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  1. #21
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    Quote Originally Posted by winner69 View Post
    My reasoning is that if a tax agent files your tax returns that'll keep the IRD away
    Yes I concur.

    Audits are simple things. You get a letter which sets out what years of accounts they wish to audit, then you are subjected to an interview where you are out numbered and then they do a reassesment which you pay. Mine was for seven years during which time I had suffered a fire so records were lost which complicated things. The whole thing took a year. The reassesment was aprox $1000 which I happily paid, now I use a tax accountant and keep my head down.
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  2. #22
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    Quote Originally Posted by fungus pudding View Post
    But if all gains are taxed at the CGT rate, then it will need to be set at the highest income tax rate - currently 33% - or those who currently pay income tax on gains will be getting off too light to suit a labour govt.
    I think in Australia CGT is at the top tax rate but you get some for of discount/index to allow for the inflation factor. Could be wrong.

    Anything more complicated than treating capital gains as income is probably a $1.5B computer project away - IRD system is struggling under WFF apparently.
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  3. #23
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    CJ unless the rules have changed recently in Australia if you have held the shares for more than twelve months you pay tax at your marginal tax rate on half the capital gain. If you have not held for twelve months you pay capital gains tax on the full amount of capital gain, at your marginal tax rate. Left Australia mid 2006
    Last edited by POSSUM THE CAT; 27-08-2012 at 12:45 PM. Reason: add to paste
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  4. #24
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    Thanks for the insights, Winner - really good to hear from someone who has actually been audited rather than these endless circular discussions we have about what "should be okay".

  5. #25
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    " IRD system is struggling under WFF apparently. "

    So are honest tax payers..

  6. #26
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    Thanks Winner, your post was exactly what I was hoping to get out of this tread. If possible I would like to ask a couple further questions of your experience.

    Quote Originally Posted by winner69 View Post
    Having been through an audit (was nearly 10 years ago) and lost several arguments and having inocme reassessed with the subsequent penalties here is a couple of points that I experienced -

    Mr Winner - we note that you hold some shares that have and probably never will pay a dividend - so the intent really was to make a capital gain wasn't it Mr Winner
    Mr Winner - noble intention of you protecting your capital by selling shares when they start to lose value and rebalancing your portfolio when you become overweight in one some shares ..... but Mr Winner more than60 trades (buys and sells counted separately) a year is more than we would expect from someone whose main aim is generate income (tax paid on this) from a portfolio.
    Sorry Mr Winner you can't have it both ways - if you are a 'trader' you can't be an 'investor' as well .... and yes Mr Winner you are seemed to be a trader and until you can convince us otherwise will always be one.
    1. Over how long a period did they deem you to be trading?
    2. More than 60 trades a year, was this one year or an average over multiple years?
    3. How many shares were you trading in your portfolio?
    4. When you were trading shares were you buying and sell your total position? or were you buy and selling part of positions?
    5. Has being audited affected the way you trade the markets? How would you describe your investment style pre audit and post audit?
    You make your own luck.

  7. #27
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    Quote Originally Posted by POSSUM THE CAT View Post
    CJ unless the rules have changed recently in Australia if you have held the shares for more than twelve months you pay tax at your marginal tax rate on half the capital gain. If you have not held for twelve months you pay capital gains tax on the full amount of capital gain, at your marginal tax rate. Left Australia mid 2006
    I think it's still the same in Australia. But at what stage is a capital gain considered income and taxed at the full marginal tax rate? Seems to me that the IRD and/or the tax payer will still have the same difficulty in knowing what tax rate to apply (whichg portfolio to place shares in).









    0.

  8. #28
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    As Lizard said there is a lot of talk and not much hard evidence in this thread. Some experience (older) but obviously limited to space and time in making the post. For anyone who is unsure of where they stand and who wants clarification it might be better to actually contact IRD and make an appointment to discuss your specific details. I have found previously that IRD are happy to help in clarifying tax situations. Also another alternative is working with your accountant, who should be able to steer you on the correct course as long as they are fully qualified and up to speed.

  9. #29
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    Lou

    They went back several years and deemed me a trader over that period ......and into the future. It was about 60 transactions in one year they focused on. Never have many stocks at any particular time and most transactions would have been the total position.

    Did it change the way I invest? Not really .....still hold while things are going up and sell when things start going down and collect divvies along the way but divvies are not generally the main motivation. That's the bulk of the current activity and all these go through a capital account in the family trust and a company

    In addition I give myself (company) some pocket money to speculate with and keep quite about any gains or losses.

    You need to do what you think is best or what your conscience allows you. Liz seems to have the right disciplined approach and prob covers all bases to protect herself.

