Tax Minimisation

Discussion in 'Accounting & Tax' started by D.T._, 27th Apr, 2006.

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  1. TryHard

    TryHard Well-Known Member

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    Jeez mate, I dunno if you would say mentioning a bit of timber would match some of the 'lows' of Somersoft I've seen in the last year or so !

    We were recommended Great Southern Plantations by our broker for our SMSF and it made an absolute motza for us since 2003. Doesn't provide any evidence of the performance of their individual schemes, but they ain't no simple sawmill, if that's your concern ;-)

    I'm all ears on the positives and negatives of this new scheme, I'd prefer to avoid ostriches as I don't like killing innocent animals, but I can help wield a chainsaw if the resource is renewable and I can give less tax to Lil Johnny in the long term :)
     
  2. Alan__

    Alan__ Well-Known Member

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    I guess some of these Agri Products have had some 'bad press' over the years and therefore many will immediately disregard them outright.

    However, if you only took that attitude you probably wouldn't buy real estate either because of the occasional shonky real estate agent and you wouldn't invest in shares because the market can be very volatile. :rolleyes:

    Personally, I'll treat this sort of investment like any other. I'll try and learn more about it first and if it still doesn't feel comfortable then I'll look at something else. If it 'fits well' and the numbers stack up, then I may proceed.

    This sort of investment takes a little bit of a mind shift though in as much as it could be viewed in one way that you will be 'losing' anyway by doing nothing and paying the tax. That is certainly part of it but there are obviously other risks and considerations too.

    I'm obviously very new to these Agri Products but on the surface the Great Southern PDS seems to lack a bit of detail that as a potential investor I may like to know. For example, you have a product that is open to risks such as fire etc. The PDS says that to mitigate this risk it carries insurance and is a member of the local bush fire brigade. :rolleyes: That's fine but just saying in a PDS they 'carry insurance' is pretty low on detail. For example, let's say the plantation has a fire go through it at the 5 year mark. Does the insurance cover a) buying some new seedlings to start over again b) a guestimate at what a 5yo tree might be worth or c) a projection of what the loss might be at the 10y harvest date. This sort of information might make a huge difference to your risk exposure!

    Let's say alternatively I invest in some grapes, the grape harvest is already pre-sold and the harvest is fully insured against the sale contract amount for fire/disease etc. In this case I would think the risk may be very different.

    I know this structure may well fly with minimal growth, but I'd still like to know how my risks are being reduced. Call be greedy, but I'd like the growth as well as the tax deduction(within reasonable risk limits.) :D

    Just thinking out aloud while I begin to ponder my research.....and yes I will contact Great Southern.........however my initial reaction to the PDS is that I wish it had included more information. That may just be me though........

    As an aside, how could InvestEd help members in this regard? If Steve is too busy at the moment, I wonder whether a rep. from Great Southern(and or others) could be invited to join InvestEd for a period, start an Agri thread and questions could be fired from a wider audience? Just a thought.....
     
  3. Simon Hampel

    Simon Hampel Founder Staff Member

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    Although TryHard did allude to it in his post ... I will reiterate that his comments here refer to the ASX200 listed company - not the plantation investments themselves :D
     
  4. Simon Hampel

    Simon Hampel Founder Staff Member

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    Yup, there have been some products which had a very questionable business model ... and there have been others where the ATO called foul and disallowed the deductions.

    The product rulings make it very clear that there are only certain circumstances where the ruling applies - and the scheme operator must comply with their stated operating strategy or else the ruling is automatically voided. You don't want to be dealing with companies who don't take these things seriously!

    On the subject of returns, I did a bit of searching and found the following site that has some analysis of Great Southern's investment schemes:

    Great Southern Plantations Timber Project 2006 ... in particular, look for the documents "AAG Research", and "PIR Research".

    They give some estimates of expected IRRs for various investment mechanisms (ie with/without gearing, etc) ... and they come up with a range of expected IRRs of between 4% and 12%, and generally give it a pretty reasonable rating.
     
  5. Alan__

    Alan__ Well-Known Member

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    Fantastic. Thanks Sim.
     
  6. Alan__

    Alan__ Well-Known Member

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    Sim,

    Did you happen to hear what commissions are payable and if any of these are rebatable?

    I don't recall that being mentioned the other night but I couldn't hear all the questions at the end.
     
  7. Simon Hampel

    Simon Hampel Founder Staff Member

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    I don't think they mentioned it ... but that would all be disclosed when you met with NFS to discuss setting up your structure.
     
  8. D.T._

    D.T._ Well-Known Member

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    Hi

    rofl :D

    Point taken.

    Since I'm in Adelaide and Steve & Crew never are, would someone be kind enough to demonstrate the 5 points Sim's first post details using some worst / best case scenario numbers. If I can get some more understanding then perhaps I'll go down to his Melbourne gig. Spreadsheet maybe??

