Interactive Brokers

[jlryan87]

An open question to everyone:

For those of you who have set up a company to bypass the margin restriction, what brings you forward to do that, apart from having a multimillion dollar account Apart from that, how do you find the cost and regulatory burden justifiable? Setting up a private company is itself $444. Then there is this secretarial and annual papaerwork. Next, you will forgo the US-AUS agreement which means dividends are now taxable at 30% instead of 15%. And I am not sure if you can still have the 50% discount on capital gains on holdings that are longer than one year. There is a separate provivion for small business that has something similar, but I am just unsure if it is applicable in the case of US stocks.

 

[Sir Burr]

An open question to everyone:

For those of you who have set up a company to bypass the margin restriction, what brings you forward to do that

Here's my reasons:
- Unsure when/if IB will lift the restriction.
- Have put a fair bit of time/money into the system which can only be traded with IB
- short term trader, 50% CGT has not effect. Few dividends.
- may have a beneficial taxation advantage.
- annual fees are not excessive.

 

[bellenuit]

An open question to everyone:

For those of you who have set up a company to bypass the margin restriction, what brings you forward to do that, apart from having a multimillion dollar account Apart from that, how do you find the cost and regulatory burden justifiable? Setting up a private company is itself $444. Then there is this secretarial and annual papaerwork. Next, you will forgo the US-AUS agreement which means dividends are now taxable at 30% instead of 15%. And I am not sure if you can still have the 50% discount on capital gains on holdings that are longer than one year. There is a separate provivion for small business that has something similar, but I am just unsure if it is applicable in the case of US stocks.

Setting up a private company is itself $444.

That's a one off cost. In my case I paid $900 back in 2000.

Then there is this secretarial and annual paperwork.

An accountant used do my annual tax return and the company accounts for $650. Fortunately I had studied some accounting, but never practised it, so last year for the first time I dispensed with the accountant and did the accounts myself (which are optional I think, but in any case do not have to be submitted depending on the size of your company) and tax return myself. I do keep everything up to date though recording all transactions etc on spreadsheets as soon as possible after they occur.

Next, you will forgo the US-AUS agreement which means dividends are now taxable at 30% instead of 15%.

I completed the form W8BEN (I think from memory) so the company gets the 15% rate.

And I am not sure if you can still have the 50% discount on capital gains on holdings that are longer than one year.

Correct. This is a downside for those companies that buy/sell shares as an investment rather than as a trader.


Some advantages:

The only way to access margin through IB at the moment and the possibility that margin facilities may not be made available to individuals in 4 months or so as promised.

If you invest in your own name and trade in the company name, then there is no ambiguity as far as the ATO is concerned whether a particular purchase was made as an investment or as a trade.

If you are on a high personal tax bracket, then less tax is taken from your trading profits as a company, allowing you more money to trade with.

If you are on a low tax bracket (say a retiree earning under $37K and on the 19% rate), you can top up to the $37K level by paying yourself an appropriate amount of franked dividend from the company. This is a very tax effective way of withdrawing company profits.

One downside that you haven't mentioned is that for an investor, capital gains cannot be written off against carried forward capital losses of the other entity. Say you personally have $50K of carried forward capital losses. If the company makes $50k capital gains in the year, they are taxed at the company rate, whereas if the same gains were made by you personally you would pay no tax as they would have been written off against the carried forward losses.

 

[dclayw]

I can tell you that I have a Family trust account (just myself and my wife) and recently I updated a company name, (which is registered for about $230 a yr with ASIC) as the trustee and IB have since removed the margin restriction.

Can you elaborate on this please:
Did you have to sell and then re-buy all assets held by the family trust, as the ownership of those assets effectively changed when you set up the corporate trustee. This ofcourse has CGT and other implications.
Did you have to close the existing IB account and create a new one, or did IB just change the ownership of the account for you.
Can you provide any other details on how easy/difficult this was to do.

The reason I ask is that I have an IB account in the name of my SMSF with my wife and I as trustees. Looks like I can get around the margin restrictions if I convert to a corporate trustee for the SMSF, but I'm not sure how much of a pain that is going to be, and what's actually involved.

