Interactive Brokers - No Margin for Aussies

bellenuit · 5 August 2015

freebird54 said:
anyone like to suggest a simpler way?

Depending on the volume of your trading, have you considered maintaining your own records. I use a spreadsheet to record all my trading activity and just use the IB reports for record purposes (in case the ATO were to require verification of my figures). It's not difficult for me to maintain (I trade only once or twice per week) and I have refined my spreadsheets so that I have a real-time view of my Profit & Loss and also my company Balance Sheet.

Although I now do the tax myself, when I did have an accountant I just gave him summary data of the type you are asking for.

Some issues I have found using the IB reports are:-

I always calculate my Closing Stock On Hand by using the "Lower of Cost or Market" method and do this on the basis of each batch of stock purchased. This minimises your reported profit for the year so you pay less tax and have more of your funds to use for trading. Eventually the profit deferred will have to be brought to account (say when you decide you no longer want to trade and close out all your positions), but if you are a successful trader, you should have benefited from having more funds at your disposal in the earlier years. I don't believe that IB can handle "Lower Of Cost or Market". Also, IB, as far as I know, only allows you to select LIFO or FIFO when deciding which batch or part batch of shares are being sold. I prefer to select a batch of my own choosing (which may not be LIFO or FIFO) as that allows me to better control the profit I want to show in a particular year.

I find some of the data from IB difficult to comprehend, particularly shares bought through corporate actions. These purchased shares appear in the corporate actions part of the report and not under trades (where other share purchases are listed) and are often fairly unintelligible, whereas I just treat them as a normal purchases in my spreadsheets.

blue0810 · 5 August 2015

bellenuit said:
...IB, as far as I know, only allows you to select LIFO or FIFO when deciding... .

The bellow tool can provide you more options:

“ The Tax Optimizer allows you to gauge the profit/loss impact of your selected tax lot matching methods, change the method on-the-fly and immediately see the potential profit/loss impact of an alternative tax lot matching method, and manually match specific lots”

https://www.interactivebrokers.com/en/software/ibto/ibto.htm

rx2 · 5 August 2015

hawamahal said:
So is it only for corporate trustee and not for individual trustee.

I believe so - a corporate trustee is a PTY entity.

blue0810 · 5 August 2015

freebird54 said:
..anyone like to suggest a simpler way?

You can create your own “customize statement” and
download the statement as a Excel file .

freebird54 · 10 August 2015

bellenuit said:
Depending on the volume of your trading, have you considered maintaining your own records. I use a spreadsheet to record all my trading activity and just use the IB reports for record purposes (in case the ATO were to require verification of my figures). It's not difficult for me to maintain (I trade only once or twice per week) and I have refined my spreadsheets so that I have a real-time view of my Profit & Loss and also my company Balance Sheet.

Although I now do the tax myself, when I did have an accountant I just gave him summary data of the type you are asking for.

Some issues I have found using the IB reports are:-

I always calculate my Closing Stock On Hand by using the "Lower of Cost or Market" method and do this on the basis of each batch of stock purchased. This minimises your reported profit for the year so you pay less tax and have more of your funds to use for trading. Eventually the profit deferred will have to be brought to account (say when you decide you no longer want to trade and close out all your positions), but if you are a successful trader, you should have benefited from having more funds at your disposal in the earlier years. I don't believe that IB can handle "Lower Of Cost or Market". Also, IB, as far as I know, only allows you to select LIFO or FIFO when deciding which batch or part batch of shares are being sold. I prefer to select a batch of my own choosing (which may not be LIFO or FIFO) as that allows me to better control the profit I want to show in a particular year.

I find some of the data from IB difficult to comprehend, particularly shares bought through corporate actions. These purchased shares appear in the corporate actions part of the report and not under trades (where other share purchases are listed) and are often fairly unintelligible, whereas I just treat them as a normal purchases in my spreadsheets.

Thanks for a very good suggestion - I know you can do this when initially moving stock from another broker to IB. I did not know you could keep doing it.
Some say everything is summarised on Page 1 of the default Fiscal year report.

blue0810 · 10 August 2015

freebird54 said:
...Some say everything is summarised ....

with activity flex query you can create your own “customise statement”,
see bellow the link for further information:

https://www.interactivebrokers.com/en/software/reportguide/reportguide/reportreference.htm

MitsoHino · 13 August 2015

mypetfly said:
I have had an IB cash account for about 6mths and have been looking for a way to get a margin account. The only solution that I have been able to come up with is to setup an LLC in the US (which can be done online for around $800) and then open an IB margin account using the new LLC as the legal entity for the account.

I actually stumbled across this forum looking for other Aussies that may have already done this. It seems pretty easy to do but before I invest time into setting this up I would love to hear from someone that might have already done it (or from those that say it it won't work).

Surely this is a simple solution that will overcome all the problems/restrictions that we have as Aussie traders on IB?

