Beating the Taxman - strategies for traders to minimise tax

[theasxgorilla]

I claim deductions, I don't avoid tax by all means possible e.g. offshore accounts and trusts....I have the means to do so, I choose not to.

Thank you for the perspective check. You clearly are not ignorant, you are not lazy and you avoid taxes. BTW, what was that saying about arguing with people on the Internet???

 

[Broadside]

now we are splitting hairs, there is a difference between tax avoidance and tax minimisation. I will confess to being lazy but it's not relevant to my argument, I am not lazy in financial matters, just other matters.

Look, I am not trying to be self righteous, but I honestly believe that if everyone seeks to avoid tax to the fullest extent possible, a lot of people who can't help themselves will be hit very hard.

What about oldies who have no families to support them, who cares for them? Disabled kids whose parents must give them full time care, and who die of old age not knowing who will look after them in their absence? Now you may say I am hitting the emotive button with examples like these, but they are real, and even as it stands now, there is very little support. Now imagine if we all avoid our tax burden, do you think that despite our personal wealth increasing, there will be benign benefactors making donations to all these causes which would adequately replace government funding? I don't, because human nature (a generalisation, but a fair one) is generally selfish.

Government is wasteful, imperfect, but without it - and without adequate funding - services to those in need will get worse and worse. If government budgets are cut, the first thing to be cut will be services, not bureaucratic jobs.

So on a micro scale, avoid tax, do whatever you like if you're fine with that....but don't kid yourself that on a macro scale it makes no difference when everyone else does the same as you.

I guess it comes down to a matter of degrees....early in this thread there was discussion of offshore bank accounts and bringing wads of cash back into the country...offshore trusts etc etc. I am all for claiming deductions and maximising my personal wealth, but I won't go to the lengths some here are advocating, which I see as shirking responsibilities to others who are lazy / ignorant / pay their share . Have a good day Mr Gorilla, you fight the good fight but I don't agree with you.

 

[theasxgorilla]

I'll say this, terminology differences aside, to the absolute best of my knowledge nothing I have advokated is illegal. The ATO is pretty sharp and they've got the legislation tied up pretty tight indeed. To try and get one past them is taking a big risk...I'm sure Glenn Wheatley would agree. As for fighting the good fight...I couldn't think of it as anything less than such.

Lord Clyde said taxpayers have the right to legally avoiding paying tax. "No man in the country is under the smallest obligation, moral or other, so to arrange his legal relations to his business or property as to enable the Inland Revenue to put the largest possible shovel in his stores," he said. "The Inland Revenue is not slow, and quite rightly, to take every advantage which is open to it under the Taxing Statutes for the purposes of depleting the taxpayer's pocket. And the taxpayer is in like manner entitled to be astute to prevent, so far as he honestly can, the depletion of his means by the Inland Revenue."

The ATO's interests do not lie with the sick and needy and aged that you mention, their context is the "Taxing Statutes"...THAT needs to be kept in mind when you arrange your tax affairs.

 

[Broadside]

Lord Clyde can say what he likes, it's simple really....less tax revenue = less services.

End of story.

 

[baxter]

Wow Baxter... So you're saying you can choose whether to be taxed under a company or personal income tax? How quick is it to setup one of these, I'm with Comsec?

Hi Insider & ASX Gorilla

Insider - setting up a company is not difficult and could be done within a week if you were so inclined. There's plenty of info on ASIC"s website about it, or you can call them and them and they'll explain the process. I have had a company for about the last 4 years, and at that time it was simply a matter of filling out paperwork, making decisions about directors/constitutions/share holdings etc. and paying the lodgement fee - was about $750 from memory. If you are reasonably compentent it's easy to do your own tax returns and BAS statements and so the only cost 'really' to me of having it set up is the $220 annual fee.

As for choosing where you're taxed, you can't 'choose' as such as you'll be taxed according to where you place the trade. For example, if you're trading on your personal account, it will be added to your personal income. If you're trading on a company account, the company will pay tax on the profits. Each will be taxed according to the relevant rate.

So from my understanding, say I make $30,000 by October this year, then I have gained the maximum benefits from my personal income as I will be taxed at 30% after that and I might as well switch to trading on my company account. It will also be taxed at 30% but there appears to be much larger deductions that can be made, and additional benfits to trading as a company - many of which I'm still exploring at present.

