When you invest, you usually receive income from those investments. Income can be in the form of:
- interest from cash or term deposits
- dividends from shares
- distributions from partnership, trusts or managed funds
- rent from property
- capital gains from the sale of assets
Investors have to declare investment income each year whether they receive it physically or not. Dividend income is declared in the year in which it is received and any dividend income that is automatically re-invested via a dividend reinvestment plan still has to be included as income. Most trust income is paid after the end of the financial year but, it has to be declared in the financial year to which it relates.
Investors have to pay tax on the ‘capital gain’ they make when they sell an asset – the difference between what it cost to own the asset and what was received when the asset was sold. Investors who own their assets for more than 12 months are entitled to reduce their capital gain by the capital gain discount of 50%.