Margin Loan

Hi All,

I've recently taken out a margin loan - making a couple investments in managed funds, but i'm wondering what to do with my existing managed funds. I would like to use the margin loan to make additional investments into those funds, but have been advised that i need to transfer these to the margin loan to be held as security.

My questions are thus:
1) Does transferring the funds involve any taxation issues?
2) Is it possible to make an investment using my margin loan (CommSec) through a discount broker like InvestSmart (the fund has a 4% entry fee which CommSec does not rebate 100% of)?

Thanks for your help.

1) there should be no taxation issue, as you are still the beneficial owner of the fund - you aren't "selling" your holdings, so no CGT event should be triggered. Double check this with your accountant just in case - some margin lenders may do things a little differently.

I've transferred funds between LevEq and St.G margin loan accounts before without any problems - in most cases it's effectively just a loan refinance (similar to refinancing your house).

2) Check with your margin lender whether this is possible - it shouldn't be a problem

In relation to the second question:

As the margin lender Commsec will be the legal owner of any managed funds (and shares) held through the loan, with the investor the beneficial owner. Whether there is a financial adviser or investment broker (to get the entry fees rebated) listed on the funds that you invest in is treated separately from this, so there would be no problem in using an investment broker other than Commsec when investing in funds. It would also be possible to change the adviser/broker on any existing managed funds held through the margin loan – most brokers will have a nomination form to allow you to do this.

That was quick, thanks Sim and 2020!

Being in my early 20's and not having an accountant, any idea what i should look out for (hopefully there are some kind tax accountants willing to help )? I note that the stat dec says the following:

The company will hold the shares as a trustee for the purchaser. The company is applying for exemption under Section 59 (A) of the Duties Act.
The purchase money for the shares were provided by myself/ourselves and there is no change to the beneficial ownership. The application is for exemption under Section 59 (A) of the Duties Act.

Thanks again.