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Interactive Brokers - No Margin for Aussies

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IB has transferred my personal a/c to Australia but my company account not yet - maybe not so urgent?

I have used margin in both accounts

Also I get franking credits back for both accounts

above contradicts some but I am not complaining
 
Hi MitsoHino

Thanks for your post, I remember reading it a couple of years back before I setup a corporate account with IB US while they still managed Australian clients.

Recently with IB Australia no longer providing Margin to Corporate accounts (following the IB LLC US migration of Aus clients to IB Australia) I'm thinking to follow your setup of a US based LLC to deal with IB US but have some queries on how it works from a tax perspective. (I currently have an Aus Pty Ltd which no longer has access to margin due to the client migration)

I'd be curious to understand how much total tax you have to pay on any realized profits which are paid out to you as dividends. I.e. how much gets taken out by the IRS when the LLC makes a realized profit for the year, and then how much you subsequently have to pay on top to the ATO and/or IRS when you receive it as a dividend on your Australian tax return.

From my understanding of LLCs they can be setup to be taxed as either a C-corp or a Tax Passthrough arrangement, would you be able to advise which one you ultimately chose and why?

Cheers and thanks in advance for any info!
 

I'm not sure if this can assist in your situation but, like you, I have an Australian corporate account which had its margin lending facilities withdrawn last month. However, I do have a family trust account with a corporate trustee and that still can trade on margin. Whether that lasts when migrated to IB Australia or not I do not know. I have had no indication if trust accounts will be migrated.
 
bellenuit said:
Whether that lasts when migrated to IB Australia or not I do not know. I have had no indication if trust accounts will be migrated.
Click to expand...

Well I do now. I just received a message from IB saying that my Trust account with corporate trustee is to be migrated to IB Australia on January 26th and that margin facilities will be withdrawn unless one can formally verify that one is a Wholesale or Professional investor. Personally I couldn't be bothered as I have the account open just 6 months or so and went through a huge hassle setting up and don't yet have sufficient assets owned by the trust to qualify (it takes quite some time to get assets into a trust if one wants to avoid triggering substantial capital gains in the one year).
 
r u talking 708 type sophisticated declaration (aussie corp act) or is this some other defined term?
 
thx belle

my words now - they are avoiding anything potentially messy that may involve future class action re insufficient disclosures surrounding risk. A 708 type aussie (called wholesale by IB) is not able to mitigate risk onto the credit provider (IB), so they are still acceptable to IB for this product.

cheers
 
Solution for margin Trading (Stock) with anyone.
Not CFD.

If you have something that you can secure as equity.

If margin is 2-1----open a line of credit with your lender
if you have a 50K account authorise $100K and off
you go.

Your risk.
 
tech/a said:
Solution for margin Trading (Stock) with anyone.
Not CFD.

If you have something that you can secure as equity.

If margin is 2-1----open a line of credit with your lender
if you have a 50K account authorise $100K and off
you go.
Click to expand...

Not as convenient as margin provided by IB though. I assume you must have the funds sitting in your account to buy, so you are paying interest if waiting on an opportunity. I would also be surprised if anyone could come close to IB's interest rate. Also, with IB you have (or had) direct access to USD margin without needing to perform conversions.
 
You only need to draw down on LOC and transfer cash when you're ready to buy so only paying interest when drawn down, interest rates are pretty low at the moment.
 
i also was hit by the bad news for my corporate trust account last week and now trying to figure out what implications this has for options trading (aside from the annoyance of losing SIPC coverage and getting the far inferior AFG protection in its place).

i'm guessing that after migrating to IB Aust, once there's no more margin, naked puts are going to have to be fully cash covered, vertical credit spreads will require the entire difference between the strikes/max loss to be completely covered by cash, etc.?

i might have to shut down a few positions this week ahead of the Jan 26 cutoff date for migration, as i was relying on margin to cover some naked put and 1 by 2 ratio put spread positions. if anyone's traded options with a non-margin IB account, is that how things generally work?
 

Yes, I am in a similar boat. It has completely screwed up my options trading strategy. What has really annoyed me is the short time frame. The day I received the note regarding transfer to IB AU, I sold US shares I held in a company account and private account in order to pay the USD margin outstanding for my trust account. Due to the time lag caused by waiting on the sell trade settlements, then the forex trade settlement to convert to AUD (I am still at this stage), then transferring from IB to my Australian company/personal bank accounts, transfer from there to my Australian Trust bank account, transfer to IB Australia trust account and finally conversion from AUD to USD in the trust account, I will just about have reached the 26th January deadline.

I would be in serious strife if I didn't have the readies available in other accounts to cash out. As is, it has forced me to liquidate at a market bottom.

Once the dust has settled, I will be taking a long look at some alternatives to IB.
 
shut down all my naked put and 1 by 2 ratio put spread positions today, along with buying back some of my open covered calls, as i needed to sell the stocks that were collateralising them to get my settled cash balance back above zero before the margining facility is cut off on Jan 26. not happy at all, some of those short options were near the money and with Jan expiry this thurs, that's some nice quick time decay to give up.

frustrating as that was, i'm not prepared to blame IB just yet, they've been really good for the last few years, and i suspect this is more to do with the onerous regulatory environment they have to operate under rather than any unforced decision making on their behalf. and as some of us here suspect by now, the regulatory authorities are probably giving IB an unnecessarily hard time to help protect the local rip-off brokers which simply can't compete with their offerings.

for that reason i have doubts whether we'll find anything better than IB, especially as far as ASX ETO trading is concerned. if anything surfaces that's too competitive, the regulatory authorities will probably invent some excuse to come down hard on them and protect the local rip-off brokers from the competition.
 
contacted IB on the live chat support today to clarify what the situation was for options trading under IB Australia.

thankfully it's not as bad as first thought.

we can still use margin to collateralise short gamma positions, ie. if the account has enough equity in it, it's still possible to sell naked puts, vertical credit spreads etc. with no cash in the account. there's no requirement to fully cover option positions using cash.

what they meant by no margin was that we can't let our cash balance drop below zero, or stocks will be liquidated at random to bring the cash balance back above zero. so options trading shouldn't be too different under IB Aust, just need to close out, roll up & out etc. to avoid getting assigned, instead of taking the assignment and relying on margin to cover it, like i used to do under IB LLC.
 
I see they are advertising all over social media with really low margin interest rates - of course lots of Australians upset by that

Did you know they were banned in Indonesia - try trading when in Bali!
 
Hi All,
So I have read all of the posts.
Has IB changed anything in the past few months?
I really like their platform.
 
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