Getting out of shares and working out taxes

[qldfrog]

Yeah. That supercomputer the ATO shares with ASIO, at least I think it's ASIO but could be another high security department, collects an enormous amount of data from share registries, bank transactions, AirBnB, State Governments and other sources, and does a lots and lots of data matching. Not perfect but close and they continue to work to improve it. As it does most of the work there is little additional cost overall to look at even the little fish like me.

keep a spreadsheet and a legal proof of all your purchase sales:
on you spreadsheet you put the buy price buy date buying fee and similar for the sales;
as long as you are sticking to australian shares and use the trust returns provided to you by your ETF/funds etc..doing the tax return is tedious but easy;
It really starts to be messy when you also trade the O/S markets with time difference, taxations already deducted, and exchange rates in the mix.

 

[Belli]

Each to their own of course. However, I won't use spreadsheets for data retention. All transactions are stored in PDF format by company and also by tax year. Backed up to at least three different locations including cloud.

 

[dyna]

There ought to be a Tax Tip thread on this forum for those masochists that like to do it themselves .
Can't find anything close , so this one will have to do.
Takeovers that involve scrip for scrip schemes of arrangement plus a cash component can do your head in a bit , come tax- return time .
Instead of heading straight to the ATO's website for their ruling , I've found it a lot easier to use the company's website as they usually have a few examples for calculating the different cost bases for multiple share holdings . Some parcels may have a capital gain , so scrip for scrip C.G. tax roll over relief can be applied. If some share purchases produced a capital loss , rollover relief can't be applied but the C. L. can be used to off-set current year C.G. 's or carried forward to future years.
In all cases though , your newly acquire shares are spread proportionally across all your share parcels. Same applies for the cash component. You just need to carefully follow the ( somewhat ) complicated- looking formulas provided , to calculate the final NET capital gain / loss and the cost base of the newly acquired shares . Hope it helps .

 

[Belli]

There ought to be a Tax Tip thread on this forum for those masochists that like to do it themselves .
Can't find anything close , so this one will have to do.
Takeovers that involve scrip for scrip schemes of arrangement plus a cash component can do your head in a bit , come tax- return time .
Instead of heading straight to the ATO's website for their ruling , I've found it a lot easier to use the company's website as they usually have a few examples for calculating the different cost bases for multiple share holdings . Some parcels may have a capital gain , so scrip for scrip C.G. tax roll over relief can be applied. If some share purchases produced a capital loss , rollover relief can't be applied but the C. L. can be used to off-set current year C.G. 's or carried forward to future years.
In all cases though , your newly acquire shares are spread proportionally across all your share parcels. Same applies for the cash component. You just need to carefully follow the ( somewhat ) complicated- looking formulas provided , to calculate the final NET capital gain / loss and the cost base of the newly acquired shares . Hope it helps .

Respect!

I believe you complete a hard copy tax return.

However, for those who may use the online service there is a simulator which can be used to gain familiarity before you actually submit your tax return online.

Simulator landing page

While there are eight simulations, I think it may be wise to use scenario 1 which does not include any prefill data. The simulator is not linked to the actual MyGov tax return application.

 

[Value Collector]

Hi everyone,

In late 2019 I started buying shares with the view of holding them till my retirement with all the dividends reinvested.
However, with the much higher interest rates now, and my accountant charging me much more because I have shares, it means I need to make 7% a year on my shares just to break even.

So I've decided to sell all my shares, but not sure how the taxes will be worked out due to the reinvestment.

Normally if I buy 100 x ABC shares for $X and I sell it for $Y. The difference in $X and $Y minus the fees is my profit and loss. That's easy and I understand that.

However in my case over the last 3 years my ABC shares have gone from 100 to 110 due to reinvestment. How can I tell if the dividends reinvested to buy the extra shares was already taxed or not?

It seems to me to be very complicated, have I misunderstood this, or is there a very easy way to work this out?

This will obviously something my accountant is for, but I would like to know.

TIA

Each time you earned a dividend, you would have been given a dividend reinvestment statement.

It shows two bits of important info.

1, how much your dividend was, you woild have paid tax on this as income.

2, how much the you paid for the new shares, you simply treat this as it you purchased them, eg. If the shares were issued to you at $2 and you sold them at $3 you pay capital gains tax on that $1 profit just like a regular purchase.

 

[Value Collector]

I was hoping there would be an easy way to do it, but it seems complicated.

I think I will simply say to my accountant I bought ABC shares for $X and sold them for $Y and the fees were $Z.
I don't believe the accountant will take into account if the dividends were franked, how much taxes I had already paid etc.
But it seems me working out exactly what I got over the years and what I have and haven't paid tax on etc is much more complicated.
The profit is quite small, so the difference won't be worth the effort I don't think.

Thanks for the help everyone

As I said above, your account should have been accounting for the dividend and franking credit in the year you earned it.

The capital gain is a different thing, each time you get allocated new shares in the reinvestment plan it’s treated as a new purchase, just as if you bought them directly, you would have been issued a statement each time.

 

[dyna]

You just need to carefully follow the ( somewhat ) complicated- looking formulas provided ,

Further to the above :
Folks looking over the ATO's website for its rulings on scrip for scrip plus cash takeovers might at first have difficulty getting a handle on all the gobbledygook . Don't be discouraged because its clarity becomes self evident once you've sat down and done a few examples , the old fashioned way , with pencil and paper. No need to give up and go crying to an accountant who will charge an arm and a leg for what is pretty much , very basic mathematics .

Initial terms like " Prima Facie capital gains/ losses " is just there to identify which share parcels are C. G . and thus used in the final Net capital gain calculation and those parcels which are C. L . and so , not allowed for scrip for scrip rollover
( but still used in the final capital gain/ loss calculation ) .
The "Ineligible proceeds cost base" equation is simply , to calculate actual capital gain. ( That number will be different from " Pima facie " C. G . )
"Eligible proceeds cost base " is just there to calculate the cost base of the new shares received in the takeover. That number is not expressed as $ per share because it has to be added to the value of the new shares you receive for the C.L share parcels before dividing the total value by the number of newly acquired shares .You'll need that price/share for when you sell. Once again , note the requirement to be scrupulous in keeping records .
Lastly , before posting my paper tax return , I include my calculation cheat sheet as well , to spare me the ordeal of yet another desk audit at some future date when I've completely forgotten how I did it !

 

[Belli]

No need to give up and go crying to an accountant who will charge an arm and a leg for what is pretty much , very basic mathematics .

Despite being capable of completing my tax return, I do use an accountant. The reason is simple. I effing hate doing them so why do something I hate? A rhetorical question there. No need for anyone to respond.

 

[dyna]

Yeah , if I wasn't so cheap , I'd give up the D.I.Y. and go fishing . It must be the ex- tradie in me. Mad , I know .
I'm giving these ferkels 47 cents in the dollar. That's what to expect if you generate a 66% increase in taxable income for just one year. Maybe it's time to slacken off ? ( My rhetorical question , right there . )
Nothing else to say.