How to Calculate CGT for HFT and Day Trading

Hi,

I am wondering, how does one calculate Capital Gains if they are involved in High Frequency trading, or frequent general day trading?

If you make a lot of trades, is there some recommended way of keeping track of CGT?

I would like to trade more frequently, but I don't want to be stung by my limited knowledge of reporting gains during tax time.

Cheers

Comments

  • http://law.ato.gov.au/atolaw/view.htm?docid=TXR/TR200515/NAT...

    Any particular reason you're not considering to treat gains as assessable income? There are a lot of constraints in being able to have that treatment appropriate for your case, but just want to know whether it's something you've considered?

    Otherwise, is the challenge high volume of trades? Drop down a formula in a spreadsheet? Your trading platform can provide you with a trade by trade result.

    • Thanks for your reply.

      I didn't know that you could treat gains as assessable income.

      Yeah, I guess it's the uncertainty about getting the right information.

      Edit: Im not running a share trading business or anything like that. I just want to be able to trade regularly I.e. a few times a week, but don't know exactly how to record it and ensure I calculate it correctly.

  • You'll never have an issue getting the right level of information from whatever platform you end up using. Have you tried contacting your provider to ask for what kind of reporting they can provide? Maybe that will give you the comfort around getting the right information.

    Don't worry about the tax implications if you're starting out. Go out and focus on making profits. Getting the tax treatment right will fall into place itself in due course.

  • If you do day trading with high frequency, you will not need to be concerned with capital gains.
    Instead you will be considered as Carrying on a business of share trading

    As a business, you can treat share buys as purchases, share sale as Sales, and you deal with beginning stock level, ending stock level, cost of goods sold (what you pay for the shares which you sold), to calculate profit. So you will not be dealing with capital gains. Hope this helps.

  • Yeh if youre intending to buy and sell frequently, that's normal income, not capital gains.

    In order to be capital gains, when you buy the shares you have to be intending to own them for a while with an intent to derive profits from holding the asset (eg from dividends). You have no intent to hold the shares. Rather,you're intending to make money from buying and selling them. That's income. (A very very general explanation)