Margin Lending with regards to taxation

[Blendy]

i've been looking into margin lending from ASB and this thread has been helpful.

So the way I see it, I can borrow a certain amount based on shares already in my portfolio, and can buy more shares with this borrowed money.
Then I'm charged interest monthly (can't find the interest rate online, but I assume it's not outrageous) on what I've borrowed.
I'm also charged $250 per year for the service.

So all I have to do then is to make the borrowed money work for me to cover the interest and the fee, and I keep whatever extra profit I'll hopefully make?

Is there anything else I need to know?

[BIRMANBOY]

Ok so 3 months later and I'm in interested in how its going and if you have discovered any pitfalls. thanks.

Agreed with what you have to say CJ. I do know that using borrowed money I have to be smart and do my research well. I do have a decent enough job that can cover my interest expenses regularly.

[CJ]

Then I'm charged interest monthly (can't find the interest rate online, but I assume it's not outrageous) on what I've borrowed.
I'm also charged $250 per year for the service.

Interest rate is about 0.25% above home floating I think - you need to call to get it. The $250 gets waived if you borrow enough (ie. interest over $400 I think)

[lou]

Current interest rate is 6.2%. So thats .45% above the floating rate.

[CJ]

Current interest rate is 6.2%. So thats .45% above the floating rate.

Just checked and you are correct (it must be on average .5% above).

Given you can get discounts for a home loan (I currently have a 5.5% floating) the margin is higher still.

[Stylerz]

Would this margin lending be suitable for stocks that operate as a PIE. Such as ARG, KIP, GMT.

All good dividend earners, and you could claim the interst back against them, effectively giving you a very low interest rate. Or am i missing something?

Also is still possible to keep stocks in a DRP once you are using margin lending?

[lou]

Would this margin lending be suitable for stocks that operate as a PIE. Such as ARG, KIP, GMT.

All good dividend earners, and you could claim the interst back against them, effectively giving you a very low interest rate. Or am i missing something?

Also is still possible to keep stocks in a DRP once you are using margin lending?

No your not missing anything.
Don't know about the DRP.
The margin rate is floating so will likely increase in the future.

[docta]

I use ASB margin lending and invest in the listed property sector. No issues with claiming interest.

New shares/units issued under the DRPs are added to my nominee holding each quarter.

[Stylerz]

Thanks for your replies, have been thinking about this for awhile.

I like the idea of keeping at least a percentage of the shares in the DRP.

[Stylerz]

Going to have a go at this, in the upcoming year.

I have currently 70K worth of shares in the listed property sector, and looking to leverage it to 100K
A salary of 60K per year, and a part time business generating 10K per year.
Fixed interst of about 2K per year
Have a basic understanding how the tax situation will work but need a little more info.
So at the end of the financial year, do i collectively take my combined income salary, business, and fixed interest, and subtract the margin lending interest off this total, and calculate how much tax i can claim back off that total.
Then with the tax refund i can buy more shares and look to possibly leverage a agin in the following year.

Or do i need to include the PIE dividends, i have received over the year in this total to. My understanding is i dont have to include PIE dividends in my tax return as they have been taxed at source.

Can someone pleas put me on the right track if i have wrong.