Sharesight Portfolio Tracker & Tax Reporting
- Free for investors with less than 10 holdings
- Comprehensive dividend and tax reporting
- Works alongside your trading platform
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It's tax time again which means a couple of things if you trade shares – you might need to pay capital gains tax and you may be able to claim deductions.
Depending on how often you trade shares and how the Australian Tax Office classifies you, you could be eligible to claim tax benefits such as franking credit rebates and deductions on trading-related costs.
Whether you're a trader or investor, this guide explains how much tax you need pay and whether you're eligible for benefits.
Yes, you need to pay tax on any profits that you've made from share trading during the year – this is called capital gains tax (CGT). Any profits that you make are added to your total taxable income for the year. So, if you're paid a salary of $49,0000 and you make $1,000 from trading shares – your total taxable income is $50,000.
Dividends are also included in your total taxable income – in fact, the ATO will already have a record of the dividends you've earned throughout the year and will have automatically added this to your income.
Profits aren't taxable until you actually sell your shares. If you sell before June 30, your profits will be included as your taxable income this financial year and if you sell after June 30, it's added to the following tax return.
Note: If you're classified as a 'share trader' for business purposes, the tax implications are a little different because you can claim any losses accrued from trading shares as a tax deduction (see below).
Any profits you make from share trading is added to your total taxable income. The tax you pay on your shares will depend on what tax bracket you fit into based on this total income.
If you're a casual investor, your profits are calculated as total profits minus total losses. So, if you bought 100 Afterpay (APT) shares at $10 per share and sold them all at $20, your taxable profit is $1000. But say a month later you bought 100 APT at $40 and sold them at $30, your total taxable profit (if you made no other trades) would be $0.
Dividends are also included. So say you bought CBA shares this financial year and decided not to sell. Then CBA paid a dividend and you made $100 in dividend profits. Assuming the first scenario where you sold APT at $10, your total taxable income is $1100.
There are also tax benefits to long-term investing over short-term investing. If you hold shares for longer than 12 months before selling, you're only taxed on 50% of the profits you make from those shares. If you buy and sell within the same financial year, your total profits are included as taxable income.
Your tax return for shares is included as part of your regular tax return after June 30.
When you lodge your annual tax return, you'll need to report any capital gains you've made on buying and selling shares throughout the financial year. Any dividends you earn will have already been added to your taxable income by the ATO.
At the end of the financial year, your broker or online share trading platform will send you a tax statement with the total profits you've earned. If you're lodging your own tax return, you'll need to include this number in your report. If you use a tax accountant, send the tax statements to them to work out.
If you use multiple brokers, it's a good idea to use a portfolio tracker to track total capital gains across all platforms.
If you use a robo-advice or micro-investment platform such as Raiz Invest or Spaceship, you are taxed on any profits you make from your portfolio.
Like regular share trading, your profits (minus losses) are added to your total taxable income. Your platform will typically send a tax statement each year. If you've been given dividend payments, these are automatically filed with the ATO.
Franking credits can be used by Australian shareholders as a tax break on share dividend payments. Franking credits stop dividend payments from being taxed twice and can be claimed as a tax refund by shareholders depending on the shareholder’s marginal tax rate.
You can read more about franking credits in our comprehensive guide.
You need to pay capital gains tax (profits minus losses) on US shares in the same way you do Australian shares, however currency conversions add another element to the equation.
When buying and selling US stocks, the capital gains is calculated immediately at the moment the trade occurs, not when you convert your currency back into AUD from USD.
The CGT calculation is made by converting USD to an AUD amount at the time of the transaction.
So say you purchased US$1,000 of Tesla shares, then sold those shares for US$1,000 a few months later - your capital gains in USD may appear to be $0, but in AUD amounts you may have either profited or lost income.
There are different tax implications depending on how often you trade shares and whether you can be classified a 'share trader' for business purposes.
The ATO defines a business for tax purposes as any money making venture where you’re not an employee. Share trading fits this definition; however, there are no black and white rules about who is a share trader and who isn’t. The ATO gives some guidelines but ultimately makes decisions on a case-by-case basis.
The ATO assesses the nature of your trading activities and your business or trading plan when deciding. This information includes how often you trade, why you make certain trade decisions and an assessment of potential investments.
If you can satisfy the ATO’s definition of being a share trader, you can claim any gains from the share market as your personal income and any losses as a tax deduction. If you’re a regular investor, your losses are deducted from your capital gains only.
Casual investors can't claim on any losses and need to pay attention to Capital Gains Tax (CGT) and the timing of the sale of shares. Any profits made after June 30 won’t be taxed until the following year.
Tax implications are different for traders and investors. The ATO will classify you as a trader if you can answer yes to the following:
You have a share trading plan if you can answer yes to the following:
We update our data regularly, but information can change between updates. Confirm details with the provider you're interested in before making a decision.
Important: Share trading can be financially risky and the value of your investment can go down as well as up. “Standard brokerage” fee is the cost to trade $1,000 or less of ASX-listed shares and ETFs without any qualifications or special eligibility. If ASX shares aren’t available, the fee shown is for US shares. Where both CHESS sponsored and custodian shares are offered, we display the cheapest option.
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