LIC & LIT UK Listed Investment Trusts (LICs)

I thought I would kick off a separate thread on this now that UK LICs appear to be available on NABtrade which is our online broker.

Some excellent dividend growth LICs are available in the UK such as CTY.LSE and more international focused LICs such as BNKR.LSE . These have been discussed on the forum in the past but deserve their own thread.

The following are those that Peter Thornhill told me he owned which he considered excellent dividend focused LICs:

The City of London Investment Trust plc

The Bankers Investment Trust PLC

Lowland Investment Company plc

Performance and company information

Useful search tool:
Find and compare investment companies | The AIC

Does anyone here know what the tax situation is for an Aussie owning U.K. LICs?

 

AU will have tax treaty with UK, so any non resident withholding tax will wash out come tax time. Same as holding US stocks. Net result, tax on Divs will be paid at AU tax rate (individual or company holder) with no franking.

Not advice!

 

But I vaguely remember there being some tax issue specific to U.K. Listed investment Trusts?

 

Rings a bell. What was that about? From memory your broker at time said something about why LITs where not available on the platform?

 

Dont you pay with holding tax only if you sell?

 

What's important I think is how the UK LICs compare with something like VGS which is domiciled in Australia, well diversified and low cost?

And in my case always remembering that any investment has to be easily understood and potentially managed by my wife who has little interest in investing. So in many ways it comes back to simplicity.

But still a good topic for discussion given that other than Australia the U.K. has some excellent LICs.

 

Certainly looks the part.

CITY OF LONDON INVESTMENT TRUST Dividends | LON:CTY

Recent dividend growth outstanding.

I'm struggling to find any issues, seems like a no brainer to add to the portfolio.

 

Change to Tax of UK Company Dividends - Residents of Australia | GM Tax

 

One thing is for people to think of their own tax positions and determine if they are happy to take unfranked dividends or discounted capital gain, and invest accordingly. Being frank - if you need income it's hard to beat franking credits. You can make a case for either depending on tax position and other non tax considerations.

 

I just had a look and you can buy via CommSec but it's seriously expensive compared to NetBank...



The cost above is 2 x the cost that CommSec has for normal trading in Aust. And it is in USD as well. Is Netbank asking you to pay in USD for international trades?

 

I believe these guys are playing dividend... they could be paid twice or 4 times in a year, regardless you sell the share or not.. the profit and dividend profit are subject to withholding tax if you're local resident. In US I checked box for alien, so they don't take the withholding tax from me when the dividend are paid. The WBen form also needs to be filled. But there is no franking credit as such I believe.

 

FX exposure?

 

Following this thread with interest. I may be overseas for a potentially long time, and hence will want some exposure to foreign currency so FX doesn't smack around my dividend income too much. So the UK investment trusts are interesting for me.

Also, if I stop being an Australian resident for tax purposes, I will lose franking and be subject to less favourable tax rates (I need to work this out with a professional most likely, since the online calculators haven't been decisive on my situation).

And if the above happens I will be looking at increasing international exposure, I would say

 

Speaking of the UK

100-year-old trusts that still make top returns: Golden oldies trump their rivals with up to 70% over three years

With Christmas fast-approaching, shoppers are rushing out to buy the latest gizmos and gadgets, but when it comes to investing it could be the oldest products that are the best.

Investment trusts that are 100 years old or more are producing bumper returns for investors who have realised the value of these golden oldies.

The 144-year-old Scottish American Trust, for example, has returned 70 per cent over the past three years compared to an average return of 52 per cent from similar investments.

The 108-year-old Scottish Mortgage Trust has returned a meaty 218 per cent over the past five years, compared to an average return of 106 per cent from rivals.

 

One of Thornhill’s favourite UK LIC holdings mentioned:

 

@Nodrog are these something you hold mate?
Could anyone weigh in on the tax implications for the dividend income?

 

Dividend Hero's

The dividend heroes pick up a new recruit: Another investment trust joins group that have raised payouts for at least 20 years

 

No unfortunately. I spoke to Peter Thornhill about it but he has UK citizenship. My research quite some time ago suggested that there are negative tax implication for Australians holding UK Investment Trusts (LICs).

If someone else here knows more about this it would be great to hear your thoughts?

 

Not too worry, the good news for us Aussies are there a plenty of great products on the asx!

 

Seem like some amazing LIC's in a bigger market but from what I can gather the tax implications do not make it worthwhile.