Deep-dive tax guides

If you buy and sell shares, options, ETFs, CFDs or crypto, this distinction determines how your gains and losses are taxed. Getting it wrong in either direction creates risk.

The core difference

How the ATO decides — the six factors from TR 2005/15

There is no single test. The ATO (and AAT/Federal Court) assess the totality of circumstances using six factors set out in Tax Ruling TR 2005/15:

1. Repetition and regularity — Are transactions regular and repeated, or sporadic? Daily/weekly trading is a strong trader indicator.
2. Profit-making purpose — Is the dominant intention to profit from price movements (trader) or from dividends and long-term growth (investor)?
3. Organised in a businesslike manner — Do you have a trading plan, risk management rules, a trade journal, dedicated infrastructure?
4. Volume and scale — Number of transactions, total turnover, proportion of total investments being traded.
5. Same kind as commercial trading businesses — Does your activity resemble what a professional trading firm does?
6. Taxpayer's own characterisation — How you describe your own activity (not determinative, but considered).

Options and CFDs — almost always revenue

Options (ASX listed or OTC), CFDs, warrants and similar instruments are typically treated as revenue account items regardless of whether the holder is otherwise an investor. Their short-term, speculative, leveraged nature takes them outside the typical investor framework. Even relatively infrequent options trades can be revenue account.

Cryptocurrency

Crypto is a CGT asset for investors. High-volume automated or systematic crypto trading can constitute a business. The ATO data-matches with all major Australian exchanges (Coinbase, Binance, CoinSpot, Independent Reserve). Every disposal — including crypto-to-crypto swaps and using crypto to pay for goods — is a CGT event (or revenue event for traders).

Division 35 of the ITAA 1997 prevents losses from a business activity being offset against salary and other income — unless you pass at least one of four gateway tests. This primarily affects sole traders, freelancers, and share traders.

The four gateway tests

What happens if you fail all four tests?

Your loss is deferred — it is quarantined and carried forward. It does not disappear. In a future year when you pass a gateway test (or if the activity makes a profit), the deferred loss is available to offset income from that activity.

Trading expenses when losses are deferred

Even when your losses are deferred under Division 35, your trading expenses remain deductible in full against the trading activity's income. Platform subscriptions, journals, data feeds, and home office costs allocated to trading all reduce your assessable trading income, even in a deferred-loss year.

The Commissioner's discretion

Even if you fail all four tests, you can apply to the Commissioner to allow the loss if your activity is genuinely commercial. The ATO considers: whether there's a genuine expectation of future profit based on commercial evidence, whether the activity is organised in a businesslike way, and why it hasn't met any gateway test. Four consecutive years of losses without improvement significantly weakens an application.

Your adjusted tax offset threshold

Division 35 only applies if your adjusted taxable income from other sources is under $250,000. Above this threshold, different rules apply and non-commercial loss rules may not apply in the same way.

Two methods to choose from each year. You cannot mix methods, and you must commit to one for the full year.

Method 1: Fixed rate — 70 cents per hour (2024–25)

Claim 70c for every hour worked from home. This covers electricity, gas, internet, phone, and computer consumables in one flat rate. Note: the rate was 67c for 2022–23 and 2023–24, and increased to 70c from 1 July 2024.

• Must keep a record of every actual hour worked from home for the full income year — timesheet, roster, diary or spreadsheet. An estimate is NOT acceptable to the ATO.
• Depreciation of work equipment can still be claimed separately (desk, chair, monitor)
• Internet, phone, electricity cannot be claimed separately — they're included in the 70c rate. The ATO calls this "no double dipping"
• You do NOT need a dedicated home office to use this method
• Example: 843 hours × $0.70 = $590.10 deduction (per ATO example, Keisha 2024–25)
• Items under $300 used exclusively for work (desk, chair) can be claimed in full as decline in value in the same year

Method 2: Actual cost method

Calculate the exact work-related proportion of each expense. More complex, often higher claim.

Step 1 — Floor area percentage

Step 2 — Time-use percentage (occupancy costs only)

Step 3 — Combined rate (mortgage interest, rent, rates)

Which rate applies to what?

