Fees from accountant (ASIC annual fee)

[bellenuit]

No, capital gains are only treated as ordinary income where the company is trading in shares, as opposed to investing. For assets purchased to generate an income on the assets, as opposed to the trading of the assets, a company is liable for CGT. It's no different to an individual.

Just to be specific on trading as opposed to investing....

When you are trading, those shares you hold for trading do not come under the capital gains regime at all. This applies to companies and individuals. Your profit from trading is Sales less Cost of Goods Sold and the latter is calculated as Opening Stock plus Purchases less Closing Stock. You have options as to how you value your share trading stock - by cost price, by market price or by the lesser of the two - and your choice can change from year to year.

I won't go into the detail here, but because of the valuation methods allowed, you can actually make profits (or losses) simply through the change in value of the stock (for instance when valued at market price) without actually buying or selling shares.

In the CGT regime, you actually have to have a Capital Gains event (such as a sale of shares) before you can have a capital gain or loss.

Shares held for investing come under the capital gains system. One difference between companies and individuals under the CGT system is that companies cannot claim the 50% discount for shares held for over a year.

Because of the different tax treatment between shares for trading and shares for investing, it is important that you can clearly identify which are which in case of an ATO audit. One way to do this is to have two separate broker accounts, one for trading and one for investing. Others might do the investing in their own name and trading in a company name to keep thins separate.