Question 1: A case study You are a financial adviser and the following information is an extract of data you gathered as part of fact-finding during an initial client consultation for married couple Jacinda (aged 38) and Steven (aged 40) Oldham. Jacinda has opted for a part-time teaching assignment with the local school for the last 3 years. Three years ago, she took a career break from her full-time teaching career given growing children. Steven works as a Senior Clinical Nurse Consultant at a local government hospital. They have two children who are aged 12 and 14.

The couple would like to know how much money they will receive after paying tax for the year ended 30th June 2020. They would like advice on how to reduce their tax liability in the future. The Oldhams have invested over the years in shares of several banks. They have come to you understand how they should invest in the future. Part of this investment is for the higher education of the children. The balance is to buy a property in the country for the post- retirement phase. The Oldhams life goal has been to buy a property in the country and live a quiet life 20 years from now. They have come to you see if they can achieve this goal.

• Travelling to and from work- $2,500 (Steven) and $600 (Jacinda)

• Donations to registered Charity $2,000 (Jacinda)

• Teacher Union Membership (Jacinda).........$1,000

  Required:

1. Calculate Jacindas and Stevens after-tax income for the year ended June 30th, 2020. For calculation, assume the figures are of the year 2019-20. Explain how Jacinda and Steven could reduce their tax liability by splitting their income. Show the effect (calculation) this strategy would have had, if they had split income for the tax year ended 30 June 2020.

2. George, their family friend has informed the couple during a family dinner that although in Australia the individuals invest directly in the stock market, in recent years 31% of the adult

   population directly invest by holding shares, down from 44% in 2004. Their question to you is: If direct share market participation is a good or bad strategy for an investor? Discuss one reason why investors should or should not invest directly in the Australian Share.

   3. Calculate the expected return for Stevens superannuation portfolio using the return for the year ended June 2020. Explain to Steven why his superannuation portfolio balance fluctuates more than he would like it to. Remember Steven wants to follow a balanced investment approach in the remaining working years.

Amount Income for the year ended 30th June 2020: Income type Gross Salary-Jacinda Gross Salary-Steven NAB Joint Savings bank Account (Jacinda and Steven): Interest NAB bank- 4000 Shares (purchased @ $18 in 2009) Steven $50,000 $177,000 $250 ANZ bank- 12,000 Shares (purchased @ $10 in 2000) Steven $840 (partial franking credit $360) $9,600 (partial franking credit $2,880) $12,600 (partial franking credit $5,400) Macquarie Group Limited- 10,000 Shares (purchased @ $22 per share in 2011) Steven Current valuation $ 6,000 Current Assets and Liabilities Assets (Ownership) Home and Contents (Joint) Car (Joint) NAB Joint Savings bank Account Investments: (Steven) NAB bank Shares ANZ bank Shares Macquarie Group Shares Superannuation- (Jacinda) Superannuation- (Steven) Current Liability valuation $ (Ownership) 720,000 Credit cards (Joint) 35,000 Includes the annual 8,000 interest cost Car loan (Joint) 72,000 5-year term at 12% 120,000 220,000 225,000 450,000 30,000 Steven's Superannuation asset allocation Investment Asset Allocation Australian Shares 45% Performance p.a. after tax 4% Cash & Fixed Interest 20% 1.4 % International Shares 25% 10.80% Property 10% 3.10% Amount Income for the year ended 30th June 2020: Income type Gross Salary-Jacinda Gross Salary-Steven NAB Joint Savings bank Account (Jacinda and Steven): Interest NAB bank- 4000 Shares (purchased @ $18 in 2009) Steven $50,000 $177,000 $250 ANZ bank- 12,000 Shares (purchased @ $10 in 2000) Steven $840 (partial franking credit $360) $9,600 (partial franking credit $2,880) $12,600 (partial franking credit $5,400) Macquarie Group Limited- 10,000 Shares (purchased @ $22 per share in 2011) Steven Current valuation $ 6,000 Current Assets and Liabilities Assets (Ownership) Home and Contents (Joint) Car (Joint) NAB Joint Savings bank Account Investments: (Steven) NAB bank Shares ANZ bank Shares Macquarie Group Shares Superannuation- (Jacinda) Superannuation- (Steven) Current Liability valuation $ (Ownership) 720,000 Credit cards (Joint) 35,000 Includes the annual 8,000 interest cost Car loan (Joint) 72,000 5-year term at 12% 120,000 220,000 225,000 450,000 30,000 Steven's Superannuation asset allocation Investment Asset Allocation Australian Shares 45% Performance p.a. after tax 4% Cash & Fixed Interest 20% 1.4 % International Shares 25% 10.80% Property 10% 3.10%