LIC & LIT Beginner's Guide to Investing in Listed Investment Companies

Discussion in 'Shares & Funds' started by Nodrog, 21st Jan, 2017.

Join Australia's most dynamic and respected property investment community
  1. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker Business Plus Member

    Joined:
    9th Jun, 2006
    Posts:
    27,148
    Location:
    Australia wide
    you would then have to consider s 302B of the Bankruptcy Act.
     
    therealAusting likes this.
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker Business Plus Member

    Joined:
    9th Jun, 2006
    Posts:
    27,148
    Location:
    Australia wide
    Yes it would be corpus. The trust deed will determine who could be a beneficiary of the captial of the trust. Generally capital is not taxable.
     
    willy1111 likes this.
  3. therealAusting

    therealAusting Well-Known Member

    Joined:
    21st Jun, 2017
    Posts:
    166
    Location:
    NSW
    302B has 2 elements from what I can see.
    (a) cancelling reducing or qualifying a beneficiaries interest under the Trust.
    Maybe not applicable to a loan agreement.
    (b) allowing the trustee to exercise a discretion to the detriment of a beneficiaries interest.
    The agreement is a loan agreement settled by repayment or death (or maybe a novel means that results in absolute discretion )and registered title under the PPSR. This part would apply so settlement other than by death or repayment would need to be by a novel method that a bankruptcy trustee couldn't enforce such he could by paying the RSPCA $100.
    Maybe time for a North Korean analogy to describe a novel method.
    I'll need to research this... THANKYOU...something interesting to do.
     
    Ynot likes this.
  4. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker Business Plus Member

    Joined:
    9th Jun, 2006
    Posts:
    27,148
    Location:
    Australia wide
    What I did for one client was to make the trust vest upon death of either 1 or 2 people so the assets of the trust would pass to their estate and then out of the estate into a testamentary discretionary trust. Thus any money gifted would come back.

    You just have to be careful not to be bankrupt on death.
     
    Ynot and therealAusting like this.
  5. therealAusting

    therealAusting Well-Known Member

    Joined:
    21st Jun, 2017
    Posts:
    166
    Location:
    NSW
    What I wanted though was to have the Trust inactive so that it is easier to manage (nil returns for tax) but use it for asset protection. The assets would be in own name and passed on 'in specie' for the shares to a TT.
    I was after the flexibility though to forgive the Loan and fold the Trust at any time. The Bankruptcy Act looks like being an obstacle But maybe not an insurmountable one.
    I will have to look into this.
     
  6. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker Business Plus Member

    Joined:
    9th Jun, 2006
    Posts:
    27,148
    Location:
    Australia wide
    The trustee of the trust could vest the trust at anytime (if deed allows) so if you control the trustee you can control this. But the control is lost once you are dead or legally incapacitated. The control could also rest with someone else, or even a company of which say 3 people control.
     
    therealAusting likes this.
  7. therealAusting

    therealAusting Well-Known Member

    Joined:
    21st Jun, 2017
    Posts:
    166
    Location:
    NSW
    Would vesting have the effect of forgiving the loan from the Trustee(a family member at first) to me without repayment?
     
  8. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker Business Plus Member

    Joined:
    9th Jun, 2006
    Posts:
    27,148
    Location:
    Australia wide
    Capital of the trust would pass to the relevant beneficiary. The debt would still be owned to the trust, but debts can be assigned and then forgiven by the assignee. Perhaps the trust won't even need to vest.
     
    Ynot likes this.
  9. danken

    danken New Member

    Joined:
    3rd Feb, 2018
    Posts:
    3
    Location:
    NSW
    HI all

    I have some very beginner questions and was wondering if someone could help. I haven't purchased any LICs yet. I'm still reading through the many LIC threads on the forum.

    1) for property investing, people say timing is everything (don't buy at peak of market etc). Not taking into account the discount/ premiums of LIC, how important is timing for the purchase of LIC for long term hold?

    The reason I ask is because I'm thinking of investing in some Argo share. The price is currently $7.8 but at the gfc and 2011, the share price did drop to $5. It's been more than 5 years since the share price dropped below $6. I'm in no rush to invest so is it worth waiting for a downturn in the hope that the price will one day drop to $5 or $6? On the forums people seem to say invest into LIC whenever you can due to the power of compounding. But at a higher price, the return on investment will be lower?

    2) I'm new to studying share price. Just looking at Argo, is there a website to go to where I can study why a particular share increased or decreased over a certain period? I know the past can't predict the future, but I'd still like to learn why things in the past happened.

    3) Suppose I buy shares in one company over a number of years. I keep records of all the different purchase prices. One day I decide to sell a couple of them. Which shares get sold off first to work out CGT and profit? The oldest ones or newest one?

    Thanks for your help and patience!

    Danken
     
  10. Hodor

    Hodor Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    2,135
    Location:
    Homeless
    Timing will have a large impact on returns, It's almost impossible to time a low or high however, holding out and missing the dividends along the way puts you a long way behind and GFCs historically haven't come around very often. As it isn't something you can't do much about most here promote buying regularly. If you have a couple of target LICs you can buy the one that appears like the best value at the time.
    Although you can't predict the future I believe you can understand the now to some extent. If the market drops 20% it might be worth loading up if you can.

    LICs are very different to individual companies. The likes of ARG move with the broad market and the sentiment of LICs at the time. Investing in LICs takes the worry out of studying individual companies. If you want to value and understand companies you'll need a number of books and websites. I'm not sure the best place to start.
     
    Snowball and KayTea like this.