An investing return comes down to two things: which basis you are taxed on, and the records standing behind the figures. The first is the investor-or-trader question, and it changes almost everything else on the return. The second is where most trouble starts, because the ATO already holds its own copy of much of your investing history and checks yours against it.
Why investor or trader changes everything
Most people who hold shares or crypto are investors, and this whole guide is written for them. A smaller group are traders who are carrying on a business of buying and selling, and they are taxed on a different basis.
A gain is a capital gain, the 50% discount can apply, and losses can only be used against other capital gains.
Shares or coins are more like stock in a business: gains are ordinary income with no CGT discount, the cost of buying is deductible in the year incurred, and losses are business losses that can offset other income, subject to rules limiting non-commercial losses.
The same run of trades can produce very different tax depending on which side of this line you sit.
How the ATO weighs it
Whether you are a trader is the same question as whether you are carrying on a business, and it turns on your actual circumstances rather than a single test. The ATO weighs the nature and purpose of your activity, since an intention to make a profit on its own is not enough. It looks at the repetition, volume and regularity of your buying and selling, at whether you run the activity in a business-like and organised way with proper records and research, and at the overall pattern.
The amount of money involved is explicitly not the deciding factor.
A person with a large portfolio they watch every day can still be an investor if they hold for dividends and long-term growth rather than to profit from constant trading. Because it depends entirely on your facts, this guide describes how the line is drawn and does not decide which side you are on. That is a question for the ATO or a registered tax agent on your specific situation.
The wash-sale rule
There is one move the ATO warns about directly, so it is worth naming. A wash sale is selling an asset to book a capital loss and then buying back the same or a substantially similar asset shortly after, where the real purpose is the tax benefit rather than any genuine change in your holding. The ATO treats this as tax avoidance, and where it identifies one it cancels the loss and can add penalties and interest. It has the data to spot the pattern, because it receives information from share registries and crypto exchanges. Selling and rebuying for genuine reasons is normal investing; doing it purely to manufacture a loss is the thing that gets unwound.
The records to keep
Good records are what turn all of the above into a return you can stand behind:
- Buy and sell contracts. For every share trade, plus the brokerage on each side.
- Dividend statements. The franked and unfranked amounts, the franking credit and any tax withheld.
- Corporate action details. Buy-backs, fund switches, redemptions and wind-ups.
- Every crypto transaction. The date and the Australian dollar value, including coin-to-coin swaps.
- Wallet and exchange records. Exported regularly, not left to trust.
- Five years, minimum. Kept for five years after the relevant event, since the period a return can be amended runs beyond the year itself.
Treat each parcel as its own asset, and keep records for longer than feels necessary.
The data the ATO already has
None of this happens in private. Dividend and interest information reported by registries, companies and funds is pre-filled into your return, and the ATO runs data-matching programs for both shares and crypto that compare what you report against what the third parties reported. A mismatch is what triggers a letter. The practical takeaway is simple: report what actually happened, keep the evidence, and let your figures line up with the ones the ATO already holds. Where a transaction is genuinely complex, a registered tax agent is the right call rather than a guess.
The bottom line
Know which side of the investor-or-trader line you sit on before you lodge, because it changes the whole basis of the return, and get help deciding if it is genuinely unclear. Keep clear of a wash sale, since the loss will not survive. Keep the contracts, statements and Australian dollar values for every holding and every swap, for five years, and report in line with the data the ATO already has. Do that and an investing return is just careful record-keeping.
See how your disposals, the discount and your losses land at tax time.
General information only, not tax or financial advice. Whether you are an investor or a trader depends on your circumstances, so check the ATO or a registered tax agent for your situation.