EOFY checklist for Australian investors

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With the Australian 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 sell particular investments to realise a capital gain or loss in the current financial year (to offset existing losses or gains), or carry forward a loss until the subsequent financial year.

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

1. Take stock of your stocks (and unlisted investments)
2. Paint your financial picture
3. Put yourself in the best tax position

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 Services, 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.

The taxable income report breaks down taxable income into local income (trust and non-trust) and foreign income.

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), for example, 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.

Fortunately, Sharesight’s capital gains tax report makes it easy to calculate capital gains and losses on investments sold during the year. Built to 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.

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 realised capital gains or losses 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 – Australian shares

An investor has recorded large capital gains during the year, but still holds Mesoblast (ASX: MSB) shares in their portfolio, purchased in 2021 at $1.87 per share. With Mesoblast shares now valued at $1.12, the investor can sell their Mesoblast 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.

The unrealised CGT report helps investors make the most of tax loss selling.

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 sales, 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 your EOFY investor checklist with Sharesight

Join thousands of Australian investors already using Sharesight to manage their investment portfolios. Sign up for Sharesight today so you can:

• Automatically track your dividend and distribution income from stocks, ETFs, LICs and mutual/managed funds – including the value of franking credits
• Use the dividend reinvestment plan (DRPs/DRIPs) feature to track the impact of DRP transactions on your performance (and tax)
• See the true picture of your investment performance, including the impact of brokerage fees, dividends, and capital gains with Sharesight’s annualised performance calculation methodology
• Run powerful tax reports to calculate your dividend income with the taxable income report
• Plus calculate your CGT obligations with Sharesight's Australian capital gains tax report and unrealised capital gains tax report

To get started for FREE, simply sign up, import your holdings and watch as dividends and prices are automatically updated. If you decide to upgrade, you’ll unlock advanced features and everything you need to run your tax reports and gain unparalleled insights into your portfolio performance throughout the year.

Plus, as an Australian tax resident, you can save even more by claiming your Sharesight subscription fees on your tax return¹.

FURTHER READING

• How to calculate your Australian capital gains tax
• 7 reasons to upgrade your Sharesight account
• Record-keeping requirements for Australian investors

¹ If you derive income from the share market, your Sharesight subscription may be tax deductible. Check with your accountant for details.