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theflasherman

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Not a tax question but a good read from Egoli-

 

Tax and the real Australian worker

24/06/05 By: Clyde Russell

 

The funny thing about Kim BeazleyÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s spirited but unsuccessful campaign against this yearÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s income tax cuts is that the cuts ultimately benefit the very people the Labor leader said were being short-changed. It is perhaps ironic that Bomber Beazley failed to grasp this, but it is more likely that it is simply tragic that he canÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢t recognise the new economic realities of Australia.

 

Mr Beazley and the minor political parties rejected the tax cuts on the basis that lower income earners got only $6 a week, while top income earners will get $86 a week from July 2006.

 

Terms like ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’â€Â¦ÃƒƒÂ¢Ãƒ¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…âہ“outrageous handoutÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚ and ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’â€Â¦ÃƒƒÂ¢Ãƒ¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…âہ“greedy richÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚ were bandied about as Mr Beazley, the GreensÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢ Bob Brown, the Democrats and a bunch of others lamented what they saw as the increasing unfairness of Australian society.

 

LetÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s leave aside the fact that increasing numbers of workers were being forced into the top two tax brackets of 43.5 and 48.5% by bracket creep. And letÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s also leave aside the troublesome fact that the biggest tax cut in percentage terms went to lower income earners.

 

And finally, letÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s also ignore the fact that in a progressive tax system such as AustraliaÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s, tax cuts will always benefit those who pay the most tax, just as tax increases always hit the higher income earners hardest.

 

 

What Mr Beazley really missed is that the aim of the tax cuts wasnÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢t really to put some extra cash in the pockets of the wealthy.

 

If that had been the main aim, then Treasurer Peter Costello would have cut or dispensed with the top tax rate altogether.

 

But he didnÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢t. Instead, he increased the threshold at which it kicks in to $95,000 from this July and to $125,000 from next July.

 

More importantly, he raised the 43.5% threshold to $63,000 from this year and $70,000 from July 2006. This means that since 2000, the income threshold for the 48.5% bracket has been lifted from $50,000 to $125,000 from July next year.

 

This has two effects: first, it allows people on better incomes to keep more of their money and, second, it goes some way towards making AustraliaÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s tax system internationally competitive.

 

But there is also a great unseen benefit and it is this one that Mr Beazley et al completely missed: the raising of the threshold provides an enormous incentive for ordinary workers to chase higher incomes.

 

Far from being an outrageous handout to the rich, the tax changes really act as an incredible boost to people on average incomes.

 

Yes, they only get an extra $6 a week but should they choose to work harder by doing overtime or increasing their skills, then they can keep a greater proportion of their income.

 

It is this incentive that Mr Costello wants people to pursue. He wants people to work harder or smarter, or put another way, to increase their productivity.

 

If this happens, not only will the economy grow faster but more people will be better off and the Government will also collect more revenue.

 

It seems that Mr Beazley also fails to understand the principle that it is always better to collect a lower rate of tax on a lot of money than it is to collect a higher rate of tax on less money.

 

In other words, if millions of workers on average incomes decide it is now worth their while to work that little bit harder because they will lose only 31.5% of the extra income rather than 48.5%, then not only are they better off but so is the country as a whole.

 

It is this reality that is very well understood in places such as the western suburbs of Sydney, home to many self-employed contractors and skilled blue collar workers. These people were earning incomes that took them perilously close to the top tax brackets because the average wage including overtime is now close to $59,000 a year.

 

They also donÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢t see themselves as the greedy rich and, if last yearÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s Federal election results are anything to go by, they reject LaborÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s characterisation of them as high income earners.

 

Australian Workers Union national secretary Bill Shorten is on record as saying steel workers were reluctant to take on overtime shifts because they didnÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢t want to pay the top tax rate. It is people like the steel workers who are the real beneficiaries of the Budget tax cuts.

 

While $86 a week is certainly welcome to people earning $125,000 a year, I doubt few of them would regard it as an outrageous handout, especially since they would be paying around $40,000 a year in income tax in the first place.

 

Certainly, Kerry Packer and the really rich will still face a top tax rate of 48.5% on most of their income and hence will still spend much of their productive time trying to work out ways not to hand half their money to the Government.

 

But for everybody else outside the thousand or so people who have incomes above $1 million a year, the tax cuts are a great idea, especially for those on average wages wanting to do better.

 

Mr Beazley said he was going to challenge the Government on economic issues, but his lack of understanding of the new dynamics of the workforce is astounding.

 

He needs to win seats in outer Sydney to have any chance of unseating the coalition next time around. Instead of backing the aspirations of a changing workforce, Mr Beazley has chosen to play the politics of envy.

 

The problem is, while this may work in some places in Australia, it fails miserably in the communities where people work hard and want to get ahead, which are the very places Mr Beazley has to win over.

 

The genius of Mr CostelloÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s tax cuts is that they provide a strong incentive to middle-income earners and go some way to easing the anger of the silvertails who were getting upset at paying too much tax.

