Keeping on top of the paperwork, understanding and taking advantage of tax and franking credit strategies and making sure that you plan for when you are no longer around are the next steps in administering your investment portfolio.

Investment income explained

  • If you own any investments you usually receive some sort of income from those investments. Investors have to declare investment income each year whether they receive it physically or not.
  • 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, or capital gains from the sale of assets.
  • 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%.

Investment income

  • Find out from the ATO about the investment income you must declare.
  • Specifically relating to share assets, if you meet certain ATO guidelines you can choose to classify yourself as a share trader, because you are ‘carrying on a business of share trading’.
  • Share traders pay tax on all income, including the sale of shares. To offset this income, they can claim brokerage and purchases of shares as deductible expenses.
  • They are unable to access the 50% capital gains discount if they do happen to hold shares for longer than 12 months.
  • The ATO has detailed information on the tax treatment of shares here.

Investment income deductions

  • You can claim a deduction for expenses incurred in earning investment income.  Find out more from the ATO about Interest, dividend and rental property investment income deductions.

Capital gains tax