Husband and wife both share traders

Hi, first time poster, been reading and searching for a while tho.

My wife and I both want to get into share trading - we've made some decent CGT gains in this tax year through the markets on things bought last year, and its spurred us into learning more about trading, so we're planning ahead and want to try trading in the next tax year using some of the realised gains as seed capital.

What we're wondering is whether we can use joint accounts for share trading (i.e. online brokerage and cash management account in both our names). We figure that having "joint custody" of the trading accounts will reduce our risk (when one or other of us isn't around the other can still exit trades). We already have one joint brokerage account for investment purposes, so the plan is to open a second for trading (so we can keep the 50% CGT discount on our long-term holdings).

Can we just declare the profit/losses 50% each as with jointly owned capital assets? (i.e. both fill out item 15 on the tax return for 50% of the trading results)

We're both employed and there's no tax advantage having it in just one name (assuming we make a profit ).

From reading here and elsewhere, a family trust may be more tax efficient, but we don't want to go to the expense and additional paperwork overhead of that until we've proven to ourselves in 2012 that we can actually make a reasonable return and are ready to give trading a more serious business (and hopefully support ourselves with it).

 

So after more reading, and i mind of the fact that I'm down to about 5 weeks to get the new accounts in place for next year.. I'm thinking we'll:

1. Keep the existing joint account for capital gains (i.e. seek a ruling from ATO that its our investment account), and use it for the long-term accumulation of a few stocks (i.e. no trading).
   
2. Start two individual trading accounts, based off the same cash management account - that way we can share free capital, but report our profits/losses separately to the ATO under item 15.

Item 2 is really just a planned stop-gap measure. If trading is going acceptably well, towards the end of 2012's tax year, we'll incorporate a family trust, shift over the trading funds to there, and then be able to jointly manage the accounts as trustees. Plus we'll be able to disburse $3k a year to the two kids (both aged under 6) for their own savings accounts.

Its tempting to dive straight in and set up a family trust, but the additional overhead, tax reporting requirements, accounting fees, and tying up of capital that it entails aren't attractive until we're more confident that we can actually make money.

 

It seems that you are trying to do "things" in the wrong order.
Why don't you first prove to yourself that you can successfully trade for at least couple of years in different market conditions (one year success means nothing).
Average person needs few years to become a successful in this business.
Statistically, 7 traders out of 10 are constantly losing money in the market.

 

Cheers mate for reading.

The point of this is to work at learning how to trade - we both have jobs, and this is a sideline

I'm just trying to work out what a reasonable compromise on tax structure is without going overboard on setup and administrative overhead/expense - we'd rather not pay an accountant and additional ATO fees totalling several thousand dollars a year until we're generating enough profit that the expenses wouldn't utterly kill our profit margin.

The issue at hand isn't whether we can successfully trade or not - we'll find that out by doing it.

The issue is whats the most efficient mechanism for us to frame the learning environment - and by efficient I mean reasonable compromise between tax efficiency and operating overheads.

If it works out ok - then in 2013 or 14, we'll consider dropping to one "regular" income and setting up a discretionary family trust or similar for more serious deployment of capital.

Now, having decided to go with two "individual" accounts, I'm left wondering whether it would make more sense for me to set up my trading account within my proprietary limited company (I'm a contractor).

 

Are you aware of changes in the recent budget that reduces the amount you can distribute to minors tax free?

Regards,

Jason

 

Hi Heff,
Do you mind sharing what you ended up doing?