Trader or Investor Query - Accountant Issue

[Prospector]

Hi People

My accountant has just mentioned that as I have a large amount of unrealised gains at the end of the last financial year he needs to account for that.

So I have presumed he has therefore classifed me as a Trader. One of the entities I buy/sell shares in is a Pty Ltd, registered for GST and the share thing is just something I do rather than let unused money sit in the bank. It is by no means 'core business activity' and in the last financial year made 47 trades, less than one a week.

So, should I dispute this classification? Are there any benefits in being classified as such or being a Pty Ltd is there no choice?

 

[lesm]

So, should I dispute this classification? Are there any benefits in being classified as such or being a Pty Ltd is there no choice?

Hi Prospector,

If it is not clear why he has classified you the way he has, you can ask him/her to explain the rationale behind the classificiation. The accountant should be able to make it clear whether there is a choice or not and the pros and cons from a tax perspective.

If you are not happy or convinced by the explanation you can request that it be raised with the ATO for a formal advice or decision. Afterall, the accountant works for you.

Alternatively, you can raise it with the ATO yourself.

Cheers.

 

[Duckman#72]

Hi People

My accountant has just mentioned that as I have a large amount of unrealised gains at the end of the last financial year he needs to account for that.

So I have presumed he has therefore classifed me as a Trader. One of the entities I buy/sell shares in is a Pty Ltd, registered for GST and the share thing is just something I do rather than let unused money sit in the bank. It is by no means 'core business activity' and in the last financial year made 47 trades, less than one a week.

So, should I dispute this classification? Are there any benefits in being classified as such or being a Pty Ltd is there no choice?

Hi Prospector

There are a couple of things you need to sort out with your accountant. I am not sure what you mean by "he needs to account for that".

Firstly - I am assuming that it is your company that you are talking about. If you are having a full set of financial statements prepared then he/she may be recording your shares at market value at year end. He/she might not be classifying you as a trader (but there is a fair chance that is what he's done).

Whether or not you are better off will depend upon the mix of gains v losses. The ATO look at a range of factors when determining whether a someone is an ivestor versus trader - including intention to make a profit, skills held by the taxpayer, frequency, investment, trading plans etc. Don't be concerned about the 47 trades - in my opinion that would be enough to argue that were a trader (if you want that classification).

Duckman