Steve and Crystal's Financial Planning Review

The assignment involves reviewing Steve and Crystal's current financial situation, including their insurance coverage, will preparation, and debt management. The reviewer is asked to identify specific issues related to these areas that will be discussed at a review meeting in 12 months. This includes assessing whether Steve has health insurance and income protection, if Crystal is working, and how they plan to manage their debts, such as the car loan and HECs debt.

Financial Planning Fundamentals
(DFP1_AS_v1A2)
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required)
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Question 2 Not yet demonstrated Not yet demonstrated
Question 3 Not yet demonstrated Not yet demonstrated
Question 4 Not yet demonstrated Not yet demonstrated
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[insert assessor feedback]
DFP1_AS_v1A2

Before you begin
Read everything in this document before you start your projectfor Financial Planning Fundamentals
(DFP1v1).
About this document
This document includes the following parts:
• Part 1: Instructions for completing and submitting this assignment
• Part 2: Case study
• Part 3: Projectquestions
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 projectwithin your enrolment period. Your study plan is in the
KapLearn Financial Planning Fundamentals (DFP1v1) 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.
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Saving your work
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work regularly.
• Use the template provided, as other formats will not be accepted for this assignment.
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• 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.
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Submitting the assignment
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The projectmarking process
You have 12 weeks from the date of your enrolment in this subject to submit your
completed assignment.
Should your projectbe deemed ‘not yet competent’ you will be give an additional four (4) weeks to
resubmit your assignment.
Your assessor will mark your projectand return it to you in the Financial Planning Fundamentals
(DFP1v1) 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 projectwill 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
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How your projectis graded
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Projecttasks 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.
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‘Not yet competent’ and resubmissions
Should sections of your projectbe 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 projectis 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 projectyou 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.
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Part 2: The case study
Steve and Crystal Riley
You met Steve Riley when he came into your office last week. He had been mowing the grass in the
park over the road and saw your business sign and came for a chat to see if you could help him and
his wife.
He and Crystal live in a small rural community outside town and have been married for three years.
Steve is aged 26 and is a horticulturalist with the local council. Crystal is aged 24 and a
librarianhowevershe 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. Steve’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 Steve 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 Steve if he has read the FSG and briefly go through the
contents for Crystal. 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:
Steve and Crystal Riley Fact Find
Table 1 Personal details
Name Steve Riley Crystal Riley
Salutation Mr Riley Mrs Riley
Age 26 24
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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 Bobby 26/6/2015 Both in good health and
developing normally
Daughter Celeste 26/6/2015
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)
Page 8 of 45

