ATO website has really good and clear info on this sort of thing imo...
Actually in relation to the above comment and the subsequent two comments in relation to it, I would vehemently disagree that the ATO has good and clear guidelines between investor and trader in relation to being both. They may have guidelines on whether your activity qualifies you as a trader, but they specifically DO NOT address the question on whether one can be an investor and trader at the same time.
When I first looked at starting share trading (in addition to investing) back in 2000, I had at the time a large share portfolio that had substantial capital gains and if sold would qualify for the 50% discount. So I was quite worried if I started trading (even using a different account) whether I would end up being classified as a trader for everything and lose my potential capital gains discount on my existing investments. I called the ATO, explained my situation, and was specifically told that I could only be an investor or trader but not both. They suggested looking at trading under a separate legal entity. My accountant at the time agreed with the ATO and thus I set a company up to do share trading.
Since then I have read many posts on forums like these that suggest you are fine so long as you clearly separate your trading from investor activities (using separate accounts or such like), but I have never once had anyone point out to me where the ATO says that is OK. Occasionally I come across a few article from accountants that restate the ATO position that one cannot be both.
I regularly revisit the ATO website to check if there is anything new and again I see no where there that it says one can be both.
I know the issue has been addressed ad nauseam, and many do adopt the multiple account approach. But I would love someone to show me where the ATO specifically allows this.
Because I have a company for share trading this is no longer an issue for me. However, I am with Interactive Brokers and they do not offer margin for individual accounts (where I do my share investing) and suggest using CFDs as an alternative. That is why this could potentially be an issue once more.
I accept that the consensus now is that you can be both a share trader or investor so long as you separate your activities clearly. And if dealing with different instruments, it should even be possible to be a trader for one (CFDs say) and investor for the other (Shares say) even in the same account as there is sufficient differentiation because there are different instruments.
But ......... where does the ATO say they will accept that?