So does this make sense?

And ASX Gorilla, you're right, the majority of my trades are intraday, or 2 day trades, and very rarely I have a trade that go for a month or 2. Last year I think my longest trade was 2 1/2 months, so the 50% capital gain doesn't apply anyway.

Cheers, Baxter.

 

[Odduna]

collecting is deemed a tax-free "hobby".

therefore, you could sell your "collection" of classic cars with no CGT.

doesnt have to be cars. Some people make a good living "collecting" paintings.

If you live on the sale of your 'collectables', chances are, ATO will deem you to be in business, not a hobby.

If not in business, and if an asset is deemed a collectable (as per the ITAA 1997) and has a value greater than $500 when you purchased it, it will be subject to CGT.

However, that being said, cars are an exempt asset from CGT.

As I've mentioned on this forum before - Money Tree tends to over simplify issues.

It is not as simple as saying collecting things means "hobby".

Just be careful basing your ITR on that assumption.

Thought i would reply to Money Trees statement to give a bit more depth to the subject (although there is a lot more i could put in).

 

[insider]

If you live on the sale of your 'collectables', chances are, ATO will deem you to be in business, not a hobby.

If not in business, and if an asset is deemed a collectable (as per the ITAA 1997) and has a value greater than $500 when you purchased it, it will be subject to CGT.

However, that being said, cars are an exempt asset from CGT.




Thought i would reply to Money Trees statement to give a bit more depth to the subject (although there is a lot more i could put in).

If you sell a certain number of cars a year you need a used car sales license and therefore it is taxed

 

[Odduna]

If you sell a certain number of cars a year you need a used car sales license and therefore it is taxed

If you are deemed in business or not, the sale of cars is not subject to CGT (capital gains tax). It is an excluded asset under the legislation.

That being said, i am not saying that they would not pay income tax on the sale of their 'trading stock' if they were in business

 

[Flying Fish]

amazing info here. thx guys

 

[MS+Tradesim]

Insider,

1) Stop being a resident of Australia for tax purposes by spending more than 50% of the f/year outside of the country.
2) Be resident in Vanuatu for more than 50% of the year
3) Establish trust and co. in Vanuatu
4) Trade ASX (or whatever)
5) Pay no income/CGT tax anywhere.

(Hint: read ATO site)

 

[TheGreenOct]

Just thought I update this thread with the useful matter in the other thread here:

https://www.aussiestockforums.com/forums/showthread.php?t=9866

SOARING house prices and plummeting share prices can tempt investors into seeking clever ways to cut their tax bill.

One of the most popular strategies - selling then re-buying shares in a company to lock in a capital loss - has been a grey area for years, but has just been given a red card by the Australian Taxation Office.

Hood Sweeney director of accounting and business services Matthew Fox said the ATO last month clarified its attitude to claiming tax losses from "wash sales'' and would deny any tax losses claimed this way.

"A wash sale is described as a sale and purchase of the same asset within a short period of time where the sale and purchase cancel each other out and there is little or no change in the economic exposure of the owner of the asset,'' Mr Fox said.

He said it had been a widely used strategy by people facing a capital gains tax bill who also had some assets where a capital loss would occur if they sold it - which could offset much or all of the gain.

"For example, Pete has sold an investment property and made a $50,000 gain. In his share portfolio he has BHP shares that cost $70,000, but are now worth $50,000. His strategy is then to instruct his broker to sell the shares on the market and re-purchase them the next day. He then realises a loss of $20,000 which he uses to reduce the gain on the investment property.''

Mr Fox said the ATO's recent ruling was that if the main purpose of the wash sale was to obtain a tax benefit, the loss would be denied.

"The loss will also be denied if Pete rather than re-purchasing in his name purchases the shares in a trust controlled by him,'' he said.

Mr Fox said to avoid an ATO rejection, the investor would need to show another purpose other than the tax benefit, such as restructuring their affairs.

"Other options to avoid this problem are to delay the re-purchase decision and to re-purchase based on market condition changes or independent market research, or to purchase an alternative stock, like Rio Tinto in Pete's case,'' he said.

