Taxation Question/Tax Advice Thread

[shortlist]

Gday all

Hoping someone can help me - and any other newbies - with regards to a couple of taxation questions. Are people listing themselves as traders or investors - is it purely subjective or are there formal definitions to help with this decision? What are the tax implications of this decision? Also, are there ways to minimise taxes via setting up trusts, etc., or is it just straight-forward income tax rates?

Thanking in advance, as ever,

SL

 

[Prospector]

It depends on a number of factors - you would be best off speaking with your accountant as the Tax Office has strict criteria to follow.

This link might help you:

http://www.ato.gov.au/print.asp?doc=/Content/21749.htm

 

[Taltan]

Investors get the benefit of the 50% CGT discount whilst traders generally get to claim more deductions. As for are there ways to minimise tax? Well yes there are but if the system was simple enough to explain succinctly there wouldn't be an accountant on every second street corner

 

[shortlist]

Investors get the benefit of the 50% CGT discount whilst traders generally get to claim more deductions. As for are there ways to minimise tax? Well yes there are but if the system was simple enough to explain succinctly there wouldn't be an accountant on every second street corner

Thanks to both for your replies. I'll check out that link. I think I read somewhere about establishing a family trust to reduce overall taxation but I think that might be for much later if I am successful, a prospect which is far from certain as of right now!

I read somewhere that changing taxation status in the future can be difficult so better to get it right straight from the beginning - is this really the case? I ask because I am happy to pay regular tax as a regular bloke trading shares, but if I got any good at it I might in the future want to look into minimising the taxable amount??

Anyway, thanks again goes out to those who know more than I do...

 

[Krusty the Klown]

Thanks to both for your replies. I'll check out that link. I think I read somewhere about establishing a family trust to reduce overall taxation but I think that might be for much later if I am successful, a prospect which is far from certain as of right now!

I read somewhere that changing taxation status in the future can be difficult so better to get it right straight from the beginning - is this really the case? I ask because I am happy to pay regular tax as a regular bloke trading shares, but if I got any good at it I might in the future want to look into minimising the taxable amount??

Anyway, thanks again goes out to those who know more than I do...

Using a trust, you can minimise some taxes, but usually only if you include your kids and, via a discretionary trust, send some of the income their way.

On the whole, the tax burden passes through the trust to the beneficiary, so you will still end up with a similar tax bill, but you will incur annual auditing fees required by law, so the benefits would most probably not outweigh the costs.

Your second question is also accurate, if you change tax status down the track, a capital gain event is triggered when you transfer the assets, so better to structure things up front.

If you are a salary/wage earning tax payer, a trust probably wont be of any benefit. The main reason you would use one is to separate private assets from business assets for protection against litigants.

 

[roofa]

Investors get the benefit of the 50% CGT discount

After holding for 12 months.
Self managed super fund as a second trading account might be worth a look.
Always best to see your accountant.