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Share Trading (Tax)

Discussion in 'Accounting & Tax' started by thesuperman, 11th May, 2016.

  1. thesuperman

    thesuperman Well-Known Member

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    Does anyone know how the ATO arrives at the figures they give to the accountant for shares traded during the financial year?

    Last financial year for share trading if I add up all the profit made in the financial year(profit from trade minus losses on trades minus brokerage fees), it totals $7k. On the other hand, the accountant said ATO gives her all the statements & the figures show I've made a $40k capital loss & this is what. she has put in my tax return.

    How can a $7k profit from share trading end up being a $40k capital loss on a tax return?
     
  2. SouthBoy

    SouthBoy Well-Known Member

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    Are you sure the $40k, is not "Net capital losses carried forward to later income years".. Maybe you were carrying a capital loss of $47k from previous years. I personally carried forward Capital losses from the GFC period, which are slowly being erased by the capital gains I made in the last couple of years.
     
  3. thesuperman

    thesuperman Well-Known Member

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    No, I didn't have any losses before that as the 2015 financial year was my 1st year of trading (and my 1st year doing anything with shares).

    Or does the ATO value your holdings on 30th June and any shares not sold within the financial year becomes a reported capital loss in their system? I had a few shares which wasn't sold within the financial year but sold in this financial year. But I never held any shares for anything near 12 months.
     
  4. BennEznElle

    BennEznElle Well-Known Member

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    Are you a share trader or an investor, there's a difference between revenue and capital.

    In terms of the information from the ATO, at this stage its generally just sale of x number of shares from company a on a specific date. It doesn't have sale price and certainly doesn't have cost price.

    There may be differences between your calculations and your accountants calculations i.e. return of capital amounts, tax deferred amounts, de-mergers affecting cost base etc. Having said that it seems like there is a big difference. Have you asked for a detailed schedule confirming the accountants calculations?
     
  5. eyespy1

    eyespy1 Member

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    i'm suprised that ato forwards info of your share profit/loss to your accountant. I know my accountant can download my profit/loss from managed funds....but not direct share purchases. This i have to tell my accountant. Maybe the capital loss u are referring to is managed funds ?
     
  6. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    The ATO provide very little CGT info to agents. Date and qty of SOME sales is best it gets. They don't know the cost and possibly the sale price either. However its getting better / worse each year and I believe in 2016 they were hoping it would be improved yet again. They also wouldnt possess the trust CGT info until its reported. eg sale of units is often affected by CGT adjustments.

    One issue is the source of data is the registries and not all HINs are individual and so a matching TFN can be a issue. Some are broker sponsored too and so data matching isnt perfect

    Broker quality varies wildly and "cost" isnt always actual cost due to mergers, demergers etc. Some brokers do it very very well and others are terrible. I find I have to check some brokers to determine if its accurate. Others are fine. I also have specialised CGT software that I use for some clients with extensive share portfolio's.

    Only share traders need to report on a trading stock basis and revalue at market. Trading requires some degree of frequency and approach beyond a dozen or so buy / sell trades. For the average CGT punter looking to make profit on some trades its basic sales value - cost = profit (or loss)

    The one error many taxpayers and clients make is brokerage. Brokerage should be ignored. The buy price incl of bro and the sale price after bro should be used. Commsecs annual trading report reports the bro and it leads everyone to think its a deduction.
     
  7. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    They may have managed fund (unit trusts etc) distribution info but they wont have info on units sold etc. Especially the cost base adjustment for tax deferred distributions etc In some cases the managed funds do track the CGT issues on units so when they are sold the annual tax stmt (not available to agents on portal !!) will show all the correct CGT info.
     
  8. SouthBoy

    SouthBoy Well-Known Member

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    @Paul@PFI, when I sat with my accountant this week to lodge my tax returns for last year, I provided the Commsec annual report to my accountant. This report lists out all the dividends and franking credits I received for 2014/15 tax year, as you know. My accountant whom I have used for many years said that some of the dividends which are listed in the Commsec report do not align with what ATO has reported him, as income from a particular share. My accountant who's ultra careful spent the next 20 minutes fiddling with various files and web sites, while I sat there silently feeling guilty for not printing the individual dividend statements. My accountant is close to retirement age and I may stop using him soon, as he's very slow and not good with responding to emails. If I use a new accountant say for this year (2015/16) how would that accountant get this ATO disclosed figures for me? How does the whole transfer process work?
     
