Are you investing solely for capital gains or spending money on researching shares before you start investing and building a portfolio?
If so, you may be incorrectly claiming these expenses in your tax return.
The ATO don’t allow deductions for share market information services or investment journals if you incur these expenses to set up an investment portfolio or if your portfolio is purely to make capital gains. See below for relevant paragraphs from the ATO’s Tax Determination 2004/1, also at
https://www.ato.gov.au/law/view/pdf/pbr/td2004-001.pdf
- Where a taxpayer subscribes to a share market information service or investment journal with a view to setting up an investment portfolio or commencing share trading activities, the expenditure is incidental and relevant to outlaying the price of acquiring the investment (e.g. shares) or the setting up of the business. Consequently, the expenditure is incurred at a point too soon for a deduction to be allowed (Federal Commissioner of Taxation v. Maddalena 71 ATC 4161; (1971) 2 ATR 541).
Furthermore, the expenditure will be capital or capital in nature and precluded from deductibility by paragraph 8-1(2)(a) of the ITAA 1997.
- If the investment portfolio is managed with the aim solely of generating capital gains that are included in the investor’s assessable income under section 102-5 of the ITAA 1997, the cost of subscriptions is not an allowable deduction by virtue of section 51AAA of the Income Tax Assessment Act 1936 (ITAA 1936). Nor are the costs included as an incidental cost in the cost base under section 110-35 of the ITAA 1997 or reduced cost base under section 110-55 of the ITAA 1997 of the relevant asset (the investment) for capital gains tax purposes. Example 1