# Capital gains tax and reinvesting



## egosbar (29 September 2017)

hi all thanks in advance for any help

just wondering how capital gains will affect my reinvesting
what i want to know is if i take 10000 profit and reinvest it in shares do i need to pay capital gains on that or does it work out that i still havent made a profit as my shares are reinvested


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## galumay (29 September 2017)

If you make $10k profit then you need to add that profit to your income for tax calculation. If you held for over 12 months it will be discounted by 50%. It is irrelevant whether you buy more shares, buy 1kg of cocaine or put the money under your bed.


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## egosbar (29 September 2017)

that sux fk the government gambling is non taxable and this is basically what we are doing


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## galumay (29 September 2017)

egosbar said:


> that sux fk the government gambling is non taxable and this is basically what we are doing




It may be what you are doing! I am hopefully investing and not gambling.


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## egosbar (29 September 2017)

galumay said:


> It may be what you are doing! I am hopefully investing and not gambling.



lifes a gamble dont matter how you put it , if you can make or lose money its a gamble  , same as a pro horse better hes still gambling call it what you like same thing in my eyes , we are just trying to increase our odds of making money by knowledge, note the key word odds thats a gambling term to me


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## tech/a (29 September 2017)

Does a Book maker gamble?


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## egosbar (29 September 2017)

tech/a said:


> Does a Book maker gamble?



interesting reply , are we the bookie or the punter? wouldnt the stockbroker be the bookie? either way doesnt really matter i do call it investing to my wife haha


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## tech/a (29 September 2017)

If the book maker runs a business then so to can the professional punter.
Both do it without gambling. Doesn't mean they don't lose from time to time.
Accumulated Losses don't exceed accumulated Profit. Successful business.

Same with traders.
Stock brokers in the old sense provide a service.
Online brokers provide a vehicle to trade.
Good investors and traders run a business they don't gamble.

So when you learn to trade like a bookie you'll know exactly what I mean

Have a look at Pete's Trading thread.


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## galumay (29 September 2017)

The logical extension of your argument would be that buying an investment property is gambling and capital gains wouldnt be taxed, good luck with that one!


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## egosbar (29 September 2017)

galumay said:


> The logical extension of your argument would be that buying an investment property is gambling and capital gains wouldnt be taxed, good luck with that one!



not really an argument just a thought , all good ill check out the trading books lol and ill say to myself ten times before i go to bed im an investor not a gambler haha


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## egosbar (29 September 2017)

galumay said:


> The logical extension of your argument would be that buying an investment property is gambling and capital gains wouldnt be taxed, good luck with that one!



although my point is fk the government , we have paid tax on the money we are investing and can take a loss or profit , but they still want to make us pay capital gains tax even on interest its a joke really but you cant beat them , any thoughts on software to help run this investing buisnees , say for example for the position im in at the moment , ive invested 12k its up to 20k in one month , so if i want to sell and reinvest i sell and make 8k then pay capital gains of 2.5-3k odd and reivest the total i then have to pay capital gains again when i sell the next transaction bloody confusing how do you keep track of it all lol and when to sell and buy without ending up with a big tax payment you have to make end of financial year


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## galumay (29 September 2017)

Yes, you pay tax when you earn the money, but obviously if you use that money to earn more money then tax is applicable. 

I use an excel spreadsheet to track, but then I am an investor so I dont make many trades. Paying tax at the end of the year is a good thing, it means you made money. My aim is to pay $1m tax! 

Also you only pay the CGT at the end of the financial year, not each time you make a trade. You just work out your overall capital gain for the year, discount if applicable and add it to your income.


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## egosbar (29 September 2017)

yep got it thanks , im not bad at excel so that sounds like a plan , do you have a master excel file you could share so i can see how youve set it up , no problems if not but would save me stuffing around lol , cheers for the advice , my aim is also to pay $1m in tax haha i like that plan
heres the problem i guess if i want to reinvest then i need to sell something at end of financial year to pay the cgt or maybe its better to only reinvest the difference and keep enough coin to pay the tax man


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## Value Collector (29 September 2017)

egosbar said:


> that sux fk the government gambling is non taxable and this is basically what we are doing




the government taxes the hell to of gambling, normally the tax is set up so you don't see it though.


