Tax Time! Or, as Borat would say:

As we head towards June 30, a bit of housekeeping skills can be used to clean up the old portfolio and get it positioned nicely as we approach the new financial year and all the riches it can (or is meant to) bring.

You have to detach yourself a bit from your mindset and look at this time of year as just a business. Leave any emotional attachment to any shares at the door whilst you go through this process.

A good start to get you fired up is to watch what Kerry Packer said in 1991 about paying tax:

So, when you are ready for action, grit the teeth and take the hit appropriately, no matter how brutal, before June 30.

You can:

  • Sell any share outright to crystallise a loss.
  • Calculate your potential liability and plan to have the cash to cover it off. Even hold off profit taking on overweight positions until after June 30, if need be.

Many a time I have seen clients stubbornly hang on to a position too long, just so they can claim their 12-month CGT discount bonus but end up with The Prince that turns back into a Frog, just as the tax bill arrives. Think Big Un!

Also note that, tax year end selling can produce many oversold positions in already underperforming shares and that by about mid-July, they tend to have recovered from the year end bashing.

Suspended stocks can be transferred off market, to crystallise a loss. Real dog stocks can be shuffled on via services like deListed offer, even if the ATO has not officially declared a company yet dead.

These are all some of the basic observations I have noted over the years, though I would consult with your accountant first, just to make sure that everything you do is legitimate and above board.

Oh, and before I forget, I mentioned last week on how the hedge funds got around the GFC rules that banned the shorting of bank shares in 2008.

They sold 1000s of futures contracts and then promptly brought back every share that made up the contracts except for – and you guessed it – any banking shares, thus leaving them legitimately short!

A politician will never outsmart a trader.

Happy housekeeping,

The Secret Broker can be found on Twitter here @SecretBrokerAU. Feel free to contact him with your best stock tips, so he can lead a simpler life.

This article does not constitute financial product or tax advice. You should consider obtaining independent advice before making any financial or tax decisions.