Details Comments
To pay their death benefit in accordance with their wishes. Faraz and Aisha would like 70% of their superannuation benefits to be paid to the surviving spouse with the remainder paid equally to their children.
Task 3 questions
Faraz and Aisha had a number of questions in regard to superannuation death benefits. You are to answer the questions, as their financial planner, taking into account their personal details in the case study. Remember, many clients may not be familiar with the superannuation system and ask questions that may be technically incorrect. Respond to the questions asked by Faraz and Aisha. You are to determine if the question asked is incorrect and if it is you are to correct Faraz and Aisha, providing the correct information and how this relates to them.
Note: Full details of their financial situation are in Appendix 3. You will need to refer to that data to answer the questions for this task.
Faraz and Aisha’s questions
Question 1
Faraz discusses his friend’s experience with their superannuation death benefit and the various options they were offered. Faraz asks,
‘Why do some people receive more money than they seem to have in the superannuation fund when a family member dies?’
Answer here
Assessor feedback:
Question 2
Aisha comments that they see their children Vihaan, Prisha and Kyra as equals to each other and asks,
‘Why is it that Vihaan and Prisha would have less options and treated differently to Kyra if they receive a death benefit from our superannuation funds?’
Answer here
Assessor feedback:
Question 3
Aisha asks,
‘What are the tax implications if our children receive a death benefit as an income stream?’
Answer here
Assessor feedback:
Question 4
Faraz asks,
‘If there is a difference in the way a death benefit is paid and taxed for our children why can’t we wait until Kyra turns 18 and is independent before a death benefit is paid to all the children?’
Answer here
Assessor feedback:
Your strategy recommendations
As part of a statement of advice (SOA) a financial planner must justify their strategies by showing how they meet their clients’ needs and objectives.
Faraz and Aisha would like to have their superannuation benefits paid in accordance with their wishes in the event of their death. They would like to have 70% of the superannuation benefits paid to the surviving spouse with the remainder paid equally to their children.
In addition, Faraz and Aisha would like to know the tax implications if they decide to pass their full benefits to their children.
To meet Faraz and Aisha’s needs, your recommendations will need to address the following:
(a) How they are to achieve their desired death benefit structure.
(b) What the process is to achieve this structure.
(c) The tax implications of the proposed structure, including all tax calculations on all benefit payments.
(d) Details of other death benefit payment options including all tax calculations on all benefit payments.
(e) The tax implications if the full death benefit is paid to their children.
You will need to demonstrate that you have considered any insurance implications in your recommendations. Use the templates on the following pages to provide your responses.
(a) Use the space below to communicate to your clients how they can best achieve their desired death benefit structure.
Answer here
Assessor feedback:
(b) Describe the process that will have to be undertaken to achieve this structure.
Answer here
Assessor feedback:
(c) Describe the tax implications of the proposed structure and include all tax calculations on all benefit payments.
Note: When answering this question assume date of death is 1 July 2014.
Calculate the total benefit payable to each beneficiary and their estimated tax liability.
Answer here
Assessor feedback:
(d) Communicate to your clients details of other death benefit payment options including all tax calculations on all benefit payments.
Answer here
Assessor feedback:
(e) Explain to your clients the tax implications if the full death benefit is paid to their children.
Answer here
Assessor feedback:
Task 4: Engaging your clients
The financial planning process is usually broken down into a series of six (6) steps. Each step is an opportunity to engage your clients in an ongoing conversation that begins with ‘fact finding’:
Select one (1) of the three case studies provided in Task 1, 2 and 3.
You will go through the process detailed in the diagram above with your selected clients and at key points ask questions about how you would deal with a situation that has arisen, or what you would say in response to one of your client’s queries or concerns.
Your assessor is looking for your ability to provide accurate information in a clear and concise manner, taking into consideration all the client’s circumstances.
Use the space provided to write your answers.
Task 4 questions
Step 1: Collecting data (and defining scope)
One of your clients is concerned about the amount of personal information you are requesting and is starting to feel uncomfortable in providing personal details to you. Your client asks,
‘Why are you asking for all this information and what are you going to do with it?’
