Macquarie Tax Ruling for Instalment Warrants

  1. 635 Posts.
    For those HotCoppers with an interest in Instalment Warrants.
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    Taxing Times Issue 4 - Wrap up of Tax Effective Strategies
    1. Macquarie Instalments - the only Instalment Warrants with an ATO Product Ruling (PR 2002/90)*
    2. HOT Instalments - maximise your deductions
    3. Shareholder Applications - create a deduction and defer CGT on existing shares with no cash outlay
    4. Flexible Trading Facility & Tailored Equity Solutions - prepay interest prior to June 30
    1. Macquarie Instalments - the only Instalment Warrants with an ATO Product Ruling (PR 2002/90)*

    Macquarie Instalments are a protected financing solution that allow investors to borrow up to 95% of the value of the underlying share, with no margin calls.
    Unlike many other capital protected investments, Macquarie Instalments are listed on the ASX and can be bought and sold at any time with minimum paperwork required, ensuring maximum flexibility.

    Investors and DIY Super Funds who are looking to invest in quality assets in a tax efficient manner should consider Macquarie Instalments.

    The Australian Tax Office has confirmed that interest payments on Macquarie Instalments are tax deductible for individuals and DIY Super Funds. This ruling applies to Cash Applications made in the primary market and to all secondary market purchases. (ATO Product Ruling PR 2002/90)* At this point in time, this ruling is exclusive to the 'IMC' Series of Macquarie Instalments. These instalments are approximately 50% geared and currently include 11 months of pre-paid interest.
    WHAT this means for you and your clients
    1. Between now and 30 June 2002, individuals can invest in Macquarie Instalments and claim a tax deduction for 11 months prepaid interest with tax certainty;
    2. DIY Super Funds can make investments now and claim the interest deduction on a pro rata basis - set up a tax effective strategy now for next year; and
    3. A portion of the borrowing fees, not attributable to the put option, are also deductible, in arrears.
    2. HOT Instalments - maximise your gearing and deductions
    HOTs Instalments are a listed protected financing solution that allow investors to borrow up to 95% of the underlying share.
    The higher funding costs associated with HOTs may result in bigger deductions for Individuals and DIY Super Funds.
    3. Shareholder Applications - create a deduction and defer CGT on existing shares with no cash outlay
    Convert existing shares to Instalments to diversify and/or gear up.
    This is tax efficient for the following reasons: - Prepay up to 11 months interest; do not trigger a CGT liability; continue to receive all ordinary dividends and franking credits on existing investment; generate futher dividend income, franking credits and prepaid interest deductions on investments made with released cash.

    4. Flexible Trading Facility & Tailored Equity Solutions - prepay interest prior to June 30
    The FTF is an "all-in-one" share and option trading facility which give investors the flexibility to trade both protected long and protected short share positions through a unique trading platform.
    Setting up a protected long share position involves: 1. Drawing down funding for a term of between 1 month to 5 years (min. $100,000 loan value) 2. Purchasing the desired shares of your choice (as available within the FTF)
    3. Buying a put option (ETO or OTC) to protect your share exposure
    * Note funding is available up to the protected value of the put option
    Consider drawing down funding pre 30 June to set up your share trading facility and prepay up to 12 months of deductible interest. Buy the stock and put option protection later in the year when you are comfortable with equity valuations.

 
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