Tax Question: Trading the US market

[bbi1]

If you are trading the US market, how do you calculate the buy & sell price converted to AUD for tax? Do you just use an exchange rate from xe.com for the buy/sell date? If so, take this scenario:

Day 1 - buy stock ABC @ $20 with $1 AUD = $0.50 USD
Day 2 - sell stock ABC @ $20 with $1 AUD = $1 USD

You've bought & sold the same stock at the same price but the exchange rate doubled the 2nd day. You haven't made a profit/loss but then you use the exchange rate of each day & for tax purposes you've "made" a 100% profit???

 

[skyQuake]

If you are trading the US market, how do you calculate the buy & sell price converted to AUD for tax? Do you just use an exchange rate from xe.com for the buy/sell date? If so, take this scenario:

Day 1 - buy stock ABC @ $20 with $1 AUD = $0.50 USD
Day 2 - sell stock ABC @ $20 with $1 AUD = $1 USD

You've bought & sold the same stock at the same price but the exchange rate doubled the 2nd day. You haven't made a profit/loss but then you use the exchange rate of each day & for tax purposes you've "made" a 100% profit???

Most brokers leave it as a $-20 USD in your account when you purchase the stock
So when you sell the stock, you get $20 which ends up at $0 USD = no p/l to report regardless of fx move.

If you sold the stock for $21, you'd have $1USD in your account which will be affected by fx. ie - fx affects the net profit only, not the cost of stock, unless you specifically do a fx

 

[bbi1]

So if there was a profit, how would you calculate the exchange rate for the buy date & the sell date? Where do you get the exchange rate from?

 

[skyQuake]

So if there was a profit, how would you calculate the exchange rate for the buy date & the sell date? Where do you get the exchange rate from?

USD P/L x live fx

You don't use the fx on the buy date or the sell date. Since your fx is not locked in. (ie your p/l is in usd not aud until you sell USD for AUD)

 

[bbi1]

USD P/L x live fx

You don't use the fx on the buy date or the sell date. Since your fx is not locked in. (ie your p/l is in usd not aud until you sell USD for AUD)

Sorry I'm a bit confused. So you use the profit or loss on the sale date multiplied by the Forex on that date? Which Forex rate do you use? From the XE.com site?

 

[John Swift]

I believe the question (that I don't know the answer to) is this:

I have A$20 and I buy US$20 worth of shares (A$1 = US$1), then some time later I sell that share for US$20 but only receive A$10 back (A$0.50 = US$1).

How is the A$10 loss treated from a tax perspective?

 

[skyQuake]

Sorry I'm a bit confused. So you use the profit or loss on the sale date multiplied by the Forex on that date? Which Forex rate do you use? From the XE.com site?

You use the live fx rate, UNLESS you convert that USD to AUD. (then u use the convo rate).

Eg u have $10 USD profit at sale date. profit is $10usd @ 0.85 (eg) = $AUD11.7647
at June30 u still havent converted fx, profit is still $10usd @ 0.67(eg) = $AUD14.9253
unless say on Jun25 you did fx @ 0.71, your p/l is $10usd/0.71 = $14.0845

I believe the question (that I don't know the answer to) is this:

I have A$20 and I buy US$20 worth of shares (A$1 = US$1), then some time later I sell that share for US$20 but only receive A$10 back (A$0.50 = US$1).

How is the A$10 loss treated from a tax perspective?

Read my prev post, unless your broker charges you AUD to pay for your US shares, your 'cost price' will always remain in USD and this remain fluid to fx fluctuations (and so will your cost price)

 

[needsajet]

The ATO has rates you can use.

https://www.ato.gov.au/Tax-professionals/TP/2014-15-income-year/

 

[John Swift]

Read my prev post, unless your broker charges you AUD to pay for your US shares, your 'cost price' will always remain in USD and this remain fluid to fx fluctuations (and so will your cost price)

I understood your post. Thank you. The question of "How is the A$10 loss treated from a tax perspective?" was not addressed. Would appreciate your further input.

 

[bbi1]

The ATO has rates you can use.

https://www.ato.gov.au/Tax-professionals/TP/2014-15-income-year/

Ok thanks, so we only use the ATO's forex rates, correct?

 

[skyQuake]

I believe the question (that I don't know the answer to) is this:

I have A$20 and I buy US$20 worth of shares (A$1 = US$1), then some time later I sell that share for US$20 but only receive A$10 back (A$0.50 = US$1).

How is the A$10 loss treated from a tax perspective?

I understood your post. Thank you. The question of "How is the A$10 loss treated from a tax perspective?" was not addressed. Would appreciate your further input.

The thing is you may or may not have a A$10 loss.
Say you have a cash management trust (CMT) of A$100 balance

Scenario1:
You buy a share for US$20, your CMT's balance is now A$100 and U$-20
(this is what Interactive Brokers would do)
You sell the shares for US$20, your CMT's balancce is A$100 and U$0; no P/L

Scenario1:
You buy a share for US$20, your broker pays for the share buy converting AUD in your CMT to USD @ (A$1 = US$1). your CMT's balance is now A$80.

You sell the shares for US$20, your broker converts the USD back into AUD @ (A$0.5 = US$1), your CMT's balancce is A$90 and; you have suffered a $10 P/L

as noted earlier, it all depends on whether you/your broker does the FX on the trade, or leaves it in local currency.

 

[John Swift]

Scenario1:
You buy a share for US$20, your broker pays for the share buy converting AUD in your CMT to USD @ (A$1 = US$1). your CMT's balance is now A$80.

You sell the shares for US$20, your broker converts the USD back into AUD @ (A$0.5 = US$1), your CMT's balancce is A$90 and; you have suffered a $10 P/L

In the above example, how is the $10 loss treated from a tax perspective?

 

[skyQuake]

In the above example, how is the $10 loss treated from a tax perspective?

Just like any other $10 loss

It would be the same as if you traded an aussie stock and lost $10