Financial Advice for Joe and Natalie

This assignment presents a financial advice case study involving Joe and Natalie, a young couple seeking to purchase their first home. Students are tasked with analyzing their financial situation, identifying suitable mortgage options, recommending strategies for debt management, and addressing potential issues they might face. The assignment requires applying financial planning principles, considering factors like income, expenses, mortgage affordability, and risk insurance.

Assignment
Financial Planning Fundamentals
(DFP1_v2A1)
Student identification(student to complete)
Please complete the fields shaded grey.
Student number
Assignment result (assessor to complete)
Result — first submission (Details for each activity are shown in the table below)
Parts that must be resubmitted:
Result — resubmission (if applicable)
Result summary(assessor to complete)
First submission Resubmission (if required)
Question 1 Not yet demonstrated Not yet demonstrated
Question 2 Not yet demonstrated Not yet demonstrated
Question 3 Not yet demonstrated Not yet demonstrated
Question 4 Not yet demonstrated Not yet demonstrated
Question 5 Not yet demonstrated Not yet demonstrated
Question 6 Not yet demonstrated Not yet demonstrated
Question 7 Not yet demonstrated Not yet demonstrated
DFP1_AS_v2A1

Feedback (assessor to complete)
[insert assessor feedback]
Page 2 of 34

Before you begin
Read everything in this document before you start your assignment for Financial Planning Fundamentals
(DFP1v2).
About this document
This document includes the following parts:
• Part 1: Instructions for completing and submitting this assignment
• Part 2: Case study
• Part 3: Assignment questions.
How to use the study plan
We recommend that you use the study plan for this subject to help you manage your time to complete
the assignment within your enrolment period. Your study plan is in the KapLearn Financial Planning
Fundamentals (DFP1v2) subject room.
Part 1: Instructions for completing and submitting this
assignment
Word count
The word count shown with each question is indicative only. You will not be penalised for exceeding the
suggested word count. Please do not include additional information which is outside the scope of the
question.
Additional research
You will be required to complete additional research to answer the assignment questions.
Page 3 of 34

Saving your work
Download this document to your desktop, type your answers in the spaces provided and save your
work regularly.
• Use the template provided, as other formats will not be accepted for this assignment.
• Name your file as follows: Studentnumber_SubjectCode_Submissionnumber
(e.g. 12345678_DFP1_Submission1).
• Include your student ID on the first page of the assignment.
Before you submit your work, please do a spell check and proofread your work to ensure that everything is
clear and unambiguous.
Submitting the assignment
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You need to save and submit this entire document.
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You are able to submit your assignment earlier than the deadline if you are confident you have completed
all parts and have prepared a quality submission.
The assignment marking process
You have 12 weeks from the date of your enrolment in this subject to submit your completed assignment.
Should your assignment be deemed ‘not yet competent’ you will be give an additional four (4) weeks to
resubmit your assignment.
Your assessor will mark your assignment and return it to you in the Financial Planning Fundamentals
(DFP1v2) subject room in KapLearn under the ‘Assessment’ tab.
Make a reasonable attempt
You must demonstrate that you have made a reasonable attempt to answer all of the questions in
your assignment. Failure to do so will mean that your assignment will not be accepted for marking;
therefore you will not receive the benefit of feedback on your submission.
If you do not meet these requirements, you will be notified. You will then have until your
submission deadline to submit your completed assignment.
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How your assignment is graded
Assignment tasks are used to determine your ‘competence’ in demonstrating the required knowledge
and/or skills for each subject. As a result, you will be graded as either competent or not yet competent.
Your assessor will follow the below process when marking your assignment:
• Assess your responses to each question, and sub-parts if applicable, and then determine whether you
have demonstrated competence in each question.
• Determine if, on a holistic basis, your responses to the questions have demonstrated overall competence.
‘Not yet competent’ and resubmissions
Should sections of your assignment be marked as ‘not yet competent’ you will be given an additional
opportunity to amend your responses so that you can demonstrate your competency to the required level.
You must address the assessor’s feedback in your amended responses. You only need amend those sections
where the assessor has determined you are ‘not yet competent’.
Make changes to your original submission. Use a different text colour for your resubmission. Your assessor
will be in a better position to gauge the quality and nature of your changes. Ensure you leave your first
assessor’s comments in your assignment, so your second assessor can see the instructions that were
originally provided for you. Do not change any comments made by a Kaplan assessor.
Units of competency
This assignment is your opportunity to demonstrate your competency against these units:
FNSFPL502 Conduct financial planning analysis and research
FNSFPL501 Comply with financial planning practice ethical and operational guidelines and regulations
FNSFPL506 Determine client financial requirements and expectations
FNSINC401 Apply principles of professional practice to work in the financial services industry
BSBITU402 Develop and use complex spreadsheets
FNSASIC301 Establish client relationship and analyse needs
FNSASIC302 Develop, present and negotiate client solutions
FNSIAD301 Provide general advice on financial products and services
We are here to help
If you have any questions about this assignment you can post your query at the ‘Ask your Tutor’ forum in
your subject room. You can expect an answer within 24 hours of your posting from one of our technical
advisers or student support staff.
Page 5 of 34

