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  1. Word on the street

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    June 10, 2019 by admin

    ‘Forget the word ‘street’,” says collector Andrew King. ”It’s simply contemporary art. If Sidney Nolan was in his prime today, I bet he’d be painting on the streets.”
    Nanjing Night Net

    King was interviewed in the July edition of Leonard, a monthly publication issued by the Leonard Joel auction house in Melbourne.

    Auction houses are becoming interested in street art because examples of this style are starting to appear on the secondary market and selling for prices that would have been unthinkable even five years ago.

    ”In my opinion, art by street artists is the next big art movement, no doubt about it,” King says. ”Most people just haven’t recognised it yet.”

    Leonard Joel was the first to hold a mainstream sale of street art when the Andy Mac Collection appeared on May 6. Mac has been collecting this style over the past two decades.

    Bestseller was Freeze Muthasticka, a giant collaboration done on 72 panels at the 2004 Big Day Out festival. The work was so big (30 metres long) it had to be divided into three lots. The first two of these sold for $28,000 (hammer price) each. No doubt this is a record.

    The growing interest in this style has resulted in some of the more prominent artists creating work in ”collectable” formats. These are the works now being bought on the secondary market by a new generation of art collectors.

    Another major collection was sold by Lawsons in Sydney last month.

    It was a litmus test for managing director Martin Farrah. This is new territory for him.

    ”I’m a bit of a brown-furniture man myself,” he laughs. ”I guess I shouldn’t have worn my tweed jacket that day.”

    Regardless, he achieved a reasonable 60 per cent sale rate and discovered that the main buyers, bidding online, were from Melbourne. This is the street-art capital. Although the main buyer was in his 50s, most of those on the floor were thirtysomethings looking for something cool to stick on the walls of their inner-west apartments. This is a cheap way to gain a foothold into the fine-art market.

    Or was. Prices have doubled or tripled over the past three or four years.

    One of Lawsons’ best results was $4000 for a work by the Die Laughing Collective. Another, which is called Murdochracy, sold for $3200. It was one of the few works to have a provenance. Done on nine panels, it was first exhibited at the Melbourne Stencil Festival in 2005 and again in Sydney in 2006, where it was displayed in front of Newscorp’s headquarters.

    It’s unlikely Rupert was the buyer.

    Finding out what work has investment potential is pretty much a mystery, particularly as most artists prefer to work under code names such as Ghostpatrol and Ha-Ha.

    Ha-Ha, aka Regan Tamanui, was certainly hot back in May. One of his Ned Kelly 2003 prints sold for a $1100 hammer price at Leonard Joel, way above estimates of $250 to $350. Many street artists who decorate walls and railway carriages are disdainful of those who exhibit commercially. Others, such as British artist Banksy, have successfully made the transition.

    He was perhaps the first to show that what he once did freely on walls – including the laneways in Melbourne in 2003 – now has considerable commercial value.

    In February 2007, one of Banksy’s portable works sold for £100,000 through Sotheby’s in London. Another fetched £288,000 through Bonhams in London the following month. For collectors, this is an opportunity to acquire one of the most exciting forms of contemporary art.

    There’s also the possibility that what you buy today could do a Banksy and increase tenfold in value overnight.

    The head of art at Leonard Joel, John Albrecht, is cautiously optimistic about this emerging scene. He is now planning to hold an annual street-art auction in Melbourne and is also evaluating a couple of prospective collections at the moment.

    This story Administrator ready to work first appeared on Nanjing Night Net.


  2. Traders continue to roll the dice

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    June 10, 2019 by admin

    Blind bet … ill-informed CFD investors could find themselves out of pocket.The Australian market in contracts for difference, or CFDs, continues to grow, despite official concerns that even experienced investors don’t fully grasp the risks involved in using these instruments.
    Nanjing Night Net

    According to the latest Investment Trends Australia CFD Report, an estimated 44,000 Australians traded CFDs in the 12 months to May 30, up from 41,000 a year earlier. The 7 per cent increase was up from 5 per cent growth in the 12 months before. ”Against a backdrop of challenging economic conditions, the market has shown resilience,” says Pawel Rokicki, a senior analyst at Investment Trends.

    However, the Australian Securities and Investments Commission (ASIC) continues to pay close attention to CFD trading, a year after taking official steps to tighten the rules for providers of over-the-counter (OTC) CFDs.

