We're growing!

Hiya! Share Trading Game update, well Dave has stayed in first place with a cash balance of $23,660, and James is still just behind. The market went back a bit for most of the week and it looks like a few people took their eye off the ball and got hurt before it rebounded today. Registration's now closed for this game but I'll keep posting the weekly updates so you can see how it's all going.

On another fun note,

We welcome Danny Holwell, the newest team member to our House! We first found Danny on the Invested forums a bit over a year ago, posting about his wealth creation goals. So just click here to introduce yourself to the wonderful Danny. We're really happy to have him officially join us now.

I hope you have an awesome weekend! =]

On the move

I'm moving house this weekend. Huzzah! It's beautiful, bright and open and spacious, and it has room for a pool table. It's about five minute's walk to my favourite cafe and about five minute's jog to my favourite running tracks.

I love it.

It has reminded me though, to remind you, to make sure that you let us know whenever you move address. We can then make sure that the tax office know about this as well, and also ASIC should you be a director or shareholder of any companies. Yes, that includes trustees.

I'm also renting this place, rather than buying it.

To me, that makes more sense at this point. I don't need the security of a principal place of residence (PPOR), nor do I need the dirty big bad debt against one. By renting instead of buying my home, I can direct that cashflow to other investments, or to my business. It also then means that the interest on all of my debts can be deductible, and it helps my serviceability for further investments as those debts are all being used to provide an income. It's a good system.

I was talking to another investor at the Somersoft meeting earlier tonight. We agreed that whilst this works nicely for me at the moment, and of course, for many others; there does come a time where having a PPOR - particularly a paid-off one - is worthwhile. Beyond as a starting point to get the free money, at the other end of the spectrum, heading into retirement with a debt-free home holds a lot of security. Using a little debt recycling, which we'll discuss at a later stage, can also accelerate that option very quickly when the time comes.

There's not necessarily a right or wrong in deciding whether to rent or buy a PPOR. As there will always be an emotional attachment as well as financial consideration, it makes the whole scenario much more circumstantial and individualised than most investment choices. But, it is still something to give a little thought to, perhaps.

No more tax returns?!

It’s that time of week again, for the Share Trading update. It’s been a very interesting week this week with David taking the lead and sitting on 24,319, but James isn't very far behind at all. But it is still early and anyone still has the chance to win.

Next week is the last chance to join this round if you’re interested in building up extra knowledge about trading shares or just want to have some fun. Just email me and I’ll get you started!

On a different but interesting note,

We found a very interesting article in the news this week that we thought that you may like to be aware of. In short, the Tax Office are thinking about calculating all basic individual tax returns for you and just sending you what they think you should get as a refund. Obviously this wouldn't apply to investors and businesses but it could be a good move to make things easier for most people. The other thing with this is that it would free up more Tax Office resources to look at other taxpayers instead, so it would be even more important to always remember to keep your receipts and records in good order!

Oh, and we also posted that article on our facebook page as well. You should check that out too and see the other interesting things that we find from time to time.

Trading vs Investing

Many of us hold shares. Not all of us however are share traders. So how do you know whether you are a share trader or a share investor?

Well there is not usually a definitive yes or no; whether an entity is trading or investing is often subject to some elasticity. The ATO however have certain qualifiers which they use to determine the difference.

Some of the questions they consider include:

  • Is the entity seeking to make a profit? Of course it is the goal of most people to make a profit, so the ATO need more proof than that to justify an entity being called a trader.
  • How regularly is the entity buying and selling shares and what is the volume of shares transacted? Someone who might buy $5000 worth of shares a couple of times a year and maybe sell one lot a year can hardly be said to be making a business out of the shares. On the other hand someone buying a new lot of shares every week and selling as often clearly would be.
  • What was the reasoning and purpose behind the share purchase? It is a common thing for investors to purchase shares to receive dividends, and hold for the long term. Though they may make a large capital gain that is not their sole purpose from buying. Traders on the other hand may make a purchase with the clear intention on making as much gain in as little time as reasonable, and any dividends picked up are bonuses.
  • What is the timeframe on buying and selling shares? Traders like to get in and out of trades reasonably quickly, although this will vary trade to trade, and one trade can go many months. Investors on the other hand can hold shares for many years without selling.
  • What sorts of records are being kept to do with the transaction of the shares? All businesses need to keep good records. Therefore if you want to convince the ATO that you are in the business of share trading, it’s a good idea to keep good records. Records of share analysis and financial reports as well as your own tax records are good examples of this.
  • How much money is being involved? Both traders and investors can involve large amounts of money, but if an entity is regularly pumping large amounts of money in to buy more shares, and then reinvesting profits, on a regular basis then this behaviour mimics the behaviour of a trader.