Part 2: The Case Study
Joe and NatalieOlden
You met JoeOlden when he came into your office last week. He had been mowing the grass in the park over
the road, saw your business sign and came for a chat to see if you could help him and his wife.
He and Natalie live in a small rural community outside town and have been married for three years. Joe is
age 26 and is a horticulturalist with the local council. Natalie is age 24 and a librarian.However,she is not
working at present as she looks after their twins. Until the twins arrived, their focus had been on working
hard and saving for a deposit to buy a house. They rent a nice home on the edge of town and enjoy the
scenic views over the hills.
Their landlord has approached them saying she wants to sell the house and will give them first refusal to
purchase it. Joe’s parents have offered to help them with a loan.
They want some help in making a decision and understanding how it will all work.
You give Joe your Financial Services Guide (FSG) and a fact-find form and you agree to meet next week.
First meeting
After introductions and pleasantries, you ask Joe if he has read the FSG and briefly go through the contents
for Natalie. They are comfortable to have an initial consultation to see where it takes them.
They have completed the fact find and as you discuss the contents, you make additional notes on their file.
The fact find looks as follows:
Joe and NatalieOldenFact Find
Table 1 Personal details
Name JoeOlden NatalieOlden
Salutation MrOlden MrsOlden
Age 26 24
Marital status Married Married— we just celebrated our third anniversary
Home address Hillview Cottage Burgenfield
Health Good Good
Smoker No No
Occupation Horticulturalist Librarian
Employer Burgenfield Rural Council Burgenfield Library
Projected retirement age Probably 67 Not thought about it
Dependents/family relationships Name Age/date of birth
Son Jason 2 (Both in good health and developing normally)
Daughter Jillian 2
Page 6 of 34

Table 2 Professional relationships
Solicitor None
Time span of relationship n.a.
Quality of relationship
Accountant None
Time span of relationship n.a.
Quality of relationship
Table 3 Assets and investments
Assets and investments (personally owned)
Assets Value Ownership
status
Other information Purchase price
Everyday bank
account
$500 Joint We try to keep at least this amount in the
account. We’d like to have more cash on
hand for the unexpected because with the
twins something is always happening
Joe’s ute $4,000 Joe It’s 12 years old and still running well. It’s a
great little workhorse
$15,000
Natalie’s sedan $12,000 Natalie It’s only three years old and I love it.
The four doors and hatchback make it great
to take the kids out and for shopping
$18,000
Home contents $7,000 Joint Includes gardening equipment that Joe
uses for part-time gardening jobs
Bonus saving account $22,500 Joint We were saving quite well and enjoying a
carefree lifestyle until the twins came
along, but for the last year we have often
had to resist the temptation to dip into it.
We get extra interest if we don’t make
withdrawals
Table 4 Liabilities
Debts Value Payment Ownership
status
Other information Interest
rate
Credit card $2,500 Minimum Joint We would prefer to pay it off each month
but we spent a lot rearranging the house
for the twins when they arrived
22.5%
Car loan $5,400 $61pw Natalie There are two years until it’s paid out 13.5%
HECS debt $12,000 None Natalie From Natalie’s librarian course CPI
Table 5 Superannuation
Fund Value Ownership Other information
SunSuper $16,300 Joe From my job with the council. I’ve been with them since I left school
and did my apprenticeship
Council Super $11,800 Natalie From my job in the library since I finished university
Page 7 of 34

Table 6 Income p.a.
Income type per annum Joe Natalie Notes
Salary $48,000 Super on top of this. I hope to get the supervisor’s job
in a couple of years when the current guy retires
Salary $5,000 I was on $47,000 before I took time off to have the kids.
I’m not sure how long I’ll be away but I don’t want to
lose the opportunity to work locally. This is my town
and I love it
I still do some work from home for the library. I hope
I’ll earn $5,000 a year but we’ll see
Centrelink About $17,500 About $675 a fortnight
Interest $394 $394 From the home deposit saving fund
Total combined
gross income
$71,288
Table 7 Estimated annualexpenditures
Expense per year Joint Notes
Accountant’s fees A friend does our tax online
Charitable donations None
Children's pocket money n.a.
Council and water rates Included in rent
Discretionary: restaurants, gifts, holidays,
etc.
$1,000 We used to go out a lot and take short weekend
breaks but we are more likely to go for a walk than
to the pub nowadays
Debt repayment $3,765 Car loan and minimum payment on the credit card
Electricity $1,000
Gas $600
Weekly shopping $30,000 What with things for the kids we easily spend $550
each week
Health insurance We don’t have any
Holidays We now visit an aunt on the coast if we go
anywhere
House insurance Landlord’s responsibility
House maintenance and repairs Landlord’s responsibility
Income protection Never thought of it
Medical bills/prescriptions $1,500 We are pretty healthy
Mobile phones and internet $1,500
Motor vehicle and fuel $10,000
Mortgage n.a.
Pay TV Don’t get time for much TV
Private school fees n.a.
Rent $15,600 $300 pw
Total expenses $64,965
Page 8 of 34

Not
applicable
Table 8 Investment objectives and attitude to risk
Joe and Natalie did not fill out this part of the fact find. They said it did not apply to them or they did not
understand the questions or possible answers.
Determining your investor risk profile Points
This investor risk profile questionnaire has been designed to help you understand the type of investor you are,
so that with the help of your adviser, you can choose the investments that best match your financial objectives.
Which of the following best describes your current stage of life?
Single with few financial commitments. You are keen to accumulate wealth for the future.
Some funds must be kept available for enjoyment, such as cars, clothes, travel and
entertainment.
A couple without children. You may be preparing for the future by establishing and
furnishing a home. There are a lot of things you need to buy. You are probably better off
financially now than you may be in the future.
Young family. This is the peak home purchasing stage. You have a mortgage and a very small
amount of savings. Probably dissatisfied with your financial position and the amount of
money saved.
Mature family. You are in your peak earning years and have the mortgage under control.
Many partners also work and any children are growing up and have either left home or
require less supervision. You are starting to think about retirement, although it may be
many years away.
Preparing for retirement. You probably own your own home and have few financial
commitments; however, you want to ensure that you can afford a comfortable retirement.
Interested in travel, recreation and self education.
Retired. No longer working you must rely on existing funds and investments to maintain
your lifestyle. You may be receiving the pension and are keen to enjoy life and maintain your
health.
What return do you reasonably expect to achieve from your investments?
A return without losing any capital
3–7% p.a.
8–12% p.a.
13–15% p.a.
Over 15% p.a.
Page 9 of 34

