Professional NewsLetter

Schuh Biz
ACCOUNTING, WEALTH & FINANCIAL PLANNING NEWSLETTER!
AUGUST 2014
SCHUH GROUP
YOUR WEALTH
IS OUR BUSINESS
✓
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Accounting
Finance
Business Consulting
Property Management
Wealth Advice
COS SCHUH
DIRECTOR.
Associate of the Institute of
Chartered Accountants.
Certified Practicing
Accountant.
Taxation Institute of Australia
member.
Bachelor of Business,
Accounting Major.
DOM SCHUH
WEALTH ADVISOR.
Bachelor of Business
Management, Economics.
Bachelor of Arts, History &
International Relations.
Advanced Diploma Financial
Planning. Chartered Life
Practitioner. SMSF Specialist
Advisor.
DAVID SCHUH
FINANCE.
Property Valuation &
Sustainable Development Bond University.
Diploma Mortgage Broking.
SCHUH GROUP
58-62 Mary Street
Gympie, QLD 4570.
PO Box 191 Gympie, QLD 4570.
p: 07 5482 2855
f: 07 5482 2495
w: schuhgroup.com.au
e: [email protected]
Disclaimer: Schuh Group’s Schuh Biz
Newsletter is intended to provide
commentary and general information. It
should not be relied on as legal advice as
such. Formal legal advice should be sought in
particular transactions or on matters of
interest arising from this newsletter.
Special Thanks to Cameron & Tanya
Outridge from CustomerGetters.com.au
for the redesign of our newsletter.
BUILDING WEALTH IN SHARES
Warren Buffet’s top three
investing mistakes to avoid
by Dominique Schuh
Warren Buffett, the billionaire investor
with the Midas touch, has a message for
Main Street share investors:
"The nice thing about investing in
shares is that, over time, equities are going
to do well," Buffett comments. "American
business is going to do well. America is
going to do well. So you have the tide
with you."
Building wealth in shares is still the
way to go, even though the ride can get
bumpy from time to time, says Buffett, 83.
But to really profit from shares and
build wealth over time, says Buffett,
individual investors must avoid making
costly mistakes that shrink their portfolio
balances, just as a football team that
wants to boost their odds of winning must
avoid fumbling the ball away, throwing an
interception or taking a penalty at a bad
time.
“People that think they can
predict the short-term
movement of the share
market are making a big
mistake”
When Buffett was recently asked in an
interview with USA Today to put on his
personal finance hat and to tick off the
three biggest mistakes amateur investors
make, here’s his list of "Top 3 Mistakes to
Avoid":
1. Trying to time the
market. "People that think they can
predict the short-term movement of the
share market — or listen to other people
who talk about (timing the market) —
they are making a big mistake," says
Buffett.
2. Trying to mimic highfrequency traders. Buying shares in a
good business and hanging on for the
long term, he says, is a better strategy
than flipping shares like a short-order
cook flips pancakes. "If they are trading
actively, they are making a big mistake,"
Buffett says.
3. Paying too much in fees and
expenses. There's no reason to pay an
expensive management fee to invest in a
managed fund when super-low-cost index
funds that mimic large indexes like the
Standard & Poor's 500-share index are
available, he says. "If they are incurring
large expenses in connection with their
TO PAGE 2
Schuh Group. Your Wealth is Our Business. Phone 07 5482 2855.
ACCOUNTING, WEALTH & FINANCIAL PLANNING NEWSLETTER!
AUGUST 2014
INVESTMENT ADVICE FROM
THE WIZARD OF OMAHA
FROM PAGE 1
investing," says Buffett, "they are making
a big mistake."
Buffett, of course, is famous for
buying shares when they are cheap,
buying solid businesses that make a lot of
money today and will make a lot of
money tomorrow, and hanging on to his
investments for a long time to better
maximize profit potential.
The strategy works. You don't become
the richest person in America during
your career with a lousy investment game
plan. (Buffett, with a net worth of $58.5
billion, is currently ranked No. 2 behind
Microsoft founder Bill Gates, who's worth
$72 billion, according
to Forbes magazine.)
"Doing reasonably well investing in
shares," Buffett says, "is very, very easy."
Here's how he says investors should
play the investing game:
"Buy an index fund, preferably over
time, so you end up owning good
businesses at a reasonable average price,"
says Buffett. "And that is all you have to
do."
SUPERANNUATION
Businesses to
contribute 9.5%
Super for their
staff in 2014/15
From 1 July 2014, the Superannuation
Guarantee rate increased to 9.5% (from the
9.25% that applied for the 2013/2014
year). Superannuation Guarantee is the
official term for compulsory superannuation
contributions made by employers on behalf
of their employees. An employer, small or
large, must contribute the equivalent of
9.5% of an employee’s salary for the
2014/15.
