So, Interactive Brokers finally allowed Australian clients to again borrow money. I enabled margin borrowing on both Moominmama's and my account. I was surprised at how low the buying power was. Much, much lower than the standard FAQ suggested. It turns out that retail clients borrowing power is capped at AUD 25k! This is stated in the footnote on that page. This seems crazily low to me. I currently have a loan cap of AUD 500k with Commonwealth Securities. But their margin rates are far higher. If I can show I am a wholesale investor I could get the cap lifted. If they require individual income of AUD 250k and/or net worth of AUD 2.5 million, that would be tough/impossible to show and would probably need to get an accountant to assess it... So, looks like I should keep more assets with Commonwealth Securities than I was planning on. I'm not planning on borrowing big to buy shares, but having borrowing power is useful.
PS
Actually, I easily qualify as a wholesale investor based on net worth. Turns out, I have 3/4 of our joint household net worth. My immediate thoughts are that this isn't optimal tax-wise and whether it is worth paying an accountant to certify it? On the other hand, borrowing in my name is a good tax move.
1 comment:
If you get accountant certified as a wholesale/professional investor rather than retail I think there are also some legal implications regarding investor protections that apply to retail investors but not 'professional' investors. Might be worth checking before getting certified (it may apply to you, rather than just the IB ML).
BTW, how does IB ML interest rates compare to St George? Last time I checked my Leveraged Equities account had the highest ML int rate, followed by CommSec ML, and the cheapest ML account I have is the St George ML (and I paid off that loan using my St George Portfolio (home equity) loan, so I basically borrow for share gearing at a rate close to the home loan rate by using my home equity loan rather than pure ML - also means I don't have to worry about margins/margin calls).
Of course, only works when you've paid off some home loan or house price has risen enough to get home revalued and home equity is available for lending.
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