I certainly don't want to change brokers, been with IB for 10 plus years and been using buttontrader frontend for most of that time too. Then again, IB could turn around tomorrow and say that no margin accounts are available to anyone or anything in Aus. Would be a lot of wasted effort and hassle if you converted to corporate trustee and that happened.

Worst case scenario would be IB quitting Australia altogether, I hope that doesn't happen. I can get by without margin I guess, if I had too, because most trading is futures and fx, but they might change the rules there too.

By the way, I don't know if this applies just to SMSF but I read somewhere that if the SMSF (which is just a trust really) has a corporate trustee and the only thing that company does is act as the trustee, then the annual fee is only something like $44, rather then $230.

 

[rnr]

Can you elaborate on this please:
Did you have to sell and then re-buy all assets held by the family trust, as the ownership of those assets effectively changed when you set up the corporate trustee. This ofcourse has CGT and other implications.
Did you have to close the existing IB account and create a new one, or did IB just change the ownership of the account for you.
Can you provide any other details on how easy/difficult this was to do.

Changing the Trustee of a Family Trust does not constitute a change in the beneficial ownership of assets so there is no CGT event to worry about.

 

[jlryan87]

Here's my reasons:
- Unsure when/if IB will lift the restriction.
- Have put a fair bit of time/money into the system which can only be traded with IB
- short term trader, 50% CGT has not effect. Few dividends.
- may have a beneficial taxation advantage.
- annual fees are not excessive.

Thanks for sharing. I am more of a long term investor, so the 50% discount on CGT is quite enticing.

 

[jlryan87]

If you are on a low tax bracket (say a retiree earning under $37K and on the 19% rate), you can top up to the $37K level by paying yourself an appropriate amount of franked dividend from the company. This is a very tax effective way of withdrawing company profits.

One downside that you haven't mentioned is that for an investor, capital gains cannot be written off against carried forward capital losses of the other entity. Say you personally have $50K of carried forward capital losses. If the company makes $50k capital gains in the year, they are taxed at the company rate, whereas if the same gains were made by you personally you would pay no tax as they would have been written off against the carried forward losses.

Hi bellenuit. Thanks for such detailed reply! Much appreciated
I got a few questions though. At the end of a fiscal year, do you just send whatever records you have to your accountant and he/she will do the rest? Is there anything else that you have to send or do prior to tax time?

Also, what are the procedures/formalities for paying yourself a franked dividend? Do you just transfer the amount from your brokerage account to your personal bank account and then tell your account so he/she will do the rest (the paperwork)? And what if you want to send in more capital to your company bank account which will be subsequently added to the brokerage account? I am guessing you will record every single action that you did and at the end of fiscal year your accountant will reconcile your written record with that of bank/brokerage statements?

I am a bit confused about the carried forward loss issue because when you explained it, you mixed both personal account and company account. Let say my company has a capital loss last year (-10k), and a capital gain this year (+20k). So this year my assessable capital gain is +10k?

 

[bellenuit]

Hi bellenuit. Thanks for such detailed reply! Much appreciated
I got a few questions though. At the end of a fiscal year, do you just send whatever records you have to your accountant and he/she will do the rest? Is there anything else that you have to send or do prior to tax time?

If you want to keep your accountancy fees low, then you should do all the hack work yourself. For instance, after the first year when I saw how my accountant categorised things for doing the accounts and tax return, I changed my spreadsheets to do things like he wanted. So rather than sending in all the transactions that represented share sales, share purchases etc. (I was classified as a trader), I just sent him the totals for each category. Why pay him to add up figures when you can do it yourself. Similarly for expenses etc., I provided him with totals for "communication expenses", "printing & stationery" etc., which were categories he used in the accounts of the company. Sending in a shoebox full of receipts is not a good idea IMO and if you take the time to learn as much as you can about how the accounts are structured and the tax return done, it can help you to do things in a more tax effective way, maximising your returns. Ultimately it is you (the company) who is responsible for your tax return, not the accountant, so be sure you have appropriate records for everything on file (you don't need to send them to the accountant, just the summary data that he can work with).

