Watch the Quarterly Market Update for December 2018 by Beulah Capital’s Director, Tom Elliott and CEO, Christian Ryan – part of the Investment Management team for Fintech Private Portfolios.

Topics mentioned in this video update include:

  • Mining sector — iron ore prices up due to Vale dam tragedy in Brazil
  • Update on ASX Companies following March reporting season
  • What to expect in markets going forward
  • Risks and Opportunities


Protect Your Super Package Banner

Please click on the following link to view APRA’s Frequently Asked Questions relating to the “Protecting your super package”

The recent passage through Parliament of “Treasury Laws Amendment (Protecting Your Superannuation Package) Act 2019” requires all Registerable Superannuation Entity (RSE) Licensees to implement a number of reforms to address account erosion of balances due to excessive fees or unnecessary insurance from 1 July 2019.

This change is part of the Protecting Your Super Package that was announced in the 2018-19 Federal Budget prior to the Federal Election. For more detailed information on the budget read our Federal Budget Analysis: https//

In April this year the Treasurer, The Hon Josh Frydenberg also announced that the Government will improve a number of superannuation contribution eligibility rules from 1 July 2020.

The changes include:

  • Allowing individuals to make voluntary ‘Concessional’ and ‘Non-Concessional’ Contributions to superannuation up to age 66 without having to meet the work test;
  • Extending the age limit for ‘Spouse Contributions’ from 69 to 74;
  • Extending the age limit for the ‘2 Year Bring-Forward’ arrangements for Non-Concessional Contributions from 64 to 66.

Please note, these proposals are not yet law and any changes will require legislation to be passed by Parliament.

Please contact the Fintech Financial Services office if you have any questions about how these changes affect your personal circumstances.

Summary of key findings:

  • The proposed changes to franking credit rules, if legislated, will have a minimal influence on Australian share market volatility.
  • Investor impacts will vary, with Self Managed Super Fund (SMSF) investors in the tax-free retirement phase the most impacted. The loss of value will be most pronounced for those individuals not paying tax, and who are ineligible to receive the Age Pension.
  • Superannuation investors holding diversified portfolios in accumulation phase will be little affected.
  • If the proposed changes are passed, impacted clients can review investment strategies, improve portfolio diversification and focus on the total return of their portfolios, rather than relying solely on Australian share income returns to meet goals in the future.


The changes to franking credits proposed by the Labor government have escalated as a prime cause for concern among Australian investors. This update addresses the likelihood of the changes coming into effect, and if passed, the implications for Australian savers and retirees, both in terms of impacts to market volatility, as well as portfolio strategy.

At this point, a few days out from a federal election, there is no guarantee that Labor will win government, though current polls indicate a likely victory which elevates the franking credit discussion to something more than just an academic exercise.

Should Labor win government, the Bill would also need to be passed into law. While a minority Senate may present some challenges, the clear policy stance presented by the Labor Party would create a reasonably strong mandate for the Senate to enact the changes into law.

  1. Labor’s current proposal

The Labor Party is proposing to roll back the treatment of franking credits to the rule that was in place prior to July 1 2000, making franking credits non-refundable. This would mean that investors on a low tax rate, or non-tax payers, may lose part or all of the franking credits. To protect low income earners, an exemption for individuals eligible for certain government support programs such as the Age Pension, Newstart and others has been proposed. Other exemptions apply, such as for SMSF’s where at least one member was a recipient of a government pension or allowance at 28 March 2019.

In order for individuals to continue to benefit from the full value of the franking credits received, the level of taxable income would need to equal or exceed the value of franking credits. Any excess franking, which would currently result in a refund from the Australian Tax Office, would be foregone.

  1. The impacts of the change are not borne equally

Franking credits are intended to have the effect of removing double taxation on company earnings. At present franking credits are earned when an Australian company generates earnings from its Australian operations and has paid tax on those earnings. For ease of explanation in this update we have assumed that the Australian company tax rate is 30%. For investors with an income tax liability that exceeds the value of the franking credits received, there will be no lost benefit. For investors with a tax liability that is less than the value of franking credits held, a portion of the benefit will be foregone.

The loss of value will be most pronounced for those individuals not paying tax, and who are ineligible to receive the Age Pension.

An interpretation of lost benefit cannot be derived by simply comparing an individual’s marginal tax rate with the company tax rate. For example, it would be false to assume that in all cases an individual with superannuation in the accumulation phase, during which time a tax rate of 15% applies, would lose half of the benefit. There are scenarios where this might be the case, however, the franking credits offset the individual’s income tax liability regardless of whether the tax liability is the result of income and capital gains generated from holdings in Australian shares or other parts of the portfolio.

Consider the following example: An individual holds an accumulation phase superannuation account invested across a mix of Australian shares, global shares and bonds. If we assume a 70% allocation to shares and a 30% allocation to bonds, and within the allocation to shares we assume 50% is held in Australian shares and 50% in global shares. Within the Australian shares allocation not all locally domiciled companies generate earnings from Australian operations, and not all earnings have had tax paid. The “franking level” of dividends paid by listed Australian companies is approximately 70%.

Taking the income yield from shares and bonds for the 2018 financial year would result in a yield of 2.5% on bonds, 4.3% on Australian shares (pre-franking) and 2.7% on global shares. The portfolio yield is 3.2%, which creates a tax liability of 0.48%. The value of the franking credits at the portfolio level equate to 0.45% resulting in a tax liability of just 0.03% of the value of the portfolio. Therefore, for superannuation investors in the accumulation phase, who are holding a well-diversified portfolio, there is little to worry about. The assumption that half the current value of franking credits could be lost, is ill-considered.

However, for self-funded retirees paying zero tax, the impact of the changes is more pronounced, with the value of the franking credits foregone, resulting in a loss of approximately 0.45% of portfolio value annually under the scenario of an investor with 70% growth assets and 50% Australian equity home bias. The impact would be even higher in the case of a less diversified portfolio with a higher exposure to Australian equities. For a retiree holding their entire portfolio in fully franked financials stocks, the impact, based on a pre-tax yield of 5.6% and a franking level of 100%, could be as much as 2.4% in lost franking credits. This extreme example also serves to highlight another important point, regarding the unintended risks stemming from highly concentrated portfolio positions.

