CFP Certification (Australia) cheat sheet

The FPSB framework organizes technical knowledge into core areas: financial management, insurance and risk, investments, taxation, retirement, estate planning, and professional conduct/regulation.

Each domain must be integrated into a single client plan; a recommendation in one area (e.g., gearing) must be tested against tax, risk, and cash-flow consequences in the others.

Cash-flow analysis: surplus = income − expenses − tax − debt repayments; surplus funds savings, investment, and insurance premiums.

Net worth = assets − liabilities; distinguish growth assets from defensive assets when assessing capacity for risk.

Personal balance sheet ratios: liquidity ratio = liquid assets / monthly expenses (target roughly 3–6 months); savings ratio = savings / gross income.

Budgeting identifies surplus or deficit before any product recommendation; a deficit must be resolved before new commitments are added.

Emergency reserve is held in liquid, capital-stable assets and sized to income stability, dependants, and debt obligations.

Financial management decisions must be sequenced: protect cash flow, manage debt, then build investment and retirement assets.

Risk management process: identify risk, measure frequency and severity, select treatment (avoid, reduce, retain, transfer), implement, monitor.

Life insurance sum insured should cover debts, income replacement for dependants, education and funeral costs, less existing assets and cover.

Income protection generally replaces up to about 70–75% of pre-disability income; benefits are taxable, so premiums are usually tax-deductible.

Total and permanent disability (TPD) cover pays a lump sum on meeting the policy definition; own-occupation definitions are stricter and costlier than any-occupation.

Trauma/critical illness cover pays a lump sum on diagnosis of a defined condition; it is separate from TPD and can be held alongside it.

Underwriting concepts: duty of disclosure, non-disclosure and misrepresentation can void a policy; cooling-off periods and policy exclusions must be checked.

Premium structures: stepped premiums rise with age; level premiums are higher initially but flatten, and are cheaper over long horizons.

Insurance inside superannuation can be cheaper and premiums may be funded from super, but cover and definitions are often more limited.

Asset classes: cash, fixed interest, property, equities, and alternatives; each has distinct return, volatility, liquidity, and inflation-hedging characteristics.

Diversification reduces unsystematic risk; systematic (market) risk cannot be eliminated through diversification.

Risk profiles combine risk tolerance (attitude) with risk capacity (ability); the lower of the two generally governs the strategy.

Expected portfolio return = weighted average of asset-class expected returns; portfolio volatility depends on correlations, not just individual volatilities.

Modern portfolio theory: efficient frontier shows portfolios offering maximum expected return for a given level of risk.

Gearing magnifies both gains and losses; negative gearing arises when investment interest and costs exceed investment income.

Managed fund structures include unit trusts, and fees (entry, management, performance) reduce net returns; compare on total cost of ownership.

Dollar-cost averaging smooths entry price but does not guarantee a better outcome than lump-sum investing.

Australian residents are taxed on worldwide income; non-residents generally on Australian-sourced income only.

Marginal tax rates apply progressively; the Medicare levy (and surcharge for high earners without private cover) is added to tax payable.

Capital gains tax applies to the net gain; individuals and trusts may access a 50% CGT discount on assets held over 12 months.

Negative gearing losses on investment property can generally be offset against other assessable income, subject to non-commercial loss rules.

Concessional super contributions are taxed at 15% in the fund; non-concessional contributions are made from after-tax money and capped by the bring-forward rule.

Division 293 tax imposes an extra 15% on concessional contributions for higher-income individuals.

Superannuation earnings in retirement phase are generally tax-free up to the transfer balance cap; excess amounts are taxed.

Salary sacrificing reduces assessable income but is limited by contribution caps and fringe benefits rules.

Retirement income comes from the age pension, superannuation, and private savings; the three-pillar approach frames the strategy.

Age pension eligibility depends on age, residency, and the assets and income tests; the lower pension result of the two tests applies.

The transfer balance cap limits the amount that can be moved into tax-free retirement phase; indexation is based on CPI.

Minimum pension drawdown factors increase with age; failing to draw the minimum can lose the tax exemption on earnings.

Superannuation preservation age and the retirement condition of release govern access to benefits.

