Tax - From Trader to Investor

[korrupt_1]

I hate navagating the ATO website - needs an overhaul... so hard to pin point exactly what you want. Anyway, I'll have a look.

As the false points above show. As good as this forum is its not one that Tax advice should be sourced from. :homer:

:iagree: true, true, true... but it is a good place to bounce ideas around and get general information before actually going to a specialist who may/may not charge you for the advice...

You TH.... are a wealth of information

 

[Doris]

To be a TRADER you MUST have an ABN.

Not true at all!!!!!

Capital Equipment is not considered an expense. Be very careful with things like this. They most probably can be rapidly depreciated but most certainly purchased Equipment is not an Expense.

As always DYOR.

true, true, true... but it is a good place to bounce ideas around and get general information before actually going to a specialist who may/may not charge you for the advice...

You TH.... are a wealth of information

Sorry TH... You are wrong that I was wrong.

I put my tax into my 'business accountant' last week and the ATO has changed their rules.

I always use an accountant for my tax return as I also have an investment property. And now that I'm trading again, after 15 years, I was very careful to find out the current rules before 30.06.08 and double checked on every item during the assessment appointment.

Yes, I totally agree that you should seek professional advice!

If you were a trader you should submit your tax return through an accountant.
... and claim their fee in the next financial year. (I always mean to pre-pay this before June 30 but always forget!)

Mine always finds deductibles I hadn't thought of... and double checks whether items should be deductible or depreciated.

e.g. depreciation of my PC and printer over three years (less % for private use);
... depreciation of my desk and chair over 10 years;
... deduction of a finance seminar + registration fee + mileage to attend and car park and toll road fees;
... printer cartridges and paper;
... % of heating, power and lighting costs for the time spent on research/trading;
... graph paper, pens;
... internet and data charges (% of use for trading);
... newspapers e.g Fin Rev and related finance magazines
(only a % of normal daily newspapers as it is not generic and you can read the unrelated news!)

I certainly have learned when you save $1.00 you have $1.00.
... but when you spend it on a tax deductible you only get your marginal tax rate back. So the spend must matter!

Yes, if you rent you can claim a % of your 'office'. I don't bother here as you are right TH, the hassle of losing the simplicity of no CGT when you sell a house is not worth paying the accountant to keep records.

I do not profess to be an expert on tax... but my accountant is!

 

[Trembling Hand]

Doris not sure where you are saying I'm wrong.

Equipment purchases are not an Expense!! like you have stated two post ago. You cannot go and purchase a computer for trading then deduct that from income as an expense.

And you don't Have to have an ABN to be deemed to be carrying out a biz.

 

[korrupt_1]

And you don't Have to have an ABN to be deemed to be carrying out a biz.

geeze wiz... reading the ATO/ABR website is making my head spin...

http://www.ato.gov.au/businesses/co...c=001/003/021/001/008&mnu=59&mfp=001&st=&cy=1

The gist i'm getting is that you don't have to have an ABN... but if you are making >$75,000 then you will need to be registered for GST which means you will need an ABN....

(????)

this one is in the too-hard basket... must go get real professional advice...

 

[Doris]

Doris not sure where you are saying I'm wrong.

Equipment purchases are not an Expense!! like you have stated two post ago. You cannot go and purchase a computer for trading then deduct that from income as an expense.

And you don't Have to have an ABN to be deemed to be carrying out a biz.

My accountant said that to classify myself as a trader for tax purposes, as this is deemed to be carrying on a business, as I am endeavouring to make money, I now need an ABN.

Income (sales of stock) must be more than $20K. (otherwise it is classed as investing and a loss will be carried forward to next financial year.)

She has applied for it for me and it will be backdated to 1 July 2007.

I use my PC to access my trading account and information/data etc thus I can claim depreciation of it over three years (less the % for personal use.)

All the items I listed (and more) have been claimed... for deduction or for depreciation over time (as exemplified) as I use them in order to trade.

 

[Trembling Hand]

Doris I really don't want to get into some argument that is really for each person to get professional advice about.

But from your first post it has to be pointed out that an asset can only be depreciated once it is paid for. If it isn't a lease purchase and you buy it from within the biz that will first be deemed a capital purchase. Which is in effect a profit which you may have to pay tax on. Only then can you depreciate it.

Your statement that you can buy equipment and then claim it as an expense is a common mistake that can lead to tax problems. Yes you will claim depreciation on it but its not as simple as an expense.

also from the ato,

 

[Doris]

Doris I really don't want to get into some argument that is really for each person to get professional advice about.

But from your first post it has to be pointed out that an asset can only be depreciated once it is paid for. If it isn't a lease purchase and you buy it from within the biz that will first be deemed a capital purchase. Which is in effect a profit which you may have to pay tax on. Only then can you depreciate it.

Your statement that you can buy equipment and then claim it as an expense is a common mistake that can lead to tax problems. Yes you will claim depreciation on it but its not as simple as an expense.

I do not get involved in arguments. It's a sport I choose to live without.

However, I do like to learn from others and discussion is healthy and edifying.

I purchase my equipment from other income - my principal occupation as a teacher, not from profits made from trading!

I agree you could not claim for equipment you have not paid for!


I rang my accountant who rang the ATO who confirmed they like traders to have an ABN.
A TFN is sufficient for my broker only.

The ATO told her to have me check their ABN Entitlement Tool on their website because:

Penalties for applying for an ABN if you are not entitled

If you apply for an ABN and are not entitled to be registered you may be committing an offence under section 8K of the Taxation Administration Act 1953 by making a false or misleading statement regarding the operation of an enterprise.
Persons found guilty of making misleading statements may be prosecuted.

