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Managing tax position with navra fund

Discussion in 'Managed Funds & Index Funds' started by dkmc, 29th Mar, 2007.

  1. dkmc

    dkmc Well-Known Member

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    Its too late for this quarters distribution but for next quarters Im trying to decide whether to sell all my navra holdings in the retail aus fund
    and repurchase after distribution

    my current tax position
    say -10000 - carried forward loss

    holdings of navra 140k - value of navra today 150k
    say I was in the same position early june

    if I sold the whole lot - the 10k would roughly be the capital gain
    Ive held navra for 2yrs
    Do I get the CG discount of 50% even tho navra trades a lot? or does that not matter for the individual

    I know this has been partially discussed earlier but I cant find the thread

    Oh with a carried forward loss - you cannot use the discounted capital gain

    thanks for any input guys
     
  2. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Yes, the sale of units in a managed fund is calculated as a capital gain/loss based on the change in unit price. It has nothing to do with the way the fund makes its money. So you would still be elegible for the CGT discount if you held the units for more than 12 months.

    The mechanism a fund uses to make its money will determine the nature of the distribution ... many funds actually distribute a lot of realised capital gains, while the Navra funds distribute almost exclusively "income".

    So in theory, I think your basic strategy will work ... but would need to look at the numbers carefully and you'd need to consider the risks involved in timing such a transaction.

    Don't forget that distribution reinvestment also counts as a new purchase - so any reinvested funds that are sold within 12 months of the reinvestment date will not get the benefit of the 50% discount.
     
  3. dkmc

    dkmc Well-Known Member

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    Thanks sim
    I note that navra's income is unfranked
    which for my situation is not very tax effective

    By harvesting the capital gain - I can at least use up some of my capital losses and pay no tax on 10k in my situation.

    How long is the lag time between making a sell request and receiving money.



     
  4. DaveA

    DaveA Well-Known Member

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    im pretty sure if your are in a current capital loss position, all gains must be offset against the loss (until 0) before any discount can be used....

    also i think that capitial deductions (more in property than shares) can not be used to minimise the capital gain (maximise capital loss) if you have a current loss, all you are able to claim (in a loss position) is purchase price minus sale price.

    this was from tax law 101 so real accountants may know ways around this...
     
  5. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    My understanding is that you are correct DaveA - Nick confirmed as much recently in another thread.

    So if dkmc has a $10K loss carried forward, and sells an asset for a $10K capital gain, then regardless of how long the asset was held, the net position is $0 - there is no discount (if applicable) applied to the gain until the loss is fully offset.
     
  6. dkmc

    dkmc Well-Known Member

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    'im pretty sure if your are in a current capital loss position, all gains must be offset against the loss (until 0) before any discount can be used'
    Yes this is correct - I checked with my accountant

    I also have other shares that I can sell

    My approach atm is to sell any thing that I have bought <12mths and has a large capital gain and leave those shares with the CGT discount to be used when my capital loss is >0
     
  7. coopranos

    coopranos Well-Known Member

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    Also you can apply carried forward capital losses to your gains in any order.
    Just something to think about for your tax planning:
    If you have a $10,000 capital loss carried forward, and make $10k discountable gain (say held >12months) and a $10k non-discountable gain (say held <12 months) you would apply your loss to your short term, non-discountable gains first, allowing you to make full use of the CGT Discount on the remaining $10k.
     
  8. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Depends on whether you are margined or not (margin lender may add a couple of days to the process). I've found anywhere between 5 and 10 days to get your money.

    The last time I redeemed units in Navra Wholesale using Leveraged Equities, I put the order in on the 15th Feb, and had the money credited to my margin account on the 21st Feb ... which is 4 business days I guess.