Share trading through a SMSF

If you are classified as a share trader and trade through your personal name then your accountant doesn't do a "Capital Gains Schedule" in your tax return but has a "Business item worksheet" where the only things that matter are the opening stock, closing stock, purchases & cost of sales.

What about if you are classified as a share trader through a SMSF? Should the accountant also do it as a "Business item worksheet" or as a "Capital Gains Schedule" in the SMSF tax return?

 

That could be an investment strategy concern where the strategy and investments made dont agree. I have seen auditors raise a concern. Especially a 2 member fund where one trustee exerts control and doesn't demonstrate unanimous decisions. SMSF law is founded on trust law

A smsf cant report revenue from a business

 

Ok thanks. So an SMSF can only have a "Capital Gains Schedule" which takes into account the purchase cost & disposal cost of each share. It can't use the method of opening stock, closing stock, purchases & cost of sales.

 

Correct, but for a specific reason.

s295-85 of ITAA 1997 applies to superannuation entities and strips out the ordinary income concerns and makes most (not all) investments a CGT asset for the avoidance of doubt. However around 2011 a large number of funds sought to benefit from trading stock / revenue provisions when markets declined in the GFC and an amendment was made to insert s275-105 and amend s70-10 to strip the trading stock (different to revenue account) provisions to shut that option / loophole of claiming losses v's deferring CGT losses. Despite having claimed gains for years earlier

However if there is frequent trading volumes etc it may be difficult to argue there is anything more than a speculative position (at risk) v's an investment. If it doesnt pay income especially the investment strategy needs to adequately explain why it was a decisive purchase. In one instance I recall the fund took stop loss positions for any such investments which were on a different broker account to its general investments. It held a % of its positions in growth potential shares and had a policy of taking profits. That seemed totally acceptable. However the management letter was qualified for the noted non-involvement of the spouse as a trustee Director in all such trading positions.

ATO ID 2009/92 is a good example of the application of the s295-85 rule.

 

Is it necessary to check all the share trades an accountant enters into a tax return or is it safe to assume that all the info will be correct when they pull all the info from the EOFY broker report supplied by the client (.csv file)? I believe accountants also have another method they can pull the data too with some software they use, is that right?

Is there a need to inform an accountant of any consolidation of shares or if the company changes their ASX code?

 

Depends. Is your info based on the trade date or the settlement date ? Does it include brokerage in the net proceeds ? We use data feeds from the broker and registry links so that things like DRPs or new issues reinvested are automated. And if a security (ETF or Managed Fund) pays tax deferred / AMIT amounts it adjusts the CGT costbase.

Corporate actions should be automated in software. eg COL / WES demerger and security code changes, buy backs, SPP and so on

These things otherwise add to time and cost