Can I claim brokerage fee back?

Do people registed as traders pay higher brokerage,

Because it's funny on some things like Insurance when you tell the insurance company that you will be using the insured item for business and claiming back the gst, I can't understand why but they put the price up with the excuse that they have to pass on some tax credit cost.

Another thing you have to look into is weather alot of your other costs will go up once trading as a business, you may have higher,

Bank fees,................. possily up to $30/month.
Accounting fees,........ you may have to lodge two tax returns
legal setup,............... It can cost over $1000 to setup a company
annual company fees,.. Asic fee every year

etc.etc

Tysonboss1 said:

Another thing you have to look into is weather alot of your other costs will go up once trading as a business

Click to expand...

The costs depend more on the structure than how you're using it. You don't need a company to run a business.

For example, I have bank accounts with NAB for personal, trust, and company. The fees on the personal one are lower, but the trust and company are the same (in the grand scale of things though, the difference is negligible). Likewise with ING and BankWest linked Internet accounts: the interest on a personal account is higher than a business account, and trusts need a business account no matter how they're used.

Accounting fees depend on the number and type of structures and the complexity of the work involved. How you use the structures may impact on the complexity of work involved, but not on the cost of obtaining and using the structures themselves.

GP

Hmm, when we are talking about a business of trading shares - it doesnt necessarily mean in a company structure. It can be as a sole trader.

GP: You have a trust and company? Is this a discretionary trust and investment company?

must be wealthy/have a good accountant :

Hyperion

Hyperion,

In your example with brokerage at $ 10 + GST $1.

as a trader you claim 75% of $ 1 = $ 0.75

you forget that the missing $ 0.25 of Gst is a cost to the trader and will have to be subtracted from the profit.

also if a trader has a turnover lower than $ 50,000, he is able to claim 100% of GST.

good for option traders I suppose, not for me.

yonnie,

"also if a trader has a turnover lower than $ 50,000, he is able to claim 100% of GST."

Thats interesting - I didn't know that. Would you be able show me where this is from? legislation or ATO website etc.

Thanks,

Hyperion

hyperion,

cant remember exactly where I got that from, but almost sure I got it from the ATO website somewhere.

good luck

yonnie,

Hmm.. are you referring to the financial acquisitions threshold?

http://www.ato.gov.au/businesses/content.asp?doc=/content/42954.htm

As far as I can see, you are permitted a 75% RITC regardless of turnover.

Hyperion said:

You have a trust and company? Is this a discretionary trust and investment company?

Click to expand...

I actually have two trusts and two companies (three if you count the one that's the trustee for one of the trusts).

Both trusts are HDTs, one company is for the share trading business, and the other company is one I've had for years and (unfortunately) owns most of my funds so is acting as my bank (very friendly bank manager there ).

must be wealthy/have a good accountant

Click to expand...

Don't know about that, but I'll soon have a wealthy accountant (actually he is good... just in case he's reading ).

GP

jet328 said:

When adding the brokerage to the cost base do you have to take out the GST component?

ie brokerage came to $1100 (you are paying $100 of GST)
Do you add $1000 or $1100 to the cost base?

Click to expand...

No.

Hyperion said:

yonnie,

Hmm.. are you referring to the financial acquisitions threshold?

http://www.ato.gov.au/businesses/content.asp?doc=/content/42954.htm

As far as I can see, you are permitted a 75% RITC regardless of turnover.

Click to expand...

hyperion, sorry I might be wrong about claiming 100%.
I just didn`t look into it properly, `cos my turnover is far more than $ 50,000.

I don't think GST can be claimed back with IB. Because they are US based, I understand they don't need to be registered. Anything supplied to them by the ASX (eg data fees, option trading fees) has the GST attached, but because IB are probably not registered, they simply pay the extra and then re-coup it from us.

Anyone know if this is so?

yonnie said:

hyperion, sorry I might be wrong about claiming 100%.
I just didn`t look into it properly, `cos my turnover is far more than $ 50,000.

Click to expand...

Hi yonnie, I thought to claim the 100% GST credits is based on "financial supply" and not "turnover" of the business - trading shares and their derivatives are not imput taxed - only the fees and other related charges.

As I understand it, as long as there is less than $50,000 pa in imput taxed fees and charges, we are entitiled to claim 100% if we are registered for GST.

Any thoughts? If I have it wrong, perhaps one of our accountants here would be happy to comment?

