How do investors here deal with tax issues?

[SuperGlue]

I began buying stocks from last September and I now want to rotate into cheaper stocks, but I'll incur a huge tax bill if I sell (more than 35%, tax is more than my day job wages for the whole year), so I'm trying to hold for next two months until September to cut the capital gains tax in half.

Hope you've been buying stocks in a separate account from your futures trading or inform ATO of your intention of not wanting to be a sole trader much earlier in the year.

Thought of salary scarficing?

Seek professional advise, I'm not an accountant.

 

[steve4046]

Hi I was just wondering how do people deal with tax on profits when they sell shares??

I began buying stocks from last September and I now want to rotate into cheaper stocks, but I'll incur a huge tax bill if I sell (more than 35%, tax is more than my day job wages for the whole year), so I'm trying to hold for next two months until September to cut the capital gains tax in half.

But this is stupid way to go about it, holding on to shares longer than necessary to minimise tax is never good option for an active trader. So what do people do?? Is the best option to set up a company so all profit will be taxed at flat 30% or is there another more tax effective way?

I used to trade futures and they were classified as business income under sole trader as I trade a lot everyday, now I trade stocks maybe once every month or two, is that still classified as business income or capital gain?

Many thanks in advance for any advice.

Depend on tax status under ATO rules....are you a trader or investor?

 

[Value Hunter]

Yeah. So you utilise the lowers tax rates that apply to you (and other members of the trust) then when those rates go above 30% you put the excess into the company.

In my own situation I simply just put all the share in my own name, because I own all my shares long term (always longer than 12 months) so when I sell the tax rate will always be less than 30% (e.g. top tax rate is 46.5% including medicare levy and half of that is only 23.25%). Because pty ltd companies are not eligible for the capital gains tax discount.

Also because my share portfolio is substantially geared (no margin loans though) I get to offset the interest and the franking credits against the dividends and I always end up getting a meaningful franking credit refund when I do my tax return. So for me personally a trust or company would give me no tax advantages and would just cost me more in accounting fees (and cause me more headaches) to run. Also since I am not a businessperson and by the way I run my life I am unlikely to ever be sued or chased by creditors (if I ever get married one day the family court can ignore/over-rule trust and company structures any way) the asset protection aspect of having trusts is not so useful to me.

In my case I just keep it simple and own all assets in my own name, because in my circumstances it works out best.

 

[Value Collector]

In my own situation I simply just put all the share in my own name, because I own all my shares long term (always longer than 12 months) so when I sell the tax rate will always be less than 30% (e.g. top tax rate is 46.5% including medicare levy and half of that is only 23.25%). Because pty ltd companies are not eligible for the capital gains tax discount.

Also because my share portfolio is substantially geared (no margin loans though) I get to offset the interest and the franking credits against the dividends and I always end up getting a meaningful franking credit refund when I do my tax return. So for me personally a trust or company would give me no tax advantages and would just cost me more in accounting fees (and cause me more headaches) to run. Also since I am not a businessperson and by the way I run my life I am unlikely to ever be sued or chased by creditors (if I ever get married one day the family court can ignore/over-rule trust and company structures any way) the asset protection aspect of having trusts is not so useful to me.

In my case I just keep it simple and own all assets in my own name, because in my circumstances it works out best.

If you have a partner that doesn't really earn much it is handy to be able to distribute earnings to her/him.

 

[Value Hunter]

Value Collector that might be true but I am currently single and currently my immediate family members earn more than me.

 

[cutz]

I began buying stocks from last September and I now want to rotate into cheaper stocks, but I'll incur a huge tax bill if I sell (more than 35%, tax is more than my day job wages for the whole year), so I'm trying to hold for next two months until September to cut the capital gains tax in half.

Set up a collar using Sep expiry options to protect your position till September.

 

[cutz]

Set up a collar using Sep expiry options to protect your position till September.

Just realized you want to rotate into a cheaper stock.

After you have set up your collar, buy the cheaper stock on margin, sell OTM calls to cover the interest.