Assets Value Owners
hip
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
Steve’s ute $4000 Steve It’s 12 years old and still running well.
It’s a great little workhorse
$15,000
Crystal’s sedan $12,000 Crystal 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 $7000 Joint Includes gardening equipment that Steve
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 Payme
nt
Ownership
status
Other information Interest
rate
Credit
card
$2500 Minimu
m
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 $5400 $61pw Crystal There are two years until it’s paid out 13.5%
HECS
debt
$12,00
0
None Crystal From Crystal’s librarian course CPI
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Table 5 Superannuation
Fund Value Ownershi
p
Other information
SunSuper $16,300 Steve From my job with the Council. I’ve been with them since I
left school and did my apprenticeship
Council
Super
$11,800 Crystal From my job in the library since I finished Uni
Table 6 Income p.a.
Income type per
annum
Steve Crystal 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 $5000 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 $5000 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
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Children's pocket money N/A
Council and water rates Included in rent
Discretionary: restaurants,
gifts, holidays, etc.
$1000 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 $3765 Car loan and minimum payment on the credit card
Electricity $1000
Gas $600
Weekly shopping $30,000 What with things for the kids we easily spend
$550 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 $1500 We are pretty healthy
Mobile phones and internet $1500
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
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Table 8 Investment objectives and attitude to risk
They did not fill out this part of the fact find. They said it did not apply to them or they did not
understand the question or possible answers. You did not push the issue as it is obvious that debt
management and short-term saving are their priorities.
Determining your investor risk profile P
o
i
n
t
s
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.
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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.
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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 influenceperformance.
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.
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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.
Which of the following best describes your purpose for investing?
You want to invest for longer than five years, probably to the age of 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
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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
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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.
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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 Steve SunSuper $125,000 Death
$175,000 TPD
$3.92pw Standard cover
Death and TPD Crystal Council
Super
$87,000 Death $2.00 pw TPD cancelled as
she is not working
Income protection
Home and contents
Private health
insurance
Steve’s ute
insurance
Crystal’s sedan
insurance
Crystal Fully
comprehensive
$420 pa Premium included
in motor vehicle
costs
You ask them about the offer from their landlord.
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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 — well a bit more than that to cover legal costs.
And you’ve had an
offer from Steve’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- fifties and plan to retire in 10 years and
will want the money back by then. Steve 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.
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Part 3: Projectquestions
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 need to 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)
Both Steve and Crystal Riley had been saving for a deposit of the house until they had twins. Their landlord
has approached them to see if they would like to purchase property and at the same time Steve’s parents
has also offered to help.
They both need help in understanding this situation and see if the financial planner can help in making a
financially sound decision.
Assessor feedback: Resubmission required?
No
Question 1b
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(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
The Clients are interested in getting a help in making a decision as to how this all will work out especially if
they decide to get help from Steve’s parents. They want to a get a deep understanding on how this will affect
their financial situation with the current liabilities and expenses they already have.
Estate Planning can be discussed with clients since they haven’t bothered after having kids. Income
Protection needs to be discussed specially in Steve’s case since he is the only bread winner currently. Home
content insurance needs to be discussed (no need for building; as they are renting).
Also private health insurance can be discussed being a young family.
Assessor feedback: Resubmission required?
No
Question 1c
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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.
(150 words)
The reasonable objectives on the basis on the fact find sheet can be as below which help us identifying
different issues:
1) To come with a plan to save for a house deposit even though they are getting some help from Steve’s
parents.
2) To be able to plan their retirement plans and works towards the savings they would need when they
retire.
3) Superannuation contributions also needs to be discussed.
4) Another objective could be to have a plan for paying bad debt which includes the credit card and the
loan for Crystal’s car.
5) The clients do not have any health insurance in place which might affect their tax liabilities down the
track when the income increase after Crystal goes back to work.
6) One objective can be to ascertain their financial potential to pay off the help that they might from
Steve’s mum for buying the house. E.g.; setting up an instalment plan for the repayments.
7) Discuss Income protection and trauma cover with the clients in case of an emergency specially when
Steve is the only bread winner.
Assessor feedback: Resubmission required?
No
Question 1d
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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)
The other questions I would be inclined to ask are:
1) When to plan to buy this house that you are saving for?
2) For how long do you think you will be able survive with just one income of Steve considering the
expenses will be a lot higher once you have made that purchase.
3) Are you to expand your family after the twins that you have just had?
4) Do you realise that you may be better off now than in the future especially when you head close to
your retirement age?
5) Would you be interested in investing your money other than banking institutions to have a higher
rate of return in the long run?
Assessor feedback: Resubmission required?
No
Page 23 of 45

