Mark Draper

Mark Draper

Option to withdraw excess non-concessional contributions from superannuation

1 July 2013

The Government has proposed that individuals will have the option to withdraw contributions made from 1 July 2013 that exceed their non-concessional contributions cap.

Under this measure, associated earnings are also able to be withdrawn and taxed at the individual’s marginal tax rate. Final details of the policy will be settled following consultation with key stakeholders in the superannuation industry.

It is understood that individuals who do not withdraw their excess non concessional contributions will be subject to excess contribution tax at the top marginal tax rate on the amount of the excess. 




GEM Capital Comment

This proposal is good news as it will mean that clients who inadvertently exceed their non- concessional cap will have the ability to withdraw the excess amount rather than have it taxed at the top marginal rate. It also ensures the treatment of excess non-concessional contributions will be broadly consistent with the rules that apply to excess concessional contributions. 


Temporary Budget Repair Levy on income over $180,000

Applies from 1 July 2014 to 30 June 2017



A levy of 2% will apply to an individual’s taxable income over $180,000 per annum for three years from 1 July 2014. In addition, the rate of Fringe Benefits Tax (FBT) will also increase to 49% to prevent high income earners from using fringe benefits to avoid the levy. The increase in the FBT rate will be from 1 April 2015 to 31 March 2017 to align with the FBT year.

A range of other tax rates that align with the top marginal rate are also expected to increase.

The levy amount expected to be paid by taxpayers with taxable income over $180,000 is summarised in the following table. 


Taxable Income   Temporary Budget Repair Levy
$200,000  $400 
 $250,000 $1,400 
$300,000  $2,400 

GEM Capital Comment

As the Temporary Budget Repair Levy is proposed to apply to taxable income, strategies which reduce taxable income will result in a reduction in the amount of levy payable. This can be achieved by either reducing assessable income or increasing deductible expenditure.

It is also important to note that while the Temporary Budget Repair Levy is proposed to apply to high income earners, it could also potentially apply to people with income below $180,000 where they:

  • -  sell an asset and realise capital gains, or

  • -  take a superannuation lump sum benefit consisting of taxable component between the age of 55 and 59, as this amount will be included in the taxpayer’s taxable income and could push the client over the $180,000 threshold.

    Taxpayers considering selling assets or taking superannuation lump sums between 1 July 2014 and 30 June 2017 may therefore need to take into account any additional levy they may incur as a result. 






Tuesday, 06 May 2014 17:57

RBA keeps rates on HOLD - May decision

BillEvans small headshot WIBIQAs expected the Board decided to leave the cash rate unchanged at 2.5%.


There were only minor changes in the Governor's compared to the statement following the April Board meeting. We were most interested in the rhetoric around the Australian dollar given that in December it was referred to as "uncomfortably high" at US0.912. Today's level of 0.928 has not evoked stronger language than "the exchange rate remains high by historical standards". Of course this was the language used at the April meeting when the AUD was printing USD0.924 but it was reasonable to expect that with concerns around a lift in inflation having subsided with the March quarter print for core inflation falling from 0.9% in December to 0.52% in March stronger language around the AUD might reasonably have been reinstated.


In the event a preference for no change prevailed over a decision to restore a successful strategy that assisted in the fall in the AUD from USD0.95 to USD0.87 through 2013.


There were only four other changes in the statement from April:

1) recognition that commodity prices have recently softened;

2) describing the outlook for the housing construction cycle as "strong" rather than "solid";

3) recognising that the unemployment rate had fallen in March but maintaining a cautious view towards the labour market by indicating that "it will probably be some time yet before unemployment declines consistently";

4) linking ongoing weak wages growth to a moderation in the prices of non-traded goods and services. This link had been a source of some frustration for the Bank given that wages had clearly weakened but non traded inflation had been stubbornly high. It appears that this was the most significant take-out by the Bank of the surprise 0.52% print in core inflation for the March quarter rather than recognising that the pass through from the weak currency in 2013 had largely run its course in the December quarter.




