Brokerage fees Tax Deductable?

[Ext User(stan the man)]

True but the disadvantage the trader has in paying full cap gains in
year of income (and the advantage of immediately deducting losses) may
be small biccies compared with the gains you make as a trader.

We may forget money makes money and time is extremely important
compnent.
Compounding our generally greater immediate gains sooner enables
greater gains in the future even if later you just stick it all in the
bank.
sounds like crap but it works for me.Esp using a low tax vehicle such
as self managed super.

[Ext User(Simon Bond)]

Are brokerage fees (comsec etc not neccessarily full service brokers) tax
deductable?

Thanks.

[Ext User(marcus88)]

Quote below is from this ATO link, refer to the last section on the
link

http://tinyurl.com/d3tpl


"Unless you are considered to be a share trader, you cannot claim a
deduction for the cost of acquiring shares - for example, expenses
for brokerage and stamp duty. These will form part of the cost base for
capital gains tax purposes when you dispose of the shares."

[Ext User(John Wright)]

"marcus88" wrote
> Quote below is from this ATO link, refer to the last section on the
> link
>
> http://tinyurl.com/d3tpl
>
>
> "Unless you are considered to be a share trader, you cannot claim a
> deduction for the cost of acquiring shares - for example, expenses
> for brokerage and stamp duty. These will form part of the cost base for
> capital gains tax purposes when you dispose of the shares."
>

So in a way you get a tax benefit in any case - either as an tax deductible
expense claimable in the year of purchase, or as being part of the capital
cost which reduces your capital gains in the year you sell (assuming you
sell eventually for a gain).

Regards - JW

[Ext User(marcus88)]

> So in a way you get a tax benefit in any case - either as an tax deductible
> expense claimable in the year of purchase, or as being part of the capital
> cost which reduces your capital gains in the year you sell (assuming you
> sell eventually for a gain).
>
> Regards - JW

If your not a share trader you cannot claim the brokerage as an expense
in the year you purchased the shares, it only counts for CGT purposes.

There may be confusion regarding what is meant by share trader,
"Whether a person is a shareholder or a trader is determined on a
case-by-case basis by the ATO. But a universal rule is that a share
trader is classed as someone who is undertaking "business activities
for the purpose of earning income from buying and selling shares". The
volume and frequency of transactions are important determining factors
- not necessarily the amount of capital invested. Other important
determinants are evidence of a business plan and the keeping of records
in a "business-like manner". Refer to link below for where this quote
was extracted.

http://tinyurl.com/by4qh

[Ext User(Travis Morien)]

John Wright wrote:

> So in a way you get a tax benefit in any case - either as an tax deductible
> expense claimable in the year of purchase, or as being part of the capital
> cost which reduces your capital gains in the year you sell (assuming you
> sell eventually for a gain).

Obviously though for longer term investors its not as good. Not only
does the 50% discount reduce your "deduction" by half, but the
"deduction" is deferred for many years into the future and in some
cases you may never realise it at all.

Travis
www.travismorien.com

[Ext User(Travis Morien)]

This is the description of a "premium" (e.g. paying subscriber-only,
and I'm not a paying subscriber) of a financial planning tech
newsletter I read.

"Draft Taxation Determination TD 2006/D7provides that margin payments
made in respect of exchange-traded option and futures contracts are not
deductible under s 8-1 of ITAA 1997 as they are considered to be an
outlay of capital or of a capital nature."

Travis
www.travismorien.com

[Ext User(Travis Morien)]

Travis Morien wrote:
> This is the description of a "premium" (e.g. paying subscriber-only,
> and I'm not a paying subscriber) of a financial planning tech
> newsletter I read.
>
> "Draft Taxation Determination TD 2006/D7provides that margin payments
> made in respect of exchange-traded option and futures contracts are not
> deductible under s 8-1 of ITAA 1997 as they are considered to be an
> outlay of capital or of a capital nature."


NB: before anyone comments, I'm well aware that this information
doesn't answer the original poster's question about brokerage. It is
new information that I thought some people would be interested in,
which covers tax deductibility of trading costs.

Travis
www.travismorien.com

[Ext User(Peter Sutton)]

On Fri, 27 Jan 2006 10:01:22 +1000, "Simon Bond" <sb2323@hotmail.com>
wrote:

>Are brokerage fees (comsec etc not neccessarily full service brokers) tax
>deductable?
>
>Thanks.
>

To add to previous replies, if you are deemed by the ATO to be a share
trader for the purposes of tax assessment (and you'd probably be
having to look to having over 90% of your earnings coming from share
trading), while you can claim 100% of brokerage in the financial year
of the transaction, I believe you forego the 50% CGT deduction on
assets held more than 12 months because all capital gain is assessed
as income.