Share trading on behalf of others

I am a share trader and have good trading profit this financial year. All my fund are from overseas investors and there is a formal agreement between me and the investors. Per the agreement, I will get 10% of the total profit as my commission. now I just wonder what is the income I need to claim when I do my 2009 individual tax return? is the total trading profit or only the 10% commission? all trades are under my name.
Thanks.

 

Are you executing trades as a service/stockbroker ?

Or are you managing funds on behalf of other people ?

Either way, you had better get some legal advice as these areas are highly regulated.

Cheers,

Rob

 

Hi Rob, thanks for you reply. I am executing trades as a service, but I don't have a license, can I just claim the commision paid to me per the agreement as my assessable income?
Thanks

 

Hi Hahahaa,

You might want to read Australian Securities and Investments Commission - For companies overview for further information to providing financial services in Australia as you need to be properly licensed.

Cheers,

Dan

 

Hi,
perhaps read this:
Australian Securities and Investments Commission - Do you need an AFS licence?

 

From a tax perspective, it sounds like you are operating a 'bare trust' of sorts - i.e. you separately keep records of the funds invested on behalf of your overseas investors (I assume you calculate your 10% based on this?).

This can be a problem, becuase from the ATO perspective, if you give your tax file number to the share registries for these investments, they can data match the information.

If you have not been declaring the total trading profit in your personal tax return, then you may be more likely to be audited by the ATO - especially if you are doing a lot of trades with a lot of money.

However, provided you have all the appropriate records that track all the invested monies and trades separately, you should be OK declaring only the commission you receive (I would declare this income at Item 2 "Allowances, earnings, tips, director's fees, etc).

Even if you are effectively running the investment under a trust arrangement, the income needs to be reported somewhere by someone, and if you are sending the profits back overseas there should likely be withholding tax.

I seriously suggest seeing a tax adviser who can not only advise you of your personal tax situation, but also of the appropriate structure for you to invest this money through.

I have not addressed the legal issues around providing brokering / investments for other people, however I definitely also recommend you see a lawyer to ensure you protect yourself.

You asked a question that looked very simple of the surface, but you have a lot of issues you needs to address.

Good luck!