Aron Case Study - Accounting and Finance Assignment Help

Assignment Task

Case Study Scenario 

Aaron is a 32-year-old IT professional who lives in a rented apartment in Adelaide with his stepbrother Toby who is 20. At the age of 18 Aaron’s father encouraged him to invest a small amount of money in shares and over the years he has actively and successfully traded his share portfolio to the point where it is currently valued at $165 000. The cost base of his portfolio for CGT purposes is $88 000. The current balance in Aaron’s industry superannuation fund was $172 000. On the last statement from his superannuation fund Aaron noticed that the indirect cost ratio was 0.61% and investment fees was 0.21%. The fund charges an admin fees of $78 per year plus 0.19% of the account balance. Aaron is considering establishing an SMSF but is unsure whether the costs of establishing and running an SMSF would be less than the costs charged by his industry fund. As Toby has recently started working as an apprentice mechanic, earning $55 000 a year, Aaron is wondering if it is advisable for Toby to join his SMSF if he were to set up one. If Aaron does establish an SMSF he would like to contribute his share portfolio as an in-specie contribution which he would continue to actively manage inside his SMSF. Aaron is planning to then use the share portfolio in his account as a collateral to enter into margin loan with his bank to buy more shares. He also has an uncle who knows a bit about accounting but nothing about SMSF who has offered to help Aaron set up and run his SMSF.
Requirements Your task is: 

(a) Firstly, provide evidence-based research to compare the relative advantages and disadvantages of Aaron remaining in an industry fund versus moving into a SMSF. Your findings should include a comparative cost analysis. (10 marks)

(b) Secondly, research and provide Aaron with recommendations to guide him in managing his superannuation savings. (10 marks)

Your recommendations in (b) should give consideration and appropriate discussion to each of the following areas:

• If Aaron was to sell the share portfolio and contribute the full sale proceeds to his industry fund as a non-concessional contribution, what would be the approximate annual cost applied by the industry fund to Aaron’s account? 
• What are the CGT consequences of contributing the share portfolio to the SMSF? 
• Will Aaron be able to contribute his share portfolio to the SMSF and be able to avoid any excess contribution tax penalties? 
• Will Aaron be able to borrow through a margin loan to leverage his funds?
• What factors are likely to impact on the cost of establishing and running an SMSF for Aaron? 
• What factors besides costs does Aaron need to take into account in determining whether or not he should establish an SMSF? • What issues need to be considered when setting the fund investment objectives and strategies?

Note: There is no right or wrong answer – you are assessed on how you decided which option to recommend. That means you should express a sound reason for selecting a particular option. Similarly, you will be assessed on which course of action you propose that best suits Aaron’s circumstances. Please clearly state any assumptions you have made in deriving your recommendations. 

The level of analysis expected of students is in line with what you have learnt in AYN442. Students are not expected to have extensive knowledge of investment analysis beyond what is covered in this unit. 

Your analysis should be supported by reference to relevant concepts, peer-reviewed literature and authoritative pronouncements.
Professional Communication (10 marks)

• The research project is to be completed individually by students. The work must reflect your personal work and any outside sources should be appropriately referenced. Plagiarism will be checked via Turnitin. Any plagiarism will be dealt with in accordance with University policy.

Your report must be typed, appropriately referenced, and professionally presented. The word count is 1 500 words, not including references. Tables do not form part of the word count if inserted as an image. Relevant appendices may be attached and do not form part of the word limit. Please note that appendices should be used sparingly and only for additional material that supplements what is already discussed in the body of the report. 10% above the word limit is acceptable. Grading will be based upon the text that is within the word limit (or 10% above). Words exceeding 10% above the word limit will not be evaluated. 
• Your assignment must be presented using the specified section headings as shown below. It is not necessary to include an executive summary or table of contents.
• Your report should have: o A cover page; o A brief introduction and conclusion; and o A reference list. 
• You should prepare the report as though you are presenting it to Aaron. It is up to you which narrative form you use.
 

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