Share Trading

[Pieter]

Hi there,

Is there anybody trading shares/futures/options on the stock exchange in Australia? Or maybe forex? I do it as a hobby on the JSE (Johannesburg Stock Exchange) and would like to know more about the Ausie way of trading.

Pieter

[Bob]

I should imagine the shares in Australia on the Australian Stock Exchange (A.S.X.) not to be unlike the JSX. . . . a lot of mining companies and a certain number of industrials.

One feature of the ASX is that Australian companies paying Australian company tax (30%) on their profits before paying dividends to shareholders, allow Franking Credits to pass on to the payee of the dividend.

If you are one of the 80% of Australian tax-payers that earn between A$25K and A$75K a year, your marginal rate of income tax will be the same as a company pays in Company tax to the Australian gov't on its profits, namely 30%.

Once you declare your dividend from an Australian company with the 30% franking credits attached, you don't pay income tax on the dividend, unless you are in a higher income tax bracket and earning over A$75K.

This way, the Australian gov't does NOT get two bites out of your money . . . . 30% Company Tax on the net profits before a dividend AND income tax on the dividend also.

This also encourages Australian residents (who will be paying tax to the Australian gov't) to invest in Australian companies making profits from earnings within Australia and therefore liable to Australian Company Tax.

There is an enormous boom at the moment in resources. The Chinese are chasing every Australian CEO who travels to China to sell steel, coal, uranium, copper, lead, iron, natural gas, etc. etc. They cannot get enough of Australian raw resources, so investing your money in Australian companies will return you a good bonus . . . . at least in the near future.

Most industrials pay a half yearly dividend and a final end-of-year dividend. Mining companies tend to be purely capital growth, with a number of exceptions.

The cheapest trader is the Commonwealth Bank's share trading arm, CommSec.

You can download their prospectus and if you trade more than 15 trades in any one quarter, they will give you the software to look at real time share trading as it happens on the floor.

Trades up to A$10K are $19.95.

Hope this helps.