Australian trading US stocks

[christrad]

There are an increasing number of brokers who would allow you to trade us stocks via stock broking platforms in Australia.

I'm trying to understand how the taxing works. If I make capital gains on trades on us stocks when I am trading from Australia, where do I pay the taxe? Do I pay taxes on capital gains in the US or in Australia?

I have never given this a lot of thought but I always thought that once you start trading us stocks you are paying tax in another country. It appears this may not be the case. I would prefer day trade us stocks because of their volatility, but haven't done so because of my lack of understanding of the process.

 

[Sean K]

There are an increasing number of brokers who would allow you to trade us stocks via stock broking platforms in Australia.

I'm trying to understand how the taxing works. If I make capital gains on trades on us stocks when I am trading from Australia, where do I pay the taxe? Do I pay taxes on capital gains in the US or in Australia?

I have never given this a lot of thought but I always thought that once you start trading us stocks you are paying tax in another country. It appears this may not be the case. I would prefer day trade us stocks because of their volatility, but haven't done so because of my lack of understanding of the process.

Hi Chris,

Where is your account based? Must be in Australia with an attached Australian bank account, yes?

SK

 

[Craton]

G'day and welcome.
A quick search and on the ATO Community site:

1:

Any income from overseas sources should absolutely be declared as income on your tax return. The country of origin of this income is irrelevant. Please see this page on the ATO website for information about income you must declare. This page also explains foreign income that needs to be declared.

This income includes any foreign source income including interest, dividends, royalties, rent, business income or a share of income from a partnership or trusts. If you're an Australian resident for tax purposes, you are taxed on your worldwide income.

Please see this page on the ATO website for information about Foreign source income and foreign assets or property.

2:

Generally you would declare all relevant returns as if they were in Australia, so as they are you convert them to AUD and report them accordingly.

The tax treatment of shares depends on whether you're considered to be holding shares as an investor or carrying on a business as a share trader. So depending on which one you are, there are different expenses you can claim. For example if you are share trading as a business you can claim the cost of the shares as a deduction in the same year but on the other hand as an investor this will be a capital cost. Once that's established we can provide further information to assist you completing your return if required.

3:
From the ATO. As an Australian resident, you must declare any foreign income you earn on your Australian tax return.

The most relevant ATO page

 

[christrad]

Hi Chris,

Where is your account based? Must be in Australia with an attached Australian bank account, yes?

SK

I am an Australian in Australia. An Australian citizen. I'm just wondering how easy it is to trade U.S stock from Australia and trying to iron out all the issues. Tax is one of them. Thanks

 

[christrad]

So what you're all telling me is that I can go about trading U.S stocks as much as I like (as an Australian in Australia) and the tax from that is paid to the Australian Government?
I never thought it was that easy.
I know there are exchange rate considerations.
Any other advice on this?

 

[christrad]

Ok, so I've looked at Hello Stake which allows you to do cheap trades on U.S markets. The issue I have with them is the 70basis point exchange rate fee deducted from the exchange rate. For example, if you are offered a AUD/USD rate of .67, you would actually get a rate of .663 because of the exchange rate. That can really add up over large amounts.

So what I'm asking is whether there is broker in Australia that offers cheap brokerage on Wall St trades and has a fairer exchange rate for converting currency between AUD and USD? When you think about it you're paying both ways which really adds up.

Superhero offers .65
CMC markets offers .6

Stake seems to be unusually high at .7

 

[divs4ever]

Ok, so I've looked at Hello Stake which allows you to do cheap trades on U.S markets. The issue I have with them is the 70basis point exchange rate fee deducted from the exchange rate. For example, if you are offered a AUD/USD rate of .67, you would actually get a rate of .663 because of the exchange rate. That can really add up over large amounts.

So what I'm asking is whether there is broker in Australia that offers cheap brokerage on Wall St trades and has a fairer exchange rate for converting currency between AUD and USD? When you think about it you're paying both ways which really adds up.

Superhero offers .65
CMC markets offers .6

Stake seems to be unusually high at .7

Commsec will let you trade US shares

but i researched them several years back , and found the conditions unattractive at that time

Commsec have initiated some changes since, but i had lost the urge to trade internationally listed shares by then , so haven't researched that recently

 

[christrad]

Commsec will let you trade US shares

but i researched them several years back , and found the conditions unattractive at that time

Commsec have initiated some changes since, but i had lost the urge to trade internationally listed shares by then , so haven't researched that recently

From what I can see CMC markets offers the best deal for trading US markets.

They offer free brokerage up to 15,000 dollars and a six basis point spread on currency conversions.

