Capital Gains Tax (CGT) on ETFs

[Beginner1234]

Hi,

Quick question. I'm new to the stock market. Let's say a buy $5000 worth of ETFs, hold on to it for well over a year, and sell it for $7500 (for a $2500 profit).

Does that mean that $2500 * 50% = $1250 would become part of my taxable income? When it comes to the calculation of the Capital Gains Tax, are ETFs treated the same way as ordinary shares?

I think that this is the case, but wish to check with the experts here if I am thinking about it correctly. Any help is much appreciated.

 

[elminster13]

Interested to hear others views on this but my thoughts where they are treated the same as any other equity. Your example seems correct to me.

 

[waimate01]

The short answer is: yep, just as you describe.

The longer answer is that sometimes ETFs include a "tax deferred amount" as part of their distribution. This works like a return of capital, and so serves to lower the cost base of your purchase and increase your capital gain. It may or may not happen.

Here's a worked example (I've included a normal dividend to contrast the effect of a tax deferred amount):

Buy $5000 worth of ETF

During the year, receive dividend of $250 fully franked and $100 tax deferred.

The $250 gets grossed up (250/7*10) to $357. You include $357 in your taxable income and claim a $107.10 tax credit.

The $100 is untaxed (whoo hoo!).

After 12 months, you sell for $7500. The $100 tax-deferred amount comes off your purchase price when calculating the capital gain, so your gain is 7500 - (5000-100) = $2600. Apply your 50% reduction for holding longer than 12 months, and include $1300 in your taxable income.

Note that it's not just ETFs that can include tax-deferred amounts, and unless you end up holding for a long long time, it's rarely material. One way to think of tax-deferred amounts is "you can run but you can't hide".

 

[jnalad]

Any stock held for more than 12 months has a 50% discount on the gains but this will apply after you offset your losses plus to optimise your gains you should offset the short term gains against losses first before offsetting against long term parcels. It is not easy especially when you have trust distributions where one can have Tax deferred and tax free and CGT components in a trust distributions. So CGT is not only about profit/losses from Buy/Sell trades. It is hard so I have found a software to take care of this for me. Whats makes it worse if you have carried forward losses from prior year. So check this site out www.unip.com.au

 

[grah33]

Hi All,
i've had to learn a bit too much about tax in one year , and i really do get nervous entering these numbers, for no reason really. but some qs for experienced people.

say you bought etfs: GOLD, QAU, MNRS (miners),
say you didn't' get any distributions , you didn't fill in the paperwork (didn't' care),
say you sold off these guys in the same financial year ...

is it like basic share calculations : difference between purchase price and sale price (account for brokerage too ) to give you a capital gain or loss. that's it? i'm googling it and it's like managed fund it seems, with distribution elements to it, but they're not mentioning the sale price aspect to it so i ask .


(what about bboz bear hedge fund? same deal ?)

 

[qldfrog]

Hi All,
i've had to learn a bit too much about tax in one year , and i really do get nervous entering these numbers, for no reason really. but some qs for experienced people.

say you bought etfs: GOLD, QAU, MNRS (miners),
say you didn't' get any distributions , you didn't fill in the paperwork (didn't' care),
say you sold off these guys in the same financial year ...

is it like basic share calculations : difference between purchase price and sale price (account for brokerage too ) to give you a capital gain or loss. that's it? i'm googling it and it's like managed fund it seems, with distribution elements to it, but they're not mentioning the sale price aspect to it so i ask .


(what about bboz bear hedge fund? same deal ?)

most of the ETFs are trusts, so they will send you an actual trust breakdown per tax category for any "dividend" paid, that is on top of the usual sell price minus purchase price equal capital gain/loss
sadly, these individualised reports are very slow and even sometimes arrive after october....your personal deadline for tax returns

 

[grah33]

most of the ETFs are trusts, so they will send you an actual trust breakdown per tax category for any "dividend" paid, that is on top of the usual sell price minus purchase price equal capital gain/loss
sadly, these individualised reports are very slow and even sometimes arrive after october....your personal deadline for tax returns

okay ...

I also got
bboz (hedge fund),



i might try to get statements from each. i trust it's the same deal with BBOZ.


