Share investment, trading or speculation?
Recently, the ATO has begun focusing on how taxpayers classify their share trading activity – whether it is share investment, trading or speculation.
In making a determination the taxpayer’s intention is taken into account.
Investments
The intention should be to derive income through dividends or distributions and appreciation of the value of shares over the long-term
Speculation
The intention should be to increase the share value by holding for the short-term and having little to no regard for the income stream.
Share trading
The intention should be to increase the share value held for the short-term with little or no regard for the income stream, with routine and systematic analysis and employ a plan or trading discipline.
It is important to know that you can shift from being a share trader to an investor or speculator, depending on your circumstances. There are clear rule changes that apply when shifting from a share trader to an investor or share investor to trader.
These factors need to be discussed with your Chartered Accountant when classifying your share trading activity.