# How do you reduce tax?



## imaginator (24 February 2008)

How much is your taxable income, and how do you try to get the most tax deduction?

Especially after you make a killing in the stock market, say you make $100,000 profit in 1 year from stocks. How do you reduce your tax and avoid giving almost 50% of it for free?

I am currently using a Macquarie Bank 100% loan product called Fusion Fund, which allows me to prepay the interest and claim some tax back from the financial year, but the performance of the fund stank! I am considering to cancel it.

I have heard someone say, sell your underperforming stocks to make paper loss, and then either buy back at same price or put in other stocks. This way you can counter your income/profits with some loss?


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## Hyperion (25 February 2008)

imaginator said:


> I have heard someone say, sell your underperforming stocks to make paper loss, and then either buy back at same price or put in other stocks. This way you can counter your income/profits with some loss?




The ATO recently released TR 2008/1 which states Part IVA (general anti-avoidance provisions) will apply to "wash sales".

You should seek professional advice regarding your individual situation...


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## imaginator (25 February 2008)

whats a wash sales?


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## Hyperion (25 February 2008)

From TR 2008/1


2. The term wash sale does not have any precise meaning. In commerce the term wash sale is used to describe the sale and purchase of the same, or substantially the same, asset within a short period of time of each other. The sale and purchase cancel each other out with the result that there is effectively no change in the economic exposure of the owner to the asset. More generally, the expression wash sale is used to describe arrangements where a disposition of an asset occurs without an intention of ceasing to hold an economic exposure to the asset. In this Ruling, however, the Commissioner is concerned with arrangements which have the effect of causing a disposition to happen which enables a taxpayer to incur a loss to offset against a gain already derived, or expected to be derived, in certain circumstances. These being where owing to the manner, substance and timing of the events it may be questioned whether the loss making event is mainly to be explained by reference to the purpose of obtaining a tax benefit from the loss. 

3. This Ruling is, therefore, concerned with arrangements under which a taxpayer disposes of, or otherwise deals with, a capital gains tax (CGT) asset (the asset) where in substance there is no significant change in the taxpayer's economic exposure to, or interest in, the asset, or where that exposure or interest may be reinstated by the taxpayer (a wash sale), in order to apply a resulting capital loss or allowable deduction against a capital gain or assessable income already derived or expected to be derived.


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## imaginator (25 February 2008)

Ah, but they can never stop anyone from selling at any time. They can't set up a law saying we cant sell despite a loss just before financial year is up. It's all very subjective area here...

If they do then they have to predetermine a date when they think we shouldn't sell etc... which is not gonna happen.


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## tech/a (25 February 2008)

If you have a genuine tax problem you can afford a geniune Tax Accountant.

Forming a Company and Holding for over 12 mths and trading within your Superfund Self Managed are some angles.


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## Judd (25 February 2008)

You can reduce your tax to zero simply by not having any income.  Easy as.  So who needs accountants and complicated tax structures?


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## Bill M (25 February 2008)

I am a private individual investor and I am in the 30% tax bracket. My tax is very low because I buy stocks that only pay fully franked dividends, they are already tax paid at 30%. I also tend to hold my stocks for 12 Months or more and in that case the maximum I pay is only 15% on capital gains.

I you can make a 100K in less than 12 Months just trading then I think you should pay your fair share of tax and cop it sweet or just simply hold for 12 Months, I know sometimes this can not be done.


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## tech/a (25 February 2008)

> I you can make a 100K in less than 12 Months just trading then I think you should pay your fair share of tax and cop it sweet




Sorry Bill but this sort of comment irks me.Your implication is that once you hit earnings levels high enough and pre determined by governments you should just cop your tax. Pay your fair share.Fair share according to whom?
If you earn under $20k in a year your fair share is zero.You can still use all the facilities but no cost.
The you can afford it type attitude from people gets up my nose.Higher earners pay higher tax,why then should they not pay 60% more for everything else?---hell they can afford it! Thats the difference in tax rates.
30% to 50% = around a 60% increase.Not only do you pay more tax but tax at a far higher rate.Your disadvantaged because your good at what you do and or spend more time and money doing it.
Yet do bugger all sit on the dole-earn cash where you can---dont make the effort or put in the time and *WE WILL HELP YOU!*

These comments generally come from those on lower tax brackets.
(yeh and the comments above come from those on higher tax brackets)

Everyone can be above average all they have to do is not accept being average.

