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Tax Return & Investments: How to Declare and What You Need to Know

Many Australians like to invest their money in something that interests them or that they think is worthwhile. The data may contradict past reports where the majority did not invest in stocks and other investments in 2017.

But in the same year, about 37% of adults (equal to 6.9 million) invested in a stock exchange. About 31% of them own shares, while 7% own derivatives. Not only adults participate actively, but also people from the age of 18. In 2012, only 10% of people between the ages of 18 and 24 were interested in investment. After five years, this number has doubled.

Australians tend to invest in investments on the exchange or in investments that take place directly on the exchange. This type of investment beats other ways, including property and cash.

When you have an investment, it is important that you understand how to declare it. This blog provides you with the information you need to declare your investments when filing your tax return.

Is your investment treated as income?

According to the Australian tax office, you must declare all income received for the specific tax year on your tax return. Filing your tax return doesn’t have to be difficult. Most of the income you have is entered in advance. The information comes from financial institutions or your employer.

However, if you have an investment, you often have to enter individual data yourself. These details include your investment income, including interest, capital gains tax, and dividends.

So to answer the question above, yes, your investments are part of your income. Therefore, if you have received income from any of your investments, you must declare it as required by the ATO. All investments, whether you received payment directly or through a trust or partnership distribution, must be listed on your tax return.

tax return australia employee investment stock

What types of investments should you declare?

Some profits from your investments may be included in your income. It means they have to do that on your tax return. The cost of these investments may be deductible, such as interest on the money you borrowed to buy stock.

There are four general categories of investment income you should have on your tax return, which can be found below:

To interest

Any interest earned from your bank accounts, for example through term deposits, is considered investment income. Other types of interest include:

The ones you have earned from other sources, such as through penalties for your investments

The interest on your child’s savings account (note: only accounts that you have opened, are active, or spent the money that was yours)

Interest credited or paid by the government

Foreign sources

If you have received bonuses from your life insurance policy, they are also considered investment income. You may even be entitled to a 30% tax cut on these bonuses.

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Dividends

Shares are a form of dividend. In order to declare the bonus shares, the company from which the shares originate must provide a statement confirming that the shares are a dividend. The company can be anything from a public trade fund to a trust of a business unit or even a publicly traded investment company.

In some cases, there are deductible dividends, which you must also declare on your tax return. In that case, you can receive a postage levy for these dividends. To elaborate further: postage credits are credits that have already been paid out as dividends. If you have super funds, such as in-house super funds, you may use the postage credits to offset part of your taxable income.

Are you a stock trader? According to the ATO, a stock trader is someone who conducts business activities to generate income by buying or selling stock. Taxing stock traders is different from other investors. If you are a stock trader, you may claim your losses as a tax deduction. If you are a regular investor, the deductions will be deducted from your capital gains.

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Managed Investment Trust

Don’t forget to include the income you received from a trust investment product on your tax return. Some examples are:

Money Market

Money management

Trust unit

Mortgage confidence

This type of trust is also seen as investment income.

Capital gains

Capital gains tax can be quite complex to understand. But to recap, the capital gain is the difference between the amount you have for a particular asset b payment and the amount you received for it. There are some situations where you will gain added value for a managed fund (eg, Equity confidence, Growth confidence, or Equity confidence) if it produces a capital gain.

Capital gains are included in your total income and are not treated as separate income. Therefore, they are taxed in the same way.

With regard to the matter, all super funds are required to pay capital gains tax if there is any capital gain from the sale of the asset, such as stock. Profits are currently taxed at 10%, but only if the asset has been part of the taxpayer’s property for more than 12 months. If the profits were made on the sale of the asset, which was held for less than 12 months, it would be taxed at 15%.

which was held for less than 12 months, it would be taxed at 15%.

guide to the declaration of shares and investments

File your tax return

As mentioned above, your tax return for all investments must be part of your regular tax return. The process can be different depending on the type of investment you have.

As an example, let’s talk about your tax on stocks. You must report the capital gains that you made on both purchases and sales during the entire fiscal year. If you’ve earned dividends, they should already be added to your taxable income automatically.

At the end of the fiscal year, you should receive a tax statement from your broker or stock trading platform. This statement contains the total profit that you have earned over the period. If you’re filing your own tax return, include your total profit in the report. In the meantime, if you’ve hired a tax accountant, all you have to do is send in the tax returns and they will sort things out on your behalf.

Your investment income, including interest and dividends, is typically taxed at 15%. This percentage applies when you are in the accrual phase. For example, you contribute to your super fund investments. Any allowable deductions or credits are deducted, such as postage on balances of shares that fall under the dividend settlement system.

Superfunds that are in the retirement stage don’t have to worry about any taxes imposed on the investment returns. Nevertheless, it is important to understand that a transfer balance limit is applied to this income. It limits the number of funds that can be transferred when they are in the accrual phase, until you reach the retirement phase. Currently, the limit is set at $ 1.6 million.

If you have some experience filing your tax return, you know the importance of keeping records. With your investments, make sure you have specific documents with which you can report your investment income. For example, you can claim all tax deductions to which you are entitled.

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