BAFI 1014 PERSONAL WEALTH MANAGEMENT Semester 1, 2020 Practical Assessment— Case Study Assignment Individual
Friday 1st May 11:59 pm 2020
Case Study and Poster – 30%
No more than 2000 words (part A only).
Lecture Materials 1 to 7.
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.
2 Assessment task Question 1: Case study You are a financial adviser and the following information is an extract of data you gathered as part of fact-finding during an initial client consultation for married couple Peter (age: 34) and Meg Morrow (age:36). Meg is an ex-Olympian and is pursuing a career in sports consultancy after retirement from active sports she is employed as sports consultant with Melbourne office of a US global sports, other events and talent management company. The couple had their first child Tim 3 years ago. The couple used a major portion of the saving to pay off the mortgage loan taken for selfoccupied home. Peter switched to part-time work to care for their child. He works as a part-time coach with a local footy club.
Expected Gross annual salary 2019- 2020
Asset and Liabilities
Home and Contents (Joint) Rental Property (Meg)
Cars (Joint) Toyota Rav4 (2016) BMW X3 (xDRIVE 30i) (2018)
Bank Account: Commonwealth Bank Savings Account (Joint)
15,000.00 as on 30/6/2020
Investments: Colonial First State Wholesale Equity Income Fund (Meg) Polynovo Ltd (ASX: PNV) (Meg) Costa Group Holdings Ltd (ASX: CGC) (Meg) Superannuation- (Meg) Superannuation- (Peter)
Credit cards (Joint) Includes the annual interest cost
Income type (ownership)
Joint saving bank account of Peter and Meg with commonwealth Bank: Interest 1.5% p.a.
Colonial First State Wholesale Equity Income Fund (Meg)
Polynovo Ltd Shares- Dividend – (Meg)
$1,491 + $639 Imputation credit
Costa Group Holdings Dividend – (Meg)
$882 + $378 Imputation credit
Rent from rental property (Meg)
• In the past meg’s father, who was a tax consultant, use to advise the couple on tax planning. Since the death of Meg’s father 2 years ago, the couple has just availed the services of local accounting firm for lodging of their tax return. Meg Morrow borrowed $361,000 to purchase a rental property built-in 2006 on advice of her father. The annual insurance, rates and costs to maintain the property is $3,900 p.a. and interest costs on her loan will be $24,000 for the year. • The Morrow couple would like to know their net earnings after paying tax for the year ended 30th June 2020. They would also like advice on how to reduce their tax liability in the future. • 10 months ago, Meg invested in equity. She bought 12,500 shares of Polynovo Ltd at 40 cents per share and 2,500 shares in Costa Group Holdings Ltd at $8.00 per share. She is stressed that the Costa Group Holdings Ltd share is currently trading at $4 and is not expected to do better in the coming 1 year. She wants to sell her Polynovo Ltd shares (expected sale price $2.00 share) to lock in her profit and has come to you for advice. She does not expect any significant change in the share price of both the firms in the coming 1 year. • A year ago the couple decided to pay an annual donation of $2000 to registered Charity. This paid from the account of Peter. Expenses for the year ended 30th June 2020: Itemised expenses per annum: • Travelling to and from work- $2,500 (Meg) and $1,100 (Peter) • Sportsmen association membership fees $1,200 (Meg) • Donations to registered Charity $2,000 (Peter) 4 Required: A. Calculate Peter and Meg’s after-tax income for the year ended June 30th, 2020. For the purpose of calculation, the assume the figures are of the year 2019-20. Explain how Peter and Meg 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 30 June 2020. B. Calculate Meg’s capital gains liability if she were to sell her Polynovo Ltd shares. Assume that Meg will sell her shares and advise her on a strategy she could use to minimise her possible capital gain. Also, show the effect this strategy (calculation) would have. C. You observed that Meg’s father has used “Negative gearing” as a tax-saving strategy for the couple in the past. Please explain this to the couple, bringing example from their tax calculation. (10 + 5 + 5 = 20 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 Managed Funds. Required: The poster should enable explanation of managed funds; advantages, downsides and risks associated with investing into managed funds, and Include any (not more than one) of the following dimension to further knowledge of the investors on managed funds. 1. Explain the regulatory environment and the structure of managed investment schemes (MISs) in Australia 2. Explain the typical fee structure of a managed fund 3. Determine how to select a managed fund for investing 4. Differentiate between different management and investment styles 5. Outline some of the methods used for measuring returns and analysing performance of managed funds. 5 The poster should be self-explanatory and contain real information. So you need to conduct additional research because you will need to use actual investments. Make sure to reference your sources in the poster. The aim of the poster is to communicate essential information about Managed funds to an audience with limited financial knowledge on this topic. Here are some useful website references: Infographic/poster websites: https://piktochart.com/ https://venngage.com/ Otherwise, you can use Adobe Photoshop or Power point to design the infographic/poster. Website for unlisted managed funds: http://www.asx.com.au/mfund/ Websites for exchange traded funds (ETFs): https://www.blackrock.com/au/individual/ishares https://www.vanguardinvestments.com.au/retail/ret/investments/product.html#/productType=et f Submission of assignment: The infographic/poster can be submitted as a picture in a word document or by providing a web link. It is your responsibility to ensure that the examiner can accurately view the poster/infographic. (10 Marks) In order to answer requirements of this assignment, you may need to access resources other than the set text. All sources used in your assignment must be clearly referenced, but there is no set referencing style for this course. 6 Marking criteria The marking criteria for the total assignment are as follows:
Question 1 A
Question 1 B
Question 1 C
Presentation (i.e. layout)
Question 2 Sub-total
Marking Guide Question 1: Case Study
Question 1 A
-5 marks of every mistake in tax calculation (maximum deduction 5)
Question 1 A
Explanation of “split of Income” taxation planning strategy and bringing example from their tax calculation after implementing “splitting of income” strategy
Question 1 B
Calculation of capital gains liability as suggested by the client (2.5 marks); Calculation after implementing the strategy (2.5 marks).
Question 1 C
Explanation of “negative gearing” strategy (2.5 marks); Example from client tax calculation after implementing strategy (2.5 marks).
Question 2: Marking guide for Infographic/Poster
Question 2 Presentation (i.e. layout)
Excellent use of graphics and data. Arrangement of information is coherent with an appeal to the audience.
Good use of graphics and data. Arrangement of information can be followed but may require more effort by the audience.
Graphics and data are presented but limited or ill suited. The presentation can be understood but is not audience friendly.
Presentation lacks graphics and/ or information. Arrangement of information does not consider the audience.
Question 2 Content
Very clear, thoroughly researched and referenced. Key similarities and differences identified and an excellent understanding demonstrated.
Clear, researched and referenced. Most similarities and differences identified and a strong understanding demonstrated.
Adequate information but not as thoroughly researched and referenced. Not all similarities and differences identified and only partial understanding shown.
Poor information, with little research and references. Does not show a clear understanding of similarities and differences. Not to undergraduate standard.