BlogInvesting Tips

EOFY checklist for Australian investors

by David Olsen, Content Manager, Sharesight

With the Australian FY18/19 financial year rapidly drawing to a close, the month of June presents one last opportunity to get on top of your investments and understand what the tax implications are — before it’s too late.

For tax purposes, each financial year is seen as a snapshot in time used to assess the tax payable by individual Australians. Because of this, the timing of when investment income is earned, or when investors realise capital gains has important tax implications.

This means prepared investors, armed with the full picture of their investment situation, are in a position to decide whether to bring forward the sale of particular investments to realise a capital gain or loss in the current financial year (to offset existing losses or gains), or to hold off a sale to fall in the subsequent financial year.

Are you a prepared investor? If not, there’s still time to paint the full picture of your investments and make the most of the opportunities it presents this financial year — here’s how:

EOFY checklist for Australian investors

Take stock of your stocks (and unlisted investments)

First, you need to find out what investments you own, and the number of shares/units you own in each.

You could turn to your broker or fund manager for this information, and if you only own investments through a single entity that makes it easy. But for investors who trade across multiple brokers, or who also own unlisted investments, it’s best to consult Australia’s share registries (Link Market, Computershare and Boardroom being the most common) for records of the investments you own.

Once you have this information, you’ll need to put it together in one place. While some investors build a spreadsheet to do this, it is much easier to use Sharesight to track all your investments in a single place. If you don’t have a Sharesight account - take a second to sign-up for a FREE account now - before finishing this article.

Paint your financial picture

Now you need to understand your income and capital gains made on your investments during the current financial year.

Share dividend and fund distributions are often a significant stream of income for Australian investors, particularly among self-funded retirees. Records of the income paid is available by running Sharesight’s taxable income report. Once you have this information, you can easily calculate the total income received from dividends and distributions.

Sharesight Taxable Income ReportClick on image to enlarge

Have you sold investments this financial year? There are capital gains tax implications if you realised capital gains or losses on the sales. To find out, you’ll need to find the cost price of any investments sold, and the price / quantity sold during the year from the broker or fund manager involved.

Calculating the capital gains on investments from this point is where it starts getting more difficult, as Australia permits multiple methods to calculate capital gains tax on shares. Using different sale allocation methods such as first-in first-out (FIFO) and last-in first-out (LIFO) can impact the cost price of the shares sold (and thus the capital gain made) if multiple parcels of shares were purchased over time at different prices.

Capital Gains Tax Sale Allocation MethodsClick on image to enlarge

Fortunately, Sharesight’s Capital Gains Tax Report makes calculating capital gains and losses on investments sold during the year easy. Built to Australian Tax Office (ATO) rules, the Capital Gains Tax Report allows investors to calculate the optimum sale allocation method for each holding sold for their individual tax position.

Calculating Australian Capital Gains Tax on investmentsClick on image to enlarge

While optimising the choice of sale allocation methods is critical to not pay more capital gains tax than is required, at this point, knowing the size of your capital gains or losses realised during the financial year will let you make the most of the time left before EOFY.

Put yourself in the best tax position

Now that you’ve got the full picture of your investments, do you know how your investments have performed? If you’ve made large capital gains during the year, there could be an opportunity to engage in tax loss selling strategies before 30 June to minimise your taxable income.

Tax loss selling is a strategy where investors sell an investment at a loss to offset a capital gains tax liability during the financial year. It’s a strategy investors can use year round, but is particularly useful leading up to the EOFY.

Tax loss selling example

An investor has recorded large capital gains during the year, but still holds Retail Food Group (ASX: RFG) shares in their portfolio purchased in 2014 at $5.69 per share. With RFG shares now valued closer to $0.20, the investor can sell their RFG shares during this financial year to realise the capital loss and offset the earlier gains from other sold shares.

Sharesight’s Unrealised Capital Gains Tax Report makes it easy to model potential tax loss selling opportunities like the above in your portfolio. By running the Unrealised CGT report, investors can model potential tax loss selling opportunities across their portfolio, with a choice of sale allocation methods broken down by short and long term capital gains (which incur different CGT discounts) and unrealised capital losses.

Tax loss selling calculatorClick on image to enlarge

Tax loss selling is within the ATO rules, but investors need to be mindful that the ATO does seek to prevent abuse of this strategy, and does not look favourably on wash trades, where investors sell just before EOFY to incur the tax loss, then repurchase the shares for a similar price early in the new year.

EOFY doesn’t have to be a nightmare

Whether you’re working with an accountant or not, it’s important to be a prepared investor. That means taking ownership of your investment decisions, tracking your own investment portfolio, and implementing strategies to ensure you aren’t paying more tax than necessary. Fortunately, with the proliferation of online tools — from your fund manager, to share registries to Sharesight — this is easier than ever.

Complete the EOFY investor checklist with Sharesight

Don’t run out of time to complete the EOFY investor checklist to and take advantage of the opportunity to optimise your tax position before June 30. Sign-up for a FREE Sharesight account and join the tens of thousands of investors already taking control of their portfolio with Sharesight.

Sharesight does not provide tax or investment advice. The buying of shares can be complex and varies by individual. Seek tax and investment advice specific to your situation before acting on any information in this article.

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