Thoughts on Not Claiming a Capital Loss On Share Sales

Aerith-Waifu on 15/07/2023 - 18:48
Last edited 16/07/2023 - 10:44 by 1 other user

This is an interesting one. Was talking to a work colleague and he said he did 20+ trades last year on ASX, not once did he make any money on any of the 20 trades.

In total he lost about $100 - $200 on each trade, he is not going to claim the losses in last years tax return as he would NEVER EVER invest in shares ever again. šŸ˜†

So basically he going to miss out up to $4000 offset on future gains. He is only 47 so not an old guy by any means

My first thought came to mind would be why would someone do that? Second thought is would he get in trouble with the ATO despite the fact they are all losing trades? Would ATO actually go after people not declare losses in investments?

Poll Options

  • 229
    1: Should always declare even it's a tax loss
  • 10
    2: It's ok I don't do it also
  • 3
    3: ATO will come after him even though he made no money
Financial Tax

Comments

  • SBOB on 15/07/2023 - 19:05
    +16

    Would your friend be willing to offer trade advice in the future, counter trading them could be a profitable exercise :)

    But you'd be crazy not to declare it. It's a future free offset pool amount that you can't claim later if you decide to, perhaps, not lose money on an investment choice.

    • askbargain on 15/07/2023 - 19:08

      he inverses time in market, so inverse that.

    • Aerith-Waifu on 15/07/2023 - 21:43

      Not a friend rather a colleague, I think he got burned hence he will never invest in the stock market.

    • JIMB0 on 16/07/2023 - 10:24
      +1

      I can think of one small cap investment newsletter that fits the bill. If only I traded counter to their advice.

  • Benoffie on 15/07/2023 - 19:15
    +12

    Stupid not to declare. People make losses. You also make gains. Claiming both allows a level of offsetting to occur. Not doing it is just wasting potential future returns.

  • Jimothy Wongingtons on 15/07/2023 - 19:22
    +10

    Need gains to actually make use of the loss though? If heā€™s swearing off investing I guess it doesnā€™t make a diff

    • conan2000 on 16/07/2023 - 21:03
      +2

      You can claim it against any Capital Gains, not just share trades. So worth putting it there just in case.

  • Daniel Plainview on 15/07/2023 - 19:28
    +10

    Future capital gains could be on ANY investment - not just equities. So it's one more field to fill out and could save him $4000 taxes at his marginal rate.

    Terrible investment advisor and accountant.

    • Aerith-Waifu on 15/07/2023 - 21:46

      Oh now you mentioned it, he did say if he is going to declare it he will need to pay more money to an accountant, and accountant costs money.

      Which brings back to his never ever invest in stock market moto. I did ask him if he invest in anything else other than shares, the answer is no.

      Guess he really is done and over with.

      • dcep on 15/07/2023 - 23:02

        There could be some time in future he buys a new home but only managed to sell his old home 6 months later which subject him to capital gain incurred for partial of any price appreciation unless he sold it for a loss (again).

        Even more so to the case if he gets an investment property or decides to rent out his old home.

      • filmer on 17/07/2023 - 13:57

        Even if he got the accountant to do the rest of his tax return he can amend it and update the losses himself. It's not hard if everything is a loss.

  • Ghost47 on 15/07/2023 - 19:34
    +6

    Your friend is clueless about how tax works.

  • JimmyF on 15/07/2023 - 19:47
    +3

    My first thought came to mind would be why would someone do that?

    As they don't plan to have any capital gains ever again ;)

    Second thought is would he get in trouble with the ATO despite the fact they are all losing trades? Would ATO actually go after people not declare loses in investments?

    You only have to declare income/profit so you can be TAXED on it.

    ATO is perfectly happy for you to not declare a loss, as that means you can't use that loss in the future.

    • FujiFruit on 15/07/2023 - 20:04

      Ah so if you make a loss you donā€™t need to declare in tax return ?

        • Malik Nasser on 15/07/2023 - 20:21
          +8

          That is bad advice. Capital losses are carried forward indefinitely, so if in 20 years time he makes a capital gain he can use them then. You only have to declare them once, so you might as well do it in the year they are incurred.
          As others have mentioned, the capital losses can be claimed on any capital gains, it does not have to be against capital gains in shares.

          • John Kimble on 15/07/2023 - 20:34
            +3

            @Malik Nasser: I stand corrected. I forgot they can be carried forward, even though it is stated in the link I provided šŸ¤¦

          • ATangk on 17/07/2023 - 20:02

            @Malik Nasser: Cant make capital loss if I never sell taps head

            • scanuck on 19/07/2023 - 16:51

              @ATangk: Not true - can claim a capital loss from a bankrupt business

      • JimmyF on 15/07/2023 - 20:59

        Ah so if you make a loss you donā€™t need to declare in tax return ?

