CDF only makes up 4% of the total value of my leveraged equities account (as I had to keep the proceeds of selling stocks in this account over the past two years in the linked cash management account in order to avoid geting margin calls), so this change won't have much effect. But CDF shares make up 50% of the investments in my Commsec margin account. When CDF is liquidated I think I'll just use the proceeds to reduce my overall margin loan balance, rather than reinvesting the proceeds in some other market proxy such as a listed investment company or ETF.
In future I intend to focus more on investing within our SMSF rather than increasing the size of my margin loan accounts. At one stage it was possibly to use gearing within a SMSF by investing in CFDs, but that may no longer be available.
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2 comments:
Isn't there a bright side to this? It will allow you to substitute these funds for a similar product (either an EFT of LIC) while the markets are low, and allow you to substantially drop your CGT cost basis?
The ATO could hardly look at an involuntary liquidation as washing!
The bright side is that at the current NAV I won't be liable for any capital gains tax. On the down side the CDF shares are currently trading for around 95c which is a 7% discount to NAV. Until the fund termination was announced they were usually trading close to NAV. If I don't sell the shares before the cease trading later this month I would be paid out the NAV calculated on 1 June.
However, I'm still waiting for Comsec margin lending to respond to my question about whether or not I'm likely to get a margin call when the shares cease trading on 25 May. The margin value of my CDF holding is around $40K and I have less than $10K margin unutilised. According to the CDF timeline, I won't receive payment until 18 June, so I'd have to find $30K cash to avoid a margin call on 25 May. This is especially annoying as both CDF fund and Comsec margin lending are owned by Commonwealth Bank.
I'll use the CDF sale/termination proceeds to pay down my Comsec margin loan by $40,000 and then contribute the remaining $15,000 or so into my SMSF as an undeducted contribution. I'll either invest in the Vanguard High Growth Index Fund (where I have all my super currently invested) or possibly buy $5K of S&P-200 ASX CFDs.
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