Labor’s proposal also creates a potential inequity in the impact of the change between pensions taken from SMSF’s versus from large pooled funds. This stems from the ability of larger funds to still give their (tax-exempt) pensioners the benefit of franking credit refunds via their unit price returns because tax is levied at the total fund level, not the particular product or member level. The extent of this disparity remains to be seen and may be subject to each fund’s pricing policy and the makeup of their member base between accumulation and post-retirement members.

  1. Addressing concerns for Fintech clients

The proposed changes have generated some common questions from our clients which are worth addressing. For example:

  • Should Fintech’s Investment Management Committee substitute Australian shares for other high yielding assets to make up for the loss of franking credits?
  • Will the change to franking credit rules result in heightened share market volatility?

a. Substituting Australian shares for other high yielding assets

The question of what can be done to “make up” the loss of yield from a change to the franking credit rules raises a broader question about the investment strategy being pursued and the goal that the strategy has been designed to support. Often, this question is attached to an income-oriented investment approach, whereby an investor seeks to meet their spending requirements from the natural yield of an Australian equity portfolio.

This behavioural tendency is understandable considering many investors spend their working lives trying to achieve a “savings target” that will support their goals in retirement. As a result, once retired, investors are often psychologically averse to spending from the portfolio in an amount that would make their balance drop. Understandably, the result is that many retirees are drawn toward an income-focused approach without realising the possible negative implications.

An excessive emphasis on yield can result in unintended risks. This could result from substituting investment grade bonds for high yield credit, or, sacrificing broad diversification for allocations to single countries, sectors or even stocks in a desire to chase yield.

A further consequence is that an income-oriented approach pays too little attention to the capital base, which can result in the portfolio being eroded by inflation and failing to last the duration, or that a retiree underspends from their portfolio and lives an unnecessarily frugal retirement.

Instead of constructing the portfolio to only align income yield with spending requirements, a total return approach aligns the portfolio’s asset allocation with the investor’s Investment Risk Profile and spending goals. This is the approach recommends to keep clients portfolio well diversified across asset classes and focused on the overall, or total, return. Where the need for additional income occurs over and above the yield generated by this broadly diversified portfolio, the investor spends the amount made from the overall portfolio, or the total return, rather than switching around holdings to generate additional yield.

b. Implications for share market volatility

A further concern voiced by investors is whether the change to franking credit rules could contribute to share market volatility as investors re-price the value of Australian equities under a new set of rules.

While impossible to reliably quantify, the changes to franking credit rules are likely to have a modest impact on share market volatility. Removing the franking credit refund will have a minimal impact on most investors. The key impact will be on zero tax paying investors who are not subject to the exemption. Larger superannuation funds will continue to receive a portion of the franking credit refund, which will vary depending on the level of tax paid relative to the value of the fund’s franking credits. Generally speaking, funds with concentrated exposures to Australian shares will have more franking credits in proportion to their overall tax liability and will be at greater risk of losing a portion of the benefit. This will likely lead to some re-weighting to other asset classes to balance out the level of franking with the tax liabilities of the fund.

As is often the case though, equity valuations, macroeconomic and geopolitical events both locally and globally are likely to have an outsized impact on share-market volatility compared to the changes to franking credit rules.

  1. What will Fintech do?

The low likelihood of a serious market correction as a direct result of what is still just a proposal, means that Fintech sees no need to rush a decision to change portfolio settings and incur unnecessary transaction costs.

If Labor win the election and the changes are legislated, revisiting goals and personal circumstances to judge the effect of the change is a critical first step. It is important that Fintech clients understand, and not overstate, the potential impact. For clients invested in Fintech’s well-diversified portfolios in the accumulation phase, or for savings outside the superannuation system, it is likely that the overall impact on your investment strategy will be negligible.

For self-funded retirees paying zero tax, the implications for portfolio positioning will depend on the starting point. For client’s holding portfolios with concentrated exposures to Australian equities, the opportunity exists to review their goals and improve the mix of diversification.

By focusing on the entire return earned by the portfolio, rather than just the income yield, a total return approach maintains your portfolio’s diversification and allows for better alignment with investment goals. It also provides more control over the size and frequency of withdrawals.

To discuss any of the above further in relation to your specific circumstances, contact Grant Chapman on telephone (07) 3252 7665.

Josh Frydenberg delivering the 2019 Federal Budget













On Tuesday, 2 April 2019, Treasurer Josh Frydenberg handed down his first Federal Budget. In an election Budget, the Treasurer announced the first Budget surplus in more than a decade at $7.1 billion for the 2019-20 financial year. The Government forecasts a total of $45 billion of surpluses over the next 4 years. Total revenue for 2019-20 is expected to be $513.8 billion, an increase of 3.6% on estimated revenue in 2018-19.














In the next few days, Prime Minister Scott Morrison is expected to announce an election date of either Saturday 11 or 18 May 2019. This Budget is unique because of its close timing to the election for two reasons. Firstly, the Liberal Government is unlikely to be able to legislate any of the measures announced prior to the election, so many of the proposals and tax incentives discussed in this analysis may not come to fruition. Secondly, the Morrison Government also announced $3.2 billion in Budget expense measures under the heading “decisions taken but not yet announced”. Therefore, expect to see some further ‘sweeteners’ announced prior to election day as the Coalition tries to win some ground back on the polls.

This places the current Government distinctly apart from the Australian Labor Party which has a superannuation policy platform that will negatively impact many retirees because of the proposed changes to remove excess franking credit refunds, and restrict super contributions. In addition, Labor has also proposed that if elected, they will remove the tax deductions for negative gearing when investing in property (except for new build houses), and reduce the Capital Gains Tax (CGT) discount to 25%. Concerns are that this could contribute to a slowdown in the Australian economy, put further downward pressure on property prices, and create a negative wealth effect overall.

