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Back to the Black Swan

Please find below our May 2011 Ark Informer which covers the main outcomes of the budget from a financial planning perspective.

Our  current poll on our Ark Website is "do you think that the Budget is good or bad" . Feel free to make a vote.

Back to the Black Swan Welcome to our special May Budget edition of the ‘Ark Informer’. In this Informer, we have covered of the main outcomes of the budget from a financial planning perspective. Overall it was a quiet budget for financial services but there are still a few key items that may have a material impact on your personal situation. In regards to superannuation the main points are:- 1.     $50,000 concession contribution limit extended for those who are age over 50 and have a superannuation balance of under $500,000. Previously this limit was to be decreased to $25,000 from the 1 of July 2012. There is still no clarification of how they will calculate the $500,000 and if it includes withdrawals and pensions. The opportunity here is for those with individuals who are approaching retirement to continue to increase their superannuation benefits and for those over 60 to take advantage of the very beneficial transition to retirement income stream. 2.     Reduction in Penalty for excess contributions – For those individuals who make excess concession contributions of less than $10,000, this excess will be taxed at your Marginal Tax Rate as opposed to 46.5%. This is a once off allowance from the 1 of July 2011. 3.     Minimum Pension phased out – The Federal Government previously lowered the minimum pension payment to 2%. By 2012/13, this will have been phased out and it will be back to the 4% minimum for those aged under 65. In regards to taxation, the main points to consider are the following; 1.     Introduction of one off flood levy 2.     Simplification of Fringe Benefits Tax in relation to cars – This will be change to a flat 20% calculation as opposed to the current tiered structure which is based on kilometers driven. This will reduce the need for those employees to drive additional kilometers towards the end of the financial year. 3.     $5,000 write off for small business owners – This allows small business owners to purchase a car and write of the first $5,000 in the first year as a deduction. The remaining purchase price will be added to the depreciation pool and written off at either 15% or 30% 4.     Tax treatment clarified for Instalment Warrants – This confirms the previous clarification that a capital gains tax event will not occur for those who own an instalment warrant over a security and then that security is then later transferred directly into their name. These are just some of the proposed changes from the Federal Budget 2011. If you would like more information and you would like to know how these changes may influence your personal situation please do not hesitate to contact us on 02 9262 3333 or email info@arktotalwealth.com.au Regards, The Ark Total Wealth Team   With kind regards   Ark Total Wealth has been established for 18 years and we provide a large range of services that help you build, maintain and protect your wealth. Ark Total Wealth offers the complete wealth creation service, offering all the traditional financial planning services you would expect, such as investments, insurance and superannuation, plus a range of additional services you might not expect. We are one of the rare groups who include direct property and lending solutions in our strategies with a large emphasis on education. Liquidity Finance is a mortgage and finance brokerage that has identified the need to provide specialist strategy and advice in mortgage lending for investors, owner occupiers and Small to Medium Size Businesses. At Liquidity, we have developed significant experience in structuring loans to suit your needs, be it for purchasing your own home, an investment property, a car or business assets. Our success can be seen in the growth of our business through referrals. Our core focus is the customer - ensuring their needs and expectations are meet.

Federal Budget 2011: IOOF Adviser Special Bulletin What the Funding for Training and Upskilling the Workforce means to you  Buying a new car? Speak to Danny at Liquidity Finance for fleet discounts and Finance Are you Travelling? Ark has negotiated with Chartis for a 20% Discount on Travel Insurance for our  Subscribers - Click Here

A Summary of the Budget in education/skills sector

The major focus of the Budget is Jobs, Jobs, Jobs and upskilling the Nation through Training. What does this mean to you?

You or your team will probably be eligible for grants to enable you to upskill you or your team to take part in the Economies Growth.

If you need more information, click here to register your Interest

Federal Budget 2011: Government unveils major skills, workplace participation drive
By Oliver Milman
Tuesday, 10 May 2011

A National Workforce Development Fund, bringing 130,000 new training places, will be created as part of a fresh drive to increase skills and participation rates in Australia’s workforce.