"Caution needs to be exercised if you are intending to realise an asset to crystallise a capital loss as the rules for deductability of the loss are now a lot stricter. You should seek the advice of a suitable qualified taxation advisor before implementing such a strategy.''

So basically call options or warrants would do the trick if they are available I guess.

 

[WinnieBlues]

Trading tax minimisation strategies

Hi everyone....i was wondering if people could share some ideas for minimising tax whilst share trading, besides the usual 50% cgt discount if held for longer than a year.

Set up a company for my share trading??? I suppose that setting up a trust would be out of the question as i have no dependents and am single.

Thanks in advance for all replies

 

[Wysiwyg]

Re: Trading tax minimisation strategies

Hi everyone....i was wondering if people could share some ideas for minimising tax whilst share trading, besides the usual 50% cgt discount if held for longer than a year.

Set up a company for my share trading??? I suppose that setting up a trust would be out of the question as i have no dependents and am single.

Thanks in advance for all replies

First of all you aren`t trading shares if you hold for more than a year, more investing. To lower your taxable income amount, decrease assessable income amount by claiming allowable deductions.

 

[cutz]

Re: Trading tax minimisation strategies

Hi WinnieBlues,

As Wysiwyg pointed out by claiming allowable deductions, the tax office has a publication for share traders if you want to dig around there.

All i can add is at the end of the year get rid of your dogs and don't get too bogged down trying to avoid taxes, the main focus should be pulling an income.

 

[WinnieBlues]

Re: Trading tax minimisation strategies

thanks to all....no prob income wise, 100k a year gross for not too much stress....am making too much money from shares buying and selling, aver 3k/week over last 10 months...some big wins recently

looking to short the market very shortly...big mac my fist target...from 16 bucks to circa 56 bucks in no time....ripe for the picking imo

am thinking about setting up a company to do my sharetrading through...just after opinions of those that have been there, done that

cheers to all

 

[Wysiwyg]

Re: Trading tax minimisation strategies

Unreal!

 

[WinnieBlues]

Re: Trading tax minimisation strategies

Unreal!

thanks...have almost liquidated the last of my holdings.....i feel it has risen too fast, too quickly, and that goes for the main global indices as well dax, ftse, dow.....i feel that the big US banks have been using their money to buy up indices...see goldman criminals trading profit up, likewise jp morganriopoff

feel its time to short some big players...like i said, mac factory is my first target

cheers, good luck to all

 

[Sir Osisofliver]

Re: Trading tax minimisation strategies

Hi everyone....i was wondering if people could share some ideas for minimising tax whilst share trading, besides the usual 50% cgt discount if held for longer than a year.

Set up a company for my share trading??? I suppose that setting up a trust would be out of the question as i have no dependents and am single.

Thanks in advance for all replies

Winnie,

http://www.ato.gov.au/businesses/content.asp?doc=/content/21749.htm

If you are working a job and trading on the side (as opposed to trading full-time), any gains that you are making potentially add towards you MTR (Marginal Tax Rate). A simple strategy therefore is to have your trading activities inside a company structure to minimise your personal income to below top MTR levels.

You need to determine whether the expense and ongoing expenses involved in setting up a company, having the company audited yearly, etc etc is worth it depending upon the amount you are earning.

Cheers

Sir O

 

[Grinder]

Re: Trading tax minimisation strategies

Hi everyone....i was wondering if people could share some ideas for minimising tax whilst share trading, besides the usual 50% cgt discount if held for longer than a year.

Set up a company for my share trading??? I suppose that setting up a trust would be out of the question as i have no dependents and am single.

Thanks in advance for all replies

WB, If you meet the ATOs requirements to be classified as a trader there are copious amounts of ways to minimize tax, all depends on how creative you want to get I suggest combing through ASF threads as alot has been discussed on this topic.

 

[nomore4s]

Re: Trading tax minimisation strategies

Hi everyone....i was wondering if people could share some ideas for minimising tax whilst share trading, besides the usual 50% cgt discount if held for longer than a year.

Set up a company for my share trading??? I suppose that setting up a trust would be out of the question as i have no dependents and am single.

Thanks in advance for all replies

WinnieBlues,

I have merged your thread with another one that was asking pretty much the same question.

You might want to read through it to get some ideas.