How do you buy shares?

[kaz101]

Hi everyone,

When I say how do you buy shares I mean do you buy them as an individual or through a business?
Do you use a self managed super to buy shares?

We have recently started buying shares (covered calls) and were wondering what the most efficient structure would be.

Thanks for any help,
Karen

 

[The Y-man]

It would depend immensely on your tax position and trading style.

For options trading (eg covered calls) I would investigate a trust to trade in, so that income can be distributed in the most tax effective manner.

Cheers,

The Y-man

 

[GreatPig]

I think the best structure depends on your circumstances, including your other investments, your overall income levels, the value of the shares you're buying, and your risk of personal law suits.

For a low-to-average income earner with low risk of law suit and not a huge value of shares, individual name may be the best choice. For large incomes and/or share values or higher risk levels, perhaps a family trust. If you already have an SMSF and are happy to add shares to it and comply with the rules in relation to shares (whatever they may be), then that would also be a possibility.

Personally I buy shares through a family trust for investment and in a company as a trading business. However, with lowering personal tax rates and thresholds, a company is becoming less attractive.

GP

 

[kaz101]

Thanks for your replies.

I am going to be discussing this with our accountant but wanted to see what others were doing.

Regards,
Karen

 

[The Y-man]

However, with lowering personal tax rates and thresholds, a company is becoming less attractive.

GP

And if you still wanted corp tax rates, you can always have the DFT distribute to a corpoarte beneficiary?

Cheers,

The Y-man

 

[GreatPig]

And if you still wanted corp tax rates, you can always have the DFT distribute to a corpoarte beneficiary?

You can, but that adds another entity with its associated costs, and really just delays the extra tax. By the time you take a dividend, it's back at your personal rate.

It does allow you to play around with timing though, and pay 30% while you're on a high income and then start taking dividends when you're back on a low income. And the company could be owned by a family trust for flexibility of distributions, but that introduces issues as well. There's also the risk of the company tax rate being lowered, potentially trapping excess franking credits in the company.

Note: I should have said before lowering personal tax rates and increasing thresholds.

GP