    Birman ...... I wouldn't ask IRD direct for advise ....bad idea in my books. Rather get a. Professional to advise or discuss on your behalf

    I could easily file my own tax returns but use an accountant as a tax agent ....theory being it gives the return some credibility (of course) and IRD probabably won.t look too hard at it. For a few hundred bucks money well spent

    My experience was ten years ago so things may well have changed

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  10. #30
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    Quote Originally Posted by Lizard View Post
    Thanks for the insights, Winner - really good to hear from someone who has actually been audited rather than these endless circular discussions we have about what "should be okay".
    Yes,thank you Winner69.

  11. #31
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    Quote Originally Posted by winner69 View Post
    It was about 60 transactions in one year they focused on. Never have many stocks at any particular time and most transactions would have been the total position.

    Did it change the way I invest? Not really .....still hold while things are going up and sell when things start going down and collect divvies along the way but divvies are not generally the main motivation.
    While "trader" might not be the right word for you, from what you have said I think you would have a hard time arguing that you hold on capital account.
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  12. #32
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    Just need to clarify an earlier post I made regards utilizing a company format. What I did not add was that as an individual you can be excused cap gains tax by investing as opposed to trading but using a company format is treated differently. if you have a cap gains it goes into a separate a/c on the company books if its a pre-existing company formed for your "normal business". Since you are trading as a company it is actually profit and will be taxed as such at some point (each year if your co is specifically set up for share trading) My understanding is that if you wound up company and were in a "no profit" scenario then the cap gains could be offset against the loss and there would be no tax due. However if there was a profit from regular trading then the Cap gains a/c will be added in to be taxed as per normal. I guess as a company might be other benefits such as home office, computer, memberships etc. etc. but would suggest strongly talk to accountant about intricacies. Apologies for earlier post..I will edit it accordingly.
    Last edited by BIRMANBOY; 28-08-2012 at 08:50 AM. Reason: trying to clarify

  13. #33
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    I know cj ........that's the issue

    Would say unless one buys and holds through good and bad and leaves things in the bottom draw forever you probably are a 'trader' of sorts .......and that's not fair or equitable.

    I appreciate that essentially I haven't changed my approach but I don't see myself as a trader and my tax agent doesn't disagree (though acting on instructions) so I take that risk at the mo.

    If things keep going up I can go long periods without selling and only buying ......but when the line on the chart doesn't.t look too flash I sell and sometimes (like a few years ago) that can cause a flurry of activity ......compounded when one starts buying back. I call this capital protection

    My tax agent has clients who run both capital and revenue accounts but she does say that they are pretty active traders and the capital account their retirement money

    It is not black and white but I wouldn't voluntary call myself a trader unless I was buying selling every day or week or because you feel you have to ..... Prob not good advice but I think chances of getting caught if guilty are pretty slim anyway

    Noe we have debated in public IRD prob going to run a check on who sells their Mighty River shares in the first week ..... My excuse the wife bought them in my name without my permission

  14. #34
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    Quote Originally Posted by winner69 View Post
    I wouldn't voluntary call myself a trader unless I was buying selling every day or week
    I think that was my point. I dont think it is as simple as I am not a trader as the test isn't "are you a trader". If you investment strategy is to buy low and sell high, then you are investing for capital gains and therefore it isn't a capital gain, it is an income gain (screwed logic I know).

    The issue is, everyone aims to buy low and sell high, they just pretend they do it for the dividend yeild.
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  15. #35
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    Well not as clear cut as that.. I buy for dividends...really, really, promise-not pretending. However I try and buy when those dividend producers are low SP. Every now and then I end up with cap gain as well(unrealized since I very rarely sell). There are considerable numbers of investors who supplement super and savings with dividends and prefer to have steady income stream as opposed to lump sum windfalls. At some point those cap gains will be realized I suppose (if they are still there) but not for number of years would be my guess.
    Quote Originally Posted by CJ View Post
    I think that was my point. I dont think it is as simple as I am not a trader as the test isn't "are you a trader". If you investment strategy is to buy low and sell high, then you are investing for capital gains and therefore it isn't a capital gain, it is an income gain (screwed logic I know).

    The issue is, everyone aims to buy low and sell high, they just pretend they do it for the dividend yeild.

  16. #36
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    Quote Originally Posted by CJ View Post

    The issue is, everyone aims to buy low and sell high, they just pretend they do it for the dividend yeild.

    Exactly CJ, you are not going to buy high and sell low beacuse there is a 10% yield.
    I think the easierst and maybe the fairest is somethong along the lines of time holding a particular asset , whether it be a share a piece of art or a property.

  17. #37
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    Quote Originally Posted by CJ View Post
    The issue is, everyone aims to buy low and sell high, they just pretend they do it for the dividend yeild.

    Not everyone. I buy for income and have no intention of selling.

  18. #38
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    Quote Originally Posted by Lizard View Post
    At about the point they appear to make enough money from capital gains to be worth sending someone around to check through their paperwork?
    That about sums it up Liz

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