The Governor repeated the key statement that "the most prudent course is likely to be a period of stability in interest rates". Our view that rates will remain on hold until the second half of 2015 is not widely held by other economic commentators with two thirds expecting rate hikes by early 2015 and some still anticipating rate cuts.

From our perspective encouraging evidence around the consumer, residential construction, exports and jobs preclude the need for lower rates whereas extensive spare capacity, a high AUD, the ongoing downturn in mining and a rising unemployment rate (despite a stronger jobs environment than in 2013) all point to an extended period of interest rate stability.


Bill Evans

Westpac Chief Economist

The imminent increase to the Medicare Levy and the planned Deficit Tax will soon make salary sacrifice even more attractive.


By way of background, from 1 July 2014, the Medicare Levy will increase from 1.5% to 2%.  For those who are employees and there are therefore in a position to salary sacrifice, the increase in the Medicare Levy actually increases the tax effectiveness of salary sacrificing.  This is because the Medicare Levy does not apply sacrificed amounts whereas it does apply to your taxable income.  However to emjoy this tax saving, you will need to sacrifice benefits that are exempt from fringe benefits tax such as superannuation, tools of trade, work related laptops, briefcases etc.  Where you sacrifice benefits that attract FBT (such as home loan repayments, cars used privately, school fees etc) the higher FBT rate of 47% will apply and thuse negate the benefit of this strategy.


The tax effectiveness of salary sacrifice will be enhanced even further if the Government goes ahead with its planned Deficit Tax which has been foreshadowed in recent times.  If implemented as reported, from 1 July 2014 the Deficit Tax would add 1% to the current 37% personal income tax rate, and 2% to the top marginal rate of 45%.  By salary sacrificing FBT exempt benefits however (such as superannuation) you can avoid these tax increases, and of course enjoy the benefit for which you have sacrificed salary (eg superannuation, laptops etc)


Those wanting to enter into a salary sacrifice arrangement, should discuss it with their employer.

Monday, 17 March 2014 16:01

Westpac no longer expect rate cuts





BillEvans small headshot WIBIQSummary: Westpac has revised its profile for the Reserve Bank cash rate in 2014.  Previously we expected that rates would be reduced by .25% in both August and November 2014.  The forecast is now for flat rates throughout 2014.  As before we do not expect a rate hike until the third quarter of 2015, with a .25% increase in both the Septemer and December quarters.

Our dominant theme in this cycle has been that a weak labour market would undermine consumer spending which in turn constrains investment, employment and incomes. Businesses react negatively to soft demand; an uncertain global environment and a “still high” AUD. Those forces are expected to be complemented by a number of known headwinds - mining slowdown; fiscal restraint; falling terms of trade and a resilient AUD as global growth, including in the US, disappoints.

We still see those forces operating to moderate growth and inflation pressures but now assess that better news on employment; consumption; and business confidence will dampen those contractionary forces to exclude a sufficiently strong case to cut rates. This is in the context of a high hurdle from the perspective of the Reserve Bank to further cutting rates. Equally, however, there will be no case for higher rates for 18 months or more. Details behind this view change are set out below :

1. The upward revisions to the current state of the labour market as indicated by the February jobs report where jobs growth in February was reported as 47,300 (80,500 full time) and January was revised up from –3,700 to 18,000 painted a much more normal picture of the Australian jobs market. That meant that the dismal start to 2014 of –10,400 in the previous 3 months was revised to a modest but respectable 41,000 over the three months to February. We accept that there were probably sampling issues with this report but that revised picture of the labour market now seems more consistent with recent lead indicators of employment intentions in the business surveys (which have recently lifted). It is true that the unemployment rate was unchanged at 6% and we still expect that the unemployment rate will increase from this point to reach around 6.5% by year’s end. However, whereas before we saw the risks to that forecast to the upside they are now tilted to the downside.

  1. We have been impressed by the momentum in household spending in the final quarter of 2013 (up 0.8% real); the upward revision in spending growth in Q3 from 0.4% to 0.7%; and the surprising 1.2% print for retail sales growth in January. That momentum is partly associated with the lift in Consumer Sentiment to a peak of 110 in November last year. The recent drop in the Index to 100 is indicating a slowing in that momentum in the second quarter but not to a pace that would, of its own, trigger a rate cut.

