CGT

[roofus]

Anyone here interested in avoiding/beating the ATO in regards to CGT

[Mofra]

Roofus,

I've read your posts in the other thread regarding having your trading income classified as gambling income - interesting challenge, but I have to ask the obvious question - how much would it estimate it will cost you in legal fees (assuming you win the case) to avoid paying CGT? Like many in the market, I immediately thought of the risk vs reward scenario ;)

Good luck,

Mofra

[roofus]

Mofra- the costs involved are substantial, but only if you lose. The repercussions for the Australian Government are huge. No more CGT on any investments that involve risk, even property wouldnt be taxable as there is no guarantee that your "investment" will go up, this has been shown recently. The only real investments that would attract tax are term deposits, however even this is subject to review as in the 1936 Tax Act, interest is not considered income unless you are in the business of lending money. The ATO twists that section to now say that it is "passive income". But it is in black and white in the '36 Act ( the '97 Act being a virtual copy) that interest doesnt form the taxpayers income...

The above arguement doesnt even touch on what the "rules" of taxation state,ie. that receipts to be declared income must come under the definition of ordinary concepts.. Ive got case law that blows that arguement out of the water...

[baglimit]

o.k. just to ensure i am understanding - will this tax discussion be 'fighting your obligations in regards to cgt, or a general war against a lot of ato rulings and hoping to change them. if the later i wish you well, but dont send me the bill. if the former, i dont wanna see the bill either, but at least you could mount an argument and get plenty of support. but i dont believe success is imminent. just a quick thing on 'gambling' - wagering, pokies, lotteries, casinos etc winnings are the result of various levels of chance - you do not have any input direct or indirect into how the results will be derived, therefore its gambling. stock market trading is the ownership , repeat ownership in various forms of shares, derivatives, etc etc, of companies that your representatives, ie directors, utilise on behalf of the company in efforts to make profits for you. therefore you are not gambling, you are using your rep (directors) to make business decisions in order to make money/income, whether that be thru capital gain or dividend, regardless of term of ownership.
this is a generalised adaptation of the ruling - go seek the official version from the ato if you like.

[GreatPig]

Roofus,


No more CGT on any investments that involve risk
At least not until the government could rush through a change to the tax laws :D.

GP

[roofus]

GreatPig- The only answer for a legislation change would be to make gambling taxable.. However even this would not work either as that would mean mean that all betting forms,lotto,keno,horses,dogs,casino,pokies would now also fall under that umbrella and people would be able to claim deductions from those

baglimit- you make a fair arguement but it is flawed. you say yourself that "you do not have any input direct or indirect into how the results will be derived, therefore its gambling". And then state that "directors, utilise on behalf of the company in efforts to make profits for you". so what your saying is that you still have no input, unless your a director. Gambling all comes down to the happening of an unknown future event. Add to this the element of monetory gain and you have a gamble.
I am well aware of the ATO's numerous opinions towards gains, but what im challenging has never been attempted before. This case will set precedent. All other tax office disputes revolve around deduction disputes

[baglimit]

roofus - i got sick of typing and didnt think i had to explain more - but here goes - directors are your ELECTED representatives in a company - you vote for them to represent you in the decisions made by the company, that you partly own. does that clear it up.

[baglimit]

great pig - further to your gambling info, the brits do it hard - they either pay a tax when they have the bet (a fixed percentage) or pay the same percentage on the winnings - the later is naturally a larger amount therefore a larger tax. of course here the tab's take out on average 16% from all betting pools and hand out the rest in dividends.

[Lucstar]

I have heard that if your classified as a stock trader, you have forget about paying cgt.

[Mofra]

Lucstar,

My understanding is that stock investers pay CGT whilst traders pay income tax on their winnings.

I'm sure someone else with a more thorough knowledge of tax law can provide a more succinct reply.

Cheers

[roofus]

bag limit- "directors are your ELECTED representatives in a company". really, I didnt know that :rolleyes: . Just curious, did you have a bet on the Melbourne Cup? I ask this because from your rational, if you were to have given me your money to bet with (as your rep.) you would not have been "gambling" on the race.

Mofra- Even in your reply you use the word "winnings". The actual classifications are share trader and share holder. the tax implications are -

A share holder is a person who holds shares for the purpose of earning income from dividends and similar receipts. This person's position may be briefly summarised as:
- the cost of purchase of shares is not an allowable deduction, but is a capital cost
- receipts from the sale of shares are not assessable income - however any net profit is subject to capital gains
tax
- a net loss from sale of shares may not be offset againsgt income from other sources, but may be carried
forward to offset against future capital gains made from the sale of shares
- costs incurred in buying or selling shares are not an allowable deduction in the year in which they are incurred,
but are taken into account in determining the amount of any capital gain
- dividends and other similar receipts are included in assessable income, and
- costs (such as interest on borrowed money) incurred in earning dividend income are an allowable deduction at
the time they incurred

A share trader is a person who carries out business activities for the purpose of earning income from buying and selling shares. This person's position may be briefly summarised as:
- receipts from the sale of shares constitute income
- purchased shares would be regarded as trading stock
- costs incurred in buying or selling shares are an allowable deduction in the year in which they are incurred, and
- dividends and other similar receipts are included in assesable income.