Financing

The government revealed that $3 billion will be spent over the next six years to tackle Australia’s skill shortage and encourage the long-term unemployed back to work, amid a declining unemployment rate.

Of this, $558 million has been earmarked for the National Workforce Development Fund, which will work with industry groups to tackle skills shortages.

The government says the initiative will deliver 130,000 “high quality training places directly tailored to industry skills needs” over four years.

Training will be a third funded by small businesses, with medium-sized enterprises contributing 50%. The scheme will target “high need” industries, with the resources, construction and aged care sectors highlighted as immediate priority areas.

A competitive process will be set up to apply for grants, with the fund set to be supported by the creation of a new National Workforce and Productivity Agency from July 1, 2012. This agency will be tasked with identifying skills shortages in Australian businesses.

The new fund is the flagship announcement among a raft of government measures in what is a noticeably skills-heavy budget.

In his budget speech, Swan said: “In a growing economy like ours, we cannot justify the fourth highest proportion of jobless families in the developed world.”

Major workplace initiatives unveiled in the budget include:

Skills

The government has taken a carrot-and-stick approach to the states and territories over vocational education and training.

The Budget commits an extra $1.75 billion in funding over five years from 2012-13 to the states for training, but only if they sign up for “more ambitious” reform of the sector.

The government says it will introduce “tougher new standards” for its National Agreement for Skills and Workforce Development, including better quality training and aligning programs with economic needs. Negotiations are set to kick off in the coming months.

Elsewhere, $143 million has been put forward in the budget to improve basic employment skills, with the creation of 30,000 additional places in the Language, Literacy and Numeracy Program.

Apprenticeships
Mentoring programs for apprenticeships have received an additional $200 million in funding. The government says this cash will help remedy the current situation, where less than half of apprentices finish their training.

More than 300 mentors will be funded to help nearly 40,000 apprentices in traditional trades and small businesses.

In addition, 144 apprentice advisors will be employed to assist school leavers to select the best option when taking up an apprenticeship.

Participation

Faced with a declining unemployment rate, the government has set its sights firmly on raising participation rates among long-term workforce absentees.

Income support for single parents will be restructured to encourage them back into the workforce. $103 million will be spent on training and career advice for single parents to ease them back into work.

From July 1, 2012, there will be participation requirements for those on Disability Support Pensions aged under 35. The DSP will be made more stringent, while wage subsidies will be given to employers who take on disabled workers for at least 15 hours a week.

A further $68 million will be spent to help school leavers develop basic employability skills, while $95 million in funding will reward businesses who give a job to someone unemployed for more than two years.

Immigration

A “measured” increase in permanent migration will see 185,000 visas issued in 2011-12. This is up slightly from the 180,000 given in the year ending September 2010.

Of this total, 125,850 will be skilled migrants, with the government fast-tracking permanent residency for temporary business visa holders who have spent two years in regional Australia and where their employer is prepared to sponsor them for a further two years.

What are the analysts saying? Budget 2011

http://www.abc.net.au/news/stories/2011/05/09/3211180.htm 

Stephen Long: It's hard to fault the political priorities of the budget - increasing skills training and workforce participation - but a "tough budget"? Tough as tofu.

Alan Kohler: Despite all the stern prime ministerial repetition, this budget is not tough... Any decent CFO would be embarrassed by this budget.

Ross Gittins: Taken in sum, there are plenty of cuts and savings that suggest some courage in Canberra.

Peter Hartcher: Stop the presses: it's a budget that ditches tax cuts.

Dennis Shanahan: It's not radical in any sense of the word but it's as close to an old-fashioned Labor budget as you could get.

Peter van Onselen: The political impact of this year's budget will only really be known in two years' time.

