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Glossary

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Don’t understand what a term means? To find out, use our glossary.

Active investment management

Fund managers using an 'active' investment style research and select each stock in their portfolio. They often buy and sell them frequently. Active management aims for an above-average return (which also involves extra risk). Compare with passive investment management

Administrator

If you die without a will, a court-appointed administrator will manage the distribution of your assets.

Agent

A representative, manager or mediator.

All Ordinaries Index    

This is a share price index composed of all the major publicly-listed shares on the Australian Stock Exchange. It is a measure of the overall performance of the Australian share market.

All Ordinaries Accumulation Index

An index that measures movements in the value of the major publicly-listed shares on the Australian Stock Exchange. It takes into account the reinvestment of dividends and is considered a more accurate measure of the Australian share market performance.
 

Annuity

With an annuity, you pay a lump sum now in return for a guaranteed income stream in the future. i.e. Regular specified payments at regular specified intervals. Annuities are generally sold by life insurance companies and are often purchased at retirement. The size of the annuities is based on factors such as:

  • amount of capital invested
  • current interest rates
  • life expectancy
  • Government set minimum and maximum limits.

Appreciation

An increase in the value of an asset. If your house grows in value by 5%, it has appreciated by 5%.

ASIC

See Australian Securities and Investment Commission.

Asset

An asset is an item which has financial value and can be traded. It can be tangible, like cash or property, or intangible, such as goodwill. It is the opposite of a liability.

Asset allocation

Your portfolio will generally include cash, property or shares. The proportion of each investment type in your portfolio is called your Asset Allocation (eg a portfolio may consist of 20% cash, 40% property and 40% shares.)

Asset class

An assets class is a broadly defined group of assets such as shares, fixed interest, cash, property. It could also be referred to as an asset sector.

Australian Securities and Investment Commission (ASIC)

ASIC is an Australian Government regulatory body that enforces and administers the Corporations Law and consumer protection law. It regulates investments, life and general insurance, superannuation, and banking (except lending).

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Balanced Fund

A ‘diversified’ managed trust that aims for a mix of income and longer term capital growth. Usually a Balanced Fund holds about 60% to 75% of its investments in shares and property (equity assets) and about 25% to 40% in more secure income-producing assets such as cash and fixed interest (debt assets).

Bond

Governments and corporations, among other institutions, sell bonds to investors in return for cash. Generally, a bond is a promise to repay the principal along with the specified interest return at specified times.

Broker

An agent that will act on behalf of a client to buy and sell securities, commodities, mortgages, insurance etc.  They are usually paid a commission, which is calculated as a percentage of the transaction.

Business cycle

See Economic cycle

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Capital

Capital includes:
  1. Investments used to generate more value
  2. The value of financial assets less any loans against that investment

Capital Gain/Loss

A capital gain/loss is the difference between how much you paid for an asset and how much you received when you sold it. If you sell it for more than you paid to buy it, you have made a capital gain. If you sell it for less, you have made a capital loss.

Capital Gains Tax (CGT)

CGT is tax you pay on any capital gain.

Capital guaranteed fund

A capital guaranteed fund is an investment product that guarantees the return of the investor's capital. Interest earnings are sometimes guaranteed as well.

Capital Growth

Capital growth is when an asset increases in value over time. It is also referred to as capital gain.

Capital Stable Fund

A capital stable fund is a 'diversified' managed trust, providing mainly income with some capital growth. It usually involves investing 70% in government bonds and cash, and 30% in property and shares.

Cash

Cash is money you can access immediately or within 24 hours. It is usually kept in bank accounts or cash management trusts. Cash is considered to be the safest asset class, but it will usually give you the lowest returns.

Cash flow

Cash flow is an amount of money that is left over from your income (including wages, investment or rental income etc) after expenses and other liabilities have been paid.  The amount applies to a certain period of time (eg: month or a year).

Cash Management Trusts (CMT)

A CMT is a managed trust that allows you to invest your money in short-term government securities and bank securities. The interest rate is usually higher than bank deposits. Some offer a cheque book and other facilities.