Answer here
Assessor feedback:
Step 2: Analysing the data
Having collected the required data from your clients you advise them that you will contact them in two weeks to provide them with a detailed financial plan.
However, your clients are impatient and contact you after a few days and ask,
‘What are you considering recommending and when can we commence the recommendation’.
Answer here
Assessor feedback:
Step 3: Research strategy and recommendations
When conducting research to determine the final recommendations for your clients, you discover that you require more information from your clients. List three (3) questions you would ask you clients to gather the required information.
Note: You can make assumptions in your questions to assist in the questions asked.
Answer here
Assessor feedback:
Step 4: Documentation and presentation of the statement of advice
As promised, you contact your clients in two weeks and you present their Statement of Advice (SOA) to them. They say,
‘This is too big! We’re not reading this! Why can’t you just jot down the main points and tell us how to start it?’
Answer here
Assessor feedback:
Step 5: Implementation of recommendations
Having presented the statement of advice (SOA) to your clients you go through the implementation of the recommendations.
You notice that your clients appear confused.
What questions would you ask your clients to check their understanding and satisfaction with the recommendations?
Answer here
Assessor feedback:
Step 6: Review and monitor the financial plan
You discuss the ongoing service that you provide to your clients. They say that surely due to their circumstances the recommendations that you have made don’t need to be updated once set in motion. Justify to your clients the need for ongoing reviews and monitoring of the financial plan.
Answer here
Assessor feedback:
Appendix 1: Case study 1
Case study 1 — Carlos and Rosa Alesi
The first meeting
Carlos and Rosa arrive at your office for the meeting. After greeting and offering them a cool drink you confirm that they received your package of documents and that they have completed them. You then take them through the key elements of the FSG and explain your role and capacity to assist them with their planning needs. You make sure that Carlos and Rosa are comfortable with that information before you proceed to the next step.
Collecting the data
At the next stage of the meeting, you learn the following information about Carlos and Rosa through a process of thorough and polite questioning. From time to time they provide you with a relevant document to confirm their financial situation.
Current situation
Carlos, born 18 December 1961, is married to Rosa, born 12 June 1963. Carlos and Rosa have two children, a son named Emmanuel, age 17, and a daughter Isabella, age 15.
Carlos and Rosa own their own home, valued at $600,000, and have recently received an inheritance from the estate of Rosa’s mother.
An amount equal to their outstanding mortgage was deposited into their mortgage offset account reducing the amount of the outstanding loan to nil. They still have access to these funds. However, they do not want to touch these funds and want to use it as an emergency account.
Carlos is a full-time sales representative for an agricultural supplies company. He has only recently commenced working for his present employer after administrators closed his previous employer’s business down. He earns $140,000 p.a. and receives additional superannuation guarantee (SG) contributions from his employer paid into the employer’s default fund.
Rosa is primarily a self-employed marketing consultant and has net business income of $65,000 p.a. She also works as a contracted employee in a mining engineering company earning $5600 p.a. plus SG into the employer’s default fund.
Emmanuel and Isabella attend the local private school and Carlos and Rosa pay $7000 p.a. in fees, uniforms, books, school trips, etc.
The family has full health insurance.
The only other assets they have are a 2007 Ford Focus currently valued at $11,000 and a 2007 Ford Falcon XR6 valued at $16,000. Both vehicles are fully comprehensively insured.
Superannuation
Carlos has $270,000 in his superannuation fund via his employer’s default fund. The benefit is fully preserved and is a 100% taxed element of the taxable component. Carlos’s service period commenced on 1 July 1992.
Rosa has $99,000 in her employer’s default superannuation fund. Her benefit is fully preserved and is a 100% taxed element of the taxable component. Rosa’s service period commenced on 1 July 1992.
Neither Carlos nor Rosa has made any additional contributions to their superannuation fund.
Carlos’s employer will allow salary sacrificing to superannuation without impacting on any other employee benefits. In addition, Carlos’s employer will maintain their SG contribution based on his pre-salary sacrifice income.
Rosa’s employer does not allow salary sacrificing to superannuation but does make SG contributions to Rosa’s superannuation fund.