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## Value Collector (29 September 2017)

egosbar said:


> not really an argument just a thought , all good ill check out the trading books lol and ill say to myself ten times before i go to bed im an investor not a gambler haha




whether you are gambling or not comes down to you and how you are approaching it, and just because there is risk doesn't mean you are gambling.

If you buy an ownership interest in say a gas pipeline, and plan for your return to come to you over time from the earnings of the gas pipeline, you are an investor.

However, if buy an ownership interest in a gas pipeline hoping to sell for a profit tomorrow, you are more than likely gambling or at least engaged in speculation.


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## Value Collector (29 September 2017)

egosbar said:


> heres the problem i guess if i want to reinvest then i need to sell something at end of financial year to pay the cgt or maybe its better to only reinvest the difference and keep enough coin to pay the tax man




Thats one of the benefits of longterm investing in companies that are growing, you pay less tax, and keep more funds compounding.

for example.

if there was a stock that grew at 10% per year, and investor A bought and sold it each year paying capital gains tax, but investor B just let it compound without selling, investor B ends up with more wealth.

Because Investor B delays paying any capital gains tax for many years, he can have more capital compounding to his benefit rather than sending it to the tax department every year.


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## tech/a (29 September 2017)

Value Collector said:


> Because Investor B delays paying any capital gains tax for many years, he can have more capital compounding to his benefit rather than sending it to the tax department every year.




Certainly benefits in that.
The only X factor is the capital gain of 10% or whatever maintained over the full year.
Cant see the point in making a 10% loss over a year in the attempt of cutting a tax gain.
Unless of course your earning big bucks and a deduction from capital loss comes in handy.
But that gets counter productive the greater the loss becomes.


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## egosbar (29 September 2017)

Value Collector said:


> the government taxes the hell to of gambling, normally the tax is set up so you don't see it though.



thats very true not poker though lol i make good coin there


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## egosbar (29 September 2017)

Value Collector said:


> Thats one of the benefits of longterm investing in companies that are growing, you pay less tax, and keep more funds compounding.
> 
> for example.
> 
> ...




thats what im trying to work out and come to the same conclusion i think at some point i will probably take some profit but hopefully they are steady growth for over a year


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## egosbar (29 September 2017)

thanks for you help men , go the pilbara gold rush lol


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## Value Collector (29 September 2017)

tech/a said:


> Certainly benefits in that.
> The only X factor is the capital gain of 10% or whatever maintained over the full year.
> Cant see the point in making a 10% loss over a year in the attempt of cutting a tax gain.
> Unless of course your earning big bucks and a deduction from capital loss comes in handy.
> But that gets counter productive the greater the loss becomes.



My point is that if you know a company is growing at a rate that will create say a 10% pa capital growth over say a ten year period, (throughout the ups and downs) you would end up better off holding it without selling, you would end up earning more than a guy that found a 10% idea each year that traded it and paid tax each year.

Off course you risk being wrong, but so does the guy buying and selling.


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## Value Collector (29 September 2017)

egosbar said:


> thats very true not poker though lol i make good coin there




You might not have to pay tax on your winnings, but the loser doesn't get to write off his losses either, so it's no skin off the governments nose.

They will however tax the organizer if it's an organized event at a club or casino, so they get their pound of flesh there, the organizer also takes a share of the revenue normally.


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## tech/a (29 September 2017)

Value Collector said:


> My point is that if you know a company is growing at a rate that will create say a 10% pa capital growth over say a ten year period, (throughout the ups and downs) you would end up better off holding it without selling, you would end up earning more than a guy that found a 10% idea each year that traded it and paid tax each year.
> 
> Off course you risk being wrong, but so does the guy buying and selling.




But not as well off as the guy who has a 30 % idea. 
Different strokes -----


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## Value Collector (29 September 2017)

tech/a said:


> But not as well off as the guy who has a 30 % idea.
> Different strokes -----




you are kinda missing the point, the exact same principle works for a 30% idea trade vs a 30% idea investment.

off course if investor A finds better investments than investor B, he will get better results, (although they do have to be quite a bit better to over come the tax and cost hurdle), but my point is that when you are dealing in similar returns, the less active of the two will do better due to less trading costs and tax events.


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## tech/a (29 September 2017)

Yep
But not for a 30 % idea and a 10 % investment

Same for same yes of course due to the tax benefit


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## Value Collector (29 September 2017)

tech/a said:


> But not for a 30 % idea and a 10 % investment




works both ways though, so not much point bringing it up, it just confuses the point


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## tech/a (29 September 2017)

If I'm covering the tax over and above from better performance then that is a better way of utilising my money.