So there are a number of things that we can look at in making that judgement call. Sometimes a case can be built either way, so it then comes down to having a solid argument to defend for if the tax office ask questions about it. Next time that I get on here, I'll write about some of the advantages of being treated as a trader or investor so you can see the difference in each.

Running late?

Like every Friday afternoon now, first let's see the sharemarket game update. James is still winning and up to $21,737 after only two weeks but it's early days yet and a few players including our last winner David R not too far behind.

It's still not too late to join this round of the sharemarket game, so show us your stuff and take up the challenge. Just email me to find out how to get started.

The other thing we need to tell you about is the tax office lodgement program. What that means for you is that if you're planning to change accountants or haven't done anything with your new accountant yet, and you want us to be involved in that process somewhere,  then the tax office usually like to know about it before 31st October where possible. So if that's you, maybe best to let us know about it sometime in the next two weeks so we can help organise an extension for you.

Have a great weekend!  =]

Looking back to look forward

Dr Ken Henry is the bloke behind what is commonly known as the 'Henry Review'.  The purpose of his existence during recent history and up until December this year is to analyse the current tax system in some level of detail, and put forward his recommendations to the Government on how to reform it for the better.

Every so often, Dr Henry has been invited to speak at various functions, and his tax reform speeches are published online about a day afterwards.

Believe it or not, those speeches actually make for quite interesting reading (ahem... if you're into that sort of thing).

The most recent of these is about how the tax system has already gone through review processes, on many occasions now, and that's precisely what's got us into the mess that we face today. He, as you would presume, writes (speaks?) a little more eloquently about the subject than I.

'The Lessons From Tax Reform Past', for those who have neither the time nor inclination to read the link, are, in order;

  • The case for reform must be compelling
  • Uncertainty and risk impose costs, too
  • Simplicity often gets left behind
  • Perceptions of equity matters a lot
  • Governments need effective tools to improve people's lives

In particular relation to that last point, Dr Henry also writes about the whole purpose of such reform.  Towards the conclusion to his speech, he offered the following statement;

"Successful tax reform is not just about increasing GDP or revenue, or making the system easier to understand, or more sustainable, or fairer, or better able to assist governments to address various social problems. It is concerned with all of these things. Successful tax reform means improving the wellbeing of the Australian people."

Hopefully, his recommendations are taken seriously...

Don't be shy!


Hiya guys! Danni here today, yep that's right, it's not just James writing these anymore. All the crew at our House will now be posting new and exciting blogs for you to read. Yay!

So firstly I wanna let everyone know where we're at with the new Share Trading Game. We've just started season three and James has already taken the lead with $20,823.

Someone beat him already!

We want you to take up the challenge and compete, so come on, don't be shy just email me for the Rules and Registrations form. Once you've filled it out remember to just send it back to me with your first trades.

And Yeeee Haaaa, it's that time of year again. Gorgeous weather, party dresses, champagne and horse racing. We will be taking a four day weekend for the Melbourne Cup, so we will be closed on Monday 2nd November and of course the Tuesday as well. So if you need to get in touch with us, just send us an email and we will get back to you on the following Wednesday.

Who's afraid of the big bad wolf?

First of all, just a reminder that the new House of Wealth sharemarket game, for Q2/2010, started today. The last round was great fun, with one of our new clients managing to overhaul my profits in the final stages of the game to claim the win and leave me in second place, for the second time in a row. Andrea & Stephen rounded out the top 3, after winning the Q4/2009 series, which is a brilliant effort on their part, too.

It's a great way to learn how the market works before risking too much skin in the real world. In the next couple of days, we'll be talking to Andrea & Stephen about their investing strategies and ideas, so that you can learn from their proven methods as well. So, if you'd like to play this round, please contact Dannielle and she'll get you hooked up.

Moving on;

Audit insurance is quickly becoming more and more common in the accounting industry. In short, it's (yet another) form of insurance that you can pay for, which is supposed to cover your accounting fees in the event of an audit from the tax office.

To be perfectly honest, in most cases... it's a rort. Waste of money; consider donating it to charity instead.

For most investors that we deal with, the cost is likely to outweigh the potential benefit. Full-blown audits are relatively rare, as the tax office data-matching and analysis often means they know the answers before having to ask the question. Usually, the inquiry is a simple question that is dealt with quickly and easily. And so if there are any accounting fees necessary, they're usually quite small.

Provided, of course, that the client has their records in good order.

Do you?