Key budget stories

• Overview: Swan makes jobs his budget mantra
• Mental health: Swan 'proud' of $1.5b boost
• Economics: Australia to ride 'Asian century'
• Defence: Boost for Uruzgan mission
• Immigration: Malaysia refugee deal to cost $216m
• Science: High hopes for massive telescope project
• Health: $1.8b for regional health facilities
• Tax: Middle class on fringe of benefits

Key budget videos

• Budget breakdown: What's it all about
• The speech: Highlights from Wayne Swan's speech

What's been the reaction?

Find out what the following groups are saying about the budget:

• The Opposition
• Australian Council of Social Service
• Mental health groups
• The Greens
• National Seniors Australia
• Australian Council of Trade Unions
• National Farmers Federation

When does the Opposition respond?

Opposition Leader Tony Abbott will deliver the Opposition's budget right of reply on Thursday May 12 at 7.30pm. It will be broadcast on ABC News 24 and ABC1.

AUSTRALIAN BUDGET – 2011 - Back to the black swan

The Government promises to have the budget back in the black in 2012-13, forecasting a modest surplus of $3.5 billion…. But will there be a Black Swan

The deficit this year is $49.4 billion - up nearly $10 billion on the previous estimate - and will fall to $22.6 billion next year, up from the estimated $12 billion – attributable to black swans….

The major initiatives are:

· new $1.5b program to address mental illness
· $360m National Workforce Development fund to deliver 130,000 training places
· $425m in bonuses for excellence in teaching
· up to $4,200 in new support for low-income families with teenagers still at school or in training
· $200m for more school facilities and programs for disabled students
· $222m to expand school chaplaincy program to 1,000 more schools
· $1.8b for regional health services
· 16,000 skilled migrants allocated to regions to take advantage of mining boom
· low-paid workers to have tax offset paid during year rather than at tax time 

In all, the Government has flagged new spending of more than $19 billion and savings of $22 billion.



Positives

· Money for training to upskill Australia – various programmes your company can take advantage of
· Looking to bring in 15,000 skilled migrants
· Funding for Health $16.4b– especially mental Health $1.5b - Reduction of Company tax to 29% in 2013
· big cuts in Public Service $2b and Defence $2.5b
· 2011-12 Federal Budget measure to allow refunds of excess concessional superannuation contributions of up to $10,000 for first time breaches from 1 July 2011.
· $425m for teachers performance bonuses
· $4.3b for the bush – hospitals, health care, universities and roads + NBN
· Support to SME $5000 of up front write off for cost of work car – woopee doo!!


Negatives

· $50b deficit this year, $22b deficit next year and budgeting for $3.5b surplus in 2013 – yeah right!!
· "Australian businesses embrace fierce competition, but many are feeling the pinch of workforce shortages and our rising dollar," Mr Swan said.Swan talks about the pain of Exporters but does nothing to support them – although the EMDG programme that has been a major support for exporters has shown a 12 to 1 return of revenue per $ spent 

· Swan does nothing to support Innovation – key to continued growth of the Economy
· shelving the Green Car Innovation Fund
· a $500 million cut in renewable energy programs
· 4% growth in GDP expected, 4.5% unemployment rate – Rate rise seems on the cards… may be kept down because of high A$ - Reserve Bank will have their work cut out for them
· Asylum seeker stuff 

Assumptions

· BRIC countries – specifically China will continue to grow and rely on our Minerals
· We are have been on a roll in last few years, and look at our deficit!!
· No Black Swans 

Comments from Around the traps

The Australian is calling this a "nip and tuck" budget of "thousands of tiny cuts".

The ABC economics correspondent Stephen Long, called it as "tough as tofu". and quotes from the lyrics of Lou Reed: "Vicious - you hit me a flower."

Australia now has a twin-speed economy - Swan called it a "patchwork economy".

This budget was about "jobs, jobs, jobs", said Swan.

Australian economy cannot continue to rely on the resources boom for its revenues - partly because the mining giants, like Rio Tinto and BHP Billiton, are investing so heavily in infrastructure, for which they receive tax deductions.