Taxation – Personal

On personal taxation, the Government announced two significant changes designed to deliver $158 billion of additional tax relief:

1.  More than doubling the low & middle income tax offset (LMITO) up to $1,080 from 2018-19.

In 2018-19

  • The Government will further reduce taxes for low and middle-income earners to ease cost of living pressures and support consumption growth.
  • Low and middle-income earners will have their tax reduced by up to $1,080 for single earners or up to $2,160 for dual income families, after lodging their tax returns as early as 1 July 2019.
  • Taxpayers earning up to $126,000 a year will receive this tax cut.
Click for a larger image

The new targeted offset will benefit over 10 million low and middle‑income earners


In 2022-23

The Government will preserve the tax relief provided by the larger low and middle income tax offset by increasing the top threshold of the 19 per cent tax bracket from $41,000 to $45,000 and increasing the low income tax offset (LITO) from $645 to $700.

2. Lowering the 32.5% tax rate to 30% from 1 July 2024.

In 2024-25

The Government will reduce the 32.5 per cent tax rate to 30 per cent, more closely aligning the middle tax bracket with corporate tax rates. This will cover around 13.3 million taxpayers earning between $45,000 and $200,000 and will mean that 94% of taxpayers are projected to face a marginal rate of 30 per cent or less.








2024-25: With the announced changes there would only be three personal income tax rates of 19%, 30% and 45%

2024-25 with the Government's plan.

* Average full-time earnings includes both males and females, and excludes earnings from overnight work.


Proposed changes to personal tax rates and thresholds over time 

Rates in
Thresholds in
New Rates in
New Thresholds in
Nil Up to $18,200 Nil Up to $18,200
19 per cent $18,201 – $37,000 19 per cent $18,201 – $45,000
32.5 per cent $37,001 – $87,000 30 per cent $45,001 – $200,000
37 per cent $87,001 – $180,000
45 per cent Above $180,000 45 per cent Above $200,000
Low income tax offset in 2017-18 Up to $445 Low income tax offset in 2024-25 Up to $700

Medicare levy changes

From 1 July 2018

While the Medicare levy remains unchanged at 2% of taxable income, the thresholds for low-income singles, families, and seniors and pensioners will increase in the 2018–19 income year.

The threshold for singles will increase to $22,398. The family threshold will increase to $37,794 plus $3,471 for each dependent child or student.

For single seniors and pensioners, the threshold will increase to $35,418. The family threshold for seniors and pensioners will increase to $49,304 plus $3,471 for each dependent child or student.

Taxation – Small and Medium Business

Instant asset write-off threshold increased to $30,000
until 30 June 2020

On Small Business tax, the Government has proposed to increase the instant asset write-off threshold to $30,000 until 30 June 2020. The threshold applies on a per asset basis, so eligible businesses can instantly write off multiple assets. This builds on the Government’s earlier announcement that the instant asset write-off threshold would be increased from $20,000 to $25,000 and extended to 30 June 2020. More than 350,000 businesses have already taken advantage of the instant asset write‑off.

The Government is also expanding access to the instant asset write-off to include medium‑sized businesses by increasing the annual turnover threshold from $10 million to $50 million. Around 22,000 additional businesses employing around 1.7 million workers will now be eligible to access the instant asset write-off.

These changes will benefit small and medium‑sized businesses and improve their cash flow as they will be able to immediately deduct purchases of eligible assets each costing less than $30,000.

Around 3.4 million businesses, employing around 7.7 million workers will be eligible.

If legislated, the increased threshold and expanded eligibility will apply from 7.30pm (AEDT) on 2 April 2019 to 30 June 2020.

















Superannuation contributions for older Australians
From 1 July 2020

The work test will no longer need to be met to make voluntary contributions to superannuation from 1 July 2020 for those aged 65 and 66. The ability to utilise the bring-forward rule will also be amended to allow individuals less than age 67 to contribute a greater amount to superannuation. This means the work test requirements will align with Age Pension age which will be 67 from 1 July 2023.

There is no change to other criteria, such as the total superannuation balance, which will limit the ability to make non-concessional contributions.

The removal of the work test would provide the opportunity for those eligible clients to:

  • Make non-concessional contributions
  • Make concessional contributions including catch-up contributions
  • Implement the recontribution strategy
  • Manage tax, including capital gains tax
  • Claim the spouse contribution tax offset or co-contributions (if eligible), and
  • Transfer foreign superannuation into an Australian superannuation account.

Spouse contributions up to age 74
From 1 July 2020

The age limit for spouse contributions will increase to 74. Currently spouse contribution can only be made if the receiving spouse is under age 70.

Additional flexibility will be provided by the removal of the work test for those aged 65 and 66. This would enable spouse contributions to be made for the receiving spouse without the need to satisfy the work test up to age 66. From age 67 to 74, the work test would need to be satisfied by the receiving spouse.

Making spouse contributions is a simple strategy that enables that spouse’s superannuation to be boosted. This may be used as a means of equalising the superannuation interests of both members of the couple. It may also entitle the contributing spouse access to the spouse contribution tax offset.

There is no change to other criteria, such as the total superannuation balance, which will limit the ability to make non-concessional contributions.

Insurance in superannuation
From 1 October 2019

Part of the Government’s Protecting Super Package included the provision of insurance in superannuation on an opt-in basis for accounts with balances of less than $6,000 and for members under age 25. The original start date for this was 1 July 2019, however it has been deferred until 1 October 2019.

Calculation of exempt current pension income
From 1 July 2020

Trustees of superannuation funds will be able to choose the method they use to calculate exempt current pension income (ECPI) for funds with members in both pension and accumulation phases.

The requirement for superannuation funds to obtain an actuarial certificate to calculate ECPI under the proportionate method when all the members are in retirement phase will be removed.

This measure would be primarily of interest to Self Managed Super Fund (SMSF) trustees.

Social Security

One-off energy payment
From 1 June 2019

A one-off payment of $75 for singles and $62.50 for each eligible member of a couple will be made to assist with the cost of energy bills. To be eligible, an individual must be a resident in Australia and be eligible for a qualifying payment on 2 April 2019. Qualifying payments are:

  • Age Pension
  • Disability Support Pension
  • Carer Payment
  • Parenting Payment (Single)
  • Veterans’ Service Pension
  • Veterans’ Income Support Supplement
  • Veterans’ Disability Payments
  • War Widow(er)s Pension, and
  • Certain permanent impairment payments

The payment will be tax free and not counted as income for social security purposes.

