Investment products may be held as trading stock by a taxpayer carrying on a business of share trading or options trading. However, whether a particular parcel should be treated as trading stock must be determined on a case-by-case basis.
Generally, the tax issues facing share traders versus passive investors are summarised below.
| Tax treatment of transactions, returns and related items | ||
| Event/item | Share trader | Passive investors |
| Gain on disposal | Sale on trading account | Capital gain |
| Loss on disposal | Sale on trading account | Capital loss |
| Dividends received | Assessable incomeWhen received but may be accounted for when derived (ie when dividend is declared) | Assessable incomeWhen received |
| Share acquisition | Purchases on trading accountAllowable deduction | Capital costNo immediate deduction allowed |
| Broker fees | PurchasesAllowable deduction | Capital costNo immediate deduction |
| GST on broker fees | Financial supplyReduced input tax credits | Capital costNo immediate deduction
No reduced input tax credits as no enterprise |
| Share investment course pre-ownership |
If business commenced then allowable deduction, however nexus must be established | Capital costNo immediate deduction |
| Share investment course post-ownership |
Professional developmentAllowable deduction | Investment expensesAllowable deduction |
| Technical books | Professional developmentAllowable deduction | Investment expensesAllowable deduction |
| Share trading software | Business expenseAllowable deduction (if not an establishment cost) |
Investment expensesAllowable deduction |
| Interest on margin loan | Interest expenseAllowable deduction incurred to obtain assessable income | Investment expensesAllowable deduction |
| Prepaid interest | Deduction up to 12 months if s82KZM satisfied | Deduction up to 12 months if s82KZM satisfied |
| Bank charges on margin loan | Bank feesAllowable deduction | Investment expensesAllowable deduction |
| Costs to establish loan | Borrowing costsAllowable deduction available over five years | Investment expensesAllowable deduction available over five years |
More information? To find out more, give us a call on 1300 023 782 or email team@cdrta.com.au.
The team at C&D Restructure and Taxation Advisory are here to help. As part of the Vault Group we can offer the full suite of financial products and advice to help you navigate the business landscape. Schedule a meeting here via Calendly or give us a call on 1300 1 VAULT (1300 182 858)
The following two tabs change content below.
Craig Dangar
Latest posts by Craig Dangar (see all)
- Consumer Confidence Rises After Hitting A 15 Month Low - February 14, 2022
- Online Sales for Myer Increase By 54 Percent - February 10, 2022
- The City of Melbourne Is Asking For More Government Support To Help Businesses - February 8, 2022
- Reasons To Consider Changing Your Accountant - February 4, 2022