        You don't have to, there is no 'fine' like the OP was asking.

        You should declare it so you can roll it over and use it in the future. A loss can be rolled over forever until needed, so it is worth reporting.

        If you don't declare it and then roll it over, you can't use it in the future.

        • Aerith-Waifu on 15/07/2023 - 21:53

          If there is no fine by the ATO, and the guy never will invest again, I still think he should declare it

        • FujiFruit on 15/07/2023 - 22:54

          Ah I see

      • TilacVIP on 16/07/2023 - 07:52

        You can/should as it will off set any gains in the future, but if you don't, ATO would not care & there is no reason to come after you as there is no tax owing.

    • Aerith-Waifu on 15/07/2023 - 21:55

      So ATO won't chase you for the capital lose by not filing the paperworks?

      • Odin on 17/07/2023 - 02:16

        No. Why would they?

  • Malik Nasser on 15/07/2023 - 20:25
    +5

    Your friend just showed you that without a trading plan, your more likely to make losses. To make 20 losses in a row is quite spectacular.
    Rather then trying to trade, which takes time and effort, he would have been better off investing.
    Find a couple of diversified ETF's and just invest in them. Buy only, never sell (unless you really need the money). As they say 'time in the market', not 'timing the market'.
    Investing is easy, trading is much harder.

    • Aerith-Waifu on 15/07/2023 - 21:52

      Well he followed some random posters in HotCopper doing day trading. Guess he isn't cut to it.

      Actually I am also not very successful when it comes to stock market either, over the years the only stock I successfully picked is FMG. Which I hold 8000 units.

      Rest I am down around 80-90%…….

      • FujiFruit on 15/07/2023 - 22:56

        The few people I know that invest has made losses too. I donā€™t know anyone that has made money

      • Malik Nasser on 16/07/2023 - 09:43

        For most people, picking individual stocks is not the way to go.
        I would built a portfolio around ETF,s and similar investments.
        As an example portfolio, I would build something like the below:

        Australian ETFs (10%) - VAS, MVE
        Australian REITs (10%) - ARF, BWP, CHC, CQE, GMG, GOZ, INA, LIC, NSR, RFF, RGN
        USA ETFs (25%) - IVV, IJH, IJR
        USA Thermatic ETF's (25%) - IXJ, MOAT, NDQ
        India ETFs (20%) - IIND, NDIA
        Individual Australian Companies (10%) - Some combination of: ARB, AUB, ALU, ALL, CSL, CAR, CWY, CKF, CCP, DTL, EBO, FPH, IFT, JBH, JLG, JIN, LOV, MQG, NCK, OCL, PSI, PWH, PME, QUB, REA, RMD, SEK, SHL, SDF, SNL, TNE, WTC

        For the ETFs, these are buy and hold only, so no trading (holding for the long term 10+ years).
        The final 10% for individual companies is where you can try your hand at picking individual stocks (if you want) - limiting any potential damage to only 10% of your portfolio.
        Australia only makes up about 2% of global markets, so I have limited exposure to Australia (30% of total portfolio). Most Australians normally invest more heavily in Australian markets, but I think that is a mistake/shortcoming.
        The above is an example only, so you should do your own research and/or get financial advice if required.
        Have a look into the above and see what you think.
        Expect a long term return of about 10% p.a, but with returns on any individual year of between -30% to +40%.
        The way I think about investing, is to look at which countries are free and open, and I expect to be significantly larger (and more prosperous) in future.
        China has good growth, but is not free and open, and previous investor returns have been relatively poor, so I steer clear of China.

        • kiitos on 16/07/2023 - 14:03

          Which countries are they? India?

        • May4th on 16/07/2023 - 22:47
          +3

          Or just go for VDHG if you want simplicity

          • ribze1 on 17/07/2023 - 22:03

            @May4th: DHHF is better

            • SBOB on 17/07/2023 - 22:11

              @ribze1:

              DHHF is better

              Apart from bond allocation, there's pretty minimal end result difference.

              Diversified diversified high growth funds and buy a bit of each :)

              • ribze1 on 19/07/2023 - 21:01

                @SBOB: Essentially there is a case to argue that DHHF should be more tax-efficient in the long run because its distributions wonā€™t be an amalgamation of capital gains, and dividends. Tax implications will also be dependent on the performance of each ETF.

                Via: https://themoneypal.com/dhhf-vs-vdhg/ under tax implications.

      • RotundPolarBear on 17/07/2023 - 00:38

        Damn that's over $170,000 in FMG you have. You should be the one giving your colleague tips on what to invest in.

