Form a company?

[pickle_master]

Hi all,

I am still relatively new at investing and have a hoping some of you might be able to help.

I have pretty much just bought shares and sat on them and only started to sell them last year (my first shares were from the AIA listing many years back).

I have heard that if you have bought shares with the purpose of income (dividends) then you don't need to pay any capital gains tax. However, I am now thinking that I may want to buy and sell shares more often so could I be subject to this?

Should I setup a company - Is that the best structure?

Sorry, nearly forgot - I live in NZ

Thanks very much
PM

[duncan macgregor]

You can run two seperate accounts in your own name, one investing and one trading. Write it all out prior to the event what you intend doing. To make it easier to follow run it from different bank accounts, and brokerages. The IRD only want honesty, dont mix it up keep both accounts completely seperate. It is easier to form a company to trade, but no requirement to do so. macdunk

[shane_m]

mate but can you have two HIN's?

[pickle_master]

Thanks Macdunk.

So what tax will i have to pay on profits?

thanks
PM

[russki]

Could you also set up an LAQC to own the shares and then claim any interest on borrowings against your income? Same way as property investors do? Only really helps if you're borrowing
to invest

[pickle_master]

Hi Russki

I wasn't really looking at borrowing (though I will probably start looking into CFDs at some stage).

Is anyone able to let me know what tax I need to pay if I was trading?

Thanks
PM

[CJ]

quote:Originally posted by pickle_master

Is anyone able to let me know what tax I need to pay if I was trading?

You pay tax on the gain (disposal price - purchase price) at your marginal tax rate. This is simplistic so any dividends/costs etc will need to be taken into account. If in a company, tax rate will be 33% and it will be more difficult to get access to the money when you need it (not imposible but there will be paperwork involves as opposed to just transfering funds from your trading account to your chq account.

Ruski - No reason to set up a LAQC just to borrow. Why not borrow in your own name? Property owners use LAQC for different reasons if this is what you are thinking.

[rev]

Hello. If I were to form a company for the sole purpose of doing more trading than investing, could I use the Share Transfer policy to gift or move the shares I have at present into a company title from an individual without attracting unwanted attention from 'the man'.

I've only recently started investing, took plenty of advice from this site and then applied a bit of my own research, again stuff I'd learn't from here, crossed my thumbs and waited and watched a modest investment grow, now I'm at the point that I'd like to continue with this exciting new hobby and try to ease back on the hours from a real job.

Hope I haven't deviated from the original thread too much. Any advice appreciated.

Cheers.

[CJ]

YOu can use the share transfer form so you dont attact brokerage costs.

If you gift it, gift duty will be payable. If you sell at market value, no issues but you will need to pass consideration at some point in time.

Why are you worried about attracting attention. If you are going to be trading in a company, I assume you will be paying tax anyway?

I still dont know why you are setting up a company. Why not just have two brokerage accounts and bank accounts. As long as you keep them sepatate (as you would still have to do with a company) there will be no issues.

If you were transfering to a trust (or company owned by trust) taht would be different.

What is the benefit of establishing a company other than bragging rights - "I own my own investment company"

[rev]

Cheers CJ.
Wasn't aware that it's possible to have two seperate accounts in the way you mention. I fully expect and intend to pay my share of tax, but for some reason I thought I'd be taxed on the highest rate for all income. I can see better profit from more short to medium term trades and paying tax, than I'd see with a few longer term tax free investments. It's clear I need to do more research. Of to the library today.
Also, at what point do profits from ASX listed shares get taxed, when I sell them, or is it up to me to put it in the tax return?
Thanks.