Cheers

Paul

Hi Paul,
I am an Australian and live in Australia. I own 2 LLC's both are registered in the State of Delaware. One of my LLC's has an IB account which I only use for trading purposes and I have no problem with margin Lending , FX trades etc, as the business is a USA business and not Australian.

The application process took 4 weeks, vs normal 1 week as Ib needs to confirm if you have the appropriate licences etc. Given this LLC of mine is not offering financial services in Australia and is just a trading account my application got approved. If an LLC offers any Financial Services in OZ then expect extensive delays as you may need to receive appropriate ASIC , ATO etc licenses.

Each LLC cost me around $500 USD and extra to receive an EIN, I also need to pay annual fees around $300 usd and my year end is DEC a will need to submit reports in the US each year.

Its is possible to create an LLC, just takes time and a little money...

Regards

traderjo · 18 August 2015

Hi Mitso
So after opening a US LLC to then open A/c with US brokers how did you open a bank A/c in US?
and can that be linked Australian banking ( say Citibank AUS and Citi US link!)

Then you have to do US taxes and then match that with ATO
is that all a hassle?

With other brokers does opening an LLC open doors so to speak?
Because at this stage both Nadex and Think or Swim won;t allow Australian to open a/c!

traderjo · 19 August 2015

Taaait said:
Really you've only got yourself to blame because you opened up a Cash Account. If you didn't know what a cash account was you should have read up on it. The fact that the Aussie regulators have banned IB from offering anything beyond a cash account (children's account) is not IB's fault.

Indeed they were told originally when the new law came in that their existing licence did not need upgrading. Then ASIC changed their mind.

Secondly you cannot even remotely compare IG CMC and Saxo to Interactive Brokers. They are a totally different thing. They are bucket shops. Pure and simple. IB on the other hand is a real broker and is far far far superior. When you've got 10+ years of trading experience then you'd know what I'm talking about.

Also does anyone have an update on the state of things? That is, is IB now allowed to offer proper Margin Accounts?

Thanks.

HOW is it not Ib's fault? it is easy to blame regulators ( and the left!)... other brokers are compliant and do business in Australia
Bucket shop ref: - OK so if so called bucket shops can operate why can't a giant like IB ?
- By the way smaller but real US brokers (SIPC protection) like Options express, offer everything ( Naked options writing, Margin T etc ) completely ASIC regulated, have Australian offices!
- Sounds like IB is doing a Uber in Australia ( screw the regulators we will operate the way we want until stopped by law)
I have 2 a/c with IB and I see the value but these restrictions + the arrogance of IB is pissing me off

McLovin · 19 August 2015

traderjo said:
HOW is it not Ib's fault? it is easy to blame regulators ( and the left!)... other brokers are compliant and do business in Australia
Bucket shop ref: - OK so if so called bucket shops can operate why can't a giant like IB ?
- By the way smaller but real US brokers (SIPC protection) like Options express, offer everything ( Naked options writing, Margin T etc ) completely ASIC regulated, have Australian offices!
- Sounds like IB is doing a Uber in Australia ( screw the regulators we will operate the way we want until stopped by law)
I have 2 a/c with IB and I see the value but these restrictions + the arrogance of IB is pissing me off

Can't you just accept that IB has made a commercial decision and isn't interested in chasing a certain segment of the market? The margin restrictions only apply to natural persons. That seems a very easy work around to me.

bellenuit · 19 August 2015

McLovin said:
Can't you just accept that IB has made a commercial decision and isn't interested in chasing a certain segment of the market? The margin restrictions only apply to natural persons. That seems a very easy work around to me.

If they have made a commercial decision not to offer margin to individuals, then they should say so instead of saying they are working on resolving it (2+ years now I think). Fortunately I had a company account and was able to move my margin "trading" activities to it, but was forced to open a nabtrade account to get margin on my "investments" which I hold as an individual. However, due to the way they have handled margin and more recently forex, I sense a lack of commitment to Australia and would not be surprised if get a letter someday saying they are pulling out and I have 4 weeks to make other arrangements.

Committing IMO means being forthright about their plans, not simply giving an estimate that it will take 4 weeks to resolve and then providing no update for a subsequent 2 years.

McLovin · 19 August 2015

bellenuit said:
If they have made a commercial decision not to offer margin to individuals, then they should say so instead of saying they are working on resolving it (2+ years now I think).

I'm not saying they've decided not to offer margin to inviduals, just that they have decided for whatever reason that it is not a high priority item. If that business line was a huge money spinner then the regulatory issue would have been resolved ASAP. It's not great from a customer service perspective to drag it out with little news, but again if large numbers of valuable customers were affected it would have been resolved. That's the commercial decision they made.

sails · 19 August 2015

McLovin said:
I'm not saying they've decided not to offer margin to inviduals, just that they have decided for whatever reason that it is not a high priority item. If that business line was a huge money spinner then the regulatory issue would have been resolved ASAP. It's not great from a customer service perspective to drag it out with little news, but again if large numbers of valuable customers were affected it would have been resolved. That's the commercial decision they made.