Not
applicable
If you did not need your capital for more than ten (10) years, for how long would you be
prepared to see your investment performing below your expectations before you cashed
it in?
You would cash it in if there were any loss in value.
Less than 1 year.
Up to 3 years.
Up to 5 years.
Up to 7 years.
Up to 10 years.
How familiar are you with investment markets?
Very little understanding or interest.
Not very familiar.
Have had enough experience to understand the importance of diversification.
Understand that markets may fluctuate and that different market sectors offer different
income, growth and taxation characteristics.
Experienced with all investment sectors and understand the various factors that may
influence performance.
If you can only receive greater tax efficiency from more volatile investments,
which balance would you be most comfortable with?
Preferably guaranteed returns, before tax savings.
Stable, reliable returns, minimal tax savings.
Some variability in returns, some tax savings.
Moderate variability in returns, reasonable tax savings.
Unstable, but potentially higher returns, maximising tax savings.
Six months after placing your investment you discover that your portfolio has decreased in
value by 20%, what would be your reaction?
Horror. Security of capital is critical and you did not intend to take risks.
You would cut your losses and transfer your money into more secure investment sectors.
You would be concerned, howeverwould wait to see if the investments improve.
This was a calculated risk and you would leave the investments in place, expecting
performance to improve.
You would invest more funds to lower your average investment price, expecting future
growth.
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Not applicable
Which of the following best describes your purpose for investing?
You want to invest for longer than five years, probably to age 55–60. You are mainly
investing for growth to accumulate long-term wealth.
You are not nearing retirement, have surplus funds to invest and you are aiming to
accumulate long-term wealth from a balanced fund.
You have a lump sum (e.g. an inheritance or a lump sum payment from your employer)
and you are uncertain about what secure investment alternatives are available.
You are nearing retirement and you are investing to ensure that you have sufficient funds
available to enjoy retirement.
You have some specific objectives within the next five years for which you want to save
enough money.
You want a regular income and/or totally protect the value of your savings.
Investor profile total points
Investor risk profile summary
70 –140 Conservative
You are a conservative investor. Risk must be very low and you are prepared to accept lower returns to protect capital.
The negative effects of tax and inflation will not concern you, provided that your initial investment is protected.
140–210 Moderate
You are a cautious investor seeking better than basic returns, howeverrisk must be low. Typically, an older investor
seeking to protect the wealth that you have accumulated, you may be prepared to consider less aggressive growth
investments.
210–280 Balanced
You are a prudent investor who wants a balanced portfolio to work towards medium- to long-term financial goals.
You require an investment strategy that will cope with the effects of tax and inflation. Calculated risks will be acceptable
to you to achieve good returns.
280–315 Growth
You are an assertive investor, probably earning sufficient income to invest most funds for capital growth.
Prepared to accept higher volatility and moderate risks, your main concern is to accumulate assets over the medium to
long term. You require a balanced portfolio, but more aggressive investment strategies may be included.
315–350 High growth
You are an aggressive investor prepared to compromise portfolio balance to pursue potentially greater long-term returns.
Your investment choices are diverse, but carry with them a higher level of risk. Security of capital is secondary to the
potential for wealth accumulation.
Page 11 of 34

Table 9 Estate planning
They have not bothered about wills because if one of them died everything would go to the other.
They haven’t got around to doing anything now they have the kids.
Insurance and risk management
Policy Life
insured
Owner Cover Premium
per annum
Notes
Death and TPD Joe SunSuper $125,000 Death
$175,000 TPD
$3.92pw Standard cover
Death and TPD Natalie Council Super $87,000 Death $2.00 pw TPD cancelled as she is not
working
Income protection
Home and contents
Private health insurance
Joe’s ute insurance
Natalie’s sedan
insurance
Natalie Fully comprehensive $420 p.a. Premium included in
motor vehicle costs
You ask them about the offer from their landlord.
Question Answer
Tell me about this offer from your
landlord?
We’ve always got on well with her. We pay our rent on time and she always
responded promptly if we had any problems. She likes to come and collect the rent
if she can so she can see our kids. So, we’re friends, really.
She says she’s selling up and moving to the coast and can’t manage a rental
property from far away. She knows we were saving to buy a house and it would
make life easy for her if we bought it and she didn’t have to pay real estate agent
fees. Of course, it would make life easy for us too as we wouldn’t have to move.
How much is she asking? Well she wants $280,000. Sounds a bargain compared to the prices they pay in the
cities nowadays but it’s only a two-bedroom weatherboard cottage and it suits us
just fine. We looked at the asking prices for other homes in the window of the real
estate office and it seemed a fair price.
Have you asked about a mortgage? Yes, we spoke to the bank and they told us if we could make a 20% deposit they
would fund the rest. So that means we would borrow $224,000 and we need
$56,000 deposit — a bit more than that to cover legal costs.
And you’ve had an offer from Joe’s
parents?
Yes, we told them we have saved $22,500 but they could see we were short about
$40,000 and they said they’d lend us the money to help us out. It’s too big an
opportunity to pass by.
But it’s a loan, not a gift? That’s right. They are in their mid-50s and plan to retire in 10 years and will want
the money back by then. Joe has two brothers and neither of them is married yet
so he’s the apple of their eye, having presented them with two grandkids at once.
They haven’t said anything about paying interest but it’s sort of understood that
once we get on top of the mortgage payments and I’m back at work we can pay
them back in instalments.
Page 12 of 34