(and some cfd etfs but i don't think distributions etc apply here as don't own the underlying etf)

 

[grah33]

i get a bit edgy with tax returns. slows down my rate of progress

 

[Gunnerguy]

Previou

most of the ETFs are trusts, so they will send you an actual trust breakdown per tax category for any "dividend" paid, that is on top of the usual sell price minus purchase price equal capital gain/loss
sadly, these individualised reports are very slow and even sometimes arrive after october....your personal deadline for tax returns

Previous years I've waited for all these ETF statements from the companies (Betashares, etfsecurities, blackrock, etc) whether I have bought/sold/bought/sold and passsed them on to my accountant. As trusts there are all sorts of things going on with dividend, franking credits, foreign income, capital gains etc., etc.
This year (so far) I'm just letting my accountant know the simple stuff eg. Bought ETF A on 1/1/21 at for $6,000, sold on 3/4/21 at $7,000, no dividend.
Its too painful passing all the papwerwork from the ETF companies to my accountant. I'm hoping to get away with it ......
Gunnerguy.
(Between Ms. Gunnerguy and myself we own ....... 13 different ETF's, many duplicated to 'manage' dividends/tax)

 

[qldfrog]

Previou

Previous years I've waited for all these ETF statements from the companies (Betashares, etfsecurities, blackrock, etc) whether I have bought/sold/bought/sold and passsed them on to my accountant. As trusts there are all sorts of things going on with dividend, franking credits, foreign income, capital gains etc., etc.
This year (so far) I'm just letting my accountant know the simple stuff eg. Bought ETF A on 1/1/21 at for $6,000, sold on 3/4/21 at $7,000, no dividend.
Its too painful passing all the papwerwork from the ETF companies to my accountant. I'm hoping to get away with it ......
Gunnerguy.
(Between Ms. Gunnerguy and myself we own ....... 13 different ETF's, many duplicated to 'manage' dividends/tax)

I know, it is nightmarish.
Previously, in the absence of report by september october, i was just declaring a dividend.not right, but in my disadvantage so doubt the ato is unhappy.this year i am trying to wait.
If on top of this i had to pay an accountant to do the entries, not sure i would bother...

 

[KevinBB]

This year (so far) I'm just letting my accountant know the simple stuff eg. Bought ETF A on 1/1/21 at for $6,000, sold on 3/4/21 at $7,000, no dividend.
Its too painful passing all the papwerwork from the ETF companies to my accountant. I'm hoping to get away with it ......

... speaking from the other side of the desk ...

If your accountant is any good, they will go and look up online any dividend / distribution information you don't provide.

So, you're much better off waiting for the annual tax statement from the ETF, and provide it, together with any dividend / distribution statements, to the accountant. It doesn't matter if the statements are in PDF format, or printed, just provide them. It would also be good if you could provide a summary of any cash dividend / distribution received. A simple spreadsheet will do, columns headed ETF name, Date, amount. Of course, a separate list of purchases and sales, with contract notes, would help too.

Ultimately, all this information is provided by the ETF to the ATO, who will put it in a format that can be read and checked by your accountant. Its very similar to the prefill information that you will see if you do your own tax returns online. But, as I said, if your accountant is any good, they will check any information the ATO provides as I have seen instances where this information just isn't correct.

KH

 

[grah33]

I know, it is nightmarish.
Previously, in the absence of report by september october, i was just declaring a dividend.not right, but in my disadvantage so doubt the ato is unhappy.this year i am trying to wait.
If on top of this i had to pay an accountant to do the entries, not sure i would bother...

well i don't seem to be seeing any distribution payment in my online tax coming up , so I think i didn't get any for any of my etfs. nor is it showing up on my cmc end of year statement. might just be the usual simple calculation for capital gain/loss for me when doing my etfs.

 

[grah33]

hmm ... looks like my FP markets cfds (capital losses,) aren't showing up in the prefill information, but i think i just declare these in similar basic fashion.

and my CMC etfs show up in prefill, except GOLD etf ... I wonder why as i sold it in financial year. perhaps one just computes that in the same manner

 

[Belli]

It may be a hassle but keep these in mind.

