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Bryn(Newbie)Newbie
11 Mar 2021

Hello,I use an online trading platform known as Etoro to buy and sell US shares. Australian Dollars are exchanged for US Dollars on deposit and then exchanged back into Australian Dollars on withdrawal for a small fee. This fee is generally 50-100 pips of the current exchange rate and is only incurred during a deposit/withdrawal and not with every trade.

I'm wondering if its allowable to include these deposit/withdrawal fees in the cost basis for calculating CGT? And if so, what is the best process for calculating this?

An example scenario (with no change in exchange rate):Jan 1 2021: Deposit $1,000 AUD @ 0.77 - 100 pips (exchange fee) = $770 USD - $10 USD ($13 AUD) = $760 USDJan 15 2021: Buy 1 share TSLA @ $600 USD = $779.22 AUDFeb 1 2021: Sell 1 share TSLA @ $650 USD = $844.16 AUD (gain of $50 USD / $64.94 AUD)Feb 3 2021: Buy 1 share SQ @ $200 USD = $259.74 AUDFeb 15 2021: Sell 1 share SQ @ $210 USD = $272.73 AUD (gain of $10 USD / $12.99 AUD)March 1 2021: Withdraw $820 USD @ 0.77 - 50 pips (exchange fee) = $1,064.94 AUD - $6.49 AUD = $1058.45 AUDMy actual gains would have been $58.45 AUD however I'm worried that the ATO will regard my gains as $77.93 AUD. This issue scales as my portfolio grows so it would be good to understand the correct processes.Any help would be appreciated :)

2,885 views
2 replies
2,885 views
2 replies

Most helpful response

Most helpful reply

RichATO(Community Support)Community Support
13 Mar 2021

Hi @Bryn

It's clear that you are currently undertaking share trading as a shareholder for investment purposes, rather than as a business. I make that distinction because the tax treatment is different between the two activities.

As an investor, the transaction costs of buying or selling shares is not an allowable deduction against income, but are taken into account in determining the amount of any capital gain. They can be included in your cost base when working out the capital gain or loss from selling the shares.

Your trading platform should keep track of these costs for you. If not, keep a spreadsheet record to track these costs and also your capital gains or losses from share transactions.

You can read more about CGT and acquiring assets on our web site.

If you increase the scale of your share trading activities it would also be useful to understand what we regard as the differences between shareholding as investor or share trading as business.

Hope you find that helpful.

RichATO

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Bryn(Newbie)Newbie
11 Mar 2021

Just for clarification, a pip, short for "percentage in point" or "price interest point," represents a tiny measure of the change in a currency pair in the forex market. It can be measured in terms of the quote or in terms of the underlying currency. - https://www.investopedia.com/ask/answers/06/pipexplained.asp

At an exchange rate of 0.77, 1 pip for $1,000 AUD roughly equates to $0.13 AUD or $0.10 USD.

Etoro would charge a fee of 100 pips ($13 AUD) for deposits and 50 pips ($6.50 AUD) for withdrawals.

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Calculation of CGT with deposit/withdrawal fees (Etoro) | ATO Community