Life Interests Testamentary Trusts

Are you an Investor or Share Trader?

As recent share market conditions have improved many people are looking to invest available funds in shares.

Consider Mary:

Mary works part-time in a financial planner’s office and has a keen interest in the share market. Mary has $150,000 to invest and is considering the different tax implications if she is classified as a share trader or a share investor.

As a share trader profits are treated as ordinary income and taxed at marginal tax rates. Losses may be applied to other income to reduce overall taxable income. An example would be if Mary trades using trading techniques, undertaking market research for each potential purchase and does so on a regular basis, she may be taxed as a share trader.

As a share investor, gains and losses are treated as capital, provided shares are held for 12 months or more a 50% capital gains tax discount will apply. Capital losses can only be applied against capital gains income, with any excess able to be carried forward. An example would be if Mary buy parcels of shares predominantly for capital growth and/or dividend income.

There is no one hard and fast rule as to which classification Mary will be. It is assessed on a case by
case basis.

If you have questions please contact Andrew Marshall or Janine Orpwood at Langley McKimmie Chartered Accountants on (03) 5427 8100 for an initial consultation.

We service clients in the Woodend and Macedon Ranges region within Victoria Australia.

The content within these articles was correct at the time of writing. Please contact us for updated information and advice. 

We provide accounting and wealth management services to clients in Woodend, Gisborne and Macedon Ranges areas within Victoria Australia.

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