        • May4th on 17/07/2023 - 18:52

          22x8000 is 17k odd

          • SBOB on 17/07/2023 - 18:54
            +1

            @May4th: With maths like that, remind me not to follow your financial advice…

            • May4th on 17/07/2023 - 19:14
              +1

              @SBOB: Oh dear what a face palm moment. I will leave my post here for ridicule

        • Aerith-Waifu on 17/07/2023 - 19:37
          -1

          You obviously didn't know my loses on HLF, DXN, FFF and SPT…..

          • SBOB on 17/07/2023 - 20:08

            @Aerith-Waifu: And this is why something like VAS is a simpler choice :)

        • Daniel Plainview on 17/07/2023 - 19:37
          -1

          Sinking a bunch into FMG isn't exactly an example Buffet-level investing powess.

          Don't get me wrong FMG is a very good company but you'd really have to know a lot more about what the investor had in their portfolio before you deduced that such a large amount in a single company was a 'good' investment or not.

    • BoltThrower on 15/07/2023 - 22:37

      It happens more often than one would think. People will choke their trades by setting their stop-loss too tight; It'll get swept up before heading in the right direction.

  • holdenmg on 15/07/2023 - 20:29
    +1

    Just don't let your work colleague run the staff Lotto syndicate in case you all win $4000 and they don't figure it is worth claiming.

    • Aerith-Waifu on 15/07/2023 - 21:48

      He does runs the staff lotto…….

      We been giving him $5 every week since April this year …..hmmmm

      • May4th on 16/07/2023 - 22:49

        Gotta recuperate that 4000 loss somehow..

  • dtc on 15/07/2023 - 20:57

    Does he have no investments at all?

    • Aerith-Waifu on 15/07/2023 - 21:48

      Yeah I did ask him he says he has no other investment at all apart from putting slot of money into his superannuation.

  • Iwantthebestprice on 15/07/2023 - 21:04

    I made a loss, didnā€™t claim it and moved on too

    • Aerith-Waifu on 15/07/2023 - 21:49

      Like others have said, you have no other investments? Gold? EFT? Even virtual currency?

      • Iwantthebestprice on 15/07/2023 - 22:44

        Stocks and crypto made a loss on both. Sold and moved on like I said

  • bobbified on 15/07/2023 - 21:53
    +2

    ATO isn't going to thank anyone for not declaring their losses, but they'll happily come after someone for not declaring their gains.

    • Aerith-Waifu on 15/07/2023 - 22:06

      So he won't get a please explain letter for not declare his losses, at all?????

      If that's true than more the reason he needs to declare them.

      As I can't imagine an accountant would cost that much to have these loses calculated for him. Maybe $200 to $300 against future offset of $4000 is a no brainer for me

      • bobbified on 15/07/2023 - 22:07
        +5

        The ATO only cares if you potentially owe them money.

        • Aerith-Waifu on 15/07/2023 - 22:13
          +1

          I see. Then he should declare them regardless if he is going to use them or not. To save $200 to $300 in accountant fees is just plain silly. Unless accountant charges $1000+ which I highly doubt…

          • andrek on 16/07/2023 - 08:42
            +4

            @Aerith-Waifu: You do not need accountant to declare your losses. If your friend colleague's tax return is straight forward otherwise - can easily be done on ATO website when he submits his tax return.

            What's more, if his main goal was to trade (as oppose to invest, and from description it seems like it was), this won't be treated as a capital loss but instead as a revenue loss and he will be able to offset his losses against his income.

            • goms on 17/07/2023 - 16:49

              @andrek: This is interesting. I learnt something new today!

            • Daniel Plainview on 17/07/2023 - 18:00
              +3

              @andrek: It's not just as simple as whether you intended to 'day trade' or 'buy & hold' - as the link you provided stated - so could you try and claim this, sure - but you can do this with anything on your tax return. Whether it passes the ATO's standard if they query it is another thing all together and from the OP's description I don';t think his pal would have a snowflakes chance in hell of supporting that he was for tax purposes a share trader.

              Suffice to say this is all speculation as clearly he individual in question isn't all that bright in either investing or tax management - so its pretty much a moot point.

              • Aerith-Waifu on 17/07/2023 - 19:17

                @Daniel Plainview: Pretty sure it's not his intent to do this as a trader, rather as a get rich quick scheme

              • andrek on 18/07/2023 - 06:44

                @Daniel Plainview: Yes, claiming it as income loss is in a "to investigate" bucket, not "definitely can do that".

                But actually claiming a loss on tax return - definitely can be done on ATO website, no need to pay an accountant for that.