Question 2a
Determine how much Crystal will receive from Centrelink in family benefits, listing in your answer
the type of benefit and calculated amount. You will need this information for Question 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 go to the Human Resources website at <https://www.humanservices.gov.au> and
click on families. Identify at ‘Payment Finder’ which benefits are available for someone in
Crystal’s position and which she is eligible to receive. Use the ‘Calculate’ function to determine
how much she will get.
(200 words)
Family Tax benefit Part A:
Eligibility criteria
1. Age limit: 0-15 years
2. 16-19 years on below conditions:
 Studying a full time secondary study
 Has an acceptable load of study
 Granted with an exemption
Conditions:
 Satisfy an income test
 Parents must devote 35% of the time in childcare.
 Child must be dependent
Base rate: $58.66 per fortnight for each dependent child
Maximum rate for 0-12 year child: $182.84 per fortnight
Maximum yearly payment for children below 12 years: $5504.20
Crystal have two dependent children both aged below 12 years, hence per fortnight payment under
FTB PART A will be $182.84 each fortnight for every child.
FTB part B:
No need to satisfy income test
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Maximum fortnight rate: $155.54 (Payments rates for Family Tax Benefit Part B, 2016)
Per child fortnight rate allowed to Crystal: $77.03 each fortnight
Standard rate for the child below 5 years: $4055.15
Two Children: $155.54 each fortnight for both the dependent son (Bobby) and daughter (Celeste)
will be available to Crystal.
Total fortnight payment under FTB Part A and FTB part B will be ($182.84 *2)+ ($77.03*2) =
$519.74 per fortnight
Rent assistance (RA)
RA Child: A child below 16 years, or turned 16 years and a senior students child, or not an absent
child
Couple, 1 or 2 children: maximum payment: $4047.85
Energy Supplement (ES): Crystal does not need to claim for ES as it is automatically provide as a
part of FTB to the eligible person.
FTB A: $182.84 *2 = $365.68
FTB B: $77.03*2 = $154
Rent assistance: $155.26
Total fortnight payment: $675 each fortnight
Annual payments: $17,500
Thus, total yearly payment that will be available to Crystal will be ($519.74/14*365) + $4047.85 =
$17,500.
Assessor feedback: Resubmission required?
No
Question 2b
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Analyse their current position when they are renting the cottage.
(i) Compile tax and cash flow statements and a statement of net worth.
Note: Please review the Kaplan resource on how to complete cash flow tables.
(ii) Describe the conclusions you have formed on the outcome of this analysis.
(100 words)
Answer:
Net worth
Net worth
Assets Mr. Rilley Mrs Rilley Combined
Investment $ 250.00 $ 250.00 $ 500.00
Steve's UTE $ 4,000.00 $ 4,000.00
Crystal's sedan $ 12,000.00 $ 12,000.00
Home contents $ 3,500.00 $ 3,500.00 $ 7,000.00
Bonus saving accounts $ 11,250.00 $ 11,250.00 $ 22,500.00
Total $ 19,000.00 $ 27,000.00 $ 46,000.00
Superannuation
Superannuation $ 16,300.00 $ 11,800.00 $ 28,100.00
Total assets $ 35,300.00 $ 38,800.00 $ 74,100.00
Liabilities
Credit card $ 1,250.00 $ 1,250.00 $ 2,500.00
Car loan $ 5,400.00 $ 5,400.00
HECS debt $ 12,000.00 $ 12,000.00
Total liabilities $ 1,250.00 $ 18,650.00 $ 19,900.00
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Net worth $ 34,050.00 $ 20,150.00 $ 54,200.00
Liabilities
Loan Current debt
Percentage tax
deductible Interest only Repayment
Credit card $ 2,500.00 $ - $ -
Interest @ 22.5% is
charged on credit
card = 2500*17% =
425
Car loan $ 5,400.00 $ -
61 per week means
61*52 = 3172 per
year inclusive
interest @ 13.5%
HECS debt $ 12,000.00 0 $ - CPI @ 1.8% = 216
Total $ 19,900.00 $ - $ -
Tax calculations Mr. Riley
Mrs
Riley Combined Comments
Income from
employment
Salary
$
48,000.00
$
5,000.00 $ 53,000.00
Steve is a Horiculturalist in a
local council and Crystal is a
librarian but not working
currently to look over her
twins
Salary sacritice
$
-
$
- $ -
Page 27 of 45