Transition to retirement pensions no longer receive tax-exempt earnings and cannot be used to salary sacrifice for tax advantage.

Longevity risk: plan for a retirement horizon of 20–30+ years and consider sequencing risk of returns in the drawdown phase.

Retirement projections should be expressed in real (inflation-adjusted) terms and stress-tested for lower returns and higher longevity.

Estate planning tools: will, power of attorney, enduring guardian, testamentary trust, superannuation death benefit nomination, and insurance.

A valid will requires the testator to have testamentary capacity, intention, and formal execution under state/territory legislation.

Intestacy rules distribute assets where there is no valid will; outcomes may not match client wishes.

Superannuation does not automatically form part of the estate; it is distributed per a binding death benefit nomination or trustee discretion.

Binding death benefit nominations may be lapsing (typically three years) or non-lapsing, depending on the fund's rules.

Testamentary trusts can provide asset protection and income-splitting benefits for beneficiaries, including minors.

Estate assets may be subject to claims under family provision legislation; dependants and spouses have standing to challenge.

Powers of attorney cover financial decisions; enduring guardianship covers personal, health, and lifestyle decisions.

The Corporations Act and ASIC Act govern financial products and advice; the Corporations Act requires an Australian Financial Services (AFS) licence for advice businesses.

Best interests duty: advisers must act in the client's best interests and provide advice appropriate to the client's objectives, financial situation, and needs.

Disclosure obligations include the Financial Services Guide (FSG), Statement of Advice (SOA), and Product Disclosure Statement (PDS).

Conflicts of interest must be managed and disclosed; conflicted remuneration such as commissions on certain products is banned.

The Code of Ethics of the Financial Advice Association of Australia (FAAA) sets principles including client first, integrity, objectivity, competence, fairness, confidentiality, professionalism, and diligence.

Continuing professional development and education standards apply to advisers; the FPSB sets global competency and ethics standards for CFP certification.

Privacy Act obligations require consent and secure handling of client personal information.

Complaints and disputes are handled through the Australian Financial Complaints Authority (AFCA); advisers must maintain professional indemnity insurance.

Centrelink income test assesses assessable income including deemed income from financial assets and some superannuation.

Deeming applies to financial assets: a lower deeming rate applies up to a threshold, and a higher rate above it.

The assets test applies to assessable assets including the family home above the exempt threshold; the lower of the two test results determines the pension.

Pensioner concession and Commonwealth Seniors Health Card eligibility depend on income and assets thresholds.

Aged care fees include a basic daily fee, means-tested care fee, and accommodation payment; the means test considers income and assets.

Home Care Packages are assessed through My Aged Care and are income-tested.

Gifting rules: gifts above annual and five-year limits are treated as deprived assets and counted in the assets test.

Superannuation and annuities may be assessed differently depending on whether they are in accumulation or pension phase.

Behavioural biases include overconfidence, anchoring, loss aversion, recency bias, herding, and mental accounting.

Loss aversion: losses are felt more strongly than equivalent gains, leading to risk-averse or risk-seeking behaviour depending on framing.

Framing effects mean choices change with how options are presented; advisers should present consistent, neutral framing.

Risk profiling tools measure tolerance but must be supplemented by a capacity assessment and a discussion of goals.

Client communication should use plain language, confirm understanding, and document advice and client instructions.

Behavioural coaching helps clients stay invested during volatility and avoid panic selling.

Mental accounting leads clients to treat money differently by source; advisers can consolidate this into a single plan.

Regret aversion may cause clients to avoid necessary decisions; structured decision frameworks help overcome it.

The financial planning process: establish relationship, gather data, analyse, develop strategy, present, implement, and review.

Data gathering covers goals, financial position, risk profile, tax position, and estate wishes; incomplete data must be noted as a limitation.

The Statement of Advice must set out the advice, the basis for it, and any conflicts or remuneration that could influence the advice.

The Record of Advice documents changes to advice after the SOA without requiring a full new SOA.

A financial plan should be reviewed at least annually and after life events such as marriage, birth, job change, or inheritance.

