Sunday 26 October 2008

A taxing weekend

The Oct 31 deadline for Australian tax returns is fast approaching, so I took a day off work on Friday and spent this weekend working on our tax returns. I'm still struggling through my stock capital gains calculations (I hate it when a stock gets taken over, as it means dredging through the past 15 years of paper records to work out the cost basis), but at least I got around to lodging tax returns for DS1 and DS2 using eTax. DS1 did busking to earn some income, so he might be entitled to a government co-contribution based on the money he put into his superannuation account last year. In previous years only PAYG employees were entitled to the co-contribution, but I think that this year self-employed people are also eligible. There wasn't really much point lodging a tax return for DS2, but he did have a couple of dollars of franking credits due on his stock dividends so I decided to go ahead and spend ten minutes lodging a return for him.

Hopefully I'll finish sorting out my capital gains figures today and be able to lodge tax returns for DW and myself today - we should each be due for a refund as our rental property was negatively geared last year (due to having to cut the rent while the property was being repaired after a tree fell on the roof!) and my stock portfolios are negatively geared using margin loans.

I'm thinking of selling off most of my individual stock holdings this financial year and reinvesting the proceeds in Commonwealth Diversified Share Fund (CDF) shares. At current market prices my capital gains tax liability should be negligible, and after calculating all the capital gains figures for next year's tax return future returns will be a lot simpler with only a couple of dividends from CDF each year and no capital gains events due to individual stocks being taken over. A couple of decades of investing in individual stocks has proven that I don't have any great talent for picking outperforming stocks (to be honest I only spend a trivial amount of time researching stocks before I decide to buy or sell them), so I may as well just invest in a diversified portfolio of stocks via index funds (in my superannuation account) or CDF shares in my stock portfolio.

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1 comment:

Anonymous said...

I understand your frustration. As a buy and hold investor like you I have found this bear market has taken all the profits built up over years of investing and it looks like it will take more besides. We are 45% down from the top.

It looks like 3430 (half of the peak 6870) could be it and then we should see 40-50% increase from there over the next year. If this is not the case make room for me in the mental hospital. So I don't think it is best to sell now and go into the funds you mentioned. Wait until your shares have reached a more realistic value and price and then it could be a time to swap over.

Just some thoughts. The problem with investing is at times like this there is no one to remind us to not sell at the bottom.