Tax, dividends and investing

mrthong · 7 August 2011

hi, im fairly new to this. i currently have 1k transfering to my commsec account. ive been interested in the share market for quite some time, for the last 6-8 months ive been doing on and off research on the companies im planning to invest in. i turned 18 last week, so now im able to investing. But the only thing im unsure of is tax the ato website is useless. im just wondering if i need to pay tax for shares and dividends? does 100% franked means i dont need to worry about paying tax?

background info about myself:
im a student, i dont have a job. i have youth allowance.

danbradster · 7 August 2011

mrthong said:
hi, im fairly new to this. i currently have 1k transfering to my commsec account. ive been interested in the share market for quite some time, for the last 6-8 months ive been doing on and off research on the companies im planning to invest in. i turned 18 last week, so now im able to investing. But the only thing im unsure of is tax the ato website is useless. im just wondering if i need to pay tax for shares and dividends? does 100% franked means i dont need to worry about paying tax?

background info about myself:
im a student, i dont have a job. i have youth allowance.

Fully franked means the tax is pre-payed at 30%. If your tax rate is 45% you'll owe some more, if your tax rate is 20% you'll be owed a refund.

You are taxed on any capital gain when you sell the shares. The tax is half if you've held the share for over a year.

Tyler Durden · 8 August 2011

Don't forget to declare to Centrelink a change in circumstances!

mrthong · 8 August 2011

danbradster said:
Fully franked means the tax is pre-payed at 30%. If your tax rate is 45% you'll owe some more, if your tax rate is 20% you'll be owed a refund.

You are taxed on any capital gain when you sell the shares. The tax is half if you've held the share for over a year.

from what i learnt ATO does not refund anyone. thanks. i dont have an income, i dont earn 6.6k + p/a so that means im eligible to receive every tax dollar i pay, back at the end of the financial year? and if i do, what am i suppose to tell/show my accountant?

ROE · 8 August 2011

mrthong said:
from what i learnt ATO does not refund anyone. thanks. i dont have an income, i dont earn 6.6k + p/a so that means im eligible to receive every tax dollar i pay, back at the end of the financial year? and if i do, what am i suppose to tell/show my accountant?

you effectively on a 0% tax rate, if you lodge a tax return you should be able to claim
30% ...30% is not your tax but the company tax paid on your behalf ...

but check with ATO or accountant to be sure...

danbradster · 8 August 2011

ROE said:
you effectively on a 0% tax rate, if you lodge a tax return you should be able to claim
30% ...30% is not your tax but the company tax paid on your behalf ...

but check with ATO or accountant to be sure...

I'm quite sure they would refund the money. Like ROE said, you just have to submit a tax return for $0 tax.

Julia · 8 August 2011

mrthong said:
from what i learnt ATO does not refund anyone. thanks. i dont have an income, i dont earn 6.6k + p/a so that means im eligible to receive every tax dollar i pay, back at the end of the financial year? and if i do, what am i suppose to tell/show my accountant?

I'm a bit curious about why you'd be employing an accountant if you have no income, are planning to invest just $1000 in shares, are on Youth Allowance, and obviously will not be paying any tax.

And the ATO does indeed refund anyone whose tax return demonstrates they are owed this, even if they have no tax owing. If you have franking credits, you will receive a cheque from the ATO.

mrthong · 8 August 2011

ROE said:
you effectively on a 0% tax rate, if you lodge a tax return you should be able to claim
30% ...30% is not your tax but the company tax paid on your behalf ...

but check with ATO or accountant to be sure...

thanks, it makes sense to me now.

I'm quite sure they would refund the money. Like ROE said, you just have to submit a tax return for $0 tax.

I'm a bit curious about why you'd be employing an accountant if you have no income, are planning to invest just $1000 in shares, are on Youth Allowance, and obviously will not be paying any tax.

And the ATO does indeed refund anyone whose tax return demonstrates they are owed this, even if they have no tax owing. If you have franking credits, you will receive a cheque from the ATO.

i thought i had to pay tax, until ROE clarified it. My accounting teacher told us (the class) that ATO does not do any refunds. i guess he's wrong.

thanks for the help/clarification guys.

HarryH · 21 August 2011

mrthong said:
thanks, it makes sense to me now.

i thought i had to pay tax, until ROE clarified it. My accounting teacher told us (the class) that ATO does not do any refunds. i guess he's wrong.

thanks for the help/clarification guys.

Tell your teacher that he obviously doesn't know what tax offsets are. How the hell is he an accounting teacher?

investorpaul · 17 October 2011

To save starting a new thread for one question, ill just post here.

Last yr ORG announced a rights issue and instead of taking up the option to acquire shares I sold the rights on market for approx $1,000.

Does anyone know the tax implications of this seeing as I didnt pay anything for the rights and those that exercised them would not have paid a capital gain (unless they later sold the shares).

Thanks in advance

investorpaul · 17 October 2011

investorpaul said:
To save starting a new thread for one question, ill just post here.

Last yr ORG announced a rights issue and instead of taking up the option to acquire shares I sold the rights on market for approx $1,000.

Does anyone know the tax implications of this seeing as I didnt pay anything for the rights and those that exercised them would not have paid a capital gain (unless they later sold the shares).

Thanks in advance

I ended up finding the answer and just so others know:

Prior to 2010 there was no income or CGT to be paid on the sale of a renounceable right, however there was a ruling between the ATO and an individual in relation to a 2008 transaction that said tax must be paid.