CGT

See Capital Gains Tax

Co-contributions

See Government Co-contributions

Complying pension

A complying pension is an income stream that has the following characteristics as specified under legislation. These include

  • The pension must be for life or an agreed term
  • The total funds cannot be withdrawn during the life of the account holder
  • The income is a set, guaranteed amount, within Government set bands

Compound Interest

Compound interest is a method of calculating interest. In each period, interest is calculated on both the principal and the interest previously earned. Henry Ford said that compound interest was 'the eighth wonder of the world'. See also simple interest.

Concessional contributions^

Concessional contributions are contributions made from pre-tax income. There are three types of concessional contributions:

  1. Employer superannuation guarantee contributions (SG) which are 9% of your gross (pre-tax) salary or wages
  2. Salary sacrifice contributions which are contributions made into your super fund from your gross salary
  3. Personal deductible contributions made by the self-employed and claimed as a tax deduction against their income

These contributions attract 15% Contributions tax.

Concessional contributions are limited to:

  • $25,000 per year for those under age 50 (indexed)
  • $50,000 per year for those over 50 (until 1 July 2012)

From 1 July 2012, the Federal Government proposes to retain the $50,000 limit, only for people aged 50 or over with total super balances below $500,000.

Contributions above these limits are taxed at the top marginal rate plus Medicare levy (currently 46.5%).

(See Non-concessional contributions)

Consolidation

See Super Consolidation

Contributions

Deposits made into a superannuation fund are called contributions. There are two main types of contributions:

  1. Concessional contributions
  2. Non-concessional contributions which have different limits and tax treatments.

Contributions Tax

Contributions tax is a 15% tax levied on concessional contributions to superannuation funds. (See Concessional Contributions)

Currency

Currency is a country's unit of exchange that allows the holder of the currency to purchase goods and services within that country.

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Debenture

Debenture is a type of fixed interest security issued by companies (as borrowers) for a medium to long-term investment of funds.

Debt

Investments can be divided into two main categories: debt and equity. Debt investments may be categorised as either cash or fixed interest. The investor is effectively lending their money to an institution that must pay interest at specified times in return. A debt also refers to an amount or an item of value that you have borrowed and that you are expected to repay.

Depreciation

Depreciation is an accounting practice that recognises assets tend to lose value as they age. The total value of the asset is divided over the years and life of the asset.  Each year the total asset value decreases by the dollar amount/value allocated to that year.  Opposite of appreciation.

Discretionary Will Trust

See Trusts and Testamentary Trust.

Diversification

The goal of diversification is to reduce risk and achieve a more consistent performance under a wide range of economic conditions. You can do this by having a variety of investment products and asset classes in your portfolio. Volatility is limited because not all asset classes or sectors move up and down in value at the same time or at the same rate.

Dividend

A dividend is a payment made to shareholders when a company distributes some or all of its profit.

Dividend imputation

Dividend imputation is when a dividend is paid to a shareholder, and the company has already paid tax on the dividend, the shareholder receives a tax credit for the tax already paid. See also Franked Dividend.

Dividend Yield

Dividend yield is the percentage return on a share investment. It is calculated by dividing the dividend rate (in cents per share) by the current share price.

Dollar Cost Averaging

Dollar cost averaging is the act of contributing a regular amount of your money into an investment (usually an equity investment, including superannuation). Investment unit prices constantly go up and down (especially share prices), When the market is down and prices are cheaper the investor buys more units or shares. When the market is up and the prices are higher, the investor buys less units or shares. This means the investor is usually getting the average price on their investments.

Drip feeding

Drip feeding is a reference to the fact that Dollar Cost Averaging is usually the investment of smaller amounts of money on a regular basis over a longer period of time.

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Economic cycle

Economic cycle refers to regular and cyclical changes in economic activity - the highs and lows of the economy. Beginning with an economic boom, the economy is shown to move through various influences until a recession (economic low). Eventually the entire cycle repeats itself.

