Kevin Rudd s First Budget

1. Kevin Rudd�s First Budget What it means for you as an investor Nick Bruining CFP B.Com, Dip FP, FFPA, FAICD, APMESA Authorised Representative of N.C. Bruining & Associates Pty Ltd AFSL 245514

2. For a copy of these slides email info@ncba.com.au Warning The information provided in this presentation is of a general nature only. You should not: Take any action. Dispose of any investments or assets Purchase any investment or assets Rely on the information contained in this presentation Without first seeking professional advice based on your own specific situation.

3. Today How Tax �Works� Common Investment Strategies How these Strategies are affected Changing Opportunities First Home Saver Accounts Things to watch out for For a copy of these slides email info@ncba.com.au

4. The Basic Tax Equation Assessable Income - Allowable Deductions = Taxable Income Applied to Tax Scales = Tax Payable - Tax Offsets & Credits = Tax Payable/Refund For a copy of these slides email info@ncba.com.au

5. New Tax Scales For a copy of these slides email info@ncba.com.au

6. Assessable Income Wages Interest Rent Dividends �Grossing Up� $2,000 Dividend �Fully Franked� = $2000/ (1- 30%) = $2,857 $2,857 - $2,000 = $857 Tax Credit (refundable) For a copy of these email info@ncba.com.au

7. Assessable Income Continued Capital Gains 50% of the Gross Profit (providing held for more than 12 months) E.G. Paula sells Investment Property Sell Price $300,000 (net of selling costs) Purch Price $200,000 (total costs) Gross Profit $100,000 � 2 =$50,000 & added to other income For a copy of these slides email info@ncba.com.au

8. Reducing Assessable Income Deferring income Salary Packaging Redirecting Income Pre-Tax Cars, Travel, etc etc �Otherwise Deductible� all OK You get the money straight away Subject to Fringe Benefits Tax of 46.5% Questionable for those on lower Tax rates Except FBT friendly �Charities� For a copy of these slides email info@ncba.com.au

9. Reducing Assessable Income Salary Sacrifice to Superannuation EG. Income $45,000 Current Tax ($8,850) Take Home Pay $36,150 BUT if Salary Sacrificed Income $45,000 Redirected to Super ($10,000) Assessable Income $35,000 New Tax ($5,850) New Take Home Pay $29,150 For a copy of these slides email info@ncba.com.au

10. Salary Sacrifice � �The Traps� Contributions Tax � 15% Contribution Caps $50,000 (under 50) $100,000 (over 50) INCLUDES 9% Relative Tax Benefits $34,000 same or lower tax rate (15%) Money is Locked Up For a copy of these slides email info@ncba.com.au

11. Double Dipping Superannuation Co-Contribution $1.50 for each $1.00 paid after tax Maximum of $1,000 = $1,500 Co-Cont $28,980 maximum, then reduces @ 5c/$1 Cuts out at $58,980 Eg $38,980 gets you $1500-$500 = $1,000 If reduced, only need 2/3 of the amount Salary Sacrifice DOWN to $28,980 �Double Dip� For a copy of these slides email info@ncba.com.au

12. Double Dipping � Dead 1/7/2009 Salary Sacrifice added back Also Centrelink Income Benefits Salary Sacrifice to get pension Centrelink Concession Cards (Claim required Low Income Card) For a copy of these slides email info@ncba.com.au

13. Changed Tax Rates and Gearing Gearing = Borrowing Money to invest Positive, when income from Investment > Expenses Neutral, when income from Investment = Expenses Negative, when income from investment < Expenses Inject $90,000 borrow $10,000 Better if borrow $90,000 and inject $10,000 The �Perfect� Investment Borrow $100,000 inject $0 For a copy of these slides email info@ncba.com.au

14. Changed Rates and Gearing 4 Years Ago, Fred earns $75,000 pa $100,000 borrowed at 5.95% Investment Generates 3% Tax Rates $70,000 + 42% So, $100,000 at 3% = $3,000 Interest Expense 5.95% = ($5,950) Net Loss = ($2,950) Tax Deduction @ 42% = $1,239 Net loss = ($1,711) For a copy of these slides email info@ncba.com.au

15. Changed Rates and Gearing Today, Fred earns $75,000 pa $100,000 borrowed at 5.95% 9.47% Investment Generates 3% 3% Tax Rates $70,000 + 42% 30% So, $100,000 at 3% = $3,000 $3,000 Interest Expense 5.95% = ($5,950) ($9,470) Net Loss = ($2,950) ($6,470) Tax Deduction @ 42% = $1,239 $1,941 (30%) Net loss = ($1,711) ($4,529) For a copy of these slides email info@ncba.com.au

16. Other Changes Account Based Pension Income Superannuation converts into ABP Payment rate = $Acct Balance X % Eg $700,000 X 10% = $70,000 If Over 60, Exempt Income Commonwealth Seniors Health Card PBS Drugs, Pharm Benefit, Payments July 1, 2009 � Assessable Income Add Back all investment losses not just R/Estate For a copy of these slides email info@ncba.com.au

17. Home Saver Accounts 1st Home owners Starts October Contribute $1,000 for 4 years No Upper limit of contributions If contribute, Govt pays 17% Bonus Max $5,000 so max bonus =$850 Max tax on earnings 15% Tax free on Withdrawal For a copy of these slides email info@ncba.com.au

18. Home Saver Accounts � BUT Can only be operated by APRA funds Balance cannot exceed $75,000 If not used, transferred to superannuation Minimum 4 years For a copy of these slides email info@ncba.com.au

19. In Summary Salary Sacrifice Generally a very good strategy Double Dipping to Cease 1/7/09 Salary Packaging Do your sums, questionable benefits under $80,000 due to marginal tax rate changes (exceptions, Nurses, Charitable workers) For a copy of these slides email info@ncba.com.au

20. In Summary Continued Gearing Look at investment yields and net cost Seriously consider growth potential Don�t get sucked in by past performance Changed Treatment of ABPs Changed Treatment of financial losses New Home Saver Accounts For a copy of these slides email info@ncba.com.au

21. But wait, there�s more..... Australia�s Tax System Review 4 reviews/enquiries into SMSF Welfare From July 2008 � End 2009 For a copy of these slides email info@ncba.com.au

22. For a copy of these slides visit www.superliving.com.au