Share investments and your tax return
Using your money to try to make more money or gain assets is called investing. Profits or returns you make on your investments usually become part of your income for tax purposes. Many expenses relating to your investment are tax deductible – for example, interest on money you borrow to buy shares.
Ways to Invest
You can obtain shares:
• by buying them
• by inheriting them
• by being given them (receiving them as a gift)
• by them being transferred to you as the result of a marriage or relationship breakdown
• through an employee share scheme
• through a conversion of notes to shares
• through demutualisation of an insurance company with which you have a policy
• through bonus share schemes of companies in which you hold shares
• through dividend reinvestment plans of companies in which you hold shares
• through mergers, takeovers and demergers of companies in which you hold shares.
When you own shares, the following activities will create tax obligations for you:
• receiving dividends
• participating in a dividend reinvestment plan
• participating in a bonus share scheme
• receiving a call payment on a bonus share scheme
• receiving non-assessable payments
• being involved in company actions such as mergers, takeovers and demergers.
Disposing of shares
You can dispose of your shares:
• by selling them
• by giving them away
• by transferring them to a spouse as the result of a breakdown in your marriage or relationship
• through share buy-backs
• through mergers, takeovers and demergers
• because the company you hold them in goes into liquidation.
• If you receive a retail premium for rights or entitlements that you didn’t take up, you need to declare these premiums as income on your tax return for the year.
Employee share schemes
Some companies encourage employees to participate in employee share schemes by offering them discounted shares or rights (including options) to acquire shares. The amount of the discount is treated as assessable income for tax purposes. You acquire shares or rights under an employee share scheme if the acquisition is in relation to your employment or any services you provide.
The discount you receive is worked out as the market value of the shares or rights less any money or other consideration you provided to acquire them. It is calculated at the date you acquired the shares or rights.
If you are submitting your personal income tax return yourself it must be lodged with the ATO by 31 October each year. However, if your return is prepared and lodged by a registered tax agent such as The Quinn Group then the deadline is significantly extended. Our dedicated team of experienced Tax Agents and Tax Accountants are able to assist you with all your tax queries and lodgement of your tax return. Contact us now by submitting an online enquiry form or call 1300 QUINNS or on +61 2 9223 9166 and arrange a meeting today.