Part 3: Assignment questions
Question 1a
The first four steps of the safe harbour are repeated below. They all form part of this stage in the financial
planning process and you must address all four steps in this first question.
• Step 1: Identify the objectives, financial situation and needs of the client that were made known
through the client’s instructions.
• Step 2: Identify the subject of the advice the client is looking for (whether explicitly or implicitly).
• Step 3: Identify the objectives, financial situation and needs of the client that would reasonably be
considered relevant to the advice sought on that subject (the client’s relevant circumstances).
• Step 4: If it is reasonably clear that information relating to the client’s circumstances is incomplete or
inaccurate, make reasonable enquiries to get complete and accurate information.
Briefly describe the clients’ financial situation, their objectives and needs as initially explained by them?
(100 words)
Joe and Natalie (client) are husband and wife residing in a rented house in a small community. The
financial situation of Joe is not strong as he is not so rich. Joe does a job of horticulturist while his
wife works for a library. The assets provides higher rate return. They are living a lower middle
class life earnings just over what is needed to meet out the livelihood expenses. However, they are
able to save a little amount every month to accumulate in a deposit. The objective of this deposit is
to buy a house for them so that they could live in a permanent house. The main objective is to
purchase house as they live in a rented house.
Assessor feedback: Resubmission required?
No
Question 1b
(i) What is the subject of the advice the clients are seeking? What advice have they asked for?
(ii) What additional advice do you think they need from what you know about their circumstances?
(100 words)
Question 1 (b) (i)
The main scope of the advice is to make appropriate suggestion for making the decision whether to
accept the offer of the landlord to buy the property currently rented. Presently, the client is residing
in a rented house, for which he is paying monthly rent. Now, the client is looking to buy the house
in which he is residing with his family. The subject matter of the advice sought by the client is the
arrangement of finance to buy the house in a most beneficial way. They are also interested to take
advice on the the risk and reward associated with the accepting the offer of the land lord.
Question 1 (b) (ii)
The client is currently residing in a rented house for which he is paying monthly rental. Now, he is
Page 13 of 34

looking to buy a house by taking mortgage loan from a bank and some private loan from his
parents. In these circumstances, the client may ask the analyst to find out a bank loan having EMI
equal to the monthly rental. The additional advice that the client are seeking includes estate
planning, management of risk, management of debt, benefit related to social security and the
strategies related to tax effectiveness.
Assessor feedback: Resubmission required?
No
Page 14 of 34

Question 1c
Assume you have asked more questions of the clients and have explained the areas where you think they
need advice.
Read the fact find thoroughly and identify all the issues they are concerned about. Identify what you
consider would be reasonable objectives for the clients.In your answer describe between six (6) and ten
(10) objectives. (200 words)
The primary issues connected with any investment analysis are the return and risk. The investor
would always want to earn as high as possible keeping the risk as low as possible. However, the risk
and return run in parallel, if return goes high, the risk also increases and vise a versa. In the current
case, the investment in property is under analysis, critical issues in respect of which have been
identified as under:
 The occupation of the client is not convincing. It may pose difficulties in paying the
loan back to the bankers as well as to the parents.
 The client has newly born twins. The expenses of the client would further increase
in the upcoming years.
 Total current net worth of the client amounts to $54200. The house that is sought to
be purchased is priced at $280,000. This depicts that client does not have enough
backup assets.
 The aggregate annual income of the client is $71,288, which leaves only $6,323
after meeting the annual expenses of $64,965.
 Important point to note is that rent amounts to $15,600, which will get eliminated
after buying the house.
In the light of the above mentioned issues, six objectives of the client have been identified as
follows:
1. Arranging money to buy a house
2. Obtaining a permanent and high paid occupation
3. Arrangement for expenses on caretaking of the twins
4. Increasing the net worth
5. Reducing the expenses
6. Earning high returns from the property in the long run
7. They should consider repaying the credit card loan,
8. They should develop a credit card repayment plan so that the liability does not
increase and there is no requirement to pay interest.
9. They should set up a fund for emergency purpose;
10. They should develop a system to make budget on a monthly basis so that income
and expenses are appropriately managed.
Page 15 of 34

11. They should develop a will as they have two beneficiary and the assets should be
appropriately distributed if both passes away in an unfortunate incident. That
means they should make appropriate estate planning.
Assessor feedback: Resubmission required?
No
Question 1d
List five (5) other clarifying questions you would ask them.This task requires you to identify what gaps there
are in your understanding of the client’s situation. (150 words)
 If your purpose is investment, do you have any alternative preferences other than investment in
property, for example, investment in shares, bonds, and mutual funds for long term?
 Lease is also an alternative to mortgage loan. So, will you prefer to take the house on lease
from the landlord rather than going for mortgage loan from a bank?
 The banks require security against the mortgage loan, so, if you are going for mortgage loan,
do you have adequate security to cover up the loan amount?
 Do you want the house in this locality only, or you can go for a house in some other locality if
available on cheaper rates compared to the current one?
 Considering your current financial situation, what amount will you be able to pay monthly
towards the loan repayment? And have you consulted bank in this regard?
Assessor feedback: Resubmission required?
No
Page 16 of 34

