You havnt held the shares for twelve months so you do not get the 50% CGT discount so it is irrelvant how you classify yourself, the tax will be exactly the same
but if I treat them as CGT, I wont be able to deduct the ipod and record keeping expenses can I?
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.
You can, you can deduct them as an expense against "ordinary" income. The ATO allows this.
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?
The ATO would allow this if they relate to his source of income - in this case pizza delivery, which is not related.
As his shares are not a source of ordinary income (being a CGT gain/loss) you cannot claim the expenses as a deduction and you must look to the CGT rules in order to determine whether or not these expenses can form part of the cost base and in turn give tax relief - in this case i doubt they would be acceptable.
Every deduction must be related to an source of income and in this case there is no relevant source to claim against.
Cheers
However, if using the CGT provisions these expenses could be added to the cost base as third element costs - costs incurred in owning or maintaining an asset.
Sorry mate, i think you are wrong on this one.
If he is not carrying on a business of share trading then he cannot claim any of the above.
If the shares are held as CGT assets, then you need to consider whether these costs will form part of the cost base of the CGT asset under subdiv 110A of income tax act 1997 and in this case they don't.
Cheers
If you invest in shares, you may be able to claim as a deduction from assessable income certain expenditure incurred in deriving your income from those shares. The following are examples of expenses that may be deductible.
Management fees
Where you pay ongoing management fees or retainers to investment advisers, you will be able to claim the expenditure as an allowable deduction. Only a proportion of the fee is deductible if the advice covers non-investment matters or relates in part to investments that do not produce assessable income. You cannot claim a deduction for a fee paid for drawing up an initial investment plan.
Interest
If you borrowed money to buy shares, you will be able to claim a deduction for the interest incurred on the loan, provided it is reasonable to expect that assessable dividends will be derived from your investment in the shares. Where the loan was also used for private purposes, you will be able to claim only interest incurred on that part of the loan used to acquire the shares.
Interest on capital protected borrowings
A capital protected borrowing is an arrangement under which listed shares, units or stapled securities are acquired using a borrowing where the borrower is wholly or partly protected against a fall in the market value of the listed shares, units or stapled securities.
Travel expenses
You may be able to claim a deduction for travel expenses where you need to travel to service your investment portfolio – for example, to consult with a broker or to attend a stock exchange or company meeting. You can claim a deduction for the full amount of your expenses where the sole purpose of the travel relates to the share investment. Where the travel is predominantly of a private nature, only the expenses which relate directly to servicing your portfolio will be allowable.
Cost of journals and publications
You may be able to claim the cost of purchasing specialist investment journals and other publications, subscriptions or share market information services which you use to manage your share portfolio. For more information, see Taxation Determination TD 2004/1 - Income tax: are the costs of subscriptions to share market information services and investment journals deductible under section 8-1 of the Income Tax Assessment Act 1997?.
Internet access and computers
You may be able to claim the cost of internet access in managing your portfolio. For example, if you use an internet broker to buy and sell shares, the cost of internet access will be deductible to the extent you use the internet for this purpose. You cannot claim a deduction for the private use portion.
You can also claim a capital allowance (previously known as depreciation) for the decline in value of your computer equipment to the extent that it has been used for income producing purposes. You cannot claim a capital allowance for the private use portion.
Borrowing expenses
You may be able to claim expenses you incurred directly in taking out a loan for purchasing shares which can reasonably be expected to produce assessable dividend income. The expenses may include establishment fees, legal expenses and stamp duty on the loan. If you incurred deductible expenses of this kind totalling more than $100 or more, they are apportioned over five years or the term of the loan, whichever is less. If your expenses are less than $100 or less, they are fully deductible in the year you incur them.
Other deductions
Any other expenses that you incur which relate directly to maintaining your portfolio are also deductible. These could include bookkeeping expenses and postage.
Deductions denominated in a foreign currency
All deductions that are denominated in a foreign currency must be translated into Australian dollars before being claimed on your Australian tax return. For more information on the exchange rates that should be used in translating foreign currency deductions, see the fact sheets Foreign exchange (forex): the general translation rule (NAT 9339) and Foreign exchange (forex): general information on average rates (NAT 13434) available on our website.
Expenses that are not deductible
Unless you are considered to be a share trader, you cannot claim a deduction for the cost of acquiring shares – for example, expenses for brokerage and stamp duty. These will form part of the cost base for capital gains tax purposes when you dispose of the shares. For more information, see the Personal investors guide to capital gains tax.
I agree with you rock, but you're assuming he has received dividend income and I don't think he has.
You'd also consider the type of stock also, i.e. if he has traded juniors then you can't really argue that you brought for dividend income.
Cheers mate
how does , software apply [amibroker]
and trading books [not uni textbooks]
great thread btw,
Hey Chorlton
All the mentioned expenses apart from brokerage and internet fees are deductible.
As you said, the brokerage is added to the cost base of the assets sold.
For your internet costs, you will have to work out the % of time you spent on trading or investing and then the % of time used for personal use. You can claim the % of usage for trading as an ordinary deduction.
It doesn't matter if you did not receive dividends, as a capital gain is assessable income.
I am presuming that making capital gains and the receipt of dividends when available was your purpose for buying the shares. That purpose makes your expenses deductible.
Have fun!!!!
when you talk about 'ordinary deductions'
are you talking about.
etax Deductions- Item15
-section 40-880 deductions
or
-other deductions
For your internet costs, you will have to work out the % of time you spent on trading or investing and then the % of time used for personal use. You can claim the % of usage for trading as an ordinary deduction.
how does , software apply [amibroker]
and trading books [not uni textbooks]
These two can be claimed as expenses against ordinary income for the same reasons. They are not tied to the purchase or sale of any one capital item.
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