Records the ATO expects

• Full year of utility bills (electricity, gas, internet, phone)
• Floor plan with office dimensions and total home dimensions clearly marked
• Working hours diary or timesheet (full year for 67c method from 1 March 2023)
• Equipment receipts for depreciation claims
• Photos of dedicated office space
• Mortgage interest statement or lease agreement (if claiming occupancy)

When must you register for GST?

You must register for GST when your GST turnover reaches or is likely to reach $75,000 per year (rolling 12 months). For not-for-profits, the threshold is $150,000. Taxi, rideshare and limousine drivers must register from day one regardless of turnover.

BAS lodgement cycles

What goes on your BAS?

You pay 1A minus 1B to the ATO. If 1B exceeds 1A, you get a refund.

Share traders and GST

Share trading is a financial supply — it is input-taxed. This means you don't charge GST on trading gains, and you generally can't claim GST credits on expenses related purely to trading. If you have mixed activities (e.g. consulting business + trading), you may need to apportion expenses between taxable and input-taxed supplies.

Penalties for late or missing BAS

Failure to lodge penalties apply at 1 penalty unit ($313 in 2024–25) per 28-day period late, up to a maximum of 5 penalty units ($1,565) for small entities. Interest on unpaid GST accrues at the ATO's GIC (general interest charge) rate. The ATO also has the power to make default assessments if you repeatedly fail to lodge.

The 50% CGT discount

If you hold a share or other CGT asset for more than 12 months before selling, you include only 50% of the capital gain in your assessable income. This is one of the most valuable concessions in Australian tax.

Calculating your cost base

Your cost base includes:

• Purchase price of the shares
• Brokerage paid on purchase
• Brokerage paid on sale (reduces your capital proceeds)
• Stamp duty (if applicable — rare for listed shares)
• Incidental costs of acquisition or disposal

DRP shares (dividend reinvestment plan): each parcel has its own cost base equal to the market price at the date of issue. Keep the DRP statements.

Capital losses

Capital losses can only be offset against capital gains — they cannot reduce salary, rental income, or other income. Unused capital losses are carried forward indefinitely until you have capital gains to absorb them. Apply losses strategically: offset short-term gains first (taxed at full marginal rate), then long-term discounted gains.

Wash sales — ATO scrutiny

Selling shares at a loss and buying the same (or substantially identical) shares back within a short period to crystallise a capital loss can be challenged by the ATO under Part IVA as a tax avoidance scheme. The ATO considers the scheme's dominant purpose. If the primary reason is tax benefit, the arrangement can be unwound. Seek advice before undertaking wash sale strategies.

Cryptocurrency — CGT asset

Every crypto disposal (sale, swap, transfer between wallets in some cases, using crypto to buy goods/services) is a CGT event. Cost base = AUD value at time of acquisition. Capital gain = AUD value at disposal minus cost base. The ATO data-matches with all major Australian exchanges. 50% discount applies where crypto held 12+ months.

How to report

In myTax: Capital gains or losses section. If your total capital proceeds exceed $10,000, you must attach a CGT schedule. Attach to your tax return a calculation showing each asset disposed of, proceeds, cost base, and net gain/loss.

How long must records be kept?

What constitutes a valid tax invoice?

For purchases over $82.50 (GST-inclusive), a valid tax invoice is required to claim a GST credit. It must show:

• The words "Tax Invoice" displayed prominently
• Supplier's name and ABN
• Date of issue
• Description of goods or services supplied
• GST amount (or a statement that the price includes GST)
• Total price payable
• Buyer's identity or ABN (for purchases over $1,000)

Digital records — accepted by the ATO

The ATO accepts digital records. Scanned paper receipts, PDF invoices, email confirmations, accounting software records (Xero, MYOB, QuickBooks), and photos of receipts on your phone are all acceptable. The key requirements: the record must be a clear, legible reproduction of the original, and it must be accessible for the full retention period.

Share trader specific records

If you are (or are claiming to be) a share trader, your records serve double duty — they support your deductions AND demonstrate your business character. Keep:

• All brokerage contract notes and CHESS statements for every trade
• Broker annual tax statements (dividends, franking, foreign income summaries)
• Invoices for all platform subscriptions (TradingView, TraderSync, data feeds)
• Your trading plan or strategy document (strongly supports business classification)
• Trade journal entries (evidence of systematic, businesslike approach)
• Bank and brokerage account statements showing all trading-related transactions
• Exchange API export files for crypto trading