salary after salary
sacrifice
$
48,000.00
$
5,000.00 $ 53,000.00
Interest income
$
394.00
$
394.00
$
788.00
Interest is received from the
home deposit saving funds
Centrelink
$
17,500.00 $ 17,500.00
Crystal received income from
centrelink for her twins under
family tax benefit provisions
including FTB part A, FTB
Part B and others
Assessable income
$
48,394.00
$
22,894.00 $ 71,288.00
Deductible/allowable
expense
Restaurants, gifts and
holidays
$
500.00
$
500.00 $ 1,000.00
Couple 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
Repayment of debt
$
296.50
$
3,468.50 $ 3,765.00
Loan on car (41 per week)
and minimum repayment on
the credit card
Electricity
$
500.00
$
500.00 $ 1,000.00 Electricity bill
Gas
$
300.00
$
300.00
$
600.00 Gas expense
Medical prescription
or bills
$
750.00
$
750.00 $ 1,500.00
Couple is pretty healthy and
spent only a little bit amount
in a year on medical
prescription
Page 28 of 45

Mobile phone and
internet
$
750.00
$
750.00 $ 1,500.00
ATO allowed payment made
on the usage of mobile phone
and internet access.
Rent paid
$
7,800.00
$
7,800.00 $ 15,600.00
Rent includes council and
water tax
Superannuation
@15%
$
2,445.00 $ 2,445.00
Here, Steve's contribution to
superannuation (SunSuper)
for the year was 16300AUD
on which 15% is allowable
deduction. However,
Crystal's contribution to
Council super has not been
allowed as she is not
currently working.
Total allowable
deductions
$
13,341.50
$
14,068.50 $ 27,410.00 Sum of deductions
Taxable income
$
35,052.50
$
8,825.50 $ 43,878.00
Assessable income - total
deductions
Tax on taxable income $ 5,807.35
Both the individual's salary is
less than taxable income of
AUD 18200 therefore, no tax
is charged
Medicare levy
$
-
$
176.51
$
176.51
Medicare levy is
charged@2%, if taxpayer
taxable income is between
AUD21,335 to AUD 26,668
every year.
Non-refundable tax
offsets (LITO)
$
445.00
$
445.00
$
890.00
LITO with maximum amount
of AUD 445 is available to
an individual with taxable
Page 29 of 45

income below 37000
Total taxes $ 6,873.86
Cash flow
Cash flow Mr. Riley Mrs Riley Combined
Income from employment
Salary $ 48,000.00 $ 5,000.00 $ 53,000.00
Salary sacrifice $ - $ - $ -
salary after salary sacrifice $ 48,000.00 $ 5,000.00 $ 53,000.00
Interest income $ 394.00 $ 394.00 $ 788.00
Centrelink $ 17,500.00 $ 17,500.00
Total Cash inflow $ 48,394.00 $ 22,894.00 $ 71,288.00
Restaurants, gifts and holidays $ 500.00 $ 500.00 $ 1,000.00
Repayment of debt $ 296.50 $ 3,468.50 $ 3,765.00
Electricity $ 500.00 $ 500.00 $ 1,000.00
Gas $ 300.00 $ 300.00 $ 600.00
Medical prescription or bills $ 750.00 $ 750.00 $ 1,500.00
Mobile phone and internet $ 750.00 $ 750.00 $ 1,500.00
Rent including council and water rates $ 7,800.00 $ 7,800.00 $ 15,600.00
Motor vehicle excluding insurance $ 5,000.00 $ 4,580.00 $ 9,580.00
shopping expense $ 15,000.00 $ 15,000.00 $ 30,000.00
Interest on credit card $ 212.50 $ 212.50 $ 425.00
Interest on HECS debt $ 216.00 $ 216.00
Page 30 of 45

