If you are in investment business any profit or return you make is your income for tax purposes, whether you have investments in Australia or overseas. It is a good idea to understand how tax work in relation to your investment. Understanding tax implication ensure you don’t pay more tax than you need to. Expenses related to your investment are tax deductible for example interest on money you borrow to buy shares.
Investing in Bank accounts– Your money in back account is not assessable but Interest from bank and other financial institution is your assessable income. You can claim ta tax deduction for expenses incurred in earning interest income or income from friendly society binds. Banks and other investment bodies report interest income to ATO and ATO match this information with the amount taxpayer report in their tax returns.
Investing in Shares– Dividends are your income for tax purposes. You can claim deductions for management fees and interest on money you borrow to buy shares. It is very important to understand the tax implications when obtaining shares. You can only declare your dividends and can claim expenses is you actually obtained them. That means your name must be on purchase order. If you hold a policy in an insurance company that demutualises, you may be subject to capital gains tax either at the time of the demutualisation or when you sell your shares. If you didn’t pay anything for your shares, you should record the market value at the time you obtain them.
Brokerage fees and stamp duty are cost base to work out your capital gain or capital loss when you dispose them. In some circumstances, you may be considered the owner of shares even if they were purchased in your child’s name.
Management Investment Trust– Any income received from cash management trust, money market trust, mortgage trust, unit trust and managed fund must be declared on your tax return. Tax deductions for managed investment trusts can include management fees, specialist journals and interest on money you borrowed to invest.
Foreign Investments– A taxpayer Australian resident and holding foreign assets must declare any capital gain or losses he makes from foreign assets.
You must keep all your investment related records for up to five years. If you invest in a dodgy tax scheme, you are risking your money and could also have to pay any missing tax (with interest and penalties) long after the promoter and your money are gone.
For further assistance, please contact Taxplanners on 1300 000 TAX (1300 000 829), 03 9600 0143 (10 Lines).
You can also visit our office for assistance –
Melbourne CBD – Suite 411-413, Level 4, 343 Little Collins Street, Melbourne
Werribee Office – 88 Watton Street, Werribee, Contact – 03 901 MY TAX (03 9016 9829)