Commerce - Year 10

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