Carlos and Rosa are happy with their current superannuation funds and the underlying investments they are invested in. They do not wish to receive advice in regard to changing their funds or investment profile.
Insurance
Carlos and Rosa have their life insurance and total and permanent disability insurance (TPD) owned by their superannuation funds.
Carlos has a self-owned trauma policy with a premium of $301 per month.
Rosa has a self-owned trauma policy with a premium of $181 per month.
Both Carlos and Rosa have income protection policies. Carlos’s premium is $157 per month and Rosa’s is $35 per month. Rosa also has business overheads insurance with a premium of $81 per month. This business overheads insurance premium is in addition to any other business expenses.
As mentioned above, Carlos and Rosa’s cars are fully comprehensively insured for $3200 p.a.
Carlos and Rosa also have home building and contents insurance cover including legal liability cover for $1500 p.a.
Carlos and Rosa have adequate family private health insurance cover with a premium of $237 per month. This premium includes any private health insurance rebate.
Carlos and Rosa are happy with their current insurance arrangements, including the premiums they are paying, the sums insured and the policy ownership structure. They have specifically requested that they do not require any advice on their insurance matters.
Investments
Carlos and Rosa do not have any investments. Excess income was used to pay-off their mortgage.
However, they do have $350,000 in their savings account that was left over from the inheritance from Rosa’s mother’s estate after paying off their mortgage. This savings account does not pay any interest.
Other information
Carlos and Rosa have a credit card with a limit of $30,000 that they use for all their general expenses and entertainment. However, they never spend up to their limit and their average expenses are $7500 per month, which they repay within the interest free period.
Carlos and Rosa go on regular annual holidays with their children and spend over $10,000 per trip.
Other expenses include a donation to the National Breast Cancer Foundation of $100 per month, a tax deductible ‘bucket’ donation of $20 p.a. to disaster relief funds, and accountant’s expenses of $500 p.a.
Needs and objectives
During your conversation with Carlos and Rosa it becomes apparent that their main objective is to save for their retirement. They are concerned that with their current savings they may not have enough funds to fund their retirement, which they would like to commence when Carlos is aged 65.
Carlos and Rosa are aware that as they do not owe anything on their mortgage they will now have excess income that they would like to use as part of their retirement planning.
They realise that their savings account is not the best place to invest their $350,000 and they want to make sure that it is invested tax effectively. Further, they want to make sure that they cannot have access to these funds until they retire.
In addition, they would also like to reduce their overall tax liability.
Closing the interview
Prior to concluding your meeting, you review the information provided by Carlos and Rosa to check that it is complete and accurate and ask if they have any questions.
Carlos and Rosa are curious about the superannuation contribution process and have a number of questions that sprang to mind after the recent seminar they attended.
You advise Carlos and Rosa of what happens next, and explain that with their agreement you will prepare a written report, based on the information they have just shared with you, which will include recommended strategies to assist them in achieving their financial goal of having adequate funds for retirement.
Carlos and Rosa agree to proceed to the next stage of the financial planning process and you make an appointment to present the plan in a fortnight.
Appendix 2: Case study 2
Case study 2 — Henry and Sandra Blake
The first meeting
Henry and Sandra arrive at your office for the meeting. After greeting and offering them a cup of tea you confirm that they received your package of documents and that they have completed them.
You then take them through the key elements of the FSG and explain your role and capacity in assisting them with their planning needs. You make sure that Henry and Sandra are comfortable with that information before you proceed to the next step.
Collecting the data
During the meeting, you learn the following information about Henry and Sandra through a process of thorough and polite questioning. From time to time they provide you with a relevant document to confirm their financial situation.
Current situation
Henry, born 18 December 1951, is married to Sandra, born 12 June 1956. Henry and Sandra have two children, a son named Arthur, age 28, and a daughter Chloe, age 26, both of whom are independent.
Henry and Sandra own their own home, valued at $600,000, and do not have any outstanding mortgage, which was paid out eight years ago.
Sandra is employed full-time as a marketing manager earning $71,000 p.a. plus superannuation guarantee (SG) paid into a retail superannuation fund that she has chosen. She has some health issues, potentially serious but not terminal. Her out of pocket health expenses are on average $560 per month.
Henry ha
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