            • May4th on 17/07/2023 - 18:50
              +1

              @andrek: The threshold is actually quite high and from first glance I wouldn't think they would qualify with such small activity level and capital

  • shockme79 on 15/07/2023 - 22:36
    +1

    He should declare the loss and it will sit against his name, and in future if he makes any capital gain the loss will be used to offest against it.

  • mskeggs on 15/07/2023 - 23:11
    +4

    When I was much younger I lost money on a ā€œmatesā€ tip related to bre-x.
    As a result i was much more cautious and largely didnā€™t invest directly in shares for trading. (I got smarter and rarely trade shares, and if i do it is in super).
    This year I have some shares I ended up with in my own name, due to work schemes, that i have sold at a profit.
    I am able to off set the losses from 1999 against those gains.

    Always book them.

  • garetz on 15/07/2023 - 23:47

    What are they going to go after exactly ? Losses wont affect what the ato takes from him. There is nothing they can go after him for.

  • hasher22 on 15/07/2023 - 23:58
    +1

    I mean, it's great if he does declare the loss to reduce capital gains in the future. To my understanding that capital loss can contribute to any capital gains, he's not locked into stock capital gains. For example, if he has an investment property and has capital gains, he can offset the capital loss from the stock towards that gain.

    But if he doesn't declare it, no loss on the ATOs side, don't think they will chase him for losses. But if your friend has potential future capital gains, then tell him to declare it, there's no harm declaring losses.

    Either way, his loss….. pun intended

    I'm still down on crypto, if/when I break even, I will cash out….. I'm not a gambling man and it was an experience I am glad I did but never again. Rather put it in a savings account.

  • kyle on 16/07/2023 - 07:59
    +1

    Why do you keep typing capital "lose" when it's "loss"?

    • John Kimble on 16/07/2023 - 10:03

      Same reason people type loose instead of lose.

    • JIMB0 on 16/07/2023 - 10:33
      +2

      Maybe he got some bad spelling advise.

      • kiitos on 16/07/2023 - 14:04
        +1

        I hope your spelling was a subtle joke!

  • RMBC on 16/07/2023 - 10:00

    There is a chance the ATO will come after him, depending on how long he held the shares for and what information they have.

    The ATO is almost certainly going to have the sale information, and as such it will expect that information included in their tax return. They may also have the purchase information, in which case they may not bother following up, however if they dont, they will default assess on the basis it cost him nothing to purchase the shares, and the sale proceeds were the full gain

  • jrvb42 on 16/07/2023 - 10:22

    Friend should declare it. Even if no intention to trade and profit in future, might change mind, then can use. Just do it.

  • JIMB0 on 16/07/2023 - 10:38
    +1

    I dabled in share trading many years ago and made a loss. It's been carried forward each year and now that I have ETFs it comes in handy as you have a capital gain each time a fund rebalances.

  • Baysew on 16/07/2023 - 10:41
    +1

    What a colleague may say they might do, can be quite different to what they actually end up doing.

  • wannagrababargain on 16/07/2023 - 11:21
    +2

    It literally costs nothing to declare it and carry it forward forever. I've been carrying a capital loss since 2009 and have only just last year used some of it to offset some capital gains from an ETF. This was something I never would have predicted in 2009…or even when I bought the ETF for that matter. If your friend ever puts money into an ETF he'll be liable a small capital gains tax component apportioned to him each year due to the trading within the ETF (even if he didn't sell any unts). This is just one example but CGT is so complicated there are bound to be other examples where you become liable for CGT that you never thought of…..so yea never say never..

  • amorn on 16/07/2023 - 12:00

    seems ATO won't bother if you actually overpay your taxes !

  • xylarr on 16/07/2023 - 12:18
    +1

    Declare the loss,you can sit on this for years.
    I bought some toll road in Brisbane back when buying toll roads was a thing. They went broke. I lost about $10k. It took a good 10 years before I realised enough gains to cover that - basically I wasn't selling anything that was making money, I was happy to hold. Eventually I had something bought as part of a takeover on which I had made quite a bit (Sydney Airport). The 10K loss sitting there helped dull the pain I guess.
    But, a loss is still a loss - I'd rather not have them.

  • AustriaBargain on 16/07/2023 - 17:29

    Perhaps not declaring it psychologically makes him not make those kind of gambles again somehow. Like it doesn't make it "real".

