# 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.


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## 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.


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## Tyler Durden (8 August 2011)

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


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## 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?


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## 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...


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## 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.


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## 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.


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## 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.


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## HarryH (21 August 2011)

mrthong said:


> thanks, it makes sense to me now.
> 
> 
> 
> ...




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


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## 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


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## 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.
> 
> ...




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.


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## 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!


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## 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:
> 
> ...




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.


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## 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.
> 
> ...




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


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## 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 .


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## 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


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## 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


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## 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.


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## 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?


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## 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 =]


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## burglar (5 August 2013)

*Re: Tax question from newbie =]*



Sergio said:


> thanks Burglar,
> 
> how to add my loss in previous financial year?
> 
> ...




From memory, a capital gain requires the use of a Supplementary Tax Form.

I would add the previous loss to current loss. 
Then I would declare it in a current return.

But what I advise you, is this: 
Speak to the Tax Man! 
He is nice until you break the law! :


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## Zedd (5 August 2013)

*Re: Tax question from newbie =]*



Sergio said:


> 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?




There's an area in the tax return that asks you to detail "Capital losses carried forward from previous years" or something similar. That's where you'd include them. Like I said though, I think there might be a limitation on how long you can carry losses forward so look this up (10yrs maybe?). And while you're learning about CGT probably worth learning what a "wash sale" is and make sure you don't fall fowl of it if you're trying to make use of previous capital losses...


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## Sharkman (5 August 2013)

*Re: Tax question from newbie =]*



Zedd said:


> There's an area in the tax return that asks you to detail "Capital losses carried forward from previous years" or something similar. That's where you'd include them. Like I said though, I think there might be a limitation on how long you can carry losses forward so look this up (10yrs maybe?). And while you're learning about CGT probably worth learning what a "wash sale" is and make sure you don't fall fowl of it if you're trying to make use of previous capital losses...




doesn't "wash sale" normally refer to crystallising a capital loss to cancel out capital gains that would otherwise have had to be paid, as opposed to crystallising a capital gain to "use up" previous capital losses? there is no urgency to "use up" previous capital losses - they can be carried forward indefinitely: http://www.ato.gov.au/General/Capit...ss/Working-out-your-net-capital-gain-or-loss/

i think you can get around the wash sale rules if it concerns a major (ie. optionable) stock. i haven't actually done this myself (has anyone done it and gotten away with it?) but i did check this with my accountant a couple of years ago to make sure this option (pardon the pun) was available, and they said it was fine. sell the stock, realise the loss, and simultaneously open a synthetic long position (buy call, sell put at the same strike). one of the options will expire ITM and you will get your stock position back at expiry. of course there is commish and spread to pay but depending on the circumstances it might be worth it to get that capital loss crystallised early...


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## Zedd (6 August 2013)

*Re: Tax question from newbie =]*



Sharkman said:


> doesn't "wash sale" normally refer to crystallising a capital loss to cancel out capital gains that would otherwise have had to be paid, as opposed to crystallising a capital gain to "use up" previous capital losses?




Usually, but my understanding is any sell-then-buy made for purely tax reasons is a wash. I was looking at doing just this to simplify my tax position, rather than to minimise any current or future taxes. Like I said, no real quals in this area, so I may be wrong. My comment was practically-newbie-to-newbie as I didn't learn about wash sales at the same time as CGT and had I of been in a position to do so I would have washed before I realised it was illegal. 



> there is no urgency to "use up" previous capital losses - they can be carried forward indefinitely



Cheers. Not sure where I picked up the idea of limited carry forward. 



> I think you can get around the wash sale rules if it concerns a major (ie. optionable) stock. i haven't actually done this myself (has anyone done it and gotten away with it?) but i did check this with my accountant a couple of years ago to make sure this option (pardon the pun) was available, and they said it was fine. sell the stock, realise the loss, and simultaneously open a synthetic long position (buy call, sell put at the same strike). one of the options will expire ITM and you will get your stock position back at expiry. of course there is commish and spread to pay but depending on the circumstances it might be worth it to get that capital loss crystallised early...




I'd be looking to get proper advice perform trying this one. As the purpose of the position is purely to incur a loss and minimise tax I think it would still be classed as a wash.


