Tax Return:: Reporting Profits from Your Shares

Hello, this is your tax and super specialist, P&C Tax Professionals.

As most people would already know, capital gains tax (CGT) applies to share investments, units in a managed fund or other unit trusts. Since calculating your capital gains or losses from shares is one of the key areas where a lot of people tend to make mistakes, it is crucial that we become aware of some of the basics of CGT.

<When does CGT apply to shares/units?>

If you are an investor, capital gains tax (CGT) normally applies to the shares and units you have acquired when:

> you dispose of them

> another CGT event occurs to them (to check the full list of other CGT events that may arise, please refer to the ATO link: https://www.ato.gov.au/individuals/capital-gains-tax/shares-and-similar-investments/when-cgt-applies-to-shares-and-units/)

This means that if you sell your shares or have another CGT event, you must declare the corresponding capital gain or loss on your annual income tax return.

<Record-keeping for shares>

If you have sold the shares you were holding in companies or units in managed funds, you would be able to gain access to the records you are required to keep for tax purposes from the company, the trading platform you are using, your fund manager or your stockbroker.

Records that are needed for your tax return include:

> the purchase/sale dates of each share

> the purchase/sale price of each share

> any commissions or fees that were paid to brokers or trading platforms upon the purchase or disposal of your shares/units

> details of important events (e.g., share splits, share consolidations, returns of capital, takeovers, mergers, demergers and bonus share issues)

<CGT discount>

The capital gains tax discount basically means that when you sell or dispose of a CGT asset, you can reduce the amount of your capital gains by half (50%). However, in order to take advantage of such a benefit, you must satisfy all of the following conditions:

1. You have owned the CGT asset for at least 12 months

- In other words, you must have owned the shares/units for at least 12 months before the ‘CGT event’ occurs.

- The CGT event refers to the point at which you either make a capital gain or loss on the assets. Here, the day of acquisition and the day the CGT event occurs are excluded when we are calculating the number of months you have owned the CGT asset for.

2. You are an Australian resident for tax purposes

- The full CGT discount (50%) is not available to foreign and temporary residents for assets which have been acquired after 8th May 2012.

- You may be able to apply the CGT discount to a portion of your capital gain if the following has happened:

· The acquisition date of the asset was on or before 8th May 2012

· You had a period of Australian residency after 8th May 2012.

- CGT events that happened on or before 8th May 2012 will remain unaffected.

<What documents do you need to give to your accountants?>

In order for us to correctly calculate your capital gain/loss amount for the shares you have disposed of, you must provide the following documents to P&C Tax:

> An excel file with details of your buy/sell transactions. We must be able to see:

- Purchase date of the shares

- Disposal date of the shares

- Unit price (i.e., the price per share)

- Quantity of shares purchased

- Quantity of shares sold

- Any brokerage fees that you incurred upon the purchase and sale of the shares

Note: When you give us your share transaction details, it is important to check that the quantity of shares purchased is equal to or greater than the quantity of shares sold for each individual share. If the quantity of shares purchased is less than the quantity of shares sold, you may have to look back at your previous years’ share transaction statements and send them through to us as well.

To that end, if you need help with your tax return or have a burning question you want to ask us, please reach out to us via our official Facebook Page (P&C Tax Professionals – Australia) or send your enquiries to our email address at pnctax@naver.com.

Thank you and bye for now!