Scope of advice must be agreed in writing; limited or scaled advice must clearly state what is excluded.

Implementation requires client consent and coordination with accountants, lawyers, and product providers.

Review should measure progress against goals and update assumptions for inflation, returns, and tax.

Business structures: sole trader, partnership, company, and trust; each has different tax, liability, and succession implications.

A buy-sell agreement funds the purchase of a departing owner's interest; it is commonly funded by life and disability insurance.

Key person insurance protects the business against the loss of an essential individual.

Business succession planning addresses ownership transfer, management continuity, and valuation.

Division 7A rules can treat certain payments, loans, or forgiven debts from a private company to shareholders or associates as dividends.

Small business capital gains tax concessions may apply on the sale of business assets, subject to eligibility criteria.

Trust distribution decisions must consider the trust deed and tax outcomes for beneficiaries, including minors.

Business owners should separate personal and business assets and review insurance and superannuation in the business context.

Superannuation contributions: concessional (before tax) and non-concessional (after tax); caps apply and excess contributions attract additional tax.

The bring-forward rule allows larger non-concessional contributions over a three-year period for eligible individuals under the age limit.

Superannuation fund types include retail, industry, corporate, public sector, and self-managed super funds (SMSFs).

SMSFs require trustees to meet investment strategy, sole purpose, and reporting obligations; they are regulated by the ATO.

Superannuation death benefits can be paid as a lump sum or income stream to dependants, with different tax treatment.

An account-based pension pays a minimum annual amount based on age; it is not guaranteed and depends on investment returns.

Annuities and defined benefit schemes provide guaranteed income and may be assessed differently for social security.

Contribution splitting allows a spouse to receive some concessional contributions, which can help equalise retirement balances.

Good debt funds assets that may appreciate; bad debt funds consumption or depreciating assets.

Debt recycling involves using surplus cash flow to pay down non-deductible debt while borrowing to invest, converting non-deductible debt into deductible debt over time.

Credit cards and personal loans carry high interest rates; priority is to repay the highest-interest debt first.

Mortgage offset accounts reduce interest payable and are generally more flexible than redraw facilities.

Loan-to-value ratio (LVR) affects interest rates and lender's mortgage insurance (LMI) requirements; LMI is usually required above 80% LVR.

Interest-only loans reduce repayments initially but do not build equity and reset to higher repayments later.

Guarantees and joint borrowing expose guarantors to the full debt; the risk must be disclosed and understood.

Debt consolidation can simplify repayments but may extend the loan term and increase total interest paid.

The FPSB Code of Ethics principles include client first, integrity, objectivity, competence, fairness, confidentiality, professionalism, and diligence.

Fiduciary duty requires acting in the client's best interests ahead of the adviser's own interests.

Conflicts of interest must be identified, avoided where possible, and disclosed where unavoidable.

Confidentiality obligations continue after the client relationship ends, subject to legal requirements.

Competence requires maintaining knowledge and skills through continuing professional development.

Ethical decision-making frameworks help resolve dilemmas by weighing duties, consequences, and professional standards.

Misleading or deceptive conduct is prohibited under the ASIC Act and Corporations Act.

Professional standards require accurate record-keeping and honest reporting to clients and regulators.

Direct shares, managed funds, ETFs, listed investment companies, bonds, and property are common investment vehicles.

ETFs trade on an exchange and typically track an index; they may have lower costs but can carry tracking error.

Bonds pay coupons and return principal at maturity; bond prices fall when interest rates rise.

Managed funds pool investor money and are valued at net asset value (NAV); entry and exit fees vary.

Listed investment companies (LICs) may trade at a premium or discount to NAV.

Property investment involves rental income, capital growth, and costs such as maintenance, rates, and land tax.

Derivatives such as options and futures can hedge or speculate; they carry leverage and counterparty risk.

Diversification across asset classes and within classes reduces concentration risk.

ASIC regulates financial services and markets; APRA regulates prudential aspects of superannuation and insurance.

The Corporations Act sets out licensing, conduct, and disclosure obligations for financial advisers.

The AFS licence imposes obligations including adequate resources, training, compliance, and dispute resolution.