There are just a few items you have to attend to before the tax year ends (ASIC fees, PAYG etc.). If the accountant is your agent he will receive the requests from the relevant authority and mail them to you.

Also, what are the procedures/formalities for paying yourself a franked dividend? Do you just transfer the amount from your brokerage account to your personal bank account and then tell your account so he/she will do the rest (the paperwork)?

I just moved an amount from my company bank account or company brokerage account to my own bank account towards the end of the tax year. At that stage I had a good idea of what my personal tax situation was and paid a dividend and franking credit that would be optimal from a personal tax point of view. If you don't understand how the Franking Account works, it is better to tell the accountant your personal situation and what he thinks would be an appropriate dividend. It is a tricky area and if you pay franking credits that you are not entitled to pay, you could end up with some tax issues.

And what if you want to send in more capital to your company bank account which will be subsequently added to the brokerage account? I am guessing you will record every single action that you did and at the end of fiscal year your accountant will reconcile your written record with that of bank/brokerage statements?

Lending TO the company is not a problem. It is just recorded in the accounts as a "Loan From Shareholder" (depending on the system your accountant uses, it may have a different name). Be very very careful withdrawing money from the company to your own account. If it is money owed to you (part of "Loan From Shareholder"), then you should be OK, but never withdraw more than the company owes you or the dividend you can pay to yourself. If it is deemed to be a loan from the company TO you, then you will have opened a bag of worms that has huge tax consequences. Be sure to check with your accountant if you are withdrawing any amount that could be close to what the company owes you.

I am a bit confused about the carried forward loss issue because when you explained it, you mixed both personal account and company account. Let say my company has a capital loss last year (-10k), and a capital gain this year (+20k). So this year my assessable capital gain is +10k?

Correct, the COMPANY's assessable capital gain is +10K. I was trying to highlight the fact that the company is an entirely separate entity from you personally from both a legal and tax point of view and you cannot intermix your tax issues. What I was trying to emphasise was that if you PERSONALLY have a large carried forward capital loss (say someone who fared very badly in the GFC), you might be a lot better off to do all your investing in your own name rather than through a company. If you have say $100K carry forward capital loss in your own name, then you will not pay any tax on subsequent capital gains (in your own name) until that $100K is written down. So basically the next $100K you make in personal capital gains will be tax free. But if you were instead to stop investing in your own name (you still have the $100K personal capital loss going forward), but set up a company for investments, then any capital gains made by the company will be taxed at the 30% company rate. Although the company can write off its capital gains against its own carry forward capital losses (as per you example), it cannot write them off against your own personal capital losses.

 

[merlinnn]

Can you elaborate on this please:
Did you have to sell and then re-buy all assets held by the family trust, as the ownership of those assets effectively changed when you set up the corporate trustee. This ofcourse has CGT and other implications.
Did you have to close the existing IB account and create a new one, or did IB just change the ownership of the account for you.
Can you provide any other details on how easy/difficult this was to do.

The reason I ask is that I have an IB account in the name of my SMSF with my wife and I as trustees. Looks like I can get around the margin restrictions if I convert to a corporate trustee for the SMSF, but I'm not sure how much of a pain that is going to be, and what's actually involved.

I certainly don't want to change brokers, been with IB for 10 plus years and been using buttontrader frontend for most of that time too. Then again, IB could turn around tomorrow and say that no margin accounts are available to anyone or anything in Aus. Would be a lot of wasted effort and hassle if you converted to corporate trustee and that happened.

Worst case scenario would be IB quitting Australia altogether, I hope that doesn't happen. I can get by without margin I guess, if I had too, because most trading is futures and fx, but they might change the rules there too.

By the way, I don't know if this applies just to SMSF but I read somewhere that if the SMSF (which is just a trust really) has a corporate trustee and the only thing that company does is act as the trustee, then the annual fee is only something like $44, rather then $230.

Interesting, I was told by several different people you cannot use the IB margin account to trade with an SMSF as they are not permitted to trade under margin? I have a pty ltd sitting in the closet doing nothing that I was going to use as the corporate Trustee. Can you elaborate on this as I'm very interested.