Eligible Termination Payment (ETP)

An ETP is a payment made to an employee at retirement, resignation, retrenchment, or disablement. An ETP may be 'rolled-over' (transferred) into various approved superannuation products to defer and minimise tax.

Equity

Equity is another name for a share. Equity investments are assets where the investor buys some or all of an asset because they believe it will increase in value over time (eg. shares or property). Equity also refers to the amount an owner has invested in an asset. For example, if your home is worth $500,000 and you still owe $200,000, the equity in your home is $300,000 (i.e. $500k - $200k).

Estate Planning

Estate planning involves planning for the care of any dependents and the distribution of your assets after you die. This planning takes into account

  • your preferences.
  • tax laws 
See Trusts and Testamentary Trust.

Exchange Rate

Exchange rate is the price of a currency in terms of another currency.

Executor

Executor is the person (or people) nominated in your will to manage the distribution of your assets and to carry out your wishes after you die.

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Financial advice

Personal Financial advice is guidance from a suitably qualified financial planner who helps you make decisions about your money based on your needs and preferences. If you’d like financial advice, contact us.

Financial Planner

A qualified Financial Planner considers your personal goals, circumstances and needs, then recommends appropriate strategies and financial products so that you can achieve more with your super savings and/or investments. If you’d like to have a Financial Adviser prepare a plan for your financial future, contact us.

Fixed Interest

If you deposit (or ‘lend’) to an institution (like a bank or a credit union) for a fixed period of time, at a specific interest rate, you are investing in fixed interest. At the date of maturity, you receive your original capital plus the interest earned. You have received income only; your capital will not grow. Examples are term deposits and debentures. Your are required to pay tax on fixed interest.

Fixed interest trust

A fixed interest trust is a managed trust that primarily invests in longer term fixed interest assets. The goal is for you to receive a high level of security for the capital you invest and more interest (an interest usually above that available from bank deposits). The trusts are riskier than cash because of three main factors: they may not be as liquid, you may find yourself locked into a lower rate of interest, and sometimes interest rate changes can affect the value of your capital.

Franked Dividends

Dividends with imputation credits are called 'franked'.

Franking credits

Franking credits are dividends on shares that have imputation credits.

Fringe Benefits Tax (FBT)

FBT is a tax on non-salary benefits.  It is paid by employers on behalf of their employees. Such benefits include parking, company cars and subsidised home mortgage payments.

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Gearing

Gearing is the amount of borrowings held against an asset.

Goods and Services Tax (GST)

GST is a tax applied at the point of sale on generally all goods and services (with the exception of food). Currently the rate is 10% and is included in the price you pay.

Government Co-contributions^

The Government Co-contributions scheme is a scheme under which the government makes a payment up to $1,500 into your super fund to encourage you to contribute more into your super. The amount is based on your contribution and your income.

If your income is $30,342 or less (2008/09 Scale), the government will pay $1.50 into your fund for every $1 you contribute into your super fund – up to a maximum of $1,500 a year. As your income increases, the co-contributions decrease on a sliding scale and cease entirely once your income reaches $60,342 a year. However, not everyone is eligible. To work out what your government contributions may be, use your Co-contributions Calculator.^

Growth Fund

A 'diversified' managed trust is focused on long-term capital growth. To achieve this growth, it will have fewer investments in "secure" assets like cash. It would typically have 80%-90% invested in shares and property. Income returns are likely to be low.

Growth investing

Fund managers using a 'growth' investment style invest in companies expected to grow faster than their competitors. Growth in the share price, rather than in dividends, is expected here. Companies of this type can do very well in good economic times. Compare to 'value' investing

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Imputation credit

If a company has already paid tax on their profits before distributing their share dividend, the shareholder is entitled to a tax credit of up to 30%. These are 'imputation credits'. Dividends with imputation credits attached are called 'franked'. Credits are passed on whether you own shares directly or through a managed fund.

Income

Income is the money earned from an asset such as rent, interest, and your own labour.

