26 Jul 2024
Friday Tidbit
- Posted by Dejan Pekic BCom DipFP CFP GAICD
Buying a primary residential property in Australia is one of the best if not the best investment schemes ever created in this country.
It just does not get better than this, with residential property prices rising and the capital gains being tax free on your primary residence.
Owning a primary residence has been used by most of our clients for decades and will continue to be used going forward because of the tax advantaged status of owning the primary residence.
Click to read.
The problem however is that once built the residential property provides little in the way of future GDP (Gross Domestic Product) for the country.
Meaning that you can have $3 million or $5 million or $10 million or even more tied up in this one asset that produces nothing.
Sure, you can employ a cleaner and or a gardener but that will only deliver on a few thousand dollars of economic activity on an asset typically worth millions.
The whole policy around owning residential property is wrong as evidenced by the fact that it is so difficult for first home buyers to purchase a primary residence and the Federal Governments of the past three decades have done nothing to solve this problem.
Today, residential property prices are extraordinarily high and they should not be this expensive.
Our business is based on referrals, so if you have family, friends or colleagues that want advice please ask them to contact us.
10 Jul 2024
Market Metrics: Gold
- Posted by Dejan Pekic BCom DipFP CFP GAICD
Gold is an asset because it represents as store of wealth.
This undisputed fact has been the case for millennia and Gold is also purchased heavily in times of financial fear such as during the past 2 years which has seen a rapid rise in inflation.
For example, the price of one ounce of Gold in October 2022 was US$1,624 and today it is US$2,370 which is a 45.9% increase in 20 months.
However, the problem with investing in this asset is that Gold does not multiply.
A bar of Gold does not produce baby Gold ingots which means an investor can make no money for extended periods such as between late 1970’s and the 2008 Global Financial Crisis (some 30 plus years) during which time an investor did not make a dollar.
Gold investors again made no money between 2011 and 2020 during which the Gold price once again remained below the 2011 purchase price.
Click for charts.
The principles of Value Investing teach us to not invest in commodities, Gold might be shiny but it is just too risky.
WARNING, this does not constitute Personal Advice. To discuss if this is an appropriate strategy for your given circumstances, please do not hesitate to contact us directly.
Our business is based on referrals, so if you have family, friends or colleagues that want advice please ask them to contact us.
4 Jul 2024
Superannuation: Boomerang Children
- Posted by Dejan Pekic BCom DipFP CFP GAICD
A question that we often get asked is in relation to adult child and whether an interdependency exists if they are living at home.
That is a difficult question and we recommend you seek legal advice because the Australian Tax Office view is that an arrangement of commercial convenience does not prove a mutual commitment to a shared life which is needed to evidence an interdependency relationship.
The benefit of an interdependency is that there is no 15% lump sum tax plus 2% Medicare to be paid on the taxable component of the superannuation death benefit.
For example, on a $500,000 superannuation death benefit that could be the difference between paying $85,000 in lump sum tax versus NIL if there is an interdependency relationship.
We have a attached a quick reference guide to who qualifies as a dependent under the Superannuation Industry (supervision) Act 1993.
Click for table.
This is also a timely reminder to keep your superannuation death benefit nominations up to date so that the individuals that you have chosen get the money rather than leaving this to the superannuation trustee to decide.
Our business is based on referrals, so if you have family, friends or colleagues that want advice please ask them to contact us.