  2. Public comments from Reserve Bank officials and recent written commentary point to the Bank having a “high hurdle” to cutting rates. The improved picture for the labour market and consumers has now, probably, made that hurdle just too high.

  3. Offshore developments have added to the rate cut case. The terms of trade will have fallen in Q1 while the AUD has remained stubbornly high. However, due to supply constraints in the key commodity markets, we do not envisage a fall in terms of trade in 2014 much beyond 6%.

  4. The Westpac Melbourne Institute Index of Unemployment Expectations has reached a 5year high. Households are nervous about their job security and that is likely to weigh on household spending going forward providing further support for a “soft spot” in consumer spending in the June and September quarters. That is likely to keep rates on hold, although more positive trends in the labour market are likely to see that “soft spot” insufficiently threatening to warrant a rate cut. 

  5. Dwelling approvals have lifted markedly. They are now up by 35% over the year to January 2014, indicating a solid lift to residential building in 2014. We have always anticipated that lift to construction activity but had expected that the slow down in the momentum in overall consumer spending would largely offset that boost. With consumer spending momentum holding up better than expected that offset is now seen to be less significant.
  6. In preliminary calculations we have raised our forecast for headline inflation in the March quarter 2014 from 0.6% to 0.7%. At this stage we retain our call for the core inflation print of 0.6% but recognise that the risks on the core are now to the upside. Note that the Reserve Bank's implied forecast for core inflation in the March quarter appears to be 0.8%, with the assumption that the pass through from the fall in the $AUD in 2013 will take longer to work through than just in the December quarter 2013. If the Reserve Bank's forecast is correct then rate cuts would be firmly off the table.

8. Growth in housing finance has been very strong, up 26.9% for the year to December and 22.3% for the year to January. Within that, loans to investors slowed from 40% (in December) to 28.6% in January. Owner occupiers slowed from 19.4% (December) to 18.6% (January). The "time to buy a dwelling" index from the Westpac Melbourne Institute Consumer Sentiment Survey is down by 16.8% from its September peak. There are tentative signs that housing lending might be slowing. As discussed, that slowdown, which has always been core to our forecasts, appears to be  evolving. However, such a slowdown was a necessary but not sufficient condition for lower rates.

9. We retain our forecast for an improvement in the condition of non mining equipment investment from a contraction of 11.5% in 2013 to a modest lift in 2014 of 3.4%.

The Australian Dollar. Our previous profile for the AUD included resilience around 90¢ until the market started to forecast the anticipated rate cuts. We still see most of the contractionary forces operating in the economy but not sufficiently strong to trigger a rate cut from the RBA. We also expect a fall in the terms of trade and a higher USD. Accordingly we are retaining our directional forecast for a lower AUD through 2014 with a target end point of 87¢ by March 2015 rather than the lower 85¢ when we expected rate cuts.


Bill Evans - Westpac Chief Economist


The information may contain material provided directly by third parties, and while such material is published with permission, Westpac accepts no responsibility for the accuracy or completeness of any such material. Except where contrary to law, Westpac intends by this notice to exclude liability for the information. The information is subject to change without notice and Westpac is under no obligation to update the information or correct any inaccuracy which may become apparent at a later date. Past performance is not a reliable indicator of future performance. The forecasts given in this document are predictive in character. Whilst every effort has been taken to ensure that the assumptions on which the forecasts are based are reasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks and uncertainties. The ultimate outcomes may differ substantially from these forecasts. 


Wednesday, 12 March 2014 08:25

Aussies should be investing overseas now


Investment specialist Douglas Isles, from Platinum Asset Management talks with Peter Switzer on Sky Business News about the reasons why Australian investors should think about investing outside of Australia.


Douglas offers his views on which markets look attractive, the $AUD and much more.



