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Share Trader or Investor, Trading Stock and Capital Asset - 11th September 2017
Investment products may be held as trading stock by a taxpayer carrying
on a business of share trading or options trading. However, whether a
particular parcel should be treated as trading stock must be determined on a
case-by-case basis.
Generally, the tax issues facing share traders versus passive investors are summarised below.
|
Tax treatment of transactions, returns and related items |
||
|
Event/item |
Share trader |
Passive investors |
|
Gain on
disposal |
Sale on
trading account |
Capital
gain |
|
Loss on
disposal |
Sale on
trading account |
Capital
loss |
|
Dividends
received |
Assessable
income When
received but may be accounted for when derived (ie when dividend is declared)
|
Assessable
income When
received |
|
Share
acquisition |
Purchases
on trading account Allowable
deduction |
Capital
cost No
immediate deduction allowed |
|
Broker
fees |
Purchases Allowable
deduction |
Capital
cost No
immediate deduction |
|
GST on
broker fees |
Financial
supply Reduced
input tax credits |
Capital
cost No
immediate deduction No reduced
input tax credits as no enterprise |
|
Share
investment course |
If
business commenced then allowable deduction, however nexus must be
established |
Capital
cost No
immediate deduction |
|
Share
investment course |
Professional
development Allowable
deduction |
Investment
expenses Allowable
deduction |
|
Technical
books |
Professional
development Allowable
deduction |
Investment
expenses Allowable
deduction |
|
Share
trading software |
Business
expense Allowable
deduction |
Investment
expenses Allowable
deduction |
|
Interest
on margin loan |
Interest
expense Allowable
deduction incurred to obtain assessable income |
Investment
expenses Allowable
deduction |
|
Prepaid
interest |
Deduction
up to 12 months if s82KZM satisfied |
Deduction
up to 12 months if s82KZM satisfied |
|
Bank
charges on margin loan |
Bank fees Allowable
deduction |
Investment
expenses Allowable
deduction |
|
Costs to
establish loan |
Borrowing
costs Allowable
deduction available over five years |
Investment
expenses Allowable
deduction available over five years |
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