 

Mr Beazley has merely maintained the support of the worst off in society, who would never vote Liberal anyway, but he has once again alienated the middle income earners that he so desperately needs.

 

Clyde Russell is Economics editor of the West Australian

 

 

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Yes it is a good read, do you think we can get it written on the bottom of a VB bottle (so they can read it while sculling) http://www.sharescene.com/html/emoticons/laughingsmiley.gif and then labour would never get elected again
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In reply to: Varmi on Friday 22/07/05 03:15pm

Simple answer is that you go by the date of the contract note - that is when the transaction becomes unconditional. Further detail below, applies to all CGT asset disposals. Note that futures and written ETOs are different.

 

CGT event A1 happens if a taxpayer disposes of a CGT asset (s 104-10). The disposal of a CGT asset takes place if a change of ownership occurs from the taxpayer to another entity, whether because of some act or event or by operation of law, eg where an asset is transferred from one person to another by way of sale or gift, or where a property is forfeited under a state law (ID 2002/67).

 

If the asset is disposed of under a contract, the time of CGT event A1 is when the taxpayer enters into the contract.

 

If there is no contract for disposal of the asset, CGT event A1 happens when the change of ownership in the asset occurs.

 

So, for example, the timing of CGT event A1 may be when: (i) an instrument evidencing a transaction is executed; (ii) a transaction is otherwise entered into; (iii) an asset is transmitted by operation of law; or (iv) the asset is delivered.

 

 

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In reply to: Smartman_plc on Wednesday 22/06/05 09:27pm

I don't quite agree with this. In relation to wash sales you need to firstly determine whether there can legally be an effective transfer of shares (ie in accordance with corporations law and the company's articles). If the shares can be legally transferred, the general anti-avoidance provisions of ITAA36 Pt IVA are not, as a general rule, attracted provided that:

 

ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚¢ absolute control and ownership of the shares are validly and effectively transferred

 

 

ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚¢ the shares are transferred at a true market value, and

 

 

ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚¢ there is no intention, arrangement or understanding at the time of transfer that the shares are to be reacquired (Taxation Ruling IT 2643).

 

Most of the above is copied from CCH tax service. The taxation ruling can be found at www.ato.gov.au

 

In practice the ATO doesn't seem to do anything about this. And yes - I've genuinely sold a share and bought it back an hour later because I realised I was wrong to sell, so it can happen. Its just the problem of convincing the tax office auditor who has never traded that this can happen.

 

 

 

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Hi,

 

I was just wondering if there is any way to legally delay making capital gains on shares held on margin whilst locking in current capital gains? To illustrate my question I'll give you an example.

 

A buys 1,000 XYZ at $10 in Jan 05 funding 70% of the purchase with a margin loan. XYZ doubles in value to $20. A wants to take some of the money (risk) out of the equation / protect some of their return but would prefer waiting to Jan 06 before selling any shares so they are eligible for the CGT discount.

 

I have done some research and have looked into writing covered call's to supplement income and provide limited downside protection. I was wondering whether it is possible to short sell a share that you have a long position in without causing a capital gain event on your long position? (I think I may have read somewhere that this is against the ASX rules), maybe CFDs could be a viable option?

 

If anyone has any ideas / any alternative strategies I'd appreciate hearing them. I will be seeking proper financial advice in regard to this matter, but thought it would be an interesting topic to raise on SS.

 

Regards

Sinkers

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QUOTE (sinkers @ Sunday 14/08/05 11:08am)

sinkers

 

writing calls, buying puts, shorting or using CFD's to short are all viable options. the cost of finding a good option market means that CFD's may be the most cost effective and accessible way of achieving your goals. there should be no issue with either strategy as far as the tax office is concerned.

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In reply to: trustme on Wednesday 22/06/05 09:38am

Do an off market transfer to your partner (assuming you have one).Write a letter of intent to each other that the consideration will be an interest free loan until shares are sold by the partner.Or of course he or she can actually buy them...You may not have immediate control but the stock remains in the family and at least within your influence albeit at arms length which should in my experience be enough to claim the loss.

 

I am not an accountant and would seek pro advice to this end.Tax law is a moving feast. http://www.sharescene.com/html/emoticons/weirdsmiley.gif

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In reply to: Varmi on Friday 22/07/05 04:15pm

Can't remember the thread where this topic came up before (prob here somewhere, lol) but in my experience its the actual buy sell date.There was considerable conjecture on this point though.

To me settlement date ie T+5 then T+3 was brought in to hurry up the actual payment / settlement process.Before that I would assume it took ages for cheques to be sent and mailed so you would have been well and truly in the dark as to when your tax liability was crytalised.What if the price crashed or rocketed in the ensuing days following the sale / purchase if not the actual date of trade?? Crystal ball required.Mind you one of my old brokers kept a genuine full size one on his desk.

Hope you're still around Fred!

 

Again sound pro advice req'd.

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