The 2 biggest expenses you will ever have – and why you want to make one BIGGER

The two biggest expenses you will ever have, and

You’ll want to make one BIGGER…  

In your lifetime you will encounter many, many expenses. Doctors and dentists, cars and houses, repairs and replacements but there are two expenses that dwarf them all.

Tax & Retirement

Retirement

Think about it, when you retire you stop working, that doesn’t mean your expenses stop rolling in. How much will you really need in retirement?

The average life expectancy for Australian males is approximately 80 years of age and 84 for females.

So when did you say you wanted to retire?

It doesn’t matter how old or young you are its time to start taking your retirement seriously. Who knows, if you get quality advice now you may even be able to retire early! Or follow your passion and do what you love without having to worry about your pay packet.

Along the way you’ll have another HUGE expense…

Tax

This is the one you do NOT want to get bigger. Legally reducing tax is one of the best strategies for improving your financial position. Which, in-turn can help out with that retirement fund.

If you currently pay in tax $20,000 (which is the approximate amount of total taxes you would pay if you earned $82,500 in this financial year) and you speak to a skilled tax accountant (say for instance Firm Name), with some quality tax planning and depending on your circumstances they could help save you $1,100 after their fees. If this happened each year, and each yearly $1,100 was invested each year at 6.5% p.a., it would return more than $100,000 over 30 years, and that’s when you start from scratch (i.e. zero savings). That’s an extra $100,000 for doing NOTHING.

So how long can you afford to wait to get this sorted?

Contact us at peter@ditommaso.com.au to discuss your tax planning.

Borrowing through a SMSF door closing ?

Get in touch if you would like to discuss this opportunity before it goes away – peter@ditommaso.com.au

NEW REPORT: Borrowing Through Your SMSF could be BANNED.

 At the weekend David Murray handed down his ‘Financial Systems Inquiry Report’, which included 44 recommendations, one of which was the prohibition on direct borrowing by superannuation funds.

So let’s clear up some abbreviations. You may have read some TLA’s (Three Letter Acronyms) and FLA’s (Four Letter Acronyms) in the news over the weekend so let’s quickly cover them now.

FSI – Financial Systems Inquiry

LRBA – Limited Recourse Borrowing Arrangement

APRA – Australian Prudential Regulation Authority

RBA – The Reserve Bank of Australia

SMSF – Self-Managed Super Fund

CBA – Commonwealth Bank of Australia

OMG – Oh My God…

What’s the big deal?

Using your SMSF to borrow money directly can be an extremely well leveraged strategy to supercharge your SMSF.

How?

Without going into specifics, borrowing through your SMSF increases the amount of money you have exposed in the market. For example, if you have $1 million and invested to get a 10% return you will get a $100,000 return. However if you borrowed another $4 million on top you would have $5 million invested for a return of $500,000 so as long as the interest repayments on the $4 million were less than the additional $400,000 return then you’re in front.

So why do the G-Men want it banned?

Well first of all, it’s not the government that would like to see it gone, the FSI is an independent report chaired by former CEO of the CBA, David Murray. The Treasurer Joe Hockey states that this report poses questions to the government and not the other way around. Decisions are not expected to be made until March 2015 at the earliest.

As the report tackles SMSF’s it poses a warning that high levels of borrowing through SMSF’s could be detrimental to the financial system over time. Therefore, the recommendation from the report is that all LRBAs in superannuation funds should be banned.

What’s Next?

Although these recommendations are just that – recommendations do not constitute law. If all the pundits are to be believed, most of these recommendations will be accepted and implemented.

Therefore if you’re interested in this strategy or would like to know if it’s something that you could do, contact us today.

If these changes go through what will happen to my LRBA?

It is understood that all LRBAs implemented before this recommendation becomes law will be ‘grandfathered’ in, meaning they will carry on as always.

There are several approaches for this strategy and they can be very powerful, that being said they may not work for others. It is critical to get quality advice before taking action. Call us today to speak to one of our SMSF experts before this opportunity goes away for good.

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