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Investin advice - Have money to play with

Discussion in 'Investing Strategies' started by Dogslobberer, 12th May, 2009.

  1. Dogslobberer

    Dogslobberer New Member

    Joined:
    12th May, 2009
    Posts:
    3
    Location:
    Perth,WA
    I have a house worth about 1 million with a mortgage of a little under 500k. I have taken out 100k of the equity on Interest only with the intent of investing it into the share market. I am new to dipping my feet into the market but have been watching closely over the past twelve months as I originally took out the 100k over twelve months ago but baulked (to the good as it turned out). Forget my other assets and liabilities as they are irrelevant to this exercise.

    I was looking at a plan of around 5 - 7 years with the principal aim of paying off the mortgage. Obviously I maintain the payments on the mortgage (and then sum).

    My questions are.

    1. If I use the whole 100k can I, for example pay the interest a year in advance?
    2. Should I be forming a company and buying the shares under the company to minimize tax? Can I incorporate my wife into the company structure to further ease any tax?
    3. Would I be better off investing in a Growth Fund with a Fund Manager and hoping for 8% growth over the period or going it alone and buying shares myself?
    4. If I go it alone and do buy and sell at a profit. Do I pay the taxes as I go at the highest rate and then file a return to claim back any excess?
    5. Are profits in the first year subject to Capital gains?

    Obviously I will be consulting a Tax Accountant and have touched base with a Banking Institutes Financial Advisor but I just wanted to throw this out there. I work in the Oil and Gas Industry and feel sure that some Energy, Mining, metals will surge back in the future. Especially those cashed up.

    My gut feel is to go it alone as I’ve already made myself a Ghost portfolio of ten stocks containing some Steel, oil, healthcare, CSR, bank, engineering, resource, travel website, property and transport.

    I appreciate any advice given.
     
  2. joanmc

    joanmc Well-Known Member

    Joined:
    10th May, 2009
    Posts:
    72
    Location:
    brisbane
    does your wife work? If not there is probably a good argument to put the lot in her name as capital gains tax is paid on your top marginal rate. have you split your loan to keep the investment part separate to the personal part otherwise you can have tax issues with claiming the interest.

    my best advice to you would be see an accountant-pronto. If you don't have one you can trust then see a few. It is better to spend a few hundred dollars now to get good advice that will save you thousands later.:cool:

    enjoy!
     
  3. Young Gun

    Young Gun Guest

    Not a recommendation, but If had $100K to invest and wanted a basket of bluechip companies that are unlikely to go belly up I had have the following:

    ANZ
    WES
    WDC
    BHP
    RIO
    WOW
    WBC
    NAB
    CBA
    BXB
    ASX
    WPL
    NWS
    +
    ARG & AFI and/or STW

    Frankly I don't think I'd go too wrong with that portfolio. If you see a fin planner they'll suggest a Managed fund(I know I would) for diversification reasons etc. But if your a DIY type of guy then direct shares is the way to go. (and hey if you want diversification ARG, AFI & STW are well diversified)

    On $100K I wouldn't waste my cash on an accountant you're not going to make that much cash in 5 -7 years to need a trust or company structure.

    Having it in your wifes name may not be the best idea either, as although you may not pay as much tax on CGT when you sell, you may miss out on the Tax benefits of having the shares in your name, when you go to claim the interest each year.
     
  4. Dogslobberer

    Dogslobberer New Member

    Joined:
    12th May, 2009
    Posts:
    3
    Location:
    Perth,WA
    No she doesn't so that is certainly looking like the way to go. I'll be seeing an accountant ASAP. Yes the loan was setup for Investing.

    Thanks for the response.
     
  5. Dogslobberer

    Dogslobberer New Member

    Joined:
    12th May, 2009
    Posts:
    3
    Location:
    Perth,WA
    Thanks Young Gun. Having my own diversified portfolio with about 10 shares is what I'm leaning towards. The idea of paying someone else to tell me what I was already thinking is off putting. If I make money then there's the self satisfaction and if I lose then I can't blame anyone else.

    If there is no benefit in a company then why bother and same with putting them in the wife's name. I'll still be seeing an accountant just so I fully understand the tax implications.
     
  6. joanmc

    joanmc Well-Known Member

    Joined:
    10th May, 2009
    Posts:
    72
    Location:
    brisbane
    In some ways I really agree with young gun and in other I really disagree.
    I love his portfolio recommendations and actually I bought $100k of nearly that exact group about 2 months ago! it has grown by 25k so far. with divs of around 1300.

    that's where the agreement ends though:)

    If shares recover to their previous prices in the next 5-7 years then that portfolio will be worth somewhere between 200 and 300 k as most of these shares have halved and some even more than that. Had you bought it in december you would already have doubled in rio and mqg! that is a significant capital gains issue and the tax benefit of claiming 5000 in interest a year (2500 at top marginal rate) over the capital gain of potentially 100k.

    That is why I would get an accountant to look at your financial situation as a whole.

    and it is never a waste of cash to get good advice:D
     
  7. AsxBroker

    AsxBroker Well-Known Member

    Joined:
    8th Sep, 2007
    Posts:
    1,448
    Location:
    Sydney, NSW
    Hi Joan,

    With deductible contributions it's amazing how you can reduce tax payable.

    Cheers,

    Dan

    PS This is general information. Before making a decision speak to your FPA registered Financial Planner.
     
  8. joanmc

    joanmc Well-Known Member

    Joined:
    10th May, 2009
    Posts:
    72
    Location:
    brisbane
    thanks Dan. but my 100k is in one of my companies that has unused capital losses to make up. Dogslobberer stated his goal was to pay out his mortgage so if he puts it into super as a deductable contribution he would not be able to use it to pay out the mortgage. That is why I suggested an accountant that could look at his position as a whole and his objectives and guide him from there. Me, I have a great accountant and as his advice has seen me effectively retired at the ripe old age of 40, I pretty much run everything past him now!!:D
     
  9. AsxBroker

    AsxBroker Well-Known Member

    Joined:
    8th Sep, 2007
    Posts:
    1,448
    Location:
    Sydney, NSW
    Hi Joan,

    That's great retiring at age 40, I hope I can do the same :)

    If Dogslobberer borrows to invest for a non-working spouse could be less tax-effective (ie, if your not paying tax, your not going to get a tax deduction are you?)

    I going to an accountant or adviser is the most important step and finding one which he feels most comfortable with.

    Cheers,

    Dan

    PS Speak to an FPA registered Financial Planner, registered accountant or registered tax agent.