Partner Service Pension – eligibility alignment
From 1 July 2019

Former spouses and former de-facto partners of veterans will be able to access the Partner Service Pension when they separate from their veteran partner.

Aged Care

Better access to care
From 1 July 2018

More funding will be available to improve the quality, safety and accessibility of residential and home care services, including:

  • The release of an additional 10,000 home care packages across the four package levels, and
  • Developing an end-to-end compliance framework for the Home Care program, including increasing auditing and monitoring of home care providers.

Other Measures


The budget includes a record $100 billion in funding for road and rail projects around the country over the next decade.

Extending FTB to ABSTUDY recipients aged 16 and over who study away from home

The Government announced that it will provide $36.4 million over 5 years from 2018-19 to extend Family Tax Benefit (FTB) eligibility to the families of ABSTUDY (secondary) student recipients who are aged 16 years and over, and are required to live away from home to attend school.

Tax Avoidance Taskforce on Large Corporates etc: more funding

The Government will provide $1.0bn over 4 years from 2019-20 to the ATO to extend the operation of the Tax Avoidance Taskforce and to expand the Taskforce’s programs and market coverage.

The Taskforce undertakes compliance activities targeting multinationals, large public and private groups, trusts and high wealth individuals. This measure is intended to allow the Taskforce to expand these activities, including increasing its scrutiny of specialist tax advisors and intermediaries that promote tax avoidance schemes and strategies.

The Government has also provided $24.2m in 2018-19 to Treasury to conduct a communications campaign focused on improving the integrity of the Australian tax system.

Tax exemption for North Queensland floods grants

The Government will provide an income tax exemption for qualifying grants made to primary producers, small businesses and non-profit organisations affected by the North Queensland floods.

Qualifying grants include Category C and Category D grants provided under the Disaster Recovery Funding Arrangements 2018, and grants provided under the On-Farm Restocking and Replanting Grants Program and the On-Farm Infrastructure Grants Program.

The exemption will apply where the grants relate to the monsoonal trough, which produced flooding that started on or after 25 January 2019 and continued into February 2019. The grants will be non-assessable non-exempt income for tax purposes.

Tax exemption for primary producers affected by Queensland storms

The Government will provide an income tax exemption to primary producers in the Fassifern Valley, Queensland affected by storm damage in October 2018.

The tax exemption relates to payments distributed to affected taxpayers through a grant totalling $1.0 million to the Foundation for Rural and Regional Renewal, working with the Salvation Army and a local community panel.

Please contact our office if you would like to review your situation and determine the financial strategy options that will assist you secure your future.


Equity markets around the world have been volatile of late, and whenever this happens, investors naturally look for explanations for the downturn and wonder whether they’re in the right investments. We believe this response to volatility, although natural, is likely unhelpful. Instead, you are better served by putting recent market movements into the context of what’s important to you in the long term. For example, looking back a decade to the massive market decline of 2008, consider this question: Would you be closer to meeting your long term financial goals by having sold out of equities after double-digit losses only to miss the rebound and one of the longest bull markets in history?  Putting market volatility into context is a much better way to react than trying to understand every market move or selling at the wrong time to quiet fears.

Reserve Bank of Australia - facade


Key Takeaways

  • Predicting how macro-economic issues will work out or how they’ll affect markets is next to impossible.
  • Volatility can be upsetting, but selling after significant losses can be counterproductive.
  • We believe valuations, not volatility are the key to portfolio reallocation, although sometimes high volatility may open up attractive valuation-driven purchases.

The good old days seem to be quickly sliding into the past. As recently as a year ago, markets were on a joyride. Ever higher returns pushed painful memories of the Global Financial Crisis (GFC) further and further into the background. The fear index, also known as the VIX or more formally the CBOE Volatility Index, rises during periods of market stress. But in 2017, the VIX couldn’t have been less scary, as it set record lows amid a seemingly ever rising market. In fact, from January 1990 through December 2016, the VIX fell below 10 on nine days (nine days in 27 years!) but in 2017 it sat below 10 for 52 days so calm were the markets.

Xi Jinping - Trump

Volatility has clearly returned to markets in 2018. Earlier in the year, fears of rising interest rates and multiple trade conflicts set the market on edge. Many investors continued to have confidence in leading growth stocks for much of the year until threats of stiffer regulations and the failure of a few internet darlings to live up to lofty expectations caused a dramatic rethinking of their worth. In addition, markets have had to wrestle with slowing economic growth in China, the possible end of Quantitative Easing (printing money) by the European Central Bank, volatility caused by the US midterm elections and property prices crashing here in Australia. If balancing all those risks to form a better forecast of how they’ll play out or affect markets seems like a tough job, we couldn’t agree more. Clearly it’s hard to predict these issues in isolation. But in reality, these issues interact and evolve, and people react to them along the way, thus multiplying complexity and making outcome predictions next to impossible. No investor can consistently know how today’s concerns might affect markets in the future. Some current examples of this are:

  • The US-China trade wars and tariffs,
  • Interest rate increases by the US Federal Reserve in response to strong economic growth,
  • The unresolved UK Brexit and political turmoil in Europe,
  • Australia’s possible change of Government in May to Labor and proposed cuts to tax benefits, including the removal of excess franking credit refunds and the reduction of tax deductions for negative gearing,
  • The Reserve Bank of Australia keeping interest rates at the historically low level of 1.50% for over two years,
  • Restrictions on investor and interest-only loans by APRA and Banks curtailing lending,
  • Property prices falling significantly in Sydney, Melb, Perth and Darwin,
  • Australian Banks being exposed for misconduct by the Royal Commission, paying billions in fines and forecasting less profits,

All demonstrating how quickly investor sentiment can change and evolve.