 

[village idiot]

Interesting, I was told by several different people you cannot use the IB margin account to trade with an SMSF as they are not permitted to trade under margin? I have a pty ltd sitting in the closet doing nothing that I was going to use as the corporate Trustee. Can you elaborate on this as I'm very interested.

you can have a IB margin account in the name of an SMSF. IB doesn't stop you and there is no rule saying an SMSF cannot have a margin account ( as long as it doesn't invest or trade stocks on margin because that is definitely prohibited by SMSF law).

So what is the point of that you ask? Well at IB you need to have a margin account to do various things that you are allowed to do in an SMSF but you cant do in an IB cash account . for example, iirc, writing options, buying foreign stocks.


However, big caveat - the standard IB customer agreement for a margin account has a clause in it that pledges all assets in the account to IB at the time of signing it, (not just if a trade requiring margin was actually taken). By my interpretation this contravenes sect 13.14 of the SISR. So read the CA carefully if you contemplate doing it.

 

[umeboshichan]

Can you elaborate on this please:
Did you have to sell and then re-buy all assets held by the family trust, as the ownership of those assets effectively changed when you set up the corporate trustee. This ofcourse has CGT and other implications.
Did you have to close the existing IB account and create a new one, or did IB just change the ownership of the account for you.
Can you provide any other details on how easy/difficult this was to do.

The reason I ask is that I have an IB account in the name of my SMSF with my wife and I as trustees. Looks like I can get around the margin restrictions if I convert to a corporate trustee for the SMSF, but I'm not sure how much of a pain that is going to be, and what's actually involved.

I certainly don't want to change brokers, been with IB for 10 plus years and been using buttontrader frontend for most of that time too. Then again, IB could turn around tomorrow and say that no margin accounts are available to anyone or anything in Aus. Would be a lot of wasted effort and hassle if you converted to corporate trustee and that happened.

Worst case scenario would be IB quitting Australia altogether, I hope that doesn't happen. I can get by without margin I guess, if I had too, because most trading is futures and fx, but they might change the rules there too.

By the way, I don't know if this applies just to SMSF but I read somewhere that if the SMSF (which is just a trust really) has a corporate trustee and the only thing that company does is act as the trustee, then the annual fee is only something like $44, rather then $230.

I already had a trust account with iB with my wife and myself as individual trustees so the process of nominating a company as trustee instead of an individual was relatively easy. (as long as your trust document states your company is a trustee) You just tell IB you wish to do that and they will ask you to submit a few documents (mainly just ID and a certified copy, which I done at my local post office of a few of the important pages of your trustee document which states the company is trustee). I didnt have to sell any shares and the process took a little more than a week. This year my ASIC fees for the company was $236 and for my Superfund pty was $230 (both just myself and wife)

 

[village idiot]

it doesn't look like you can do an In specie/off market transfer of shares from an IB account in your own name to your SMSF account ( with IB), even though they are linked, because they don't share the same name.

can anyone confirm/deny/offer a way round it ?

thanks

 

[freebird54]

Yes typical paranoid USA I have been with them for years with a company and a personal a/c and never the twain shall meet
they make you transfer back to your bank a/c and then back into the other a/c

I now have opened full ASX participant [not shadow brokers] a/c here which give great full advisory service and are very competitive, I found I was spending too long online with IB and always concerned over the stock not in my name - I have my life back.

I had used many here in the part - Hartley Pointon, Macquarie, rivkin, westpac/commsec and a few other online ones - last 2 non advisory

it doesn't look like you can do an In specie/off market transfer of shares from an IB account in your own name to your SMSF account ( with IB), even though they are linked, because they don't share the same name.

can anyone confirm/deny/offer a way round it ?

thanks

 

[freebird54]

Latest update from IB re Margin problem

My PTY Company a/c no problem but for cash covered personal one a friend just got this reply from IB with regard to USA Option trading

"You can trade covered calls, and cash-covered puts.

You can also trade spreads, as long as the short leg of the spread expires at or before the long leg. Example, vertical spread like a Bull Call spread. Or a calendar spread where the short leg expires first.

