# Options And Tax



## cutz (11 April 2009)

G’Day Everyone,

I’ve just got a query on how options traders handle tax reporting, I gave my accountant excel spreadsheets for the year 0708 which will be used to transfer all of the details of the options trades onto the system, this seems to be a tedious way of doing things, I thought that all the ATO would require is a total profit result (excluding assigned positions which would be handled as stock sales).

There are also guys here that perform numerous stock trades per day; surely these aren’t handled as individual stock transactions at tax time.

Any thoughts on this? I can’t find any info on how to handle high trade turnover on the ATO site.


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## jackson8 (11 April 2009)

*Re: Options And Tax.*



cutz said:


> G’Day Everyone,
> 
> I’ve just got a query on how options traders handle tax reporting, I gave my accountant excel spreadsheets for the year 0708 which will be used to transfer all of the details of the options trades onto the system, this seems to be a tedious way of doing things, I thought that all the ATO would require is a total profit result (excluding assigned positions which would be handled as stock sales).
> 
> ...





morning cutz
here is a link to quite a lengthy document which may help you out

http://www.asx.com.au/products/pdf/taxation_treatment_of_options.pdf

because i only do small amount of trades i just claim either cg loss or gain keep it simple


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## sails (11 April 2009)

*Re: Options And Tax.*

Cutz, I give our accountant everything itemized and have the books reconciled with the trading accounts every month.  I try to copy and paste as much as possible from the broker's site to help cut down the work load, but it is still quite time consuming.  I would also be interested to know if there is a quicker way...


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## cutz (11 April 2009)

*Re: Options And Tax.*

Thanks Gary, I actually gave a printout of that document to my accountant, some good info in it.

Yeah I agree sails it could get pretty tedious, seeing there aren’t any solid tax rules in regards to options trading, disclosing total profit and number of trades would be a lot easier and it satisfies requirements because the government gets its proper cut.

Interested to hear from intraday scalpers.


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## jackson8 (11 April 2009)

i think it becomes a bit complicated when you are holding positions over the end of fin year period from one to the next

also the buying back of positions to close out seems to attract attention as the legislation is a bit unclear about claiming that against the initial sold.

it can be hard to find an agent who is up to scratch on all this.


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## cutz (11 April 2009)

jackson8 said:


> i think it becomes a bit complicated when you are holding positions over the end of fin year period from one to the next
> 
> also the buying back of positions to close out seems to attract attention as the legislation is a bit unclear about claiming that against the initial sold.
> 
> it can be hard to find an agent who is up to scratch on all this.





With the positions that were opened in 0708 but not closed in that year I just cut and pasted into the 0809 year sheet.

With the sell to open then buy to close, it should treated as a conventional capital gain event, you're correct laws are unclear but i'm sure the ATO would accept this.


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## Grinder (11 April 2009)

cutz said:


> With the positions that were opened in 0708 but not closed in that year I just cut and pasted into the 0809 year sheet.
> 
> With the sell to open then buy to close, it should treated as a conventional capital gain event, you're correct laws are unclear but i'm sure the ATO would accept this.




They seem to from my understanding.

Yet to find a tax accountant that understands it  so I hand in my excel sheet full of itemized trades, codes, dates, fees etc... & tell him what to punch in & the end P/L for the year. It's a pain but after converstions with the ato & based on what the ato says below this is permissable.

_*The doc below is from the ato but should not be taken as financial advice *_

CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

This ATOID provides you with the following level of protection:

If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.

Hope it sheds some light on an otherwise complicated matter that should be straight forward.


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## jackson8 (11 April 2009)

another point from last years tax was that because i had done many trades over the fin year and ended with a loss (on stock not options trading )

i tried to claim the losses as a trader as i thought they could be offsett against my normal tax but my agent said this was not so and it still was recorded as a cgt event.

just trying to reduce my tax liabilty from last year, gotta give it a go just in case.


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## Grinder (11 April 2009)

trading can be viewed by the ato as a buisness (if you meet their criteria), therefore you would think any losses incured could be claimed against any overall gains, whether that be stocks or options.


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## cutz (11 April 2009)

Grinder said:


> They seem to from my understanding.
> 
> Yet to find a tax accountant that understands it  so I hand in my excel sheet full of itemized trades, codes, dates, fees etc... & tell him what to punch in & the end P/L for the year. It's a pain but after converstions with the ato & based on what the ato says below this is permissable.
> 
> ...




Hi Grinder,

That's exactly what i did regarding the spreadsheet, i'm not looking forward to doing 0809 as the level of trading has increased a fair deal, i feel that the manaul transfer from spreadsheet to tax return may increase the chances of error.

BTW, have you got a link to the ATO info.


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## Grinder (12 April 2009)

Sorry Cutz, don't have a link as it was a doc from the ATO that was sent to me after enquiry about options & tax. The info I posted was pretty much all of what they sent me. Tried accessing the info online but can't seem to do so, if I can will post here.


