How to Improve your Tax Position as a Share Trading Business

Having a hobby-turned-business but not sure about the tax implications? Let’s take a look at the story of Sara. Do you run a side business, and are concerned about ways to save time and maximize the tax refund, Did you know that there is a material impact on your tax if you choose a capital account versus a share trading account? well come and talk EndureGo Tax, as one of the most trusted and professional accountants and tax agents in Inner West Sydney and Ashfield, we would be able to help you improve your tax position and maximize your tax refund, please read on.

Maximize tax refund in sydney and ashfield

To cope with the ever-rising cost of living, Sara has been working in a full-time job while investing her spare time and effort in share trading which is very entertaining and sometimes, profitable. However, she is not sure how to treat it, whether as capital even or normal business.

tax audit ato

In this case, Sara should be cautious of the profit made from share trading. Should her hobby turn into business, the income gained from share trading should be subject to tax along with her employment income. Then it is important to consider which side will it be parked on, the capital account or the income account.

What about Sara making losses in share trading?

share trading

Effective way to save capital gain tax

Even if Sara’s share trading activity has business-like characteristics, if it is unlikely to ever make a profit and doesn’t have a significant commercial purpose or character, Sara can’t offset the losses against her other income. In this case, she can defer the losses until she makes a profit from the business. However, if the loss is from the capital account, then it is only able to offset the loss with future capital gain.

However, Sara may offset the business losses against her other income provided she fulfilled:-

  1. The income requirement – where the sum of taxable income, reportable fringe benefits, reportable super contributions, and total net investment losses is less than $250,000.
  2. One of the four tests (i.e. assessable income test, profit test, real property test, and other assets test).
 Let’s look back on Sara if during the year, her employment income was $65,000 and her share trading business made an income of $30,000 and a loss of $70,000. Since Sara has fulfilled the requirements mentioned above, she can offset the net loss of $40,000 against her employment income. Eventually, Sara has only $25,000 in taxable income which saves a significant amount of taxes to be paid. However, if Sara wrongly categorized the share trading as a capital event, and then the loss would be capital loss, then the loss from the share trading would only be able to offset against the future capital gain.

In EndureGo Tax, as one of the most trusted accountants and tax agents in Ashfield and Sydney, we have a team of professionals equipped with in-depth tax knowledge and experience in dealing with the ATO in areas of personal tax, company tax as well as tax audit. Should you require any assistance in general tax inquiries or taxation advice, and to maximize your tax refund, we can provide the best solutions. Especially if you are having unfortunate occasions with ATO, we can also provide you with our best packs to resolve your problems.

Please give John a call on 0410-829-900 hence he can help you to maximize your tax position.