Tuesday, 04 March 2014 15:02

Chinese Manufacturing - Declining

We have been writing about the great stress that of the Chinese Financial System.  One of the outputs of this is likely to show up in manufacturing data. Every month HSBC produces a Chinese Manufacturing Purchasing Managers Index ahead of the actual PMI data that is released.  In short, a reading of higher than 50 means that the Chinese manufacturing sector is expanding, and a reading below 50 means that Chinese manufacturing is contracting.


Key Points:


Flash China Manufacturing PMI at 48.3 in February (49.5 in January).  Seven month low.

Flash China Manufacturing Output Index at 49.2 in February (50.8 in January).  Seven month low.


Data collected 12–18 February 2014.

These charts show a downward trajectory in Chinese manufacturing, which is consistent with a Chinese financial system that is under stress.


Tuesday, 04 March 2014 14:20

Warren Buffet's - 5 Investing Don'ts


Warren Buffet, attributed as one of the best investors of the 20th century and one of the world's wealthiest people recently gave an interview to CBNC.  During this interview, 5 specific things NOT TO DO came from the discussion.  Warren Buffet's net worth is estimated to be around US$60bn at the time of writing this blog.


1. Don’t let world events affect your investing decisions.

Even if the Oracle of Omaha said he knew a big war was unavoidable, “I will still be buying stock ... The one thing you can be sure of is if we went into some very major war, the value of money would go down,” CNBC reported him as saying on its web site.

“The last thing you want to do is hold money during a war. You might want to own a farm, you might want to own an apartment house, you might want to own securities. During World War II the stock market advanced. The stock market is going to advance over time.”


2. Don’t feel bad when stocks go down

Even as global markets began to gyrate because of the Russian military build-up in the CRimean region of neighbouring Ukraine, the 83-year-old head of Berkshire Hathaway said: “When I got up this morning I actually looked at a stock on the computer, on the trades in London, that we’re buying and it’s down and I felt good ... We were buying it on Friday and it’s cheaper this morning and that’s good news.” Asked if he would buy more, he replied: “Absolutely.”


3. Don’t think you have to be an expert to profit from stocks

“The stock market just offers you so many opportunities, thousands and thousands of different businesses. You don’t have to be an expert on every one of them. You don’t need to be an expert on 10 percent of them even. You just have to have some conviction that either a given company, or a group of companies ... are likely to make more money five or 10 or 20 years from now than they’re earning now. And that is not a difficult decision to come to,” CNBC reported Buffett as saying.


4. Don’t go for the quick profit

When Buffett, whose fortune was estimated in December to be worth about $US59.1 billion ($66.2 billion), was asked if activist investors were acting in the best interest of targeted companies and their shareholders, he replied: “Generally speaking, they are interested in making a quick profit and there’s no law against making quick profits. But our whole attitude in our own business and what we like to see with the businesses we own stock in is we want to run them for the people who are going to stay in rather than the people who are going to get out. At any given time, you can make more money, usually, selling the company. ... The answer isn’t to sell the company. The answer is to keep running the company well. ... I could do certain things to jiggle up the price of Berkshire in the short run. It would not be good for the company over five or 10 years.”


5. Don’t put your money into bitcoins for the long run.

When Buffett was asked about the latest craze of investing in the virtual currency Bitcoin, he was quick to reply: “It’s not a currency. It does not meet the test of a currency. I wouldn’t be surprised if it’s not around in 10 or 20 years. ... It’s been a speculative – a very speculative – kind of Buck Rogers-type thing, and people buy and sell them because they hope they go up or down just like they did with tulip bulbs a long time ago.”


Tuesday, 04 March 2014 08:18

Master Class


We have dedicated this section of our website to helping investors, become better investors.  We have created a series (and are continuing to do so) of short videos with some of Australia's best investors talking about ways to improve investors skills.  We hope you become a better investor as a result.


Common Mistake - Inability to maintain investment position

Roger Montgomery (Montgomery Fund) and regularly presenter on Sky Business News and on Radio 2GB talks about the most common mistake he sees investors make - and that is surrendering a perfectly good investment position by listening to market noise.















Price is Everything

Andrew Clifford talks about how investors relate price to the investment opportunity in front of them.  

