Tagged: fund setup asset balance
September 24, 2014 at 2:21 pm #2617
I have a number of equity assets for which there are multiple buy and/or sell transactions prior to the ‘migration date’.
I can easily enter the current holding and net cost at the ‘migration date’ but this doesnt represent the true picture from a tax perspective where there are multiple transaction dates.
What is your recommended practice for handling these situations:
1) Holding at migration date consists of say 1000 units bought in 2 batches of 500 units on different dates at different costs
2) Holding at migration date consists of say 1000 units as a result of an initial purchase of 2000 units and a subsequent sale of 1000 units (on different dates at different prices).September 24, 2014 at 5:20 pm #2618
Asset History can be recorded at Parcel level totalling to Holding of a equity.
In Opening balances, Add opening Balances, after you have chosen Asset class- Direct equity- You have an option to Add New holding- Which may be say TLS-
Under which you can record costs of different parcels with different date of purchase and cost.
I would say for scenario 2- you may record the date of purchase and cost of the remaining parcel, but may not
be possible to record the buy and sale historical transactions .September 25, 2014 at 12:07 am #2619
Thanks for the response BOS.
For McLowd’s attention I would say that there are 2 issues here that should be addressed:
1. These scenarios, which most be commonplace are not discussed in any of the reference or help material available and in fact there is no on-screen information to suggest what the difference between the ‘New holding and new parcel’ and ‘New holding only’ or any clue has to why you would want to use one option over the other. It is still not clear to me what the precise steps are to record 2 separate purchases for the same holding during Fund Setup.
2. The inability to support a sale of a portion of a parcel prior to the ‘initial migration’ is an oversight as this is a genuine real world situation.
The lack of facility to support these situations means that the system does not hold an accurate representation of transactions executed which can only lead to errors in the representation of the taxation position when the holding is fullly disposed of.September 25, 2014 at 12:30 am #2620
Thanks for the feedback.
I will ask our Product Manager Graeme McGuire and Support Manager Chirag Doshi to review these items and respond accordingly.
In the meantime I agree with your comment about the help materials lagging the current level of functionality, and we are very aware of that fact. Our immediate focus is on the release of 3.0 and once this has been bedded down we will have a bit more time to go back and fill in the gaps in terms of online tools / assistance.
As I have mentioned in previous threads in order for the software to be free – and for this to be a sustainable model – we have had to build the accounting software iteratively, and this has meant involving the user community in our collective journey. While this approach has its frustrations, it also means savings in the millions of $$ annually in terms of licence fees, and hence improved retirement outcomes for many Australians.
AshleyOctober 10, 2014 at 3:57 am #2645
Thanks for your post. I understand that what you are looking for is the ability to report historical asset information prior to migration to Mclowd.
Given current priorities in relation to support for individual trustees (and now practitioners), we do not anticipate supporting this use case at this point it time.
Please keep your feedback coming as it is invaluable for the ongoing evolution of the Community.
Regards,October 10, 2014 at 6:34 am #2647
If I understand what Chirag is saying then it will be impossible to calculate capital gains or losses from purchases made prior to migration??October 11, 2014 at 6:01 am #2648
Yes, I believe that this is the problem.
The point of the software (I would have thought) is to allow you to track all investments accurately and produce credible tax statements. If there is no means of capturing precisely when each asset was purchased and at what cost then it is not possible to calculate an accurate tax position which makes the whole thing kind of pointless…October 11, 2014 at 6:30 am #2651
Our Product Manager Graeme McGuire will revert shortly, but I can confirm that all of the underlying accounting / tax logic has been subject to rigorous review by our Advisory Board.
AshleyOctober 11, 2014 at 7:03 am #2652
Thanks for your post regarding historical asset information. Per your original questions ,
“1) Holding at migration date consists of say 1000 units bought in 2 batches of 500 units on different dates at different costs”
When the user migrates to Mclowd and enters their Opening Balance they have to record :
– Original Purchase Date
– Original Purchase Value
– No of units at migration
– Value at Migration
Using your example and extrapolating with some data – lets say you
– Migrate at 30-Jun-13
– 1,000 Shares of Telstra – (Holding)
– 500 Units bought at $4.50 on 1-Jan-2010 (Parcel)
– 500 Units nought at $5.00 on 1-Jan-2013 (Parcel)
In this example you would enter 2 separate Parcels of Telstra stocks with the original purchase price and the original dates.