  9. BennEznElle

    BennEznElle Well-Known Member

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    Pretty simple process, new accountant adds you as a client to their ATO list and then can access the ATO reports from the ATO Portal. New accountant would probably ask for holder numbers for you share holdings to give extra access via Computershare and Link Market Services which are often used to cross check discrepancies with the ATO reports (they aren't perfect).
     
  10. SouthBoy

    SouthBoy Well-Known Member

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    @BennEznElle, thanks for that. Do I need to tell ATO, not to send any further correspondence to my old accountant?
     
  11. wogitalia

    wogitalia Well-Known Member

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    The information provided makes it very hard to work out.

    For starters if you're share trading then capital losses are entirely different topic and any capital losses can't be offset against share trading gains.

    The ATO itself gives very little information to tax agents, we get some information on shares sold during the year but this is very hit and miss and quite limited (no cost base information or proceeds are given).

    If you've been treated as a share trader it's possible that your accountant has chosen to value your closing stock at market value rather than cost, which could create a loss like what you have but it wouldn't be a capital loss it would be a business loss shown at item I15 on the return.

    If you've been treated as a share investor, then the information would be at item I18 on the return, this one is far harder to explain, perhaps a managed fund distributed losses? It's possible, but unlikely, that a corporate action happened that caused it also. It's also possible that the accountant has chosen the tax preferential treatment for parcel matching rather than whatever system you've used (for example you might have bought a parcel of BHP at $30 and another at $15 and sold one at $20 and you've used the $15 to show a $5 gain while the accountant has chosen the $30 to show a $10 loss).

    First step though is working out if you've been treated as a trader or investor!
     
  12. wogitalia

    wogitalia Well-Known Member

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    New accountant should update the address to either your address or their address (you can decide in the meeting). They'll also send an ethical letter to the old accountant to ensure he has no objections (unpaid fees being the most common one) to you leaving.
     
  13. SouthBoy

    SouthBoy Well-Known Member

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    Thanks for that. My wife who also uses the same accountant, operates under a company name. Her company was set up by our current accountant, and her quarterly BAS are done by him. How much of a hassle will it be for her to change accountants? Me and my wife hold 2 properties ( & loans) in joint name and a couple in individual names. We would ideally like to use the same accountant.
     
  14. BennEznElle

    BennEznElle Well-Known Member

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    As @wogitalia said. The address will be updated. No difference with a company, same process, although there would normally be a bit more documentation requested by the new accountant, e.g. statutory binder, last years financials etc. The new accountant would normally advise ASIC as well if they were managing the annual ASIC documents as well.
     
  15. wogitalia

    wogitalia Well-Known Member

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    Shouldn't be an issue at all. The new accountant will be able to prepare BAS (if they can't you've got the wrong accountant!) and the change is just as simple for her. The company details are just transferred to the new accountants corporate registry.

    PS. @BennEznElle has covered the other details :)
     
  16. dan c

    dan c Member

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    Sometimes the ATO don't have all the data. We have noticed that some stocks in particular years are not showing up on the ATO reports for a number of clients.

    Also, if you engage in a share buy back and this includes a dividend component, sometimes the ATO don't have this information.

    Your accountant should always check your information against the ATO report, as sometimes th ATO is missing data, and sometimes the client doesn't have all the information.
     
  17. wogitalia

    wogitalia Well-Known Member

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    Realistically they should be checking all holdings against the share registry every year if they're doing their job. It gets hard when the clients don't tell them about holdings but between the ATO reports, the client and common sense there aren't many that should get through to the keeper!
     
  18. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Unrealistic to assume that. Its exceptionally time consuming and not all regstries play easy. Depends what client wants to pay. Good broker reports can avoid that issue and cost.
     
  19. wogitalia

    wogitalia Well-Known Member

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    It would depend on scope but generally those that are large enough to be time restrictive are going to have the broker reports that can be relied upon in probably 99% of situations (actually recently had one that couldn't which I think was a first). In most situations it's less than a minute per holding so it's absolutely something that should be done, it's absolutely something I've seen not done often, the amount of times you will take on a new client and the accounts have a bunch of companies that haven't even existed in years is somewhat scary (like any job I guess there are an awful lot of bad accountants out there!).
     
  20. thesuperman

    thesuperman Well-Known Member

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    I told the accountant I'm a share trader. Last financial year trading shares is the only active thing I've been doing and must've made about 50 trades. No income from a job. Only distribution from a discretionary trust. This being said the "profession" listed in my tax return was written "No listed profession" or something like that with the code being something like 99990000 next to the profession. (Don't have the tax return with me to confirm).

    No I haven't asked for a detailed schedule confirming the accountants calculations. I will ask them.