Question 3 Total Marks: 30 You recently graduated from university, and your job search led you to Coles Group Limited. Since you thought the company's business was very promising you accepted their job offer As you are finishing your employment paperwork, Michel, who works in the Finance Department, stops by to inform you about the company's new superannuation plan Australian companies offer membership of a superannuation fund to their employees, where their Superannuation Guarantee contributions are saved. Superannuation funds have concessional tax arrangements, which saves tax if you save for your retirement through your fund. So, if you can make contributions to the fund from your pre tax income (known as salary sacrifice), contributions are deducted from your current salary, and no nt income tax is paid on the money, and the super fund pays only 15% tax on the contributions. For example, assume your salary will be $130 000 per year. If you contribute $7200 pre-tax to the superannuation fund, you will pay taxes on only $122 800 in income Taxes will be payable on the initial deposits at 15% and on any capital gains or fund income while you are invested in the fund, and you will not pay taxes when you withdraw the money at retirement, provided you retire at or after turning 60. At Coles, you can contribute up to 6% of your salary to the plan, which will be saved in the fund with your 9% Superannuation Guarantee contributions The Coles superannuation fund has several options for investments, most of which are managed funds. As you know, a managed fund is usually made up of a portfolio of assets. When you purchase shares in a managed fund, you are actually purchasing partial ownership of the fund's assets, similar to purchasing shares in a company. The return of the fund is the weighted average of the retu of the assets owned by the fund, minus any expenses. The largest expense is typically the management fee paid to the fund manager, which makes all of the investment decisions for the fund. Coles Group Limited uses Down Under Financial Services to manage its superannuation plan W SONY All Ordinaries Index Fund 9.15% 19.35 Property Trust Fund 14.05 26.82 Bond Fund 9.53 23.82 Money Market Fund 8.73 11.45 Type your answer here: 1. Compared to the Bond Fund, the advantages of choosing the All Ordinaries Index fund are Shares in the fund are weighted exactly the same as they are in the All Ordinaries Index The manager is not required to research shares and make investment decisions Lower expenses charged by the fund which is of 0.20% of assets per year On the other hand, the disadvantages is that it has lower standard deviations and returns over the past 10 years which means it performed poorer than the Bond Fund. II Higher volatility of returns means higher profits or losses. In general, when investing in a fund with more volatile returns, you will eam more profits or risk taking heavy losses. 6 W SONY Question 3 Total Marks: 30 You recently graduated from university, and your job search led you to Coles Group Limited. Since you thought the company's business was very promising you accepted their job offer As you are finishing your employment paperwork, Michel, who works in the Finance Department, stops by to inform you about the company's new superannuation plan Australian companies offer membership of a superannuation fund to their employees, where their Superannuation Guarantee contributions are saved. Superannuation funds have concessional tax arrangements, which saves tax if you save for your retirement through your fund. So, if you can make contributions to the fund from your pre tax income (known as salary sacrifice), contributions are deducted from your current salary, and no nt income tax is paid on the money, and the super fund pays only 15% tax on the contributions. For example, assume your salary will be $130 000 per year. If you contribute $7200 pre-tax to the superannuation fund, you will pay taxes on only $122 800 in income Taxes will be payable on the initial deposits at 15% and on any capital gains or fund income while you are invested in the fund, and you will not pay taxes when you withdraw the money at retirement, provided you retire at or after turning 60. At Coles, you can contribute up to 6% of your salary to the plan, which will be saved in the fund with your 9% Superannuation Guarantee contributions The Coles superannuation fund has several options for investments, most of which are managed funds. As you know, a managed fund is usually made up of a portfolio of assets. When you purchase shares in a managed fund, you are actually purchasing partial ownership of the fund's assets, similar to purchasing shares in a company. The return of the fund is the weighted average of the retu of the assets owned by the fund, minus any expenses. The largest expense is typically the management fee paid to the fund manager, which makes all of the investment decisions for the fund. Coles Group Limited uses Down Under Financial Services to manage its superannuation plan W SONY All Ordinaries Index Fund 9.15% 19.35 Property Trust Fund 14.05 26.82 Bond Fund 9.53 23.82 Money Market Fund 8.73 11.45 Type your answer here: 1. Compared to the Bond Fund, the advantages of choosing the All Ordinaries Index fund are Shares in the fund are weighted exactly the same as they are in the All Ordinaries Index The manager is not required to research shares and make investment decisions Lower expenses charged by the fund which is of 0.20% of assets per year On the other hand, the disadvantages is that it has lower standard deviations and returns over the past 10 years which means it performed poorer than the Bond Fund. II Higher volatility of returns means higher profits or losses. In general, when investing in a fund with more volatile returns, you will eam more profits or risk taking heavy losses. 6 W SONY