Personally I believe everyone on every earnings level should minimise their tax.


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## Bill M (25 February 2008)

tech/a said:


> Personally I believe everyone on every earnings level should minimise their tax.




You got me wrong, I was only referring to quick short term capital gains. We are all bound by the same rules. If you sell before your 12 Months then you will be up for the full whack of tax, if you sell after 12 Months the top rate is only 25%.

I am all for people making as much as possible, it's good for everyone including me.

As Kerry Packer once said: "If anybody doesn't minimise their tax then they need their heads read", I like that one, cheers.


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## imaginator (25 February 2008)

tech/a said:


> Everyone can be above average all they have to do is not accept being average.
> 
> Personally I believe everyone on every earnings level should minimise their tax.




Well put! I have a friend only paying $35 tax per year! His salary is above 90k .


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## Buster (25 February 2008)

tech/a said:


> Sorry Bill but this sort of comment irks me.Your implication is that once you hit earnings levels high enough and pre determined by governments you should just cop your tax. Pay your fair share.Fair share according to whom?
> 
> These comments generally come from those on lower tax brackets.




Tech, you might enjoy this.. this was bandied around when the last tax break was on the books, and I think it's quite good..



			
				David R. K said:
			
		

> *THE STUPIDITY OF GREED*
> 
> Here is the real story to lighten the Budget discussion! You've heard the cry in the last couple of weeks from across Australia: "It's just a tax cut for the rich!", and it is accepted as fact. But what does that really mean?  The following explanation may help.....
> 
> ...




Regards,

Buster


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## trading_rookie (25 February 2008)

> If you sell before your 12 Months then you will be up for the full whack of tax, if you sell after 12 Months the top rate is only 25%.




True, but if you wait 12 months to avoid 100% CGT it’s possible your investment is only worth half of what it was 6 months earlier while you were trying to avoid a full whack of tax. 



> As Kerry Packer once said: "If anybody doesn't minimise their tax then they need their heads read", I like that one, cheers.




While in general I agree with the sentiment, the problem was the late Packer was a fan of the now extinct bottom-of-the-harbour tax scheme. That’s where a dodgy tax ‘professional’ bought your company for 10% of it’s value and then proceeded to sell it around and cut and paste a swag of different directors to it. When the taxman finally got around to who the current owner was they backed off when they found it to be the notorious Painters and Dockers union. Source: The rise and rise of Kerry Packer Uncut.

Also, tax schemes that encourage one to lose money in order to claim it back are silly…why would you intentionally lose money so you can claim it back?? One should accept that if they’re paying a lot of tax then it means they’re making a lot of money…the trick is how to get to a lower tax bracket…ie, become a player not a pawn. For example, as tech/a said, set up a company that owns the shares then you only pay a flat 30% as opposed to (if your making 100K) 40%+medicare levy. You can pay 15% tax if the shares are owned by a SMSF, but then you have to wait till your 60-65 to get at it ;-)


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## Tysonboss1 (25 February 2008)

imaginator said:


> How much is your taxable income, and how do you try to get the most tax deduction?
> 
> Especially after you make a killing in the stock market, say you make $100,000 profit in 1 year from stocks. How do you reduce your tax and avoid giving almost 50% of it for free?
> 
> ...




Buying your investments under a trust/company arrangement where you hold the investments in a trust with the company as the trustee,... that way you can spread the profits to the family members with the lowest tax rate and as soon as you get over the 30% tax rate feed the over flow into the company because it's tax rate is capped at 30%.

Time your sales so that you release the profit over different financel years.

make sure you are keeping recepts for everything you could possible claim, 

hold the stock for 12months so that you get the 50% discount,

and remember that if you are paying tax you are making money so it ain't all bad,


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