Eureka Correspondence

International share trading, is Gowing an A-REIT? Changes to the seniors health card, and franking credits among the top 10.

International share trading

Thanks David and Clay for information on international share trading and the first recommendation for overseas markets, Whiting Petroleum (see each of Clay’s recommendations).

I go through a CommSec broker, but I think it is around $100 a trade. And yes there is a bit of paperwork to go through to start off with.

Laurie Wilson

You may be interested that Etrade International shares will not accept a W-8BEN form and won’t supply an intermediate. Inexplicitly, they will not help to avoid the extra 15% tax on US shares. I have owned Apple shares for eight months and have to move them to CommSec International before I sell to avoid double taxation. WARN others!

PM

David Gilmour’s response: Thanks for your letter. You are correct – CommSec and some other brokers stipulate that you must fill in the W8-BEN form through them before you begin international share trading, but Etrade doesn’t and, furthermore, won’t accept the form.

If you do have international shares with Etrade, you must submit the form to the Internal Revenue Service (IRS) directly.

Is Gowing an A-REIT?

I have been looking at real-estate investment trusts. I have also been reading about Gowing Bros. It looks like a REIT, has all the characteristics of a REIT, but I don't think it is one. Can you help me, please?

Rosemary Steinfort’s response: Gowing Bros. is a listed investment company that buys listed companies. It does hold a majority weight in property but it is not a property trust as it does not have the structure of a trust, it so cannot access the tax-free benefits with respect to income. Some of the A-REITs may have an investment company within their stapled structure – but most of the income (over 70%) of the trust must come from property related activities which are actively managed rather than investment. For information on REITs, see my articles A-REITs: Building income returns and High-risk signs for high-yield A-REITs.

I cannot offer an opinion apart from that Gowing Bros is trading at a discount to net asset value (NAV). Some similar companies that invest in listed securities, such as Australian Foundation Investment Company (AFI) and Argo Investments (ARG) are currently trading at premiums.

Changes to the CSHC

With the government’s proposed change to the super pension income rule for assessment in Centrelink, how will it affect the Commonwealth Seniors Health Care Card? Will super income be assessed as well as the asset? Hope you are able to comment, cheers.

Phil Harris

Editor’s response: Thanks for your letter. Eureka Report’s expert on all matters relating to SMSFs, Bruce Brammall, wrote about this topic in May (see his article). He says access to this card will be restricted from January 1, 2015, and planning for the change is critical.

Franking credits among the top 10

I read the report Dividend Testing LICs and ETFs by Scott Francis. It seems to me that he is comparing dividends from major companies that do not include franking credits with dividends from listed investment companies (LICs) that do include franking credits. Am I correct?

Name withheld

Editor’s response: Thanks for your question. The LICs and exchange-traded funds (ETFs) that Scott lists (which issue franking credits) have stakes in the Australian stock exchange’s 10 biggest companies – the 10 companies listed in the article. Each of these companies, except for CSL, pay fully franked dividends.

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