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Trade as cc or as individual - please help?

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Not applicable
Hi guys, has anybody got any advice on the subject? I'm thinking of doing all my short-term SSF trading through a CC as opposed to in my personal capacity. Does it have any influence over our tax situation? I've heard that by opening a SSF account, the receiver could immediately clasify us as traders, which will affect all transactions we do... is this true? Simon, do you have any insight?
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13 REPLIES 13
Samir
Super Contributor
Purely from a tax point of view... Trading in a CC has 29% tax rate plus 12.5% STC when u remit profits to yourself(member). Thus effective tax rate is 37.88%. So, it would make sense to go the CC route if your personal marginal rate is 40%. You can claim a salary from the CC for doing all the work of trading and researching. If you are currently un-employed, you can put thru a salary of R43k without paying tax in your personal name. Also, You can loan the CC money and get the CC to pay you R18k interest for the year which will also be tax free in your name (provided that is the only source of interest). So, in the above examples, the CC can make profit of approx R60k without anybody paying tax. Hope this helps.
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Not applicable
trust with Beneficiaries could help traded with cc but was paying to much moved over to trust big diffrence
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Preston
Super Contributor
Samir .. STC is being currently being revised.. All the above comment is extremely useful if he trade SSF successful. My advise to that individual is to "please read forum posting of how individual lost money by opting for Gearing" Play it safe.....
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ABuzz
Super Contributor
I also believe that the latest legislation taxes only 10% on cc's for the first R 300 000.
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Not applicable
Thanks for the feedback guys. How many of you buy and sell shares part-time, have a full-time job and have an equities account and SSF account which you manage yourself? I'm interested to know if you are taxed the same for your equities account, as the SSF account? Anyone?
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Samir
Super Contributor
Abuzz, the 10% story is not applicable for certain busineesess. Read the Act carefully. You can't earn more than 20% of your gross income from things like royalties,interst, share proceeds etc.. Preton, agreed about the 10%. Gave my example as at current for illustrative purposes only.
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ABuzz
Super Contributor
Thanks Samir - I appreciate the clarification on that point
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Not applicable
Samir - sorry to repeat but I would appreciate your input. Is one taxed the same on their SSF account as they are on their regular equities account? Assuming they are employed full-time.
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Samir
Super Contributor
Fresh, the short answer to your last posting is YES. SARS can very easily identify your activities and intentions. By definition of the product,trading SSFs will always result in you being taxed as a trader.Thus, every other trade you make(shares,warrants etc) will not be considered capital and will be taxed at your marginal rate, unless you can prove that you held the share for 3 years or unless you can prove that it was a forced disposal(like what Aspen did some time ago in their BEE deal). If you are employed, and are taxed at 40%, then its a good idea to go via the CC as you can save a bit tax.(See previous post with calculations). If it is worth your while, seek professional advice.
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kr_pto
Super Contributor
From what i understand, the best is to have two separate accounts, one for trading (which would be SSF enabled then) and one for capital investment. Keep the two activities separate, and explain to SARS their individual purposes. Obviously the one attracting capital gains only needs to comply with the 3 year hold rule for every share in it.
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Not applicable
Check out www.sars.co.za in their income tax section under their brochure section their is a guide for share owners......I would still seek prof. advise, but it gives you the basics .....a lot of it revovles around what your intentions are...hope it helps.
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geordie1
Super Contributor
I invest under individual account and trade occasionally.I trade more often under my cc account and invest,If you can afford the accountant's costs it can be advantageous to have a cc-salary,expenses, and tax credit can be quite advantageous cc also pays some medical and provident contributions,car allowance is another deductable.I have been doing business this way for around 10 years and it has worked out very well.If you have a large enough portfolio I can recommend this approach.
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CAB
Contributor
Just taken Simon's advice on this (after many moons!) and gone to the professionals on this. Outcome as per Samir's suggestion, trade under a CC that costs R900 off the shelf. Slight tax advantage but can also dump some expenses against your profits....including the accountant's fees!
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