BAFI1014 Personal Wealth Management Case Study: Financial Analysis

This assignment presents a detailed case study on personal wealth management, focusing on a married couple, Alex and Rachel William. It involves calculating their after-tax incomes, assessing tax liabilities, and exploring strategies to reduce their tax burdens. The analysis includes the impact of salary sacrifice and superannuation contributions on taxable income. Furthermore, the assignment calculates capital gains tax from the sale of shares and examines the expected return on superannuation investments, considering different asset allocations and market fluctuations. The study also touches upon the characteristics of exchange-traded funds (ETFs) and other investment options, providing a comprehensive overview of financial planning concepts and practical applications. The solution includes calculations, analysis, and recommendations to optimize the couple's financial situation.

Running head: PERSONAL WEALTH MANAGEMENT
Personal Wealth Management
Name of the Student:
Name of the University:
Authors Note:

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PERSONAL WEALTH MANAGEMENT
Contents
Answer 1:.........................................................................................................................................2
Answer 2:.......................................................................................................................................11
References:....................................................................................................................................14

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Answer 1:
Calculation of after tax income of Alex for the year ending on June 30, 2019 is calculated in the
table below:
Taxable income of Alex Williams
Particulars Alex William
Gross annual salary 32,400.00
Add: other taxable income
Interest on savings bank account -
Wisdom Tree income -
Dividend received less imputation credit -
Dicker Data limited -
Galaxy Resources Limited -
Gross taxable income 32,400.00
Less: Deductions
Travelling to and from work place assuming allowed as deduction 1,100.00
Membership fees of Institute of Architect
Donations to charity 1,750.00

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PERSONAL WEALTH MANAGEMENT
Net taxable income 29,550.00
Less: Income tax liability
Income tax liability @19%
(29550 - 18000) x 19% 2147
After tax income 27,403.00
After tax income of Alex is $27,403 (Hyun Seok Yoon, 2018).
After tax income of Alex Williams for the year ended on June 30, 2019 is $27,403 as calculated
in table above.
Calculation of after tax income of Rachel William for the year ending on June 30, 2019 is
calculated in the table below:
Taxable income of Rachel Williams
Particulars Rachel
William
Gross annual salary 102,200.00
Add: other taxable income
Interest on savings bank account 440.00

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PERSONAL WEALTH MANAGEMENT
Wisdom Tree income 780.00
Dividend received less imputation credit
Dicker Data limited 840.00
Galaxy Resources Limited 390.00
Gross taxable income 104,650.00
Less: Deductions
Travelling to and from work place assuming allowed as deduction 2,500.00
Membership fees of Institute of Architect 1,060
.00
Donations to charity
(A): Net taxable income 102,150.00
Less: Income tax liability
Tax till $90000 20797
Add: (131700 -90000)x37% 15429
(B): Total tax 36226
After tax income (A - B) 65,924
.00

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PERSONAL WEALTH MANAGEMENT
Thus, after tax income of Rachel Williams for the year ending on 30th June 2019 is $65,924
(Jones, 2016).
Alex and Rachel by following some simple and legal steps could easily reduce their income tax
liability. Here are few steps mentioned below that will help the couple to reduce their respective
income tax liabilities for the year ending on June 30th 2019 (Li, 2017).
I. Salary sacrifice.
II. Use of con-contribution scheme.
III. Investing maximum amount possible in superannuation funds.
Impact of investing 12% of gross salary on superannuation fund:
Taxable income of Alex
Particulars Alex William
Gross annual salary 32,400.00
Less: Investment in superannuation funds 3,888.00
Net salary 28,512.00
Add: other taxable income
Interest on savings bank account -
Wisdom Tree income -

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PERSONAL WEALTH MANAGEMENT
Dividend received less imputation credit -
Dicker Data limited -
Galaxy Resources Limited -
Gross taxable income 28,512.00
Less: Deductions
Travelling to and from work place assuming allowed as
deduction
1,100.00
Membership fees of Institute of Architect
Donations to charity 1,750.00
(A): Net taxable income 25,662.00
Less: Income tax liability
1417.78
Total tax liability 1,417.78
Taxable income of Alex and Rachel Williams
Particulars Rachel

