Trading and Holding US Securities Most Efficiently, Broker Reviews and Minimising US Withholding Tax

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  [Deactivated] on 21/03/2017 - 23:41

  IB has a US$10/month minimum … not so great for trading a few times a year.

  Comsec is reasonable for people only trading a few times a year.

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    Scrooge McDuck on 21/03/2017 - 23:53

    IB has a US$10/month minimum … not so great for trading a few times a year.

    That fee is waived for accounts above a certain Net Liquidation Value.

    Comsec is reasonable for people only trading a few times a year.

    They're much more expensive than IB:

    Commsec:
    US: 0.31 %, plus a 25 AUD/p.a. custody fee, plus a huge spread on FX.
    AU: 0.12 %

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      [Deactivated] on 22/03/2017 - 00:04

      Multiply it out and see how much difference it actually makes.

      The difference in $500 (comsec) and $100 (IB) is insignificant when you've got US$100k.

      You're better off spending time on your investment strategy, than minimizing brokerage.

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        Scrooge McDuck on 22/03/2017 - 00:14

        Multiply it out and see how much difference it actually makes.

        Commsec would cost hundreds per trade. IB would cost only a few dollars per trade.

        You're better off spending time on your investment strategy, than minimizing brokerage.

        I really just want to buy and hold growth securities, but have the freedom to change securities.

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  mskeggs on 22/03/2017 - 11:19

  +1

  There is no restriction on opening an account with an American broker directly, and I think you should look at that. The only hassle is transferring money internationally.
  I don't hold any off shore equities directly anymore, but it used to be quite straight forward, especially if you hold those that aren't paying dividends (usual for tech stocks) and there is a separate section on your tax return that deals with any foreign taxation and income/gains.
  I don't think there is a single broker who allows both ASX and US trades at a competitive price, so having two accounts is the way to go, in my opinion.
  The paperwork to open the account is a bit over the top (remember it when people are telling you how good Americans have it with their lack of regulation!) but otherwise the Americans only want you complete one form annually, and only if you earned income. My broker mailed it to me each year. Most years it went in the bin if I had no income to report, and nobody ever contacted me in any way about it. But again, I wasn't earning dividends most years, so I expect it would be different if you had any meaningful dividend income.

  This is a bit of a specialist question, I'd suggest posting it on Hotcopper or another investment forum where you will get more replies from active investors doing what you are wanting.

  For the record, I use local ETFs for international exposure now, mainly as I invest via an SMSF and I don't want any extra compliance paperwork/headaches for the modest amount I would be investing.

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    Scrooge McDuck on 22/03/2017 - 13:43

    especially if you hold those that aren't paying dividends (usual for tech stocks)

    Bingo! That's a significant component of their appeal to me.

    Would it make sense to sell and re-buy around special dividends to avoid US withholding tax? Does that have to be a CGT event? Even still, it could be a beneficial tactic if no more than one special dividend is paid within a year.

    This is a bit of a specialist question, I'd suggest posting it on Hotcopper or another investment forum where you will get more replies from active investors doing what you are wanting.

    Thanks, I plan to. But I respect the community here and have seen Interactive Brokers mentioned by a few users, so hopefully they find their ways here and share their experiences. :)

    I use local ETFs for international exposure now,

    But you still need to file a W8-BEN form for each and claim a FITO, right?

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      mskeggs on 22/03/2017 - 14:09

      I mean ASX listed ETFs that invest in international equities. They do the paperwork and present an after-tax position so I don't have to do any of that, and the income statement just goes off to the accountant like a dividend statement. I haven't got one to hand or I'd take a look and see how each part is worded.
      I have found them OK, but they have limited liquidity, so the spread can be painful, and they obviously focus on a sector or index so they might not cover the specific equities you want, or conversely include some you rate as dogs.

      I don't think you could do well turning over equities to avoid the dividend, it is possible it might even breach the ATO tax rules (as we tax income higher than capital gains they might view it as trying to take gains as capital rather than income, but I'm speculating). In any case, transaction costs and the hassle of recalculating and paying CGT probably makes it more trouble than it is worth. And remember, any withholding tax you pay is credited against your Australian tax bill, so you won't be double taxed (although this is obviously still a problem if you don't pay AU tax!).

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        Scrooge McDuck on 22/03/2017 - 14:20

        I mean ASX listed ETFs that invest in international equities.

        So do I, I gather yours are domiciled domestically?

        I bought a US domiciled CDI ETF and was sent a W8-BEN form (of course I understood the nominal tax implications beforehand and had already emailed one to Computershare).

        they might view it as trying to take gains as capital rather than income,

        XD

        although this is obviously still a problem if you don't pay AU tax!

        XD

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        mskeggs on 22/03/2017 - 16:41

        @Scrooge McDuck:

        So do I, I gather yours are domiciled domestically?

        Yes.

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    [Deactivated] on 23/03/2017 - 07:59

    There is no restriction on opening an account with an American broker directly, and I think you should look at that.

    Have you tried speaking to a US discount broker recently? Most are unwilling to touch accounts for foreigners or americans living overseas. FATCA compliance has made it almost impossible.

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      mskeggs on 23/03/2017 - 09:12

      No, I haven't what a pain.

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  od810 on 23/03/2017 - 09:04

  I used to have VTS (which is VTI AUD docimiled) and like mskeggs said all the income was treated like dividend (subjected to 15% tax witholding). Very low liquidity so the spread is a bit crazy. But most of the time the price tracks quite well with the USD docimiled (subject to the fx market). Betashares has the nasdaq 100 etf (ASX:NDQ), that could work for you.