    Last year, the regulator found that most investors didn’t understand how CFDs worked, with many believing they’re buying the underlying security – a share or currency, say – when in fact they’re buying a derivative instrument.

    The CFDs allow investors to take a bet on changes in the prices of assets such as equities, share indices, commodities and foreign exchange, using borrowed money to multiply their exposure.

    ”[They] have been compared with gambling, but CFDs are far more risky than having a punt at the TAB,” the chairman of ASIC, Greg Medcraft, wrote last year. ”Because CFDs are a full-recourse leveraged investment, you can end up owing much more than your initial investment or margin.”

    ASIC research also found investors didn’t receive enough information to make informed decisions.

    The study showed that some CFD investors traded even though their circumstances suggested they shouldn’t. ASIC estimated about 15 per cent of CFD traders had 50 per cent to 100 per cent of their portfolio in CFDs.

    In response, ASIC is taking action in several areas: requiring better disclosure for retail investors; raising the bar on the financial strength of CFD issuers; and trying to keep a lid on advertising claims.

    Since March, ASIC has required that CFD issuers meet new disclosure benchmarks. It says all issuers have complied. ”Later this year we’ll conduct targeted, risk-based reviews of the quality of these disclosures,” an ASIC spokeswoman says.

    In addition, ASIC has issued a regulatory guide stepping up the financial requirements for issuers, saying the bar needs to be higher ”to ensure licensees have adequate financial resources to properly oversee and manage the operational risks inherent in the OTC derivatives market”.

    Two CFD providers have collapsed in recent times. When it failed last year, the New York-based broking house MF Global was the third-largest player in the local CFD market. Sonray, one of the first brokers to advise on CFDs in Australia, was placed in liquidation in October 2010 and its chief executive jailed a year later after a $46 million shortfall was uncovered.

    ASIC is also monitoring advertising of CFD products ”to ensure the marketing does not give a misleading impression of the risks or potential rewards of CFD trading,” the spokeswoman says.

    Trading questions

    ASIC suggests you ask these questions before trading CFDs:

    ■ What is the financial position of the issuer?

    ■ What is the issuer’s policy on the use of client money?

    ■ How does the issuer determine the prices of CFDs it offers?

    ■ Can the issuer change the price after you’ve placed your order?

    ■ When processing CFD trades, does the issuer enter into a corresponding position in the market for the underlying asset?

    ■ If there’s little or no trading going on in the underlying market for an asset, can you still trade CFDs over that asset?

    See moneysmart.gov.au/investing/complex-investments/contracts-for-difference.

    This story Administrator ready to work first appeared on Nanjing Night Net.


  3. Pension labyrinth

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    June 10, 2019 by admin

    Are you ready? … planning ahead will ensure you get the most out of retirement. Illustration: Warren HackshallThe first question everybody asks on facing retirement is, ”how much do I need?”
    Nanjing Night Net

    There is no simple answer, because the amount depends on a range of variables that include how long you will live, your health, the performance of your portfolio and the rate of inflation.

    A general rule of thumb is 12 to 15 times your annual expected expenditure, but the numbers are further complicated because your eligibility for Centrelink benefits increases as your assets reduce.

    For instance, a home-owner couple with $950,000 of assessable assets may qualify for a pension of $123.50 a fortnight.

    However, if those assets were run down to $600,000, the pension would rise to $648.50 a fortnight.

    At the very least it’s important to be up to speed on the rules, benefits and strategies available to you.

    ACCESS RULES

    Unless you find it necessary to access your super under the hardship provisions, it is locked up until your preservation age.

    This is 55 for people born before July 1, 1960, and then rises in steps until it becomes 60 for people born on or after July 1, 1964.

    However, even if 55 is your preservation age, you cannot access your funds before 65 unless you trigger a condition of release.

    Between the ages of 55 and 60 you need to satisfy the trustee of your fund that you intend to retire permanently and intend never to be gainfully employed for 10 hours or more each week. This does not forever prohibit you from going back to work, because after a reasonable absence from your job you are entitled to have a change of heart and resume employment.

    Once you reach 60, you can trigger a condition of release by resigning from a job – it need not be your main job.

    At 65 you are free to access your super and can even contribute for the next 10 years if you satisfy the work test.

    If you are a part-time worker you must be gainfully employed for at least 10 hours, and less than 30 hours in the week you make the contribution.