Income Protection Insurance

Income Protection Insurance insures your income against loss if due to illness or injury.  It replaces up to 75% of your income for the time you have selected (after your chosen 'waiting period').

Income splitting

Income splitting is a potential tax saving strategy that applies if you have a spouse or partner in a lower tax bracket than you. Investments paying interest, dividends or rent can be made partially, or entirely, in the name of the lower tax-paying spouse or partner, reducing the household’s overall tax burden. Employment income cannot be `split'.

Income tax

Tax on the income earned from working, and investments, based on your marginal tax rate.

Index

A numerical scale used to compare variables. Specific economic indexes measure the activity of different markets. For example, the All Ordinaries index is a measure of share market prices in Australia.

Index investing

See Passive investing

Inflation

Inflation is a measure of how prices rise over time. It is measured by the "Consumer Price Index" (CPI) which shows the price changes of items included in a specific 'basket" of goods and services. Inflation is shown as the percentage change in the CPI.

Insurance Agent

An insurance agent provides specialised insurance advice (a Financial Planner may or may not be an agent). An agent's primary responsibility is to the insurance company, not to the client.

Investment debt

Investment debt is a debt created to purchase investment assets that are expected to grow in value over time. Some examples include a mortgage on an investment property or a margin loan used to purchase shares.

Investment trust

See Managed Funds

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Lazy Asset

Lazy asset is an asset that cannot or does not generate income or capital growth.  It usually requires extra income/money from you. It is sometimes called a "lifestyle asset" (eg. your car).

Liability

A liability is an amount you owe or have borrowed. Examples include a mortgage, a personal or an investment loan. It is an obligation to pay in the future.

Life Insurance

Life Insurance is cover that provides a lump sum benefit when the person dies. The amount paid depends on the premium and age of the person insured.

Liquidity

An asset is considered liquid if it can be easily sold for cash (eg sold within 24 hours). The most common liquid assets are bank accounts.

Listed

Listed is a security that you can purchase on the stock exchange.

Listed Property Trust (LPT)

LPT is a managed fund which invests in a range of real properties, and is listed on the stock exchange. Units are bought and sold in the same way as shares in a company that is listed on the stock exchange. These funds may focus on commercial or residential properties, or a mixture of both. Their value will typically change based on the income they produce. See Managed Funds and Property Trusts.

Lump Sum

Refers to an amount paid in cash.  For example, if you withdraw your superannuation funds instead of rolling them over to another account, you will receive the money as a lump sum.

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Managed Funds

Managed funds are also known as managed trusts. Managed funds allow investors to pool their money with other investors so they may invest in larger, more complex assets (eg commercial property, international shares). This gives smaller investors access to assets that they would not otherwise be able to afford. The smaller investor also benefits from the expertise of a fund manager who buys and sells assets on their behalf. When you invest in a managed fund you buy 'units' that go up and down according to the value of the investments. You receive income and capital gain, in proportion to your unit-holding.

Margin call

When you take out a margin loan to buy shares, you must agree to maintain your equity above a certain minimum level. If the share price falls, your level of equity also falls. If it falls below the minimum level, you will be required to make an immediate additional investment to restore your level of equity to the agreed percentage, or sell some shares. This is referred to as a margin call.

Margin loan

A Margin loan is when the lender provides finance for a highly liquid investment asset (usually shares). In return, the borrower promises to maintain a certain minimum level of equity in the investment. The borrower pays interest on the loan, and receives all dividends and capital gains (or losses). If the value of the shares drops, you will be subject to a margin call

Marginal Tax Rate

The amount of tax each taxpayer is obligated to pay is calculated on a progressive (graduated) scale. The higher the level of income, the higher the tax rate applied.

Market

Market is the place where buyers and sellers meet to exchange goods and services for money. The share market is where shares are exchanged; the fixed interest market is where bonds and debentures are traded.

Market Capitalisation

Market capitalisation is the value of the company as determined by the market. It is calculated by taking the total number of securities (usually shares) issued by a company and multiplying it by the current market price of those securities.

