Question: I have eight grandchildren from age 10 down to 14 months. Unfortunately when I opened a CHESS account to buy shares for them, I put the chess register under my name as trustee for each child. My problem is I still earn an income and my partner does not. Who pays the tax if I sell the shares: my partner or me? This problem came about because I purchased LNG shares at 38c for the two oldest children and they are now $3.25 and I want to sell half. They have only held these shares for five months.
Answer (By Paul Rickard): I am not sure I follow how you have registered the shares in CHESS. However, it is most likely that your grandchild will be liable for any capital gains tax – not you or your partner. It all depends on the situation. If the child is legitimately the owner of the shares and all the income through dividends goes back to the child, then they will be liable for any tax. The first $416 of income will be tax free – after that, the effective tax rate is 66%. I have attached the ATO’s link that provides different examples – see situation two here.
There is a link here to a copy of an article we published on this subject in January that explains the best mechanisms to buy shares for children or grandchildren.
Question 2: Do you have any recommendations on GI Dynamics (GID) that Charlie Aitken recommended recently, I bought them at 49 cents and they keep dropping, now at 42 cents, not sure to hang in there or cop my loss.
Answer (By Paul Rickard): I think GI Dynamics is in the “speculative” category. This means that you might need to wear some pain.
It has been a one-way train since they issued their second quarter update on 2 July 2014 and it is a little hard to say when the market might reassess. They are currently trading on a 52-week low.
If you are uncomfortable with the position, then cop your loss and move on. If you believe in the vision and the position is not material in your portfolio, then you probably hang on. They had $US71.7 million in cash at the end of June. They released their most recent quarterly statement today.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.
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