Frequent equity trader tax efficient account

All,

I was wondering if anyone has any recommendations regarding the best 'vehicle' for running a frequent or day trader account that is tax efficient.

More specifically the scenario is:

I have a large cash sum eg. $500K and want to 'day-trade'. I have experince trading (20 years) but I want to set up a 'vehicle' that will allow me to trade frequently and will reduce my capital gains, ie. hold equity for days or weeks and less that the 1 year 50% tax timeframe. SMSF may be best but I don't trust the Government with my Super in the future.

Do I set up a trust or a company ? I am very good at keeping records of my trades but specifically want to reduce my tax. If I do this as I am now ('high income earner') then my gains will be taxed at 45% or so.

Any ideas ?

GunnerGuy.

 

SMSF taxed at 15% contributions and 15% income and has the cap restrictions and retire at 65 issuses to deal with.

Discretionary Trust income distributed is taxed at the rate of the benificiary that recives the income. Works if you have a wife, children and parents reciving a low income that you can top up from the trust.

I would tend to think that using both is an option worth considering with that amount of working capital with the trust generating income that is paid into your SMSF so you only pay 15% on the first 25k transered into super including your normal work contribution and you can transfer 150K a year in after tax extra payments with an option to pay 3 years in a lump sum.

Further reading at Super contributions - too much super can mean extra tax

I would think you could also set up a stand alone company to divert trust payments to so you pay the company rate as long as you don't distrubite the income. Would also be posiable to trade this way as your not long term holding so CGT benifits lost don't matter and you pay the 30% company tax rate on profits that the company retains.

It's a lot more complicated than the buy and hold in a trust to end up LOE so pro advice would be needed.

 

I wouldn't set up a vechile at all if you are primarily worried about CGT. You won't actually incur CGT if you are truly day-trading.

The ATO have a page on this, start here and work through the topics on the right.

If you want to reduce income tax that's a different matter and one of the accountant types here would be best to help you out. I imagine a trust type structure to distribute income would be about right.

Its worth keeping in mind the Holding Period Rule if you're looking to work the imputation credits too.

 

I have a large cash sum eg. $500K and want to 'day-trade'. I have experince trading (20 years) but I want to set up a 'vehicle' that will allow me to trade frequently and will reduce my capital gains, ie. hold equity for days or weeks and less that the 1 year 50% tax timeframe. SMSF may be best but I don't trust the Government with my Super in the future.Do I set up a trust or a company ? I am very good at keeping records of my trades but specifically want to reduce my tax. If I do this as I am now ('high income earner') then my gains will be taxed at 45% or so.that recives the income. Works if you have a wife, children and parents reciving a low income that you can top up from the trust.I would tend to think that using both is an option worth considering with that amount of working capital with the trust generating income that is paid into your SMSF so you only pay 15% on the first 25k transered into super including your normal work contribution and you can transfer 150K a year in after tax extra payments with an option to pay 3 years in a lump sum.




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I was hoping to do the following:

1. Put the $500K in a Family Trust.
2. Trade shares regularly (greater or less than 45 days) and make a capital gains.
3. Gain dividend income through the year from the share holdings and some fixed income funds/bonds.

Then at year end (should I have a successful year) ....
Total assets in the Trust valued at say $550K.

Distribute $50K to me and my wife depending on our income tax brackets.

The questiona are:
1. Do I have to pay any CGT on my share trading ?
2. What is the CGT rate ?
3. What is the income tax rate ?
4. Since holding an asset less than a year do I pay CGT ?

GunnerGuy