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Author Topic: Tax  (Read 266840 times)

Aragorn

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Re: Tax
« Reply #135 on: October 23, 2013, 07:06:52 am »
Quote from: Orca on October 22, 2013, 03:09:25 pm
Part 1 of my move to Portugal is done. Got a buyer for my Coffee shop today.
Now if I add this money to top up my current stocks, how will this affect the 3 year thingy?
I presume the new shares will start on this new date. Am I correct?
@ Orca
As your plan in due course is to liquidate your shares and place them into ETF's, would it not be prudent to place these funds directly into ETFs. That way you can avoid the 3 year thingy (unless of course the liquidation plans are still 3 years away.)
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Orca

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Re: Tax
« Reply #136 on: October 23, 2013, 10:35:05 am »
Aragorn, if I read you correctly, you are saying that ETF's are exempt from the 3 year thingy?

I still have just over a year to go for the 3 year period. My CML gains are massive so selling now would attract tax of about R200k.
Between a rock and a hard place now.
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Aragorn

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Re: Tax
« Reply #137 on: October 23, 2013, 11:40:05 am »
Quote from: Orca on October 23, 2013, 10:35:05 am
Aragorn, if I read you correctly, you are saying that ETF's are exempt from the 3 year thingy?
No, not at all.
Thought that you planned to move your CML etc to ETF's and live off the income and small withdrawals.
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wtg

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Re: Tax
« Reply #138 on: October 29, 2013, 10:59:54 am »
I have a tax question.

So I have a FNB share investor acc in which I do my investing.
I want to open up a stockbroker account at FNB in which I can do share trading...

Will my investor account remain taxed CGT?? (assuming I do not sell anything within 3 years)
And my stock broking account be taxed as income tax??

Do I pay tax on either account if I use all gains for buying more shares?? (ie the profit/gains does not go into my cheque account)

Thanks for your help!
« Last Edit: October 29, 2013, 11:09:40 am by wtg »
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Orca

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Re: Tax
« Reply #139 on: October 29, 2013, 12:28:10 pm »
That's what got me into trouble. I was under the impression that I could buy and sell as I wished and as long as the gains are not withdrawn into my bank account for my personal use, it would not be considered a tax event.

If you hold your shares for a minimum of 3 years in either of your 2 accounts, you will only pay CGT.
You have done the correct thing by separating your investment account from your trading account as now you will only pay income tax as revenue on your trading account.  All your gains or losses made after each trade will be a tax event whether you withdraw it or not.
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wtg

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Re: Tax
« Reply #140 on: October 29, 2013, 01:14:49 pm »
Quote from: Orca on October 29, 2013, 12:28:10 pm
That's what got me into trouble. I was under the impression that I could buy and sell as I wished and as long as the gains are not withdrawn into my bank account for my personal use, it would not be considered a tax event.

If you hold your shares for a minimum of 3 years in either of your 2 accounts, you will only pay CGT.
You have done the correct thing by separating your investment account from your trading account as now you will only pay income tax as revenue on your trading account.  All your gains or losses made after each trade will be a tax event whether you withdraw it or not.

Thanks for the answer - much appreciated.

That is sad news! I hate tax. :wall:
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Delusionsofgrandeur

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Re: Tax
« Reply #141 on: November 10, 2013, 11:38:42 am »
Read through the thread and Im still not sure of some questions.

Questions

Scenario:I buy one batch of shares ,lets say I invest in the INDI 25.Now,2 years later I buy my second batch of the INDI 25.Now,after the 3 year period from the first day I bought my first batch of shares,I want to sell some of them.Will all my shares be clumped together as non CGT tax shares,based on the date of the last purchased shares?

How does this work?Is my whole portfolio clumped together or is each individual share different in the date of their purchase?

Also,which type of tax will I be charged if I invest in different shares at different times,is it based on the last bought shares?
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yossarian

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Re: Tax
« Reply #142 on: November 10, 2013, 03:42:16 pm »
Quote from: Delusionsofgrandeur on November 10, 2013, 11:38:42 am
Read through the thread and Im still not sure of some questions.

Questions

Scenario:I buy one batch of shares ,lets say I invest in the INDI 25.Now,2 years later I buy my second batch of the INDI 25.Now,after the 3 year period from the first day I bought my first batch of shares,I want to sell some of them.Will all my shares be clumped together as non CGT tax shares,based on the date of the last purchased shares?

FIFO.   SARS generally accepts FIFO as the the way to work out the age of your shares.

Quote from: Delusionsofgrandeur on November 10, 2013, 11:38:42 am
How does this work?Is my whole portfolio clumped together or is each individual share different in the date of their purchase?


