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new investors tax adelaide accountant

How new investors can prevent tax shock


Dec 16, 2021


It has been a boom period for new investors. But accountant Kym Nitschke warns of looming tax implications.

Building an investment portfolio is easier than ever. The surge of micro-investing platforms in the last 18 months have led to an unprecedented number of first-time investors buying into the exciting investment boom.

However, many rookie investors are unaware that trading shares and cryptocurrencies comes with tax issues.

If you’re new to the investment world or using micro-investing platforms, it is important to talk to an experienced accountant as soon as possible. With their advice, you can put a clear strategy in place, understand your obligations and mitigated any risks. And if you’ve had some investment success, you can get prepared for any extra tax you may need to pay.

Here’s a few tax tips for new investors.

Declare all distributions

One of the biggest mistakes new investors make is failing to divulge all distributions from Exchange-Traded Funds or micro-investing platforms. ETFs can offer the chance to reinvest distributions rather than a payout through buying more shares or units. This is often done automatically with these new platforms, giving you very little time to register that a taxable trade has just happened.

Tax must always be paid on dividends and distributions and not only on the money earned through selling shares. This means that even if you’ve received no cash into your bank account, you may need to disclose this distribution or reinvestment in your return.

Separate sold shares from other types of income

Once shares are sold, this will need to be included as a capital gain or loss on your tax return. These gains or losses can’t be used to reduce other types of income like a salary; capital losses can only be offset against capital gains.

‘Paper losses’, which is when the value drops on shares you still own, can’t be claimed as a loss either; only losses on shares sold can be used to offset any capital gains.

Keep meticulous records

It’s crucial to keep clear and complete records. Ask yourself, has all of my financial data been logged and managed correctly?

– Have you recorded the dates of any purchases or reinvestment and their value?

– If you’ve sold any shares, what are the dates of sale and their sale prices? This includes partially paid sales.

– Information about payments that are non-assessable

– Commission or brokerage costs with any sale, for both buying and selling

– Have there been any capital losses? These could potentially be used to offset losses against capital gains in the future

– Do you have your Standard Distribution Statements?

– The details stock market events such as mergers, constellations and bonus share issues

The ATO is on the lookout for inaccurate tax returns, especially regarding cryptocurrencies, and is acutely aware that new investors have made mistakes in the past with dividends and distributions.

Get tax advice as soon as possible

Whether deliberate or not, errors or omissions on tax returns will need to be rectified. This could be costly, and penalties may apply.

Now is the time to get advice from an experienced accountant.

Contact us today to talk about your needs.

The information contained on this article is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.

Taxation, legal and other matters referred to on this website are of a general nature only and are based on Nitschke Nancarrow’s interpretation of laws existing at the time and should not be relied upon in place of appropriate professional advice. Those laws may change from time to time.

Nitschke Nancarrow specialises in accounting, tax and financial advice for superannuation. Contact us now for a no obligations discussion about your needs.

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