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## Sharkman (6 August 2013)

*Re: Tax question from newbie =]*



Zedd said:


> I'd be looking to get proper advice perform trying this one. As the purpose of the position is purely to incur a loss and minimise tax I think it would still be classed as a wash.




i did. my accountants said it was ok. but as i didn't end up using the tactic (in the end i didn't really have a reason to) i was curious to find out if anyone has indeed used something like this, and gotten away with it. i think my accountants' interpretation was that the wash sale rules stipulate that it is the sale and purchase of the *same asset* within a short period of time. an options spread is not the same asset as a stock, even if the risk profile would be practically identical.

i suppose if one was to be a bit more cautious one could take on a risk reversal with the strikes close together instead of taking on a synthetic long. then you could argue that the risk on the position has changed from the long stock position, therefore it cannot be a wash sale. though in that case you aren't guaranteed to automatically get the position back at expiry, but if you don't, it will be between the two strikes so you can simply buy it back normally at a price close to the original sale price at expiry, which should be far enough in the future from the original sale date to avoid falling into the wash sale rule.


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## Zedd (6 August 2013)

Sorry Sergio, we're getting rather off-topic.



> "…in substance there is no significant change in the taxpayer's economic exposure to, or interest in, the asset, or where that exposure or interest may be reinstated by the taxpayer".



This is supposedly from TR 2008/1 from the ATO. I'm not sure if the site is down or if it's because I'm outside of Australia that I can't get it from the horse's mouth. I'd say by that definition, using any form of derivative to maintain your holding at the same price you sold it is a wash.


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## Sharkman (6 August 2013)

Zedd said:


> This is supposedly from TR 2008/1 from the ATO. I'm not sure if the site is down or if it's because I'm outside of Australia that I can't get it from the horse's mouth. I'd say by that definition, using any form of derivative to maintain your holding at the same price you sold it is a wash.




hmmm, yes that wording does sound like it would preclude the use of option spreads to avoid the wash sale rule. i'll have to check with my accountants again next year in april, and point that TR out to them, in case i find myself needing to do some wash sales next year. if using derivatives don't get you out of the wash sale rule, then perhaps resorting to using two separate entities may do the trick ie. if my trust needs to crystallise a loss, buy it back as myself (i'm not the sole beneficiary of the trust so should be all good there, as the beneficial ownership of the assets will have changed), and vice versa, if i need to crystallise a loss out of my individual holdings, then buy it back under the trust. i will have to make a note to check that up with my accountants pre EOFY as well.


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## Sergio (7 August 2013)

thanks for those replies guys =]

thanks zedd, i just entered loss amount on capital loss and saved all of my evidence =]


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## Sergio (25 August 2013)

Hi Guys, 

i have another several questions regarding dividend if u guys dont mind =]

the case is (not a real life case, for example only) 
i earn $4,500 franking credit (below $5,000 and all of them come from 100% franked dividend) and i am in 19% tax bracket.

it means franked amount $10,500, unfranked amount $0 and franking credit $4,500..
and i have to pay tax on $10,500+$4,500=$15,000
$15,000*19% is $2,850 


so, is that means i will get $4,500 returned to me + franking credit rebate $1,650 ($4,500-$2,850)?

or

i just get the $4,500 ?


second case, how about if i have two stocks, each give me $4,500 franking credit (100% franked dividend) with a total $9,000 franking credit (my tax is 19%)

it means franked amount $21,000, unfranked amount $0 and franking credit $4,500...
and i have to pay tax on $21,000+$9,000=$30,000
$30,000*19% is $5,700

so, how to calculate amount will returned to me as $9,000 is over $5,000 rules?

is it $5,000 + $3,300 ($9,000-$5,700) ?

or

just the $3,300?

PS: i held the stock for NOT LONGER than 45 days for those 2 cases...



i know the link to ato in regard of this, but i still a bit confuse...help is much appreciated =]

http://ato.gov.au/Business/Imputati...edits---individuals/?anchor=P34-3937#P34-3937

thanks heaps,

Sergio =]


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## PinkGirl (26 August 2013)

Hypothetically speaking, if a individual Aust tax resident was in the $18,201 to $37,000 tax bracket for 2013/14 income year and received a fully franked dividend of $10,500 and assuming the other income (here the example uses other income of $18,200 and no tax has been deducted from this income), then the tax on the dividends would be

$15,000 x 19% = $2,850

Medicare Levy (assuming no exemption and over the upper threshold limit) would be $33,200 x 1.5% = $498

So tax payable on $33,200 in this example would be $3,348

Franked Credits are $4,500

So refund would be $1,152

As hypothetical individual has not held said shares 'at risk' for at least 45 days during the qualification period, hypothetical individual would still get the franking credits under the small shareholder rule (assuming hypothetical individual is not under the related payments rule).