Even the discount apps like superhero and stake don't offer it as good a deal. Not saying that a 6 basis point spread is wonderful news but it's better than the others.

I could imagine interactive brokers is probably the next best thing.

 

[qldfrog]

So what you're all telling me is that I can go about trading U.S stocks as much as I like (as an Australian in Australia) and the tax from that is paid to the Australian Government?
I never thought it was that easy.
I know there are exchange rate considerations.
Any other advice on this?

This is not as simple as that:
When you deal with US securities (shares, some ETFs,etc), you might learn that some ETFs and not all , are actually subject to a US government capital gain..from memory..tax of the profit on resale.
There is a list of these available.
not yet 5am as I type, so will ask you to do your work there but i found that, de facto, these specific ETFs, funds, etc became non viable to trade in my case.
Just to avoid you a shock if you go there.
We have had a thread about this a couple of years or more ago when this relatively new US regulation came.
@peter2 might know from his head where this list is, i have been out of US securities for nearly 2 years

 

[qldfrog]

Commsec will let you trade US shares

but i researched them several years back , and found the conditions unattractive at that time

Commsec have initiated some changes since, but i had lost the urge to trade internationally listed shares by then , so haven't researched that recently

Forget even wasting time looking at commsec for international trading;imho they are trying to close this options as they are not only extremely expensive but are restricting the tools accessible

 

[christrad]

This is not as simple as that:
When you deal with US securities (shares, some ETFs,etc), you might learn that some ETFs and not all , are actually subject to a US government capital gain..from memory..tax of the profit on resale.
There is a list of these available.
not yet 5am as I type, so will ask you to do your work there but i found that, de facto, these specific ETFs, funds, etc became non viable to trade in my case.
Just to avoid you a shock if you go there.
We have had a thread about this a couple of years or more ago when this relatively new US regulation came.
@peter2 might know from his head where this list is, i have been out of US securities for nearly 2 years

Thanks I will look at that.
I thought the ETF's might be subject to capital gains tax if the etf is such that the dividends are reiinvested.

I will take a look at your thread.

 

[qldfrog]

Thanks I will look at that.
I thought the ETF's might be subject to capital gains tax if the etf is such that the dividends are reiinvested.

I will take a look at your thread.

This is what i am talking about

What is the withholding tax on Publicly Traded Partnerships (“PTP”) Securities? - webull.com.au

Pursuant to Internal Revenue Code (IRC) Sections 1446(a) and 1446(f) of the US IRS starting from January 1, 2023, the sale or transfer of Publicly Traded Partne

www.webull.com.au

 

[christrad]

This is what i am talking about

What is the withholding tax on Publicly Traded Partnerships (“PTP”) Securities? - webull.com.au

Pursuant to Internal Revenue Code (IRC) Sections 1446(a) and 1446(f) of the US IRS starting from January 1, 2023, the sale or transfer of Publicly Traded Partne

www.webull.com.au

PTP's and some ETF'S.
It's unlikely I will be trading anything too complicated or structured. But yes thanks for the heads up.

 

[qldfrog]

PTP's and some ETF'S.
It's unlikely I will be trading anything too complicated or structured. But yes thanks for the heads up.

If a starter on the US market, I would highly recommend you look at using specific ETFs for your allocation vs specific companies;
The US market offers plenty of liquid ETFs which allow you to play any trend sector, domain you want to get in, without the risk of putting it all in a specific single company.
Just consider..and then ensure you are not the victim of this IRS tax if you do
Hope it helps you, or later readers

 

[Garpal Gumnut]

@christrad and @qldfrog . Thanks for the interesting posts and opinions.

I tend not to use etf's in the American market as the individual stocks are less opaque than the etf's. There is so much more information available in the stocks on the three main indices than there is on Australian stocks on the ASX. It makes it much easier to make an informed up to date decision. I also prefer to lose my own money or gain than leave it to an american etf. I do trade Australian etf's for the same reasons, they have more ASX information than I will ever have and their expense % can inform my choice of etf..

American stocks also move on technical points, I use TA a lot, so again this is useful for me.

All the best for your trading, etf's or stocks on American indices.

gg

 

[christrad]

If a starter on the US market, I would highly recommend you look at using specific ETFs for your allocation vs specific companies;
The US market offers plenty of liquid ETFs which allow you to play any trend sector, domain you want to get in, without the risk of putting it all in a specific single company.
Just consider..and then ensure you are not the victim of this IRS tax if you do
Hope it helps you, or later readers

That's really helpful information thank you very much. I will specifically look at that.