Hi All,

Just to clear things up,

As i have traded about 100 times this year. Brokerage fees (including GST) = $3300. I also kept a copy of P/L statement (in case ATO call me up)

So basically, when submitting tax returns. I would list this deduction under
"D7 - Deductions - Interest and Dividends" with $3300 as the amount to be claimed.

Is it that simple ? or have i missed something ?

Its self assessment...and ive assessed that all costs of buying
and selling shares are a deduction.

I like self assessment.

So_Cynical said:

Its self assessment...and ive assessed that all costs of buying
and selling shares are a deduction.

I like self assessment.

Click to expand...

What do you mean by self assessment ? With self assessment, do you record it somewhere just incase ATO call up ?

Thanks,
overule

Overule,

Whether you can claim brokerage as a deduction depends on your status - whether you are a share "holder" or a share "trader".

Whether you are a share holder or a share trader depends. The following factors are relevant:

1. nature of activities
2. repeition and regularity
3. organisation in a business-like manner, the keeping of books or records and the use of a system
4. the volume of operations
5. amount of capital employed.

Positive factors Negative factors
More likely to be a business if ... Less likely to be a business if ...
Large scale operations Small scale operations
Involves employees One person operation
Frequent acts/transactions Infrequent acts/transactions
Conducted with a view to profit Conducted as mere hobby
Profitable Non-profitable
Conducted over long period Short-term
Conducted continuously and systematically Spasmodic
In commercial premises At home
Involves items typically dealt with commercially Involves items not ordinarily dealt with commercially
Involves exercise of specialised knowledge Involves little knowledge or skills
Significant capital investment Little or no capital investment
Business records kept Records not kept, or inadequate
Full-time Part-time
Market research done No market research
Associated with other commercial activities of taxpayer No other commercial activities
Existence of business organisation, business name Conducted personally/privately
Advertising No advertising
Active Inactive or preliminary

If you are a share holder, brokerage is added to your cost base of your shares. Thus it reduces the capital gain when you dispose of your shares.

If you are share trader, then you shares are trading stock and fall under the trading stock provisions. Your brokerage will be a deduction.

I'd just like to add, that there really isnt any benefit in being classed as a share trader. The only reason it would appear to be of benefit is if you are making large losses - which I hope isnt the case.

I would think that many of us would not be classed as share traders. If you hold another job, it would be very difficult to be classified a share trader. In fact, there is a case about someone who claimed to be a share trader and the judge said you would almost have to be derelict in your duties at your day job to be classed a share trader. (because the effort and time required)

Hyperion

sails said:

Hi yonnie, I thought to claim the 100% GST credits is based on "financial supply" and not "turnover" of the business - trading shares and their derivatives are not imput taxed - only the fees and other related charges.

As I understand it, as long as there is less than $50,000 pa in imput taxed fees and charges, we are entitiled to claim 100% if we are registered for GST.

Any thoughts? If I have it wrong, perhaps one of our accountants here would be happy to comment?

Click to expand...

You need to be a business and registered for GST to claim any GST. If you are registered, I believe you can only claim 75% of the GST you have paid on brokerage/fees as as it is a Reduced Input Tax Credit - and there is no limit.

As IB is international, I don't think they charge you GST, so you wouldnt be able to claim it. You will be able to see on the contract notes/tax invoices whether they have charged you GST.

hmm, admittedly, my GST knowledge isnt all that great though...

Hyperion

overule said:

What do you mean by self assessment ? With self assessment, do you record it somewhere just incase ATO call up ?

Thanks,
overule

Click to expand...

Self-assessment and the taxpayer

http://www.ato.gov.au/individuals/content.asp?doc=/content/13685.htm

U keep records for 5 years...i use a work sheet to calculate everything
and thats my record...so if the ATO ask, i can show them how i arrived
at a figure...i like to be honest with my tax so im not deducting costs
that arnt there.

overule said:

Hi All,

Just to clear things up,

As i have traded about 100 times this year. Brokerage fees (including GST) = $3300. I also kept a copy of P/L statement (in case ATO call me up)

So basically, when submitting tax returns. I would list this deduction under
"D7 - Deductions - Interest and Dividends" with $3300 as the amount to be claimed.

Is it that simple ? or have i missed something ?

Click to expand...

hi overule,

if you have a business as a share trader, your brokerage fees should be in your P/L, not as a separate item in D7 - Deductions