Brokerage fees tax deductible?

[rock86]

Is 'record keeping' a good enough excuse?

Thats a tough one but reading 'You and Your Shares' from the tax office, here's the link if ya wanna take a read
http://www.ato.gov.au/content/downloads/IND00191825n26320609.pdf It to me reads as if you would be able to say 'record keeping' is a good enough excuse.

I had a little smile on my face after reading some of the things that are deductible, eg. the depreciation of my computer and internet I use for my investments, being a grad accountant I'm still learning.

 

[Krusty the Klown]

Is 'record keeping' a good enough excuse?

Definitely.

The company shares you are holding, should be producing assessable income and distributing dividends (assessable income to you) and hopefully franking credits to you.

You need to be able to prove to the ATO what income and tax has been paid on your return. Hence you should keep records of all these transactions. In fact record keeping is MANDATORY. It is a necessary expense to manage your share holdings and is therefore deductible. It is illegal to claim expenses as a deduction without proof, if total deductions are above $300.

Your record keeping is your proof.

Keep in mind that if you use your ink and printer for private purposes, then you can only claim a % of the expense as a deduction.

The ATO absolutely loves people who keep meticulous records.

 

[jono1887]

Are textbooks for an economics degree tax deductable for share trading based on 'self-education'??

 

[Julia]

Are textbooks for an economics degree tax deductable for share trading based on 'self-education'??

Wasn't there a case a couple of months ago where someone on Youth Allowance was able to claim quite a decent amount for text books?
I remember it was in the news media and we did discuss it.

I once got away with claiming the expenses of my dog, i.e. the purchase cost of the dog (substantial), all the vet treatment and food etc for a year, on the basis that she was protection for the drugs I was keeping in the car and in my home.

It must have been a different person doing the assessments the following year, because it didn't work twice.

 

[rock86]

Are textbooks for an economics degree tax deductable for share trading based on 'self-education'??

Textbooks for an economics degree are not deductible unless this degree relates to your current employment, and where the education will further your employment (eg. increase in salary). If this is so, then the textbooks will be deductible.

Wasn't there a case a couple of months ago where someone on Youth Allowance was able to claim quite a decent amount for text books?
I remember it was in the news media and we did discuss it.

I once got away with claiming the expenses of my dog, i.e. the purchase cost of the dog (substantial), all the vet treatment and food etc for a year, on the basis that she was protection for the drugs I was keeping in the car and in my home.

It must have been a different person doing the assessments the following year, because it didn't work twice.

The women a few months ago won a case where she was able to claim all her university expenses (textbooks etc.) as she argued that as Youth Allowance is assessable income and to be elgible for youth allowance you must meet certain conditions, the main one being studying; that expenses incurred due to studying should be deductible as these expenses are necessary for you to 'earn' your youth allowance. So you may be able to claim the textbooks this way if you receive Youth Allowance.

 

[beerwm]

Are textbooks for an economics degree tax deductable for share trading based on 'self-education'??

Textbooks for an economics degree are not deductible unless this degree relates to your current employment, and where the education will further your employment (eg. increase in salary). If this is so, then the textbooks will be deductible.

In etax, sections D4, D5

it specifies 'work as an employee'
---is employment classified as self-employed trader?
:. deductions such as; computer, books, software

or am i missing another section.

thanks

 

[rock86]

In etax, sections D4, D5

it specifies 'work as an employee'
---is employment classified as self-employed trader?
:. deductions such as; computer, books, software

or am i missing another section.

thanks

If you were a self employed trader, where your primary business is trading, you would usually have a business name, ABN etc. Exactly like subbie's etc.

 

[jono1887]

Textbooks for an economics degree are not deductible unless this degree relates to your current employment, and where the education will further your employment (eg. increase in salary). If this is so, then the textbooks will be deductible.

Well, im assuming that increasing my education of the economy, finance systems ect ect will be able to further increase my income from share trading in the future... so would they be considered tax deductable?

 

[Krusty the Klown]

Well, im assuming that increasing my education of the economy, finance systems ect ect will be able to further increase my income from share trading in the future... so would they be considered tax deductable?

Possibly.... Sometimes yes, sometimes no.

Cryptic enough?????

Sometimes your deductions might be allowed if audited, other times disallowed. It depends on the tax assessor. It depends on your individual circumstances if you are audited.

Point being, there is a lot of grey areas in tax law - this is one. If it's not your principle source of income your chances would diminish. If not, you can always appeal.