Life insurance premium $ 203.84 $ 104.00 $ 307.84
Sedan insurance $ 420.00 $ 420.00
Total expenditures made $ 31,312.84 $ 34,601.00 $ 65,913.84
Cash flow before income tax $ 17,081.16 $ (11,707.00) $ 5,374.16
Tax payable including Medicare levy and
LITO $ 6,873.86
Net cash flow $ (1,500)
(ii)
As per the results, it is found that Steve and Crystal have a net worth of $34,050 and
$20,150 totalled to $54,200. In order to perform tax calculation, superannuation deduction is only
allowed to Steve @ 15% because Crystal is not currently working and did not contribute to the
superannuation fund this year. Medicare levy @ 2% is charged only for Crystal because its taxable
income is below the range of $21,335 to $26,668, however, low income tax offset is available to
both because their taxable income is less than $37,000. As per individual tax rate, $18,200 is
exempted and above this, $18,800 is charged @ 19% and rest $6,878 is charged at 32.5%. Total tax
liability of the couple is found to $6,873.86. However, under the cash flow, credit card, life
insurance premium, sedan insurance and HECS debt taken into account for cash outflow. Net cash
outflow is determined to deficit position of $1,500.
Assessor feedback: Resubmission required?
No
Page 31 of 45

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. Whilst a honeymoon interest
rate may give short-term benefits you should also illustrate repayments if rates were higher than
today. Use an online mortgage calculator or develop your own using Excel. Set out your
assumptions and workings.
(150 words)
Mortgage
Calculator
User-Input Fields: Fixed Calculations:
Loan Amount: $224,000.0
0 Scheduled Payment Amount: $1,151.65
Interest Rate (%): 3.75% Total No. Payments: 300
Number of Years: 25 Total Payment Amount: $345,496.1
7
Number of Payments Per Year: 12 Total Interest Paid: $121,496.1
7
Start Date (optional): 15-Dec-
2016 Date of Last Payment: 15-Dec-
2041
According to the results, Ubank has been used for the interest rate @ 3.75% with an deposit of
80%. Here, variable rate is used because as per the volatile market, it helps to maintain flexibility.
However, Ubank did not offer honeymoon rate therefore; it is not used and client will not suffer
any financial shock once the honeymoon is over.
Assessor feedback: Resubmission required?
No
Question 2d
Page 32 of 45

(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 costs in their budget (like rent) will not apply
and be replaced by mortgage repayments. Some cost items are likely to increase and some
may decrease. Some new cost items will apply. In answering this question use your
judgement to create a cash flow statement that you can show to Steve and Crystal to illustrate
the possible outcome if they buy the house.
Note: You may search for average council rates to use them in your answer. Only a
reasonable assumption is required for this question, students are not assessed on their ability
to assume a correct figure for council rates.
(ii) Write some notes explaining the differences you have identified such as changes in
Centrelinkbenefits.
(100 words)
Calculation of tax payable
Tax calculations Mr. Riley Mrs Riley Combined
Income from employment
Salary $ 48,000.00 $ 5,000.00 $ 53,000.00
Salary sacritice $ - $ - $ -
salary after salary sacrifice $ 48,000.00 $ 5,000.00 $ 53,000.00
Interest income
$
394.00
$
394.00
$
788.00
Centrelink $ 13,452.15 $ 13,452.15
Assessable income $ 48,394.00 $ 18,846.15 $ 67,240.15
Deductible/alowable expense
Resturants, gifts and holidays
$
500.00
$
500.00 $ 1,000.00
Repayment of debt
$
296.50 $ 3,468.50 $ 3,765.00
Electricity
$
600.00
$
600.00 $ 1,200.00
Gas
$
300.00
$
300.00
$
600.00
Medical prescription or bills
$
750.00
$
750.00 $ 1,500.00
Mobile phone and internet
$
750.00
$
750.00 $ 1,500.00
Mortgage $ 11,536.00 $ 11,536.00 $ 23,072.00
Council and water rates
$
500.00
$
500.00 $ 1,000.00
House maintenance and repairs
$
450.00
$
450.00
$
900.00
Superannuation @15% $ 2,445.00 $ - $ 2,445.00
Legal costs $ 3,250.00 $ - $ 6,500.00
Total allowable deductions $ 21,377.50 $ 18,854.50 $ 43,482.00
Page 33 of 45