The cost basis would be
– Parcel 1 : 500x 4.50 = $2,250
– Parcel 2 : 500x 5.00 = $2,500
Total Cost Basis = $4,750
Mclowd will record these separately and this information will be used for any subsequent sale and tax calculations.
“2) Holding at migration date consists of say 1000 units as a result of an initial purchase of 2000 units and a subsequent sale of 1000 units (on different dates at different prices)”
When you migrate , you will need to enter :
– 1,000 units remaining at their original cost and original purchase date.
So for example , if you purchased 2,000 units of BHP at 1-Jan-2013 for $30 and sold 1,000 units on 1-Feb-2013
At 30-Jun-2013 you would enter the remaining $1,000 at $30 = $30,000 as the remaining costs basis.
If there are multiple dates and different prices then these need to be entered as separate parcels in Mclowd as per your first question.
Mclowd will not record the cost information for the 1,000 units sold prior to 30-Jun-13 migration as there is no need to record this for future tax reporting or compliance.
As long as the cost basis is captured correctly at the time of migration then there should be no issue with calculating the correct capital gains for both costs basis and term (short term and long term).
Now that we have delivered the 3.0 release I will be recording more instructional videos and will be sure to include this as an example. We already have a number of help videos in the Fund Set Up screen.
Let me know if this answers your query properly
GraemeOctober 11, 2014 at 7:22 am #2654
Thanks for your comment regarding Capital Gains …”If I understand what Chirag is saying then it will be impossible to calculate capital gains or losses from purchases made prior to migration??”
Just to clarify……
Mclowd does calculate the capital gains and loss from purchases made prior to migration as it captures the original cost basis of that asset.
GraemeOctober 11, 2014 at 7:37 am #2655
Thanks for your detailed response which is most helpful.
However, I am still slightly confused and this may just be a matter of terminology. This is further compunded by the fact that it is now a number of weeks since I completed the initial Fund Setup.
For a given share, TLS say, I presume that the Fund is only permitted to hold one ‘holding’ at any point in time which consists of one or more parcels (less any disposals). A ‘parcel’ therefore is a quantity of a share bought on a given date at a given price. Right?
When adding a share you get the choice of ‘New holding only’ or ‘New holding and new parcel’. It is not clear to me what ‘New holding only’ means as this appears to add a share with no quantity? What would be the point of that?
There may be a third choice, where you select an existing holding from the list of ‘Your Holdings’. I say ‘may be a third choice’ because I havent done the experiment to determine if, for an existing holding, selecting that holding produces the same outcome as ‘New holding and new parcel’. It seems to me that, if my understanding of terminology as described initially is correct, if I want to add a new parcel to an existing holding, the appropriate option is to choose that holding rather than ‘New holding and new parcel’. Would this create a second holding for the same share with a single parcel?
Anyhow, to go back to the original ‘problem’ – it is not clear to me whether by following your suggestion for 1) I end up with a) 1 holding with 2 parcels of 1000 units or b) 2 holdings with a single parcel each of 1000 units.
If b), then my issue would be, yes this is correct from a taxation perspective, but makes an administrative overhead going forwards when having to treat a single holding as two separate holdings.
Looking at the ‘Add Opening Balance Entry’ page accessed via Fund Setup -> Investments, in retrospect my problem may well have been one of understanhding of terminology and/or interface when I first completed this step.
I was expecting to be able to add a Holding (eg 2000 units of TLS) then enter multiple transactions with different purchase dates.
My increased familiarity with the interface now, combined with your response, makes me think that I should perhaps have been adding additional parcels to a single holding, with the initial quantity entered representing the initial purchase quantity not the total quantity held on the migration date.
I now have a problem in that I have set up all my assets with a total quantity held on the migration date, a purchase date equal to the initial purchase date, and an averaged cost (which takes into account the acquisition of additional parcels between the initial purchase date and the migration date).
