Capital gains tax

Johno · 28 January 2009

How is this figured out? Does the government take tax out of every trade you do? Or do they take the tax out of what your entire capital is at the end of the year?

IOW if your portfolio started at say $10 000 and you won and lost a few trades, but your entire port folio ended up down by $2000, would you still pay tax on the trades that you profited from? Or do they only charge capital gains tax if your WHOLE capital has made a profit?

AlterEgo · 28 January 2009

Johno said:
IOW if your portfolio started at say $10 000 and you won and lost a few trades, but your entire port folio ended up down by $2000, would you still pay tax on the trades that you profited from? Or do they only charge capital gains tax if your WHOLE capital has made a profit?

If the total of all your capital gains and losses ended up being an overall loss of $2000 for the financial year, then you wouldn't pay any tax on it. You'd declare a capital loss of $2000 on your tax return, which you can then carry forward to offset any capital gains made in future years.

son of baglimit · 29 January 2009

oh dear - the number of folk that go into share trading, or any investment, and not understand any of the tax implications - until its too late.

try this.........for each trade

http://www.delisted.com.au/CapitalGainLossCalculator.aspx

drsmith · 29 January 2009

The simplest answer to this is the following Australian Tax Office link.

http://www.ato.gov.au/individuals/pathway.asp?pc=001/002/026&mfp=001/002&mnu=44684#001_002_026

transportable · 29 January 2009

please let me know if I am wrong but if you are trading in shares That is turning over shares on a daily, weekly basis with the intention of making a profit rather than aninvestment then it is not capital gains tax involved but income tax as if running any business and you were buying and selling any commodity.

Problem with trading share the GST is only partly refundable as it is a financial instrument.

Please advise if I am onthe wrong track.

transportable · 29 January 2009

ok the ATO advised that you should go to ATO website and search for share trading This will give you information on whether you are a trader and then income or loss wil be revenue or if you are an invester the profit or loss will be capital. Good luck.

MS+Tradesim · 29 January 2009

transportable said:
ok the ATO advised that you should go to ATO website and search for share trading This will give you information on whether you are a trader and then income or loss wil be revenue or if you are an invester the profit or loss will be capital. Good luck.

Even if you are a trader you can still nominate individual trades as capital purchases rather than trading stock.

Johno · 29 January 2009

So is the simple answer, no you dont have to pay tax if your total capital is down?

MS+Tradesim · 29 January 2009

Johno said:
So is the simple answer, no you dont have to pay tax if your total capital is down?

If your realised losses are greater than your realised gains, then generally there would be no tax payable.

As it would also be your intention to make money from trading you would also be able to claim some expenses. eg. data costs, subscriptions to relevant magazines, books about trading, a percentage of your internet costs, etc. Speak to your accountant for specific advice for your situation.

roofa · 29 January 2009

Johno said:
So is the simple answer, no you dont have to pay tax if your total capital is down?

Johno, to put it simply you only have to worry about CGT if you have sold shares at a profit overall. This has nothing to do with your total holdings or overall capital invested being up or down in value.

It is not a gain until you sell.
It is not a loss until you sell.

Hope this is easy to understand.

wonderrman · 29 January 2009

There is this big guide you can get from the ATO on cgt. It's very good and free. Think you can order it from the website.

Johno · 30 January 2009

roofa said:
Johno, to put it simply you only have to worry about CGT if you have sold shares at a profit overall. This has nothing to do with your total holdings or overall capital invested being up or down in value.

It is not a gain until you sell.
It is not a loss until you sell.

Hope this is easy to understand.

Roofa, what i want to know is...is every trade treated seperate from one another as far as paying CGT or does the tax office tax you on your WHOLE portfolia.

So if ive made 100 trades and 40 of them made a profit, yet my whole portfolia (capital) was down, would i still have to pay tax on those 40 trades because they were a profit?

AlterEgo · 30 January 2009

Johno said:
So if ive made 100 trades and 40 of them made a profit, yet my whole portfolia (capital) was down, would i still have to pay tax on those 40 trades because they were a profit?

No.

The capital losses outweight the capital gains - overall capital gain for the year is negative - therefore no tax to pay.

And remember to carry that capital loss forward, as it can be used to offset capital gains made in later years.

Edit: Hang on, let me check something with you. These losses you're talking about, are they realised losses? ie. have those shares been sold? If not, they can't be used to offset the ones that have sold at a profit. CGT only applies to RELIASED gains and losses.

AlterEgo · 30 January 2009

Following on from that last point of mine, as far as GCT goes, the ATO only cares about REALISED profits and losses. The ATO does not care whether your current potfolio (ie. the shares you haven't sold yet) is in profit or loss, only the profit and loss of the shares that you have ACTUALLY SOLD.

So, if you have entered 100 trades and sold out of 40 of them at a total profit of say 20K, and the remaining 60 trades have not yet been sold and are at a current balance of a loss of 30K, then YES, YOU WILL STILL PAY CGT on the 20K, UNLESS you sell those remaining shares at a loss so that you realise a capital loss on them.

Johno · 31 January 2009

OK, yep youve answered my question. So I am taxed on my CAPITAL not individual trades.

I am talking about realised losses as in sold stocks.

Thankyou.

jersey10 · 31 January 2009

AlterEgo said:
So, if you have entered 100 trades and sold out of 40 of them at a total profit of say 20K, and the remaining 60 trades have not yet been sold and are at a current balance of a loss of 30K, then YES, YOU WILL STILL PAY CGT on the 20K, UNLESS you sell those remaining shares at a loss so that you realise a capital loss on them.

how much CGT will you pay on that 20K? do you pay less if you held the shares for over 1 year?

Johno · 31 January 2009

jersey10 said:
how much CGT will you pay on that 20K? do you pay less if you held the shares for over 1 year?

Yes you pay half if held for over a year.

jackson8 · 31 January 2009

AlterEgo said:
Following on from that last point of mine, as far as GCT goes, the ATO only cares about REALISED profits and losses. The ATO does not care whether your current potfolio (ie. the shares you haven't sold yet) is in profit or loss, only the profit and loss of the shares that you have ACTUALLY SOLD.

So, if you have entered 100 trades and sold out of 40 of them at a total profit of say 20K, and the remaining 60 trades have not yet been sold and are at a current balance of a loss of 30K, then YES, YOU WILL STILL PAY CGT on the 20K, UNLESS you sell those remaining shares at a loss so that you realise a capital loss on them.

and thats why a lot of people will sell their stocks that are showing a loss before end of tax year to offset their gains and then repurchase them back in the new financial year
there is a proper term to describe this it just escapes me at the moment

but the tax office has rules concerning this sort of practice as well

someone may know the term used to describe this method ...swishing or something like that...

Julia · 31 January 2009

Another aspect to consider is that if you have bought/sold several parcels of the same stock you can choose which parcel to offset against in order to minimise tax payable.

cutz · 31 January 2009

jackson8 said:
someone may know the term used to describe this method ...swishing or something like that...

Hi Gary,

It's called a wash sale.

Capital gains tax

Johno

AlterEgo

son of baglimit

drsmith

transportable

Transportable

transportable

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MS+Tradesim

Johno

MS+Tradesim

roofa

wonderrman

Johno

AlterEgo

AlterEgo

Johno

jersey10

Johno

jackson8

Julia

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cutz

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