Just buying quality is not enough, in fact ...... Price is Everything.















How to BUY low and SELL high

Here Roger Montgomery provides some tips to help investors achieve the goal of buying low and selling high















3 Tips for Success in the Sharemarket

Anton Tagliaferro (CEO Investors Mutual) and one of Australia's most respected investment managers gives us his best 3 tips for success in the sharemarket.

Monday, 03 March 2014 20:08

SMSF - Checklist to consider


With Self Managed Superannuation Funds (SMSF) being the fastest growing sector in the Superannuation system, here we explore a series of questions that we believe people should ask themselves before proceeding to establish a SMSF.


  1. Ask yourself one more time if this is the right decision for you. It might be time to take a deep breath and just check that you are sure. Don't do it just because SMSF is a buzzword and everyone else you know is doing it. It has to work for you and your family. So maybe sit down and do the age old thing, draw up two columns, one pro and one con, and go through it all again
  2. Part of the shift is being confident, not only that the SMSF structure will work for you, but that it will perform better than what you have already. So go through your existing statements on your retail or industry fund or whatever it is you have, and check its performance over time. Do you have a consistent and coherent investment strategy to fulfil your goals for retirement savings
  3. Make sure you have a good idea of how you will deploy your money when you set up your fund, either acting by yourself or with the help of an investment adviser you trust. Part of this is to understand how you can roll over existing super accounts, but also how you might put other assets currently outside your super into your new fund. Think about what assets you want to put into your fund and understand how much tax you might have to pay on getting them into your SMSF.
  4. You're going to become a trustee of your fund, so you need to make sure you understand your responsibilities and legal obligations. Work out if you want to get some professional help, or if you want to be completely DIY. You should understand how much work is required to administer the fund and work out if you have the time and expertise to do it yourself. If not, you should know what sort of skills you need to access, have some particular advisers in mind and have an understanding of their fees.
  5. Decide on your structure - individual trustees or a corporate trustee. The corporate route has gained in popularity in recent times but there are advantages and disadvantages for each. Professional advice will be useful here.
  6. Make sure all your tax affairs are in order. The ATO is the regulator of the SMSF sector and will approve the creation of your fund. It will definitely have issues with your application if you've been convicted of dishonesty offences, but they will also be cautious if you have a large outstanding tax bill, a history of not lodging your returns, if you have a private company with a poor reporting record or taxes outstanding.  If there are other trustees in your fund, they also need to be eligible, so check that they are.
  7. Apply the residency test. If you live outside of Australia for long periods, an SMSF might not work for you because that will impact on the tax situation. The fund needs to meet the ATO's definition of an "Australian superannuation fund” to be eligible for tax concessions.
  8. Get your trust deed together with the help of a legal practitioner. Sign and date it and make sure that is properly executed. Make sure all trustees sign it. At the same time, or within 21 days of becoming a trustee or director, all trustees need to sign a declaration saying they understand their duties and responsibilities. Keep this safe because you could be asked to produce it later.
  9. Access the tax file numbers of everyone in the fund, because these will be quoted when the fund is registered with the AT0.
  10. Set up your fund's bank account. You'll quote this account if and when you close down your existing super funds to kick off your SMSF.
  11. You need your trust deeds and bank account number when you register your fund with the AT0. If you've gone with a company structure, you'll also need an Australian Business Number (ABN).
  12. Write out your fund's investment strategy. This is not only a good exercise to go through, but you'll need it to show that your investment decisions comply with the strategy you have already outlined, and even more importantly, comply with super laws.
  13. Finally, refer to the ATO’s website for its SMSF series of booklets and information at   And don't be shy about reaching out to the professionals for advice - that's what we're here for.


Note: Advice contained in this flyer is general in nature and does not consider your particular situation or needs. If information contained is not appropriate to you at this stage please pass on to family and friends who may benefit. Please do not act on this advice until its appropriateness has been determined by a qualified adviser.

For more information on SMSF’s or to arrange a no-cost, no-obligation first consultation, please contact us at GEM Capital on Ph (08) 8273 3222


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