The Future of Financial Advice (FOFA) reforms introduced the best interests duty and banned conflicted remuneration.

The Design and Distribution Obligations (DDO) require issuers and distributors to design and distribute products to appropriate target markets.

The Anti-Money Laundering and Counter-Terrorism Financing Act requires customer identification and reporting.

The Privacy Act requires consent, secure storage, and access rights for personal information.

Breach reporting obligations require notifying ASIC of significant breaches within specified timeframes.

Cash flow statement records inflows and outflows over a period; the balance sheet records assets and liabilities at a point in time.

Net cash flow = total inflows − total outflows; a positive result can fund savings or debt reduction.

Fixed expenses are relatively stable (rent, insurance); variable expenses fluctuate (groceries, entertainment).

Budgeting should be realistic and reviewed regularly; tracking actual spending improves accuracy.

Emergency fund sizing depends on income stability, dependants, and fixed obligations.

Surplus cash flow should be allocated to debt reduction, emergency reserves, and goal-based savings in priority order.

Cash flow projections should account for irregular expenses such as insurance premiums and holidays.

A deficit requires reducing discretionary spending or increasing income before new financial commitments.

Aged care services include home care, residential care, and respite care; access is through My Aged Care assessment.

Residential aged care costs include a basic daily fee, means-tested care fee, and accommodation payment.

The means test for aged care considers income and assets, including the family home in some circumstances.

The family home may be exempt from the pension assets test for up to two years if a spouse or dependent lives there.

Home Care Packages are income-tested and have different fee arrangements from residential care.

Gifting and deprivation rules apply to both pension and aged care means testing.

The Commonwealth Seniors Health Card provides concessions for eligible self-funded retirees.

Aged care planning should consider the impact of accommodation payments on cash flow and estate planning.

Investment structures include individual, joint, company, trust, and superannuation; each has different tax and asset protection outcomes.

Companies pay tax at the company rate; dividends carry franking credits that can reduce personal tax.

Trusts distribute income to beneficiaries; the trustee is taxed at the top marginal rate on undistributed income.

Negative gearing benefits depend on the investor's marginal tax rate; higher earners gain more from deductions.

Capital gains tax applies to the disposal of investments; the 50% discount applies to individuals and trusts for assets held over 12 months.

Franking credits can be refunded to some taxpayers with low taxable income.

Superannuation is a tax-effective structure for retirement savings but has contribution and access restrictions.

Asset protection differs by structure; trusts and companies can limit personal liability but have complex rules.

Life insurance products include term life, whole of life, endowment, and investment-linked policies.

Term life provides cover for a specified period and pays a lump sum on death; it has no investment component.

Whole of life provides lifetime cover and may have a savings component; it is generally more expensive.

Income protection replaces part of income during disability; waiting periods and benefit periods affect premiums.

Trauma insurance pays on diagnosis of a specified condition; it is not a replacement for income protection.

Business insurance includes key person, buy-sell funding, and business expense cover.

Policy exclusions, waiting periods, and definitions must be checked before recommending cover.

Insurance premiums may be tax-deductible depending on the policy type and purpose.

Account-based pensions are the most common retirement income stream; they are flexible but not guaranteed.

Minimum drawdown amounts increase with age and must be met each year.

Annuities provide guaranteed income for life or a fixed term; they may be indexed or level.

The transfer balance cap limits the amount that can be transferred to retirement phase.

Retirement phase earnings are tax-free up to the cap; excess amounts are taxed.

Lump sum withdrawals from super are generally tax-free after age 60 for taxed funds.

Sequencing risk is the risk of poor returns early in retirement; a cash buffer can reduce it.

Retirement income planning should consider age pension eligibility and the interaction with superannuation.

A will sets out how assets are distributed; it must be valid and up to date.

A testamentary trust can provide asset protection and tax benefits for beneficiaries.

Powers of attorney allow someone to make financial decisions if the client loses capacity.

Enduring guardianship covers personal and health decisions.

Binding death benefit nominations direct superannuation death benefits to nominated dependants.

Life insurance can provide liquidity to pay estate costs and taxes.

Estate planning should consider blended families, dependants, and business interests.