Taxable income $ 27,016.50
$
(8.35) $ 23,758.15
On first AUD 18200 @ nil $ - $ -
Between AUD18,201-AUD37,000, 19
cents $ 1,675.14 $ 1,675.14
Medicare levy @ 2%
$
(0.17)
$
(0.17)
LIFO
$
445.00
$
445.00
$
890.00
Total tax payable $ 2,120.14
$
444.83 $ 2,564.97
Cash flow
Cash flow Mr. Riley Mrs Riley Combined
Income from employment
Salary $ 48,000.00 $ 5,000.00 $ 53,000.00
Salary sacritice $ - $ -
$
-
salary after salary sacrifice $ 48,000.00 $ 5,000.00 $ 53,000.00
Interest income
$
394.00
$
394.00
$
788.00
Centrelink $ 13,452.15 $ 13,452.15
Loan received $ 224,000.00
Assistance from other $ 40,000.00
Own savings $ 22,500.00
Total Cash inflow $ 48,394.00 $ 18,846.15 $ 353,740.15
Home purchased $ 280,000.00
Restaurants, gifts and holidays
$
500.00
$
500.00 $ 1,000.00
Repayment of debt $ 1,882.50 $ 1,883.50 $ 3,765.00
Electricity
$
500.00
$
500.00 $ 1,000.00
Gas
$
300.00
$
300.00
$
600.00
Medical prescription or bills
$
750.00
$
750.00 $ 1,500.00
Mobile phone and internet
$
750.00
$
750.00 $ 1,500.00
Loan mortgage inclusive interest @ 3.5% $ 11,536.00 $ 11,536.00 $ 23,072.00
Council and water rates
$
600.00
$
600.00 $ 1,200.00
Home insurance
$
450.00
$
450.00
$
900.00
House maintenance and repairs
$
600.00
$
600.00 $ 1,200.00
Motor vehicle excluding insurance $ 5,000.00 $ 4,580.00 $ 9,580.00
shopping expense $ 15,000.00 $ 15,000.00 $ 30,000.00
Interest on credit card
$
212.50
$
212.50
$
425.00
Interest on HECS debt $ $
Page 34 of 45

216.00 216.00
Life insurance premium
$
203.84
$
104.00
$
307.84
Sedan insurance
$
420.00
$
420.00
Legal costs $ 3,250.00 $ 3,250.00 $ 6,500.00
Total expenditures made $ 38,284.84 $ 38,402.00 $ 363,185.84
Cash flow before income tax $ 10,109.16
$
(19,555.85)
$
(9,445.69)
Tax payable $ 2,120.14
$
444.83 $ 2,564.97
Net cash flow $ 7,989.03
$
(20,000.68)
$
(12,010.66)
(ii) From the calculations performed above, couple will no longer need to pay rental charges for the
property as they purchased their own house. For purchase home, bank ready to give credit of 80%
equal to $224,000 and the rest $56,000 needs to be satisfied by the couple itself. Here, couple have
own saving worth $22,500 and they get assistance from Steve’s parents worth $40,000, totaled to
$62,500. The difference between $62,500 and $54,000 is the cost of legal formalities for owning a
new home that is reported in cash outflow. Besides this, cash inflow increased by loan and personal
investment whiles the amount of home purchase worth $280,000 resultant cash outflow. According
to the results, it is seen that NCF of deficit balance increased from $1500 to $8043.77.
Assessor feedback: Resubmission required?
No
Page 35 of 45

