QUESTION 1

Julian Knight is currently 58 years of age, and has met a condition of release (with superannuation only). He has $80,000 in tax-free super, and $490,000 taxed super sitting in his fund.

How much should Julian re-contribute to take advantage of the current government allowance?

What will be the new proportion of after-tax and before-tax super?

How much tax is Julian expecting to pay upon withdrawal at this age?

Julian?s sons Carl and Benji have been nominated as beneficiaries of his super fund. If Julian dies prematurely, how much tax will each son pay? Assume that they are both independent, Carl?s MTR is 37%, whilst Benji?s MTR is 19%

-Prior to re-contribution?

-After re-contribution?

QUESTION 2

Dr. Ben Dover, a retired proctologist, is 72 years old and shows the typical characteristics of being asset rich but cash poor. Ben?s life expectancy is 85 years. Ben would like to probe a reverse mortgage on his $1.5 Million house to help release some cash. Assume that property values in Ben?s area will increase by 4% per year. The variable interest rate on the cheapest reverse mortgage is currently 6.25%, but is expected to drop to 5.75% in 12 months and remain constant thereafter. Ben would like to bequest $800,000 from the future sale of his house to an animal shelter. What is the maximum amount that Ben should borrow?

QUESTION 3

Client	Moe J. Lester
Occupation	Catholic school principal
Wage income	$89,000
Age	64

Assets	Income Value
NAB Shares (100% DRP, fully franked), worth $200,000, purchased in 2008 for $80,000	4% after franking
Cash in NAB Term deposit account, $390,000	3.5%

Seemingly-related Purchases	p.a.
Principal?s Association membership	$650
Italian leather briefcase	$300
Archdiocese of Australia Journal subscription	$210
Gold-label Cuban cigars	$450
Income protection insurance	$1,100
Quote for unpurchased PHI	$1,200

Super fund balance	$360,000
Employer super contribution p.a.	13%
Non concessional contribution in 2015	$150,000

Moe has $360,000 in superannuation, which is yet to be drawn upon.

Calculate Moe?s tax based on the status quo

Calculate Moe?s tax obligation with the most efficient TTR strategy

List any advantages and disadvantages of contributing shares into a self-managed super fund

How much can Moe derive from his TTR pension?

QUESTION 4

Jerry and Elaine are both 67 years old. Jerry is working part-time as a comedian, earning $9,000 per year and draws on an account-based pension, with a balance of $210,000. Elaine works at Pendant Publishing part time, earning $11,000 and has a life expectancy annuity of $7,000 p.a. for the next 20 years, with a reduced balance of $80,000 (purchased in 2011). They have given away $150,000 to their children George and Kramer for various hair-brained schemes over the past 5 years. As expected, none of this money has been accounted for. The couple?s assets are as follows.

Asset	Value ($)	Return (%p.a.)
Apartment on West 53rdSt that they rent	2,638,000
Bonds in Kramerica Industries	31,000
Shares in Vandelay Industries	25,000	14%
Saab 903	18,000
Rental flat in Delboca Vista with a mortgage of $67,000 outstanding	208,000	10%
Non-fixtured furniture	N/A
A fur coat (still at the local dry cleaners)	2,500
Every day savings account	22,000	2%
Platinum bullion	7,000
Prepaid Funeral (Elaine)	60,000
Funeral Bond (Jerry)	13,250
Holiday house in the Hamptons (Leased to Mr Steinbrenner for 9 months every year)	180,000	4%
Surrender value of life insurance	11,000
Winnings (now sitting in a bank account) from an illegal cockfight attributed to Jerry, won by a rooster owned by Kramer	2,000	2%

Calculate the age pension to be received by Jerry and Elaine, using both income and assets tests separately.

BEO3347 PRACTICE EXAM QUESTIONS QUESTION 1 Julian Knight is currently 58 years of age, and has met a condition of release (with superannuation only). He has $80,000 in tax-free super, and $490,000 taxed super sitting in his fund. a) How much should Julian re-contribute to take advantage of the current government allowance? b) What will be the new proportion of after-tax and before-tax super? c) How much tax is Julian expecting to pay upon withdrawal at this age? d) Julian's sons Carl and Benji have been nominated as beneficiaries of his super fund. If Julian dies prematurely, how much tax will each son pay? Assume that they are both independent, Carl's MTR is 37%, whilst Benji's MTR is 19% -Prior to re-contribution? -After re-contribution? QUESTION 2 Dr. Ben Dover, a retired proctologist, is 72 years old and shows the typical characteristics of being asset rich but cash poor. Ben's life expectancy is 85 years. Ben would like to probe a reverse mortgage on his $1.5 Million house to help release some cash. Assume that property values in Ben's area will increase by 4% per year. The variable interest rate on the cheapest reverse mortgage is currently 6.25%, but is expected to drop to 5.75% in 12 months and remain constant thereafter. Ben would like to bequest $800,000 from the future sale of his house to an animal shelter. What is the maximum amount that Ben should borrow? QUESTION 3 Client Occupation Wage income Age Moe J. Lester Catholic school principal $89,000 64 Assets Income Value NAB Shares (100% DRP, fully franked), worth 4% after franking $200,000, purchased in 2008 for $80,000 Cash in NAB Term deposit account, $390,000 3.5% Seemingly-related Purchases Principal's Association membership Italian leather briefcase Archdiocese of Australia Journal subscription Gold-label Cuban cigars Income protection insurance Quote for unpurchased PHI p.a. $650 $300 $210 $450 $1,100 $1,200 Super fund balance $360,000 Employer super contribution p.a. 13% Non concessional contribution in 2015 $150,000 Moe has $360,000 in superannuation, which is yet to be drawn upon. a) Calculate Moe's tax based on the status quo b) Calculate Moe's tax obligation with the most efficient TTR strategy c) List any advantages and disadvantages of contributing shares into a self-managed super fund d) How much can Moe derive from his TTR pension? QUESTION 4 Jerry and Elaine are both 67 years old. Jerry is working part-time as a comedian, earning $9,000 per year and draws on an account-based pension, with a balance of $210,000. Elaine works at Pendant Publishing part time, earning $11,000 and has a life expectancy annuity of $7,000 p.a. for the next 20 years, with a reduced balance of $80,000 (purchased in 2011). They have given away $150,000 to their children George and Kramer for various hair-brained schemes over the past 5 years. As expected, none of this money has been accounted for. The couple's assets are as follows. Asset Value ($) Return (%p.a.) Apartment on West 53rd St that they rent 2,638,000 Bonds in Kramerica Industries 31,000 Shares in Vandelay Industries 25,000 14% Saab 903 18,000 Rental flat in Delboca Vista with a mortgage of $67,000 outstanding 208,000 10% Non-fixtured furniture N/A A fur coat (still at the local dry cleaners) 2,500 Every day savings account 22,000 2% Platinum bullion 7,000 Prepaid Funeral (Elaine) 60,000 Funeral Bond (Jerry) 13,250 Holiday house in the Hamptons (Leased to Mr Steinbrenner for 9 months every year) 180,000 4% Surrender value of life insurance 11,000 Winnings (now sitting in a bank account) from an illegal cockfight attributed to Jerry, won 2,000 2% by a rooster owned by Kramer Calculate the age pension to be received by Jerry and Elaine, using both income and assets tests separately