REVISION QUESTIONS

REVISION QUESTIONS
Below are some revision questions for practice only. Please use the Tax rates &
Formula Sheet provided under Modules. When attempting the questions, you are
expected to elaborate wherever required, to display the extent of your
understanding of the questions or issues. Short and telegraphic answers with bullet
points should be avoided. We look for well-constructed sentences, clear expression,
and justification of your statements. The solutions provided for revision questions
may be abridged and provide guidance only. Please show how you have arrived
at your answers or conclusions.
Part 1: Case study
Sally and Peter, aged 28 and 27 respectively, seek your professional advice
concerning their financial affairs. Sally is a primary school teacher, and Peter is in
sales manager with an Australian food (distribution) services. The couple has two
children aged 4 and 1.
The couple’s plans are as follows:
• The couple intends to retire thirty years from now. (Does this means anything:
The eligibility are for old age pension???).
• A years ago, the couple has purchased the house on a mortgage using support
from their parents. The duration of the loan payment period is 30 years. The price
rise in recent years allows them to estimate good valuation for this house at the time
of their retirement.
At the time of retirement, the couple plan to downsize and move to a small house
close to the beach. The part proceeds of this downsizing to be part of their retirement
fund.
Assume the couple’s assets and liabilities are as follows:

Assets	$
House	600,000
Cars	48,000
Managed funds – fixed interest (Peter)	50,000
Cash at bank	500
Superannuation – Sally (fixed interest)	110,000

RMIT Classification: Trusted

Superannuation – Peter (fixed interest)	150,000
NAB shares (Sally)	15,000
Liabilities
Mortgage on home	480,000
Credit card	15,000

The couple’s income and expenses for the 2019/20 year of income are as follows:

Income
Salary Sally	50,000
Salary Peter	100,000
Distribution from managed funds (Peter)	3,500
Franked dividends from NAB (Sally)	1,400 ($600 Imputation credit)
Expenses
Living expenses	40,000
Work-related expenses for Sally: Travel between work and home	1,500
Union fees (Sally)	600
Voluntary superannuation contributions (Non concessional) (peter)	3,000
Peter (Donation)	1,200

Required
1. Calculate the tax payable by Sally and Peter individually for the 2020/2021
income tax year (use the tax rates as provided in Tax Rates & Formula Sheet
available under Modules in Canvas). Show all your workings.
2. Discuss in relation to the couple likely personal insurance requirements.
3. Sally and Peter are looking at having a Will. Explain to the couple what a Will
and the purpose is of having it.
4. Discuss some of the problem areas that you see with their superannuation
portfolio, keeping in view that is approximately more than 15 years away from their
planned retirement. Remember the couple wants to follow an aggressive investment
approach for nest 10 years of their working years. Also provide some
recommendations to the couple.
Part 2:
Question 1
Describe the importance of analysing the risk profile of a person when preparing a
Financial Plan for them.
Question 2
How is a financial planner able to determine the exact financial objectives of a
client? List 5 financial objectives that a couple in their mid-40’s is likely to have.
Question 3
(a) Your 5-year-old son inherited $20,000 for his university education from an
Aunty who passed away. After seeking your advice, his Aunty invested the money
in a bond fund paying 3.5% p.a. semi-annually for 15 years. All interest is
reinvested. How much money will your son have when he turns 20?
(b) Your brother is saving to go on a world trip in two years. His monthly
surplus, after his tax and expenditure, is $500, which he invests into a bank
account regularly. He has also been able to accumulate $4,000 in savings from his
end of month salary and is thinking to invest this amount plus the regular monthly
surplus of $500 into the bank account. The bank gives him an interest rate of 6%
p.a. and the interest is compounded monthly. How much money will your brother
have at the end of the two years?
Question 4
(a) Jason aged 47, is a business analyst who earns a salary of $42,000. He is
concerned about whether his superannuation fund will be large enough to support
his retirement when he finishes work.
Required

(i)	Calculate the minimum amount of contributions Jason’s employer must
make to his superannuation fund per annum.
(ii)	Outline two strategies that Jason could adopt to increase his

superannuation balance in retirement.
Question 5
Deborah, single and aged 67 is seeking advice on whether she is eligible for an
Aged Pension.
Following is the list of her assets and liabilities:

Assets	$
Residence	520,000
Contents	40,000
Savings account	10,000
Term deposit	30,000
Managed fund	50,000
Investment property	160,000
Income	$
Interest from savings account	100
Interest from term deposit	1,200
Income distribution from managed fund 4,500

Rental income from Investment property 7,500
Required
(a)Calculate the amount of age pension payable to Deborah under the asset test.
(b)Calculate how much income Deborah will be deemed to have earned and the
pension she will receive under the income test. How much age pension is she
entitled to receive after considering the calculations from both asset and income
test?
Question 6
Kath incurred the following capital transactions for the year ended 30 June,2020:
Sold a unit for $150,000 on 1 January 2020 that she had purchased for $180,000
on 20 September 2007.
Sold some shares for $85,000 on 24 February 2020 that she had acquired for
$45,000 on 25 June 1997.
Calculate the net capital gain forming part of Kath’s assessable income for the
year ended 30 June 2020.

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