Migration to IB Australia Pty Ltd: Margin Restrictions for Retail Accounts

[Stephen James]

Not too sure Scott. I find it odd that Australian residents are even offered after IB set up here.

It might have to be USD account as the brokerage for AUD denominated is 0.12% trade value Min $7.50, unless that is to trade the ASX – its not clear.

You could contact them with all the relevant questions and see what comes back.

[Stephen James]

I’ve had a bit more of a read and it would seem that it would be a no go for margin.

The account opening process is to fill out some TS agreements to gain access to the TS platform. Then you have open an IB account.

So if you have an existing IB account, I’d say the trading permissions would not change and Australian residents would get diverted to IB Aust if opening a new account.

IB UK do not do trust accounts so that is not an avenue either.

TS are just acting as a referrer to IB it seems, to get their platform exposure and for referrers fees, hence the slightly higher brokerage rates than with direct IB.

[ScottMcNab]

Craig Fisher wrote:

Not too sure Scott. I find it odd that Australian residents are even offered after IB set up here.

It might have to be USD account as the brokerage for AUD denominated is 0.12% trade value Min $7.50, unless that is to trade the ASX – its not clear.

You could contact them with all the relevant questions and see what comes back.

I’m not actually after a margin acct…just found the link in a forum and thought I would post it here in case was of any use to others..

[TrentRothall]

Well i seem to be a ‘Lucky’ one who managed to hold onto my IB US acc untill now. Now IB with their no Margin Have screwed my ASX MR system pretty much ffs, I guess ill trade 10 positions for now. I also have a second account with a cash balance in it that ill transfer across to hopefully provide me a buffer to place orders.

I’m guessing no one has come up with a solution to the IB issues?

[Anonymous]

Although it may be a bit painful to set up (and ongoing with tax issues), is there anything stopping you setting up a company in the US, funding it, then setting up a company account with IB US? Can non-professional/non-wholesale company accounts in the US get margin?

I’d imagine that as there is a tax treaty between AU and US that if 30% company tax on profits would otherwise need to be paid in Australia (as the Australian authorities will deem the activities as Australian based as I assume you would be sitting here in Australia the majority of the year doing the trades) that when the taxes are due to be paid if you can show the first 25% company tax due in the US has been paid to the US authorities you would only need to pay the remaining 5% balance to the Aust govt ??

I’d be quite confident that any city/state in the US would be happy to have a business registered there, a pile of money poured in and future taxes paid there, especially from individuals with a clean background, not funded by questionable sources, directors/shareholders from good countries like Australia etc?

How then to take tax effective dividends/salary/directors fees on an international basis, hopefully have the taxes franked so you don’t pay income tax on them, I have no idea.

[TrentRothall]

Thanks Matthew, i might have to look onto it. i imagine it would be painful as you said!

[ScottMcNab]

Hi Trent
I think I remember reading that you dont use the CBT code as it didn’t give you the exposure you wanted..was that right ? Have you tried it on the RUA with the CBT code…may find that 10×10 gives good results and can avoid the headache altogether….or even 5×20 if filter out the small fry

[TerryDunne]

Matthew,

Tax in the US is quite different in a range of ways from here.

On the positive side, you can choose to domicile your shelf company in a ‘no tax’ state. For example, I think Arizona has no state taxes.

On the negative side, depending on your setup, brokerage costs may not be tax deductible…

This isn’t meant as tax advice of course (while I’m an accountant, I’m not a tax accountant and certainly not a US tax accountant), just to highlight that it can be quite different there.

Regards,

Terry

[JulianCohen]

Have a look at Singapore…Relatively easy to set up a company and I run my IB from there with margin. Tax is minimal.

[Anonymous]

Julian what is your residency status there in Singapore? Do you have any other residencies globally that you have to consider from a tax perspective?

For me, I’m clearly spending the majority of the year in Australia. And even if you only spend say three months of the year here but have a property (even just a rental), or bank accounts, or a mailing address etc the Aust govt will still deem you are ultimately resident in Australia as you are using it as your home base and you will still be taxed for your global incomes here in Australia (used to be just a “183 days in the country” rule, but they altered it two or so years ago to capture those riding the 183 day margin and enjoying the fruits of the country for half the year without needing to declare global income or pay tax on it here).

Aust and Singapore have a dual taxation treaty, so again it would be a case of probably not needing to pay any more tax in total than what you would have had to pay in Australia on its own without the Singapore idea.

Good to know you can get a margin account with such a structure.

Do you think IB would still give a company account to a Singapore company customer that clearly has directors/activities being performed outside Singapore? I’ve had a company in Singapore in the past and the workaround is a nominee director who is a Singaporean citizen/resident and pay them $SGD 2,500 a year for the privilege.

I’ve been a big fan of Singapore for many years now, including how well it can allow you to do business, tax effectiveness etc. I’ll be the first one to tell people to go set up business in Singapore, I just didn’t know how well IB was placed in giving accounts to companies there.

[JulianCohen]

I’m a PR in Singapore and have been for over ten years, so that made it easy for me to set up with IB.

If you have a Singapore company already, I would definitely check with IB about opening a company account. Can’t hurt to ask right? Unless they specifically ask questions about directors residences then I don’t see a need to tell them, although nowadays I’d be surprised if they didn’t ask about anything that was an issue for them.

[TrentRothall]

surely it can’t be that easy can it? Seems to be too good to just start a company in Singapore. A nice tax friendly country would do wonders for compounding..

[JulianCohen]

It won’t be easy Trent but it will be easier than the US I would suggest. Unfortunately you would have to go there to create a company I’m sure, and also you need to have a Permanent Resident or a National on the board of the company….so they don’t just give it away

One thing you could look into, which is just occurring to me as I type this, is what is IB’s policy on BVI companies, or Isle of Man or Cook Islands. That type of company is very easy to set up, but financial institutions are now very wary of them due to money laundering schemes.

[Anonymous]

Yes it would be interesting to know their positions on these regions.

Also middle east. If you set up a company in the UAE, specifically an offshore company somewhere like Ras Al Khaimah (commonly referred to as a “RAK Offshore”) then you could potentially open an IB account with that company and pay zero tax on earnings in the UAE. If you use a nominee you can also have none of your own name on any public records of the company and as the UAE is not a member of the OECD if any jurisdiction ever went knocking on their door looking for information sharing on profits, accounts, cash flows, tax avoidance etc they’d tell them to stick it where the sun doesn’t shine and have no obligation to provide. This is one of the issues with the likes of BVI, Isle of Man, Cook, Caymans, Panama etc. They are more and more becoming responsible to adhere to information sharing treaties.

Still, I’m not advocating tax avoidance or any such activity. It would however be good to know if IB would in fact be willing to open an account for company customers in these odd countries/regions and offer margin to boot.

[Nick Radge]

You won’t be able to setup a company in the US. The new money laundering / terrorist laws make it impossible. We used to have a bank account over there but had to close it.

[Author]

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