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International Investing / Australia (All-Ordinaries)


Subject:  Re: Tax question (please help) Date:  4/30/2000  12:01 AM
Author:  demiller1 Number:  1401 of 6186

If you make the declaration of share trader you do lose CGT benefits as it is treated as assessable income (or losses) from a business concern. Hence CGT better!

There is no reason, from my point of view, that you cannot be a share trader in one year and incur say massive losses and then transfer trading stock through to the asset accounts as investments only in the following year. The ATO would have to look at your intentions throughout the two tax periods and I feel that a large loss through trading is a prime motivator to quit trading as a speculator and go investor via long term buy and hold.

If you look at the situation and your 'costs' are recorded correctly in acquisitions and your closing stock is at 'market value' and a loss is shown (after taking into consideration all of the legitimate expenses of brokerage, bank fees, telephone, internet connection (research) etal) then I would recommend that, if the trades are sufficient, then go for it! It is a very simple conclusion at the end of the day and when ones equity in stocks suffers through the volatility of the equity markets, there should be some incentive to maintain and offset against other assessable income.

During the 1987 crash the ATO were paranoid about not being able to collect sufficient revenue as everyone wanted to become share traders. The losses incurred by individuals in the main could not be offset against assessable income and the effect on personal asset base at the end of the day was extreme. This in fact put a lot of people 'off' investing in the share markets.

Even today I find that people prefer 'real' or 'tangible' assets rather than shares, when shares have the best capital growth and income (annuities) ability over time. Especially when one looks at retiring and the annuities afforded by the wise (or should I say Fool ?) investments.
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