Term 2 Standard Examination 2017

Part A: Short Answer Questions

Question A1: If a financial planner is to give appropriate advice, they require a broad and good knowledge of the economic environment and the flow on effect. Discuss.

Question A2: Why is ASIC, the financial services regulator, concerned that financial advisers Finished thorough risk tolerance analysis as a fundamental financial planning task while established financial planners insist it's not enough? Instead, financial planners argue that to meet their 'know the client' obligations, addressing a client's risk capacity is also critical. Discuss.

Question A3: What is a reverse mortgage? In which situation might a reverse mortgage be a suitable option for a person?

Question A4: What is a binding death nomination? What is the purpose of a binding death benefit nomination? What are the consequences and risks of having a non-binding death benefit nomination?

Question A5: Describe the difference in treatment of assets upon the death of a person between those that are jointly owned as compared to those held in a tenancy-in-common arrangement.

Question A6: What are the key estate planning matters that financial planners should identify when advising clients?

Part B: Financial Planning Skills

Question B1: [5 Marks] Mark is 29 and earns $100,000. His employer contributes 12% [SGC] of his salary to his nominated superannuation fund. The 12% SGC payment is based on his base salary after deductions, such as salary sacrifice. If Mark salary sacrifices $20,000 into superannuation a) do you envisage a problem for Mark if he makes this level of contribution and b) how much contributions tax will he pay?

Question B2: [5 Marks] Kim is 57 years old and has $500,000 in superannuation. Her superannuation comprises a tax free component of $150,000 and taxed superannuation money of $350,000. Kim has satisfied a condition of release from superannuation and would like to withdraw a $300,000 lump sum. How much lump sum tax would be payable?

Question B3: [10 Marks] Based on the information provided, Marie French, one of your financial planning clients has asked you to:

I. Make personal cash flow budget and balance sheet for the current financial year. Then ascertain her surplus / deficit cashflow position and net worth.

II. Explain if she were to make a pre-tax contribution [i.e. salary sacrifice] to superannuation rather than post-tax [as she does now] explain how would this change her overall cashflow?

Marie provides the following details: She is a 33 year-old employed florist. Her gross income is $55,000 for the current financial year. Her employer contributes 9.25% [SGC] of her gross income into a personal superannuation fund.

Her fortnightly expenditure (based on gross income) is as follows:

Details Percentage of Salary

Taxation Based on Marginal Tax Rates

Personal super contributions [i.e. post tax] 7%

Private Health Cover 3%

Other expenditures incurred by Marie for the current financial year include:

Details Amount

Household expenses $10,000

Mortgage loan repayments $12,000

Credit card repayments $8,000

Entertainment expenses $5,000

Marie's assets and liabilities are shown below:

Details Amount

House and personal effects $400,000

Superannuation $160,000

Car $10,000

Savings account $2,000

Mortgage loan $250,000

Credit card balance $10,000