CGT & Me

[Jonchilds]

I'm in a bit of a dilemma here.
I currently have an account with Colonial FS in their 'Managed Investment Fund' category, which has limited options for where I put my money, and who manages it.

CFS also has a 'First Choice Investment' account, with a wider range of managers, and marginally lower fees, and a couple of other things which makes it more attractive for the long term.

I have a 'low' income this year financial year due to being a student and span the $30k margin. I will be under this margin once all my expected deductions are punched in (Working student FTW!), so additional income is taxed at a slightly lower rate than it will be next year.

I want to move the money from my MIF into a new FCI account, and this will attract CGT. It will be wise to move it this financial year due to the deductions and income and tax brackets blah blah blah.

Do I:
- Move it now?
- Wait until the market has picked up a bit and cash out?
- Wait until the next distribution is paid?
- Move it in June (makes full use of CGT reductions?)?
- Move it in July (Attracts more tax)
- Leave the money where it is, and put future invesments into the FCI account?
- Do something else?

[M_Green]

Just out of interest, how much gain are we talking here?

[Jonchilds]

Estimating total between $3k-$4k total for this year, which will see me paying the full amount, instead of the 50% CGT reduction.

Performance difference between the two is probably 2%pa for the most part, which is bugger all, but I will fall below the $30k/30% bracket after deductions are taken into account, so It makes sense to switch whilst I have the opportunity to pay less tax...

[M_Green]

If your keen on switching then doing it while your tax liability is low is the obvious option, for a 2%pa gain, maybe leaving the funds and start investing in the new fund may be the most cost effective???.

another thing to check before switching though is where the fund managers are investing the funds, as the saying goes past performance is no indication of future performance, even though the fund shows 2%pa higher returns....if for example the new fund manager had a higher wieghting to aus prop...and the growth returns to normal level (which they are) then your return on investment will obviously not be as good...

too give you an example....some industry funds are invested heavily into aus prop...now over the last few years this has meant their returns have been very high...but as the growth slows down, so will theirs.

but don't take my advice, i'm a dole bludger.

[Jonchilds]

I've had a good look at the funds, they're all fairly similar (Aust. Shares).
Will be 35% Aust. Shares, 20% Small companies, 10% Property & 35% International Resource Shares

I'm quite risk adverse at the moment. What I've got in the fund ain't gonna get me much, and I don't mind mulling a period of poor performance (look at todays ASX200 130 point drop). The 3-5 year outlook seems to be similar to the last few years. If things look dodgy, the property fund would probably end up with a larger share.