The Client …
Joe & Jill run a small business installing car stereos & accessories. They are in their late 40’s, live in the unit over their business, and have a rental property which recently became positively geared. They employ 3 other staff and have taxable income of about $65,000 pa. They have about $80,000 in super.
The Problem …
They don’t have adequate life and disability insurance, and are concerned about the performance of their current super. The problem is that Jill has a medical problem, and can’t get any more insurance. They also don’t want to pay any tax on their rental property if possible.
The Process …
We sat down with the clients and discussed their needs and objectives. The major concern was insurance for Jill. Although cashflow was tight because of prevailing economic conditions, clients knew things would improve, and recognised this was a good time to start investing as investment prices were low.
We looked at solutions to:
- Personal insurance needs
- Tax on the rental property
- Wealth building
The Solution …
Because they were both working in their business, and had 3 other staff, we could change their current super into a corporate super fund, where all members had automatic acceptance cover for Life & Permanent Disablement Insurance up to $250,000. Although this wasn’t quite the level Jill needed, it was certainly better than having no cover.
Joe took out increased insurance, plus income protection and business expense cover. This protected them and their business in a better way.
We recommended that they also contribute personal contributions to super to gain government Co-contribution payments.
We re-organised their loans more effectively, freeing up cashflow. This allowed them to borrow more for a negatively geared investment portfolio.
The Outcome …
The clients had better personal protection, particularly Jill who had been told previously she could not increase her cover. This was done in a tax effective manner mainly through superannuation. Of course, contributions were tax deductible due to them being self employed.
They will be able to build their wealth through the geared portfolio, and reduce tax as well.
Their super will increase through extra contributions and Co-contribution.
They have a bonus in knowing their staff are all covered by insurance they didn’t have before, including their daughter.
We also arranged for them to meet an accountant we knew could help them with their business cashflow. They were impressed with the result.
They also got two new customers when Nev and his son Luke had work done on their cars.
This is a real case history where names have been changed for privacy reasons.