super funds and trading *****important

  1. 1,383 Posts.
    I am generally a fairly fast trader with a 3-5 day turnover. I have applied the same techniques to my super fund as it is what I know and feel safest with. Though I do try to trade less frequently and hold longer, as it causes havoc at tax time to have to report 200 trades in 3 different ways.

    As far as I know there are no limitations on doing this or on using warrants or even ETOs to trade. You cant use CFDs though as they have margin and super funds cannot borrow.

    Where I have run into trouble is with capital gains. The taxes on these are very low for super funds - but in my experience, capital gains are very hard to achieve. I know a few good and guaranteed ways of converting capital gains into income but none of doing the reverse.

    For example if you buy a stock pre div and sell it ex, you have converted capital gains into income. This is not good in a super fund as capital gains have lower tax rates. Whats more, you can only write capital losses off against future capital gains and if you dont make any - you are way out of pocket.

    I asked my accountant to investigate whether I could treat trades for taxation purposes as current income (as I do for normal trading). He asked for a tax ruling and the answer was NO. Super funds are not really supposed to be running a trading business as they might be disadvantaged by cash flow since they cant borrow money. All trades on a super fund, even day trades, have to be treated as long term capital trades.

    I think the Tax Office is wrong but you are a fool to ignore them.

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