The Cayman Islands have been in our news lately as a place where many managed investment funds find it advantageous to be registered.
Now take the case of an Australian mum and dad investor buying shares on the ASX or overseas stock exchanges and using his own name and Australian address. Just say one of his shares rises in value by say 50% – now if he wants to sell and pocket the profit – if he has held for less than a year the entire profit adds to his taxable income for that year. If he has held for over a year I understand 50% of the profit adds to his taxable income. He might have held for 10 years but the same 50% of the profit still adds to his taxable income. If you sell at a loss then the loss is tax deductible.
I am curious what the situation is if you were a millionaire Australia investing in Cayman Island registered managed funds. I assume the fund is all the time buying and selling equity investments here and there at stock exchanges around the world. My question is – on what basis is the millionaire paying tax on capital gains and losses on ASX shares if the Cayman Islands fund were to so invest a proportion of their capital? And how does it compare to what tax our mum and dad investors would pay if they so happened to experience exactly the same capital gain buying and selling ASX shares that the millionaire gained through his proportion of the Cayman Island managed fund?
Can anybody assist?
Obvoiusly someone who is absolutely incompetent to manage that sort of thing might chose Cayman Island registered managed funds because he thinks Australians are untrustworthy.
It looks as if foreigners (which would presumably include foreign funds) are not subject to CGT on share investments – only on real property and direct investments:
www.ato.gov.au/Business/International-tax-for-business/In-detail/Residency/CGT-on-foreign-residents,-temporary-residents-and-changing-residency/
Not sure though whether Malcolm himself might be up for CGT when he realised gains by selling his stake in the investment fund.
A reader mentioned having this book – Treasure Islands by Nicholas Shaxson
Warwick, firstly it would be presumed that Turnbull would have two or more self managed super fund (one complying for himself and one complying for Lucy -which she might manage and maybe a non-complying because he might be over the limit on the complying funds). Super funds pay a lower tax on earnings and capital gains. The overseas fund sends annually a return which includes the distribution made up of income, capital gains and with holding tax (an example is the Westfield America Trust -my self managed super fund has some investment in that as part of the Westfield Group). My self managed super fund (which is not that large and is mainly in the pension phase) prefers to invest in Australian shares because with the dividend imputation there is actually a positive return from the tax office. It can beat most Australian managed funds.
Warwick, could you give me a ring please, I’ve left a message on your answer phone