Whether you’re a share trader or investor, the way you conduct business will have tax implications. This is where we at Rands Financial Services (through its registered Tax Agent [rands Tax Solutions Line Reg No 25395774]) happily step in to help.
The share market….a place where fortunes can be made and lost. To the uninitiated, it may appear to be a labyrinth of numbers, and to the experienced, the back of their hand. Based on your intentions, it is important that you are able to define who you are in this market; share trader or investor?
How you define yourself matters, not only to be clear about your goals within the market, but also to have a clear idea of the tax implications on yourself.
Are you a share trader?
The Tax Office defines a share trader as someone who undertakes “business activities for the purpose of earning income from buying and selling shares”. As a share trader, the Tax Office views you as someone with the intention to buy and sell shares purely for short-term profits.
As a share trader (the following is an ‘including, but not limited to’ list):
- Your shares are the trading stock in your business, meaning costs of the share and share transactions can be claimed as a tax deduction
- Your gains are your ordinary income
- Any losses and costs that you incur can be treated as tax-deductible expenses in the year they are incurred
- Any dividends you receive are treated as assessable income
Are you a share investor?
The Tax Office considers an entity a share investor if its intention is to hold shares for long-term capital growth and then sell to realise that growth.
As a share investor (the following is an ‘including, but not limited to’ list):
- Your shares are treated as assets, and thus are subject to capital gains tax if you sell them
- Your costs are considered when selling your shares
- Any capital loss you incur can be used to offset capital gains, but not income from other sources
- You earn income through dividends and other means
Of course, there are pros and cons to being either a trader or investor. There can be temptation to switch between either of them given the condition of the share market at the time. However, this should be done with caution as the Tax Office is on the alert when an entity does decide to change its position. This is because tax implications for traders and investors are different and the Tax Office wants to ensure that tax evasion does not take place.
If an entity does indeed decide to change status, the Tax Office will look into factors such as; the nature and purpose of your activities; repetition, volume and regularity of your activities; whether the organisation is handled in a business-like way and how well it keeps records, and; the amount of capital invested.
Does all this sound…..’taxing’?
Well, you can write off those worries as Rands Financial Services will help you navigate the tricky waters of taxation laws safely. At Rands, we understand your unique needs and are committed to providing a timely, reliable and professional service, helping you achieve the best possible outcome.
So contact us, and let us help alleviate your taxation worries. +61 434 391 331