PERSONAL WEALTH MANAGEMENT
Practical Assessment— Case Study Assignment
|Due date:||30th April 2021 11:59pm|
|Weighting:||Case Study and Poster – 30%|
|Content Coverage||Lecture Materials 1 to 7.|
|Learning outcomes||Understand and perform simple financial need analysis.
Understand concepts associated with portfolio theory. Appreciate the effects of taxation on financial planning and calculate taxation liability
Develop and be able to critically evaluate a financial plan for an individual.
Other objectives: Research, problem-solving skills, communication skills, critical thinking, writing competence.
Question 1: Case study
Assume: You are a financial adviser and the married couple Timothy (aged 37) and Sara (aged 38) Brown approached you for planning to save for their retirement. The following information is an extract of data you gathered as part of fact-finding during an initial client consultation. Timothy works as a human resources administrator and Sara works as a Medical Imaging Technologist. They have two children who are aged 13 and 15.
- Timothy and Sara would like to know how much money they will receive after paying tax for the year ended 30th June 2021. They would like advice on how to reduce their tax liability in the future.
- Sara on the advice of her brother purchased a rental property for $400,000 by borrowing $360,000 from Bank in 2015. The annual insurance, rates and costs to maintain the property is $3,900 p.a. and interest costs on her loan is $24,000 for the year.
- 10 months ago, Sara invested in shares. She bought 3,000 shares in “IOOF Holdings Limited” at $5 a share (current market price: $3.50) and 750 shares in “Afterpay Ltd” at $20 a share (current market price: $120). She wants to sell her Afterpay Ltd shares to lock in her profit and has come to you for advice. Her brother advised her to use the sale proceeds of these shares to buy another investment property to avail negative gearing. This time she wants to buy the property in the name of her husband. She does not expect any major change in the prices of these shares in the near future.
Income for the year ended 30th June 2021:
|Income type (ownership)||Amount|
|Gross Salary- (Sara)||$95,000|
|Gross Salary- (Timothy)||$40,000|
|ANZ Savings Account – Interest 3.00%- (Sara & Timothy)||$550|
|Investment Growth Bond
(Commonwealth bank) – Distribution 4.60% (Sara)
|“IOOF Holdings Limited”- Dividend (Sara)||$490
+ $210 Imputation Credit
|“Afterpay Ltd” Dividend- Dividend (Sara)||$900
+ 387 Imputation Credit
|Rent from rental property (Sara)||$17,940 p.a.|
- Travelling to and from work- $2500 (Sara) and $2000 (Timothy)
- CAANZ- Membership Fees $735.00 (Sara)
- Donations to registered Charity $1,500 (Timothy)
Current Assets and Liabilities
|Liability (Ownership)||Current valuation|
|Home and Contents (Joint)||$850,000||Mortgage (Joint)||$450,000|
|Rental Property (Sara)||$400,000||Mortgage-Rental property (Sara)||$360,000|
|Cars (Joint)||$35,000||Credit cards (Joint) Includes the annual interest cost||$6,000|
ANZ Savings Account (Joint)
Commonwealth bank Bond Fund-
“IOOF Holdings Limited” Shares
“Afterpay Ltd”750- (Sara)
- Calculate Timothy and Sara’s after-tax income for the year ended June 30th Also, explain how Timothy and Sara could reduce their tax liability by splitting their income. Show the effect this strategy would have had if they had split income for the tax year ended. A brief explanation of splitting of income is required (not more than 100 words) as the major focus is on explanation by calculation on tax after splitting of income.
- Calculate Sara’s capital gains liability if she were to sell her Afterpay Ltd Shares. Assume that Sara will sell her shares and advise her on a strategy she could use to minimise her possible capital gain. Also, show (calculation) the effect this strategy would have.
- The couple is happy that they invested in the rental property, as the property market value has shown good appreciation. Perhaps that is the reason Sars is considering investing in another rental property, although this time in name of her husband. While claiming to have done this investment to save tax, they are wondering what is a “negative gearing” tax strategy. Please provide the couple with an explanation of gearing and negative gearing using in their current context. Whose name should the investment property and mortgage be held in and why to avail themselves of the maximum benefit provided by negative gearing? (not more than 150 words).
(10 + 5 + 5 = 15 marks)
Question 2: Infographic/poster
You are required to design an infographic/poster that would be used on the financial planner’s website or displayed in their office. The purpose of the infographic/poster is to explain to investors the key similarities and differences between investing in exchange-traded bonds vs. ordinary shares.
The poster should be self-explanatory and contain real information. So, you need to conduct additional research and you may want to compare two actual investments. Make sure to reference your sources in the poster. The poster aims to communicate essential information about exchangetraded bonds and ordinary shares to an audience with limited financial knowledge on this topic.
Here are some useful website references:
Otherwise, you can use Adobe Photoshop or PowerPoint to design the infographic/poster.
Website for information on shares: Yahoo Finance
https://www.marketindex.com.au/ Investopedia- Fundamental Analysis
Submission of assignment:
The infographic/poster can be submitted as an image or by providing a web link. It is your responsibility to ensure that the examiner can accurately view the poster/infographic. (10 Marks)
To answer the requirements of this assignment, you may need to access resources other than the set text. All sources used in your assignment must be referenced.
This assessment is criterion-referenced where marks will be awarded according to the criterion listed on the table below:
|Practical Case Study||Marks|
|Presentation (i.e. layout)||5|
|Question 1A||10||9 – 10 marks||All tax and Medicare calculations are correct with clear formula, calculations and results presented. Provide an adequate explanation of splitting of income strategy in reducing tax expense for the couple with calculation.|
|6 – 8.5 marks||Some mistakes in tax and Medicare calculations and/or formula, calculations or results not presented clearly.|
|0 – 5.5 marks||Excessive mistakes in tax and Medicare calculations and/or formula, calculations or results poorly presented.|
|Question 1B||5||4.5 – 5 marks||Correct calculation with clarity in explanation.|
|3 – 4 marks||Some mistake in calculation and with an explanation to the client provide but can be better.|
|0 – 2 marks||Major mistakes in calculation with the poor selection of key issue and unclear analysis.|
|Question 1C||5||4.5 – 5 marks||Excellent selection of key issues and clear explanation for the client.|
|3 – 4 marks||Selection of key issues is not entirely appropriate and/or explanation to the client provide but can be better.|
|0 – 2 marks||Poor selection of key issue and unclear explanation.|
|5||5 marks||Excellent use of graphics and data. The arrangement of information is coherent with an appeal to the audience.|
|4 marks||Good use of graphics and data. The arrangement of information can be followed but may require more effort by the audience.|
|3 marks||Graphics and data are presented but limited or ill-suited. The presentation can be understood but is not audiencefriendly.|
|0 – 2 marks||The presentation lacks graphics and/ or information. The arrangement of information does not consider the audience.|
|Question 2 Content||5||5 marks||Very clear, thoroughly researched and referenced. Key similarities and differences identified and an excellent understanding demonstrated.|
|4 marks||Clear, researched and referenced. Most similarities and differences identified and a strong understanding demonstrated.|
|3 marks||Adequate information but not as thoroughly researched and referenced. Not all similarities and differences identified and only partial understanding shown.|
|0 – 2 marks||Poor information, with little research and references. Does not show a clear understanding of similarities and differences. Not to undergraduate standard.|