Hi all!
I'm interested in setting up a company to separate my capital and revenue accounts for my shares. I have had a read through this thread
http://www.sharetrader.co.nz/showthread.php?t=6220 and IRD's/Companies Offices website, although some of the information is quite confusing.
Currently I have a capital account with ASB securities which I will keep for my "longer term holdings". In around 6 months time I am looking to start day trading to supplement my current PT income as I believe I can earn more money putting my time into equities than I do standing around working retail for 9 hours.
I will be going to see my parents company accountant next week to discuss this process further and to work out what he believes will be in my best interest, however I would like some initial clarification and understanding before I meet with him (looks at shasta/any other accountants out there ;))
Obviously I want to limit my tax exposure as much as possible so a company structure would be the best solution seeing as these trading shares would be held on "revenue"
Tax should be the very LAST reason to set up a company!
If your income is likely to be under $70k (2009 Tax year), then you shouldn't worry about a company setup, you wont save anything!
The 1 April 2009 tax cuts will reduce the marginal rate down a bit further too.
Under the old system....
$60k income for an individual paid $14,670 tax
$60k income for a company paid $18,000 tax (@ 30% on EVERY $)
Theres a benefit of $3,330 to NOT be a company.
My main questions are:
1. Am I better to setup a LAQC or a non LAQC (qualifying company? or normal company?)?
See above
From my understanding, by setting up a LAQC I am able to offset any losses I make against any current profit I have made? instead of having to wait for future profit to offset the loses against?
Yes, but as a "trader" you don't need a company to claim expenses against income.
2. So once I have setup a LAQC/Company I will be paying 30% on any profit I make in comparison to 5% FIF tax that I pay on any companies that aren't included in the ASX300/Australian Exempt List (currently half my companies are included in the exempt list and the other half aren't)
The exempt go wider than you think, the entire ALL Ord's are exempt, so long as the company is NOT overseas registered.
3. What would be the best way to pay myself as director/sole shareholder an income out of my company? weekly wages that would attract PAYE? monthly dividends? salary?
If you are looking for income from your investments why not invest in dividend paying companies?
I'm happy to help you should you wish to go thru with the company setup, but you would be best to rethink this strategy for now...
4. By having a company I am able offset any income by expenses such as computers/software/trade fee's effectively causing me to have a smaller tax liability?
You can claim these as an individual if you trade, incl brokerage!
So for example I spend $5,000 on assets to setup my trading system during the year, and I make $15 profit from shares, my tax liability would be 30% of $10,000?
Thats pretty simple & there are ways around that, again i believe you shoudl re-think the strategy, until such time that your personal income is well over the top tax rate threshold.
Any advice on the above would be greatly appreciated as would other users current company setups/ways the work around having differing share accounts.