Feb

7

More info on gifting shares

Posted In: Stock Market

When Christmas is just around the corner, there’s always someone on your gift list who you want to go the extra mile for.
Have you thought of buying a loved one shares but don’t know how to go about it?

Here are some things to consider and how you can go about gifting a parcel of shares for Christmas.

All I want for Christmas is…
Try to buy a company that the person would be interested in following. If your loved one is:
• A shop-a-holic, in Australia you can choose from a number of retail companies such as Billabong, Myer or David Jones
• A handyman/woman, they might enjoy Wesfarmers which owns Bunnings
• A seafood lover, you could look at Clean Sea Tuna
• Environmentally conscious, there is a raft of innovative companies such as Geodynamics, Petratherm or Infigen.

A Christmas gift that increases in value
Apart from collectibles, what other gift can you give that will increase in value? Buying shares as a gift is a wonderful idea, but if you want your shares to go up in value, you may need to look at doing some research.

Think of buying shares like you’re buying a business. In actual fact, with share ownership you are becoming a part owner in the business, albeit a small one. So you’d want to know:

• if the company is making money
• how it is looking to grow its business
• if there are competitors taking away market share.

Blue chips
If you are worried about losing money, you may want to consider sticking with the blue chips.

The 20 biggest companies on the Australian market have generally risen in value. The S&P/ASX 20 has risen over the last 10 years with an average return of over 200%.

The best performer over the last 10 years in the ASX 20 has been Origin Energy which increased by 1035%.

The worst performer in the ASX 20 has been Telstra with a loss of 57%.
Gifting to children
Gifting shares is great but remember, if the person is under 18, then there may be some restrictions.

The child usually bears the tax consequences so make sure you check the tax rules before buying shares.

Generally, share registries will only accept registrations under an adult’s name. So if you want to buy for a child, you will need to register the shares under an adult’s name with a designation to the child.

Dividends to children
The level of dividends received by the child is also important. The Australian Tax Office has measures in place to try and prevent parents from funnelling tax obligations to children.
If the dividends come to more than $2,666 then the child may need to lodge a tax return and pay tax.

So obviously you’ll need to see your tax advisor before acting as each situation is different.

Ownership
Once the child turns 18, you can transfer the shares or account to them. You will need to fill out a change of ownership form with the share registry.

If you tick ‘no change of ownership’ then you shouldn’t incur any capital gains tax on the transfer but make sure you check the tax consequences with your tax adviser.

Buying your share gift
To buy your shares, you’ll need to find a broker. Obviously I would suggest you choose Bell Direct, which charges just $15 in brokerage. If you don’t want to use an online broker, you can go with a full service broker who will provide you with advice, but they’ll likely charge over $100 per trade, so it’s best to consider what would be right for you.

Remember, the minimum parcel of shares that you can buy on the ASX is $500. So to gift shares you’d be looking at spending at least $515.
Keep it interesting

All in all, buying shares for a loved one is not an easy gift to give. There is a lot of paperwork involved and with a minimum investment of $500 it can be pricey.

But if there’s someone you love who might benefit from learning more about the sharemarket, then there’s really no better way to pique their interest than to start a share portfolio for them.
You’ll be able to teach them what you know, show them how they can find out more, and best of all, together you can watch how their very own investment performs in the sharemarket.

After all, the quickest way to learn about investing is to actually have money in the game.

Happy trading!

Julia Lee is an Equities Analyst for online share trading platform Bell Direct. Julia provides information on share trading and online trading for frequent traders and investors.

Article Source: More info on gifting shares