w/e 8-4 post mortem, page-9

ON TAX

The tax law I think is quite clear: if you are in the business of share trading all your transactions are profit/loss regardless of the time your trading stock is held. However that does not prevent you from investing in stock; however you would need to flag any such investment as it being intended for a long term hold so you can claim the CGT discount. This makes it very important to keep good books.

You should never think of the ATO as stupid - if you hold a stock for a longer time because it just had not moved and then sell it on a spike I am sure the ATO would smell a rat. Even worse if all your long term gains were presented as CGT and all your long term losses were presented as trading losses I image the ATO would have quite a chuckle.

As far as not including any profits in your taxs return - FORGET IT. The ATO gets reports from all the fianacial institutions. They accept your tax return under self assessment without checking its validity. Tell your friends that if 5 years after they lodged their incorrect tax return they had not heard from the ATO they can breathe easy. I would suggest that they request to have their return amended before being requested to do by the ATO. Certainly they should not try it a second year - a second attempt would likely incur a fine wheras the first lot probably would be just a warning.

I have a question for you chook. If it is an easy question to answer it would save me the research: If you don't hold a share for long enough you lose the franking credit of the dividend on that share. However there is a cutoff point of $5000. Is this $5000 a threshold for all your dividends or for the exempt dividends only. ie if I had $7000 in dividend and $2000 were not held long enough would I lose the franking credit on the $2000 dividend. It might be important to me if I earn more franked dividends.

Have a great weekend all and good trading next week.

W2