Capital Gains and Losses - Split between two people

[DionM]

I have a trading account with investments in the name of both my wife and I. I also have an account in just my name.

Coming up to tax time, and I have a CG to declare, and also looking to offset with some losses.

I understand that CL can only be offset against CG.

However, a couple of questions forthose that may have been in the same situation before:

1. For the joint account, do I split the CG and CL equally between my wife and I? Or can I "allocate" it all (CG or CL) to me, for example?

2. Do CL have to be offset again the exact CGs? For example, say I have a $1000 CG between my wife and I's account, and a $1000 CG for my account. If I take $500 CG from the combined and the $1000 from my own, I have $1500 CG. Can I write off CL purely from my own account against that $1500, or does it need to have contributions from both?

 

[tech/a]

You offset any losses against the higher taxed partner.

The standard seek out a tax accountant applies---but you probably expected that!

 

[Sir Burr]

You offset any losses against the higher taxed partner.

This is interesting, I would have thought it would be equal between the joint account holders.

Do you mean it's possible to offset all losses against the highest tax partner and gains to the lowest tax partner? That would be nice!

Cheers SB

 

[tech/a]

Well yes.
In business you offset as much as you can (profit) to the lowest paid partner,that way mitigating the tax paid.
As far as i know its no different regardless of how income was derived.

 

[barney]

Dion,

Many variables can come into play here. What may need to be taken into account is the future position of each partner when deciding where to allocate the "first" years CL's ... (Assuming it is your first years return incorporating trading wins/losses?)

For eg. Once you set the precedent of allocating more losses to one "partner"(assuming you can do that with a trading account), you may not be able to change that percentage in following years .. ie If your wife decided to go back to work, and her taxable income increased substantially, the initial benefit may be negated. (I am assuming you are earning more than her at present)

I submitted some hefty CL's last tax year, and our joint trading account was treated 50/50% by my accountant, so Prof. advice is definitely a must before filing your TR. Good luck with it.

 

[son of baglimit]

please verify this as always, but it might be that the source of the funds used to invest then determines the treatment of the gains/losses.

eg. A puts up 70% of the funds, B puts up 30% - when declaring, thats the split

 

[DionM]

For reference in future, I spoke to a tax person, who said I could only split 50/50 for the joint account.

 

[AlterEgo]

From the ATO "You and your shares" publication:

JOINT OWNERSHIP OF SHARES

Shares may be held in joint names. If you hold shares jointly
with another person, such as your spouse, it is assumed
that ownership of the shares is divided equally.

Shares can also be owned in unequal proportions. You have
to be able to demonstrate this – for example, with a record of
the amount contributed by each party to the cost of acquiring
the shares. Dividend income and franking credits are
assessable in the same proportion as the shares are owned.

 

[DionM]

From the ATO "You and your shares" publication:

Thanks for that - interesting. I couldn't find it on the ATO website?

 

[Sir Burr]

http://www.ato.gov.au/content/downloads/NAT2632_07.pdf

Page 12

Although, I can't see how being able to own in "unequal proportions" makes a difference.

Having to prove who owns what portion when you buy the shares how do you know which will be a CG or CL when sold!

 

[DionM]

http://www.ato.gov.au/content/downloads/NAT2632_07.pdf

Page 12

Although, I can't see how being able to own in "unequal proportions" makes a difference.

Having to prove who owns what portion when you buy the shares how do you know which will be a CG or CL when sold!

Thanks!

I even searched from the ATO site "You and your shares" and got nothing like this document in the first few pages of results?

 

[DionM]

Okay so I've read the document.

Whilst the loan and shares are in our joint account, the repayments for the loan (to buy the shares) comes entirely from my salary (direct deposit into the account by my employer's payroll).

So I could claim the entire amount for myself, it would appear.

Hmmm. Much thinking to do.

Or I could split it in the ratio of our incomes - e.g. if I earnt double her income, I take 2/3 the CG and CL.

 

[Duckman#72]

Well yes.
In business you offset as much as you can (profit) to the lowest paid partner,that way mitigating the tax paid.
As far as i know its no different regardless of how income was derived.

That's incorrect due to oversimplification.

That is not necessarily the way it is done "in business". It depends on your tax structure, partnership, trust, company. As a general rule you try to allocate income to the lowest paying taxxpayer, however you need to be able to legally "allocate" it.

The nature of your income also impacts. Passive investments such as shares, managed funds and rental property are treated differently for tax purposes than business income and business real property. How the income is derived, or more correctly, "the nature" of the information derived is very crucial to the outcome.

Sir Burr makes a good point. And the very reason most jointly held shares are held 50/50. Which ones are going to make a gain and which ones a loss?

Duckman