Structuring for CGT Minimisation

Discussion in 'Stocks & Derivatives' started by FullMetalFever, May 5, 2016.

  1. FullMetalFever

    FullMetalFever Member

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    This is probably a stupid question and I'm pretty sure the answer is NO, but wanted to throw it out to the think tank .....

    Is there a way to structure your investment affairs so that CGT is not payable/calculated every time you change positions in your share portfolio?

    As an example of my thoughts - when you invest in a managed fund, your CGT is calculated based on the profit/loss made between your entry and exit of the fund. That fund however, may have changed positions in its share holdings multiple times, making a profit on some trades and losses on others. The goings on within the fund are transparent to you the end investor.

    So I guess what I'm asking is whether it is possible to set up a company and/or trust to act as a "managed fund" that you as a "retail" investor can put your money into and only pay CGT when you withdraw from the fund?

    If possible, does anyone know how such a fund would be treated for taxation purposes? I would imagine that managed funds do not have to calculate CGT on every transaction, but rather operate as a company that pays taxes on profits and/or potentially the change in book value?

    Appreciate any and all responses. Thanks!
     
  2. Ipv6Ready

    Ipv6Ready Well-Known Member Silver Stacker

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    Look up the difference between a Share trader and share investor.

    HOWEVER tax office has a particular way of accessing if you are a trader. Talk to your financial advisor.
     
  3. trew

    trew Active Member Silver Stacker

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    Well yes, but that's how it works for individuals too.

    If you made a capital gain of $10k and a capital loss of $9k in the same year, you only pay CGT on $1k
    All your transactions for the year are added together to calculate CGT
     
  4. wrcmad

    wrcmad Well-Known Member Silver Stacker

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    Simply change position in PM's every time you change position in shares - the CGT on share sales will be offset by capital losses in PM sales. :p
     
  5. mschif

    mschif Member

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    There are much better people than me on here to answer your question however if it helps lately I have been looking into insurance bonds...tax free after 10 years, money not tied up if you need it, switch between investment options and top ups all the way to the 10 year mark
    hope it helps
     
  6. SpacePete

    SpacePete Well-Known Member Silver Stacker

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    What is the risk that future changes in taxation policy will negate the benefits of present-day CGT minimization strategies and structures? Are there any strategies that insulate you from the whims of government?
     
  7. FullMetalFever

    FullMetalFever Member

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    I understand that, however if you've made a realised capital gain of $10k, and have paper losses of $9k (have not exited position), then you pay CGT on $10k.
     
  8. FullMetalFever

    FullMetalFever Member

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    Certainly a risk, not just in relation to CGT but many other things - e.g. negative gearing, SMSF, estate structuring, etc.

    We do however, have to deal with the playing field as its currently presented to us, otherwise we will be forever frozen by inaction .....
     
  9. FullMetalFever

    FullMetalFever Member

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    I've considered it, but am far too fond of my stack ..... although still unsure why?!? (been a while but at least it looks to be moving in the right direction again)
     
  10. Elemental

    Elemental Active Member Silver Stacker

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    When you get an annual tax statement from a managed fund (that is, a summary of your yearly income distributions from the fund) it is actually broken down into its components so when you report the income from your managed fund holdings on your tax return you actually do have capital gains (usually a combo of dividend income, capital gains, foreign income, interest and trust distributions).

    The closest solution to what you want to achieve (I think) is to be a share trader - as someone else mentioned. All shares are treated as trading stock and valued at lower of cost or net realisable value at the end of the year. Stock revaluations across the whole portfolio affect trading income and profit for the year. The downside is no capital gains tax discount as its all on revenue account. The upside is that as long as you satisfy the non commercial business loss provisions then losses offset salary and wage income.

    See you own advisor, this isn't financial advice and general in nature and so on.
     

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