Gross income for sophisticated/wholesale investor

Hi all

I'm interested in opening an Interactive Brokers margin loan with rates that are lower than owner occupier home loans. However, to be eligible I would need to be a Wholesale Client within the meaning Section 761G(7)(c) of Corporations Act. This requires a certificate from a qualified accountant confirming that I have net assets of at least $2.5m or gross income for 2 last financial years of at least $250k.

Does anyone know whether superannuation contributions made by my employer would count towards my gross income?

Also, if I had a discretionary family trust in which I was the appointor, a beneficiary and the sole director and shareholder of the corporate trustee, would all dividends and capital gains (without deducting interest expenses) of the trust (even if they were distributed to a different beneficiary) count towards my gross income? Section 708(9C) of the Corporations Act states that "In determining the gross income of a person under subparagraph (8)(c)(ii), the gross income of a company or trust controlled by the person may be included."

Grateful for your thoughts!

 

I’m not a financial advisor but my common sense approach would say that usually super won’t count towards your gross income for this letter, think along the lines of needing to verify your income with tax returns, super wouldn’t form part of that and you wouldn’t be able to use those super contributions to repay any borrowings unless you are old enough to access your super.

With the trust income question the way the corps act reads, it sounds like you could potentially include the trust income as your own (net income, not gross though) however, the ASIC website states “Decisions about how the gross income and net assets are measured for the purposes of the calculations under the certificate are matters the Corporations Act has left to your professional judgement as an accountant.” Certificates issued by a qualified accountant | ASIC - Australian Securities and Investments Commission

An accountant shouldn’t write this letter unless they can verify your income or assets, so you should ask them these questions too.

 

superannuation is a trust - do you control the super fund?

 

No I don't control the super fund so the income earned in the fund would not count towards my gross income. But I wondered whether the superannuation guarantee contributions coming out of my salary count as my gross income. For example if my salary was $250k but $25k of that was super contribution and $225k was received, would I have $250k gross income?

 

Super is not counted. It is not your income. It is a element of your remuneration. Its akin to counting the value of company provided vehicle. Its not income either. Franking credits which form part of assessable income are not counted

Income from rentals is generally not counted, despite the rent being income. In some rare instances I have seen net rent counted towards gross income where the person relies upon this income as their predominant income.

The tests are quite strict. The past two financial years. Not the past year + this present year.

The company trust tests are more complex. Generally it will come down a range of tests concerning control. The general view on owning 51% of shares for example is less a issue as the issue of decision making capable of being stopped or controlled by others. Trust income and assets cant be counted for complex issues concerning common law which would involve legal advice. Refer to ASIC link for explanation :
https://asic.gov.au/regulatory-reso...ertificates-issued-by-a-qualified-accountant/

Many accountants are not permitted by their PI insurer to issue these certificates.

 

Thanks Paul. On the net assets test, if a couple own houses as joint proprietors, do they count 100% towards the assets (net of debt) or does only 50% count?

 

50%...If they have a mortgage it will be less.

 

Wealthy clients are no longer sophisticated investors