who here buys shares with their trust?

[Player]

It would probably appear "cleaner" and more delineated in the ATO's eyes to have two different entities for two different strategies; rather than just two different broking accounts doing two different strategies in the same entity/trust.

For example what I do in my SMSF is "investing" .....great because CG are taxed at only 10 % anyway. In my family trust I "trade" shares, options, and hold some cash term deposits.

 

[rodimus]

hmm, does this mean if i hold property with Trust 1, then trading in shares in the same Trust 1 will make my property seem like trading too?

It's odd why the ATP doesnt allow a Trust to have 2 different brokerage accounts for 2 different strategies. Some shares are suitable for buy and hold, while others are suitable for short term trade.

 

[Player]

hmm, does this mean if i hold property with Trust 1, then trading in shares in the same Trust 1 will make my property seem like trading too?

It's odd why the ATP doesnt allow a Trust to have 2 different brokerage accounts for 2 different strategies. Some shares are suitable for buy and hold, while others are suitable for short term trade.

Answer to first point is, No. If you are deemed a trader for shares and have a property the rent will be income and when/if you sell that property that's a cap gain to be distributed to a beneficiary. Many people have exactly that scenario, and use share trading income as cash flow to offset negative gearing losses in their trust so they are not trapped and accrue The two are not related instruments (eg: shares are oranges and property are apples).

Second point, I'm not sure that the ATO actually disallows the two strategies in the one entity, my point is that it would be clearer and more transparent to have one entity to trade the oranges and one different entity to invest in oranges, regardless of whether or not it also holds apples.

Sorry for the fruit metaphors

 

[Patosan]

Second point, I'm not sure that the ATO actually disallows the two strategies in the one entity

I find it interesting that with the number of savy people here using trusts, and the number of professionals that have and do frequent the forum, this question has never been resolved. The safe option of having seperate entities for trading and holding would seem the best advice, though it involves extra costs and work.

Come on you guys out there that have real experience in this field ... open up !
Give everyone a definitive answer.

 

[PrimeCommercial]

Come on you guys out there that have real experience in this field ... open up !Give everyone a definitive answer.

I've had a quick look thru the ATO website and cant find anything on there to answer your question.
At the end of the day you can do anything you want, but if you get audited you better have a strong legal point to back your position up.

Tax Law is quite fluid and unless their is Law or a test case to back up your reasoning you may find yourself in the unenviable position of being a test case.

In this situation however, I doubt that it hasnt come up before so if you dig hard enough you'll find your answer.

 

[rodimus]

where are the accountants?

 

[The Y-man]

All of our share trading would come under the general heading of "carrying out share trading" by the ATO. We wear the CGT (although going by the losses I have racked up in the past 12 months, we probably won't have to worry about cgt for the next decade or two! )

Cheers,

The Y-man

 

[Player]

All of our share trading would come under the general heading of "carrying out share trading" by the ATO. We wear the CGT (although going by the losses I have racked up in the past 12 months, we probably won't have to worry about cgt for the next decade or two! )

Cheers,

The Y-man

Don't feel you're alone there Y-man. July/Aug last year and Dec/Jan saw me donating (transferring wealth) to the market also

But are you sure it will take you a decade or two to buffer your losses out

 

[Mry]

Hi Mry,

Just out of curiousity do you take the more purist asset protection view that share/funds should not be held in a Disc Trust that also holds IPs?

Thanks - Gordon

I didn't see this question earlier. DTs are so cheap and my accounting fees for myself are zero, so I take this approach personally. For clients, I point out to them the costs, benefits and risks and let them make their own decision.

 

[Aaron Sice]

i use a DT as well.

 

[austini]

I didn't see this question earlier. DTs are so cheap and my accounting fees for myself are zero, so I take this approach personally. For clients, I point out to them the costs, benefits and risks and let them make their own decision.

Hi Mry,

Thanks very much for your reply. I thought that would be the case.

I was originally going to put future share holdings into a separate DT but given that I'm now 48 and able to access Super at 55 the bulk of future share purchases will be in the SMSF which is very light on assets compared to our holdings outside of Super. So share holdings outside the SMSF (most likely < $500K) may not be enough to warrant a separate trust. Hence it probably makes more sense to put them in one of the existing DTs which already holds a couple of IPs. Plus one the IPs in this trust will be sold off in a few years time leaving only one remaining IP potentially putting the shares at risk and I have no intention of purchasing any more IPs in that trust.

Cheers - Gordon

 

[rodimus]

I didn't see this question earlier. DTs are so cheap and my accounting fees for myself are zero, so I take this approach personally. For clients, I point out to them the costs, benefits and risks and let them make their own decision.

Mry,

Any problem with using a Hybrid trust?
Any issues to consider?

I have an existing HDT and would like to use that instead of starting a new DT.

 

[Mry]

Any problem with using a Hybrid trust?

I think by now the problems have been pointed out well and truly to death.

 

[rodimus]

when i read those threads about hybrid, there seems to be more confusion and question than there are answers.............

The thing is, if i use a HDT only as a DT (eg not for negative gearing against personal income), will it still be ok?

 

[Mry]

when i read those threads about hybrid, there seems to be more confusion and question than there are answers.............

The thing is, if i use a HDT only as a DT (eg not for negative gearing against personal income), will it still be ok?

You mostly have accountant's opinions when it comes to HDTs, merely because there is little in the way of confirmation from the ATO and from court cases. If you start asking HDT questions, the thread goes out to 4 pages of back and forth. You also have a number of deeds out there, promoters making claims, re-writes of unit application terms, different intentions for different taxpayers, etc, which makes it nigh unto impossible to make any sort of blanket claim that HDTs either work or do not work.

I was given a HDT from a certain law firm that was a full on tax dodge that would never pass ATO inspection. Others are difficult to nail down on because they are purposefully vague. What I have found though is the taxpayer's intentions on incurring the interest are key, which makes statements like "x's HDT deeds are ok" very misleading.

Using a HDT with no units on issue (so discretionary powers are in full operation) is the same as using a DT - there are no problems. When it issues units that a taxpayer wants to claim a negative gearing loss on, well, that's when life gets interesting.

 

[rodimus]

Mry,

ok i get what u mean now. I do have a HDT with units issued to me from past property transaction..... Now that the property is sold, should i sell? give? those units back to the trust to save myself from any potential headache?

Sorry Im not familiar with how the units are given or sold back. It;s my first HDT. Will there be any money exchanging hands between me and my trust?

I just bought a property and put it into my trust in December, but that hasnt been recorded in the trust yet (no units issued for it yet). So in this July, I just tell my accountant not to issue new units to me.

Now I am deciding to do share trading with my HDT, and want to make it work like a DT.

 

[yadreamin]

Seen this is a share thread l thought l would ask this question here, hope that is ok.
Wher can l find out the MARKETABLE PARCEL of a share with each company.
For example is the minimum buy in BHP shares, 5000 or 1000?
where is this info?
l had a bit of a search around the Comsec site today but didnt find the answer.
Thanks
cheers
yadreamin

 

[keithj]

Wher can l find out the MARKETABLE PARCEL of a share with each company.
For example is the minimum buy in BHP shares, 5000 or 1000?
where is this info?

A 'marketable parcel' is $500 worth.

 

[GreatPig]

The minimum value of a stock that you can attempt to buy is $500, but once you have that, you can buy as little as a single share.

GP

 

[yadreamin]

Thankyou very much Gentlemen for your reply,s. Much apreciated.