Question 3a
(i) Consider their debt management position. 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)
Debts Value Payme
nt
Ownership
status
Other information Interest
rate
Credit
card
$2500 Minimu
m
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 $5400 $61pw Crystal There are two years until it’s paid out 13.5%
HECS
debt
$12,00
0
None Crystal From Crystal’s librarian course CPI
If the couple is in strong financial position and have sufficient fund to pay off all the debt, then,
they must follow following sequence:
Credit card: It should pay-off first because it is a very small debt of $2,500 but interest is charge at
a high percentage (bad loan) of 22.5%, which compounds quickly. Thus, by paying it, couple can
reduce interest liability and save more.
Car loan: After it, car loan should be paid because by this, they will be able to combat their yearly
payment of (61*52) = $3,172 and boost net worth.
HECS debt: It must pay lastly, because it collects repayment when total income of the party
exceeds a threshold, in 2017/18, it is $55,874 (Haynes, 2017). After paying all, payment to HECs
debt can be make before reaching threshold limit.
(ii)
Strategies to reduce credit card:
 Timely payment of the charges before due date
 Paying more than minimum set limit helps to repay credit card debt quickly (How to
Page 36 of 45

manage your debt, 2017).
Strategies to reduce car loan
 Use lump-sum repayment method for making additional payments
 Extra facilities such as loan insurance and others can be withdrawn from the car loan to
minimize extra charges
 Refinancing from a different lender with more repayment flexibility, less interest charges at
extra benefits
Strategies to reduce HECs debt
 As repayment started after a threshold limit, therefore, voluntary repayment can be opted to
pay off debt sooner. Although, these are not tax deductible, still helps to minimize future
compulsory payment for Crystal.
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)
Risks to the client’s financial position
 As per the current situation, after satisfying all the financial commitments, cash flow
balance shows deficit position of $1,500. It means that couple may face financial issues to
pay their debts obligations such as interest on credit card, loan as well as other daily
expenses. Due to poor financial situation, they will not be able to spend more on their
lifestyle and may face issues to meet out their twin’s requirement properly.
 Besides this, having own house improve their lifestyle, still, increased debt obligation for
Page 37 of 45

repayment of home loan increase cash shortfall. Thus, couple will not be able to pay off
their liabilities, interest on credit card, home loan, car loan and others, even they need to
control their current spending to increase saving. They may need to cut shopping expense on
children, their mobile phone bills and internet usage and others, which adversely affect their
lifestyle and financial situation.
 Although in the case study, both Crystal and Steve are insured with Death and TPD policy.
However, Crystal TPD benefit has been cancelled because she is not working. Thus, if in
case, Crystal face an unexpected injury or illness faced, then she would not be able to get
TPD benefits as she left her job. Thus, it can bring risk of financial difficulties or turbulence
for the couple at the time of emergency.
 In despite of these, if Steve faced any serious injury or loss but it does not come in the
definition of critical illness as stated in the insurance coverage, then in such situation, Steve
would not be able to get the TPD insurance benefits because it only provide protective
coverage for the long-term disability. Therefore, it is much better for him to get income
protection coverage, which provides beneficial coverage for both the short-term and long-
term disabilities.
Assessor feedback: Resubmission required?
No
Page 38 of 45

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 Steve, Crystal and their family face if either or both of them die and
what general recommendations do you believe they should consider to mitigate these risks.
(200 words)
 Currently, Steve is the only breadwinner in the family because Crystal is on leave because
she is looking after the twins. Thus, it suggested to Steve to insure himself with a trauma
cover, as he did not have any health insurance currently. By this, he can get coverage for
sudden illness or serious injury to his health.
 Steve also should get Income Protection Insurance (IPI), which protect him against any
financial issues, which may arise due to sudden harm, illness or accident. In such case,
although Steve would not be able to work, still, he can get salary or income and save his
family life.
 If in case either Steve or Crystal, or both of them unexpectedly die, then it may bring
significant financial burden on the living person to pay the life-partner debt also.
In such respect, it seems advisable to both of them to prepare their will to present their
willingness to transfer their assets and properties to other who can get benefit after his or
her death.
 As they currently living in a rented house, therefore, they must insure it through home and
content insurance to maintain insurance coverage for both property and possessions.
 If both of them die suddenly, then children may suffer a lot, therefore; couple must set clear
plans for their children so that they can enjoy a safe, secure and wealthy life.
 In despite of this, as Steve owns a life insurance with SunSuper and Crystal with Council
super, thus, it must be clearly set out that what amount of such life insurance can be used
for paying off debts.
Assessor feedback: Resubmission required?
No
Page 39 of 45

