Affiliate Ads support this blog:

Friday, 5 July 2019

Paying less tax under the Liberals

Well, the tax package the NLP government took to the last election has now been passed by both houses, so will become legislation. My local MP sent me a link to this handy tax relief estimator. My actual taxable income is hard to know in advance, as it will depend on how large my tax deductions (interest paid on my margin loans, costs associated with my Ubereats casual work, and my self-education and business expenses relating to starting up my financial planning business) turn out to be, and how much extra income I get from dividends, and how much (if any) income I earn from my business and casual work. And any capital gains (or losses) made on any shares I sell during a particular financial year...

Based on my raw (before any deductions or other income) annual salary, plus bonus, of around $125,000, my tax bill would drop by only $165 (to $36,217 ie. a reduction of only 0.45% in tax) during 2018-19 to 2021-22 FY. The tax cuts for 2022-23 and 2023-24 would increase to $2,565 (a 7.05% reduction in tax), and (assuming Labor doesn't rescind the latter tax cuts) the final stage from 2024-25 onwards would see the tax on $125,000 of taxable income drop by $4,790 (13.16%).

However, my taxable income is usually a lot less than this raw figure, so the initial tax savings will be proportionately larger in the next couple of years. If my taxable income was $90,000 the initial tax rate changes would save me $1,215 in tax (a reduction in tax paid of 5.3%), which is equivalent to a fairly hefty pay rise.

And then, if my business becomes profitable in a few years time, the latter tax cuts that benefit higher income levels more will be just getting phased in. So, if my taxable income reached $200,000 by 2024-25 the tax saving would be worth $11,640 (a reduction of 17.3% in the amount of tax due).

The prospect of significant reductions in income tax for higher income earners from 2022 (and even more from 2024) means that it will be a good tax strategy to realize any capital losses in the next couple of years, and postpone selling any assets that will realize significant capital gains until the final stage of tax cuts has been implemented. Assuming it all goes ahead as planned...

Subscribe to Enough Wealth. Copyright 2006-2019

Thursday, 4 July 2019

Invested in 'start up' company Adviser Ratings via crowd funding

Last time I invested in a company pre-listing was a US ISP start-up 'Global Entrepreneurs Network' (GEN) last century. Despite being a dot-com company prior to the dot-com boom-bust in the late 1990s, that company managed to run out of money and go bust (actually it appears it was acquired by SAGE, but the original public investors didn't end up with any equity) before it reached IPO/listing stage.

It was a bit disappointing (especially as I could have invested in listed companies such as Microsoft or Apple instead - and could have made a lot of money) but not unexpected with those sort of high risk 'blue sky' investments. On the other hand, if a pre-IPO investment works out, you can potentially make a considerable profit.

After twenty years I've finally decided to risk another small investment in a 'start up' company - this time I've invested $4,215 via crowdfunding to 'invest' (aka speculate) in buying150 shares in the new financial adviser rating company called 'Adviser Ratings' (not as imaginative a company name as Alphabet, but at least its truth-in-labelling). There is a considerable demand for reliable financial advice in Australia (and the UK and US), and considerable difficulty for consumers in knowing which advisers are good and which aren't (for example, some of the shonkiest advisers exposed during the Hayne RC had high profiles, and appeared to be highly regarded 'experts'). So a 'trip adviser' style consumer rating system for financial advisers would seem to have considerable potential.

Also, being a software based company with (apparently) some revenue streams already (one of the big risks is whether or not these revenues do turn out to be 'sticky' and ongoing as expected), and the  potential to replicate its business model in the UK and possibly the US (although I've no idea what existing/potential competitors might be doing a similar thing in those markets) it could scale up at minimal cost, and grow revenue. Whether this actually happens or the shares end up worthless is the risk you take when making such 'blue sky' investments.