    Would be good to see him again since I haven't since the Perth Optimal Structure course.

    Thanks,
     
  9. TryHard

    TryHard Well-Known Member

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    Um, yeah, that's what I meant by "Doesn't provide any evidence of the performance of their individual schemes, but they ain't no simple sawmill, if that's your concern ;-)" Apologies I was not clear.
     
  10. Alan__

    Alan__ Well-Known Member

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    Yep.....I guess it would have to be Sim.

    Since I didn't specifically hear any mention made of this at the Presentation I just assumed that the Navra Group would be looking at this investment in a 'holistic' sort of way by the benefit that NFS may receive from Fund Entry Fees, Trailing Commissions and NavraInvest may receive by increased FUM etc.

    If there were additional commissions paid, rebates available etc. I just assumed that this would have been mentioned at the Presentation anyway? If applicable, presumably this would vary from product to product, but at least for the one that the PDS was handed out.

    I guess I can ring, ask the question and post the answer but I would have thought this seemed the L-O-N-G way around when the company partly sponsors this Site and has just 'released' a new product for which people will want to discuss a number of issues. :confused:

    Oh well........I'll post the question here now and if anyone from the Navra Group wants to answer it, well and good. If not I guess I can contact NFS direct.
     
  11. TryHard

    TryHard Well-Known Member

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    Last time a similar situation arose, Navra Invest made it pretty clear they don't participate regularly on this forum (Its Steve that owns a slice of InvestEd, not NavraInvest) and suggested everything should be sent to them on [email protected] or their 1-300 number.

    Am I right the Tax Minimisation concept is a product of Navra Financial Services, or does it fall under the NavraInvest umbrella ?

    Regardless, it's kind of confusing when something like the Tax Minimisation concept is discussed on here, you'd have to think it'd be in the Navra people's (Steve's, or NI's, of NFS's) interests to be on here and push the product, by answering any questions. I mean where else will you find a captive audience of the exact target market needed to test the waters ?

    I think its rather strange to expect our forum members to seek clarity, then do the job of answering reasonable questions on here, or maybe that's what a 'community forum' does ? :p I'm probably just jaded 'cos its 'labour day' ;-)

    Cheers
    Carl
     
  12. Simon Hampel

    Simon Hampel Founder Staff Member

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    The tax minimisation product is from NFS, not NI.

    NI do stand to benefit from the product - but only indirectly. There is nothing tying the tax product to NI's products, other than the suggestion that NI's products are possibly the most suitable to provide the income you need to make the scheme work.

    I think you'll find that they currently have no need to "push their product" here, because they are flat out dealing with the enquiries they have already.

    My suggestion is to not wait for the information to come to you ... go out and get it. Then if you feel like being a "good community member", you can share it with the rest of us :D
     
  13. Alan__

    Alan__ Well-Known Member

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    That's great that they don't need to be 'pushing the product', I just thought this might be a timely and efficient way of even anwering the questions of a number of existing clients rather than doing them all one by one. :eek:

    Anyway, I guess that's their call, not mine. Indeed, maybe there aren't even that many questions...........

    The beauty of a Forum such as this though can often be that you get answers to questions you personally didn't even think about asking at the time. :)
     
  14. TryHard

    TryHard Well-Known Member

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    Fair point. My old boss used to say "The meek shall inherit the Earth .... when every other b....rd's finished with it".

    I can't decide if I'm meek or a b....rd :p (actually my parents had me before they were married, so I guess that answer's my question ;-)
     
  15. Alan__

    Alan__ Well-Known Member

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    With regards to Rebates etc, I went to a presentation the other night at St Leonards(Sydney) put on by a crowd called 2020 Direct Invest.

    At the Presentation they had various Agribusiness Reps such as Great Southern etc giving brief talks.

    With regards to commissions and rebates they indicated that they received a 5% straight commission plus an additional 5% 'marketing' commission of which they would rebate the first 5% fully and 3% of the second 5%!

    This was a brief presentation and I know very little about the company, but I was surprised by the size of the rebate. :eek:

    These 'savings' could be offset in other areas though and you'd need to look at this in light of your own circumstances and the 'bigger picture'.
     
  16. andykumi

    andykumi New Member

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    This is my first post to the forum but I've been a client of Steve's for a few years and, so far, haven't had any reason to distrust his advice. So, when I approached my accountant about this scheme, this is a part of the reply I got:-

    "I have noted the unusual situation where the financial advisor has recommended his own managed funds even though they have not performed as well as most on the market. Andrew, I am neither licensed nor qualified to give financial advice, and so I cannot comment on whether this appropriate or not. I just note that it seems unusual.

    I also note the recommendation for you to consider a tax effective investment in the Great Southern Plantations projects.