Kryzz · 22 July 2013

I'm totally lost guys when trying to work out what to put in my tax return this year! The limited reporting on Interactive Brokers doesn't make things easy either.

Can anyone throw me a bone here, working example: I received a gross dividend of $176.40 from DOW (Downer), the net amount is $168.46 (taxed $7.94). This dividend was 70% franked:

http://www.asx.com.au/asx/research/companyInfo.do?by=asxCode&allinfo=&asxCode=dow

So I've completed etax as the following screenshot, does this look right? (The $117.92 being 70% of the net dividend):

Thanks!

craft · 22 July 2013

Kryzz said:
I'm totally lost guys when trying to work out what to put in my tax return this year! The limited reporting on Interactive Brokers doesn't make things easy either.

Can anyone throw me a bone here, working example: I received a gross dividend of $176.40 from DOW (Downer), the net amount is $168.46 (taxed $7.94). This dividend was 70% franked:

http://www.asx.com.au/asx/research/companyInfo.do?by=asxCode&allinfo=&asxCode=dow

So I've completed etax as the following screenshot, does this look right? (The $117.92 being 70% of the net dividend):

Thanks!

Go to IB Account Management : Tax : Tax Forms: and print out the Income Transaction Taxable form for fiscal year ending 2013.

It should show amount received $176.40; Unfranked amount $52.92; Franked amount $123.48 and Tax Credit amount (franking credits in e-tax) $52.92.

p.s I don’t think the $7.94 is TFN withheld – looks more like an internal IB accrual which got reversed when you were paid.

Kryzz · 22 July 2013

craft said:
Go to IB Account Management : Tax : Tax Forms: and print out the Income Transaction Taxable form for fiscal year ending 2013.

It should show amount received $176.40; Unfranked amount $52.92; Franked amount $123.48 and Tax Credit amount (franking credits in e-tax) $52.92.

p.s I don’t think the $7.94 is TFN withheld – looks more like an internal IB accrual which got reversed when you were paid.

Thanks Craft, was not aware of this report, very handy indeed. Not to suss out what the tax witheld component is!

blue0810 · 22 July 2013

Kryzz said:
Thanks Craft, was not aware of this report, very handy indeed. Not to suss out what the tax witheld component is!

Download your fiscal year activity statement and check "Withholding Tax"
for details .

Sharkman · 22 July 2013

be warned that the IB reporting as far as dividends & franking credits are concerned isn't perfect - i and others have found inaccuracies in our statements as described here

https://www.aussiestockforums.com/forums/showthread.php?t=10838&page=49

i'd suggest manually keeping records in excel until they get that fixed. even after they fix it i'm probably still going to keep track of everything in my own excel sheet anyway and crosscheck the two at tax time just to be on the safe side. the ATO/govt are desperate for tax dollars these days and will make a nuisance of themselves if you get anything wrong - last year they hounded me for $60 in underpaid tax from FY2009... they probably spent more than that in international phone calls (i'm living in singapore now - and a big reason i moved was to get away from the aust tax system!) plus their staff's time in order to recover that $60

Sergio · 5 August 2013

Tax question from newbie =]

Good Day guys,

i got a case...

i start share trading in 2011-2012 FY and lost about 6k without receiving any dividend.
my tax adviser who did my tax return said that i dont have to declare my loss.

then in 2012-2013 FY (current) i lost another 1k and receive some dividend, total dividend received does not reach 6k with combination of fully franked and non franked dividend.

after 2 straight loss years, i very confident that i will catch up some of my loss in this period =]

my question is...
should i declare my loss in 2011-2012 FY? how about in 2012-2013 period?
i dont have ABN but i have TFN. i am a full time student with a part time job.

the things that i know is: my loss from stock exchange will only deduct my gain from stock exchange too..so how about my dividend? will it calculated/added towards my primary income as part timer?

thanks for reading =]

Regards
Sergio

burglar · 5 August 2013

Re: tax question from newbie =]

Sergio said:
... the things that i know is: my loss from stock exchange will only deduct my gain from stock exchange too ...

Your loss is a "Capital Gains event" not a "stock exchange event"
As such, your Capital Losses of any kind can accumulate until offset against Capital Gains of any kind.

If you add properties to the mix, it can become complex.

I disagree with your tax adviser.
It doesn't hurt to declare your losses as you go.
It may avert a tax review, or a misunderstanding.

Learn more about Capital Gains Tax.
It's your money.

Hope this helps.

Zedd · 5 August 2013

Re: tax question from newbie =]

Standard disclaimer: Not a financial or tax adviser. You need to speak to someone about this in more detail, especially with regards to your specific situation...

Dividends are considered normal income, along with salaries and wages, so you need to include them in your return and you need to pay tax on them. The tax return will ask for franked/non-franked amounts and given your situation I'd say you'll get some of the franking credits back in your return, rather than having to pay extra tax on your dividends.

Profits made through the sale of investments though are considered capital gains and are taxed differently. You can offset capital losses against capital gains to minimise the CGT owed but you cannot use losses to offset normal income.

I understand there's a time limit as to how far back you can date capital losses so something to look into. And I don't think you're required to declare it as a loss. I seem to remember a comment on E-Tax saying losses aren't even submitted with your return unless they're offset against a gain, but it's useful for your own records to include them.

How's that for a summary, without advice?

Sergio · 5 August 2013

Re: Tax question from newbie =]

thanks Burglar and Zedd,

however, how to add my loss in previous financial year?
or i only can deduct it if i got capital gain in the next FY year?

cheers
sergio

ps: of course i wont use all information provided in forum as tax advise =]

Tax, dividends and investing

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