# Tax Time - trading/investing and taxes



## matty2.0 (3 July 2009)

It's that time of the year again ... taxes. 
Last year I had a quite a bit of trades to deal with but it wasn't excessive. This year is a different story. I told myself last year that I would find some specialist accountant who specializes in trading to do my tax returns, however I haven't been able to get around to it. 

I'm just wondering;
- how do you guys do your tax returns when it comes to trading (derivatives, options, or just plain equity trades)
 ... by yourself i.e. e-tax 2009? or through a special accountant?

Last year I used H&R Block b/c it wasn't too crazy or complicated. They did a decent job, and  it was quite cheap. 

I've never done my tax returns by myself due to the complexity ... I'm thinking the ATO won't believe me when I claim my deductions, so I just use some reputable tax agent (like H&R) ... lol. Is it possible to do it by yourself? Do any of you guys do it?

Cheers.


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## antzlovinit (3 July 2009)

Still a newb!

Well I just started investing from 2008 in december and sold some shares in march? 

Then from my profit of $1500. And just say I pay broker costs for buying and selling at $30. 
Do I pay tax on the $1500 or $1440 (1500-60).

I rebought shares for $1400 and sold them for $1200. IF my taxable income is at e.g 15%, how much tax do I actually pay.


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## Krusty the Klown (3 July 2009)

matty2.0 said:


> I'm just wondering;
> 
> Is it possible to do it by yourself? Do any of you guys do it?
> 
> Cheers.




Yes you can do it yourself. Try e-tax, this way you can enter your return online. Have a look at the ATO website for more info www.ato.gov.au 

It is quite good and takes you through everything step by step and has help screens also - very educational.

Have fun!


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## Krusty the Klown (3 July 2009)

antzlovinit said:


> Still a newb!
> 
> Well I just started investing from 2008 in december and sold some shares in march?
> 
> ...




These profits and loss will be taxed as capital gains and not ordinary income. 

You will pay tax, at marginal rates, on $1,180. Calculated as $1,440 ($1,500 less $60) minus $260 ($200 loss + $60 brokerage)

So $1,180 x 0.15 = $177

I wish that was my tax bill.


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## bonkerrs (3 July 2009)

I'm going to attempt the ATO's online system (E-Tax). Over the last 4 years I've managed to get through it OK but that was without any shares component just straight forward employee salary stuff.

Like Krusty said, you get lots of help from the help screens. And if you need more help - there is always a quick (or not so quick) call to the ATO with the reference number (each screen or page has a ref number). But I've only got experience without buying/selling shares. Hope it isn't too hard with the shares component.


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## matty2.0 (3 July 2009)

Krusty the Klown said:


> Yes you can do it yourself. Try e-tax, this way you can enter your return online. Have a look at the ATO website for more info www.ato.gov.au
> 
> It is quite good and takes you through everything step by step and has help screens also - very educational.
> 
> Have fun!




Yeah I've been thinking about doing it by myself, but the thing is ... I've got over 100+ trades to sort out. 
And I'm thinking that if I do it by myself I won't get as much deductions since I don't know enough about what constitutes an expense and what not. 
Last year I got over 10K+ in tax deductions by going to H&R Block.


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## MACCA350 (3 July 2009)

I'm going the other way. I've always done my own tax, firstly by paper, then using Etax when they started it(very simple and quick about 1 week from lodging to refund in the bank). 

Now our accounting has become more complicated I'm planning to use an accountant.

cheers


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## Krusty the Klown (4 July 2009)

Yes, the more complex your affairs get, sometimes it is easy to overlook (or haven't even heard of) certain deductions. That is when it is good to go see an adviser.

If in doubt, get some help, it may cost a couple of hundred bucks, but at least you have peace of mind that you got all you are entitled to refunded. 

Particularly as tax rules change each year.


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## ojm (4 July 2009)

Quick question for you guys. 

My first share trading was last financial year. And I came up with a small loss (around $800 or so). 

I've heard that capital loses can be rolled over to another financial year?

Does this mean I don't have to bother putting the share losses on my tax return this year? 

I'll be lodging via e-tax, like I do every year, as my tax return is pretty basic.


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## matty2.0 (4 July 2009)

ojm said:


> Quick question for you guys.
> 
> My first share trading was last financial year. And I came up with a small loss (around $800 or so).
> 
> ...




You should record the loss, or else it won't be rolled over for next year. So if you make a gain next year, you take it away from the 800 loss first, before any capital gains gets calculated on the profit.


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## ojm (4 July 2009)

matty2.0 said:


> You should record the loss, or else it won't be rolled over for next year. So if you make a gain next year, you take it away from the 800 loss first, before any capital gains gets calculated on the profit.




