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 incomeWhen received but may be accounted for when derived (ie when dividend is declared) Assessable incomeWhen received
Share acquisition Purchases on trading accountAllowable deduction Capital costNo immediate deduction allowed
Broker fees PurchasesAllowable deduction Capital costNo immediate deduction
GST on broker fees Financial supplyReduced input tax credits Capital costNo immediate deduction

No reduced input tax credits as no enterprise

Share investment course
pre-ownership
If business commenced then allowable deduction, however nexus must be established Capital costNo immediate deduction
Share investment course
post-ownership
Professional developmentAllowable deduction Investment expensesAllowable deduction
Technical books Professional developmentAllowable deduction Investment expensesAllowable deduction
Share trading software Business expenseAllowable deduction
(if not an establishment cost)
Investment expensesAllowable deduction
Interest on margin loan Interest expenseAllowable deduction incurred to obtain assessable income Investment expensesAllowable 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 feesAllowable deduction Investment expensesAllowable deduction
Costs to establish loan Borrowing costsAllowable deduction available over five years Investment expensesAllowable deduction available over five years

More information? To find out more, give us a call on 1300 023 782 or email team@cdrta.com.au.

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Craig is the principal consultant of C&D Restructure and Taxation Advisory and has been working in the industry since 1999. Having established C&D Commercial Partners in 2015 the precursor to the current business.

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Craig is the principal consultant of C&D Restructure and Taxation Advisory and has been working in the industry since 1999. Having established C&D Commercial Partners in 2015 the precursor to the current business.

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