Austalian shares tipped to bounce December 21

 

The Australian share market is tipped to bounce this morning after global stocks posted solid gains in light trading volume. Wall Street rose on improved housing figures. European markets lifted on an upbeat read of business confidence in Germany and strong demand for Spanish debt. The Australian dollar has returned to parity with the US currency.    Germany's Ifo economic institute showed an unexpected rise in business sentiment overnight while a separate survey showed consumer confidence was holding up in European largest economic, despite the ongoing debt crisis.
US data released overnight, showed new home starts in November rose 9.3 per cent to their highest level since April 2010.


At 0711 AEDT on Wednesday, the March 2012 share price index futures contract was 71 points or 1.76 per cent higher at 4,110.
In economic news on Wednesday, the Westpac-Melbourne Institute will release its leading Indexes of economic activity for December.
On Tuesday, the benchmark S&P/ASX200 index was down 7.3 points, or 0.2 per cent, at 4,053.1, while the broader All Ordinaries index fell 6.8 points, also 0.2 per cent, to 4,107.1, the lowest since November 25.
US economic news
US housing starts and building permits increased more than expected to 1.5 year high last month. The Commerce Department reported housing starts gained 9.3 per cent in November from the month before and were 24.3 per cent higher from the year before to a seasonally adjusted annual rate of 685,000 units. New permits for future construction rose 5.7 per cent to a 681,000-unit pace in November.
Figures:
Wall Street advanced on Tuesday: The Dow Jones Industrial Average gained 337 points to close at 12,104, the S&P500 added 36 points to close at 1,241 and the Nasdaq put on 81 points to close at 2,604.

European markets closed higher Tuesday: London’s FTSE was up 55 points, Paris was up 81 points and Frankfurt was up 176 points.
Asian markets finished mixed: Hong Kong’s Hang Seng was up 10 points, Tokyo Nikkei was up 40 and China’s Shanghai Composite eased 2 points.

The Australian share market finished 0.2 per cent down after choppy trade on Tuesday. The S&P/ASX 200 Index lost 7 points to finish at 4,053. On the futures market the SPI is 74 points stronger.

Currencies:
The Australian Dollar at 8:20AM was buying $US1.0078 cents, 64.37 Pence Sterling, 78.49 Yen and 77.06 Euro cents.

Please contact Amazon Financial Group if you require further information or advice, (03) 9866 2400 or email admin@amazon.net.au

Why aren’t my super contributions tax-free?

This is a common question from a number of my clients;

Q: I checked my statement and I put an extra $10 per week into my super and each time an amount is put in, it has been taxed. Is this right? I thought that my contributions were tax-free?
Stephen's response: I’m not certain if you’re asking:

• whether you pay any tax at all when you use your income to make super contributions,
• whether you pay tax on super contributions when they enter a super fund, or
• whether you pay tax on your income before you make super contributions

In any case, I will ensure that I answer all of these questions.
The deal with super contributions is that tax is usually paid on that money at some stage (by you or your super fund account), unless you don’t pay tax on your personal income and you make an after-tax contribution. For example, an individual who may not pay income tax on personal income is someone who has a taxable income of less than $16,000 (for the 2011/2012 year).
If you make a non-concessional contribution, that is, an after-tax contribution, you are making a contribution from your after-tax money. If you’re an employee, then typically your employer deducts PAYG tax instalments, and then your pay goes into your bank account, and then a contribution is made from that bank account, or your employer makes that payment for you. In these circumstances, no additional tax should be deducted upon entry into the super fund because such contributions are treated as non-concessional contributions. For a contribution to be treated as a non-concessional contribution however, the super fund must be aware that it is a non-concessional contribution.

If you choose to make a concessional (before-tax) contribution, then the super fund deducts a 15% ‘contributions’ tax from the contribution upon entry into the fund. If you’re paying less than 15 cents in the dollar tax on your personal income, then concessional contributions are not considered a tax-effective option.
Concessional contributions include your employer’s Superannuation Guarantee payments, any salary sacrificed contributions and tax-deductible super contributions (if eligible).
Note: If you intended to make after-tax contributions, and the super fund has treated them as concessional (before-tax), then you need to chat to your super fund to resolve this matter.

Please contact Amazon Financial Group if you require further information or advice, (03) 9866 2400 or email admin@amazon.net.au

Dividend a reason to invest

What a disappointing year it has been for investors, particularly for shareholders.
A recovery of sorts appeared to be under way when the market almost touched 5000 points, as measured by the S&P/ASX 200 index in April.
But in the second half of the year, trading was constrained to a range of between 4000 points and 4500 points. The market is about 5 per cent lower than where it started the year.

Any prospect of a sustained recovery in shares has likely been put off for even longer now that the euro zone is almost certainly in recession. That is bad news not just for those holding shares directly.
A poorly performing sharemarket leads to poorly performing superannuation funds because shares are the biggest investment of default funds, where most people have their super.
It is hard to see how share returns can improve next year when so much uncertainty surrounds the euro zone debt crisis. Speculation on recession in Europe could unsettle markets, even if the Europeans come up with a credible plan to get government debt under control.

Now the turmoil in Europe has been compounded by the spectre of recession, speculation over the consequences for global economic growth will intensify. The Australian sharemarket is regarded by global investors, such as pension funds, as a resources play, so lower global growth and commodities prices will force them to reduce their exposure. That is already happening to some extent because the high Australian dollar makes our shares expensive for foreign investors.
All this is swamping the relatively good news on economic growth and corporate profits.
Big companies such as Telstra and the banks are paying cash dividends of 6 per cent to 9 per cent, even more with their franking credits. Some sectors, such as retailing, are struggling but by most measures share valuations are low.

Do not assume the recovery, when it eventually comes, will be a rerun of the bull market in shares between the early 1980s and 2007.
The trend towards low inflation and interest rates that was mostly behind the bull market (as well as companies and individuals loading up on debt) was a one-off.
Investors focused on the rising prices of their shares. The income the shares paid became immaterial. In all likelihood, the game has changed. Investors will be much more focused on the income that is generated as they expect only fairly modest capital gains over the longer term. The swelling ranks of retirees in developed countries can be expected to help drive this trend as they favour investments with good income streams.