1202AFE Lecture Notes - Lecture 5: Stamp Duty, Australian Securities Exchange, Negative Equity
30 May 2018
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Week 5 Financial Planning 1 Lecture Notes
Topic 5: Investing directly in Cash, Fixed Interest, Shares and Property
Whose name(s) should the house be in?
• Mark and Susanne are married and are about to buy their first home for $350,000
and want to know who they should structure their purchase
o i.e. whose name(s) should it be in?
• Mark has his own engineering business, while Susanne is an HR manager for a large
company. Both earn approximately $80,000 per year
o What are their options?
o What do they need to take into consideration?
o What would you recommend? Why?
Cash and Fixed interest
Cash
• Includes savings accounts and money market securities
• Savings account characteristics include:
o Very liquid
o Low or no risk
▪ Govt. guarantee with Authorized Deposit-taking Institutions
o Suitable for a short-term investment timeframe
o Longer term investments: be aware of inflation
Fixed interest
• Includes term deposits, Government or corporate bonds and debentures
• Term deposit characteristics include:
o Fixed interest rate
o Investment for a fixed time period (e.g. 30 days to 5 years)
▪ Penalty fee or loss of interest if need withdraw investment early
o Cannot add to existing investment
o Safe ivestet: Govt. guaatee fo ADIs applies
• Government or corporate bonds and debentures
find more resources at oneclass.com
find more resources at oneclass.com
Fixed interest: Bonds
• Bond characteristics include:
o Fixed principal (face value/ capital)
o Regular fixed interest (coupon) payments or interest factored into final
payment
o Cannot add to existing investment
o Low to medium risk
▪ Interest rates vary with maturity and perceived riskiness of issuer
o Short- medium term investment timeframe
Shares
Shares
• Characteristics:
o Part owner of the business
o Limited liability
o Purchase on an exchange e.g. Australian Securities Exchange (ASX)
o May provide income (dividends) and long term capital growth
o Australian Shares may also offer tax benefits (franking credits)
o Medium to high risk
o Mid-long term investment timeframe
Bull or bear market?
Australian shares: Franking credits refresher
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Topic 5: investing directly in cash, fixed interest, shares and property. Includes savings accounts and money market securities: very liquid, low or no risk, govt. guarantee with authorized deposit-taking institutions, suitable for a short-term investment timeframe, longer term investments: be aware of inflation. Includes term deposits, government or corporate bonds and debentures: term deposit characteristics include, fixed interest rate. Fixed interest: bonds: bond characteristics include, fixed principal (face value/ capital, regular fixed interest (coupon) payments or interest factored into final payment, cannot add to existing investment, low to medium risk. Interest rates vary with maturity and perceived riskiness of issuer: short- medium term investment timeframe. Property: general tax implications: gst applies to the sale of new homes and land, sta(cid:373)p dut(cid:455) (cid:894)(cid:858)t(cid:396)a(cid:374)sfe(cid:396) dut(cid:455)(cid:859)(cid:895) (cid:373)a(cid:455) also appl(cid:455) (cid:894)state (cid:271)ased ta(cid:454)(cid:895)- buyers, be aware of land tax (state based tax) Imposed on the total value of your land at 30 june each year if this exceeds a certain value.