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William
Gross annual salary 102,200.0
0
Less: Investment in superannuation funds 12,264.0
0
Net salary 89,936.0
0
Add: other taxable income
Interest on savings bank account 440.
00
Wisdom Tree income 780.
00
Dividend received less imputation credit
Dicker Data limited 840.
00
Galaxy Resources Limited 390.
00
Gross taxable income 92,386.0
0

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PERSONAL WEALTH MANAGEMENT
Less: Deductions
Travelling to and from work place assuming allowed as
deduction
2,500.0
0
Membership fees of Institute of Architect 1,060
.00
(A): Net taxable income 89,886.00
Less: Income tax liability
20759.95
Total tax liability 20,759
.95
Part B:
Calculation of capital gain of Rachel Williams from sale of Dicker Data Ltd share is provided
below:
Particulars Amount
($)
Amount
($)
Sale proceeds (4000 x 7) 28,000.
00

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Less: Cost of acquisition 12,000.
00
Short term capital gain 16,000
.00
The capital gain tax can be reduced from the sale of shares if Rachel just waits another 2 months.
This will ensure classification of capital gain as long term capital gain to reduce the capital gain
tax liability of Rachel as the rate of capital gain tax on long term capital gain is lower than short
term capital gain tax rate (Niblock, Sinnewe and Heng, 2017).
Part C:
On the basis of following returns and investment proportion the expected return on
superannuation is calculated below.
Investment in superannuation fund assumed to be 12% of gross salary
Particulars Investmen
t ($)
Retur
n ($)
Investment in superannuation fund assumed to be 12% of gross salary 3,888.0
0
Investment in Australian share 1,555.2
0 46.66

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cash and fixed interest investment 583.
20 8.16
Investment I international shares 1,360.8
0 95.26
Investment in properties 388.
80 12.05
Total return
162.13
The rate of return on the superannuation fund can be calculated by using the following formula:
Where,
• Ri is the return for each asset i;
• Pi is the proportion of the each asset in the portfolio; and
• i counts the number of assets.
The rate of return on superannuation fund investment is 4.17% as per the above table.

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The reason for fluctuation in superannuation portfolio balance is due to the continuous changes
in the rate of return on different assets which are part of the superannuation portfolio investment
fund of Alex. Though the superannuation fund has fixed ratios when it comes to making
investment of the funds in different assets but since the rate of return on these funds continuously
fluctuate with the changes in market condition hence, the superannuation balance of Alex also
fluctuates accordingly (Taxation. Income Tax. Joint Return. Joint and Several Liability under
1936 Act, 2018).
Has the superannuation fund been invested in treasury or bond instead of Australian and
international shares then the expected fluctuation in the superannuation balance would have been
much lower however, in that case the return on investment would also have been significantly
lower than the rate of return earned on the superannuation fund investment at present (Invensys
Australia Superannuation Fund Pty Ltd v Austrac Investments Ltd and Others, 2017).
Answer 2:
Characteristics of investment in exchange traded funds.

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Unlisted managed funds have the following characteristics (Weber, 2016).

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References:
Hyun Seok Yoon (2018). Review of 2010 Income Tax Act Law Cases. Seoul Tax Law Review,
18(2), pp.499-539.
Invensys Australia Superannuation Fund Pty Ltd v Austrac Investments Ltd and Others.
(2017). Victorian Reports, 15 VR(12), pp.87-112.
Jones, W. (2016). TAXATION CHANGES FOR PETROLEUM COMPANIES ARISING
UNDER THE TAX LAW IMPROVEMENT PROJECT RE-WRITE OF THE PETROLEUM
PROVISIONS OF THE INCOME TAX ASSESSMENT ACT. The APPEA Journal, 41(5),
p.134.
Li, Y. (2017). Valuation Models for Low-Income Housing: How Does Income Approach Reduce
Ambiguity of Assessing Property Tax?. SSRN Electronic Journal, 2(2), pp.142-221.
Niblock, S., Sinnewe, E. and Heng, P. (2017). A review of superannuation fund performance
studies. Accounting Research Journal, 30(2), pp.224-240.
Taxation. Income Tax. Joint Return. Joint and Several Liability under 1936 Act.
(2018). Columbia Law Review, 51(9), p.549.
Weber, C. (2016). Does the Earned Income Tax Credit Reduce Saving by Low-Income
Households?. National Tax Journal, 69(1), pp.41-76.