Maturity

Maturity is the date when a loan, bond, mortgage, or other debt or security is due to be repaid.

Money Coach

Our personal Money Coaches are experts in money management, financial advice and wealth building. They can advise you on any of your money matters, from budgeting to superannuation or even paying off a loan. They provide answers to everyday questions over the phone, so you can access personal advice in the privacy of your own home. Our Coaches can help you with questions such as:

  • How do I start to save?
  • When can I retire?
  • Should I salary sacrifice?
  • Should I consolidate my super? How?
  • I have money to invest. What do I do?
  • Should I move my super?
  • Which investment option is right for me?

To ask a Money Coach to help you, contact us

Mortgage

Mortgage is a loan to finance the purchase of property. It usually includes a contract outlining a specified payment plan and payment period.

Mortgage Trust

Mortgage trust is a managed trust that invests in a range of mortgages on behalf of its unit holders.

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Negative Gearing

An investment strategy where you borrow money to purchase an investment and the interest on the loan is more than the income received from the investment. This loss is tax-deductible. The objective is for the property to rise in value over time. Negative gearing is commonly used for purchasing investment property, and can also be used to purchase shares or managed funds.

Net worth

Your net worth is what's left after subtracting your debts from your assets.

Non-concessional Contributions

This is when you use your after-tax money to make personal contributions to your super. You cannot claim a tax deduction on these contributions but you also do not have to pay 15% contribution tax. There is no tax payable on this contribution amount even if you withdraw when are under 60 years of age.

These contributions are limited to $150,000 for each person each year. If you are under 65 years of age, you can also average up to $450,000 contributions over three years.

Contributions exceeding these caps will be subject

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Passive Investing

Each fund manager has its own approach to investing. Some have an approach that effectively copies what the market as a whole is doing. This is called passive (or 'index') management. Passive managers simply put together a portfolio of shares that mirrors all the shares in a particular index. Compare with Active investment management

Pay As You Earn (PAYE)

Abbreviation for pay-as-you-earn, where tax is deducted in instalments by an employer from an employee's wages or salary. This is normally summarised on your Group Certificate at the end of each financial year.

Pay As You Go (PAYG)

This is the taxation system for paying instalments towards your expected tax liability on business or investment income.

Pension

A regular payment to a person usually after retirement.

Personal debt or personal loan

A loan used to purchase assets that don't produce income and can lose value over time. Car loans and credit card debts are good examples.

Personal Summary

A summary of your personal information - including personal details, income, expenses, current insurances, assets and liabilities and goals.

Portfolio

An investor's collection of investments, usually used when referring to its mix of different asset classes.

Preservation Age

The age at which you are allowed to access your superannuation. This age will depend on your birthdate.

Date of Birth Preservation Age
Before 1 July 1960 55
1 July 1960 – 30 June 1961 56
1 July 1961 – 30 June 1962 57
1 July 1962 – 30 June 1963 58
1 July 1963 – 30 June 1964 59
After 30 June 1964 60

This allows people who have  reached their preservation age and permanently retired from the workforse to draw on their super as a lump sum.

Under new laws, those who have reached their preservation age can draw on their super through a Transition to Retirement while continuing to work.

Principal

The original amount borrowed or invested on which interest is calculated. This also means interest which is not withdrawn before the next period will form part of the principal.

Principal payment

Repayments on a loan debt above the interest charged.  This reduces the principal. Most home loans are 'principal and interest' loans designed to reduce the principal to zero within the agreed term.

Product Disclosure Statement (PDS)

A document that describes a fund’s features, fees, structures, trustees, performance etc in great detail and includes an application form. Each unlisted managed fund has its PDS. The Australian Securities and Investment Commission (ASIC) closely monitors the content of every PDS.

Property

All real estate investments including such assets as houses, commercial buildings, factories, offices and farms.

Property Trusts

A property trust enables you to be a part-owner of a number of properties (usually large commercial ones). Most property trusts are listed on the Stock Exchange, while others are available through a prospectus or PDS.