Records you need to keep | Australian Taxation Office

Records you need to show a payment or expense, the format to keep your records in, and how long to keep them.

www.ato.gov.au

And whether you submit through an tax agent, an accountant or online you and only you are declaring this.

Although the ATO may have data it does not remove the obligation on you to maintain records to support your tax position.

Ignore the law at your own peril is an adage which should be at the forefront of tax payers.

 

[qldfrog]

It may be a hassle but keep these in mind.

Records you need to keep | Australian Taxation Office

Records you need to show a payment or expense, the format to keep your records in, and how long to keep them.

www.ato.gov.au

And whether you submit through an tax agent, an accountant or online you and only you are declaring this.

View attachment 130113


Although the ATO may have data it does not remove the obligation on you to maintain records to support your tax position.

Ignore the law at your own peril is an adage which should be at the forefront of tax payers.

true, but you are required to fill you return by october, by that time, you should have access to all data..but Fact is you do not...
So i fill my tax teturn and i m truthful when i sign it.
When later on the trust move their fingers from their arse and send their reports too late.
As it is in my disadvantage vs registering any proceed as dividend, i doubt the ato will complain...

 

[Belli]

I was simply placing the information the ATO, which administers the tax law, expects.

As to deferring until after 31 October it can be done by contacting the ATO.

How to lodge your tax return | Australian Taxation Office

Check what options you have to lodge your tax return yourself or with help from someone else.

www.ato.gov.au

What people do is up to them.

 

[grah33]

bboz and qau showed up (under prefill), but not GOLD (etfsecurities etf, asx). any ideas? i'll double check but i did sell it off in the financial year

 

[grah33]

... speaking from the other side of the desk ...

If your accountant is any good, they will go and look up online any dividend / distribution information you don't provide.

So, you're much better off waiting for the annual tax statement from the ETF, and provide it, together with any dividend / distribution statements, to the accountant. It doesn't matter if the statements are in PDF format, or printed, just provide them. It would also be good if you could provide a summary of any cash dividend / distribution received. A simple spreadsheet will do, columns headed ETF name, Date, amount. Of course, a separate list of purchases and sales, with contract notes, would help too.

Ultimately, all this information is provided by the ETF to the ATO, who will put it in a format that can be read and checked by your accountant. Its very similar to the prefill information that you will see if you do your own tax returns online. But, as I said, if your accountant is any good, they will check any information the ATO provides as I have seen instances where this information just isn't correct.

KH

u know why GOLD etf (asx) didn't show up in prefill? bboz, qau (etfs ) did

 

[Sharkman]

I'm hoping to get away with it ......

i wouldn't bet on it. they are merciless when it comes to chasing down tax dollars when you have underpaid. many years ago i was hounded for some trivial amount ($63 from memory) because i had accidentally got the franked vs unfranked portions slightly wrong for one of my dividends (this was in the days before pre-fill). though TBF they did classify it as an honest mistake and didn't charge any penalty beyond the $63 i had underpaid.

yet when they get it wrong (in a different year they overcharged me by about $700 when they applied 30% withholding tax to an unfranked dividend, when Singapore has a bilateral tax treaty with Aust which means the withholding tax should be 15%) they filibustered and wasted hours of my time on the phone before finally admitting they were wrong and correcting the bill. even if it had been $7 i still would've hassled them about it and relentlessly complained until they fixed it. not a single cent more for the tax office than they're entitled to.

moral of the story. you can't assume the entire distribution is dividend. it may not be. you have to wait for the tax statement from the ETF to arrive and double check that the numbers (whether you pre-fill or manually enter) match up. if you get it even slightly wrong (in your favour), expect to be pursued about it and they might not be so lenient these days with the budget the way it is, they do have the discretion to apply a penalty in such cases.

 

[KevinBB]

One of two reasons that an entity may or may not appear on your prefill:

1. The entity didn't make any taxable distributions during the year; or
2. The entity hasn't, as yet, reported to the ATO.

It is unlikely that any capital gains or losses will be included in the prefill information. ATO will know that you held a particular listed asset at one point during the year, so they will be expecting a capital gain or loss to be reported. This information should be available on the annual statement from your stock broker. Look it up.

If you aren't certain about these details, you should seek professional advice before lodging your tax return, in this case advice from a registered tax agent.

KH