    Again, I am not in a position to offer any advice on such a recommendation. However, I draw attention to my earlier comments that these schemes are often unwound by the tax office causing grief and turmoil to people. I also note the uncertainty about market conditions and the doubt about the yields and results expected. Andrew, there is quite a bit of research available on the internet about the woodlot industry and I encourage you to do your own due diligence on this industry before making any decisions.

    Yes, the scheme may reduce your tax (I note the existence of a tax office product ruling confirming this tax deduction), but, there is no guarantee that the scheme will perform anywhere near as well as the prospectus suggests and you therefore need to determine whether or not the scheme is a good investment for your needs under the circumstances.

    Andrew, I encourage you to take a step back and look at the recommendations in terms of your long term investing needs. Will they bring you closer to your financial goals, or will they take you further away from your financial goals?"

    I can understand that he has to protect himself from a legal point of view but it appears to me he doesn't fully understand the scheme - ie, that it doesn't depend on the performance of the trees, that it is just using money that I would have given to the ATO anyway, and that the fund creates the cashflow so that there is no out of pocket expenses.

    Does anyone have any comments on this? I wondered about the comment "the financial advisor has recommended his own managed funds even though they have not performed as well as most on the market". Is this true? I thought the Navra funds were outperforming other funds.

    Thanks
     
  17. gazza

    gazza Well-Known Member

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    Andy

    I think it is fair to say there are other managed funds out there that have indeed performed better than the Navra fund (I am sure there are some that performed worse too). The point to remember is, Steve is not suggesting that the only way this scheme works is by investing the tax refund in his fund. You can invest it anywhere you like or spend it on a holiday. The basis of the scheme is to invest in a fund that will return you more than costs of the loan to buy the agri product. Obviously Steve would want you to invest it in his fund (and his track record suggests it will return you more than the cost) but that is not a prerequisite.

    Gazza
     
  18. Simon Hampel

    Simon Hampel Founder Staff Member

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    It's not that he doesn't necessarily understand the scheme ... he is just giving you good, sound financial advice (even if he isn't qualified to do so). Make sure your eyes are wide open.

    This is very good advice. Are the investments fundamentally sound ? Are the assumptions made reasonable ? Are the risks manageable ? Will it bring you closer to your financial goals ?

    There are many funds which invest in blue chip Australian shares, and many of these have performed better in recent years than NavraInvest has. I don't think anyone will deny that. However, the point is that you need a reliable source of income to make this scheme work - and the assumption is that NavraInvest will provide this ... while most of those other funds which have outperformed NavraInvest, are not likely to provide such a reliable source of income ... especially WHEN the market turns.

    There are some pretty big assumptions there ... your accountant is just pointing out that you need to be cautious about your assumptions.

    Have you looked at the worst case scenarios ... do you even know what they are ? ... and can you manage the risks comfortably ?

    I'm not saying don't do it ... I'm just saying, don't be so hard on your accountant.

    FWIW ... I'm undecided about the scheme at this point, although I am counting on the NavraInvest funds to provide the reliable income source that this scheme depends on ... however, my assumptions possibly aren't quite as optimistic as NFS's in that area.
     
  19. TryHard

    TryHard Well-Known Member

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    Hi Andykumi

    You'll probably find quite a few threads on here about the performance of NI versus other managed funds. The more I've read on here the more I am understanding about the choice and diversity out there (oh, and the risk!)

    Start by having a read through :
    - http://www.invested.com.au/forums/showthread.php?t=630
    - http://www.invested.com.au/forums/showthread.php?t=621
    - http://www.invested.com.au/forums/showthread.php?t=697
    - http://www.invested.com.au/forums/showthread.php?t=675

    - There'd be plenty of funds that 'outperform' NI but different funds suit different purposes. If you want a conservative, diversified, income-based fund with the ability to lock in a fair bit of the gains each quarter by receiving income, I'm not sure how many compare favourably to NI. To be honest, as NI keeps doing what it is meant to, I'm too lazy to be bothered researching, as I know and trust the navra organisation and I can't say the same for any others, yet.

    If you have employed NFS for financial advice, as seems to be the case if your accountant is making the statements you've quoted, then why not run these comments back past your advisor at NFS for comment ?

    I'm not too up to speed on the Tax Minimisation but plenty on here are, so you might get better advice on that here, or again direct through your Financial Advisor. I understand the investment vehicle just needs to meet certain criteria so you have a better than good chance of repaying the loan you've taken out - I don't think its limited to NI, but if you think Steve The Super Salesman won't try to sell you his products, then think again. Thing is, his products are good, so its win win :)

    Good luck out there ;-)
    Cheers
    Carl
     
  20. TwoDogs

    TwoDogs Well-Known Member

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    The PDS goes out of its way NOT to provide any returns data, how closely was it read?

    I think the concept of the scheme is lost of your learned friend, send him along to one of the free Navra presentations.