Question 2a
Determine how much Natalie will receive from Centrelink in family benefits, listing in your answer the type
of benefit and calculatedamount. You will need this information forQuestion 2b.
Tips: Reread Topic 8 on payments to support families. Refer to the latest Guide to Commonwealth
Government Payments booklet available at<https://www.humanservices.gov.au/> Corporate 
Publications and resources  ‘A guide to Australian Government payments’.
Alternatively,usethe Human Services website at https://www.humanservices.gov.au/.Click on ‘Families’ and
then ‘Payment Finder’ to see which benefits are available for someone in Natalie’s position and which she is
eligible to receive. You will then need to use the ‘Calculate’ function to determine how much she will get.
The payment finder calculator is used in the DHS. The interest from savings account is included in the taxable income.
The income that is earned from the Joes part-time gardening job is excluded from the calculation as this information is
not provided in the fact finder. The amount that is eligible by Natalie is:
Family Tax Benefit Part A: $360 per fortnight
Family Tax Benefit Part B: $155.54 per fortnight
Rent Assistance: $153.02 per fortnight
TOTAL: $669.20 per fortnight
Assessor feedback: Resubmission required?
No
Question 2b
Analyse their current position when they are renting the cottage.
(i) Compile in table form tax and cash flow statements and a statement of net worth. (Reference can be
made to the Kaplan resource ‘How to complete a cash flow table’ for guidance when completing this
question).
(ii) Describe the conclusions you have formed on the outcome of this analysis.
(100 words)
Question 2 (b) (i)
Analysing the current position of the client, the statements of tax, cash flows, and net worth are
presented below:
Statement of Tax
Tax calculation JoeOlden NatalieOld Notes
Page 17 of 34

en
Income from employment
Salary $48,000 5000
Salary sacrifice $0 0
Salary after
salary sacrifice
$48,000 $5,000
Other income
Bank account
interest
$394 $394 The interest is earned from the
savings fund of the interest
earned. The jointly owned
interest is distributed.
Interest from
other
investments
$0 0
Central link
benefit
$0 $17399 The calculator shows that
family tax benefit Part A is
$360 per fortnight and the FTB
for Part B is $155.54 per
fortnight. In addition to this the
rent assistance per fortnight that
is received is $ 153.02.
Assessable
capital gains
$0 0
Total
assessable
income
$48,394 $5,394 The assessable income includes
salary, interest and the FTB
received.
Deductable
expenses (e.g.
MEDICAL
BILLS)
0 0
Taxable income $48394 $5,394 The taxable income is the
assessable income after
allowable deduction.
Income tax on
taxable income
$7275 0 The tax is calculated on taxable
income.
Page 18 of 34

less tax offsets
(e.g.
LITO/SAPTO)
$274 0
plus Medicare
levy
$0 0
plus Medicare
levy surcharge
$0 0
less Imputation
credits
$0 0
less non-
refundable tax
offsets
$946 0
Net tax payable $7947 $0
Statement of Cash Flows
Family cash flow JoeOlden NatalieOlden Combine
d
Comment
Cash flow calculation:
Salary less any salary sacrificed
amount
$48,000 $5,000 $53,000 The income from
salary as per the
information
provided in fact
finder.
Non-taxable income (e.g. income
from a superannuation pension
for a person aged over 60, Family
Tax Benefits, etc.)
$0 0 $0
Interest income $394 $394 $788 The interest earned
from deposits.
Dividends received (excluding
franking credits)
$0 $0
Assistance from Centrelink
(Natalie)
0
$17,399 $17399 As per the amount
calculated using the
calculator in the
DHS.
Page 19 of 34

Other income $0 $0
Total income received before
tax
$48,000 $22,794 $70,793
Discretionary: restaurants, gifts, holidays
etc.
$500 $500 $1000
Credit Card Payments (minimum) $297 $279 $594
Car Loan $3172 $3172
Electricity $500 $500 $1000
Gas $300 $300 $600
Weekly shopping $15000 $15000 $30000
Medical Bills/Prescriptions $750 $750 $1500
Motor Vehicle and Fuel $4580 $5420 $10000
Rent $7800 $7800 $15600
Total expenses $30477 $34489 $64,966
Total income received before
tax less expenses
$17523 ($11695) $5,827
Net tax payable from tax table
above
$7947 $0 $7947
Total net cash flow $9576 ($11695) ($2120)
Statement of Net
Worth
Asset Owner Value
Liabilitie
s
Net
Value Notes
Personal Assets
Ute Joe $4,000 $4,000
The cash flow is not
generated from the use of car.
Sedan Natalie $12,000 $5,400 $6,600
The cash flow is not
generated from the use of car.
Home Contents Joint $7,000 $7,000
This assets is used for
producing income.
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Credit Card Joint $2,500 $2,500
This will be helpful in
removing liability.
Total $23,000 $7,900 $15,100
Superannuation
SunSuper Joe $16,300 $16,300
The employer is contributing
in superannuation fund.
There is no additional
personal contribution.
Council Super Natalie $11,800 $11,800
The employer contributes in
the super. There is no
personal contribution.
Total $28,100 n/a $28,100
Other Assets
Everyday bank
account Joint $500 $500
The cash flow generated is
minimum.
Bonus saving
account Joint $22,500 $22,500
The cash flow generated is
through collection of interest.
Total $23,000 n/a $23,000
Additional
Liabilities Owner
% tax
deductibl
e
Current
Debt
Interest
Only Notes
HECS Debt Natalie n/a $12,000 n/a
Net Worth $72,100 $19,900 $52,200
Question 2 (b) (ii)
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The statement of taxes shows net tax payments of $7947. The amount of tax comprises of only tax
on the salary income of Joe as the income of Natalie is not below the minimum table limit of
$18,000 (Australia Taxation Office, 2016). The statement of cash flow shows current net cash
position of the family. This implies that the annual expenses are in excess of the receipts of the
family. The negative cash position depicts that the family needs financial assistance so that the cash
receipts could be increased. However, the net worth position as shown in the statement of net worth
is positive. The total net worth of the family as depicted in the statement is $52200.
Assessor feedback: Resubmission required?
No
Page 22 of 34

