Another capital gain question

[Pornstar]

If i am holding shares that are currently in a loss, but i am going to keep holding them long term until they come back into profit, i can sell the shares now to lock in a capital loss, then buy back the shares at around the same price and continue to hold them. Can anyone tell me if there are any rules regarding this, ie. do i have to wait a certain amount of time before i can buy the shares back, etc?

 

[frantelle]

Not sure to be honest. Not sure I would bother though, all things equal your long term gain/loss on the shares will be the exact same and seeing as how any gain/loss would be the same and seeing as how you can carry losses forward I wouldn't bother, except you are just forcing yourself into paying extra transaction costs

EDIT: all your effectively doing is either increasing your future tax payments (or receiving capital losses earlier) but the benefit you will receive today and the premium you'll pay for this is the 2 extra transcation fees. Look at it that way, what are you gaining and what is it costing you? Is it worth it?
If you have a large amount of money, trade online, and intend to hold onto the stocks long term anyway then yeah it might be worth it, but just view it as a return v cost scenario

 

[NitroFan]

I wouldn't think there's anything stopping you. I'm sure day traders buy and sell the same shares all the time.

 

[Eagle87]

If i am holding shares that are currently in a loss, but i am going to keep holding them long term until they come back into profit, i can sell the shares now to lock in a capital loss, then buy back the shares at around the same price and continue to hold them. Can anyone tell me if there are any rules regarding this, ie. do i have to wait a certain amount of time before i can buy the shares back, etc?

Why are you locking in the loss?

If you are locking in the loss to offset against an existing capital gain then the ATO put out a ruling (from memory TR 2008/1) dealing with potential application of general anti-avoidance rules (Part IVA) to Wash Sales. This could apply.

Typically though wash sales are done around 30 June to crystallise a loss to apply against other gains of that year. If you are "locking in a loss" for fun then you are an odd chap but its likely to have no tax consequence even if you buy back a similar amount the following day. Locking in a capital loss, in the absence of any gains is pretty much entirely pointless...

 

[Eagle87]

I wouldn't think there's anything stopping you. I'm sure day traders buy and sell the same shares all the time.

Day traders by definition are traders and are assessed on revenue rather than capital account. As such the CGT provisions and any rules or rulings associated with them would have no application regarding their day trading activity.

 

[Pornstar]

Just to clarify, the purpose of locking in the loss is to offset against other capital gains to reduce the tax liability for the year. I realise that eventually the capital gains made will be taxed, but the intention is to delay that for as long as possible. Something i want to avoid at all costs is paying tax on a capital gain that was made in less than 1 year as i would pay the full nominal tax rate on it, whereas a gain realised after more than 1 year gets the 50% discount. Managing the capital gains and losses therefore becomes quite important.

 

[Frodo]

Eagle87 is correct.
I doubt any here are traders other than myself.
Investors may only offset losses against gains.
So if you are not holding capital gains there is no tax advantage in taking losses.
Hold a stock for a year and you gain a 50% CGT concession. ( Which I don't receive as a trader).