Tax Minimisation

Gosh.......there's a whole lot of interesting points raised here aren't there?

Ok.....to start with, I can't see a lot wrong with the basic advice you received from your accountant except I would also say make sure you have balanced/educated yourself about what the Navra Group is saying, clarify any issues you are still not certain about, and if then you still don't feel comfortable........ don't beat yourself up about not proceeding.

I've said before that most Groups don't participate in a Forum such as this and when they do they are really raising the accountability/service level another couple of notches.

I hope the Navra Group will jump back on here again soon and be able to openly discuss a lot of general questions as personally I've always found that type of interaction to be really educational.

 

There are different investing tools for different purposes.

Most managed funds aim to produce maximum growth with income as a secondary concern. In these boom market times many funds have done spectacularly well, far in excess of the low 20%s that NavraInvest has produced. (Altho if we all reality check ourselves here...20% return investing in blue chip shares looks pretty tasty...especially if you've geared and the cost of funds is around 8%)

Others aim to produce regular income with growth as a nice addition. NavraInvest falls into this latter category.

If you have negatively geared growth real estate then you need CASHFLOW to offset those holding costs. Unfortunately the Bank won't accept the nice capital growth on your managed fund to pay the interest bill each month!

So instead you can use a fund like NavraInvest which has historically produced a high income and to smooth your cashflow distributes QUARTERLY to help you hold more negatively geared growth assets.

It's all about your overall portfolio cash flow... some assets neg, some generating income and balancing the two. There are a variety of ways you can do this, it just happens that trading shares (through NavraInvest) is an easy and efficient way to generate that balancing income.

These issues are discussed at some length in the Living on Equity series of articles...I'd recommend people revist them.

Cheers
N.

 

"Most managed funds aim to produce maximum growth with income as a secondary concern. In these boom market times many funds have done spectacularly well, far in excess of the low 20%s that NavraInvest has produced. (Altho if we all reality check ourselves here...20% return investing in blue chip shares looks pretty tasty...especially if you've geared and the cost of funds is around 8%)

Others aim to produce regular income with growth as a nice addition. NavraInvest falls into this latter category.

If you have negatively geared growth real estate then you need CASHFLOW to offset those holding costs. Unfortunately the Bank won't accept the nice capital growth on your managed fund to pay the interest bill each month!".

SPOT ON !!!!!!!!

 

I saw Steve yesterday in regards to the product. It does look interesting.
In my case, as I am highly negatively geared the amount of tax I will pay this year is minimal.
However, this product would decrease my tax payable down to close to zero.
This would not be the only reason to proceed (if I did). From what was shown, my family tax benefit would increase form around 7k to 12k this year - so 5k extra in the hand. As I have not been claiming the family tax benefit over the last 2 years (I believed that we were over the limit) , I will need to run this by my accountant to ensure this is right.
The end result (if correct) in 10 years would place me better off than I am now - and also increase my cashflow.
So I will give this very serious thought.

 

Went top the Melb talk, very interesting concept, and certainly worth exploring.

My biggest problem with it is:
1) Not in top tax bracket anymore
2) The loan amounts killing my LVR and DSR. This restricts me buying more houses.

Some links ..

A site showing a multitude of different agri-schemes.
http://www.fundbroker.com.au/agribusiness.html

This page details the schemes by IRR .. note the top one .. Tomatoes LOL.
http://www.fundbroker.com.au/tax_effective/Agribusiness_pages/agribusiness_by_IRR.html

And this shows how much COMMISSION you can get back. The number is NOT insignificant....
http://www.fundbroker.com.au/tax_effective/agribusiness_commission_rebates.html


And here is the GSP 2005 research .. note that it says 2006 in the title, but all the material refers to 2005. Not sure if/how it may relate to the 2006 product. Still, very interesting reading, and a good start for DD.
http://www.fundbroker.com.au/tax_effective/Great_Southern/great_southern_plantations_timber_project.html

Here is somewhere you can purchase independent reports on the various schemes. Not sure if these are the same as the ones presented via fundbroker.com... there are additional reports on the overall sectors, and some others too.
http://www.ausagrigroup.com.au/index.php

 

Many thanks for the comments on my post yesterday regarding my accountant's thoughts on the scheme.

FWIW, I'll discuss the comments with the Navra people, especially concentrating on worse case scenarios. So, what are they:-

- Southern Group doesn't fulfill the terms of the PDS in which case the ATO ruling is void.
- The trees don't grow or are worthless in 10 years or are destroyed by a non-insured event.
- Southern Group goes bust.
- Navra underperforms or goes bust.

It seems to me that points 1, 3 and 4 are fairly remote chances, given the size and reputation Southern Group and the system which Steve has for trading the shares. Point 2 is valid although we don't have full details of the insurance available. However, it gets back to the point that we are using money that would have gone in tax anyway and any return at the end of 10 years is a bonus.

There are probably many more worst case scenarios which I haven't thought about - any comments. What about interest rate movements for the loan for the trees? Not valid because Steve has negotiated fixed rates.

This discussion is invaluable to me - thanks to all who are contributing.

Andrew

 

Andy

I am doing my calculations based on that fact that the trees (or whatever you buy) are worthless at the end of 10 years. The numbers need to work based on that. If Great Southern vary the terms of the PDS which voids the product ruling and therefore the tax refund, Steve's view is they are big enough to be sued, in fact that is why he chose them.

Gazza

 

Sorry I'm going to come across dumb, but if you're working with worst case scenarios, if the numbers need to work with that, then wouldn't the numbers look better by borrowing to invest in Navrainvest (or whatever) and not take a loan out for tree purchasing at all?

 

Glebe

The only reason you are taking out a loan to buy the agri product, is to be able to then claim it as a tax deduction which then gives you a tax refund. What you are trying to do is invest the money you would normally pay in tax, into something that would be of better value. Once you have the tax refund, you invest it and a equal amount (via a margin loan) into a managed fund that will hopefully earn more than what it is costing you to pay off the loan. The idea is that over the course of the investment, the returns from the fund pay off the loan leaving you with a holding in the managed fund that is 50% owned outright by you (the other 50% is the margin loan). if the product does produce some returns , you could pay off some of the margin loan as well.

Gazza

 

Crucial for me is how centrelink views it all.
If it means a extra 5 or 6k family tax benefit to me, then (after taking all of the other points made before me such as what andykumi said) I will go ahead with it.

 

Hey guys,

Just letting you know that i talked to my financial planner yesterday at Navra and he mentioned that they were looking at striking up an interest only loan next year for this scheme instead of the P&I loan offered this year. This would mean that if the share fund was only returning more average returns of around 10% that an individual would still be able to cover the agri loan from the units that were purchased with the tax refund.

I personally would not like to be in a situation 4-5 years down the track where it could be possible that the Navra fund was not covering the P&I agri loan and you needed to put in your own funds (which may not be available) to cover it.

 

That line there straight away gives clue as to which accountant it was that you saw. He says that line to me often. Being as good as accountant as he is, I think his advice is very sound.

Doesnt property give enough tax refunds on it's own? And don't funds, whether navrainvest or elsewhere, provide enough servicability on their own?

 

Yes, I reckon he's pretty good too. I've decided not to go with Navra's tax scheme this year but will re-consider it next year again.

Cheers

 

Those Trees

Andykumi,

I've decided to go with it this year for a number of reasons but also will reconsider it next year..

Bob