 

[jono1887]

So how do I fill up my tax return?
Do I put the profits from my trades under normal income? or capital gains?

And how do deductions work? I know theres a place where I write in the total deduction. But do I mail in my reciepts as well? And where do I write the reason for each deduction?

 

[Krusty the Klown]

So how do I fill up my tax return?
Do I put the profits from my trades under normal income? or capital gains?

And how do deductions work? I know theres a place where I write in the total deduction. But do I mail in my reciepts as well? And where do I write the reason for each deduction?

You really should see a tax adviser. Most people declare them as capital gains, either way you will pay the same amount of tax.

You don't need to send in your receipts, just keep them for 5 years. You don't need to give reasons for your deductions, just input total deductions for each category. You only need to be able to justify a deduction if you get audited.

 

[cutz]

So how do I fill up my tax return?
Do I put the profits from my trades under normal income? or capital gains?

And how do deductions work? I know theres a place where I write in the total deduction. But do I mail in my reciepts as well? And where do I write the reason for each deduction?

Jono,

What are you making in your normal income and what are you pulling from trading, give us a clearer picture, although i'm not a tax specialist i may be able to help you out with a suggestion to take to your tax agent.

As far as expenses go i normally run a spreadsheet detailing everything to take to my accountant, i store all receipts in case i receive an audit.

Personally it sounds like you may not be classified as a trader.

 

[jono1887]

Jono,

What are you making in your normal income and what are you pulling from trading, give us a clearer picture, although i'm not a tax specialist i may be able to help you out with a suggestion to take to your tax agent.

As far as expenses go i normally run a spreadsheet detailing everything to take to my accountant, i store all receipts in case i receive an audit.

Personally it sounds like you may not be classified as a trader.

Ok, well I've only made 16 trades (32 buy and sell transactions) since I started in Nov. Average trade was 10k and made an average of 10% per trade that were held for anywhere between 1-5 weeks. Made a total of 16k from trades, 1k from interest in various accounts and term deposits and $800 from real work [pizza delivery]...

The deductions that I want to make are photocopying, ink, economics text books (for econ degree - as it will 'increase my income in the furture') and my ipod touch - which I use to monitor stocks and make trades when I'm in uni.

 

[cutz]

Hi Jono,

In your situation i suspect that capital gain is more appropriate, but either way as Krusty suggested you will be paying about the same amount of tax anyway.

As far as deductions go, i can't see a problem with your iphone, your using it for trading purposes. Uni text books, could be pushing it but that's your and your accountant's call.

Good luck with it, i must admit though the rules are pretty vague when it comes to trading.

 

[jonnohowe]

Text Books:

You can claim if they are courses which will further your ability to obtain work in that specific field. Because you're self employed may be a little difficult considering you aren't a professional, just a trader.

Brokerage Fees

No.

 

[jono1887]

Text Books:

You can claim if they are courses which will further your ability to obtain work in that specific field. Because you're self employed may be a little difficult considering you aren't a professional, just a trader.

Brokerage Fees

No.

Why not brokerage fees?m arent they a necessary cost in obtaining my income from shares?

 

[cutz]

Jono,

Your cost base on stock purchases includes brokerage+fees, proceeds from sales have brokerage+fees deducted.

Suggest getting a copy of the taxpayer's guide, it good reading + it's tax deductible.

 

[rock86]

Ok, well I've only made 16 trades (32 buy and sell transactions) since I started in Nov. Average trade was 10k and made an average of 10% per trade that were held for anywhere between 1-5 weeks. Made a total of 16k from trades, 1k from interest in various accounts and term deposits and $800 from real work [pizza delivery]...

The deductions that I want to make are photocopying, ink, economics text books (for econ degree - as it will 'increase my income in the furture') and my ipod touch - which I use to monitor stocks and make trades when I'm in uni.

I agree with Cutz and Krusty, you would be using CGT for your share trading; to me your trades were still only investments, if you were a trader then their would be more trades and you would not be holding onto the assets for as long as you have .

IPod- Yes: but only a prercentage. You can only claim the amount you used for trading stocks, you cannot claim all of it as (I'm guessing) you used it for listening to music etc. their for you cannot claim your private use of an asset. Also you cannot claim the cost of purchase of the IPod, as it is an asset, you must claim the depreciation of the asset; however if you are renting etc. you can claim your repayments of an asset.

Photocopying and Ink etc.- Yes: as if your keeping records, performing calculations, printing out info on shers etc. they are all deductible as they are necessary for your investments and therefore necessary in generating your income.