McLovin, totally agree it's a business decision they have made. I just hope that they don't pull the pin on all of us and more likely to do so if their customer service staff get hassled too much. I hope they realise that some of us are fine with the current situation and happy to find work arounds rather than lose it altogether. They provide great software and brokerage prices which I have never seen provided by Aussie brokers.

blue0810 · 19 August 2015

I hope no more surprise from IB.
I hope they never will go bust.

traderjo · 19 August 2015

sails said:
McLovin, totally agree it's a business decision they have made. I just hope that they don't pull the pin on all of us and more likely to do so if their customer service staff get hassled too much. I hope they realise that some of us are fine with the current situation and happy to find work arounds rather than lose it altogether. They provide great software and brokerage prices which I have never seen provided by Aussie brokers.

You guys might be happy the way things are other's might not be.. so you also have to accept that rather than blaming us who raise the question!
Opening a company is an unnecessary expense and a hassle.
Another issue is SMSF a/c... again CASH only!

as the previous poster says Ibs attitude and a long delay is what irks.

I also hope they resolve this soon, so we we all can be happy

Until then whether you like it or not those who want this resolved will keep asking IB

traderjo · 19 August 2015

blue0810 said:
I hope no more surprise from IB.
I hope they never will go bust.

hahhaha yes... but hope that does not happen, they did take a 150 M loss in the Swiss FX event and survived ( better than FX only players like FXCM and Alpari)
Good news is they are SIPC protected ( even money from Futures and FX is swept back to Equity a/c daily)

Better protection than ASIC!

kfbcomm · 20 August 2015

bellenuit said:
.... Fortunately I had a company account and was able to move my margin "trading" activities to it, but was forced to open a nabtrade account to get margin on my "investments" which I hold as an individual. ...

How does setting up as a company affect tax compared to being an individual. Also for transition what happens to things like positions opened ; carried forward tax losses etc when you convert to a company account ?

bellenuit · 20 August 2015

kfbcomm said:
How does setting up as a company affect tax compared to being an individual. Also for transition what happens to things like positions opened ; carried forward tax losses etc when you convert to a company account ?

I didn't convert to a company account. I opened up a new account in the name of a company that I already owned (as sole shareholder). I have kept the individual account for investments (long term holds), but I also moved some of the investments to a nabtrade margin account (individual) as opportunities arise from time to time when I am cash poor and having a margin account in my own name allows me to avail of those opportunities.

Regarding the company account that I use for trading, I opened up new positions for that. Tax wise, the main difference for a company is that you cannot avail of the 50% Capital Gains Discount for investments held longer than 12 months. In my case that is irrelevant, as the company is classified as a trader for tax purposes (hence it doesn't pay CGT tax, but is instead taxed on company profit (income less expenses)) and in any case I rarely hold anything longer than 12 months. Additionally a company pays a 30% (28% for some starting 2015) flat rate of tax. You can pay yourself franked dividends out of company profits (to get money out of the company).

kfbcomm · 21 August 2015

bellenuit said:
I didn't convert to a company account. I opened up a new account in the name of a company that I already owned (as sole shareholder). I have kept the individual account for investments (long term holds), but I also moved some of the investments to a nabtrade margin account (individual) as opportunities arise from time to time when I am cash poor and having a margin account in my own name allows me to avail of those opportunities.

Regarding the company account that I use for trading, I opened up new positions for that. Tax wise, the main difference for a company is that you cannot avail of the 50% Capital Gains Discount for investments held longer than 12 months. In my case that is irrelevant, as the company is classified as a trader for tax purposes (hence it doesn't pay CGT tax, but is instead taxed on company profit (income less expenses)) and in any case I rarely hold anything longer than 12 months. Additionally a company pays a 30% (28% for some starting 2015) flat rate of tax. You can pay yourself franked dividends out of company profits (to get money out of the company).

A major consideration for me is that i have some old losses that I would like to offset against gains if they were of appropriate size. it looks like that can't happen though. Ah well c'est la vie.

Thanks for the information. I really appreciate your sharing.

One more request if i may - Is there any source you could point me at that gives details of doing trading as a business as opposed to a personal investor. It does seem to have some advantages

Thanks

bellenuit · 21 August 2015

kfbcomm said:
One more request if i may - Is there any source you could point me at that gives details of doing trading as a business as opposed to a personal investor. It does seem to have some advantages

Not that I can point to. It is discussed from time to time on ASF forums and also on Whirlpool's Finance forum. The advantages are not absolute as they depend on your personal circumstances (your marginal tax rate, extra administrative workload etc.). You can do trading under your own name or under another structure such as a company and each have different plusses and minuses.

Interactive Brokers - No Margin for Aussies

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