Selling shares for tax gain

[tugga]

if you sell at a loss you get a tax advantage correct.

now what, if you were to sell and buy in the same company day later is that allowed?

 

[Struzball]

Yes, at the moment..

 

[nioka]

Yes, at the moment..

Maybe, maybe not. I've been told that if is done with the purpose being to get a tax advantage then the tax department may disallow the deduction.???????

 

[tugga]

i was going to sell now before the pre july firesale

so i can scoop u more for cheaper

 

[ColB]

Tugga, I'm pretty sure you can only write off a loss against a share profit and if you don't have a profit to write the loss off against you can carry it into the next year. I understand a lot of people do what you are suggesting particularly around 30th June. Nioka maybe right when suggesting the ATO may look at the practice unfavourably but perhaps don't re purchase the same share or not at least straight away. The ultimate reply probably lies with your accountant. Regards CB

 

[SenTineL]

Maybe, maybe not. I've been told that if is done with the purpose being to get a tax advantage then the tax department may disallow the deduction.???????

how would the tax dept. know what the intention of any sale is??

it's not like you have to declare the purpose of each share sale

 

[kyme]

Selling a share to generate a tax loss and then repurchasing later is classed as a "wash" sale by ATO. Although commonly done in the past, it is prohibited under ATO regulations, been several newspaper articles this year re Tax Office would be taking a harder line on this matter. If they became aware of it, no tax deduction would be allowed. You might get lucky I suppose and never get audited. Suggest you go to ATO web site and do some research.

 

[nioka]

how would the tax dept. know what the intention of any sale is??

it's not like you have to declare the purpose of each share sale

If you ever get to have a difference of opinion with the tax office you will find that they will declare something to be in their favour and it is up to you to prove that it is not the way they say it is. They would declare it done deliberately to reduce tax as the main reason and you would have to prove otherwise. The best bet is to sell and invest the funds in something else. You could decide later to sell something else and repurchase the original stock. I had a run in with them many years ago. My accountant did very well out of it. I had a win of sorts and the tax office got zilch. Actually they got less because my accountants fees were deductable.

The tax office have very sophisticated computer programs which scan tax returns for anything out of the ordinary.

 

[hangseng]

if you sell at a loss you get a tax advantage correct.

now what, if you were to sell and buy in the same company day later is that allowed?

Tugga I trust you read what you asked me and I sent you 2 days ago?

"I believe this is what is termed by the ATO as a "wash sale" transaction. http://law.ato.gov.au/pdf/tr2008-001.pdf "

What did you find fro the ATO? I found that it is a no go zone and WILL draw negative attention.

I would have to ask if the stock is worthy of just buying back after you had just sold it, why sell it in the first place?

I also leave you with what a clever accountant told me years ago. "If you are paying the tax you are making the money". From that point on I decided I would gladly pay >$1m in tax as it means I am also earning a tidy sum.

I am all for 'legally minimising' tax exposure, however it should be a secondary consideration to wealth accumulation and investment thinking.

 

[tugga]

yes i read it i just thought it was a good question to discuss and other people might advantage from me asking it