Is AFIC's DSSP (own name) a viable alternative to a Trust

Discussion in 'Legal Issues' started by therealAusting, 20th Oct, 2017.

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  1. therealAusting

    therealAusting Well-Known Member

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    Hi

    Has anyone else here had the thought that using AFIC's (held in own name) DSSP might be a (1) less complicated and (2) viable and tax efficient method, for handling share income that might otherwise have been held in a Trust and distributed to a bucket company?

    The end goal being to access the funds upon retirement in the next 5 (if I really can't stand it) to 9 years (if things keep going as they are).

    From my limited knowledge AFIC is the only one of the big 4 (Argo AFI MLT and BKI) that allow a DSSP that gives the holder shares which have the cost base of the original shares you purchased. This, if true makes it simpler than keeping track of prices through a DRP.

    Could this be a nice and simple answer?
     
  2. SatayKing

    SatayKing Well-Known Member

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    Not sure there are any legal issues as such but I understand, and this is not a recommendation in anyway whatsoever, some who elect to participate in DSSP may do so because:

    • they want to increase their holdings rather than take cash;
    • prefer to defer tax until the shares are sold;
    • maybe on a high marginal tax bracket on dividends.
    They do, however, forgo any franking credits and LIC capital gain.
     
  3. therealAusting

    therealAusting Well-Known Member

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    Hi Satay

    Thanks for the responce.

    When I posted this I was thinking of Austing who closed his Trust (I think). He may not want to collect all the dividends if he is earning to much (is there such a thing?) taxable income if the LICs are in his own name. AFIC's DSSP would allow him to recieve shares at original price instead of dividends which he may have to pay tax on.
    As for possible CGT, I am assuming it is based also on the original price paid.
    All in all seems like a good Trust replacement strategy for diverting income. If it really does work like this it makes me wonder why more people don't operate this way.
     
    Last edited: 20th Oct, 2017
  4. SatayKing

    SatayKing Well-Known Member

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    No probs. I'm sure if there are legal issues, some kind qualified soul can hopefully give you an answer.

    Re the part I have put in bold, no in my opinion. Even if tax is paid (and I do), I get to get the vast proportion of the income. It'll do me.
     
  5. Hodor

    Hodor Well-Known Member

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    From reading your post it is not clear in my mind what you are trying to say.

    DSSP doesn't change your cost base at all. If you buy $5000 worth of shares and use DSSP for 20 years and then sell them you will pay CGT on Sale price minus $5,000. New shares are given zero cost per my understanding.

    This effect for tax purposes is the same as a company that chooses not to pay a dividend and internally compound, such as BRK. With the DSSP you get more shares rather than an increase in unit price.
     

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