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How to lodge a tax return if you invest in shares

Find out about capital gains tax on shares and what to do at tax time if you're an investor.

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It's tax time again which means a couple of things if you trade shares – you might need to pay capital gains tax and you may be able to claim deductions.

Depending on how often you trade shares and how the Australian Tax Office classifies you, you could be eligible to claim tax benefits such as franking credit rebates and deductions on trading-related costs.

The ATO defines a share trader as, "a person who carries out business activities for the purpose of earning income from buying and selling shares.”

Regular investors are taxed differently; while traders can claim losses on the market as a tax deduction, but if you’re an investor, your losses are deducted from your capital gains only.

Whether you're a trader or investor, this guide explains how much tax you need pay and whether you're eligible for benefits.

How does the ATO classify share traders and share investors?

The ATO defines a business for tax purposes as any money making venture where you’re not an employee. Share trading fits this definition; however, there are no black and white rules about who is a share trader and who isn’t. The ATO gives some guidelines but ultimately makes decisions on a case-by-case basis.

The ATO assesses the nature of your trading activities when deciding to classify you as a share trader or investor. This involves whether you’re trading regularly, how much you trade and whether this is comparable to other share traders.

The ATO also looks at your business or trading plan. This should include information such as why you’ve decided to hold and sell shares, in addition to your assessment of potential investments.

What are the tax implications of share trading?

If you can satisfy the ATO’s definition of being a share trader, you can claim any gains from the share market as your personal income and any losses as a tax deduction.

Casual investors can't claim on any losses and need to pay attention to Capital Gains Tax (CGT) and the timing of the sale of shares. Any profits made after June 30 won’t be taxed until the following year.

Do I need to pay tax on shares?

Yes, you need to pay tax on any profits that you've made from share trading during the year – this is called capital gains tax (CGT). Any profits that you make are added to your total taxable income for the year. So, if you're paid a salary of $49,0000 and you make $1,000 from trading shares – your total taxable income is $50,000.

Dividends are also included in your total taxable income – in fact, the ATO will already have a record of the dividends you've earned throughout the year and will have automatically added this to your income.

If you're a casual investor, your profits are calculated as total profits – total losses. So, if you bought 100 Afterpay (APT) shares at $10 per share and sold them all at $20, your taxable profit is $1000. But say a month later you bought 100 APT at $40 and sold them at $30, your total taxable profit (if you made no other trades) would be $0.

It's important to note that profits aren't taxable until you actually sell your shares. If you sell before June 30, your profits will be included as your taxable income this financial year and if you sell after June 30, it's added to the following tax return.

How much tax do you pay on shares?

Any profits you make from share trading is added to your total taxable income. The tax you pay will depend on what tax bracket you fit into based on this total income.

However there are big tax benefits to long-term investing over short-term investing. If you hold shares for longer than 12 months, you're only taxed on 50% of the profits you make from those shares. If you buy and sell within the same financial year, your total profits are included as taxable income.

What are franking credits?

Franking credits can be used by shareholders as a tax break on share dividend payments. Franking credits stop dividend payments from being taxed twice and can be claimed as a tax refund by shareholders depending on the shareholder’s marginal tax rate.

You can read more about franking credits in our comprehensive guide.

How do I lodge a tax return for shares?

Your tax return for shares is included as part of your regular tax return after June 30.

When you lodge your annual tax return, you'll need to report any capital gains you've made on buying and selling shares throughout the financial year. Any dividends you earn will have already been added to your taxable income by the ATO.

At the end of the financial year, your broker or online share trading platform will send you a tax statement with the total profits you've earned. If you're lodging your own tax return, you'll need to include this number in your report. If you use a tax accountant, send the tax statements to them to work out.

How does the tax office define a trader?

Tax implications are different for traders and investors. The ATO will classify you as a trader if you can answer yes to the following:

  1. You purchase shares on a regular basis in a routine way. The ATO will also look at the volume of shares traded and the size of the investment(s).
  2. You have a trading plan. The ATO will look at whether you have a registered business and whether you have business premises and all the relevant qualifications and licences.
  3. You make use of share trading techniques, such as market analyses.
  4. You have a Plan B in case your shares run at a loss.

