Assignment Question: A married couple has come to you seeking your professional help in constructing a financial plan.

Their personal financial details are listed below: Deano and Tammy have two grown-up children (who do not live at home) and live in Sydney. Deano and Tammys ages are 60 and 59, respectively. Their risk profile is low, meaning they prefer to invest in defensive assets, although they are happy to also have some exposure to growth assets. Both Deano and Tammy are fully employed, earning $130,000 p.a. and $65,000 p.a. (before tax, respectively). Both receive superannuation contributions in addition these stated remuneration details at the rate of 9% p.a. of gross salary. The assets (and income) of the couple are all jointly held/received and include the following: o house valued at $1,000,000 o 2 cars (worth in total $120,000), one car is a 2011 Lexus IS 350 Prestige and one is a 1998 Honda NSX. o $120,000 invested in a cash management trust o $7,500 in a transactional bank account, for everyday living needs, which pays interest equal to 4.5% p.a. (interested credited monthly).

o $185,000 invested in 2 managed funds offered by two different investment institutions the first fund has 10% invested a balanced (multi-sector) fund (whose asset mix is 30% Australian shares, 20%

international shares, 15% listed property, 20% Australian fixed interest, 15% cash), and the other has remaining assets invested in another balanced fund with asset allocation as follows: 45% Australian shares, 25% international shares, 5% listed property, 10% Australian fixed interest, 5% international fixed interest, 10% cash) . o The couple own direct shares currently worth $173,000 - which were acquired from initial public offers or demutualisations Woolworths (20%), Telstra (13%), Commonwealth Bank (47%), NRMA (Insurance Australia Group) (10%, AMP (10%). Assume these companies all pay dividends that are fully franked (i.e. 100% imputed credit). (Visit the websites of these companies and obtain the dividend per share (DPS) information from their most recent annual report. Alternatively, visit the Australian Financial Reviews Market Wrap section to locate the DPS.) Value the shares as at Friday 26th August. Superannuation assets equal to $325,000 ($175,000 for Deano and $150,000 for Tammy) with a balanced asset allocation.

o Term deposit for 6 months, which matures in 3 months equal to $17,000, and pays interest at 7% p.a. o Both the House and Contents are fully insured. Contents are worth $157,000 to replace (if stolen or lost due to damage). No insurance cover exists for the cars, life insurance, health insurance, or income protection insurance. The liabilities of the couple are as follows:

o $300,000 mortgage (interest is paid at the variable rate of 7.21% p.a.) o $20,000 credit card liability (17% p.a. interest rate) o $30,000 personal loan (used for the new car) (rate is 12% p.a.). o $5,600 overdraft facility (i.e. a short-term debt) (15% p.a. interest rate) The estimated expenses of the couple amount to: o $3200 per week (includes all expenditure including debt repayments) o Plans for a round the world trip over 2 months which is estimated to cost them $A40,000 which needs to be provisioned in their savings plan. They plan to take the trip this year

Create a financial plan/statement of advice which will assist Deano and Tammy in achieving their life objectives. This should include but not be limited to: A) Clearly stating their short-term and long-term life objectives.

B) Using tables (which are clearly marked) provide the following review) a current budget (i.e. income and expenses) statement use assumptions if necessary but outline any of the assumptions); An aggregated asset/liability statement showing the financial position and net worth of the client. Using the current tax scales (available from the Australian Tax Offices website), calculate the income tax payable

by both Deano and Tammy (show all workings including the tax paid at each scale by both Deano and Tammy) for the last financial year. Assume (for simplicity) they have no allowable deductions or tax offsets. However, the dividend imputation issue needs to be included in your answer. Also include the Medicare levy as part of their tax assessments. What are the tax implications for couples who have no health insurance cover?

C) Show the asset allocation of Deano and Tammys total assets, decomposed into the areas of Australian shares, international shares, listed property, direct property, Australian fixed interest, international fixed interest and cash. You should also highlight which assets are directly held, and thoseassets which are indirect. To what extent might Tammy and Deano need to re-balance their asset allocation through time? Why might this be the case? D) Provide a brief discussion of the issues arising from their financial situation, including current strengths and weaknesses (problems). Incorporate ratio analysis in the discussion.

E) Discuss their superannuation and insurance arrangements and whether or not these are satisfactory.

F) Given the high level of tax paid by the couple, discuss possible options available to them to legally minimise their tax. In your assessment, identify the benefits/constraints of these strategies.