Each *batch* of a single type of share you buy is a "stock item" for want of a better term.  Stock that you sell before 3 years attracts income tax; stock sold after 3 yaers attracts CGT.
[/quote]

Quote from: Delusionsofgrandeur on November 10, 2013, 11:38:42 am
Also,which type of tax will I be charged if I invest in different shares at different times,is it based on the last bought shares?

If you undertstand the concept of FIFO and stock the answer to this question should be obvious.
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Orca

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Re: Tax
« Reply #143 on: November 10, 2013, 03:49:25 pm »
You can use the fifo method or the weighted average base cost method but must stick to that method.

If you elect to use the fifo method and cannot buy all the shares on the same day at the same price due to volume,
you can add up all the share costs (Due From You) together and divide it by the amount of shares. This will give you a weighted average base cost for your shares bought for that day at cost.
Now if after a year you add more then do the same calculation. Now you have 2 batches of shares of the same stock at at 2 different base costs.
If you sell, then you must first sell the ones from your first batch. If the first batch is 3 years or older then you will pay CGT less the R30k exclusion. If not, you might have to add all your gains to your other income and pay tax at your normal margin.

I prefer the weighted average method as it is less paper work for me.
« Last Edit: November 10, 2013, 04:16:29 pm by Orca »
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Orca

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Re: Tax
« Reply #144 on: November 10, 2013, 06:18:02 pm »
Now that I'm bored, I will expand on that.

If you are selling within the 3 year holding period you are a trader and the method of calculation is the same as if you have a business.

Work out Cost of Sales.
Opening stock at cost. ie. Carried over from previous year.
Add any new purchases at cost.
Less Closing Stock at cost.

This will give you the cost of your stock that you had for sale in that year.

Work out your gains.
Total Sales at cost less the above Cost of Sales.
Now you have your Gain.

Now in E-Filing.
In the Trading Section.
Fill in the Sales and Cost of Sales.
Deductions. Internet costs, subscriptions, etc.

Source Code is 2514 as you made a gain.

Done. Any queries, ask Moon. He is our residential Tax Expert.



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Orca

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Re: Tax
« Reply #145 on: November 10, 2013, 06:44:04 pm »
Part 2 as I am still bored.

The occasional sale of a share within the 3 year period does not always make you a Trader in shares. SARS states that "One swallow does not a summer make".
I would not personally enter a once off sale as a trade. I will go for CGT. Chances of a query is small as most e filing is computerized and no human gets to see it. Only if you consistently buy and sell will the sophisticated program raise a red flag for human intervention.
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Delusionsofgrandeur

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Re: Tax
« Reply #146 on: November 14, 2013, 04:14:11 pm »
Quote from: Orca on November 10, 2013, 06:44:04 pm
Part 2 as I am still bored.

The occasional sale of a share within the 3 year period does not always make you a Trader in shares. SARS states that "One swallow does not a summer make".

Does this refer to volume or frequency of stock sales within a 3 year period?
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Orca

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Re: Tax
« Reply #147 on: November 14, 2013, 05:17:09 pm »
I would not try more than 1 within the first 3 year period to be safe.
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scitrader

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Re: Tax
« Reply #148 on: November 14, 2013, 05:55:45 pm »
Hi Orca
When you take into account the deductions a trader can make, these can be quite substantial if the trader (as in your case) trades for a living.
These can include:
- internet costs and subscriptions (as mentioned)
- a percentage of your rent, electricity, water, insurance, domestic worker, gardener etc
- depreciation on your computer and other electronic gadgets required for trading
- telephone, cellphone,
- motor running expenses
- wages for your wife or assistant who helps with all the paperwork and research
- bank charges and other sundry expenses
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Orca

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Re: Tax
« Reply #149 on: November 14, 2013, 06:22:44 pm »
Quote from: scitrader on November 14, 2013, 05:55:45 pm
Hi Orca
When you take into account the deductions a trader can make, these can be quite substantial if the trader (as in your case) trades for a living.
These can include:
- internet costs and subscriptions (as mentioned)
- a percentage of your rent, electricity, water, insurance, domestic worker, gardener etc
- depreciation on your computer and other electronic gadgets required for trading
- telephone, cellphone,
- motor running expenses
- wages for your wife or assistant who helps with all the paperwork and research
- bank charges and other sundry expenses
Unless your domestic worker and gardener helps you pick stocks and you drive to the JSE to Buy and Sell, then by all means, make those deductions.
You must pay your wife or assistant and pay UIF for them as well. Don't think SARS will like that.
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