Do you know what assume means?
Do you know what assume means was a question a builder client asked us sometime ago?
We had to admit then that we didn’t know & so a brief translation was provided and starts off as ‘the mother of all’.
This has been the recurrent & comment mistake by government over recent times & something we never do with our spouse. I.e. we assume that all our taxx is well spent and the banks are as safe as houses & Kevin Flip flop is action what he spins a promise.
I.e. assume that property always goes up. Have we all forgotten all of that frozen funds in property trusts. Lets recall Centro which was the lead player before the GFC & was in fact in ‘the too big to fail’ category. Yes this is commercial property, such as retail office & offices. The banks are propping these funds up as otherwise the banks will need propping up. We have no expectations of residential prices doing other than a similar slide as elsewhere on the planet. Why else are we any different.
So we see from the Henry report the assumption that mining companies will pay a 40% super profits taxx RSPT as it will be good for your superannuation & infrastructure & whatever. That is a very big assumption as so far all super funds with any exposure to resources stocks have fallen 15%+. Thanks heaps. Ross Garnaut of Lihir & an economist was also questioning the treasury assumptions. One of them is China will continually grow & need our resources.
A big assumption is that this RSPT will kick in once companies earn over the risk free rate of 6 %. Risk free is benchmarked to government bond rate. We only need to read of ‘sovereign risk’ in Europe to be very aware that this risk has significantly increased. We attended a presentation by a fund manager recently that showed a slide of a Fosters bond being better priced i.e. less risk than that the Australian government bond in February this year.
We all assume that the health system which is a bottomless pit will look after us in our time of need. We are sorry but there are too many examples of a failing health system which takes a disproportionate share of everyone’s dollar. Yes there are some great emotional & success stories which we have commented on before such as road trauma & premature infants. In general there is a gap either in time or money that you have to find.
We only had this week an example with a client needing shoulder surgery. The estimated cost is 40k which Work Cover will pay. Work cover always needs serious convincing in such matters & it is even less likely for a major medical trauma. Hence you may need a solution for that & welcome to call us as we have two separate ideas on that. One of those is at a seminar in Brisbane on June 21st with a Collette Larsen who has an incredible health & income story. Welcome to call on 07 3848 1088 or email for free tickets.
As it is now June then it is time to act & do something on your taxx before June 30. We have made the above comments because you can safely assume that your taxx will be wasted. There is almost always something to be actioned before June 30.
If you find that more than too much of your money goes to Taxx you wouldn’t want the standard deduction the government wants to allow.
At some stage Australia could wake up & read what the new UK government read i.e. ‘sorry but no money left’.
At least A. Robb [an appropriate name] commented in the budget reply after Joe lopped 42B off that ‘we can’t afford it’. That’s a start with an attitude change although Tony the loose cannon could also be very loose with your taxx.
The other chunk of your after taxx income may go to your mortgage. Then of course it time to act as one client has this week.
“Hi John,
Jackie here......Mick and I would be keen to have you offer us advice on how to better structure our loans etc.
Firstly, we want to make sure our loans etc are working to the best of the ability, and secondly, we are not happy with our BOQ service. Our latest home loan is with CBA and we also have a mortgage with Macquarie.
It is difficult for us to get down to see you from Dalby for the hours / days we work. I thought it might be possible to get the ball rolling over email - if you could let me know if this is OK, and what you would need to look at (Mortgage statements, rates etc).
I could either email or mail a package of everything you need for you to review and then hopefully we can get down to see you personally to wrap up.
How does that sound?
Thanks in advance for your assistance,
Jackie”
So if you need to reduce your taxx before June 30 or that mortgage is so big it is stressing you or you want to protect the downside then call on 3848 1088 or email as we have 26 years of happy clients. We have an elegant & simple strategy to achieve your goals.
Assuming all is good means you will end up as you are or maybe ‘the mother of all’.
John McAuliffe
Mick and I would be keen to have you offer us advice on how to better structure our loans etc
“Hi John,
Jackie here......Mick and I would be keen to have you offer us advice on how to better structure our loans etc.
Firstly, we want to make sure our loans etc are working to the best of the ability, and secondly, we are not happy with our BOQ service. Our latest home loan is with CBA and we also have a mortgage with Macquarie.
It is difficult for us to get down seeing you for the hours / days we work. I thought it might be possible to get the ball rolling over email - if you could let me know if this is OK, and what you would need to look at (Mortgage statements, rates etc).
I could either email or mail a package of everything you need for you to review and then hopefully we can get down to see you personally to wrap up.
How does that sound?
Thanks in advance for your assistance,
Jackie”
Why is this so?
In our discussions they commented that they ‘understood property’ & they ‘liked renovating them’ and ‘buying low’ meant that they should make capital gains. These are very good reasons but they haven’t done back of the envelope cash flows which is why to use Michael’s phrase ‘they are robbing Peter to pay Peter.’
[Julia could use the same phrase with the MRRT and SPRT]
Let’s look at a rental property scenario with a house value say 400K
Debt on it of say 75% i.e. 300K @ 7.4% interest only means -22,000
Costs as rates + insurance + RE fees + 1%-2% maintainence at least = - 8,000
Rent which always should be higher say 350pw +17,500
I.e. a gross negative cashflow of 12,500
How much is this over 5 years = $62,500 which must be made up.
Good luck as the real estate agent is ~3% = 12K+ & the government wants its share 50% of the nominal gain. Michael & Jackie & all others are hoping for a sizable gain to have a residual capital gain left for them. It isn’t worth the risk or the reduced lifestyle now.
What if the rental was empty for a long period? How much does that cost & where does the cashflow come from? What if 2 properties were not rented for a period?