    TRANSITION TO RETIREMENT

    There is a clever strategy that enables people aged 55 and over to access their super prior to their preservation age even if they are working, called transition to retirement.

    It was introduced to enable people to reduce their working hours yet stay in the workforce (although there is no need to reduce your working hours to take advantage of it).

    It’s simply a matter of increasing your salary-sacrificed contributions to super to the maximum, and then compensating for the decrease in take-home pay by drawing a pension.

    Take an employee on $100,000 a year whose employer contributes $9000 in compulsory super.

    It is well short of the $25,000 the employee can contribute as a concessional contribution.

    Suppose the employee reduces their income to $84,000 by salary sacrificing an additional $16,000 a year to super.

    Yes, their take-home pay would reduce by $10,080 but the net contribution to super would be $13,600 after deduction of the 15 per cent entry tax, leaving them $3520 better off.

    CENTRELINK AND AGE PENSION

    Money in super isn’t counted by Centrelink until the pensionable age is reached. This is 65 for men born before July 1, 1952, and 64½ for women born between July 1, 1947 and December 31, 1948. Where couples have a big age difference they should take advice, otherwise valuable Centrelink benefits could be lost.

    Take a husband, 65, and a wife, 58, with assessable assets of $650,000.

    Let’s say the wife retires and receives a super payout of $450,000 and starts an account-based pension to enjoy the tax benefits.

    As a consequence of this, the husband would immediately lose his Centrelink benefits because her super is now counted.

    Had she left the money in the accumulation phase, he could have continued to enjoy a part-age pension.

    When assessing eligibility for the age pension, the super balance is assessed under the asset test, while for income-test purposes the income from the fund is based on a formula that takes into account the life expectancy of the superannuant.

    Take a couple aged 66 and 65 who have their own home, $25,000 in lifestyle assets such as furniture and car, as well as his super of $300,000, which is now in the account-based pension phase. His life expectancy is 17.76.

    The exempt amount for Centrelink income-test purposes is found by dividing his super account balance by his life expectancy.

    In this example it is $16,892.

    As a result, the first $16,892 of his account-based pension income is not assessed for the income test.

    The minimum amount that is currently required to be drawn from his super fund is just $11,250 a year, which means he could draw even more than the required minimum without being affected under the income test.

    Anybody who believes they are eligible for the age pension should take advice well before they reach pensionable age.

    In some circumstances, it may be appropriate to gift assets to family members or a charity in order to maximise Centrelink benefits, as Centrelink only assesses assets that have been disposed of within five years of applying for the pension.

    There is no gift duty in Australia, but the decision to give substantial assets to family members should not be taken lightly, as they can be lost for good if the family members who receive them suffer financial problems such as a relationship breakdown or bankruptcy.

    As a general rule it is better to help your children when they are younger as long as they are responsible, rather than make them wait until the parents are 90 and the children are 60, when they should not need it. Each case must be decided on its merits.

    STARTING AN INCOME STREAM

    Every investment strategy has advantages and disadvantages.

    The benefit of starting an income stream is that you move to a tax-free environment, but the price is the requirement to draw an increasing percentage as years pass.

    The benefit of staying in the accumulation phase is that you are not required to withdraw any money – the disadvantage is the 15 per cent tax on earnings.

    Most Australians will have insufficient funds outside super for them to justify staying in the accumulation phase.

    But those with large income-producing assets such as property and shares are better off leaving their super in the accumulation stage if their income from sources outside super exceeds $18,200 a year – the point where the 19 per cent tax rate cuts in.

    TAKE IT ALL OUT?

    The slump in assets caused by the global financial crisis has led to a flood of questions asking whether it’s better to take the money out of super and ”put it in the bank”.

    Super is not an asset class like cash, property or shares, but merely a vehicle that lets you hold assets in a low- or zero-tax area. It is also one of the few assets you can own that is not available to creditors if you find yourself in financial strife.

    If you only had a small amount in super, say $200,000, there is little point in staying there and incurring the fees that go with super because you would still remain in the tax-free area, even if the money was withdrawn and invested in personal names.

    Advice should always be taken before withdrawing funds from super, as it could cause a loss of Centrelink benefits if you are assessed under the income test and drawing an income stream.

    If money is withdrawn to pay off debts such as a home loan, there are no adverse consequences for Centrelink benefits because the money is being retained in the household.