Background
In May 2010, employed Australians
received a pleasant surprise when Treasurer
Wayne Swan announced compulsory
employer super contributions would jump
from 9% to 12% of salary by July 2019, an
eventual 33% increase in contributions. In
March 2012, the proposed increase in SG
entitlements received Royal Assent and
became law. The new Liberal government
has promised to continue the SG rate
That's it? It's that simple? Buffett says
yes. "You don't need to look at the prices
of the shares you own from week-to-week,
or month-to-month, or even year-to-year,"
says Buffett. "If you own a cross-section of
American businesses, and you don't get
excited (and buy) just at the very top, and
if you buy in over time, you are going to
do well."
We wholeheartedly support Warren
Buffett’s recommendation of using low
cost index funds as the basis of your share
increase, but at a slower rate. The Liberal
government will be introducing
amendments to slow down the increase in
the SG rate. They announced the SG rate
increase will stall for 3 years (from 1 July
2015), rising to 10% from 1 July 2018.
The SG rate would then increase by 0.5%
each year until it reached 12% by July
2022 (see table below).
Fin. Year
2012/13
2013/14
2014/15
2015/16
2016/17
2017/18
2018/19
2019/20
2020/21
2021/22
2022/23
Rate
9%
9.25%
9.5%
9.5%
9.5%
9.5%
10%
10.5%
11%
11.5%
12%
What does this mean for your
retirement plans?
The SG increase has significant financial
implications for anyone expecting to remain
in the workforce for more than 8 years.
Because the full 3% increase takes affect
from the start of the 2022/2023 year – in 8
years’ time. According to the Federal
Government, the 33% increase in the SG
rate will give a 30-year-old on average fulltime wages an extra $108,000 in retirement
Schuh Group. Your Wealth is Our Business. Phone 07 5482 2855.
portfolio, and this is exactly the type of
investment strategies we put in place for
our clients. An example of an index fund
for Australian investors is the ASX200 – a
basket of shares made up of the top 200
companies on our stock exchange, which
we often use in investor’s portfolios.
• If you would like more information in
this area, please contact Dominique
Schuh on 07 5480 4877 or at
[email protected]
savings just by turning up for work.
There has been, and will continue to be,
some resistance from employers, especially
small business employers. The former
Federal government argued, however, that
the 3-year lead time
(from May 2010
through to July 2013)
would have given
employers plenty of
time to prepare for
the increase.
An interesting
stumble in the selling
of the SG increase, is
that the company tax
rate was eventually
going to fall to 28%.
During 2012, the
Government
announced that the
company tax cuts
would not go ahead.
If you are an
employer, please make
arrangements early in the current financial
year for your employees to now be receiving
a 9.5% SG payment rate. And if you would
like any assistance in cashflow budgeting for
this increased expense, please contact our
office.
• Check with our office on 07 5480 4877
prior to contribution if you have any
doubts.
YOUR ACCOUNTING,
WEALTH
& FINANCIAL
PLANNING
NEWSLETTER!
ACCOUNTING,
WEALTH
& FINANCIAL
PLANNING
NEWSLETTER!
APRIL 2014
2014
AUGUST
HOW YOU CAN TAKE ADVANTAGE OF
THE BANKS’ RATE PREDICAMENT.
Interest rates are on the move, and the banks are in a
predicament trying to attract new business. The banks
cannot reduce their Standard Variable rates to attract
new borrowers, as this would impact their whole
customer portfolio and cost them billions in lost revenue.
Instead, they are o!ering arti"cially low short term
"xed rates to attract new business with a cheap
headline rate.
Savings on the variable rate of up to 0.6% can be made
by taking a 1 year "xed rate with your current bank. It
would take three RBA downward movements of 0.25%
for a borrower to be disadvantaged. On a $300k loan,
this would save the borrower $1,800 per annum. The
cost to switch to a "xed rate is usually around $300.
• If you would like a review of your current loan
arrangements, please contact David Schuh on 07 5480
4808 or at [email protected]
SUPERANNUATION
Superannuation contributions rise for 2014/15
The contribution caps for concessional
(before tax) and non-concessional (after
tax) contributions to super have increased
for the 2014/15 year, as a result of
indexation.
Concessional contributions
include:
• your employer’s compulsory
Superannuation Guarantee
contributions,
• your salary-sacrificed contributions,
or
• any contributions claimed as a tax
deduction.
Under the superannuation rules, the
concessional cap is indexed in line with
movements in average wages, and
increases in $5,000 increments.
If you’re aged 48 years or younger on
the 30 June 2014, you can contribute up to
$30,000 a year in concessional
contributions for the 2014/2015 year
(previous years the cap is $25,000). Refer
table below.
Concessional contributions
Year
Under50 50-59yrs 60 & over
2014/15 $30,000 $35,000 $35,000
2013/14 $25,000 $25,000 $35,000
If you’re aged 49 years or older on the
30 June 2014, then you can contribute up
to $35,000 a year in concessional
contributions for the 2014/2015 year.
The special cap of $35,000 was also
available for the 2013/2014 financial year,
but only for Australians who were aged 59
years or older on 30 June 2013.