Question 2c
Calculate the costs of a 25-year mortgage if they borrow $224,000. You should determine an illustrative
interest rate from searching amongst mortgage providers. Where a ‘honeymoon’ interest rate, (i.e. a lower
interest rate for an initial introductory period), is given by the provider you have selected, you should also
illustrate repayments when the loan reverts to the higher standard rate. Use an online mortgage calculator
or develop your own using Excel. Set out your assumptions and workings.
Loan Option-1:
Unsecured
Loan Option-2: HSBC
Secured
Loan Option-3: IMB
secured
Loan Amount 224,000 Loan Amount 224,000 Loan Amount 224,000
Interest rate
p.a. 5.00% Interest rate p.a. 3.55% Interest rate p.a. 3.87%
Terms years 25 Terms years 25 Terms years 25
EMI EMI EMI
Monthly 1309.48 Monthly 1127.41 Monthly 1166.34
Weekly 301.95 Weekly 259.99 Weekly 268.96
In the current case, the client wants to buy a house by taking mortgage loan. Total cost of house is
estimated to be $280,000 out of which the client ha to deposit $56,000 and the remaining amount
of $224,000 could be taken on loan. For this purpose an analysis has been conducted in the table
presented above, which shows comparison of three best available loan options. The first loan
option offers loan at 5% without any further security and surety from the client. In this offer, the
client will have to repay $1309.48 monthly and $301.95 weekly. There is another offer from HSBC
at lower interest rate 3.55% with monthly repayments of $1127.41 or $259.99 weekly. The third
offer from IBM is also available at 3.87%, with monthly payments of $1166.34 or weekly $268.96
(Yourmortgage.com, 2016). Considering the cash position of the client, second loan offer
providing for $259.99 weekly repayments is advisable.
Assessor feedback: Resubmission required?
No
Question 2d
(i) Compile a cash flow statement if they go ahead and buy the house. Consider every item in the
statement. How will their income change? Some items in their budget, such as rent, will not apply
and be replaced by mortgage repayments. Some costs are likely to increase and some may decrease.
Some new cost items will apply. In answering this question, use your judgment to create a cash flow
statement that you can show to Joe and Natalie to illustrate the possible outcome if they buy the
house.
(ii) Write some notes explaining the differences you have identified, such as changes in
Centrelink benefits.
(100 words)
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Question 2 (d) (i)
i)
Cash Flow Joe Natalie Combined Comment
Salary $48,000 $5,000 $53,000
Joe's income as per the Fact
Find is $48,000 in which he
presumably works full time.
Natalie's income is
approximately $5,000
working from home.
Centrelink Benefit $13,404 $13,404
Based on the DHS
calculator: Assuming Joe is
not eligible for FTB as he
did not receive them when
renting. Checked if either
were eligible for other
benefits but they were not.
Natalie can no longer
receive rent assistance.
Natalie - FTB(A): $360 per
fortnight; FTB(B): $155.54
per fortnight.
Other Income
Page 24 of 34

Total income received before
tax $48,000 $18,404 $66,404
*all expenses except car loan are joint and split equally between Joe and Natalie
Accountant fees Friend does tax
Charitable Donations
Children’s pocket money
Mortgage repayments $7,092 $7,092 $14,184
Based on Commonwealth
Bank home loan estimate
(Q2a)
Council & Water Rates $300 $300 $600
Average - estimated based
on realestate.com article
Home and Contents Insurance $694 $694 $1,388
Based on average cost in
NSW
Lender's mortgage insurance
As Joe and Natalie are able
to pay a deposit of 20%, the
bank does not have to lend
more than 80% of the
property value so they do
not have to get this
insurance
Stamp Duty Used NSW stamp duty
calculator. As they are first
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home buyers, no stamp duty
is to apply
Maintenance/repairs costs $1,400 $1,400 $2,800
Based on an average
estimate (1% of home value
expected to be the purchase
price) as this expense is not
consistent yearly. Some
years may require minimal,
while others may require
additional
maintenance/repairs
Payment Plan - Joe's parents
As Joe's parents have given
them time to get their affairs
in order before repaying
them, this has not been
included
Discretionary: restaurants,
gifts, holidays etc. $500 $500 $1,000
Rarely indulge in expensive
activities, usually take walks
rather than get a meal
Credit Card Payments
(minimum) $297 $297 $594
Credit Card payment p.a =
debt repayment p.a - car
loan payment p.a
Car Loan $3,172 $3,172 $61 per week
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Electricity $500 $500 $1,000
assume it is the same
following purchase
Gas $300 $300 $600
assume it is the same
following purchase
Weekly shopping $15,000 $15,000 $30,000
Health Insurance
Holidays
Rarely go on expensive
holidays, visit family instead
Investment Expenses
Income Protection
Medical Bills/Prescriptions $750 $750 $1,500 Both are healthy
Mobile Phones/Internet Bills $750 $750 $1,500
Motor Vehicle and Fuel $4,580 $5,420 $10,000
Natalie's car insurance is
included in motor vehicle
costs. It has been allocated
to Natalie.
Pay TV
Private School Fees
Total expenses $32,163 $36,175 $68,338
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Total income received before
tax less total expenses $15,837 ($17,771) ($1,934)
Total tax payable from tax
table above $7,947 $7,947
Total income received less
total expenses and total tax
payable
Total net cash flow $7,890 ($17,771) ($9,881)
Question 2 (d) (ii)
The assumption that is used in the preparation of the cash flow statement is that the initial
investment and the cost that are required on an upfront basis have been covered. It can be said that
the client will to be able to receive the interest from the saving account, as the amount will be used
for the payment of deposit. The Centrelink benefit will reduce, as Natalie will not receive the rent
benefit any longer. The FTB is not included in the projection as the outcome is determined based on
the current situation. They will be required to repay the mortgage payment but it is less than the
rental payment. The difference between the rent and mortgage will not result in savings as water
rates, insurance cost and maintenance cost will offset all the benefit.
Assessor feedback: Resubmission required?
No
Page 28 of 34