Regular review of estate documents is essential after life events.

Return measures include total return, which combines income and capital growth.

Time-weighted returns remove the effect of cash flows and are used to compare investment managers.

Money-weighted returns reflect the investor's actual experience and are affected by cash flow timing.

Risk-adjusted measures include the Sharpe ratio, which divides excess return by volatility.

Benchmarking compares portfolio performance to a relevant index or peer group.

Diversification and asset allocation are the primary drivers of long-term portfolio outcomes.

Costs such as management fees and transaction costs reduce net returns.

Rebalancing restores the target asset allocation and manages risk.

Family planning includes education funding, insurance, and estate planning.

Education savings options include savings accounts, investment bonds, and education funds.

Life and income protection insurance are critical for families with dependants.

A will and guardianship arrangements should be in place for minor children.

Budgeting for family expenses should account for childcare, schooling, and healthcare.

Family tax benefits and childcare subsidies can affect cash flow.

Estate planning should consider blended families and dependants with special needs.

Regular reviews are needed as children grow and circumstances change.

Business owners should separate personal and business finances.

Business structures affect tax, liability, and succession.

Key person insurance protects the business against the loss of an essential individual.

Buy-sell agreements fund the transfer of ownership on death or disability.

Business succession planning should start early and be reviewed regularly.

Superannuation and retirement planning for business owners may involve SMSFs.

Cash flow management is critical for small business viability.

Tax planning should consider Division 7A and small business concessions.

Overconfidence leads investors to trade too much and underestimate risk.

Loss aversion causes investors to hold losing investments too long and sell winners too early.

Anchoring leads investors to fixate on past prices or initial information.

Recency bias causes investors to overemphasise recent market performance.

Herding leads investors to follow the crowd rather than their own analysis.

Mental accounting leads investors to treat money differently based on its source.

Framing effects change decisions based on how information is presented.

Advisers can use behavioural coaching to keep clients disciplined.

ASIC regulates financial services and markets; APRA regulates prudential aspects.

AFS licence holders must meet conduct and disclosure obligations.

FOFA reforms introduced the best interests duty and banned conflicted remuneration.

Design and Distribution Obligations require products to be distributed to appropriate target markets.

Anti-money laundering laws require customer identification and reporting.

Privacy laws require consent and secure handling of personal information.

Breach reporting obligations require notifying ASIC of significant breaches.

Professional indemnity insurance is required for advisers.

Retirement income comes from the age pension, superannuation, and private savings.

Age pension eligibility depends on age, residency, and the assets and income tests.

The transfer balance cap limits the amount that can be moved into retirement phase.

Minimum pension drawdown factors increase with age.

Preservation age and conditions of release govern access to superannuation.

Transition to retirement pensions no longer receive tax-exempt earnings.

Longevity risk requires planning for a long retirement.

Retirement projections should be stress-tested for lower returns.

Australian residents are taxed on worldwide income.

Marginal tax rates apply progressively; the Medicare levy is added.

Capital gains tax applies to net gains; the 50% discount applies to assets held over 12 months.

Negative gearing losses can offset other assessable income.

Concessional super contributions are taxed at 15% in the fund.

Division 293 tax imposes an extra 15% on concessional contributions for higher-income individuals.

Superannuation earnings in retirement phase are generally tax-free up to the cap.

Salary sacrificing reduces assessable income but is limited by contribution caps.

Risk management involves identifying, measuring, and treating risk.

Life insurance sum insured should cover debts, income replacement, and expenses.

Income protection replaces up to about 70–75% of income.

TPD pays a lump sum on meeting the policy definition.

Trauma cover pays on diagnosis of a defined condition.

Duty of disclosure requires full disclosure to the insurer.

Stepped premiums rise with age; level premiums are higher initially.

Insurance inside superannuation can be cheaper but more limited.

Asset classes include cash, fixed interest, property, equities, and alternatives.

Diversification reduces unsystematic risk.

Risk profiles combine tolerance and capacity.

Expected portfolio return is a weighted average of asset-class returns.

Modern portfolio theory shows the efficient frontier.

Gearing magnifies gains and losses.

