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Welcome to the January Newsletter.
Happy New Year and best wishes for a prosperous 2007
Instalment Warrants Investment Approved
The government has announced that it will introduce legislation allowing superannuation funds to continue to invest in instalment warrants.
Warrants enable your self managed superannuation fund to enjoy the benefits (and risks) of gearing as they do not entail a borrowing which is normally prohibited by superannuation law. This means that the effective gearing benefit that a borrowing would create in your fund is substantially replicated by the use of instalment warrants as an investment for your fund.
If you wish to invest in such products please contact us.
Capitalised Interest Deductible
Clients may recall that the decision in
Hart
meant that most “split loan” facilities effectively had caps on the level of interest that could be deducted. In a recent ATO decision, compounding interest on a line of credit was held to be deductible. This appears to be in contra distinction to the decision in
Hart.
The facility in question did not require any minimum principal and interest repayment and contained an investment account and a private account within the one facility. The ATO decision has specifically stated that the features that would normally cause the general anti avoidance provisions to apply were not evident and therefore there may be some scope for clients to structure their affairs within this decision and enjoy further taxation benefits from geared investments.
Foreign Investments Markets – Asia
Clients may have read in recent times about the high returns being experienced from investments in emerging markets. “Emerging markets” generally refers to investment in markets such as China and other Asian economies have the potential to grow faster than those than more developed nations such as the United States or Australia. The quarter of the world’s population living in China, that country alone can represent an outstanding investment opportunity but of course is not without its risks. Investment returns in this sector have averaged 31% to the end of October when measured in Australian dollar terms according to the MSCI World Index.
Whilst this does not in any way constitute investment advice and you should seek independent professional advice taking into account your circumstances, you may wish to discuss this opportunity with our financial planning team.
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Less than Six Months Until Undeducted Contribution Opportunity Ends
Following the Government’s substantial reforms to superannuation in the May 2006 budget, a special window of opportunity for a contribution of up to $1 million of undeducted contributions to a superannuation fund prior to June 2007. After that date an annual cap of $150,000 per year calculated on a tri-annual basis will be in place.
When a substantial contribution to a superannuation fund is made, it is often attractive to establish your own self managed superannuation fund. We provide self managed fund superannuation services to many clients and they find it often a more cost effective and flexible investment vehicle than the retail offerings of the superannuation industry.
Some of the advantages of your own private self managed superannuation fund are:
• Unlike a retail superannuation fund that spreads the benefit of franking benefits across its members, your personal superannuation fund can use the franking credits in more strategic ways
• Transfers between members can occur without attracting capital gains tax
• Deferral of CGT on asset disposals is more flexible with a self managed superannuation fund
A self managed superannuation fund does not suit all taxpayers and therefore appropriate advice should be obtained to ensure that this is the most appropriate strategy for you.
In any event, taking advantage of this unique window of opportunity that will close on 30 June 2007 for the making of the very tax effective superannuation contributions should be explored through a call or meeting with your usual contact at the firm.
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