CGT exploit strategy

[mit]

Seems pretty well confirmed. But as in my reply above you could make it work if you had a third leg. Although you need to have a pretty good prior knowledge to make it work

You assume that you are going to make $10k in trades this year and want to avoid paying full tax on the trades.

You then do the hedge as suggested and set it up so that it is going to be +/-10k after 366 days.

So after 366 days you have

$10k in short term trading profits (NO CGT discount)
$10k hedge win (CGT Discount)
$10k loss.

The Tax office does allow you to pick what you want to net off and actually suggest that you use the CGT that hasn't a discount to start with. So your Short Term trading wins would net to zero against the hedge loss.

You would then be left with the hedge win that has the discount.

So you have effectively halved the tax owing on the trading profits.

Of course this assumes in advance that you know what you are going to make on trading and the outcome of the hedge.

MIT

 

[kaveman]

Of course this assumes in advance that you know what you are going to make on trading and the outcome of the hedge.

MIT

absolutely no risk involved in that

 

[dutchie]

I have a copy of Money Tree's strategy and although I have not fully taken in the whole paper I can see the merits of it.

Without giving away the exact details it appears to be a long term risk free system returning a minimum of 7% (and this figure increases depending on the entities used, dividends received and if the price falls or rises).
(A minimum 25% return would then be attainable).

The only risk factor would be a sharp change in price of over 10% on the last day of the strategy. On the entitities used in the strategy this would be unlikely.

Therefore I personally would class this strategy as risk free.

Nice work MoneyTree.

 

[mit]

Dutchie,

Does the strategy take account of what we have been talking about? MoneyTree seemed to indicate that his strategy depended on applying the CGT discount before neting against the loss. A look at the ATO shows that this isn't true, that you have to net first. In his hint he would have ended up with a zero position and so no paper loss. Have we misunderstood Moneytree?

MIT

 

[RichKid]

If that is your belief, then for you, it is true.

Cheers

Not taking sides here but Wayne reminded me of a favourite quote:

If you think you can do a thing or think you can't do a thing, you're right.
Henry Ford

(Also by Ford:
I am looking for a lot of men who have an infinite capacity to not know what can't be done.)

 

[RichKid]

Must have missed your advisement of licence number to provide fin adv.
..............
perhaps this forum isn't for me after all when people can post adds without letting readers know they are adds for paid services.

You are correct in that we don't encourage ads of this nature, I have brought it to MT's attention in my earlier post. As this discussion has been of some benefit to all I will let it continue, subject to Joe's advice.

If anyone is to take up MT's course/strategy it will have to be through him direct, I neither discourage nor encourage such a course of action on ASF but you are all free to make your individual decisions after considering his offer and taking appropriate professional advice.

 

[RichKid]

Good luck then. Personally I'm wary of schemes that "get around" tax laws, as I think there's too much chance of them being challenged and perhaps having part IVa applied. I'd be looking for a private ruling before accepting any untried scheme that I wasn't comfortable with.
Cheers,
GP

I commend you too MT (and Synapse) for being innovative and proactive but if it involves Tax you really would need a private ruling and a tax expert to be safe. This would be in your clients' interests as well. Just my opinion, not financial or legal advice about your methods efficacy or otherwise.

 

[GreatPig]

So your Short Term trading wins would net to zero against the hedge loss.

That would depend on whether or not the short term trading was classed as a business. If it was, then the hedge arrangement would have to be in a different entity otherwise it would just be classed as part of the same business. And of course you can't offset things across different entities.

Even if your short term trading was classed as investing, then you're just saying you make $20K profit and $10K loss and you're ahead. However, while the hedge part might be considered almost risk free, the short term trading part certainly isn't. It could also result in a $10K loss.

GP

 

[mime]

Wait a minute. What if your losses out weigh your gains? How are you supposed to profit from that? Does this strategy rely on you make a CG before you can profit?

 

[dutchie]

Mit, sorry about taking so long to answer your question.

The strategy does involve taking the 50% cgt discount before neting profits and losses.

 

[kaveman]

The strategy does involve taking the 50% cgt discount before neting profits and losses.

but haven't the rules changed and the 50% tax discount on profits can only be taken on nett profit, not before offsetting losses

Please rework your strategy to reflect the true tax rules as in force today, not 12 months ago

CGT event = (Profits - Losses) / 2

 

[jeffreytp]

Hi Money Tree,

I am interested in your webiste and risk free strategies. Can you please contact me?

Thanks,

Jeff