change of director's interest notice ..., page-23

There is no incentive to sell as low as possible. At best he will recieve the top tax rate back (45%) from any loss.

Say he made a capital gain of $300,000, he will probably owe 45% tax ie $135,000

He could either

A) Sell shares at a $150,000 loss and reduce his overall capital gain to $150,000 - resulting in a bill of $67,500

Or

B) Sell shares at a $300,000 loss so he doesnt have a capital gain resulting in no tax bill

If he took option B) it would have cost him $150,000 to save $67,500....that seems like a pretty lowsy move to me!

I'm not an accountant, but I do feel i have some of the more important concepts grasped. The tax system is so widely misunderstood by the community and it must lead to some poor decisions. Like people that complain about being taxed more simply because they have a second job - wring you are getting taxed more to make up for the fact you will probably slip into a higher tax bracket.


While on the topic, I am always amazed that people will invest in things for for the upfront tax benefit. Things like forestry etc. The aim of an investment is to make money not minimize tax!

End rant