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AU shares - portfolio update: 30 May 2007

May 30th, 2007 at 07:07 am

I had planned on selling off my portfolio of Australian stocks during the next financial year to reinvest the proceeds within our SMSF, but I've decided against this course of action as the realized capital gains would minimize the benefits of shifting the investment into the tax-sheltered SMSF. Instead I'll just salary sacrifice a large part of my salary into super each year (up to the A$50K deductible contributions limit). Since I'm not planning on selling off my portfolio in the next year I've decided to prepay 12 months interest on the bulk of my margin loan balances, so that I can take the usual tax deduction this financial year. For my Comsec loan I've sent in the paperwork to prepay $100K out of the $116,612.16 loan balance, at an interest rate of 8.75%. If I have any spare income during the year (eg. from takeovers) I'll pay off the remaining $16K of variable rate loan remaining. I'll also prepay $120K of the $150K loan balance on my Leveraged Equities margin loan before the 30th June.

For the next two years I'll be supplementing my salary income with the $34K I withdrew from my superannuation account. This will allow me to salary sacrifice at a high rate for those two years. After that time I'll look at slowly selling some of my Australian stock portfolio each year to allow me to continue salary sacrifice into our SMSF. If I get enough pay rise in the next couple of years to offset the amount I wish to salary sacrifice, I'll retain the existing stock portfolio holdings until I retire, at which time I'll have a very low assessable income (under the new Simpler Super rules pension income isn't taxed after you turn 60) and I could then sell off a portion of my holding each year without accruing much CGT liability. Until 75 I would still be able to contribute the proceeds into super while drawing a pension. After 75 I wouldn't be able to contribute into my own super, but I could start to contribute any excess funds into the super accounts of DS1 and DS2. Under current rules up to $150K a year of undeducted contributions could go into each of their accounts each year. As they will be in their 30s by that time I don't expect that they would be contributing that much into their super accounts yet.

All this planning assumes that the superannuation tax rules don't change much in the next 30 years - a most unrealistic assumption! This plan will obviously have to be updated as the rules and our financial situation changes over time.

Current holdings:
Leveraged Equities Account (loan balance $150,000.00, value $316,303.73)
stock qty price mkt value margin
AAN 295 $15.22 $4,489.90 70%
AEO 1,405 $2.04 $2,866.20 65%
AGK 510 $15.32 $7,813.20 70%
AMP 735 $10.01 $7,357.35 75%
ANN 480 $12.00 $5,760.00 70%
ANZ 1,107 $28.78 $31,859.46 75%
BHP 748 $31.06 $23,232.88 75%
BSL 781 $11.27 $8,801.87 70%
CDF 6,943 $2.02 $14,024.86 70%
CHB 118 $51.01 $6,019.18 65%
DJS 2,000 $5.13 $10,260.00 65%
FGL 3,751 $6.27 $23,518.77 75%
LLC 481 $19.82 $9,533.42 70%
NAB 316 $42.40 $13,398.40 75%
QAN 2,175 $5.06 $11,005.50 70%
QBE 983 $31.56 $31,023.48 75%
SGM 830 $27.08 $22,476.40 70%
SUN 963 $21.16 $20,377.08 75%
SYB 2,880 $4.37 $12,585.60 70%
TLS 5,000 $4.78 $23,900.00 80%
TLSCA 3,000 $3.31 $9,930.00 80%
VRL 1,500 $3.20 $4,800.00 60%
WDC 783 $20.77 $16,262.91 75%

Comsec Account (loan balance $116,612.16, value $229,848.59)
stock qty price mkt value margin
AGK 240 $15.32 $3,676.80 70%
AAN 139 $15.23 $2,116.97 70%
APA 4,644 $4.22 $19,597.68 70%
ASX 200 $48.39 $9,678.00 70%
CBA 130 $55.03 $7,153.90 75%
CDF 43,997 $2.02 $88,873.94 70%
IPEO 54,000 $0.019 $1,026.00 0%
IPE 8,000 $0.995 $7,960.00 60%
IFL 1,300 $10.25 $13,325.00 60%
LDW 1,350 $7.81 $10,543.50 0%
NCM 300 $21.68 $6,504.00 60%
OST 2,000 $6.52 $13,040.00 70%
QBE 607 $31.60 $19,181.20 75%
RIO 60 $94.55 $5,673.00 75%
THG 4,000 $1.02 $4,080.00 50%
WBC 300 $26.03 $7,809.00 75%
WPL 220 $43.68 $9,609.60 75%


Changes to portfolio since last update:

I sold my Qantas shares on the market for $5.39 on the last day before the takeover offer closed. I guessed correctly that the APA offer would fail to reach the required acceptances to proceed, and over the next few days the QAN share price dropped, as had been expected. However I had expected the price would drop to under $5.00. In fact the stock price has since increased after the Qantas management released an upbeat assessment of their prospects, and is now trading around $5.60. The proceeds of the sale reduced my loan balance below the $150K I had prepaid interest on for this financial year, so Leveraged Equities automatically moved the surplus amount into the linked Cash Management Account so I'm at least getting some interest on this bit of borrowed money.

My AMP holding increased by 15 shares due to a dividend reinvestment. I no longer enrol in DRP for new stocks I buy as there is little if any price discount and the hassles of keeping records for CGT calculation outweighs the benefits. I simply use dividends to help pay the interest on my margin loans.

My QBE holding increased by 17 shares due to a dividend reinvestment.

My SUN holding increased by 113 shares due to a Share Purchase Plan offer I took up.

My SYB holding increased by 32 shares due to a dividend reinvestment. This company is currently subject to a take over offer, which pushed the price up from $3.70 to $4.37. As the offer is a cash plus stock mix I may decide to sell my holding on the market rather than accept the offer.

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