Non-concessional contributions are
voluntary contributions not claimed as an
income tax deduction by you, or your
employer.
The non-concessional cap is indexed in
$30,000 increments in line with any $5,000
increase in the concessional contributions
cap.
The non-concessional (after tax)
contributions cap has increased to
$180,000 for the 2014/15 year, compared
Schuh Group. Your Wealth is Our Business. Phone 07 5482 2855.
with $150,000 for the 2013/14 year.
If you take advantage of the bringforward rules during the 2014/15 year,
then you can make up to $540,000 in nonconcessional contributions in one year,
representing your non-concessional cap for
the current year and following two years.
Quote from George’s Desk
Better to keep your mouth
closed and be thought a fool
than to open your mouth and
prove it. – Dorothy Schuh
ACCOUNTING, WEALTH & FINANCIAL PLANNING NEWSLETTER!
AUGUST 2014
PROPERTY
Buying a rental property? Don’t bet on growth
REGION
Now that interest rates are at
historically low levels, many
people are looking seriously
at entering the property
market, in an attempt to gain
higher rates of return than
cash.
People are also making
use of the relatively low
borrowing costs also
associated with the lower
interest rates. However, the
table below highlights the
need for investor caution in
this area, particularly in
Queensland regions:
From the above data, it’s
clear that capital growth in
Queensland properties has
been relatively low. This means
that for a residential property
ANNUAL CHANGE IN HOME VALUES ACROSS REGIONAL QUEENSLAND AREAS.
HOUSES
UNITS
Qtr
1yr
5 yr
10 yr
Qtr
1yr
5 yr
10 y
Brisbane
Gold Coast 0.8%
Sunshine Coast
West Morton
Wide Bay-Burnett
Darling Downs
South West
Fitzroy
Central West
Mackay
Northern
Far North
North West
0.6%
6.1%
-0.3%
-3.2%
-0.7%
0.5%
0.4%
-2.9%
0.4%
-0.4%
-1.3%
0.7%
0.4%
7.2%
-0.3%
3.3%
-2.7%
1.0%
3.2%
4.7%
-3.8%
4.7%
0.0%
-3.5%
5.8%
4.7%
0.0%
2.4%
0.0%
-2.3%
-1.8%
1.7%
1.2%
1.5%
1.2%
2.8%
-1.6%
1.2%
1.2%
3.5%
-1.2%
2.8%
3.4%
3.2%
5.3%
4.6%
7.9%
4.6%
9.8%
5.0%
5.9%
4.6%
1.4%
0.2%
-0.6%
na
0.8%
1.8%
na
na
na
na
-0.1%
-0.3%
na
5.4%
-2.0%
1.4%
na
1.5%
5.5%
na
na
na
na
-4.9%
-0.5%
na
0.5%
1.4%
-1.3%
na
-0.1%
-2.5%
na
na
na
na
-3.6%
-2.4%
na
4.1%
0.6%
na
3.7%
2.7%
na
na
na
na
5.0%
2.3%
na
Note: Table has been supplied by RP Data. Capital city values are up to June 2014 whereas all other
markets are to May 2014. 5 yr figure is the 5 yr compound annual change and 10 yr compound annual
change.
investment to be successful, an
investor must be sure of
extremely strong income
returns from tenants. The
figures above are contrary to
our usual assumption that
“property always goes up,” as
we can see there are many
occasions when the growth rate
is less than the rate of inflation
of 3%.
• If you’re considering
buying a residential property
for the purpose of investment,
and you would like a second
opinion on the soundness of
the investment, please contact
either Cos or Dominique
Schuh. on 07 5480 4877 or
email dominique.schuh
@schuhgroup.com.au.
IT’S THAT TIME OF YEAR AGAIN.
GET YOUR TAX DONE IN 30 DAYS!
Are you ready for the tax season? We are! Feel free to
drop your tax work into our o#ce as soon as you can,
and we will endeavour to have this processed for you
within a 30 day period at the latest. You never know,
you may just be eligible for a refund this year, so the
GST and property — you may only
get one chance to get it right!
If you are buying or selling
property it is important that
you consult us about any
possible GST implications. As
property transactions involve
large sums of money, any
incorrect GST treatment can
have a huge detrimental impact
– particularly for the vendor.
There is still a deal of
confusion regarding GST
exemptions particularly in the
areas of; Residential Property,
Rural Farm Land and Going
Concern transactions. Unfortunately not all legal
advisers have the necessary
knowledge to accurately advise
you regarding GST.
We recommend that you
always check with our office
prior to signing any contracts,
particularly those involving
rural or commercial property.
• If you have any queries
please contact- Peter Flemming
on direct email
[email protected]
m.au or 07 3878 8889
Schuh Group. Your Wealth is Our Business. Phone 07 5482 2855.
sooner your work is completed the sooner you can
expect your payment. • If you would like a meeting
with one of our accountants, please contact our o#ce
on 07 5482 2855.