Is brokerage from share trading tax deductible? Well, it’s complicated! Here’s what you need to know

Is brokerage from share trading tax deductible? This is a question many share traders would wonder. The short answer is that it can be, but may not always be and how it is to be claimed differs significantly.

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Is brokerage from share trading tax deductible?

This question depends on whether or not your trading is done as a private individual or if you are running a legitimate business. Let’s deal with the first scenario because we assume most of our readers fall into that category.

It is deductible, but not year by year…

For most equity investors, brokerage is only deductible in relation to CGT. It is not something you can claim year-by-year, regardless of thresholds. For shares held on capital account (which is the default for ordinary investors), brokerage is treated as a capital cost. When you buy, it’s added to the cost base; when you sell, it’s deducted from the capital proceeds. That means it only matters at the CGT event, not annually. You can’t currently choose to deduct brokerage each year in the way you could deduct certain expenses involved in generating an income.

The only time brokerage becomes an annual deduction is if you’re carrying on a business of share trading (revenue account), which the ATO interprets narrowly and very deliberately excludes most retail investors.

But this is where it gets interesting. Australia is on the cusp of introducing a ‘standard deduction’ – where investors could all claim a A$1,000 without receipts. In this instance, investors may choose to claim it rather than claiming individual expenses – so they may think they could be claiming on brokerage. Of course investors should still keep receipts in case the ATO comes knocking and for some (who have over $1000 in expenses), and again they cannot claim brokerage as a deduction year by year. Unless of course they are running a business.

…unless you’ve got a legitimate business

Yes — if you are genuinely carrying on a business of share trading, brokerage is deductible year by year. But the “if” is doing a lot of work here.

In that case, an investor’s shares are on revenue account, not capital account. Brokerage is treated as an ordinary business expense, just like commissions or fees in any other trading business, and you deduct it in the year it’s incurred. Profits are ordinary income, losses are ordinary losses, and CGT (including the 50% discount) doesn’t apply at all.

The catch is that the ATO sets the bar for “carrying on a business” quite high. They look at things, particularly intention and what actions suggest. They don’t use a single test, rather they applies a holistic, facts-and-circumstances analysis, drawing from case law. What usually trips people up is that they satisfy one or two factors strongly, but fail the overall commercial picture.

The biggest misconception is frequency alone. People assume “I trade a lot, therefore business”. You can place hundreds of trades a year and still be an investor if what you’re really doing is managing your own capital in a discretionary, opportunistic way. The ATO is looking for repetition plus an organised, income-seeking structure.

Intent matters, but actions matter more. Saying “I intend to trade for profit” carries little weight if your behaviour looks like holding positions, reacting to news, or sitting on losses waiting for recovery. Traders aim to extract short-term price movements as income; investors aim to grow capital over time. Holding periods are a strong signal. Regularly holding positions for months, or only exiting when the thesis changes, pushes you toward investor status even if the portfolio churns.

Scale and turnover is another sticking point. A business normally has a meaningful relationship between capital employed, turnover, and expected income. Someone turning over $200k–$300k a year on a $100k portfolio might look trader-ish; someone making ten trades a month on a $50k portfolio almost never does. The ATO doesn’t publish thresholds, but small scale combined with sporadic activity is usually fatal. You may think you have a business just because you have a portfolio of half a dozen companies worth $10-20k, but the ATO will beg to differ, especially if you spent an hour a week at most on your portfolio.

Systemisation and discipline is where genuine traders separate themselves. The ATO expects evidence of a method: predefined entry and exit rules, risk management, position sizing, consistent strategies applied across trades, and contemporaneous records showing those rules were actually followed. Ad-hoc “I liked the chart / story” decisions look like investment, not business.

Business-like behaviour is another quiet killer. Separate bank accounts, dedicated accounting records, profit and loss tracking, budgeting, and a clear view of trading as an income-producing activity all matter. You don’t need an ABN, but if everything is mixed with personal finances and there’s no formal P&L mindset, the ATO will struggle to see a business.

Profit history and expectation also counts. A trader doesn’t need to be profitable every year, but there needs to be a commercial expectation of profit in a reasonable timeframe. Years of losses justified by “learning” or “the market was bad” look like a hobby or speculative investing, not a business.

Now, the greyest of grey areas: People who trade actively, have decent turnover, maybe even use technical analysis, but also hold positions for months, don’t cut losses consistently, and fundamentally think in terms of “good companies” rather than “setups”. These people feel like traders, talk like traders, but in tax law terms are almost always investors. This is where most ATO disputes sit.

When the ATO challenges classification, they don’t just disallow one deduction — they can recharacterise everything: deny revenue deductions, push profits back into CGT, reverse loss treatment, and sometimes amend multiple years. That’s why advisers are conservative about calling someone a trader unless the facts are very strong.

Conclusion

For the overwhelming majority of people buying and selling shares — even those trading fairly frequently — brokerage cannot be deducted annually because the activity is classified as investment, not a business. For them, brokerage is locked into the CGT calculation and only “realised” when the shares are sold.