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## cutz (12 April 2009)

Grinder said:


> Sorry Cutz, don't have a link as it was a doc from the ATO that was sent to me after enquiry about options & tax. The info I posted was pretty much all of what they sent me. Tried accessing the info online but can't seem to do so, if I can will post here.




Thanks for checking it out Grinder,
I might give them a buzz in preparation for my next return.


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## Grinder (1 July 2009)

It's that time again, just finished beautifying my spreadsheet for the 08/09 FY Im aware that being classified as conducting a buisness of trading allows the claiming of broking fees, however my accountant last year told me broker fees/transcation costs are already factored into the P/L of each transaction so can't be claimed seperately to reduce the payable tax on total profit. 

Im getting too many vague answers, can anyone give it to me straight?


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## Kez180 (1 July 2009)

Grinder said:


> It's that time again, just finished beautifying my spreadsheet for the 08/09 FY Im aware that being classified as conducting a buisness of trading allows the claiming of broking fees, however my accountant last year told me broker fees/transcation costs are already factored into the P/L of each transaction so can't be claimed seperately to reduce the payable tax on total profit.
> 
> Im getting too many vague answers, can anyone give it to me straight?




You can't claim them twice.... if you buy a share for $20, sell it for $25 and Pay $1 Brokerage you have made $4...

You can't then have an additional deduction for brokerage....


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## cutz (1 July 2009)

Grinder said:


> It's that time again, just finished beautifying my spreadsheet for the 08/09 FY Im aware that being classified as conducting a buisness of trading allows the claiming of broking fees, however my accountant last year told me broker fees/transcation costs are already factored into the P/L of each transaction so can't be claimed seperately to reduce the payable tax on total profit.
> 
> Im getting too many vague answers, can anyone give it to me straight?




Hi Grinder,

Me personally i factor in brokerage/fees in each opened and closed position so i don't claim brokerage as a separate expense.

Must agree though, the rules regarding options trading aren't clear cut, i treat each round trip as a CGT event.


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## Grinder (2 July 2009)

cutz said:


> Hi Grinder,
> 
> Me personally i factor in brokerage/fees in each opened and closed position so i don't claim brokerage as a separate expense.
> 
> Must agree though, the rules regarding options trading aren't clear cut, i treat each round trip as a CGT event.




Thanks guys, figured as much. 

Cutz, when you say 'round trip', are you referring to opening & closing a position minus the brokerage for either a P/L ? 

Would you then assess each round trip as to whether it's a possible CG or CL, or tally up all trades for the FY to determine a P/L as a whole? This is the way I have been doing it.


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## cutz (2 July 2009)

Grinder said:


> Thanks guys, figured as much.
> 
> Cutz, when you say 'round trip', are you referring to opening & closing a position minus the brokerage for either a P/L ?
> 
> Would you then assess each round trip as to whether it's a possible CG or CL, or tally up all trades for the FY to determine a P/L as a whole? This is the way I have been doing it.




I just record all trades on a spreadsheet each line calculates the net P/L for each leg.

Yep round trip = opening&closing-brokerage-fees.


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## wayneL (2 July 2009)

I do my books both back in Oz and here in the UK just like a shop buying and selling tiddlywinks or boxes of cornflakes.

Gross trading profit less expenses equal nett profit. CGT doesn't come into it. But I don't have any other income apart from some rental income.


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## Grinder (2 July 2009)

Yep, all sorted  now I'd just like another truck load of expenses to slap down my tax


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## bongcso (17 July 2009)

*Re: Options And Tax.*



jackson8 said:


> here is a link to quite a lengthy document which may help you out
> 
> http://www.asx.com.au/products/pdf/taxation_treatment_of_options.pdf
> 
> because i only do small amount of trades i just claim either cg loss or gain keep it simple




Jackson
Thanks for this link. I think this will be a big help for a lot of people. I run a blog for SMSF trustees and one of the problems I have always had was convincing people that options are not risky and they can be used by a SMSF, because they have been told otherwise by their accountants. This doc written by a Tax partner of a big accounting firm will definitely help them (and their accountants). I hunted around the ATO website and could not find anything on options. I have posted the link on my website. Thanks again.

Christina
http://blog.sli-smsf.com/


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## cutz (17 July 2009)

Hi Christina,

In what way would you use options in a SMSF ?


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## person (30 August 2010)

I know that this is an old thread but I was wondering if anyone has any further information on taxation regarding options trading?  It would be great to know how the criteria the ATO uses to decide what tax structure you should be using.  I will continue to look into it but if anyone has links to good articles or documents (the asx link from earlier in this thread is now broken ) that would be great.


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## cutz (30 August 2010)

person said:


> I will continue to look into it but if anyone has links to good articles or documents (the asx link from earlier in this thread is now broken ) that would be great.




Search for the following on the ASX site, >> Taxation Treatment Of Exchange Traded Options <<, for an updated paper.


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