Tax deductible expenses

[markrmau]

Hi, Does anyone have any guidelines for tax deductible expenses if share trading were your sole source of income (I tried looking at ATO web site but didn't find much).

Are internet expenses, computer hardware purchases deductible? (Of course your answer will not be construed as tax advice.)

Thanks, Mark.

 

[tech/a]

Mark Im no accountant.

but pretty well anything that can be seen as an aid to creating an income.

Software,Hardware,Books,datafeeds,seminars,Brokerage fees,an office or room in the house.Any losses.% of Car (to see your broker daily).

I claim most of these (well my accountant does) and Im not trading fulltime but it does derive an income and as such is taxed.So Ill claim what I can legitimately.

tech

 

[GreatPig]

Mark,

I'm not an accountant either, but note that some things are not deductible but rather depreciable (like computer hardware and software). They are considered assets rather than expenses.

Also be aware that what's deductible, and how gains and losses are treated, depends on how the ATO classes you - either as an investor or a professional trader. While number of trades per year and the fact it's your only income are significant, they're not the only criteria.

See the attached ATO documents from their legal database.

Cheers,
GP

 

[RichKid]

I have no idea if this is true as I don't have any expertise in tax but because costs associated with attending AGM's are deductible I was told by one guy who runs investment seminars that they often have them (the seminars) in New Zealand and people claim air fares (or part of it?) because it's related to deriving income or is educational or something like that. People must be doing this for overseas AGM's too?? Sounds a bit far fetched but it it's true I might just plan my next holiday around it....

 

[Mofra]

markrmau,

It could be worth meeting with an accountant with a list of questions for an hour to discuss your own arrangements, whether to is more tax-effective to trade under a company structure, etc. The meeting could be be a deduction itself. "If education sounds expensive, try ignorance".

Good luck, whatever you find out will certainly be of interest to more than a few here at a guess.

 

[GreatPig]

RichKid,

In theory you are only supposed to claim travel expenses for that sort of thing on a pro-rata basis for the time spent on business matters. So if you went to an AGM for one day and then spent four days at the beach, you can only really claim about 20% of the costs.

It can get tricky though, like if you go somewhere on business but stay with family or friends. This might be deemed a combination of business and private affairs, even though if you stayed in a hotel instead it would be all business. Likewise if you went to check up on your investment properties at Airlie Beach and decided to stay the night on Hamilton Island. Again, even though you have to stay somewhere, it might be deemed that the stint on Hamilton Island was more holiday than business, so you might not be able to claim those costs as expenses (or perhaps not the component above the cost of a normal hotel).

You'd really need to check with an accountant or tax adviser before relying on claiming anything like this.

GP

 

[roofus]

well, where do I start?? Im a full time day trader with a turnover of $25m plus per year and am currently in a legal battle with the ATO in regards to CGT. anyone here interested?

 

[GreatPig]

anyone here interested?

Interested in what - joining you in your battle or starting their own?

What don't the ATO agree with? If you are a full time day trader, I wouldn't have thought you'd have any CGT at all as it would all be classed as normal income.

Cheers,
GP

 

[roofus]

income vs CGT is all determined by what that ATO declare you to be, ie. a business=income, or, a trader=CGT. However if you analyze the tax act and do as much research into case law as I have, you will realise that essentially trading (or gambling) on the stock market should not attract any taxation as reciepts gained from any form of gambling are not taxable, unless you are in that profession so to speak. ( eg.a horse trainer betting on his own horse would attract tax, but a general member of the public is merely indulging in a pastime, therefore they are not a business,hence no taxation)

 

[markrmau]

Thanks for all the tips posted in this discussion (yes I will sit down with an accountant, but just wanted to get a general feel so I would know what questions to ask).

Also, if your a day trader turning over 25M I assume you don't keep much stock for 1 year. Then it doesn't matter if it CGT or income. Taxed at same amount. Right?

Cheers,Mark.

 

[GreatPig]

trading (or gambling) on the stock market should not attract any taxation as reciepts gained from any form of gambling are not taxable

I think you might be hard pressed to convince the ATO that share trading is gambling. Gambling is not supposed to have any element of skill, although some forms do have some. And if you succeeded, that would immediately bar all those mega-rich super funds from buying shares. I think the stock market might then collapse .

And as for not being considered a business, those two attachments I posted up-thread have some info on that. While number of transactions, turnover, and sole employment are significant components, there are other things they talk about there.

