I've got some legacy issues from my early investing days - a quantity of stocks (~$800k) in my own name, that generate taxable income for me (a good problem to have). However, they are taxed at my marginal rate (39%), where as the investments I have in my family trust, investment company and self managed super are taxed between 15 and 30%. Obviously, I'd prefer to have these investments held in these entities in the long term.
However, moving them across is a capital gains tax event, and there is about $200k of unrealized gains in this portfolio. i.e. if I were to move it all across, I'd be up for a major capital gain tax bills.
I've sliced and diced the higher yielding / lower capital gains stocks together, which would move about $20k/year of dividends into the other accounts, for a cost of about $12,000 in capital gains tax and brokerage. That would save me about $1800/year in tax, or a ~15% annual return. Sadly, I'm taxed either way - either a lump sum right now, or a stream of taxes in future.
I see my three options being:
- Leave it as it. Just wear the $1800/year in extra tax that I'm paying, but save the $12k
- Transfer it and pay the CGT. This would seem to be getting an ongoing 15% return on my $12k (a pretty good ROI), with low risk (regulatory risk that the company/super/trust tax rules change).
- Wait it out and hope for a market crash, so I can transfer my stocks at a lower price (realize less capital gains).
While it is probably trying to time the market, I'm tempted to go with option 3, transferring any individual stocks that have a negative or neutral capital gain as the opportunity arises?
What would you do?