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Investing For Children., Investing For Children
Varmi
post Posted: Dec 21 2010, 12:57 PM
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Let me be clear, I am not a financial guru lol Please feel free to comment.

Hopefully I've ben on the right track with attempting to help the kids to get a headstart on life.. but most importantly to get them interested in saving and making their money work for them.

I set up separate accounts in trust 4 years ago with Westpac Broking. One is now 17 the other 15. It'll give them a head start when they are ready to buy their first home, or even to build on their portfolio..

Both portfolios consisted of one bank, one bio that pay franked dividends that are reinvested by taking advantage of the DRP facility. So far the ATO has returned the franked portions (to the kids delight)each year. Now it gets interesting, this year we have CGT issue and a likely high tax rate hit for a growth stock - AOE...should be interesting when we submit their tax returns this year. So much for hoping to hold long term. The proceeds were used to top up the bank stock as well as buying another. DTE shares(from AOE offer) are doing nicely and with a new growth stock added IGR, which has been doing very well altho a little underweight..

17 yr old is now working so there we have another challenge...but in my way of thinking, we'll get on with it and pay what's due. At the end of the end they are still way ahead. Her Portfolio is up 50% and the son's 30%. They have two saving accounts thru another bank, one for everyday use(no fees or interest) and the other(no fees, high interest account if min $10/mnth deposited) used for big ticket items ie - car etc

Son has been expressing interest in term deposits so will be looking at that soon, no that he has accumulated enough in his savings acc.

I use an accountant for peace of mind at tax time and so far it's been straight forward. Hopefully the "name" change over will be straight forward with no surprises.

Hope the above is clear huh.gif






--------------------
"I learned that courage was not the absence of fear, but the triumph over it." - Nelson Mandela.

Said 'Thanks' for this post: arty  
 
skorpian
post Posted: May 21 2007, 08:59 AM
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In reply to: mosaic1996 on Sunday 20/05/07 03:51pm

QUOTE
3. Alinta CG greater than $4,000 / 2 = $2,000 so robably a nasty surprise here.


mosaic and I have clarified this...

Even at the higher tax level, with the CGT discount for long term holdings, they will slip in below the threshold...

but good lessons in making sure the shares are long term holdings that have fully franked dividends. Growth shares would be a potential problem if there was a reason to sell and shares that were subject to private equity takeovers etc

 
mosaic1996
post Posted: May 20 2007, 07:48 PM
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Skopian, good luck with the tax system. Bigger picture is still the valuable lessons for the kids. You could tell them that they are paying the salary of their teachers - although that may not be wise graduated.gif .

Sinner, I know that it can be a real hassle trying to get correct information from the ATO. In their defense, the tax law is very complex (mostly to stop shonky people -but it effects the honest people more). Good luck (especially to your accountant lmaosmiley.gif ).

Cheers,
Mosaic

 
Sinner
post Posted: May 20 2007, 07:14 PM
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QUOTE (mosaic1996 @ Sunday 20/05/07 03:51pm)

Mosaic,
You are right about putting in amended returns to possibly recoup past franking credits (although there must be a time limit-maybe the 6(?) years we need to retain records for?). But given I've been waiting TWO years for the tax office to fix up an error THEY made to a return in 2005, I don't know if it is worth the hassle! Admittedly it is a trust account (for nieces) and apparently they're 'harder' for the tax office to amend than individual returns, but this is beyond a joke! All for $100! The good thing is I did it through an accountant, so he is the poor bugger who is ringing up the tax office weekly to try to sort this out. No wonder staff morale at the ATO is low...
Cheers!

 
skorpian
post Posted: May 20 2007, 06:06 PM
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In reply to: mosaic1996 on Sunday 20/05/07 03:51pm

thanks mosaic1996

They have TFN numbers but apparently it is something that CBA does with the CDIA accounts - and whose TFN CBA uses.

The problem is when the account is
Senior Skorpian in trust for Little John Skorpian

I think the problem is when CBA uses the childs TFN.... but the child doesnt submit a tax return it turns up as an avoided tax account. I am still checking up on it...

Since this year they will get tax returns it presumably will not be a problem, but everyone else should be aware.



 
mosaic1996
post Posted: May 20 2007, 05:51 PM
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QUOTE (skorpian @ Sunday 20/05/07 05:17pm)

Skorpian,

This isn't my field of expertiese. However, my best guesses are as follows:

1. CBA accounts. If they are you as trustee for the kids then it would be a return in the kids name. I suspect that you put in a return saying that it is the first return, and the ATO would assign a TFN as a result of the first return.

2. Franked dividends. Excess franking credits are refunded each year. So if they had excess franking credits in past years, it would be worth putting in past returns to get the excess franking credits.

3. Alinta CG greater than $4,000 / 2 = $2,000 so robably a nasty surprise here.

Ignorance is bliss sometimes. However, whilst it probably wouldn't save you if the ATO gets wind of the windfall, it would probably be a reasonable excuse to avoid penalties especially if you hadn't claimed excess franking credits in the past.

I believe that the law/regualtion was inttroduced to stop tax avoidance by distribution of trust income to minors. Frequently the income wasn't actually distributed to the kids. Unfortunately it gets the average mug punter where the intention/motivation is to teach their kids good saving/investing habits rather than tax minimisation/avoidance.

Cheers,
Mosaic

 


skorpian
post Posted: May 20 2007, 05:42 PM
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In reply to: Sinner on Sunday 20/05/07 03:37pm

Thanks Guys...

Lesson is shares need to be long termers... as Alinta was supposed to be !

 
Sinner
post Posted: May 20 2007, 05:37 PM
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In reply to: skorpian on Sunday 20/05/07 03:30pm

Franking credits do not carry forward-they actually form part of your income, but have an equivalent tax paid component. That is, if you received $700 ff income, you actually need to declare $1000 income, but you have $300 tax credits.
To back up Mosaic 1996, I think the threshold this year is $1333.
Cheers!

 
skorpian
post Posted: May 20 2007, 05:30 PM
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Another tax query...

Probably a very basic question but....

Most of their shares are long term dividend paying and they have franked dividends. That is part the reason this problem hasnt arisen until this financial year...

Now that there is the Alinta sale problem, the current franked dividends might help a tiny bit, but can you carry them forward from the last few years or do they not carry over year to year in that way ??

 
skorpian
post Posted: May 20 2007, 05:17 PM
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QUOTE (mosaic1996 @ Sunday 20/05/07 02:54pm)

mosaic1996

Thanks

Only my 18 year old portfolio is at that level of return (in the thousands) - although Alinta was one of the shares that I bought for the three of them in the float ... and they sold a few months ago.. (from memory thats 2.25 and selling at about 13 or 14....with 400 shares each).

The 18 year olds tax return is going to be altered by family trust distributions anyway so his will all be declared..

so that link would suggest they had all better get their tax returns in this financial year..

Thanks for the pick up... bummer. Time for them to all learn about paying tax sadsmiley02.gif

Any idea whose TFN the ATO wants on the accounts that have both of our names on (CBA requires an adult on the CDIA accounts)

 
 


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