They reiterated that if it is likely that my sales may exceed $75k then I need to register for GST well prior to reaching this level, quoting my ABN.

A TFN, only, is sufficient for investors.

To find this tool:

www.ato.gov.au

Put cursor on: FOR BUSINESSES ... on the left menu. Click on 'business home page' from the drop down menu.

Click on RATES, CALCULATORS & TOOLS in the 'What you Can do' menu section on the left.

Then... click on 'TOOLS' at the bottom.
then... click on ABN Entitlement decision tool

You can then complete the 'test' and it will tell you if you are entitled to have an ABN. They also say to print out your 'test' as a record.


OR... YOU CAN SIMPLY GO TO THIS PAGE TO FIND IT:

http://calculators.ato.gov.au/scripts/axos/axos.asp?CONTEXT=&KBS=ABN_Entitlement.xr4&go=ok

You click on START and then click YES or NO to each question and a few minutes later you know.

Perhaps someone with experience can confirm that with >$75k of sales you can claim a rebate on the GST you pay with each brokerage fee? (provided you have an ABN and register for GST well before you near this level)

I very much doubt I'll get to that level this year!

 

[blablabla]

To be a TRADER you MUST have an ABN.

If your sales are under $75k you don't have to register for or pay GST.

Hi Doris,

Later posters have already refuted your assertion that to be a trader you must have an ABN, but I'm not sure that this thread is very clear on the subject. I had a look in the ATO website and found ATO publication NAT 11306-06.2007 which is a brochure about ABNs.

On page 1 it states:- "If your business has a GST turnover of $75,000 or more (or $150,000 or more for not-for-profit entities) you must register for GST and you’ll need an ABN to do this. If your business has a lower GST turnover, it’s up to you whether you register."

You pay GST on brokerages, professional fees, etc but not on the cost of the shares themselves. So, to have a GST turnover of $75,000 your share trading turnover would have to be in the megamillions.

Note that if you are registered for GST your accountant will have more work to do and will therefore have to charge you higher fees. Oh dear. I will be happy to be proved wrong, but for most simple traders there appears to be no need to either register for GST or to apply for an ABN.

If you have a later ATO ruling that changes any of this then please post a link or the reference number of the publication.

 

[Doris]

Hi Doris,

On page 1 it states:- "If your business has a GST turnover of $75,000 or more (or $150,000 or more for not-for-profit entities) you must register for GST and you’ll need an ABN to do this. If your business has a lower GST turnover, it’s up to you whether you register."

You pay GST on brokerages, professional fees, etc but not on the cost of the shares themselves. So, to have a GST turnover of $75,000 your share trading turnover would have to be in the megamillions.

Hey BBB...

I had a look at your site and it does indeed say 'a GST turnover of $75,000 or more'!
I thought you may have not recorded it correctly!

You just can't rely on public servants sometimes! (Blame their English teacher?)

What it should say is 'a turnover of $75,000'...
not inferring... have paid $75,000 of GST

i.e. If your sales are over $75,000 then you must register for GST.
... and to do this you must already have an ABN.
... and register for GST well before you cross the $75,000 sales line.

You were quite astute picking up the anomaly!

Will you notify the ATO they have published an error or shall I?

 

[Doris]

Hey BBB...

I had a look at your site and it does indeed say 'a GST turnover of $75,000 or more'!

What it should say is 'a turnover of $75,000'...
not inferring... have paid $75,000 of GST

i.e. If your sales are over $75,000 then you must register for GST.
... and to do this you must already have an ABN.
... and register for GST well before you cross the $75,000 sales line.

You were quite astute picking up the anomaly!

Will you notify the ATO they have published an error or shall I?

BBB... I phoned the ATO. I'm glad my attitude was tentative!

The wording is from the tax laws and is an accounting definition.

"Accountants know (but not the general public?) GST turnover means GST applicable income not GST exempt income.

- exactly what my accountant explained... as I reiterated above. Obviously she knows this definition

I was also told the ABN, whilst not compulsory for share traders, is advisable as it makes it easier to deal with them, government departments and financial institutions etc.

I can't see myself using it but who knows. Maybe it's for a check-up they have in their 'big brother system'?

My accountant did say I would not have to do business statements... Phew!

 

[white_goodman]

im doing property taxation at uni this semester, lets just say put some time aside for reading cos its a mother... theres so many different rules and guidelines that its ridiculous

 

[benn]

ill jump in on this too. When i was working in business services, we went to regular training sessions. This guy was unreal how much he knew www.justtax.com.au.
Anyway i recently dug up one lot of training material on the non commercial loss provisions and it had in there that for the $20k income rule, for share traders this does not work in the 'usual' way and you have to make $20k profit on your trades not just sell $20k worth of stock. To sell $20k worth of stock would be too easy and ato will disallow.
I guess im lucky this year that i made $20k over a number of trades but also lost much much more, BUT still that $20k rule will kick in for me.
I will struggle to make $20k this year the way it is panning out also.

Also on another note, i put in my private ruling a couple of weeks ago and tonight got home to a letter from the ato. Alas, it didnt have my verdict in it, it just said they received my forms and would get back to me in 28 days. Pff, it has been about that since i sent it in the first place.

Ill write when i get a response from them and then post some of what i had in my ruling as might help others

i also dont have an ABN as i didnt think it was necessary.