Question

a) Your employer wants to know how the Australian financial system is regulated? (Council of financial Regulators)

b)

With reference to the regression modelling explain why don’t people salary sacrifice more into super under the following headings:

-knowledge

-competing demands for long term savings (eg exemption of owner-occupier housing from the   capital gains tax and from the Age Pension assets test

-Australian superannuation system provides a mandatory saving mechanism to ensure that all employees have at least some savings for retirement. Many may see the mandatory employer contribution rate under the Superannuation Guarantee as ‘de facto’ advice and believe that they are already saving enough

Answer 1

a)The Australian financial system works constantly in the balancing the borrowing and lending of funds , managing the financial institutions and mobilising the currency constantly so that it can bring wealth maximisation to both its government and its citizens.the system have shown a rapid growth in asset management and volume of transaction, and has become more open and competative and have taken important shifts in market share mobilisation . Australian financial system have been divided into two parts that are i. Financial intermediaries or the credit institutions in which commercial banks are the largest part ii. The fund managers who are further classified as the superannuation funds and the unit trusts.

The council of financial regulators is the coordinating body for Australia's main financial regulatory system ,it is a non-statutory body whose function is to contribute,change,implement efficiency and effectiveness of financial regulations and to promote stability of the Australian financial system, it have four members who are i. The Australian prudential regulation authority. ii. The Australian securities and investment commission iii. The Australian treasury iv. The reserve bank of Australia .

b).Salary sacrificing is the strategy which help in long term savings plan which is a government plan that allow you to pay for some service from your salary before tax deductions which reduces the taxable income and saves tax.the salary sacrifice is good for the middle and the high income earners in many different ways, such as education which can increase the individuals knowledge ,skills and ability of doing higher works and earning good salary. This also gives employees attractive benifits. Diverting the salary for superannuation is also a good way to save taxes in the short term and to grow the retirement saving in the long terms.