Cross Trade?

[RobJC]

I would like to sell an underperforming stock and buy back in at a lower price. Creating a capital loss but retaining the stock at a lower price. Is this a cross trade, if it is do I need a conditional order ? Why not do a BUY and SELL At Market at the same time. I use the Commsec platform. Thanks for feedback

 

[sptrawler]

I would like to sell an underperforming stock and buy back in at a lower price. Creating a capital loss but retaining the stock at a lower price. Is this a cross trade, if it is do I need a conditional order ? Why not do a BUY and SELL At Market at the same time. I use the Commsec platform. Thanks for feedback

Who says you will be able to buy in at a lower price?

 

[peter2]

The transaction I assume your referring to is called a "wash sale" . The ATO has a very dim view of this action and may disallow the capital loss. You've got to look it up and then get advice from a tax professional.

 

[divs4ever]

i NORMALLY try that tactic sell ( shares i already hold ) and buy lower , when there is an attractive capital raise

( sell down to cash up to participate in the SPP )

i don't do it often because i don't find many SPPs attractive , now i don't do this to generate a cash profit , but to increase the share-holding at a lower cost ( you pay brokerage to sell but not to buy via the capital-raising , and you should end up with more shares than you had when you sold down )

obviously this only works when the price you sell for is higher than the offer price

please note this is NOT a guaranteed tactic the capital raise might be oversubscribed and your entitlement might be reduced and you end up with some shares and some returned cash , and you might have been better off watching from the sidelines

Who says you will be able to buy in at a lower price ?

yep i got caught like that is my early days on QBE .. the share price didn't drop to where i hoped for more than a year ( i saw some 'bad news' the market didn't agree , and the SP climbed .. for months )

 

[barney]

I would like to sell an underperforming stock and buy back in at a lower price. Creating a capital loss but retaining the stock at a lower price. Is this a cross trade, if it is do I need a conditional order ? Why not do a BUY and SELL At Market at the same time. I use the Commsec platform. Thanks for feedback

Hi @RobJC and welcome to ASF

As @peter2 has eluded to, it is not a "cross trade" ... It is potentially a wash trade

For the record, I trade the Spec end of the market and regularly do as you are suggesting

It is far less likely to be considered a "wash trade" if you make the trades during the "regular season" to coin a sports analogy

If however, you sell very late in June and then buy back very early in July to create a tax deduction event, you may be a little more likely to generate some unwanted interest.

To be honest I have never had a problem with any of my trades done in that regard, even if done in June/July (not advice of course)

I think the size of the deduction created would have a large bearing on any interest by the tax dept.

Trading is a tough gig at times so you are unlikely to have big brother knocking on your door just because you saved a little tax one year

Theoretically, once you re-buy lower, you will hopefully sell higher somewhere down the track, so the T/man will get you sooner or later

Cheers

 

[Dona Ferentes]

What's wrong with "wash sales"?

ATO warns investors over 'wash sales' The ATO has warned investors to be cautious about 'wash sales', the process of selling shares and buying them back a short time later to offset capital gains. People getting their affairs in order for the end of the financial year should be cautious...

www.aussiestockforums.com

and a few other threads. TKype in wash in search, and screen for Topic

 

[RobJC]

Thanks for the info, A "wash sale" is what I meant. Better to get professional advice. A good idea in theory.

 

[Country Lad]

In case anybody is interested, it is not just that the ATO may look at wash trades, there is actually an ATO ruling TR 2008/1. This is part of the ruling:

11. Where a capital loss is incurred in connection with the wash sale and the counterfactual[5] is established in the circumstances of the case, the taxpayer obtains a tax benefit in connection with the scheme under paragraph 177C(1)(ba). The counterfactual is that the taxpayer would not have disposed of or otherwise dealt with the asset but would, or could, be expected to have continued to beneficially own, or have an interest in, the asset during that income year. The objective features of the scheme, for instance that under the scheme the taxpayer acquires the same asset, or substantially the same asset, continues to enjoy the financial benefits of the asset or there is otherwise no significant change in the taxpayer's economic exposure to, or interest in, the asset indicate that this is the relevant counterfactual. Thus, but for the scheme, a capital loss would not have been, or might reasonably be expected not to have been, incurred by the taxpayer