Trading fees, worked through
Shares cost money to buy, hold and sell: brokerage on each trade, sometimes a monthly or inactivity fee, foreign exchange fees on overseas shares, and tax. Fees can be a big share of a small trade, so the size of your trades matters as much as the rate.
General information, not financial advice. The fee schedule on this page is invented to show the arithmetic. It is not any provider’s pricing and not a guide to market rates. Moneysmart’s costs of buying and selling shares is the official overview.
Every platform publishes its own fees, and they change, so this page does not quote any. What does not change is how the kinds of fee behave. A flat fee is heavy on a small trade and light on a large one. A percentage fee grows with the trade. A monthly fee costs the same whether your account holds a little or a lot. Once you can see those shapes, any provider’s schedule becomes easier to read.
The kinds of fee
Moneysmart lists four costs to check before you start.
- Brokerage. What the broker charges each time you buy or sell. Moneysmart says most online brokers charge a flat fee for smaller trades and switch to a percentage of the trade for larger amounts; a few charge the same flat fee whatever the size; full-service brokers usually charge a percentage of each trade.
- Platform fees. Some online brokers charge a monthly fee or an inactivity fee.
- Foreign exchange fees. These may apply when you buy shares listed overseas.
- Tax. You may pay tax on dividends and on a capital gain when you sell for more than you paid.
Other products bring other costs. Fractional share trading can involve different pricing from whole shares, FX fees on international shares, and forced selling costs if you want to move platforms. CFD trading often incurs commissions, spreads and overnight financing fees, which Moneysmart says can be high.
A made-up schedule
The Example Broker’s fees
Brokerage of $10 a trade for trades up to $10,000, and 0.1% of the whole trade for anything larger. Currency conversion of 0.5% of the amount converted. An inactivity fee of $5 a month. No real provider is described here; the shape follows the common pattern Moneysmart describes.
Brokerage against the size of the trade
The table applies the invented brokerage to six trade sizes. A “round trip” is buying and later selling the same value, which means paying brokerage twice.
| Trade value | Brokerage each way | Share, one way | Round trip | Share, round trip |
|---|---|---|---|---|
| $500 | $10.00 | 2.00% | $20.00 | 4.00% |
| $1,000 | $10.00 | 1.00% | $20.00 | 2.00% |
| $2,500 | $10.00 | 0.40% | $20.00 | 0.80% |
| $5,000 | $10.00 | 0.20% | $20.00 | 0.40% |
| $10,000 | $10.00 | 0.10% | $20.00 | 0.20% |
| $20,000 | $20.00 | 0.10% | $40.00 | 0.20% |
The same $10 is 2% of a $500 trade and a tenth of one per cent of a $10,000 trade. On the smallest trade, a holding bought and sold at the same value would have cost $20, or 4% of the money, in brokerage alone. That is what Moneysmart means by fees being a big share of a small trade.
Buying overseas shares
Now suppose a $2,000 purchase of shares listed overseas, under the same invented schedule, and a later sale at the same value. Moneysmart notes foreign exchange fees may apply when you buy shares listed overseas.
| Step | Cost |
|---|---|
| Convert $2,000 into the foreign currency, at 0.5% | $10.00 |
| Brokerage on the purchase | $10.00 |
| Cost of getting in | $20.00 |
| Brokerage on the sale | $10.00 |
| Convert $2,000 back into Australian dollars, at 0.5% | $10.00 |
| Round trip, 2% of the money | $40.00 |
In this schedule, the conversion fee is charged on the amount converted, each way, so it stays the same share of the trade at every size. The brokerage does not.
Fees that arrive whether you trade or not
The invented $5 monthly inactivity fee comes to $60 over a year with no trades. On an account holding $1,500, that is 4% of the balance in a year; on $15,000 it is 0.4%. Moneysmart mentions monthly and inactivity fees among the costs some online brokers charge, so they are worth finding in a schedule before you open an account.
Where to find a provider’s real fees
Look in the provider’s own documents. For CFDs, Moneysmart points to the product disclosure statement and the terms and conditions, because each issuer sets its own. For fractional trading, it says each provider may have a slightly different fee structure, and to read the disclosure documents before you invest. After each trade, the confirmation shows the fees you were charged.
Moneysmart’s questions for fractional trading travel well to any platform: do I know what fees I’ll be paying, are they reasonable for how much I’ll be investing, and how do they compare with other providers or brokers?
Fees and tax
Brokerage does not vanish at tax time. For an investor, the ATO counts a broker’s fees among the incidental costs that form part of an asset’s cost base, and transaction costs of buying or selling shares are taken into account when the gain or loss is worked out on sale. For someone the ATO treats as carrying on a business of share trading, transaction costs are deductible in the year they are incurred instead. Page 7 works through a sale, brokerage included.
Investment platforms and their fees
Wrap accounts and master trusts, which Moneysmart calls investment platforms, bundle reporting, administration and many investment options. Moneysmart notes that there is a cost to that convenience, and that layers of fees can erode returns for smaller investment amounts.