Whether the market is, or will become completely comfortable with all or some of the concerns above remains to be seen. In the US, reaching a new North American trade agreement gave some relief, but progress has been elusive in talks with China, a situation that appears poised to potentially flare at any moment. Europe’s slow growth is fragile, and it looks likely Australia will have another change of Prime Minister in May 2019. But again, knowing when a flare up around these issues might happen, how long it would last, and how it might impact investment markets strikes us as a monumental task.

Bill Shorten

Fintech’s investment management committee think there’s a better way to invest. Specifically, we don’t believe every market hiccup needs deep analysis, nor do we read tea leaves. We prefer to focus our work on fundamental research, contrarian signals, and investment valuations. In the long term, you get paid by the current and future cash flows of the shares and securities you own. We seek to buy securities when prices are low compared to expected cash flows. This valuation work is the driver of our research, and it relieves us from becoming overly concerned about the next central bank rate decision or the outcome of an election.

Scott Morrison frustrated

Should We React to Spikes in Volatility?

The short answer: No. We focus on long term valuations, the true and durable value of an asset class, rather than the volatility of its market price. Having a long term perspective makes the next turn in interest rates, political posturing, the US-China trade spat or the Brexit deal less concerning to us. Instead, we ask, “How might this affect fundamentals over the next several years?”

Investors who trade on emotion and short term market moves are more likely to sell after markets have gone down and buy after they’ve risen. We seek to do the opposite, in part by sticking to our principled approach to investing, which is designed to keep us rational in a sometimes irrational world. In this regard, Fintech’s investment management team is prepared to be buyers if and when valuations provide an attractive buying opportunity.

US Federal Reserve Building

Making sure your financial strategies accurately reflect what’s important to you and your specific needs, is critically important. Fintech Financial Services provides advice relating to your level of income, tax, assets, debts, risks (personal and business), family needs, health, savings and desired lifestyle. A key element is constructing your investment structure and portfolios in line with your Investment Risk Profile, tax effectiveness and to provide the level of certainty you require over the long term.

Please contact our office if you would like to review your situation and determine the financial strategy options that will assist you secure your future.


Watch the Quarterly Market Update for November 2018 by Beulah Capital’s Director, Tom Elliott and CEO, Christian Ryan – part of the Investment Management team for Fintech Private Portfolios.

Topics mentioned in this video update include:

  • Positive Investment Ideas for 2019
    1. Technology (FAANGS)
    2. Alternative Lending
  • Interest Rates in Australia
  • Retail and Etail – Myer and Amazon
  • Investment in Victorian freeways good for Transurban Group


Watch the Quarterly Market Update for August 2018 by Beulah Capital’s Director, Tom Elliott and CEO, Christian Ryan – part of the Investment Management team for Fintech Private Portfolios.

Topics mentioned in this video update include:

  • Australian Residential Property Market – Capital Cities In Decline – No Exposure In Your Portfolios
  • Update on ASX Companies Following August Reporting Season
  • Higher Commodity and Oil Prices – RIO and BHP Flush With Cash
  • Corporate Takeovers Activity – Amcor $10b acquisition, Nine & Fairfax, BWX Management Buyout
  • Risks and Opportunities


Scott Morrison’s third budget is headlined by $140 billion in tax cuts over the next decade, immediate tax relief of up to $1,060 a year for middle-income households and a fundamental reform of the tax system.

This Budget will be the last before the next federal election (due by May 2019) and not surprisingly, the proposals include a range of pre-election sweeteners. However, Treasurer Scott Morrison is also keeping the focus on a return to a surplus. Thanks to an improvement in the budget position of around $7bn per annum, the path to surplus has been made relatively easy for the Turnbull Government.

The modest fiscal stimulus will help households, but the main risk is that the revenue boost seen this year is not sustained and the budget continues to have relatively optimistic assumptions regarding revenue growth.

The Government’s stronger corporate revenue has mainly come from reduced tax losses and higher commodity prices. Added to this is stronger personal tax revenue thanks to higher employment and reduced spending. As a result, the 2017-2018 budget deficit is projected to come in at $18.2bn compared to $23.6bn in the Mid-Year review. Impact on the Reserve Bank of Australia’s interest rate settings and the share market is likely to be minimal, if at all.

Positive outlook

The Government has assumed that much of this revenue boost will continue (see the ‘Parameter changes’ line in the table below) and has only used a small part of it to fund tax cuts and other measures. The net result is that the budget is projected to continue to track to a surplus. This is now expected to be reached one year earlier in 2019-2020 albeit only just at $2.2bn in the positive or 0.1% of GDP. The move back to surplus is slowed slightly by the fiscal easing from policy changes, which are predominately tax cuts. For example, the 2018-2019 deficit is projected to fall to $14.5bn but it would have fallen to $13.8bn were it not for the tax cuts announced.


The planned tax cuts for higher income earners over the next decade are designed to satisfy the Government’s commitment from the 2014 Budget to cap tax revenue at 23.9% of GDP (or total revenue once dividends are allowed for as shown in the chart below at 25.4% of GDP). This is on the basis of the historic highs reached in the Howard resources boom years, and this cap is now projected to be reached in 2021-2022.


What’s next

The 2018-19 Budget has a sensible focus on providing a small boost to households (with the full impact of tax cuts not occurring until next decade) and to infrastructure at the same time as maintaining a return to surplus. The main risks are around whether the recent revenue windfall to the budget proves temporary and the assumptions for continued strong revenue growth.

If you would like to discuss the implications of any of the 2018 Federal Budget announcements to your personal situation, please contact Fintech Financial Services on telephone 07 3252 7665.


Summary of key Budget measures

Note: These changes are proposals only and may or may not be made law.
From 1 July 2018

  • Low and middle income earners are to benefit from tax savings of up to $530 per person (or $1,060 per couple). This is mainly achieved by lifting the Low Income Tax Offset and raising the $87,000 tax threshold to $90,000.
  • Dropping the planned 0.5% Medicare Levy increase, which will remain at 2%.
  • The $20,000 instant asset write-off for business with aggregate turnover less than $10m will be extended until 30 June 2019.
  • Funding for home care services and residential aged care will increase, and new products listed on the Pharmaceutical Benefits Scheme.