So just to clarify. 

I put the $800 loss in this years return. Then next year, say I make $800 (hoping to do better!), I'd put in the $800 gain on my return, and the loss from last (this) year will cancel it out? Or next year, if I make the $800, I'd enter $0 into the gains component?


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## moreld (4 July 2009)

ojm said:


> So just to clarify.
> 
> I put the $800 loss in this years return. Then next year, say I make $800 (hoping to do better!), I'd put in the $800 gain on my return, and the loss from last (this) year will cancel it out? Or next year, if I make the $800, I'd enter $0 into the gains component?




Check this out at ATO http://www.ato.gov.au/content/downloads/NAT4151work-04.pdf

I am not an accountant, so double check anything I saw.

The sheet makes it pretty obvious what to do. In short enter the capital loss this year. Then next year use the sheet to calculate your gain/loss and enter that.
If you make $800 next year you'd enter $0 in capital gain. If you made $600 you'd carry over $200 loss.


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## cislfamily (4 July 2009)

Just want to clarify this - the return includes a box to put losses to carry forward.  Next year, when you make your gain, you include that gain, and then put in the amount of losses (from last year) you can claim (up to the amount of your gain) and the net result is a '0' gain.

hope this helps!

Suzanne


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## bonkerrs (9 July 2009)

Started doing my tax with ETax 2009 this afternoon. Wondering if someone could help with filling in dividend info!

'Computershare screen' is where I get the info for dividends
'ETax 2009' - self explained

In the picture... to fill in 'b.' I get the figure from 'a.'?


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## Krusty the Klown (9 July 2009)

bonkerrs said:


> Started doing my tax with ETax 2009 this afternoon. Wondering if someone could help with filling in dividend info!
> 
> 'Computershare screen' is where I get the info for dividends
> 'ETax 2009' - self explained
> ...




Correct, provided the shares are solely in your name.


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## bonkerrs (9 July 2009)

Krusty the Klown said:


> Correct, provided the shares are solely in your name.



Cheers Krusty, thought so but wanted to ask anyway.


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## MACCA350 (9 July 2009)

Krusty the Klown said:


> Correct, provided the shares are solely in your name.



Just an offshoot question, which I should have asked my accountant a while ago, with regard to the capital gains. 

The capital used for investing is equally owned by two people(50/50 split)in a joint account, one has a broking account for trading. Can the capital gains be 50/50 split and recorded on the two individual tax returns? and further to CG, what about dividends and franking credits?

My assumption was yes, since the capital used to produce the capital gains is legally owned 50/50 by both people........or is that not the case and for this to occur both people would need a joint broking account?

cheers


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## Krusty the Klown (10 July 2009)

MACCA350 said:


> Just an offshoot question, which I should have asked my accountant a while ago, with regard to the capital gains.
> 
> The capital used for investing is equally owned by two people(50/50 split)in a joint account, one has a broking account for trading. Can the capital gains be 50/50 split and recorded on the two individual tax returns? and further to CG, what about dividends and franking credits?
> 
> ...




Yes, 50/50 is fine for all those things mentioned. The shares are _legally_ owned by one person only, the one who has the broking account and the chess sponsor if a dispute arises. But for tax purposes splitting everything is fine as long as all tax is paid.

Sometimes you might find an issue where the broker will only settle trades to an account in the same name(s) only, as the broking account, but its up to the broker.


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## MACCA350 (10 July 2009)

Krusty the Klown said:


> Yes, 50/50 is fine for all those things mentioned. The shares are _legally_ owned by one person only, the one who has the broking account and the chess sponsor if a dispute arises. But for tax purposes splitting everything is fine as long as all tax is paid.



So that includes the dividends and franking credits?



> Sometimes you might find an issue where the broker will only settle trades to an account in the same name(s) only, as the broking account, but its up to the broker.



What if the broking account and settling account is in one persons name. ie funds are shifted from joint acc to broking settling acc to fund the broking acc(and then in reverse for sold funds) ............or is all this irrelevant to the actual ownership of the capital and the CG/Dividends/franking credits can be split 50/50 into both tax returns, in which case all earnings are fulfilling their tax obligations. 

Which also brings up another question, can the % split be modified, ie 70/30 or placed on just one individual, ie 100/0.........and if so can it be changed from one year to the next...........I tried looking for the relevant tax ruling/legislation on the issue but could not find anything on the ATO site.

Is this something all accountants would be aware of?

cheers


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## Krusty the Klown (10 July 2009)

MACCA350 said:


> So that includes the dividends and franking credits?




