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Types of return
Capital gain and income stream
Risks of capital gain based investments
Depreciation, takes time
Three examples of an income stream
Rent, dividends, interest
Three types of cash investments
Savings accounts, term deposits, bonds
A share represents
Part-ownership in a publically-listed company
Current percentage of an employee’s income which an employer has to pay into an allocated super fund
11%
Purpose of superannuation
Ensures that more people have money for retirement, placing less strain on social services
Tax advantages of super
Money made in super is only taxed at 15%, you can reduce your assessable income by putting more than the minimum into your super and costs associated with running a super account may be allowable deductions
Economist’s definition of an investment
The process of capital creation or the accumulation of stock
Examples of an economist’s definition of an investment
Manufacturing equipment, factories, a refrigerator
Accountant’s definition of an investment
Acquiring an asset or item with the goal of appreciation/generating income
Examples of an accountant’s definition of an investment
Stocks, housing, bonds
Risk
The chance of something going wrong
Return
What you get back from your investment
Affluenza
Buying things you don’t need with money that you don’t have to impress people that you don’t like
Gearing
Borrowing money to invest using previous investments as security
Some factors which determine housing prices
Interest rates, economic growth and availability of homes
Benefits of property investment
Generally less volatile than other options like shares, can be used to produce an income stream
Drawbacks of property investment
Higher price than stocks, vulnerable to different risks and tenants may not pay on time/damage the place
Costs of property investment
Time, in finding the property and ensuring inspections/maintenance are done correctly. Money, in purchasing the property, hiring a real estate agent, paying insurance and the costs of maintenance
What is a bluechip share
Issued by well-established and financially sound companies who are expected to post good results
What is a speculative share
Shares with low prices and high volatility. They tend to be in industries such as rare metal mining and biotech
Fees associated with managed funds
Entry fees, running cost/account keeping fees and exit fees
What are the draws of managed funds over investing by yourself
Managed funds are invested with the use of expert opinion and allow you access into markets, such as property, which you wouldn’t normally have access to without the proper amount of money
What is a budget
A financial plan based on expected revenue and expenses over a set amount of time
Benefits of shares
Less money needed to enter, easy to liquidate
Drawbacks of shares
No guarantee of a return, the company might fail
Purpose of an interest only loan
Allow the borrower to pay the loan off later, gear their interest against rent
What is progressive tax?
Progressive tax means that the higher the income, the higher the percentage paid
Give an example of progressive tax
Income Tax
What is regressive tax?
Regressive tax means that you pay the same dollar amount, no matter your income
Give an example of regressive tax
GST
What is assessable income?
Income on which tax must be paid
What is non-assessable income?
Money received on which tax is not payable
What is taxable income?
Assessable income less allowable deductions
What is Pay as You Go?
PAYG refers to tax that an employer takes out of an employees wages and given to the ATO on their behalf
What is the Medicare Levy?
A proportional tax used to fund the national health service, Medicare
What is the Higher Education Loan Program (HELP)?
Loans which assist students with their tuition fees
What is Capital Gains Tax?
Tax paid on profit of selling an asset
Give an example of something that Capital Gains Tax does not apply to
The selling of houses
What is Fringe Benefits Tax?
Tax payable on a non-salary benefit for an employee
What is GST?
10% tax that is payable on most goods and services
What is an excise tax?
Tax put on undesirable goods
Give an example of goods that have an excise tax
Tobacco
What is customs tax?
Tax placed on specific imported goods
What are tariffs?
Taxes placed on specific imported goods with the intention to protect domestic industries
Give some examples of substantiation
Receipts, cheque butts, bank statements, credit card statements, log books and diary entries
Why do we have the medicare levy surcharge?
To reduce the burden on public systems by making more people get private health insurance
What is a contract?
A legally binding agreement between two or more parties
What are the four features of a contract?
Intention, and offer and acceptance, consideration and clarity of terms
What must consideration be?
Greater than $2 but does not have to be the full amount
Who issues property rates?
Local government/council
What is payroll tax?
Tax payable by businesses based on the amount of their wages bill that is over a threshold
Who collects payroll tax?
The state government
What is stamp duty?
Tax payable on certain types of transactions such as buying property or cars
Who collects stamp duty?
The state government
What is land tax?
Tax payable if an individual or business owns land valued over a certain level
Who collects land tax?
The state government
Who collects departure tax?
The Federal government
Give some examples of exempt income
Gifts, pocket money, inheritance and lottery winnings
Define royalties
Royalties is money paid to the owner, author or composer when someone else uses their services or work
Define commision
Commisions are a percentage of the proceeds of a sale paid to a saleperson
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