Mick & Jackie need to restructure their debts using our active wealth strategy.
We had other discussions this week.
Noel wanted some 800,000 life insurance & so we ran off the top 18 company rates for his age of 48. In our discussions he asked ‘did we have a strategy so that he could retire his current income’. That’s a challenge when he has 2 children & still a debt of 180K. This is a very common problem out there. He at least knows his position & doesn’t like the outlook. Our active wealth strategy may help if he has a positive risk profile & doesn’t want to be ‘the frog in the jug’.
Of course the regulators in their wisdom want him to rely on them. Does he?
We had Will call us after being referred by another happy client. Will has a 245K mortgage & was also aged 48. However he had 16K on credit cards & very concerned that he would be in the same financial position & debt when he retired. A different solution is required & we need to maximise the second income with some discipline.
We had Tony comment after 6 weeks in Turkey enjoying hot air ballooning & holidaying. He admitted that 3 years ago he came to the conclusion that would never own another house in his lifetime. He couldn’t afford to buy the $1m+ house which his lifestyle wanted. However he could afford to rent it. Any landlord is going to be better than a bank as a landlord. What Tony is doing is saving all those extra costs of house ownership such as rates & maintainence & using our active wealth strategy.
I.e. let’s revisit if we need a house.
We had from Lianne today after emailing her monthly HW.
‘Back from our walkabout – it was fantastic’ and ‘we did 3 week trip including Lake Eyre and Uluru and other sites along the way – tenting it!
Come back to make sure we can go again for longer and’ Also did a crossing of the Simpson Desert west to east’.
Lianne can do this as they have reduced their large mortgage over time to a nominal 34k bad debt today. They are so happy with us they wanted off the satin drugs they were on for our active health prevention strategy which also everyone needs.
As these are not uncommon scenarios then we invite you to call on 07 3848 1088 or email us or visit our websites. Our active wealth strategy may be worth lunching over.
John McAuliffe
“Hi John,
Jackie here......Mick and I would be keen to have you offer us advice on how to better structure our loans etc.
Firstly, we want to make sure our loans etc are working to the best of the ability, and secondly, we are not happy with our BOQ service. Our latest home loan is with CBA and we also have a mortgage with Macquarie.
It is difficult for us to get down seeing you for the hours / days we work. I thought it might be possible to get the ball rolling over email - if you could let me know if this is OK, and what you would need to look at (Mortgage statements, rates etc).
I could either email or mail a package of everything you need for you to review and then hopefully we can get down to see you personally to wrap up.
How does that sound?
Thanks in advance for your assistance,
Jackie”
Why is this so?
In our discussions they commented that they ‘understood property’ & they ‘liked renovating them’ and ‘buying low’ meant that they should make capital gains. These are very good reasons but they haven’t done back of the envelope cash flows which is why to use Michael’s phrase ‘they are robbing Peter to pay Peter.’
[Julia could use the same phrase with the MRRT and SPRT]
Let’s look at a rental property scenario with a house value say 400K
Debt on it of say 75% i.e. 300K @ 7.4% interest only means -22,000
Costs as rates + insurance + RE fees + 1%-2% maintainence at least = - 8,000
Rent which always should be higher say 350pw +17,500
I.e. a gross negative cashflow of 12,500
How much is this over 5 years = $62,500 which must be made up.
Good luck as the real estate agent is ~3% = 12K+ & the government wants its share 50% of the nominal gain. Michael & Jackie & all others are hoping for a sizable gain to have a residual capital gain left for them. It isn’t worth the risk or the reduced lifestyle now.
What if the rental was empty for a long period? How much does that cost & where does the cashflow come from? What if 2 properties were not rented for a period?
Mick & Jackie need to restructure their debts using our active wealth strategy.
We had other discussions this week.
Noel wanted some 800,000 life insurance & so we ran off the top 18 company rates for his age of 48. In our discussions he asked ‘did we have a strategy so that he could retire his current income’. That’s a challenge when he has 2 children & still a debt of 180K. This is a very common problem out there. He at least knows his position & doesn’t like the outlook. Our active wealth strategy may help if he has a positive risk profile & doesn’t want to be ‘the frog in the jug’.
Of course the regulators in their wisdom want him to rely on them. Does he?
We had Will call us after being referred by another happy client. Will has a 245K mortgage & was also aged 48. However he had 16K on credit cards & very concerned that he would be in the same financial position & debt when he retired. A different solution is required & we need to maximise the second income with some discipline.
We had Tony comment after 6 weeks in Turkey enjoying hot air ballooning & holidaying. He admitted that 3 years ago he came to the conclusion that would never own another house in his lifetime. He couldn’t afford to buy the $1m+ house which his lifestyle wanted. However he could afford to rent it. Any landlord is going to be better than a bank as a landlord. What Tony is doing is saving all those extra costs of house ownership such as rates & maintainence & using our active wealth strategy.
I.e. let’s revisit if we need a house.
We had from Lianne today after emailing her monthly HW.
‘Back from our walkabout – it was fantastic’ and ‘we did 3 week trip including Lake Eyre and Uluru and other sites along the way – tenting it!
Come back to make sure we can go again for longer and’ Also did a crossing of the Simpson Desert west to east’.
Lianne can do this as they have reduced their large mortgage over time to a nominal 34k bad debt today. They are so happy with us they wanted off the satin drugs they were on for our active health prevention strategy which also everyone needs.
As these are not uncommon scenarios then we invite you to call on 07 3848 1088 or email us or visit our websites. Our active wealth strategy may be worth lunching over.
John McAuliffe
