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tax claims - shares & MF

Discussion in 'Accounting & Tax' started by S0805, 16th Oct, 2015.

  1. S0805

    S0805 Well-Known Member

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    This year we've commenced investing in shares for long term (with DRP in all holdings) and exploring the other options like Managed funds & insurance bonds. We are using the personal savings for these investments. Just wondering what things we can claim in tax for these investments.
     
  2. chylld

    chylld Well-Known Member

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    If you used your personal savings to pay down a loan and then redrew the same amount as an investment loan, then the interest on income-related borrowings from that loan would have been tax deductible.

    edit: clarified tense and purpose
     
    Last edited: 16th Oct, 2015
  3. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Likely very little if anything. They are passive investments and as you didn't borrow money to acquire the managed funds there may be no outgoings incurred in earning assessable income.

    The costs for research etc relating to the decision to invest would have been incurred too soon (a bit like paying a financial adviser for advice to make an initial investment is non-deductible)
     
  4. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    But didn't = no deduction. You cant refinance something that wasn't borrowed. To do this you would have to unwind the portfolio back to credit the loan and drawn new funds (on separate account !!) and take losses on managed funds then refinance it all and buy again. (Part IVA = wash sale ?) Those losses in 2016 would be CGT losses and wont offset managed fund income.
     
  5. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    What expenses do you incur that relate to these shares?
     
  6. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    It would only be deductible if you used those funds to invest.
     
  7. chylld

    chylld Well-Known Member

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    I meant to use past tense, friday brainfart had to come at some point...

    Also fixed, thanks
     
  8. S0805

    S0805 Well-Known Member

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    Unfortunately, shares holding in lower income earning spouse name and loans are in higher. I am still trying to get my head around it but, Insurance bonds could be right candidate to recycle debt as you suggested in high income name as they seem to have no tax issues as long as you hold for 10 yrs...

    Also, have not bought MF yet but in process of it. How about brokerage costs for buying shares....
     
  9. S0805

    S0805 Well-Known Member

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    No non-deductible loan. All investment loans are IO. Access money is in my offset against the IP loan. So can put money in redraw and draw it down for investment in Insurance bonds or something. But i guess it creates the problem with Nexus as my bank won't allow transfer from redraw so I've to park it in separate new savings account to use it as investment...
     
  10. chylld

    chylld Well-Known Member

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    So you've taken the borrowings from the investment loan and put it in your savings account?

    https://propertychat.com.au/communi...ing-borrowed-money-in-an-offset-account.1313/
     
  11. S0805

    S0805 Well-Known Member

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    No that is not the case. Money sitting in offset are personal savings offsetting IP loan. As debt recycle strategy I am thinking use offset money to pay off IP loan. This paid off money will sit in redraw as loan in IO. Then redraw the same money and use that to invest in Insurance bonds/MF....As redrawn money is used for investment purposes it should be tax deductible.....Only question is how these redrawn money should travel till its reach to Insurance bonds/MF investment so nexus is maintained....
     
  12. chylld

    chylld Well-Known Member

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    If the purpose of debt decycling is to convert non-deductible debt into deductible debt, I don't understand why you'd want to pay down your IP loan (reduce deductible debt) only to redraw for investment purposes (return deductible debt back to its current level).

    It may also make your tax situation quite complex if the IP and shares/MF/etc are not owned in the same ownership ratios (between you and your spouse) as the interest would need to be apportioned.

    As for how the redrawn money should travel: if your bank won't allow transfer from redraws then maybe a LOC split would work better?
     
  13. S0805

    S0805 Well-Known Member

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    You are correct. I've confused myself here....As part of recycling I was thinking of converting my cash savings in deductible money by putting in deductible loan. In fact I need to Non deductible loan for debt recycling....:oops:

    On the other note, brokerage costs for investing in shares can those be claimed in tax??
     
  14. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Capital expense, used to reduce CGT.
     
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  15. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Brokerage is part of the cost. So if you buy 500 CBA shares at $71 and cost is $35,500 and brokerage is $63 the cost per share is $71.126.

    Brokerage is never separately accounted for. Even on revenue account the bro is part of cost or final sale value.
     
  16. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Interest is generally deductible for insurance bonds too.
    1. No expectation of income;
    2. Exempt income after 10 years means no deduction anyway
     
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