Cheers,
GP

 

[GreatPig]

I assume you don't keep much stock for 1 year. Then it doesn't matter if it CGT or income. Taxed at same amount. Right?

As I understand it, that's correct - same as if the trading was done in a company structure - but there's more to it than just the amount of tax.

When it's not classed as a business, income and capital gains (or losses) are treated separately. Capital losses cannot be offset by income and vice-versa.

So for example if you have a pile of income from dividends and other sources, but make a capital loss on trades, you end up having to pay tax on the income and just carrying the capital loss forward. You can't offset them against each other.

GP

 

[roofus]

markrmau- no I dont keep a stock for more than 24hrs,period.
GreatPig -skill doesnt come into the question of whether something is a gamble or not, can check any dictionary you like, and to confirm those definitions, there are a multitude of decisions in The Supreme Court, aswell as The Federal Court that back them up.

This crusade that I have embarked on is for the benefit of all "investors" that have been taxed "illegally". Just think about it for a moment, wouldnt you or anyone else for that matter prefer to relinquish the allowable "deductables"
(ie. losses,brokerage,fees,etc) for a tax free environment?

You cant be serious in saying that there is no risk involved with share trading? If that were the case all charts would simply go straight up, and anything that you "purchased" today would be worth more tommorrow. Risk is a fundamental part of whether something is considered a gamble or not.

 

[GreatPig]

skill doesnt come into the question of whether something is a gamble or not

That depends on who's defining it. The NSW Liquor Administration Board, which controls gaming in NSW, uses that as one of the criteria in determining if something is gambling or not. There's an amusement machine around called "Skill Tester" specifically to highlight that it does have skill (not that you'd notice ) and thus is not a gambling machine that needs a gaming licence.

However, I don't know exactly what definition the ATO uses for tax purposes.

You cant be serious in saying that there is no risk involved with share trading?

I didn't say that. I didn't mention risk at all. All I was implying is that there's at least some skill involved in share trading, and thus it would not likely be considered gambling.

And good luck with your crusade. If you're taking on the tax office, I hope you have deep pockets .

Cheers,
GP

 

[roofus]

GreatPig-GAMBLE- to play games of chance for money,to take risk for some advantage, to risk in gambling ie. bet, an undertaking involving risk. Websters.

 

[baglimit]

oh my dear god - so much info - so much of it wrong. most of you need to consult a tax expert if you consider true the things you have stated, and are yet to be audited. realistic claims for pc depreciation, loan interest, net fees, real assoc costs etc are claimable, whether hobby or pro trader. if hobby (not primary source of income) you need to be as careful as any normal wage earner in what you claim. if a pro, a whole new world opens up, and i'm sorry to say the CGT info here was oh so wrong. i'm not going to go into the complexities of it all now, but lets just say if any of you get audited soon, pray they are sympathetic - AND LENIENT - but i doubt it.

why not one of you open up a forum on tax, and we'll see what questions & answers can be made. but please, only answer it IF YOU KNOW IT TO BE TRUE, NOT WHAT YA MATE RECKONED, OR EVEN YA DODGY ACCOUNTANT.
be careful out the folk - it is dangerous.

 

[GreatPig]

Roofus,

Dictionary definitions are irrelevant. The only important thing in your case is how the ATO defines it for tax purposes.

GP

 

[GreatPig]

i'm sorry to say the CGT info here was oh so wrong. i'm not going to go into the complexities of it all now

I doubt anyone wants the complexities, but a summary of your view of how it really is would probably be appreciated.

you need to consult a tax expert

Absolutely.

GP

 

[roofus]

baglimit- you sound like you know what your talking about, I wonder what your take is on CGT or taxation in general for that matter when it comes to share trading? Do you believe that share trading should attract tax when gambling doesnt? There is a direct correlation between gambling and share trading. I have over 3 dozen cases from The Supreme Court, aswell as cases from The Federal Court in which either the ATO has challenged individuals, or vice versa, and have succeded. The ATO change their defence to make it suit themselves (more tax).
You only have to pick up the paper and read any article in the finance section and the writer frequently refers to risk,gamble,bet, etc.

 

[baglimit]

roofus - read my post (4) in CGT this pm. on gambling. and as i said in regards to other matters, pose a question and lets see what answers you get. but people, pls only answer IF YOU KNOW IT TO BE TRUE. keep your wannabes to another forum.