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Real Return

Your 'real' return is the rate after inflation is deducted.

Rebate

See tax rebate

Return

In investing, a return is what you earn (or ‘get back’) on an investment. It is usually expressed as a percentage of the original amount invested.

Risk

The likelihood of loss, or that investment returns are less than expected. Investments with greater risk usually provide higher expected returns to attract investors.

Rollover

In relation to superannuation, the transfer of one approved fund (eg. approved deposit fund, allocated pension, super fund) into another approved fund.

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Salary Sacrifice/ Salary Sacrificing

Where an employee directs part of their pre-tax salary into an account, such as their superannuation, or towards payment of a good or service eg. laptop, mobile phone, lease. It has the effect of reducing the employee’s pre-tax salary and in effect, their overall tax payments. It may also reduce the effective cost.

Sector

A subset of a market, industry or economy where the members of the sector share common characteristics. For example, in the newspapers shares are divided into industrial and resource stocks.

Security

  1. A financial investment which can be traded on the stock market. Can be a debt or equity eg. shares, bonds.
  2. Property pledged as collateral for a loan.

Set-and-forget investing

Describes the fact that investing in growth assets is for the longer term and that they should be left to grow over time.  This also means that you aren't concerned with ups and downs in the short-term but are more concerned with the long-term growth.

Share or 'Equity' Trusts

Managed funds investing in shares. Some funds invest in specific sectors eg. technology, mining, gold or energy. Others invest in specific regions e.g. international, US, Europe; or have a particular style (passive or growth) or investment philosophy eg ethical investments.

Shares

A share basically makes you a part-owner of a company. This entitles the shareholder to take part in the company's profits (usually via dividends) or losses, elect its board of directors and vote on major issues. Shares are also called "equities" and "stocks".

Simple Interest

The interest paid on the initial investment (principal) alone. (See also Compound Interest).

Single Issue Advice

As well as preparing complete financial plans, we can also help you with specific money issues eg How to consolidate your super, how to use Salary Sacrificing etc. When a Money Coach helps you with these specific issues rather than your overall financial situation, we call it "single issue advice". Single issue advice costs less than a financial plan and has made financial advice affordable for the average working Australian.

Single Responsible Entity (SRE)

In the past, independent trustees oversaw the operation of managed funds. They're now being phased out and investment managers are taking over full responsibility for their funds by becoming a 'single responsible entity'.

Stock Exchange

A market for the buying and selling of shares.

Superannuation (also known as super)

A tax-advantaged method of saving for retirement. Money invested in superannuation is generally not available until you stop working. Due to its long-term nature, super has tax advantages over normal investments. Super is usually structured like any other managed fund and invests in assets such as cash, fixed interest, Australian and international shares.

Superannuation Consolidation

The act of merging many different superannuation accounts belonging to one person into one super account. This has the benefit of making it easier for the member to keep track of their superannuation and can potentially lead to savings by reducing the number of different fees charged.

Superannuation Guarantee Charge (SGC)

A charge levied on employers failing to provide the required level of superannuation guarantee support for their employees. The charge is non-tax deductible and is made up of superannuation guarantee (See Superannuation Guarantee Contributions) shortfall amounts, interest on the shortfall and an administration fee.

Superannuation Guarantee Contribution (SGC)

Contributions which all Australian employers are required to pay into the superannuation accounts of their employees who earn more than $450 per month. These accounts need to comply with legislation and payments made by the 28th day of the month following the end of each quarter. Currently, the required Superannuation Guarantee Contribution is 9% of pre-tax salary or wages.

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Tax Deduction

An expense that may be used to decrease taxable income; usually incurred in generating that income.  