Question 5
In Question 1c you identified between six (6) and ten (10) objectives for Steve and Crystal.
For each objective, set out your recommendations to assist Steve and Crystal 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.
The reasonable objectives on the basis on the fact find sheet can be as below which help us
identifying different issues:
1) To come with a plan to save for a house deposit even though they are getting some help
from Steve’s parents.
2) To be able to plan their retirement plans and works towards the savings they would need
when they retire.
(500 words)
1. Although, informal financial help is available from Steve's parent to purchase a new house,
still, despite of borrowing from them, they should save more by paying off both the bad
loan credit card and car loan as soon as possible so that saving can be increased and invested
in a saving account with some interest earnings.
2. In order to remain financially strong after retirement, it is suggest investing some money in
pension plans so that after reaching an age limit, they can get a fixed income from the fund
and secure their old age. In Australia, maximum rate for an age pension is
AUD808.30/fortnight for single and for couple, it is AUD 609.30/fortnight. Thus, couple is
suggest to invest AUD 609.30/per fortnight to an age pension scheme.
3. Superannuation fund: By contributing more amount voluntarily than the minimum set
limit to superannuation will enable couple to save more money to remain financially strong
in the older age. Accumulating hire money to the fund will also enable to get a good return
on it.
4. Credit card and car loan are called bad loan which must be pay off prior before other debts.
In this respect, credit card can be use to repay loan and then balance can be transferred to a
zero percent interest credit card. By this way, couple can pay-off car loan in full and there
will be no need to bear high rate of interest @ 22.5% on credit card.
5. Client does not have any health insurance policy, therefore, it seems better to suggest the
party to take income protection coverage along with the health insurance policy like trauma
Page 40 of 45

coverage. By Income Protection Insurance (IPI), they can assure a continuous source of
income even in case of any disability to work and incapacitated due to sudden accident. It
will help to make timely payments to the creditors. On the other side, health insurance
provides coverage to the party against sudden illness or serious injury to his health.
6. In order to repay loan instalments timely to Steve’s mother who was taken to purchase own
home, can be repaid by investing money in tax-deductible investments. It will help to save
tax payment to repay timely instalments. Besides this, savings can be invest in such
securities, which ensure regular income stream such as debentures on which high interest
rate is pay by the issuer compare to bank deposits. Thus, by this way, Steve can assure
regular incoming and pay off instalments on correct time.
Assessor feedback: Resubmission required?
No
Page 41 of 45

Question 6
Identify two issues that Steve and Crystal 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/concerns and how you would incorporate them into your
recommendations.
(200 words)
 In the advising process, it is obvious, that in some situation, client may be dissatisfy with
the recommendation and plan suggested. For instance, as per the cash flow, it is found
that if couple purchase their own house, then NCF will be rise from AUD1500 to
AUD8000, which suggest party not to purchase it. However, in such situation, couple
may be disagreeing upon the advice, because everyone needs their own home instead of
living in a rented house, even if they need to cut their current spending level. In such
case, instead of encouraging him not to invest, we have suggested alternate ways to pay
off debt obligations on time and client respond us positively. These, mutual discussion
and negotiation helped to deal with such issues successfully.
 Besides this, Steve may be disagree to get insure through a health insurance plan because,
he is financially fit now and insurance required payment of timely premium. Thus, in
such case, we discussed with the client that future is unexpected, and he is the only
person upon which entire family is dependent. Thus, by paying some premium charges, it
can save future of their family and get benefits for the financial strengthen. A clear
communication and providing them knowledge about various benefits helped to
overcome such issues.
Debts Value Payme
nt
Ownership
status
Other information Interest
rate
Credit
card
$2500 Minimu
m
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 $5400 $61pw Crystal There are two years until it’s paid out 13.5%
Page 42 of 45