21/11/2006 - 21:00

Well, I declare, ATO wants its cut

21/11/2006 - 21:00

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The heirs and successors of the late Rene Rivkin are not alone in worrying about tax matters. The next 12 months could prove to be a bumper time for tax fears, especially for the thousands of investors who have made profits in the booming resources sector of the stock market.

The detail of Mr Rivkin’s tax problems is a family secret, partly exposed by media reports, which allege a demand of $30 million from the Australian Tax Office.

If the dollar figure, not to mention the claim itself, is genuine and not just an ambit grab from the ATO, then bankruptcy might be a preferred route for the estate of the late Mr Rivkin.

The same might also be the preferred option for some still-living investors who counted, or worse still, spent the profits from their trading in tear-away speculative success stories such as Paladin Resources, Oxiana or Fortescue Metals.

The problem, which comes around as routinely as every share market boom, is the need to keep up to date with your tax payments.

Once upon a time, when provisional tax was the favoured collection method of the fiscal fiend, anyone making a share trading profit in one tax year faced a corresponding bill of roughly the same amount for the following year on the assumption that he would make the same profit again. The ATO argued that it was simply jumping in early for its share.

The problem with that system was that booms end, and so do overnight profits from share trading, meaning that last year’s windfall was unlikely to be repeated – though a tax bill arrived on the assumption that it would.

The end result was lots of paperwork and appeals to the ATO to vary assessments, plus a few famous bankruptcies.

Those hard times have given way to an instalment payments on tax, which should minimise the pain felt by share traders.

However, as the Rivkin example appears to show, even the best and brightest among us can often fall down on the question of tax, especially in making sure that we’ve set sufficient profits aside to make sure we pay what’s fair.

Briefcase  has no inside knowledge as how the ATO is handling the current boom in speculative share trading, except to feel confident that boom towns like Perth and Brisbane, where fat short-term winnings have been made from the flotilla of new floats, and other high-flying stocks, will be a marvellous hunting ground for the tax inspectors.

A very easy starting point to find out who made what is the initial share registers of new floats, and the share registers today. Anyone who disappeared between the two inspections will be presumed to have made a profit, and part of that ought to have made its way to the ATO; and if it hasn’t been declared, why not?

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On the question of regulation making life harder for all of us there is a nasty case of ‘password creep’ heading our way from the US.

There is currently a crackdown on fraud in the country that invented the internet, and which has become the world leader in internet shopping and banking, which sounds good on one hand but more than a little worrying for the average consumer on the other.

The problem is a growing requirement for net users to have ever-more complex passwords and user names, and for those tricky little sets of numbers and letters to vary regularly.

Gone are the days when a user name could be as simple as a surname and family name, and the password the name of the family parrot, cat, or dog.

From what Briefcase has been reading, the new system heading our way will involve protective measures such as passwords with up to 12 characters, some uppercase and some lowercase, plus the inclusion of the odd ampersand, @ sign, or some other symbol from the top row of a ‘qwerty’ keyboard.

At first blush this sounds like a system that will add to the protection of net shoppers, and bank users.

But what happens when more complexity is layered on, such as all bank accounts requiring two (or more) forms of password, plus a requirement to routinely change the details for added protection?

It might be naive of Briefcase but it reckons this increasingly complex world of passwords is not for the protection of the customer, but more for the protection of the shop, or bank.

Why is this so? Because right now, most of us can remember our small list of passwords, and we learn to live with them without breaking the first rule of passwords – writing them down where some dodgy dude can find them.

This new, and far more complex system, will force many more people to resort to memory aids – and you can bet that these will become the first question from a bank in future fraud claims.

•••

On a more straight forward matter, Briefcase noted that BHP Billiton is the latest company to express public anger with serial under-bidder David Tweed – the chap who makes direct, low-ball bids for parcels of shares and seems to routinely attract enough of the gullible to keep his business afloat.

Briefcase is not an apologist for Mr Tweed, but it does seem to be somewhat unreasonable to heap all of the blame on him; just as it’s unreasonable to blame buzzards from picking the bones of a dead horse, or a journalist or lawyer from chasing an ambulance.

In a way, everyone is simply doing his/her job and if someone is so silly as to accept Mr Tweed’s share purchase offers perhaps they really ought not to be trusted with money anyway.

Take this example Briefcase saw the other day. A shareholder in BHP Billiton was offered $38,660 by Mr Tweed’s Direct Share Purchasing Corporation for a parcel of 1,933 shares. On the day the letter arrived the parcel could have been sold on the stock exchange for $51,200, creating a theoretical profit for Mr Tweed of around $12,500.

The gap between the market value and Mr Tweed’s offer is so great that some people run around screaming ‘change the law and stop this man’. Perhaps they’re right.

But, there is also an argument that asks what’s wrong with someone offering a low-ball price. It’s done every day in the property and art markets, and by many people wanting to buy a used car – so why are shares different?

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“Seriousness is the only refuge of the shallow.” Oscar Wilde

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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