10% no tax 
30% taxed who's better off?

I get what your saying but there are more ways than just buy and hold.


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## Value Collector (29 September 2017)

tech/a said:


> If I'm covering the tax over and above from better performance then that is a better way of utilising my money.
> 
> 10% no tax
> 30% taxed who's better off?
> ...




30% no tax
10% taxed who's better off?

obviously which ever side you pin the 30% gain on is going to do better, so that's not part of my original example, 

there is no rule that says that traders on average will get better gains than inactive folks, in fact "on average" they will do worse, And from his posts, I haven't seen anything that suggests this guy is above average (yet)


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## egosbar (30 September 2017)

im average at best lol thats why im asking questions not answering them , thanks though i think ill play safe for a bit and just keep it rolling while i learn more


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## Value Collector (3 October 2017)

egosbar said:


> im average at best lol thats why im asking questions not answering them , thanks though i think ill play safe for a bit and just keep it rolling while i learn more




My comment wasn't meant to be be an attack on you, I was just pointing out a couple of facts about Active trading vs longterm passive holding that a lot of people miss.

The first fact is that a completely in active, passive and lazy investor can get a good return on his capital by simply buying into an index that covers the whole market, by investing in everything and simply holding it he is guaranteed to get the market average return.

Now, the only reason anyone would avoid taking this simple passive approach that guarantees them the market average is that they believe they can beat that average.

Traders, believe they can beat that average by buying and selling at the ideal times, they will jump in and out of the market attempting to take advantage of their predictions, and some of them will succeed.

My comment was based on the fact that although some traders will succeed in beating the market average, those "extra returns" are being funded by the traders who failed. So as a group, on average, traders will fail to beat the average, and due to the significantly higher Trading costs etc, as a group they will under perform the inactive.


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## tech/a (3 October 2017)

Value Collector said:


> My comment wasn't meant to be be an attack on you, I was just pointing out a couple of facts about Active trading vs longterm passive holding that a lot of people miss.
> 
> The first fact is that a completely in active, passive and lazy investor can get a good return on his capital by simply buying into an index that covers the whole market, by investing in everything and simply holding it he is guaranteed to get the market average return.
> 
> ...




Agree.

There will be leaders that bolster the index.
Would it not make sense to just invest in them
Review every 3 or so months and adjust if necessary.
Top 5 non correlated would do better I'm sure than
simply following an index.


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## Value Collector (3 October 2017)

tech/a said:


> Agree.
> 
> There will be leaders that bolster the index.
> Would it not make sense to just invest in them





That is certainly a route to beating the market, Warren Buffett for example beat the market by about 11% on average for the last 50 years by being able to figure out which companies

1, have competitive advantages

2, and what they fair value of them is

Then accumulate them when they are below fair value, which means over time his return will be above the market average.

Warren Buffett himself has said though that 99% of people won't have the skills required or the emotional stability to invest that way, and hence should stick to index style investments.

Its the same in trading (I guess), the majority of people that try their hands at it are going to under perform, it has to be that way mathematically.

To think that on average people can perform better than average, is illogical. a large portion of those that try will have their lunch eaten by the ones that are either skilled or lucky.


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## egosbar (3 October 2017)

i play poker and im skilled but lucky is just as important heres hoping im lucky on calidus lol


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## Value Collector (4 October 2017)

egosbar said:


> i play poker and im skilled but lucky is just as important heres hoping im lucky on calidus lol




Well, the stock market can be used as a casino if you are looking for a place to gamble, but it is certainly not its intended purpose, I use it as a place to buy pieces of companies to add to my portfolio.


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## crackajack2 (5 October 2017)

tech/a said:


> Does a Book maker gamble?



Hope so lol


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## crackajack2 (5 October 2017)

tech/a said:


> Certainly benefits in that.
> The only X factor is the capital gain of 10% or whatever maintained over the full year.
> Cant see the point in making a 10% loss over a year in the attempt of cutting a tax gain.
> Unless of course your earning big bucks and a deduction from capital loss comes in handy.
> But that gets counter productive the greater the loss becomes.



Are you an accountant?


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## tech/a (5 October 2017)

No a duck


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## crackajack2 (5 October 2017)

tech/a said:


> No a duck



quack quack lol


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