    • Aerith-Waifu on 17/07/2023 - 19:15

      More like stupidity following some hotcopper advice lol

  • AnophthalmiaCervidae on 16/07/2023 - 17:42
    +1

    The question on the Tax Form is
    "Did you have a capital gains
    tax event during the year?"
    A loss is still a Capital Gains tax event and should therefore be declared, otherwise he is making a false declaration.
    Could still get into trouble for NOT declaring it.
    https://www.ato.gov.au/General/Interest-and-penalties/Penaltā€¦
    The ATO is fairly forgiving if you make an honest mistake, though this would be an "intentional disregard".
    The ATO will have record of the share sale, better to declare it than attract the attention of the ATO and risk an audit, even if all your tax affairs are in order a tax audit is still a hassle.

  • mungas on 16/07/2023 - 20:20

    My thoughts are to remain off the radar, maybe planning to not disclose future gains?

    • Daniel Plainview on 16/07/2023 - 20:44

      Haha what do you think you can make a CG on that the ATO won't easily find out about? Obscure stuff maybe - but forget about any vaguely mainstream investments or using your bank account for cash flow that doesnt line up with your reported income,

      And heaven help you if you end up triggered an audit on yourself - as thats a whole world of hurt.

  • original15 on 16/07/2023 - 23:27

    Over a decade ago during uni I invested $2k on shares and the gfc hit and those shares eventually went to nothing, one went trading halt and company went bust, other got renamed etc and then nothing (good tips from my mates brother lol)
    As a student I had Nfi what to do so just did nothing at tax time. Should I try and find the paper trail in email from 10y ago and revise historical returns to include a CGT event (loss?)

    • Cave Fire on 17/07/2023 - 22:46
      +1

      Yes… I edited my 2003 tax return in 2015 odd. They grumbled and took their time but eventually got my real return back.

  • Wilson Wallace on 17/07/2023 - 11:32

    You should always declare your losses. If i'm down about 2-3k on a single stock, id usually sell it before the finical year ends (around 10 days), claim the loss then buy back the stock or another one. ATO doesn't like it but oh well :)

  • SpicyStew on 17/07/2023 - 11:39
    +1

    tell him to look into crypto next

  • Drakesy on 17/07/2023 - 11:47
    +1

    I too like to cop losses and give the government a free ride whilst they tax me every other way.

  • ruddiger7 on 17/07/2023 - 18:32

    Buy high sell low

  • Daniel Plainview on 17/07/2023 - 22:47
    +1

    Dunno if it's just me but I don't know if I've ever been so surprised by the number of responses to an absolute no brainer question & poll.

    For those 12 OzBers who picked the last 2 responses…. yikes!

  • Choc0 on 18/07/2023 - 08:59

    I bought $2000 worth of shares in 2008. They went to zero.

    I finally tracked down the paperwork last year and used it to offset a capital gain. So it's never too late!

    • Daniel Plainview on 18/07/2023 - 09:30

      So did you lodge the capital loss in your 2008/09 return and carry that forward in every return since then?

      As I hate to be the bearer of bad news but while the claim might have gone through at present - if the ATO ever (and I think they have 7 years to do this) look into your account - thats going to be rejected and you're going to owe them the deduction and a GIC for the time you owed it on top.

      For this to have been ATO compliant you'd either have had to do as stated - or gone back and lodged amended returns for affected years where the loss that you incurred was not initially lodged and then brought forward in EVERY SINGLE annual return, but lodging amendment to returns has a limit of IIRC 5yrs - so you're incorrect, as it very much is too late after a certain point.

    • wetsandwich on 18/07/2023 - 12:56
      +1

      Yeah you can't actually do that..

  • wetsandwich on 18/07/2023 - 12:56

    Some idiots can't be helped.

    Just do the opposite of anything else he says and you'll do well in life.

  • Chandler on 18/07/2023 - 15:12
    +1

    I'm just here to thank our Power Users like @Baysew - I didn't see this post before your edits and maybe that's a good thing :D

  • T-man on 18/07/2023 - 22:28

    I am glad that he ran away and will never invest in the stock market again, itā€™s all fraud, they control the market and will always win, you never win, they do everything possible to steal, loot from retail investors.

  • payless69 on 19/07/2023 - 11:32

    The socialists get their way! Build new mental hospitals and qld even has Wellcamp.
    Roy Morgan has their own oppinion
    https://youtu.be/Yu1OOYmsl-k?t=22

    payless69 on 19/07/2023 - 11:32 (Collapsed - Offtopic. Show)
  • palmplex on 14/11/2023 - 18:54

    If there's something to declare to the taxman , then losses should be at the top of the list. There's no tax to pay and you might just save some tax years down the line but you have to carry it forward from year to year which is annoying as its not automatic. I have some I've been carrying forward for 15 years.
    **What have other people done to use up their capital losses in a simple way? Any suggestions?…I hate wasting a benefit ! **

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