The tax office differentiates between an investor and a trader.

In essence a trader holds for a short period of time and sells for a capital gain. An investor holds on to shares, usually receiving dividends. The ATO is specific about who is an investor and who is a trader. Check with a professional to see if you can qualify for tax treatment as a trader.

The ATO provides a lot of info for share investors in their booklets, somewhat less is provided for traders. Rather than merely repeat the contents of the ATO investor booklets, which is all I would be doing anyway if I wrote about it here, I'll leave it to the reader to read the ATO booklets. What follows is only a little bit of info on traders, since the ATO doesn't have booklets about that.

For stock traders, your profits are regarded as taxable income. You will pay tax on your earnings at your highest marginal tax rate. Your income is regarded in the same manner as anyone who buys and sells goods for a living, taxable profit = sales - expenses. You should check with your accountant exactly which expenses are claimable, your brokerage, duty paid and the cost of your purchases will be deductible, as will most software and books you buy related to the topic.

You can divide your portfolio into a trading section and an investment section if you want to, but try to keep them seperate or else you will pay income tax on all profits, rather than CGT, which is half the rate now if the investment is held for more than 12 months.

You should provide your accountant with everything required to prepare a trading profit and loss statement, namely:

It is best for you, and for your accountant if you prepare this information yourself. You accountant has much better things to do than go through a hundred contract notes, and you will find it easier to keep track of things if you maintain such "books" throughout the year, just as a well run business is kept up-to-date, rather than giving their accountant a garbage bag containing five thousand small receipts. A number of portfolio management software packages and accounting packages handle this, and can produce statements at a keypress.

Why would you want to be taxed as a trader?  Well the number one reason is because it would enable you to claim tax deductions on losses.  Given that you miss out on the capital gains tax discount on gains, it is questionable whether a person making much money would want to be taxed as a trader.  Most enquiries about being taxed as a trader in the investment newsgroups seem to come from people who have made a significant loss and want to be able to claim a tax deduction rather than carry forward a loss for many years to offset against capital gains which may never come.

More taxation information is covered in the Tax FAQ.