Taxation and Trusts

[suzanne]

Hi All,

Just a few questions about shares, tax and trusts. Firstly does anyone invest or trade using a family or hybrid trust. I have just started looking at such structures for our property portfolio and wondered if anyone who uses them with shares, could give some feed back on their usefulness and tax savings.

Another question is in regards to taxation and shares. It is my understanding that if you use borrowed funds you cannot claim a deduction for interest costs and other expenses, if you are an investor and not classified as a "trader". But how does one prove they are a trader? Is there some criteria you need to qualify for - eg you need to trade 'X' amount of times in a year??

Also is negative gearing only applicable if you are a trader not an investor?

If this subject has been mentioned elsewhere on the forum please don't worry as I can find it.

Looking forward to your responses,

Cheers

suzanne

 

[Fleeta]

I certainly hope you are wrong on the interest deduction statement. I have always claimed interest deductions from my margin loan and I am sure that is allowed regardless of your status. If you are classified as a trader, you do not pay CGT but are taxed on both realised and unrealised gains at your marginal tax rate.

 

[rozella]

Hi All,

Just a few questions about shares, tax and trusts. Firstly does anyone invest or trade using a family or hybrid trust. I have just started looking at such structures for our property portfolio and wondered if anyone who uses them with shares, could give some feed back on their usefulness and tax savings.

Another question is in regards to taxation and shares. It is my understanding that if you use borrowed funds you cannot claim a deduction for interest costs and other expenses, if you are an investor and not classified as a "trader". But how does one prove they are a trader? Is there some criteria you need to qualify for - eg you need to trade 'X' amount of times in a year??

Also is negative gearing only applicable if you are a trader not an investor?

If this subject has been mentioned elsewhere on the forum please don't worry as I can find it.

Looking forward to your responses,

Cheers

suzanne

sharetrader vs shareholder

rozella

 

[suzanne]

Dear Fleeta and rozella,

thanks for your replies. I am still taking in the info.

cheers

suzanne

 

[GreatPig]

Suzanne,

Also see ID2001/745 and ID2001/746.

However, I don't believe there's any difference between a trader and an investor in respect of being able to claim interest deductions. The main differences relate to the nature of the returns (income or CG) and thus whether losses can be offset against other income.

I've started using an HDT for share investing. As far as I can see, the advantages and disadvantages are the same as for real estate. One potential issue with a trust though that is perhaps more relevant to shares than real estate relates to the ability to deduct losses, and the ability to use franking credits of more than $5,000, without making a family trust election - which then has its own issues. This is something I've been trying to find out more about, but it doesn't look like it should be a problem if you don't make a loss and don't have heaps of franking credits to distribute.

Cheers,
GP

 

[RamonR]

Wondering if anybody has more information then has previously been supplied.
I am starting to look at setting up a trust for my trading and also holding my share portfolio.

Have 16th month old so eventually the trust will start paying for her once she reaches 18 but I know that cannot divert any income to her without paying punitive tax rates.

Main possible benefits seem to arrive from having a company as beneficiary, but this is hardly talked about in the book I have thus far read.
Other possible benefit would be if death taxes ever came back.

 

[RamonR]

I see that there is plenty of info already if one searches under Trust instead of trusts