Are you a share trader or share investor?

It’s an important distinction as it can make a world of difference.

Both declare dividends as income (with a tax credit for any imputation/franking credits).  However:-

• A share investor is assessed on realised gains (i.e. when a share is sold). Only 50% of the gain is assessed if the share is held for more than 12 months.  No deduction is available for realised losses; they can only be offset against capital gains.
• A share trader is assessed on both realised and unrealised gains (and losses). The cost of shares bought are deducted as purchases, the sales treated as income and the value of shares at 30^th June is treated as closing stock (and therefore income).

So are you a share trader? 

Well that depends on matter such as:-

• The amount invested.
• The frequency of trades.
• The amount of trades.
• Whether it is being carried on in a business like manner. In this regard, the ATO always places great weight on the existence of a business plan.
• Time and money spent on research.
• The sophistication of the operation including software programs.

It must also be said that the ATO take particular interest in taxpayers who change from one status to the other.  Particularly so in years where there are large market movements.

Not sure where you sit? 

The ATO has a useful short summary at – click here

We would your call to discuss your situation at greater length with you.