June 2022
shares and cgt

Am I a share trader for tax purposes?

A Share trader is regarded by the ATO as conducting a share trading business when it comes to reporting your tax, based on factors around how you and how often you invest. An investor is looking long term and will not frequently undertake a systematic approach.

Tax law regards Share trading is assessed as income on a Revenue Account, and no Capital Gains Discount can be claimed.

Share traders and tax

However good news for share traders is, share losses are allowed as a tax deduction un S8-1 of the ITA997. A share trader can recognize unrealized losses and gains as the change value in the share process can be reflected. Whereas a Share Investor will only recognize losses and gains when they are realized. An investor can access the cgt 50% tax discount concession if shares are held for 12 months.

Your shares held as a share trader are considered trading stock and must be included as part of your year-end income statement. Your share stock can be valued at either cost, market, or replacement value, enabling you to determine the best tax result for you. If your records are in order, you can choose which suits your taxation circumstances for each parcel of shares

Factors that may classify you as a share trader

A share trader is considered in business if

  • There is a system
  • Operating to a plan
  • Maintains regular trading in a systematic way
  • Record system to track transactions and revenue earned
  • The volume of the equity trading
  • The reliance on share trading to earn a regular income

Determining if you are a trader will always be a matter of fact, and based on the above, your actions will determine whether the ATO would consider you a trader. Repetition – the frequency of transactions or the number of similar transactions – is a crucial characteristic of business activities as a share trader.

The higher the volume of your share transactions, the more likely it is that you are carrying on a business.

Changing from trader to investor

If your activities change from trader to investor, your shares are no longer trading stock.

At the time of the change, you treat your shares as if:

  1. just before they stopped being trading stock, you sold them to someone else (at arm’s length and in the ordinary course of business) for their cost
  2. you immediately bought the shares back for the same amount.

Take the time to consider your position. Look at your facts and consider what has been outlined above.

The information provided above is of general nature and not specific to circumstances. Please contact us if you would like to discuss your specific situation.

local manufacturing accountant

Local manufacturing

Local manufacturing businesses based in the South East area in Melbourne such as Moorabbin and areas such as Currum Downes and Seaford can take advantage of bringing forward tax incentives to help their manufacturing business.

Helping local manufacturing businesses

Gartly Advisory are Melbourne Accountants based in Ormond. We love servicing manufacturing businesses. Our advice to the manufacturing businesses is that we help is to take advantage of these incentives. Modernise your systems and save tax!

Manufacturing, like every business experiences growth and also tough times. We have seen that those businesses that chose to invest in new equipment and technology thrive ahead of those that don’t.

Technology can save labour costs and also the accuracy of delivery of the product. One of our small businesses was able to almost replace one staff member by investing in the latest machine that delivers quicker and more accurate production of materials.

We work in interesting times but in saying that we encourage our clients to stick to their goals and vision.

As small business accountants, we work with our clients to strategically plan their futures. A successful manufacturing business will understand its metrics. They know how many widgets to produce that result in a healthy gross profit result.

Understand your numbers

Understand your numbers, your capacity and your opportunities. Knowing this data allows for careful planning as your business grows.

Over the next month take the time to analyse three key products that you make and sell. Understand the costs and time components. The next step is to look at your Gross Profit margin and see how this impacts the bottom line? Are you making enough from manufacturing

Understanding your market and pricing gives you a competitive advantage when it comes to growing your customer base. Businesses will be forced to look at price increases moving forward. The cost of manufacturing will increase and therefore price rises will need to be factored in to maintain profits. Make sure you have the data to do so.

Gartly Advisory are Chartered Accountants in Ormond. We love helping manufacturing businesses. Reach out and see if we can help you to make your manufacturing business shine in the local Melbourne market.