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ATO Interpretative Decision

ATO ID 2002/844

Income Tax

Deductibility of Brokerage Fees and Stamp Duty for a Share Trader
FOI status: may be released

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CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

This ATOID provides you with the following level of protection:

If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.

Issue

Is the taxpayer entitled to claim a deduction for brokerage fees and stamp duty costs incurred with every share trade as a share trader under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision

Yes. The brokerage fees and stamp duty are deductible under section 8-1 of the ITAA 1997.

Facts

The taxpayer is carrying on a business of share trading.

In respect of each share trade, the taxpayer incurs brokerage fees and stamp duty.

Reasons for Decision

A general deduction under section 8-1 of the ITAA 1997 is allowed for outgoings to the extent that they are incurred in gaining or producing assessable income or in carrying on a business for that purpose, except to the extent that the expense is of a capital, private or domestic nature or incurred in gaining or producing exempt income.

The taxpayer incurs brokerage and stamp duty costs when they purchase or sell shares. The purchase of shares by a sharetrader would be regarded as the purchase of trading stock and would be considered an outgoing incurred in gaining or producing assessable income. The expenses are not considered to be of a capital, private or domestic nature.

The taxpayer is entitled to claim a deduction under section 8-1 of the ITAA 1997 for the cost of brokerage fees and stamp duty they have incurred in respect of the share trading activity.

Date of decision:  23 July 2002

Year of income:  Year ended 30 June 2001

Legislative References:
Income Tax Assessment Act 1997
   Section 8-1

Keywords
Hobby vs business
Shares
Stamp duties

Business Line:  Private Groups and High Wealth Individuals

Date of publication:  23 August 2002

ISSN: 1445-2782

history
  Date: Version:
You are here 23 July 2002 Original statement
  15 August 2014 Archived

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