Question 3a
(i) Consider their debt management position if they go ahead and purchase the house. If they had the
capacity,in what sequence should they pay off the debts? Explain your reasoning.
(ii) What strategies could they adopt to reduce their current debts?
(200 words)
Question 3 (a) (i)
The current net worth of the client is $54,200, and the loan needed is $224,000. This indicates that
the debt repayment capacity of the client is very low. However, assistance from the Centrelink
could rise up the income level of the client making him capable to repay the loan amount. Further, it
is also crucial to take into consideration that currently client is paying $300 as rent for the house
use. This amount could be diverted to loan repayment easily. Therefore, it is advised that the client
chooses weekly repayment plan for 25 years from HSBC, which is offering loan of $224,000 at
3.55% with weekly repayments at $259.99 for 25 years.
They should firstly pay off the car loan, as the interest expenses for this loan is the highest. They
can repay the loan at once or alternative can reduce the term of the loan by increasing the amount of
repayment. Then they should pay off the loan related to credit card. This will eliminate the interest
amount related to credit card. Then lastly, they should utilise the surplus income for the payment of
the HECS debt. Then only the long term loan that is the home loan will remain for repayment.
Question 3 (a) (ii)
The current debt possessed by the client amounts to $19,900, which comprises of credit card
outstanding of $2,500, car loan of $5,400, and HECS debt of $12,000. In respect of the credit card
debt it has been observed that the client’s major spending is on rearrangement of the house each
month. After, buying a permanent house, the credit debt would be eliminated or be reduced to a
significant level. Further, car loan and HECS debt could be paid back by claiming the payments due
in superannuation account.
Assessor feedback: Resubmission required?
No
Question 4a
Describe what risks there are to the client’s financial position.
Reread the fact find and think about what risks they face. You should consider all the risks to their lifestyle
not just the traditional ones that can be insured.
(200 words)
The risk that they both face is the risk of redundancy in the employment market that is highly
volatile. The volatility in the employment market is a risk and a threat for both of them. This risk
could eliminate the income and as a result both will not be able to cover the debt and the expense
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without taking the emergency funds from savings.
There are other two major risks to the client’s financial position in respect of loan repayment such
as low net worth and low household income. Currently, the total household income per annum of
the client is $53,000 and the annual expenses amounts to $64,965, which leaves nothing to payback
the proposed debt. Therefore, the support from Centrelink is very crucial in strengthening the
client’s financial position. Further, the fact that the client has twins at a very young age as of now
also increases the risk. The client’s spending would go higher in the future years as compared to the
current position due to the increased burden of caretaking of the kids.
Further, it is also essential to note that the type of occupation of Joe (Client) is risky. Joe is engaged
in horticulture as salaried employee, which is not permanent. However, Natalie (Client’s wife) is a
librarian, who seems to be permanently employed. There is a risk of Natalie setting apart in future.
If Natalie goes for separation, the risk of reduction in the house hold income will increase. There is
a risk of cash flow deficit as they both have low income. The intention to purchase a house and
more liability of mortgage repayment will further increase the risk. If there is no change in the
current income then in the long run there is a possibility of increase in risk as the children’s
expenses will increase.
Assessor feedback: Resubmission required?
No
Page 30 of 34

