At what point does a Investor become a Trader from a tax perspective?

[h2so4]

My reasoning is that if a tax agent files your tax returns that'll keep the IRD away

Yes I concur.

Audits are simple things. You get a letter which sets out what years of accounts they wish to audit, then you are subjected to an interview where you are out numbered and then they do a reassesment which you pay. Mine was for seven years during which time I had suffered a fire so records were lost which complicated things. The whole thing took a year. The reassesment was aprox $1000 which I happily paid, now I use a tax accountant and keep my head down.

[CJ]

But if all gains are taxed at the CGT rate, then it will need to be set at the highest income tax rate - currently 33% - or those who currently pay income tax on gains will be getting off too light to suit a labour govt.

I think in Australia CGT is at the top tax rate but you get some for of discount/index to allow for the inflation factor. Could be wrong.

Anything more complicated than treating capital gains as income is probably a $1.5B computer project away - IRD system is struggling under WFF apparently.

[POSSUM THE CAT]

CJ unless the rules have changed recently in Australia if you have held the shares for more than twelve months you pay tax at your marginal tax rate on half the capital gain. If you have not held for twelve months you pay capital gains tax on the full amount of capital gain, at your marginal tax rate. Left Australia mid 2006

[Lizard]

Thanks for the insights, Winner - really good to hear from someone who has actually been audited rather than these endless circular discussions we have about what "should be okay".

[janner]

" IRD system is struggling under WFF apparently. "

So are honest tax payers..

[lou]

Thanks Winner, your post was exactly what I was hoping to get out of this tread. If possible I would like to ask a couple further questions of your experience.

Having been through an audit (was nearly 10 years ago) and lost several arguments and having inocme reassessed with the subsequent penalties here is a couple of points that I experienced -

Mr Winner - we note that you hold some shares that have and probably never will pay a dividend - so the intent really was to make a capital gain wasn't it Mr Winner
Mr Winner - noble intention of you protecting your capital by selling shares when they start to lose value and rebalancing your portfolio when you become overweight in one some shares ..... but Mr Winner more than60 trades (buys and sells counted separately) a year is more than we would expect from someone whose main aim is generate income (tax paid on this) from a portfolio.
Sorry Mr Winner you can't have it both ways - if you are a 'trader' you can't be an 'investor' as well .... and yes Mr Winner you are seemed to be a trader and until you can convince us otherwise will always be one.

1. Over how long a period did they deem you to be trading?
2. More than 60 trades a year, was this one year or an average over multiple years?
3. How many shares were you trading in your portfolio?
4. When you were trading shares were you buying and sell your total position? or were you buy and selling part of positions?
5. Has being audited affected the way you trade the markets? How would you describe your investment style pre audit and post audit?

[fungus pudding]

CJ unless the rules have changed recently in Australia if you have held the shares for more than twelve months you pay tax at your marginal tax rate on half the capital gain. If you have not held for twelve months you pay capital gains tax on the full amount of capital gain, at your marginal tax rate. Left Australia mid 2006

I think it's still the same in Australia. But at what stage is a capital gain considered income and taxed at the full marginal tax rate? Seems to me that the IRD and/or the tax payer will still have the same difficulty in knowing what tax rate to apply (whichg portfolio to place shares in).









0.

[BIRMANBOY]

As Lizard said there is a lot of talk and not much hard evidence in this thread. Some experience (older) but obviously limited to space and time in making the post. For anyone who is unsure of where they stand and who wants clarification it might be better to actually contact IRD and make an appointment to discuss your specific details. I have found previously that IRD are happy to help in clarifying tax situations. Also another alternative is working with your accountant, who should be able to steer you on the correct course as long as they are fully qualified and up to speed.

[winner69]

Lou

They went back several years and deemed me a trader over that period ......and into the future. It was about 60 transactions in one year they focused on. Never have many stocks at any particular time and most transactions would have been the total position.

Did it change the way I invest? Not really .....still hold while things are going up and sell when things start going down and collect divvies along the way but divvies are not generally the main motivation. That's the bulk of the current activity and all these go through a capital account in the family trust and a company

In addition I give myself (company) some pocket money to speculate with and keep quite about any gains or losses.

You need to do what you think is best or what your conscience allows you. Liz seems to have the right disciplined approach and prob covers all bases to protect herself.

Birman ...... I wouldn't ask IRD direct for advise ....bad idea in my books. Rather get a. Professional to advise or discuss on your behalf

I could easily file my own tax returns but use an accountant as a tax agent ....theory being it gives the return some credibility (of course) and IRD probabably won.t look too hard at it. For a few hundred bucks money well spent

My experience was ten years ago so things may well have changed

.

[percy]

Thanks for the insights, Winner - really good to hear from someone who has actually been audited rather than these endless circular discussions we have about what "should be okay".

Yes,thank you Winner69.