How can I best rectify this without starting all over again?
CraigOctober 11, 2014 at 9:11 pm #2658
I’m glad that you and Graeme have made progress in relation to your underlying question.
In relation to the data that you have entered, I would recommend engaging someone in the marketplace to assist with the migration (this is the most common task being posted in recent months).
While the option will always be there for individual trustees to do everything themselves, when crowdsourced resources are available at rates as low as US$20 per hour, the cost of re-entering the data will be minimal, and they can also provide ongoing assistance if required.
(That rates have fallen so far and so fast has implications for the professional services sector, as I described in this blog post: http://www.mclowd.com/role-opportunity-cost-market-professional-services/)
I started Mclowd because of the fees a Sydney-based firm was charging my mother for administration. Now she has access to a free technology platform and a crowdsourced resource who:
- is CPA qualified
- is a member of SPAA
- is familiar with the software
- has 10 years of SMSF experience
Her costs have as a consequence fallen by 80%, and at the rate she is paying she can focus on the things she enjoys doing in retirement.
AshleyOctober 12, 2014 at 8:30 am #2668
Thanks for your enthusiastic and thought provoking responses.
I have now read all of the links you have provided, and while still ‘processing’ the economic argumments, as an IT professional well-versed in Agile software development methodologies, the technology approach speaks for itself.
My personal approach to things that I both understand and am interested in is to learn how to do something myself before outsourcing to a third party. I am then better able to understand what needs to be outsourced and can make a more informed decision on the value of outsourcing it!
I would still be interested therefore in determining what options are available to me to rectify my initial ‘fund setup’.
Incidentally (re my post on asset disposals), the need from a tax persoective to enter each individual parcel however small (can be many when accumulated via DRP over a number of years) magnifies the need to address a soon as possible the current available method of asset disposal.
In fact the suggestion made to change the feature to allow ‘selection of multiple parcels at disposal’ seems to continue to fail to recognise the real world scenario where an asset holder quantifies the number of units of a share they wish to sell, NOT a number of purchased parcels. As an experienced software developer once said to me ‘computers are extremely good at completing repetitive tasks with 100% accuracy’ – why therefore continue to force a human to complete a task (in this case identifying the parcels required to make up the units to be disposed) when the system could easily determine from the quantities entered which parcels are to be sold.
Personally, I dont buy into this whole ‘parcel’ approach to looking at assets – I see it as a holding with multiple buy and sell transactions. I could buy a ‘parcel’ of 1000 units and another of 1000 units and then sell a ‘parcel’ of 1500 units, which requires.
Currently in Mclowd parlance to sell 500 units of the original 1000 requires a ‘split parcel’ – the situation above complicates the user experience even further unless you just allow them to sell 1500 units (must be <= 2000) and get the system do the necessary calculations.
Anyway, just my 2 cents worth….
CraigOctober 13, 2014 at 1:31 am #2670
Re; the parcel approach , we have to record asset parcels to correctly record the accurate cost basis.
With regard to the asset disposal we plan to implement functionality for:
1.”Sell All” – Here all asset parcels are selected for a Holding e.g. all Telstra shares
this will provide the automation required in your post
2. “Sell Parcels” – Where not all of the assets are disposed of in a Holding , then the user has the option to select which is the most tax efficient means of disposing of the assets or self select the parcels they want to dispose of. If the user selects the most tax efficient then this will be actioned automatically. If the user wants to self select (and our content experts tell us they will want that functionality) then we will need to present by parcel.
Our approach all along is to minimise the amount of complexity the user has to deal with. Simplifying asset disposal will be one area that we will simplify.
GraemeOctober 13, 2014 at 2:02 am #2671
In relation to your particular circumstances, I think there are two options:
- Engage with Mclowd around the current and proposed functionality, and as with many of the other trustee users, seek to influence priorities through your input
- Dis-engage for a few months and wait for the Community to evolve to a point where the technology is closer to your requirements
In either case you would need to delete the existing account (under settings) and start again, with data entry that reflects the methodology in place at that time.
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