Yep.



> What if the broking account and settling account is in one persons name. ie funds are shifted from joint acc to broking settling acc to fund the broking acc(and then in reverse for sold funds) ............or is all this irrelevant to the actual ownership of the capital and the CG/Dividends/franking credits can be split 50/50 into both tax returns, in which case all earnings are fulfilling their tax obligations.




That sounds fine. Answer to second question - yes it is irrelevant in this case, the broking account is just a means to execute an income producing activity.




> Which also brings up another question, can the % split be modified, ie 70/30 or placed on just one individual, ie 100/0.........and if so can it be changed from one year to the next...........I tried looking for the relevant tax ruling/legislation on the issue but could not find anything on the ATO site.




Generally spouses can do this, but no assets held by other joint parties can. If you modify ownership legally, then yes (buy buying the other party out or one party introducing more capital). 

But just changing equity to minimise tax - no that would qualify as tax avoidance - if it resulted in a lower amount of tax paid than would be at 50:50. Changing equity from year to year another no-no.



> Is this something all accountants would be aware of?




It should be.


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## cheeyeen (10 July 2009)

MACCA350 said:


> Just an offshoot question, which I should have asked my accountant a while ago, with regard to the capital gains.
> 
> The capital used for investing is equally owned by two people(50/50 split)in a joint account, one has a broking account for trading. Can the capital gains be 50/50 split and recorded on the two individual tax returns? and further to CG, what about dividends and franking credits?
> 
> ...





Krusty the Klown said:


> Yes, 50/50 is fine for all those things mentioned. The shares are _legally_ owned by one person only, the one who has the broking account and the chess sponsor if a dispute arises. But for tax purposes splitting everything is fine as long as all tax is paid.
> 
> Sometimes you might find an issue where the broker will only settle trades to an account in the same name(s) only, as the broking account, but its up to the broker.




I have different opinion and probably wouldn't split it in this case (note this is just my view and I am not a qualified tax agent or accountant).  The investment is held under one person's name and that is the person who should report the capital gain/dividends etc.  The source of funding doesn't determine how you split the profit/income.

You could argue that the investment is held in trust for a partnership, but you need documentation to prove that if you get audit by the tax office.  Especially it doesn't look like you have that intention and the support document when you start investing (since you are asking about 30/70 etc.) so the anti avoidance rule could come in.  This is especially true if you are splitting with someone with lower income tax threshold.  

The ATO can do (and they do) data matching easily these days (they can even pre-filled the dividends info for you in e-tax).  They know how much income/gain is registered under a tax file number (and I don't think you can provide 2 tax file number for a CHESS account under one person's name).  When the system found out that the div/capital gain amount in your tax return is different from what they get from the share registry, it is almost an invitation to a tax audit if you do it this way.  Probably not worth it in my opinion.


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## Krusty the Klown (10 July 2009)

cheeyeen said:


> I have different opinion and probably wouldn't split it in this case (note this is just my view and I am not a qualified tax agent or accountant).  The investment is held under one person's name and that is the person who should report the capital gain/dividends etc.  The source of funding doesn't determine how you split the profit/income.




You could do it that way if you wanted to.



> You could argue that the investment is held in trust for a partnership, but you need documentation to prove that if you get audit by the tax office.  Especially it doesn't look like you have that intention and the support document when you start investing (since you are asking about 30/70 etc.) so the anti avoidance rule could come in.  This is especially true if you are splitting with someone with lower income tax threshold.




The evidence would be on the second party's tax return where the income is declared. Also from the joint bank account statements.


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## MACCA350 (10 July 2009)

Krusty the Klown said:


> Generally spouses can do this, but no assets held by other joint parties can. If you modify ownership legally, then yes (buy buying the other party out or one party introducing more capital).
> 
> But just changing equity to minimise tax - no that would qualify as tax avoidance - if it resulted in a lower amount of tax paid than would be at 50:50. Changing equity from year to year another no-no.



I'd have thought it would be simple tax minimization, though I guess they would not see it that way



			
				cheeyeen said:
			
		

> You could argue that the investment is held in trust for a partnership, but you need documentation to prove that if you get audit by the tax office. Especially it doesn't look like you have that intention and the support document when you start investing (since you are asking about 30/70 etc.) so the anti avoidance rule could come in. This is especially true if you are splitting with someone with lower income tax threshold.



We do have a trust(which was setup prior to the first stock purchase) though the intention was not for trading but another company which is for other purposes. But I guess we could use the trust for distribution of stock trading returns also........ we'll have to go through all this with our accountant in due course.

cheers


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