tax ... share trader or share holder, page-2

I spoke to the Australian Tax Office yesterday and asked the following question. I thought that some here may be interested in this scenario as it is not explained on the ATO website.

Is it permissible to split the shares that I hold into 2 groups:
1. Those that I hold for dividends and/or longer term growth as a Share Holder.
2. Those that I trade for short term profits as a Share Trader.

The ATO advised that yes, I can split my shares into the above two categories.

Hence, for shares held in a designated Share Trader category, the following tax treatment applies.

- Shares are treated as Trading Stock. Hence, the profit or loss is simply the value of the Shares at the end of 30-Jun less the value one year prior. How you calculate the value is explained in the link on Trading Stock as provided in my earlier post. This means that you don’t have to sell the shares allocated to the Share Trader category to include a profit or loss in your tax return.
- The profit or loss is a normal business profit or loss. That is, the profit or loss is not a capital gain or loss. Hence, the 50% capital gains concession after 12 months does not apply.
- Costs such as books, newsletter subscriptions, conference fees, etc. are a tax deductible expense in the year they occur.
- Interest on money borrowed to purchase shares is deductible in the year that the interest is paid.
- Dividends are assessable income in the year received.
- If you hold an ABN, then the GST component of broker fees is claimable in the year it is incurred.

For shares held in a designated Share Holder category, the following tax treatment applies.

- Shares are treated as capital. Hence, the 50% capital gains concession after 12 months does apply.
- Costs such as broker fees, books, newsletter subscriptions, conference fees, etc. cannot be claimed as a tax deductible expense in the year they occur. However, these costs are taken into account when determining the amount of any capital gain or loss.
- Interest on money borrowed to purchase shares is deductible in the year that the interest is paid. (Same as a Share Trader).
- Dividends are assessable income in the year received. (Same as a Share Trader).
- If you hold an ABN, then the GST component of broker fees is claimable in the year it is incurred. (Same as a Share Trader).


Further to my earlier email in this thread, the following link provides further clarification on whether an individual qualifies as a Share Trader or not. http://www.ato.gov.au/businesses/content.asp?doc=/content/21749.htm

It is my understanding that CFDs and Forex are treated the same as Shares. The only qualification is the gambling clause as posted by groundzero earlier today.

Note that I am not a tax expert, the above is simply my interpretation of how it all works.