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How can I maximise tax benefits from share trading losses?

I’ve taken a business loss of some $200,000 over the past two years and I have now sold the business. My accountant told me I have to go back into business to be able to access these tax losses, is this correct? Is it possible to run a business from home by share trading on a daily basis and use up these losses?

Your accountant is right, which means you would have to set up a business of a similar nature. Share trading income is different in nature to the business income, therefore I don't believe you can recover the losses this way.

By the way, day-to-day share traders are different to professional share traders and if you are intending on doing the latter, you should get professional accounting advice.

For investors who trade fairly regularly, they can use losses for tax purposes. Say you lose $5000 on shares and you sell them. Then in the same year you sell some shares where you make a capital gain of $15,000, you can take the loss ($5000) from the gain ($15,000) and only pay tax on $10,000.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

For advice you can trust book a complimentary first appointment with Switzer Financial Services today.

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Published on: Tuesday, December 07, 2010

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