What makes a Trader v Investor

[JBmurc]

An investor can also write off costs against their other income (dividend). No difference as to the tax treatment there. But as an investor I do not pay tax when I do sell my shares at a profit. Rather be an investor than a trader.

Yes I understand an investor cannot trade more than a several times per year aka you can't sell and buy back into the same company in within short period of time ...
I was an investor back pre 2005 made some great returns off just several trades but was pushing it and wanted more freedom as so many times I was limited not wanting to be classed as a trader..

Glad to have formed a company and now can trade as much or little as I want ...of course one wouldn't become a trader if they had a small amount of funds and time invested weekly... accountant costs etc ... I have also used the same company to purchase property or small business operations etc

And as my focus is on risker end of the market I like the protection ability to claim capital losses against future profits ...

Yes I knew you could claim cost on taxable incomes like Dividends...but really how much tax saving do you see here ?? whats you costs being an investor ? you only trade less than few times a year

[blackcap]

Yes I understand an investor cannot trade more than a several times per year aka you can't sell and buy back into the same company in within short period of time ...
I was an investor back pre 2005 made some great returns off just several trades but was pushing it and wanted more freedom as so many times I was limited not wanting to be classed as a trader..

Glad to have formed a company and now can trade as much or little as I want ...of course one wouldn't become a trader if they had a small amount of funds and time invested weekly... accountant costs etc ... I have also used the same company to purchase property or small business operations etc

And as my focus is on risker end of the market I like the protection ability to claim capital losses against future profits ...

Yes I knew you could claim cost on taxable incomes like Dividends...but really how much tax saving do you see here ?? whats you costs being an investor ? you only trade less than few times a year

Ahha, I get you. We were probably at cross purposes. The thing I like about being an investor is that you never get taxed on any gains you make realisable or other. As a trader you do get to claim the losses but must pay tax on the gains. Long term you would expect to make gains so there is a tax loss.
It all boils down to intent. You can probably trade 50 times a year if the intent is to build an income producing stream from your portfolio and if the intent is not to trade the stocks. Sometimes I do take some profits off the table and re-invest elsewhere with good rationale. If a stock goes up a lot (say like ATM) then it becomes too weighty in the portfolio and its called rebalancing. If it falls in price again it becomes underweight and I might buy a few back.
But its not out and out trading. I have control of another entity that does that purely as its operations and yes I do pay tax on gains there.

[JBmurc]

Ahha, I get you. We were probably at cross purposes. The thing I like about being an investor is that you never get taxed on any gains you make realisable or other. As a trader you do get to claim the losses but must pay tax on the gains. Long term you would expect to make gains so there is a tax loss.
It all boils down to intent. You can probably trade 50 times a year if the intent is to build an income producing stream from your portfolio and if the intent is not to trade the stocks. Sometimes I do take some profits off the table and re-invest elsewhere with good rationale. If a stock goes up a lot (say like ATM) then it becomes too weighty in the portfolio and its called rebalancing. If it falls in price again it becomes underweight and I might buy a few back.
But its not out and out trading. I have control of another entity that does that purely as its operations and yes I do pay tax on gains there.

Yes is a real grey area my accountant deemed my investing back early 2000's as getting close to trading with around 7-9 trades pa .. I guess like you say its what kind of trading you are doing .. if you are only Buying up investments and selling down a few spread over the year then no stress

I had no real focus on dividends taxable incomes etc and ASX mainly..at the time I did also have a Trading company I was using to spec build in Qutown with ...in the end I just wanted freedom and not an audit and the stress I might be liable on tax avoidance ... so closed down the Property only Trading company and created a new one with focus on the trading equities+ other trading opts

[bottomfeeder]

Investors can sleep at night because their mantra is "Its not timing the market, its time in the market". Traders can't sleep at night.

[King1212]

U tell me in the next couple months...whether u can sleep or not. When the market is in the bear....even market darling ATM will down ....

No stocks that safe. USA debts is increasing to $55 T.....

So..it is just a ticking bomb

[bottomfeeder]

U tell me in the next couple months...whether u can sleep or not. When the market is in the bear....even market darling ATM will down ....

No stocks that safe. USA debts is increasing to $55 T.....

So..it is just a ticking bomb

Oh no more things to worry about. Do I sell now or do I hold a bit longer. Hahaha

Actually sleep better when the market is going down, can't sell. But when the market is going up, what to do?.

[Waltzing]

you be both a trader and investor. Run multiple entities and portfolios and as stocks mature in value you can move then into the trading porfolio and move trading stocks into trusts before they mature else you will pay tax on them as you do an off market transfers.

[bottomfeeder]

Once a trader, all trades are caught. Even if under another entity. Just like property development. No doubt many investors are really traders, just waiting to be caught out by IRD. My brother was an investor, until he lost a car on Wynyard, at which time he wanted to be a trader. I am happy to pay tax on profits, and claiming losses eases the burden. I was a Chartered Accountant for 35 years and never did I have any investors caught out as traders. So go for your life, whichever suits you most. But in your tax return where you have to declare non taxed gains, if these amounts are large and consistent, I would be careful.

[Cadalac123]

If you enter every trade with an underlying assumption that there could be an eventual dividend gain sometime in the future, and each of your exits was due to a change in that hypothesis how can IRD classify you as a trader? Doesn't make any sense

[bottomfeeder]

Except if the IRD makes the assessment that you are a trader based on their criteria, YOU HAVE TO PROVE THEM WRONG.
Ahhh what do I know, I am now retired, haha.