From 1 July 2019

  • A one year exemption from the ‘work test’ will apply to recent retirees who have less than $300,000 in total super savings.
  • Life insurance can only be offered in super on an ‘opt-in basis’ to new members under 25 years of age or members with inactive accounts or an account balance under $6,000.
  • Fees when exiting a super fund will be banned and administration/investment fees will be capped at 3% pa on accounts with balances of less than $6,000.
  • The ATO will work to proactively reunite Australians’ dormant superannuation funds with their active account, with inactive balances less than $6,000 to be transferred to the ATO.
  • The Pension Loans Scheme will be available to all Australians over Age Pension age and the maximum payments will increase to 150% of the full Age Pension.
  • An extra $25bn in infrastructure spending including the Melbourne rail link, Bruce Highway, Gold Coast/Brisbane M1, road and rail in WA and North-South Corridor in SA. This is only partly offset by various savings including an illicit tobacco tax and the usual tax integrity measures to target the black economy and multinational tax avoidance.
  • Ongoing commitment to cut the corporate tax rate to 25% for large companies by 2026-27.

Opportunities post 1 July 2018

There are some key financial strategy opportunities for our clients following announcements made in previous Federal Budgets that are already legislated to take effect on 1 July 2018. These include:

  • People aged 65 or over can make ‘downsizer’ super contributions of up to $300,000 from the proceeds of selling their home.
  • First home buyers who have made super contributions under the First Home Super Saver Scheme can access their money for eligible property purchases.
  • Where the annual concessional contribution cap is not fully utilised, it may be possible to accrue unused amounts for use in subsequent financial years.

Further information on these opportunities can found at the end of this summary.


Personal income tax savings
Date of effect: From 1 July 2018
Low and middle income earners will benefit from initial tax savings of up to $530 per person (or $1,060 per couple) in the 2018-2019 financial year, then via a series of further tax cuts to be implemented over seven years.

Personal income tax thresholds

Treasurer, Scott Morrison has a plan to fundamentally reform the tax system with changes to the income thresholds in 2022, and in 2024. The tables below show the impact of removing the 37% tax bracket and having the 32.5% tax bracket go all the way up to $200,000 on 1 July 2024.


Personal tax offsets

  • A Low and Middle Income Earners Tax Offset of up to $530 will apply from 1 July 2018 to 30 June 2022.
  • From 1 July 2022, the Low Income Tax Offset will increase from $445 to $645.

Personal tax savings

Table 2 below illustrates the tax payable in future financial years (and the potential tax savings compared to 2017/2018) for a range of taxable incomes. These figures take into account the proposed personal income threshold and tax offset changes.


Medicare levy to stay at 2%

The previously proposed increase in the Medicare levy to 2.5% from 1 July 2019 has been abandoned.

Extension of instant asset write off

Date of effect: From 1 July 2018
Small businesses with turnover of less than $10 million will be able to immediately write-off newly acquired eligible assets valued at less than $20,000 for a further 12 months.


Work test exemption for retirees
Date of effect: 1 July 2019

A person aged 65 to 74 is currently able to make contributions to superannuation if the ‘work test’ has been satisfied (i.e. they have worked at least 40 hours in 30 consecutive days) in the financial year the contribution is made.

A one year exemption from the work test will apply to older Australians who have less than $300,000 in total super savings. This exemption will apply to the financial year following the last year the work test was satisfied. This will allow an additional period of time for those eligible to contribute to superannuation.

Insurance in super

Date of effect: 1 July 2019
In many super funds, including MySuper and employer funds, insurance is offered as a default option. It’s proposed that members will need to ‘opt-in’ for insurance where they:

  • have a balance less than $6,000
  • are new members under age 25, or
  • have an account which has not received a contribution in 13 months and are considered inactive.

Protection for small super balances

Date of effect: 1 July 2019
Measures will be introduced to reduce the impact of fees on low super balances and focus on returning lost super to members.

  • Protection will be provided to super accounts by limiting administration and investment fees to a 3% annual cap. This cap will apply to accounts with balances below $6,000.
  • Exit fees will also be banned on all super accounts.
  • A $6,000 threshold will apply to inactive accounts. These accounts will need to be transferred to the ATO. The ATO will increase data matching activities to return amounts to active accounts held by members.

Personal deductions

Date of effect: 1 July 2018
The ATO will develop new compliance processes for taxpayers claiming a deduction for personal superannuation contributions. This includes raising awareness regarding the necessary steps, including lodging a ‘notice of intent to claim a tax deduction’ form with the super fund trustee.

Inadvertent concessional cap breaches

Date of effect: 1 July 2018
Employers are required to pay Superannuation Guarantee (SG) based on an individual employee’s income. For some individuals this means their concessional contribution cap is breached by the total of multiple employers’ compulsory contributions.

Individuals who have a total income exceeding $263,157 pa and multiple employers will have the option to elect to no longer have SG contributions paid on certain income from their employer. This overcomes the inadvertent breach of the concessional contribution cap and associated tax penalties.

SMSF increase in member numbers

Date of effect: 1 July 2019
Self-managed superannuation funds (SMSFs) are limited to having four members. This threshold will increase to six to provide greater flexibility and allow families, for example, to all be members of the same SMSF.

SMSF three-year audit cycle

Date of effect: 1 July 2019
SMSFs with a history of good record-keeping and compliance will move from providing an audit on an annual basis to a three-yearly cycle. Eligible SMSFs will be those with a history of three consecutive years of clear audit reports and have lodged annual returns on time.

Social security

Pension Loans Scheme

Date of effect: 1 July 2019
The Pension Loans Scheme allows eligible individuals to access some of the equity in the home or other property via a Government loan, which is advanced in fortnightly instalments.

This scheme will be available to all Australians over Age Pension age and the maximum loan payments will increase to 150% of the full Age Pension. Eligibility will continue to limited by the value of the property used as loan security.

The following table summarises the payment ranges for singles and couples based on current rates, where the full pension and no pension is available.