Western Australia Premier Colin Barnett claims the federal government's emphasis on the mining boom as the driving force of the national economy will prove to be "inherently flawed" because only the resource rich states will significantly benefit. It will not flow to Sydney nor Melbourne

Xingweiinc ♥♫ lisa ,xing,☼ ♥ Wayne swan kicked mothers in Australia in the teeth " and family,s .So heartless ..Cant believe labor would do that @@

CHRIS UHLMANN Channel 7: But if you could miss your back by $8 billion this year and $10 billion the next, anything like that would see you miss your surplus by a considerable mark in two years' time, so why can't we just focus on the now rather than the never-never?

Greens leader Bob Brown said the budget was "lacklustre" and his party, which will hold the balance of power in the Senate from July 1, would discuss changes with the treasurer.

Joe Hockey – said the governments budget is bullshit and rubbish

LyndsayFarlow Lyndsay Farlow $32m saved from "rationalisation of corporate functions"#FewerDepartmentalPissUps #budget2011 #auspol

Asked why he thought Treasurer Wayne Swan did not mention the words environment or indigenous in his speech, Senator Brown said: "I just think there's a mind-blank there."

And what do I think? Swan needs to ensure that more money comes in than goes out, and there is a good chance there will be a surplus!

The RBA have decided to leave the cash rate unchanged at 4.75%

The RBA Governor Glenn Stevens noted that there will be possible inflationary pressures as a result of higher utilities costs, rising food costs due to the natural disasters in QLD and high prices at the petrol pumps.

We believe that this higher costs of living will force the Reserve Bank’s hand in moving interest rates in the second half of this calendar year to stifle consumer spending and curb further inflationary pressures.

WHAT DOES THIS MEAN TO YOU?

With all the above to consider, there is no better time to have a home loan health check.

The last 2 years have seen the Australian home loan market go through some major changes in the way in which lenders approach home and investment loan products. We have seen lenders increase interest rates above the Reserve Bank increase and we also saw lenders reduce Loan to Value Ratios (LVR’s) as a consequence the uncertain market.

In the past 3 months however, we have seen LVR’s return to more “normal” levels as well as increased competition between lenders, which has been a welcome change for the consumer.

Now is the time to ask yourself the following questions, as a review of your current home loan may be overdue.

• Has it been more than 12 months since you have reviewed your home loan?
• Are you unsure whether or not your current loan is still the best one for you?
• Are you looking for ways to reduce your monthly repayments or outgoings on your home loan, personal loans or credit cards?
• Are you looking to change your current situation, in regards to work or family?
• Do you want to build wealth by accessing any potential equity in your property?

 If you answered yes to any of the questions above, then you need to call today or click here to arrange your complementary home loan health check. click here .        Why?

  You change....

Over time, your personal and financial situation may change. You may get a pay rise, or you might want to start a family, or look at starting to invest in either property or shares. As your needs and priorities change, you'll probably find the right home loan product for you will change. A home loan health check will ensure your current loan suits your current needs.

 Rate rises

In stable economic conditions, a variable interest rate might look more attractive, while in more volatile periods you could prefer the predictability of a fixed interest rate. Refinance your home loan to suit the economic times. We can also look at the option of splitting your loan to give you both some amount of security without compromising the flexibility of a variable product.
  
Access to an Ark Total Wealth Financial Planner
 
As well as giving your home loan an overview, we will arrange for an Ark Total Wealth Financial Planner to give you a complementary financial planning meeting valued at $395. (including but not limited to Investments, Residential Investment Property, Superannuation, Insurance and Business Planning.)

We  look forward to meeting with you

Michael Luca and Danny Luu

Mortgage Brokers

Suite 701, Level 7, 14 Martin Place Sydney NSW 2000
GPO BOX 4013 Sydney NSW 2001
P: +61 2 9290 2777
D: +61 2 8203 0426
M: 0405 113 543
F: +61 2 9262 5788
E: michael.luca@liquidityfinance.com.au  or danny.luu@liquidityfinance.com.au