What is a share trading plan?

You have a share trading plan if you can answer yes to the following:

  1. You carry out analyses of future investments.
  2. You look at the market to identify areas of potential gain.
  3. You make a decision to buy or hold shares based on future value.

Tax deductions

Share traders

  • Money from the sale of shares and share dividends are included in assessable income.
  • The costs of buying and selling shares can be claimed as a tax deduction.
  • Share traders can claim the costs of items such as computers, as they are necessary to making trades and keeping records. You can also claim depreciation on items costing more than $300.

Share investors

  • Can’t claim the purchase price of shares as a tax deduction.
  • Capital losses are subtracted from capital gains.
  • Any net profit is subject to CGT.
  • Can claim deductions on the prepayment of expenses such as internet fees, seminars or subscriptions for up to 12 months in advance.
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Compare share and CFD trading accounts

Data indicated here is updated regularly
Name Product Standard brokerage fee Inactivity fee Markets International
IG Share Trading
Finder Award
IG Share Trading
AUD 50 per quarter if you make fewer than three trades in that period
ASX shares, Global shares, Forex, CFDs, Margin trading
Brokerage discount: $5 on Australian shares for active traders & $0 commission on US and global shares
Enjoy some of the lowest brokerage fees on the market when trading Australian shares, international shares, forex and CFDs, plus get access to 24-hour customer support.
eToro Share Trading (US stocks)
USD 10 per month if there’s been no login for 12 months
Forex, CFDs, US shares
Zero brokerage share trading on US stocks with trades as low as $50.
Note: This broker offers CFDs which are volatile investment products and most clients lose money trading CFDs with this provider.
Join the world’s biggest social trading network when you trade stocks, commodities and forex from the one account.
Superhero share trading
ASX shares
Pay zero brokerage on all Australian ETFs.
Trade ASX stocks with a flat $5 commission fee and a low minimum investment of just $100.
CMC Markets Stockbroking
AUD 11
ASX shares, Global shares, Forex, CFDs, Margin trading, Options trading, mFunds
$0 brokerage on global shares including US, UK and Japan markets.
Trade up to 9,000 products, including shares, managed funds, forex, commodities and cryptocurrencies, plus access up to 15 major global and Australian stock exchanges.
SelfWealth Share Trading (Basic account)
AUD 9.5
ASX shares
Trade ASX-listed shares for a flat fee of $9.50, regardless of the trade size.
New customers receive free access to Community Insights with SelfWealth Premium for the first 90 days. Follow other investors and benchmark your portfolio performance.
ANZ Share Investing
AUD 19.95
ASX shares, Global shares, Margin trading, Options trading
Earn 1 Qantas Point per AU$3 spent on brokerage fees on certain instruments.
Access Morningstar reports, company announcements and and live pricing via ANZ’s share investing platform. Available for desktop and mobile.
Westpac Online Investing Account
AUD 19.95
AUD 63.50 per year on the global markets account
ASX shares, Global shares, Options trading, US shares

Compare up to 4 providers

Important: Share trading can be financially risky and the value of your investment can go down as well as up. Standard brokerage fee is the cost to trade $1,000 or less of ASX-listed shares and ETFs without any qualifications or special eligibility. If ASX shares aren’t available, the fee shown is for US shares.

Rates last updated October 27th, 2020
Details Features
FP Markets CFD Account
FP Markets CFD Account
Trade CFDs with FP Markets using the IRESSTrader platform. Trade CFDs on international equities, futures and forex. Commission - AUS shares: $10 or 0.10% Go to site More info
Rates last updated October 27th, 2020
Details Features
FP Markets FX Trading Account
FP Markets FX Trading Account
Trade forex using an Electronic Communications Network (ECN) model, meaning FP Markets doesn't profit from client losses. Two account types to choose from. Spreads: From 0.8 pips Go to site More info
IG Forex Trading Account
IG Forex Trading Account
Trade from over 10,000 markets with Australia's leading service for CFD trading and forex. Spreads: From 0.6 pips Go to site More info
Low brokerage fees on Australian and international shares.

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