Tax Offsets (also known as tax rebates)

Rebates are initiatives or schemes to reduce the income tax payable be an individual in certain circumstances eg, They usually are not affected by the person's marginal tax rate

Taxation

Tax is payable by individuals to the government at various stages - including on income from working, income derived from investments and from capital gains made when an investment is sold at a profit

Tax minimisation

Legal methods of managing your income and investment in different ways to reduce the amount of tax you pay. Common strategies include income splitting, family trusts and salary sacrificing. (If your methods are illegal, it is called Tax Evasion.) Talk to a qualified taxation account if you are at all unsure about the tax minimisation strategies you are using - or thinking of using.

Tax Rebate

Coming Soon

Term Deposit

A deposit with a financial institution for a fixed period, with a fixed rate of interest. Interest payments may be made during the term or at maturity. The principal is available on maturity. Breaking the term usually incurs and interest rate penalty.

Testamentary Trust

A testamentary trust (or 'discretionary will trust') is established in a will, and comes into effect when the will-maker dies. Instead of having assets pass straight to the beneficiary/ies, assets pass to a trustee who holds the estate assets in a trust for the beneficiary/ies. The main benefit of a discretionary testamentary trust is to give beneficiaries flexibility when dealing when their inheritance.

Total and Permanent Disablement Insurance

Insurance which provides a lump sum of money if you suffer an illness or injury that means you can no longer work.

Transition to Retirement Pension

Also known as TRAPs, private pensions or personal pensions. A pension for those who have passes their preservation age. They are able to rollover any or all of their accumulated benefits (eg. their super) into it, and draw down a portion, even while still working. If the member is over 60, returns and the amount drawn are tax-free. They usually offer a range of investment options and funds. 

Transition to Retirement Strategy

Available to over 55s, Transition to Retirement is a superannuation strategy that involves taking some or all of your super and converting it into a pension – even if you’re still working. This allows you to:
  • reduce the hours you work without necessarily reducing your income
  • use some or all of your salary or wages to salary sacrifice in super
  • take advantage of lower taxes to boost your retirement savings.

Trauma Insurance

Covers many of the illnesses and injuries that involve potentially expensive medical care and that often lead to time off work. The illnesses and injuries covered are always stated very specifically in the policy. Trauma insurance is sometimes available as a component of a life insurance policy, or as a policy by itself. A trauma policy does not require disability or death in order to pay a benefit.

Trusts

(See also Testamentary Trust) A trust is an arrangement when a Trustee has a legal obligation to hold assets for the benefits of others – the beneficiaries. The terms of this arrangement is set out in the Trust Deed by the ‘Settlor’ who established the trust.

There are many kinds of trusts, such as Family Trusts, Discretionary Trusts and Testamentary Trusts. Trusts can form an important part of your estate planning, as they defer and/or minimise tax on investments until they are distributed and in the hands of the beneficiary.

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Unit

A term of measurement that represents a share in the underlying assets of a managed fund. Investors in a manage fund buy units in that fund. The units are valued according to the combined value of all the assets held by the fund.

Unit Trust

Another term for a managed in a managed fund.

Unit Holders

Investors holding units in a managed fund.

Unlisted

An investment that cannot be purchased on the stock exchange

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Value Investing

Fund managers using a 'value' investment style buy shares in companies they feel are trading at below their true value due to short-term volatility ie. they look for shares where the share price and/or price earnings ratios are relatively low, or dividend yields are relatively high ect. Compare with 'growth investing'

Volatility

Fluctuation in share prices, exchange rates, interest rates, and so on. The higher the volatility, the less certain an investor is of potential returns, and therefore volatility is one measure of risk

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Wealth Accumulation

By spending your money carefully and investing wisely, you can over time increase your net worth. This process is called wealth accumulation.

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Working Asset

An asset with the potential to generate income and/or capital growth.

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Yield

The return received from an investment which takes into account the frequency of interest or dividend payments. It is expressed as a percentage of its capital value.

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^ Important: The Federal Government has proposed a number of changes to superannuation and Centrelink rules that may affect the accuracy of this information. If the proposed changes become law, the above calculations will need to be reviewed. Please refer to our Federal Budget Update Fact Sheet for further information on the proposed changes announced on 12 May 2009.