Thread: Is Day Trading on the stock market gambling ??

In Australia we pay capital gains tax on profits from day trading.
This tax is equivalent to our level on income tax that we pay.
The problem is that there is no definition of gambling in the Income Tax Act.

There is, however a clause which states that no tax is payable on gambling profits.

The definition of gambling in any dictionary is "a monetary payment based on the result of
any future uncertain event"

Wouldnt this apply to watching the stock price of a company, buying shares in that company and selling
them a few minutes/hours later for a profit/loss.

The name of the case escapes me, but in 1948, it was held by a Judge that it was not the responsibility
of courts to define "gambling" and that it was the responsibility of the people...

Well, if theres no definition in the appropriate legislation, why do we have to pay tax on day trading profits...

We also have to pay tax on currency trading profits etc etc....

I feel that sitting in front of a computor, day trading with the click of a mouse is gambling, and tax should
not be paid.....

BUT of course think of the billions in tax our Government would lose....

I wonder if anyone has the balls to take this up in the appropriate court ???

I thought this might be too hard...!!!
Aren't there any accountants out there....???

maybe there should be a minimum time a stock can be held, like 10 days or something

if you sell before then your taxed heavily, sorta like selling your 401k before retirement you get a 10% penalty
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The crux of my argument is "what is gambling"

You dont have to pay tax on winnings from gambling, and day trading in my opinion,
is gambling, because of the risk involved in holding a stock for a few minutes...hours, and
then selling either at a loss because you sell quickly, because the market goes down, and
youve reached your stop loss line...or at a profit, because you fluked the upward trend...
Its gambling, everyone knows its gambling, but, like the Aussie mugs we are, we still
pay tax on it.....

In my opinion, stock trading is gambling. But society has tended to legitimize it while decrying slot machines. Risk is risk, isn't it? Founding a business is gambling as well. I've done several times. Can't help you with tax law. I'm not competent in that field.

Originally Posted by fmw

In my opinion, stock trading is gambling. But society has tended to legitimize it while decrying slot machines. Risk is risk, isn't it? Founding a business is gambling as well. I've done several times. Can't help you with tax law. I'm not competent in that field.

You think it's gambling because you don't understand it. The stock market is a market for capital. It dictates where and how money is invested in the economy and its gains and loses occur accordingly. It's a game of research, patience, and guts. You don't play the odds, you diversify away your risk and make informed decisions about the macro economic climate. When you start a business and it fails, it doesn't fail because of poor luck, it fails because it was a poorly run business or was a poorly planned business; it's not because you bet a sum of money against established odds and lost.

Originally Posted by IgnoranceisBliss

You think it's gambling because you don't understand it. The stock market is a market for capital. It dictates where and how money is invested in the economy and its gains and loses occur accordingly. It's a game of research, patience, and guts. You don't play the odds, you diversify away your risk and make informed decisions about the macro economic climate. When you start a business and it fails, it doesn't fail because of poor luck, it fails because it was a poorly run business or was a poorly planned business; it's not because you bet a sum of money against established odds and lost.

Normal, long-term investing, maybe. But not day-trading. Day-trading is attempting to anticipate the short-term movement of a stock and ride it. That's closer to gambling, because those short-term movements are far more unpredictable -- at least, if you want to anticipate them far enough ahead to turn a profit on the movement. As a rule, day traders are unconcerned with a stock's underlying fundamentals: they're just trying to surf the wave.

A more interesting question, to me, is why Australia exempts gambling profits from taxation.

The reason gambling profits are exempt is simple.
They cant/wont allow gambling losses to be deductions when assessing taxable income.
The only punter who was taxed as a business/gambler was the late professional gambler,
Don Scott, who claimed huge overheads when stating he was a professional gambler in his tax returns, as
he employed staff, and travelled frequently from Sydney to Melbourne by plane to back horses personally
at the track, as he secured better prices...he later stopped travelling as the costs were too heavy.

Day trading profits have been taxed in Australia for years.

My feeling is that a well researched case would have an excellent chance of success, particularly with the
current global financial crisis adding to the risk factor...but then I cant afford legal action...

Maybe someone else can...

Originally Posted by IgnoranceisBliss

You think it's gambling because you don't understand it. The stock market is a market for capital. It dictates where and how money is invested in the economy and its gains and loses occur accordingly. It's a game of research, patience, and guts. You don't play the odds, you diversify away your risk and make informed decisions about the macro economic climate. When you start a business and it fails, it doesn't fail because of poor luck, it fails because it was a poorly run business or was a poorly planned business; it's not because you bet a sum of money against established odds and lost.

Just like poker.