How do I pay Taxes?

[Sophia87]

Hello, guys, and girls

I have a problem, and I need someone to answer couple of my questions.

Long time ago, I got interested in stock market, and since then I am studying it, developing strategy to earn money as a day trader.

But I am too scared to even open the brokerage account because I have no idea how to pay taxes, and I don't want to get in trouble.


Lets say, for example, that I have a capital of 5,000$ and in one year I traded 50 times ( 50 times in, 50 times out), and made a profit of 10,000$. That's 15,000$ in my account.

Now, how do I pay tax on my profit?
What percentage it would be since I want to be a daytrader?
Do I have to pay it before I withdraw that money in my bank account, or..?

Also, what if I lose, lets say, 2500$? Is that taxable?

How complicated is to calculate, and to pay my taxes? ( I want to avoid accountant )

I am interested in Interactive Brokers, and I want to trade American stocks. Do I have to pay tax both in America, and Australia? I am REALLY, REALLY confused

I feel so scared, and stupid!

 

[Trembling Hand]

Hi. You cannot day trade American stocks with anything less than $25,000 usd accounts because of this rule.
http://www.investopedia.com/university/introduction-stock-trader-types/pattern-day-traders.asp

As far as tax you only pay tax in australian if you are an Australian resident.
https://www.irs.gov/Individuals/International-Taxpayers/Claiming-Tax-Treaty-Benefits
The way you pay is at the end of the year when you do your tax return the ato will tell you to pay them whatever share of profits you made after expenses as per australian tax scales.
https://www.ato.gov.au/rates/individual-income-tax-rates/

If after the first year you make enough the ato may start asking you to pay your tax every quarter based on an estimation but few day traders ever get to that stage.

 

[pixel]

Rule 1: Keep good and complete trading records.
Save each contract note (usually your broker will send them as a pdf attachment by email).
Make sure those contract notes can't get lost; BACKUP on an external drive or memory stick.
It's a good practice to enter each buy and sell into a spreadsheet, including brokerage and sundry costs.
When closing a trade, also record the profit/ loss made off it.

Rule 2: At all times, be aware of your current profit/loss status.
For Australian residents, the tax year starts on the 1st of July and ends 30th of June the following year.
Maintain records in separate folders, one for each Financial (Tax-) Year.
Most traders will only lodge one tax return per Financial Year. If your only income consisted of interest, dividends, and Capital Gains, filling out a tax return is fairly easy and straight-forward. Once you have lodged it, the Tax Office will tell you how much tax you have to pay.
Depending on your tax status and trading setup (sole trader, trust account, ABN, ...) you may be able to apply various trade-related expenses as an offset against trading profits. Some setups would even allow you to reclaim much of the GST.

Rule 3: Select a setup that is the most advantageous for your individual situation.
Do you want to trade full-time? Or is it a hobby in addition to a regular job? Do you have family/ dependants? Or are you someone else's dependant?

At your current stage of general ignorance, it would be counter-productive to think about saving accountant fees. Pick an expert's brain and get the setup right. It will save you in the long run. All it takes is one bad year where you ended up with a loss. With the right setup, you will be able to carry losses forward as offsets against future profits. A tax accountant will be able to advise you of all your options. (A call to the ATO may also be effective - but you will need to know which questions to ask.)

 

[VSntchr]

If after the first year you make enough the ato may start asking you to pay your tax every quarter based on an estimation but few day traders ever get to that stage.

Sounds a bit like a badge of honor:

 

[Sophia87]

And is there any way to avoid PDT rule? I thought it only applies for brokers in America, since it's American law.

 

[Modest]

And is there any way to avoid PDT rule? I thought it only applies for brokers in America, since it's American law.

Be a swing trader?

 

[Sophia87]

Be a swing trader?

It fits the strategy.

 

[pixel]

And is there any way to avoid PDT rule? I thought it only applies for brokers in America, since it's American law.

Googled "pdt rule".
Found this near the top: http://www.timothysykes.com/2015/04...-trader-rule-and-what-you-should-do-about-it/
check it out, and there's more

 

[Trembling Hand]

Rule 1: Keep good and complete trading records.

Pixel most of what you have here outside of keep good records and talk to an accountant have no relevance to someone day trading US stocks or Aussie stocks through IB. Contract notes are for Oz only but you don't get them with IB. Day traders don't pay capitol gains tax, there is no divs and when you move to foreign currency transaction where P&L are not in AUD the tax return can start to get hard.

And is there any way to avoid PDT rule? I thought it only applies for brokers in America, since it's American law.

Use an Aussie based CFD provider. Which you would probably have to do anyway to trade effectively using small capital. (assuming of course you are still using correct position sizing which being new you won't )

 

[Gringotts Bank]

And is there any way to avoid PDT rule? I thought it only applies for brokers in America, since it's American law.

How is it you know about the PDT ruling, and yet you know absolutely nothing about the most basic aspects of income tax?

Say hi to Vidic for me.

 

[Trembling Hand]

How is it you know about the PDT ruling, and yet you know absolutely nothing about the most basic aspects of income tax?

Say hi to Vidic for me.

GB maybe before you have another drink read the thread properly. I posted about it in the very first reply and linked to it.