Second Example

Now assuming hypothetical individual received two dividends each being $10,500 fully franked and has not held the shares 'at risk' for at least 45 days during the qualification period and was still in the $18,201 to $37,000 tax bracket for 2013/14 income year. Firstly this example assumes that the hypothetical individual only has other income of $16,000 in order to say within the $18,201 to $37,000 tax bracket.

So in this example there is $37,000 of taxable income ($16,000 from other source and $21,000 from the dividends, noting that the shares where not held 'at risk' for at least 45 days during the qualification period and therefore not entitled to the franking credits).

Tax on $37,000 = $3,572 ($2,200 of the dividends is using the remaining amount of the tax-free threshold)
Medicare Levy on $37,000 x 1.5% = $555

Franking credits = 0

Net tax payable on $37,000 is $4,127

If the shares where held 'at risk' for 45 days or more during the qualification period then assuming hypothetical income had $16,000 of income from other source, fully franked dividends of $21,000 and franking credits of $9,000

Taxable Income is $46,000

Tax on $46,000 = $6,497 (being $0 tax on first $18,200 of income, $3,572 tax on the next $18,800 of income and $2,925 of tax on the next $9,000) of income
Medicare levy on $46,000 at 1.5% = $690

Total Tax is $7,187

Franking credits are $9,000

So refund is $1,813

Obviously this is not tax advice and people should seek their own tax advice specific to their own circumstances


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## Sergio (27 August 2013)

Pink , thanks for answer my non-real life case =] it sum up almost everything up =]

however, does ATO do apportion on which shares are held for 45 days and which are not?

i red somewhere between this forum before, that once the FC over $5k, ALL of the shares need to be held for 45days?


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## PinkGirl (27 August 2013)

Sergio said:


> Pink , thanks for answer my non-real life case =] it sum up almost everything up =]
> 
> however, does ATO do apportion on which shares are held for 45 days and which are not?
> 
> i red somewhere between this forum before, that once the FC over $5k, ALL of the shares need to be held for 45days?




Once you exceed $5k of franking credits then you need to pass the 45 day holding period rules for all parcels of securities that pay franked dividends. Any parcels of securities that you fail on you only lose those franking credits attributable to the failed parcels. Assuming that there are no related payments, the 45 day holding period only need to be passed once in respect of a parcel of securities.

There is a very good paper on the 45 day holding period. Just search the net using "ASX 45 day holding period rule" and it should be one of the first hits


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## Sergio (27 August 2013)

thanks Pink, it all clear now =]


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## Roller_1 (22 August 2017)

Hi guys

Do you declare divs in the FY of the ex date or the pay date?


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## willy1111 (22 August 2017)

Date I receive it in my bank account, so pay date


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## pixel (22 August 2017)

Roller_1 said:


> Hi guys
> 
> Do you declare divs in the FY of the ex date or the pay date?



I have always declared dividend income in the FY, into which the Record Date falls.
My Accountant has included the list in every Tax Return, so it can't have been illegal.
Have scoured the ATO website, but not been able to find any clear determination.


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## Roller_1 (23 August 2017)

pixel said:


> I have always declared dividend income in the FY, into which the Record Date falls.
> My Accountant has included the list in every Tax Return, so it can't have been illegal.
> Have scoured the ATO website, but not been able to find any clear determination.



Yes i couldn't find much either Pixel. I spoke to my accountant, he said it goes by the pay date...


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## McLovin (23 August 2017)

Roller_1 said:


> Yes i couldn't find much either Pixel. I spoke to my accountant, he said it goes by the pay date...




Your accountant is correct, it's the pay date.


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## Belli (23 August 2017)

First, I'll make the disclaimer I have no financial or legal qualifications.  Having said that, for the purposes of an income tax return I understand dividends are declared as income in the year in which they are received.  This may not necessarily apply to Exchange Traded Funds, such as STW, as those entities are a managed investment trust and, as a result, income from them relate to the taxation year during which the income was accrued.  That may NOT be the year the distribution(s) are paid.

However, some ETF's do pay an actual dividend so the taxation year they are received applies.  It can depend on how they are structured and the PDS should state the taxation implications although it requires some digging around.  Always best to obtain the view of an appropriately qualified person.

PS: My statement about dividends is based on the Dividend Payment statements I receive from companies which advise within them that the dividend advice "is for use in preparing [year] income tax return.  As the companies have been playing this game longer than me, I reckon they know what or what not to include in those payment statements.


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