We currently do not have an estimate as to when the margin restriction will be lifted. We can tell you that we've petitioned with ASIC, and we think it will be 6 to 9 months before we have any progress. We, unfortunately, don't have any guarantee from ASIC that the margin restriction will be lifted at all.

Our only role is to wait patiently, which is what we are doing. We do not have any authority, whatsoever, to contradict the process or the length of time involved, imposed by ASIC or any other regulator."

We could die waiting for ASIC as they have so many cases and so few staff with the expertise - there is a senate enquiry into them as we speak but the government has to save $$$ somewhere ;-)

 

[merlinnn]

My biggest frustration at the moment is waiting T3 to clear funds after selling some shares, this limits the amount of trades I can take. Does anyone know if you can bypass this with the margin account without using a margin? Or this deemed as trading on margin because the T3 happens in the background anyway? I think I just confused myself, hope this makes sense.

you can have a IB margin account in the name of an SMSF. IB doesn't stop you and there is no rule saying an SMSF cannot have a margin account ( as long as it doesn't invest or trade stocks on margin because that is definitely prohibited by SMSF law).

So what is the point of that you ask? Well at IB you need to have a margin account to do various things that you are allowed to do in an SMSF but you cant do in an IB cash account . for example, iirc, writing options, buying foreign stocks.


However, big caveat - the standard IB customer agreement for a margin account has a clause in it that pledges all assets in the account to IB at the time of signing it, (not just if a trade requiring margin was actually taken). By my interpretation this contravenes sect 13.14 of the SISR. So read the CA carefully if you contemplate doing it.

 

[rx2]

My biggest frustration at the moment is waiting T3 to clear funds after selling some shares, this limits the amount of trades I can take. Does anyone know if you can bypass this with the margin account without using a margin? Or this deemed as trading on margin because the T3 happens in the background anyway? I think I just confused myself, hope this makes sense.

Share the frustration here also...... I am considering switching from a cash account to a margin account for SMSF to get around this T3 clearing issue; however I am concerned with the customer agreement where we need to pledge assets which contravenes the SIS act. That saying, the default cash account customer agreement also states that you need to pledge your assets. Note - the intention of switching is not to trade on margin!

 

[merlinnn]

Share the frustration here also...... I am considering switching from a cash account to a margin account for SMSF to get around this T3 clearing issue; however I am concerned with the customer agreement where we need to pledge assets which contravenes the SIS act. That saying, the default cash account customer agreement also states that you need to pledge your assets. Note - the intention of switching is not to trade on margin!

Also noticed I can't short with the cash account. This is becoming a nightmare as I am currently following Radge and missing lots of shorts at the moment. I'm just changing SMSF providers at the moment and will use CMC for Aussie shares to spread some of the risk in case all goes pear shaped in the US.

Once I am up and running with my new SMSF provider I will clarify all the trading options and post here RX2

 

[graexx]

Hello
Apologies if this question has already been answered (I couldn't find a specific answer from my search):

What is the online trading commission (brokerage) for online trades from brokers who offer the IB to Australian clients, for:

1. US index options - assume 2 or more legs per order
2. Aus stocks

I know it is somewhat negotiable and depends on which broker you go through (Halifax, and others).

I currently pay $2 for the US options and the greater of $12 or .12% for the Aus stocks.

(I have found US brokers will not allow me as a client as I am a not a US resident).

Thanks so much.

 

[waterbottle]

Does anyone know how to download intraday FX data from TWS into Excel?

I figured out how to export end of day data, but there doesn't seem to be a way to do intraday 1-minute data.

 

[baxter]

Did anyone have trouble logging into TWS a couple of mornings ago (8 Jan 14)? I tried through a couple of computers, then through the mobile app and was unable to login to the platform. I then tried calling IB to cancel an order I'd put in just a few minutes before, but was on hold for 10 minutes (after calling the Syd number) while I watched the market open with no way of cancelling my order. ANyone else strike similar problems? I was able to log in earlier but about 9:45am EST the platform logged out, and until 10:06 or so, I was unable to log back in. I've put a complaint in to IB, but would like to know if anyone else was affected?