Textbooks- No: Your not a proffesional trader or have a current job in trading; therefore this degree at the end of the day may allow you to obtain employment in this area, and therefore you cannot claim any fees that are relted to this course.

Brokerage fees- No: they make up the cost base of your shares (as Cutz said) and are included when working out your Capital Gain/Loss on your shares.

Hope I helped

 

[jono1887]

I agree with Cutz and Krusty, you would be using CGT for your share trading; to me your trades were still only investments, if you were a trader then their would be more trades and you would not be holding onto the assets for as long as you have .

IPod- Yes: but only a prercentage. You can only claim the amount you used for trading stocks, you cannot claim all of it as (I'm guessing) you used it for listening to music etc. their for you cannot claim your private use of an asset. Also you cannot claim the cost of purchase of the IPod, as it is an asset, you must claim the depreciation of the asset; however if you are renting etc. you can claim your repayments of an asset.

Textbooks- No: Your not a proffesional trader or have a current job in trading; therefore this degree at the end of the day may allow you to obtain employment in this area, and therefore you cannot claim any fees that are relted to this course.

Hope I helped

So with the ipod, I can only claim the depreciation of the asset and only a % of this depreciation?
With the renting - were you referring to the renting of the capital (ipod) or renting as in accommodation?

Example 1 – Share trader

Molly is an electrical engineer. After seeing a television program, Molly decides to become involved in share trading activities.

Molly sets up an office in one of the rooms in her house. She has a computer and access to the internet.

Molly has $100,000 of her own funds available to purchase shares and, in addition, she has access to a $50,000 borrowing facility through her bank.

Molly conducts daily analysis and assessment of developments in equity markets. The resources she uses include financial newspapers, investment magazines and stock market reports. Molly's objective is to identify stocks that will increase in value in the short term to enable her to sell at a profit after holding them for a brief period.

In the year ended 30 June 2001, Molly conducted 60 share transactions: 35 buying and 25 selling. The average buying transaction involved 500 shares and the average cost was $1,000. The average selling transaction involved 750 shares and the average selling price was $1,800. All the transactions were conducted through stockbroking facilities on the internet. The average time that Molly held shares before selling them was twelve weeks. Molly's activities resulted in a loss of $5,000 after expenses.

Molly's activities show all the factors that would be expected from a person carrying on a business. Her share trading operation demonstrates a profit making intention even though a loss has resulted. Molly’s activities are regular and repetitive, and they are organised in a business-like manner. The volume of shares turned over is high and Molly has injected a large amount of capital into the operation.

Example 2 – Share holder

George is an accountant. He has bought 200,000 shares in twenty ‘blue chip’ companies over several years. His total portfolio cost $1.5 million. George bought the shares because of consistently high dividends. He would not consider selling shares unless their price appreciated markedly before selling them. In the year ended 30 June 2001, he sold 20,000 shares over the year for a gain of $50,000

Although George has made a large gain on the sale of shares, he would not be considered to be carrying on a business of share trading. He has purchased his shares for the purpose of gaining dividend income rather than making a profit from buying and selling shares.

From this example from the ATO, it seems the main determining factor is the purpose of puchasing the shares. The traders purpose was to obtain profit whereas the investors purpose of obtaining dividend income. My trades did not have any intention to gain dividend income and were mainly for the purpose of obtaining profit. And the no. of trades made by the 'trader' in the example is 60 over 12 months where I made 32 over 7-8 months... I don't think the lack of number of trades makes me an investor over a trader.

 

[Krusty the Klown]

Good examples, one thing to keep in mind too, is are you going to keep on doing the share trading? One thing the ATO specifies with a business enterprise is will this be an ongoing concern?

You could go either way - either use the CGT method or ordinary income. Possibly the only benefit of one over the other is, that if you use the CGT method, the ATO won't question anything if you get audited.

With the IPOD, you have to separate which % of use was for business use and which % you used for private purposes (listening to music) and declare that business % of the depreciation as an expense. As it is classed as plant and equipment you cannot claim the purchase cost as a deduction - only depreciate the total purchase price over the asset's useful life. As it is a computer it will be depreciable over three years.

So let's say you use the IPOD 20% of time for share trading and 80% for music. You can claim 20% of one third of the purchase price each year for depreciation as a deduction.

In terms of renting. If you lease plant and equipment you cannot claim depreciation as an expense as you don't own the asset. You can claim the lease or RENT payments as an expense deduction. Leasing is the same as renting.