Managed fund fees reduce net returns.

Dollar-cost averaging smooths entry price but does not guarantee better outcomes.

The financial planning process includes establishing the relationship, gathering data, analysing, developing strategy, presenting, implementing, and reviewing.

Data gathering covers goals, financial position, risk profile, and estate wishes.

The Statement of Advice must set out the advice and its basis.

The Record of Advice documents changes to advice.

A financial plan should be reviewed at least annually.

Scope of advice must be agreed in writing.

Implementation requires client consent.

Review should measure progress against goals.

The FPSB Code of Ethics principles include client first, integrity, objectivity, competence, fairness, confidentiality, professionalism, and diligence.

Fiduciary duty requires acting in the client's best interests.

Conflicts of interest must be identified and disclosed.

Confidentiality obligations continue after the relationship ends.

Competence requires continuing professional development.

Ethical decision-making frameworks help resolve dilemmas.

Misleading conduct is prohibited under the ASIC Act.

Professional standards require accurate record-keeping.

Centrelink income test assesses assessable income including deemed income.

Deeming applies to financial assets with lower and higher rates.

The assets test applies to assessable assets including the family home above the threshold.

The lower of the two test results determines the pension.

Pensioner concession and Commonwealth Seniors Health Card eligibility depend on income and assets thresholds.

Aged care fees include a basic daily fee, means-tested care fee, and accommodation payment.

Home Care Packages are assessed through My Aged Care.

Gifting rules treat gifts above limits as deprived assets.

Business structures include sole trader, partnership, company, and trust.

A buy-sell agreement funds the purchase of a departing owner's interest.

Key person insurance protects the business against the loss of an essential individual.

Business succession planning addresses ownership transfer and continuity.

Division 7A rules can treat certain payments as dividends.

Small business capital gains tax concessions may apply on sale.

Trust distribution decisions must consider the trust deed.

Business owners should separate personal and business assets.

Superannuation contributions are concessional or non-concessional.

The bring-forward rule allows larger non-concessional contributions over three years.

Superannuation fund types include retail, industry, corporate, public sector, and SMSFs.

SMSFs require trustees to meet investment strategy and reporting obligations.

Superannuation death benefits can be paid as a lump sum or income stream.

Account-based pensions pay a minimum annual amount based on age.

Annuities provide guaranteed income.

Contribution splitting can help equalise retirement balances.

Good debt funds assets that may appreciate; bad debt funds consumption.

Debt recycling converts non-deductible debt into deductible debt over time.

Priority is to repay the highest-interest debt first.

Mortgage offset accounts reduce interest payable.

LVR affects interest rates and LMI requirements.

Interest-only loans reduce repayments initially but do not build equity.

Guarantees and joint borrowing expose guarantors to the full debt.

Debt consolidation can simplify repayments but may increase total interest.

Direct shares, managed funds, ETFs, LICs, bonds, and property are common investment vehicles.

ETFs trade on an exchange and typically track an index.

Bond prices fall when interest rates rise.

Managed funds are valued at net asset value.

LICs may trade at a premium or discount to NAV.

Property investment involves rental income, capital growth, and costs.

Derivatives can hedge or speculate and carry leverage risk.

Diversification reduces concentration risk.

Cash flow records inflows and outflows over a period.

Net cash flow = total inflows − total outflows.

Fixed expenses are stable; variable expenses fluctuate.

Budgeting should be realistic and reviewed regularly.

Emergency fund sizing depends on income stability and obligations.

Surplus cash flow should be allocated to debt reduction and savings.

Cash flow projections should account for irregular expenses.

A deficit requires reducing spending or increasing income.

Aged care services include home care, residential care, and respite care.

Residential aged care costs include a basic daily fee, means-tested care fee, and accommodation payment.

The means test considers income and assets, including the family home in some circumstances.

The family home may be exempt from the pension assets test for up to two years if a spouse lives there.

Home Care Packages are income-tested.

Gifting and deprivation rules apply to aged care means testing.

The Commonwealth Seniors Health Card provides concessions for eligible self-funded retirees.

Aged care planning should consider the impact on cash flow and estate planning.