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Monday, July 25, 2011

A reminder about what “simplified tax returns” actually means.

I know I covered this last year following the 2010 Federal Budget, but I thought it was worth re-visiting as it’s a topic that seems to have caused some confusion.

You may recall at the time, Wayne Swan tried to promote the proposal by saying it will give most people “more time with their loved ones.” Talk about a stretch!! Methinks he needs a tad more spin doctor training.

The idea is that from 1 July 2012, individual taxpayers will have the option of claiming a standard deduction of $500 for work related expenses and the cost of managing their tax affairs. From 1 July 2013, the Government will increase this standard deduction to $1,000.

This is supposed to make it easier to lodge your own tax return, and in some instances this will be the case. The standard deduction is optional, you can still claim your full “actual” expenses if you believe they will be higher.

An important statistic to take into account that the government is not promoting is that the ATO have released figures showing that the actual average deductions claimed is more than $2,800.

So it begs the question - do you trust the government with your tax deductions? And please bear in mind they are talking about $1,000 of deductions, not a $1,000 refund. At the 30% marginal tax rate the ATO’s actual average taxpayer will be doing themselves out of almost $600 refund.

By making it simpler, are they really hoping that we’ll get lazy and forego our higher tax refund for the easier option? After all, it’s the government trying to save themselves money through reduced administration. Call me cynical, but I just don’t see the government introducing this policy to make my life easier, there has to be more in it for them.

Talk soon,

Thursday, July 14, 2011


Oh man, it has been a noisy few weeks in sharemarket land. And most of that noise has been coming from the media – bless their often misguided, sometimes completely irresponsible, cotton socks.

This will be a fairly lengthy blog, but I think (hope) well worthwhile for anyone that’s wondering what on earth is going on. More importantly, it will provide some perspective.

But most importantly, there’s a prize offer at the end!!!!!

At my business, The Hendrie Group, our approach to managing finances has always been to identify long term goals and then to develop strategic plans to help meet those objectives.

As with all plans, nothing is set in stone, and there may well be variations along the way, to respond to changes both in your goals and to investment markets.

But we try to keep those changes to a minimum, by having a long term strategy, and filtering out the market “noise” which fills the media on an almost daily basis.

Those of you who regularly read my blog or listen to my radio program (98.1FM Radio Eastern Thursdays after the 9am news), will be accustomed to my periodic harangues about the need to be wary of sensationalism in media headlines and reporting. Not to mention, inaccurate reporting, media focus on “short termism” particularly in relation to investment returns, over-emphasis on the issue of fees, etc, etc ….. and to remain focused on the long term.

So, given the market gyrations of recent weeks, and the associated reports, I was pleased to read two articles which – in differing ways - reflected my philosophy.

In a topical article titled Why the fear industry has moved on from the Greek ‘crisis’ well-known and respected Australian finance journalist Michael Pascoe wrote:

“Is anyone feeling a little sheepish after all the hype about the potential Greek Armageddon last week? Probably not. The fear and worry industry immediately moved on to beating up the importance of China’s manufacturing industry numbers on Friday.

For all the theatre of protesters and police, the whiff of tear-gas in reporters’ constant pieces to camera, the repeated lines about the danger of Greece causing another global financial crisis….nothing much really happened.

…….Meanwhile, back at the headline factory, China’s indicator of manufacturing activity, the purchasing managers index (PMI) came in lower than expected for June. The Australian stock market allegedly saw that as a bad thing, indicating that China is slowing, albeit to a growth of about 9%. The Shanghai market saw it as a good thing, indicating that China is slowing and therefore Beijing won’t have to increase interest rates again. So it goes.”

(Market Perspective, The Sunday Age, July 3 2011, p22)

Jim Stackpool, a leading management consultant to financial planning businesses, says:

Good financial professionals deliver certainty in a constantly uncertain world. Mining booms will come and go, international markets will fluctuate, countries - and companies the size of continents - will not perform predictably, natural and unnatural disasters will occur, and unforeseen threats will raise their ugly heads. The ramifications of each of these events will affect the assurance people seek, and good financial professionals anticipate this.

… (they) also understand our ‘natural financial wiring’… adversely affects most peoples’ decision making (that is most of us mere mortals tend to buy high and sell low), and they know how this thinking will most significantly affect the attainment of greater financial certainty in our lives.

Even more importantly, they understand their clients well enough to deliver the wealth management services required to reinforce and lead their clients on the financial journey most appropriate to deliver the assurance each and every client seeks.”

(Asset Financial Review, July 2011, p40-41)

(Note: All the bolding is mine for emphasis).
And finally, eminent Australian economist Shane Oliver (so not the media) wrote in his latest issue of Oliver’s Insights:

“A massive increase in economic and financial information flow is adding to investor jitters and driving a shift further away from long term-investing. This is likely to work against investors over time.

Investors should consider turning down the ‘news volume’ and refocus on investing for the long term, remembering the best time to invest is when everyone is gloomy. Averaging into weakness is a good way to go.”

(Oliver’s Insights, Edition 18, 29 June 2011)

So my message remains the same - stick with your long term strategy. Unless you really can’t stand the strain, in which case talk through your issues with your adviser.

Ok, now to the prize offer. If you have a Facebook account all you need to do to enter our draw is “like” our new Hendrie Group page before 31 July. The prize is a 26" Full HD LED Kogan TV with built-in DVD player and PVR. How good is that?

Talk soon,