Question 4b
Although you do not need to provide specific, tailored risk management and estate planning advice,
you can identify issues for the clients to consider and provide strategic advice that will assist them.
Briefly describe what risks Joe, Natalie and their family face if either or both of them die and what general
optionsdo you believe they should consider to mitigate these risks.
(200 words)
Presently, Joe and Natalie are aged 26 and 24 respectively. They have newly born twins in their
family. They have been living in a rented house but now they plan to buy a new house. Although,
buying a new house would be beneficial for them from financial view point and it will also fix the
problems of stay, but it also has certain risks. The fact that Joe and Natalie have newly born twins
gives rise to certain risks in relation to investment in property. The most prominent risk is the risk
of death of Joe and or Natalie. If Joe and or Natalie die at early age, the burden to repay the loan
would lie on their children. Further, the risk of caretaking of the property also arises in case Joe and
or Natalie die at the early age because their children are so young.
In order to mitigate these risks, it is recommended to Joe to take life (death) insurance cover for
himself and his wife. In the case of his or his wife’s death, the money could be received from
insurers to arrange for the repayment of the mortgage debt (Brammall, Tyson, Griswold, 2013).
Further, it is also recommended to create a will providing that in case of his or his wife’s death, the
property be vested in the trust and will be maintained by that trust till his children attain majority
(Brammall, Tyson, Griswold, 2013).
In the current situation they can consider a testamentary trust as both the children are young and they can
benefit from the distribution. The wellbeing of the dependent can be ensured by the preparation of the will
as it is an important responsibility for guardianship.
Assessor feedback: Resubmission required?
No
Question 5
In Question 1c you identified between six (6) and ten (10) objectives for Joe and Natalie. For each objective,
set out your recommendations to assist Joe and Natalie achieve that objective. Refer to ‘Step 3
Development of recommendations’ in Topic 10 for one way to present your answer. You can provide your
recommendations as dot points.
(500 words)
The recommendations for each objective have been set out as follows:
Objective-1: Arranging money to buy a house
Recommendations: The primary objective of the client is to buy a house. However, the financial
condition of the client is not good; therefore, he will have to make arrangements for finance to
purchase the house. In this regard, two alternatives are recommended to the client, one is to take
mortgage loan and buy the house and another is to take the house on lease from the landlord. In the
leasing option, the client will have to pay yearly lease to the landlord while in the mortgage debt,
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monthly/weekly repayment are to be made to the banker.
Objective-2: Obtaining a permanent and high paid occupation
Recommendations: Currently, Joe’s occupation is horticulture, which pays him a $48,000 yearly
and his wife earns $5,000 per year. It is recommended to Joe to change the occupation so that the
income could be increased. Further, since his wife Natalie cannot work for a few months, he should
strive to increase his earning beyond $48,000.
Objective-3: Arrangement for expenses on caretaking of the twins
Recommendations: The expenses of caretaking of the twins are going to be increased in future,
thus, it is recommended to start making arrangements from now. Joe and his wife are concerned by
the increasing expenses on the household due to twins. Further, the expenses on their education will
also increase as the time passes. Therefore, thinking of the future, Joe is advised to make deposits
with the bank so that money enough to take care of his children is accumulated.
Objective-4: Increasing the net worth
Recommendations: The net worth is one of the major financial indicators that the banks consider in
sanctioning the loans. Joe is in need of a bank loan to purchase the house. Thus, it is recommended
to maintain high net worth so that higher amount of loan could be sanctioned. Currently, Joe has a
net worth of $54,200, while, the loan needed is for $280,000. Joe is should reduce the debt
liabilities to increase the net worth.
Objective-5: Reducing the expenses
Recommendations: One way to improve the financial condition is to increase the income and
another is to reduce the expenses. In the current situation, the financial condition of Joe is not good
and he is seeking to buy a house. In order to achieve this objective, he should reduce the expenses
as much as possible.
Objective-6: Earning high returns from the property in the long run
Recommendations: Though, Initially, the purchased house will be used for self-residence by Joe,
however, as the time passes, he should think of letting out a part of the property. Letting a part of
the house will help him arranging finance to repay the mortgage debt easily. Further, it is also
recommended to hold the house for long term so that higher returns could be realized from its sell.
Assessor feedback: Resubmission required?
No
Page 32 of 34

Question 6
Identify two issues that Joe and Natalie may wish to change in your recommendations. Refer to the
negotiations that occurred in the advice process in Topic 10. Explain how you would deal with their
objections or concerns, and how you would incorporate them into your recommendations.
(200 words)
The first issue that could arise pertaining to the recommendations made to the client is that the
client may not accept to pay off the existing debt. As the cash position of the client is not good,
therefore, the client may not agree to the advice of paying off the existing debt immediately.
However, in order to enhance the net worth, it is crucial to reduce the level of debt. In this situation,
the adviser should demonstrate the actual benefits of paying off the existing debt by taking new
mortgage debt and buying the house property. Another issue in regard to the recommendations
made could be of letting out the house property after purchasing it. Immediately, it may not be
possible for the client to find out good tenants. In order to tackle this issue, the adviser may provide
additional services to help them find good tenants.
Assessor feedback: Resubmission required?
No
Question 7
Joe and Natalie agree to join your ongoing service plan. Identify four specific issues related to their financial
circumstances that you will raise with them at a review meeting in 12 months.
(200 words)
The four specific issues related to the financial circumstances of Joe and its family that would be
discussed in the review meeting, are as follows:
Issue-1: Cash position
Your, current cash position is -$858, which means that your yearly expenses are exceeding the
yearly receipts. It is essential to have positive cash position to buy the house. So, for this purpose,
cash receipts will have been increased, which, in the present circumstances, is possible through
Centrelink grant.
Issue-2: Income level
The level of household income is very low due to your wife being on maternity leaves. Thus, the
gap will have to be filled up either by you working additional hours or by applying for Centrelink
payments. The Centrelink payments, which your wife will be eligible for are estimated to be around
$9462 yearly. However, Centrelink receipts are not big but are enough to make arrangements for
repayment of the mortgage debt.
Issue-3: Arrangement to buy the house
In respect of the financial arrangement to buy the house, it can be asserted that there two equally
valid options such lease and mortgage debt. Either you can take the house on lease from your
landlord or alternatively you can borrow from bankers to buy the house. As per our evaluation, the
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bank loan from HSBC @3.55% with weekly repayment of $259.99 suits best.
Issue-4: Risk insurance
Since your children are very young, therefore, it will be essential for to cover the risk of any
casualty with the insurance.
Assessor feedback: Resubmission required?
No
Page 34 of 34