Premium Finance Services

Saving Tax is not only a priority for most investors but seems to be almost an obsession with many Australian Tax payers.  When saving tax is viewed as a goal rather than a tool then investment strategy is often left wanting with the result being poor, bad, or even disastrous investment returns.

The fundamental starting point for any wealth creation, or wealth preservation, plan (other than the plan itself) is to ensure that the investment strategy is sound.  Groups like Premium Finance Services always start with designing or creating a blue print that is client specific identifying and meeting the specific needs of the clients in question.  The next step is to identify an investment strategy and then, and only then, should tax minimisation (savings) be introduced.

But back to saving tax – in simple terms a tax refund (for investment purposes) is only payable when the investor makes a LOSS and a LOSS means just that – on our tax paperwork we are going backwards – either the investment is losing value and we have realised our losses through a sale or the cost of keeping the investment is more than the income we are making – running at a loss!

So the easiest way to get a tax refund is to make a loss on an ‘investment’!  Believe it or not most “tax driven” investments do just that – they give you a big loss and no investment return.  Common tax driven investments are agriculturally based – emus, pine trees, alpacas, etc, and anything that is promoted primarily as a “tax saving” rather than a quality investment should be avoided

If all you want is a tax deduction then make that decision and give your money to the Salvos or other charity – it will make you feel good, help someone in need and give you a tax deduction without the anguish of a massive investment loss and failure to provide for your future.

If however you want to make money rather than lose it, that is to create wealth or preserve wealth, then Premium Finance Services believes you should set making money as your primary goal rather than saving tax and the best way to do that is to plan to pay $1 million in tax remembering that if you paid $1 million in tax then there must be $2 Million or $3 million in profit left for you!

Tax avoidance is illegal but tax minimisation is just prudent investment management.  With help from professionals like Premium Finance Services the maximum tax savings (tax minimisation) can be planned for and obtained once the appropriate investment strategy and wealth creation blue print has been identified.

In many instances a properly structured wealth creation plan can see the cost of creating your future wealth reduced by 30% to 50% by simply using prudent tax minimisation strategies to invest into quality investments.  That means with proper tax planning you can create 30% to 50% more wealth for the same investment.

The rule for today is to not let saving tax stop you creating wealth.

Today I want to address and differentiate between an investment, a tax strategy, and a wealth creation strategy (financial plan). This may seem a simple concept, and in reality it is, but the media, the government, and to some extent the financial planning industry, have all confused the issue in order to make their job easier leading to confusion within the general public about their wealth creation plans.

An investment is, as the name implies, an asset that can (and should) over time appreciate in value. There are three main investment asset classes
1. Cash & Fixed Interest;
2. Shares; and
3. Property.
There are other investment types that are often more speculative and less reliable as wealth creation vehicles and are not considered main stream investments including, collectables and anything that can live (and die).

A tax strategy exists at two levels and includes the inherent tax advantages of a particular asset class as well as the structure in which we hold those assets. The two most common tax structures for investment purposes are Superannuation; and Negative Gearing.

A wealth creation or financial, plan is the financial path along which we intend to travel to reach our desired financial / wealth creation goals.

It does not matter how good the tax strategy is if the investments are poor – you still will not create any wealth so it is imperative that you focus on sound investments before considering which tax strategy suites you best. Similarly it is important to have a goal or outcome in mind before determining which investments or tax strategies are best.

The most common mistake made in the financial services industry is believing that Superannuation is an investment and a wealth creation plan/vehicle; it is NOT it is a merely a tax strategy and just having a tax strategy is NOT sufficient to create wealth. The massive losses suffered last year by investors and retirees in superannuation funds was in a large part due to not understanding the difference between the investments held (shares) and the tax strategy (superannuation) and the financial goals of the investor.

Companies like Premium Finance Services will not only differentiate between tax strategies and investments, but between tax strategies and wealth creation plans or blue prints. At Premium Finance Services we assist each client (most often a couple) to identify their financial goals first, then we show them the options available to create wealth and finally they choose which options (including tax strategies) best suit them to meet their wealth creation plans. A great wealth creation plan is;
1. Financial Goals first
2. Investment Strategy second
3. Tax Strategy third

Wealth Creation with Premium Finance Services Brisbane and Melbourne

Part 1

I will start with an introduction of who I am and what I intend to do with this blog.

I have been involved as a practitioner and advisor in the financial planning, investment advisory and wealth creation industry since March 1987 so I have seen the industry’s birth from the life insurance industry in the early 1980’s and its evolution since.

During this time life expectancies have increased, retirement ages decreased and at the same time the Government’s ability to support retirees has drastically decreased. It is no wonder then that 95% of retirees fail to maintain a comfortable (pre-retirement) standard of living with 84% effectively living on less than the minimum wage.

The rise of wealth creation specialists like Premium Finance Services and an invigorated financial planning industry focussing on wealth creation in addition to the old staple of wealth preservation are working towards improving these statistics by offering solutions that can be used to improve the retirement outlook for the vast majority of Australians.

This blog will deal with ad hoc topics that come to mind dealing with wealth creation and retirement planning with the aim of assisting those interested understand the options and choices available to improve their chances of a comfortable retirement.

Bt way of background I have an Honours Degree in Science from the Australian National University, Graduate studies in Micro & Macro Economics From Canberra University, a non-accredited Diploma of Financial Planning from Monitor Money, an accredited Diploma of Financial Planning from Deakin University, an accredited Diploma in Financial Services (PS146 compliance) and a Certificate IV in Property plus over 22 years as a financial planner and wealth creation expert.

I have worked as a licensed financial planner (authorised representative) managing over $20 Million in private client funds for one of Australia’s largest independent financial planning companies (Monitor Money in Canberra) as well as a similar role with the NSW Labor Council (Chifley Financial Services Southern NSW), a wealth creation specialist and researcher (Phoenix Financial Consultants – Sydney & Brisbane), and now a Relationship Manager (wealth creation expert for Premium Financial Services in Brisbane).