The Australian Taxation Office (ATO) has a message for first time investors: keep your records up-to-date.
The ATO often encounters mistakes such as misreporting capital gains from the sale of shares and income in the form of dividends and distributions from taxpayers new to the investing field.
The growth of micro-investment platforms has allowed many newcomers access to stock trading, but the ATO noted that many aren’t aware of how to handle the tax side of their portfolios.
“Unfortunately, first-time investors often don’t understand their taxation obligations, don’t keep appropriate records and are more likely to make mistakes when lodging their tax returns,” ATO assistant commissioner Tim Loh said.
The ATO is provided with data collected by the Australian Securities and Investments Commission (ASIC), brokers, exchanges, and share registries, on dividend payments and the purchase and sale of shares. This tax time, for example, information on 5.8 million transactions will automatically be added to the tax returns of 612,000 taxpayers.
“While this data makes tax time much simpler, it is still important for investors to check that all their relevant data has been included,” Mr Loh said.
Mr Loh urged new investors to check that all relevant data has been included in their tax return before lodging or to ensure their registered tax agent has all the necessary information before lodging.
The ATO noted that even the best registered tax agents can only work with the information they are given.
Mr Loh urged taxpayers to keep up-to-date records of:
- The date of purchase/reinvestment;
- The purchase amount/value;
- Details of any non-assessable payments to you;
- The date and amount of any calls (if shares were partly paid);
- The date of sale and sale price (if you sell them);
- Any brokerage costs or commissions paid to brokers when you buy or sell;
- Details of events such as share splits, share consolidations, returns of capital, takeovers, mergers, demergers and bonus share issues;
- Details of capital losses made in previous years – you may be able to offset these losses against future capital gains; and
- Dividend or managed investment distribution statements (Standard Distribution Statements).
“Keeping good records is the best way to ensure you are complying with your tax obligations,” Mr Loh said, warning of the headache that inaccurate lodgments cause.
“Errors related to CGT or income from dividends and distributions, whether deliberate or accidental, will lead to amendments. You may need to repay some or all of a tax refund and penalties may apply.”
