E*TRADE's deal with Praemium to provide a free tax reporting service to retail investors is one step closer to being launched.

The Tax Tools Standard Service provides a comprehensive report at the end of each financial year, detailing the investor's tax positions for their E*TRADE activities.

The system compiles the investor's contract notes, dividend statements and other equity-related documentation throughout the year into a single document.

The new service will be made available from end July.

Stuart Sayers, managing director of E*TRADE Australia, said two additional subscription tax reporting services with extra features for proactive traders will be made available later this year.

The service is available to all active retail E*TRADE customers residing in Australia and have traded in equities, warrants, options or exchange traded funds, or have held a position in these products during the financial year.

Earlier this year Praemium signed a deal with E*Trade to provide the tax reporting solution to all 350,000 of the latter's Australian clients.

In turn, Praemium will milk a "significant fee" from the base service with growth potential depending on usage patterns, the ASX-listed firm said.

Under the terms of the arrangement, Praemium will not provide these services to any other online brokerage business for a period of at least 2 years from launch. The detailed terms of the arrangement remain confidential.

Arthur Naoumidis, group chief executive of Praemium said the deal was a positive sign that companies were still committed to offering online investment solutions in spite of the market turmoil.