Work Bonus

Date of effect: 1 July 2019
Under the Work Bonus, the first $300 per fortnight (currently $250) of employment income will not count when calculating Age Pension entitlements under the income test.

Self-employed retirees will be able to access the scheme for the first time.

A ‘personal exertion test’ will ensure the bonus only applies to income earned from paid work.

Any unused Work Bonus (up to a total of $7,800 pa) can continue to be accrued to reduce assessable employment income in a future period.

Means-testing of certain lifetime income streams

Date of effect: 1 July 2019
Favourable social security rules will be introduced to encourage the development and use of income products that will help retirees reduce the risk of outliving their savings.

Under the proposed rules, only 60% of the amount initially invested in these ‘lifetime income streams’ will be assessed under the assets test. This concession will apply until the account holder is 84 (or for a minimum of five years). After this time, only 30% will be assessed for the rest of the person’s life. Also, only 60% of the income payments will be assessed under the income test.

Means testing of Carers Allowance

Date of effect: To be confirmed by Government
As previously announced, the Carer Allowance and Carer Allowance (child) Health Care Card will be income tested. Households earning over $250,000 won’t be eligible. Both existing and new recipients of Carer Allowance will need to meet this income test.

Aged care

Additional funding for aged care

Date of effect: From 1 July 2018
Funding for home care services and residential aged care will increase, including:

  • 14,000 new home care packages over four years
  • 13,500 new residential aged care places, and
  • grants for aged care facilities in rural, regional and remote areas.

Legislated super changes post 1 July 2018

Downsizer contributions

Individuals aged 65 or older may be able to make super contributions of up to $300,000 (or $600,000 per couple) from 1 July 2018 when selling their home.

These contributions, known as ‘downsizer contributions’ can be made without having to meet a ‘work test’ or ‘total super balance test’ and they don’t count towards the contribution caps. However, they must be made with 90 days of settlement and a tax deduction can’t be claimed.

The property must have been owned for at least 10 years and have been the main residence at some time during this period.

First home super saver scheme – access

First home buyers who have made super contributions under the First Home Super Saver Scheme (FHSSS) can access their money from 1 July 2018.

The FHSSS started on 1 July 2017 and allows eligible first home buyers to save a deposit in the concessionally taxed superannuation system. Contributions of up to $15,000 per year (and a total of $30,000) can be made and they count towards the relevant contribution cap.

An online estimator is available to explore the potential benefits of using the FHSSS.

Catch-up concessional contributions

Where the annual concessional contribution (CC) cap is not fully utilised from 1 July 2018, it may be possible to accrue unused amounts for use in subsequent financial years.

The CC cap is currently $25,000 pa1. Counted towards this limit are all employer contributions (including super guarantee and salary sacrifice), personal tax deductible contributions and certain other amounts.

Unused cap amounts can be accrued for up to five financial years. 2019/20 is the first financial year it will be possible to use carried forward amounts.

To be eligible, individuals cannot have a total super balance exceeding $500,000 on the previous 30 June.

This measure could help those with broken work patterns and competing financial commitments to better utilise the CC cap. It could also help to manage tax and get more money into super when selling assets that result in a capital gain.

This cap applies in FY 2017/2018 and 2018/2019. It may be indexed in future financial years.




The Reserve Bank of Australia (RBA) has kept Interest Rates on hold at 1.5% for the 19th consecutive month at its monthly board meeting on Tuesday – but this is not a time to be complacent even though rates are likely to stay low for the time being.

Australia’s central bank has signalled on several occasions that the next cash rate move is likely to be up. Whilst we agree, we believe the “lower for longer” interest rate environment will continue until around the end of the 2018 calendar year.

There are competing core factors in the current market place that make it unlikely that the official RBA rate will change before then.

On one hand, high business confidence, strong jobs growth and the RBA’s own growth and inflation forecasts argue against a rate cut.

However, on the other hand, downwards pressure on consumer spending, weak wages growth, low inflation, the slowing Sydney & Melbourne property markets and the stubbornly high Australian dollar argue against a rate hike.

The eastern coast residential property market (particularly Sydney & Melbourne) is also showing signs of a soft landing. A controlled slowdown in the housing sector will be a welcome outcome for the RBA. In addition, the current rate of unemployment, although lower than a year ago, only crept higher from 5.4 per cent to 5.5 per cent in February 2018.

Even though these counterbalancing factors have created remarkably steady interest rates for 19 consecutive months, this is not a time to be complacent about the future impact of rising interest rates.

We are advising clients to start preparing for interest rate increases from the end of the 2018 calendar year. This is particularly important for clients with high levels of debt against residential property who are making fixed ‘Interest Only’ repayments right now.

This is because the Australian Prudential Regulation Authority (APRA) – who oversee the banks – restricted the ability of the banks to provide new ‘Interest Only’ loans to investors and homeowners more than a year ago. These macro-prudential policies were put in place as an alternative to rates being increased and to curb the rate of lending in the property sector. Prior to this, an increased number of 1 – 5 year fixed term ‘Interest Only’ loans were established, given the lower level of repayments required. When these come to an end, they will typically be restructured to ‘Principal & Interest’ loans.

This means that the size of repayments investors will have to make to service the principal & interest loans will significantly increase. On top of this, interest rate increases in the future will add more cash flow pressure to them. We are advising our clients to review their incomes and cash flow to ensure they are able to stay liquid and grow their wealth during this change in the long term interest rate cycle.

The only good news in this scenario is for those investors looking for a better rate of return on their cash at bank or term deposits; as interest rates rise.

Please contact our office if you wish to discuss any of the above further in relation to your specific circumstances.

What does Bill Shorten’s proposal to remove the refund on excess franking credits mean?

We have had several enquiries from clients wondering what this all means, so we have put together an overview of the key issues to explain how this could affect you.

Firstly, it is important to point out that these changes are only ‘proposals’ made by Bill Shorten, the leader of the opposition party, and are evolving as the party gauges how popular the proposals are with the Labor constituents and the general public.