    Money spent on personal items such as travel and home renovations do not affect eligibility.

    Assets such as a car, caravan or furniture will be assessed under the asset test at market value.

    There is no limit on the amount that can be withdrawn from super once you reach the preservation age and have satisfied a condition of release.

    Tax treatment of super: how the rules work

    Pre-tax contributions to super lose a 15 per cent entry tax; after-tax contributions incur no entry tax. The fund pays 15 per cent tax on its earnings but once an income stream starts, the earnings are tax-free.

    Most members’ accounts will have both taxable and a non-taxable components. There is no tax on that portion of the withdrawal that comes from the non-taxable component, but between age 55 and 60 there is a tax of 16.5 per cent (including the Medicare levy) on the taxable component that exceeds $175,000.

    Once age 60 is reached, all withdrawals are tax-free.

    On death, the taxable component incurs a 16.5 per cent tax if left to a non-dependent child. A spouse is always regarded as a dependant.

    Therefore, a person age 60 or over, drawing an account-based pension, is living in a money paradise – the fund itself is tax-free and, at the same time, they are drawing a tax-free income from it.

    Anybody drawing an account-based pension (also called allocated pension) has to draw a minimum amount each year (see above) – there is no maximum.

    Noel Whittaker is the author of Making Money Made Simple and numerous other books on personal finance.

    This story Administrator ready to work first appeared on Nanjing Night Net.


  4. It’s a trust issue

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    June 10, 2019 by admin

    Search and recover … misplaced trust deeds can prove costly. Illustration: Karl HilzingerThe strategy: To find out whether there’s a potential problem with my family trust.
    Nanjing Night Net

    Is that likely? At last count, there were more than 600,000 family trusts in Australia, many of which were set up 20 or 30 years ago. So when was the last time you looked at the trust deed? Do you even know where it is?

    A partner with Hall & Wilcox, Emma Woolley, says a growing number of people are looking to review or modernise their trust deeds and are discovering they don’t know where they are. The family may not have retained the original documents, or they may have been left with an adviser such as an accountant or lawyer that the family moved on from years ago, or they may have been damaged at some time.

    Even worse, she says, some clients are seeing advisers to have their trusts reviewed, only to find they have matured and no longer exist. This can have significant tax and legal consequences and, ideally, you’d like time to plan for them, but if you don’t know when the trust matures it could be too late.

    Why do I need the trust deed? Woolley says family trusts are much less flexible than companies, or even self-managed super funds. The trust deed is the document that sets out what the trustee can do and how the trust should be managed. She says the Bamford court decision of 2010 emphasised the importance of the trust deed in determining how income from the trust could be distributed. Prior to that decision, she says, people assumed all trusts were the same, but they’re not.

    The Bamford decision centred around streaming of trust income – paying different types of income to different beneficiaries – and caused many families and their advisers to go back to their trust deeds to find out exactly what they said. But if you don’t have the trust deed, you can’t read it. And if you can’t read it, you can’t find out whether it needs to be updated.

    ”Some trusts have limitations or require a particular person’s consent to any changes,” she says. ”There’s a real risk that if you don’t know that, any changes you do make might not be effective.”

    Woolley says she is also expecting a ”tidal wave” of litigation when trusts mature and family members, who have been tied together by the trust, fall out.

    So what should I do? A good start, even if you don’t think the deed needs any changes, would be to track down the trust deed and ensure it is in a safe place. She says even if it doesn’t need any changes now, it may once the government review of how trusts are taxed is completed.

    If you can’t find the original deed, Woolley says there is a risk the Tax Office might not believe it existed. In most cases, she says, clients are able to find enough documentation to give comfort that the trust exists. You may be able to find a copy of the original deed or some other form of evidence.

    She says in one case, two brothers had established identical trusts at the same time with the same accountant. One brother had later moved his business (and trust deed) to a new accountant and lost track of the trust but had enough evidence to show his lost deed was identical to his brother’s.

    If you have no evidence, she says, you can go through the court system to try to establish confirmation of a deed, but this is expensive and potentially risky.

    Is it worth having a trust? Woolley says they are still useful vehicles for estate and succession planning, and for protecting an individual’s assets. But they have their own challenges and are ruled by the trust deed. So it’s a document to be taken care of.

    Twitter: @sampsonsmh

    This story Administrator ready to work first appeared on Nanjing Night Net.