Anyhow, its an interesting investment opportunity, and fits in with knowledge of the financial advice industry (one of the old cliches of share investing is to pick companies that produce products you know about and consume yourself - whether it is a winning strategy is dubious - just think of all the people that used VHS tapes in the 80s!). And if the company never 'lists' and the shares end up worthless I can afford to loose the $4,215 (I lost a lot more when I invested in Agribusinesses Timbercorp and Rewards!). If anyone is interested in investing, you can use this link (which will utilize my referral code, and I'd end up getting 30% of the 6% fee that birchal charges for the crowdfunding). The crowdingfund share 'float' for Adviser Ratings has already passed its minimum funding target (raising $350K) so it looks like this tranche of shares will be issued.

NOTE: This is NOT a recommendation to invest in this company - do you own research and make up your own mind!

Subscribe to Enough Wealth. Copyright 2006-2019


Wednesday, 3 July 2019

MFinPlan progress

I was relieved that I managed to end up getting a Credit grade for last semester's subject 'Commercial Law' with a mark of 66%. As I had only gotten marks just over 65% for the assessment tasks during term, I had gone into the exam expecting to either just Pass the course or maybe get a Credit. Law was certainly not one of my favourite subjects! I've now completed 1/4 of the Masters degree in Financial Planning, and will be nearly half-way through by the end of the year.

My previous two subject results had been a Distinction and a High Distinction, so I'm just on track for the annual "Dean's Letter" this year (which requires a Distinction average and taking at least four subjects) and to remain on track to make the cut-off for consideration for a 'with Distinction' degree (must have a Distinction average overall i.e. GPA >=6.0) and to a have any shot at getting an academic medal (to get that I'd have to end up in the 'top 2%' of the graduating cohort, which would probably require getting mostly HDs from here on).

This semester I'm doing the subject 'Investment Planning', which should be a lot more enjoyable, although it seems to cover a lot of stuff that I'm already familiar with:
Module 1 - Investment environment
Module 2 - Risk and return
Module 3 - Investing in shares
Module 4 - Alternative investment
Module 5 - Investing in fixed income securities
Module 6 - Investment administration
Module 7 - The investment planning model and client profile
Module 8 - Investment objectives and returns
Module 9 - Management of risk
Module 10  - Investment strategy
Module 11 - Investment selection
Module 12 - Portfolio construction and management

This semester I need to make sure I also finish off the two 'specialist' courses (Margin Lending and SMSFs) that I'm enrolled in at the International Institute of Technology (I'm nearly finished, aside from the 'role play' video submissions and the final assessment quizes), and I also need to try to get a couple of the modules completed towards the Advanced Diploma in Financial Planning that I'm also enrolled in.

Subscribe to Enough Wealth. Copyright 2006-2019

Monday, 1 July 2019

Net Worth: June 2019

The positive performance of the Australian and global share markets during June resulted in my geared share portfolio gaining $22,317 (10.34%) and my superannuation savings rising by $40,058 (3.88%). I don't have new sales data for calculating our house price estimate this month, but the overall Sydney property market data showed practically no change in average prices during June, suggesting that the market has 'bottomed out' in response to the RBA lowering interest rates (which flowed on to home mortgage interest rates) and the election result ruling out the proposed changes to negative gearing that had been Labor policy. While most pundits don't expect a strong rebound in house prices during the remainder of 2019, I don't expect out home price estimate to be a major drag on my NW during the financial year (and may even have modest gains during 2020).

My NW estimate $2,336,288 rose $62,606 (2.75%) during June and has recovered to be within $2,500 of my previous all-time-high (in August 2018). While dropping interest rates suggest that the economy is weak (a negative for the prospects of the stock market), on the other hand they make dividends more attractive relative to bond yields, which may support stock prices. Hopefully the tax cut legislation will be passed this week, which should provide some economic stimulus during the latter part of 2019, and should help bolster consumer sentiment despite the ongoing lack of any significant real wage growth.

Subscribe to Enough Wealth. Copyright 2006-2019