To affect change, Labor would need to win the next election, and be in a strong enough position to successfully get the changes passed through the House of Representatives and the Parliament by majority vote. Outside the possibility of a double dissolution, the next election must be held between 4 August 2018 and 18 May 2019, so it is likely that the details and complexities of this policy will be hotly debated by both parties as they attempt to increase their numbers in the polls.

In a nutshell

This is a policy that proposes to take away a tax refund that mostly benefits people (and/or their super funds) in the lowest tax brackets (see the first two tax brackets in Table 1.). So, it will be tough for Labor to maintain the argument that the reason for the proposal is because low income earners are being disadvantaged by the wealthy elite who are getting more tax refunds than they are. There are a lot of complexities behind all this, so be prepared to hear more debates and conflicting information from both sides of politics and the media.

Table 1.
2017–2018 Individual income tax rates (Australian residents)

Table1 - Individual Income Tax Rates - Australian Residents

The above rates do not include:

  • The Medicare levy of 2% (legislation pending to increase this to 2.5%).
  • The low-income levy, which effectively increases the tax-free threshold to $20,543.

Self Managed Super Funds (SMSFs) and Pensioners

However, you can see in the top section of Table 2. below, that in the 2014-2015 year there were large numbers of SMSFs and Pensioners across every state of Australia benefiting from the tax refunds from excess franking credits.

Australia is very unique in the way it refunds taxes on dividends and provides tax-free income streams for retirees in superannuation. No other country in the world provides this benefit. The Labor Government will argue that this combination of benefits is creating an increasingly larger group of wealthy seniors who are spending longer periods of time paying no tax as their life expectancies increase. Official figures show that the proportion of older Australians paying no income tax has increased from 73% in 1995 to 84% in 2014, and is growing. These are issues that the Government will need to address whoever is in power.

In summary, those affected by Labor’s proposals would include a relatively small number of people on the Full Age Pension, a slightly larger number of people on Part-Pensions and then the Self-Funded Retirees (drawing tax-free super pensions). Many of our clients in these categories stand to lose what has become a significant supplement to their income, ranging from hundreds, thousands to tens of thousands of dollars a year.

To soften the original announcement, Labor have also announced that low-income retirees will now be excluded from the franking credit crackdown as will SMSFs with at least one Age Pensioner (or Centrelink allowance recipient) before 28 March this year. The problem with this approach is the that those SMSF retirees who did not qualify for the Age Pension before 28 March 2018, will not be able to access the same level of Age Pension entitlements to supplement their superannuation incomes, creating an unfair, two-tiered and complex system for SMSF members and superannuation going forward.


The bottom section of Table 2. below shows that the two lowest income brackets for Individuals ($0 – $18,200 and $18,201 – $37,000) make up 86% of those that qualify for the excess franking credits refunds. This highlights that low income earning individuals are mostly those receiving some kind of benefit from the refund of excess franking credits.

Table 2.
Table2 - Those receiving Franking Credit refunds, by type 2014-2015

What are franking credits and dividend imputation?

A portion of Fintech’s diversified portfolios are invested in Australian shares, which benefit from some franked dividend income. Dividends are the amounts paid out from those Australian shares using profits that the companies have made during the year and often come with an imputation or franking credit attached.

Dividends are grouped together with any other income or earnings you make during a financial year to determine your overall taxable income. When a large company earns a profit, it is required to pay tax on that money at the corporate tax rate of 30%.

Before the dividend imputation system was introduced in 1987 by the Hawke/Keating government, the tax office would firstly tax the company, and then secondly the investor when they received the dividend, in effect a form of double taxation.

Since the introduction of the dividend imputation (or franking credit) system, when you have received a dividend from an Australian share in your portfolio, you have only been taxed on the difference between the company tax rate of 30% already paid and your marginal tax rate.

Three examples of how franking credits are applied:

  1. If your Individual tax rate was at the highest level of 47% (inc 2% Medicare Levy), then you would pay tax at 17%, the difference between your tax rate of 47% and the 30% franking credit for the company tax already paid.
  2. Conversely, if your Individual tax rate was 30%, then you would not pay any tax on dividend income received, as it would be offset completely by the 30% franking credit for the company tax already paid.
  3. Refunding of excess franking credits – If your tax rate was 0% (same as the tax-free pension phase in super), the you would be eligible for a refund of the excess franking credit. That is, the entire 30% company tax paid is added back to your income as a credit, creating a tax refund.

This has made owning ‘blue chip’ Australian shares paying dividends with imputation or franking credits a powerful strategy, especially for investors whose marginal tax rates are less than the corporate tax rate of 30%. Since the year 2000, when the Howard/Costello Government made excess franking credits fully refundable, the cost to the federal budget has ballooned to about $5.6 billion a year, and growing.

Table 3. below provides a comparison of the impact of Labor’s plan to end cash refunds for unused or excess franking credits across three different investor structures.

Table3 - Franking Comparison - Source: BDO Interact


  • Dividend Yield 4%
  • Franking Rate 100%
  • Corporate Tax Rate 36% (1998), 30% (2017, 2021)

Comparison Chart Source: BDO Interact

In summary

The refunding of excess franking credits has been particularly beneficial for members of superannuation funds or SMSFs that are in tax-free pension mode (over age 60 and fully retired), as it has added approximately 1.71% per annum to the after-tax return. A benefit of approximately 1.33% in additional returns applies to Individuals who own Australian shares with franking credits and have no other earnings in their own names, as they are also on a 0% tax rate.

The Turnbull government will argue that on 1 July 2017, it introduced the $1.6 million limit on the amount of money that can flow tax free from pensions in super (Transfer Balance Cap), which has already curbed some of the costs of super concessions. Under the new rules, SMSF members with more than $1.6 million will be paying tax on some of their earnings that will offset the value of their franking credits, limiting their refunds.

It will be very interesting to see whether Shorten’s radical policy announcements to remove the refund on excess franking credits will have enough appeal to the tradition Labor heartland or become a big policy mistake. There may be enough weight with disgruntled self-funded retirees to garner support and momentum for the Turnbull Government to win a second term and continue implementing the existing policies that only came into effect from 1 July 2017.

Please contact our office if you wish to discuss any of the above in relation to your specific circumstances.