EOFY Tax Hacks For Your Share Portfolio

She's on the money. She's on the money. My name is Natasha Bamble. I'm a proud First Nations woman and I'm here to acknowledge country. Hello beautiful friends. We gather on the lands of the Aboriginal people. We thank, acknowledge and respect the Aboriginal people's land that we're gathering on today. Take pleasure in all the land and respect. All that you see. She's on the money podcast, acknowledges culture, country, community and connections. Bringing you the tools, knowledge and resources for you to thrive. Hello friends and welcome to another deep dive episode of She's on the Money. The podcast that helps make your personal finances feel a little less overwhelming, especially at tax time. That is right. We are reaching the pointy end of the financial year. Whether you're facing a spicy bill or you're looking forward to a very cheeky little return, we have questions like how are your investments taxed and how might changes in this year's budget affect the way that the ATO is going to view your shares. Whether you've been investing for years or you're just getting started, my friend, this episode was made exactly for you. We'll be explaining when you actually pay tax, what needs to be reported and the legit ways that savvy investors minimise their tax bill come June 30. More on that though, after this very short break. Hello and welcome back to She's on the Money. I am, as always, Victoria Devine, and joining me on the deep dive couch today is not who you would expect. It is the gorgeous Miss Jess Goriichi. Me, hi friend. Are you excited to talk about investing in tax? I'm very excited. I love tax time. I think you've rubbed off on me in that way. Because you get tax back every time. Correct. I am one of those people who is looking forward to a cheeky little return. I love that for you, but let's get straight into it. So, when do you actually have to pay tax when it comes to shares? Let's say that you own shares or ETFs, which are bundles of shares and have earned a dividend, sexy, or you've got an redistribution, even sexier. Here, you might need to pay tax on what you've earned because it's actually considered a form of income. And I think that's where people start going. Is it worth it? Yes, Queen. Like if you're making money and you're paying tax, you're clearly in a better position. But the sticky thing there is that sometimes we just don't know that we have to pay tax on income like that because we might be just like, "PAYG employees," and it's always been taken out beforehand. So it feels like a kick in the butt when you're like, "I was trying to get ahead." And now I've already spent that or I've already reinvested that. It feels like kind of mean to be taxed. Yeah. That's why we're getting you to think about it now. Exactly. And if you've earned a dividend and then you reinvested that back into a portfolio, I think a few people think, "Oh, well, it's back in my investment. I don't know anything, but you might actually have to pay tax on that as well." So additionally, if you've then sold some shares or sold some of your ETFs and you've made a profit, that's actually called, and it's hot topic at the moment, that's actually called a capital gain. And you will very likely need to pay tax on that. But the amount of tax you pay is going to vary depending on when you earn the dividends, the distributions, or capital gains on that asset. And how long you actually held that asset for. So there's a little bit of like, "I keep using the word today nuance." And I'm glad that all of the episodes I've recorded today aren't coming out on the same date, because you'll be like, "I'm nuanced out." Yeah. But there is a lot of nuance. And because earning anything from your shares counts towards your personal income, your investments can actually influence. And this is like a good thing and a bad thing, but it can influence your marginal tax rate. So like, if you start to accrue a really nice investment portfolio, it might tip you over into the next marginal tax rate, which won't have been considered in your actual PAYG job. Yeah. And it might be an even ruder surprise come tax time. So we want to keep track of this and make sure that we're all hungry-dory, right? Yeah. And just to make it extra fun, shares and ETFs also tax a little bit differently aren't they? Yes. So with shares, your taxed on your dividends, which is the amount that the company will pay its shareholders for its profit each and every single year. But let's say that you paid tax on your shares at the corporate level already, you might actually receive what's called a franking credit, which is kind of like a little IOU certificate. And I think that's the way or the best way to explain it, because the company gives you an IOU. Yeah. And says, "Hey Jess, you owned this direct share." But don't worry, we already paid 30% tax on it. And you go, "Oh, that's hot. I'm going to keep this IOU and give it to the ATO." And then that can be used to offset your income tax, which is basically a way to let the ATO know that you've actually paid tax already through the company on some of your investments so that they don't tax you twice, because that's not sexy. No, someone who's been there, not fun. I was about to say, and you've got beef with the ATO at the moment, because they did, in fact, tax you twice on something. Mm-hmm. And you made the news. Yes. I made the news as a whole thing. Don't be like me. Don't be like us, you had a time. Also, that's a really important lesson on manifesting, because in our team, when something goes wrong, we are really dramatic, and we will say something like, "Oh my God, I'm going to be on the news." Obviously, we're so mad that we're going to do something that ends us up on the news. You said that one too many times. I fear I did. You flew too close to the sun, and the ATO was like, "Well, you've got me on the news." Yeah, we give you what you want. Anyway, so that is really nice when it comes to direct shares. But then with ETFs, they are slightly different, and they are treated more like trusts when it comes to tax. So ETFs often pay what's called a distribution, which is the profit that comes off multiple different types of assets. And because the bundles are made up of different shares, and some would be corporate direct shares, some might be different trust assets, they can often be taxed completely differently. So you'll often receive some franking credits to offset your income when completing your tax return, but not every single one is going to have that. So it's taxed a little bit more in a complex way, but don't worry, because I don't want you to go, "Oh my gosh, should I not buy an ETF then?" That sounds hectic, V. Your investing platform will usually just put it on a silver platter for you. And they're like, "Hey, this is what your ETF did just provide this piece of information to the ATO." Amazing. So don't stress. If you've invested in shares in ETFs this year, is that how you would go about finding out how much you've earned dividends and capital gains in distribution? Yes, and this is why we talk about the importance of the platform that you're on. So if you've bought your shares through a platform, you're going to get a statement at the end of the financial year that is literally a run-down of all of this information so that you just hand it over. And now I'm going to talk about Sharesys in a non-sponsored way, but just in a way that's like, "Okay, I know most of our community use Sharesys to invest, and I know that the comments on Spotify are going to be like, "How do I do this? Just Sharesys support this?" There are features on the Sharesys platform that let you do this. And it basically, just if you go into your settings at any point, it will show you how much you've earned, like, so think dividends, your distributions, your capital gains. And if you've sold, it will also note that and we'll let you know what profit you have to pay tax on during that year. So it's kind of like, "I use that part in my Sharesys app, not just for tax." Because I'm pervy. I want to know how much money I'm making. I like logging in and being like, "Oh, ex-return." And I like that it tells you when there's one coming up. Like when it says, "Oh, upcoming dividend." I get really excited, even though it might not be that much. But like, money is coming. From little things, big things grow. Yeah. And I think that's fun, right? But I love the nuance. There's that word again. But I love being able to say, "Oh, okay, I've had, you know, let's pretend I had 11% return on something." The second I've seen numbers like that, I'm like, "Oh, I want to know how, like, was that a dividend? Was it a distribution? Like, was it just growth in the value of a share? Like, I want to know what that looks like. Yeah. But here's the thing. If you're going, "Oh my gosh," and Mr. Jessica, are you used to be like this? Mm-hmm. Where, come June 30. Yeah. Doddler eyes, cross-alertes. She's got an income statement from work. And you would basically put your tax in on the first of July. Oh, yeah. I was like, give me that refund. Yeah, 100%. But if you're in investor, that statement from your share platform actually can't even be started to be generated until they have all of the information from the ASX to start creating these reports for you. So that statement might not arrive in your heart little hands until mid-July or even September. And that's reasonable. Yeah. Like, I know it doesn't feel it, because you're like, "But I want to do my tax." Mm-hmm. But they're doing like all of the numbers for every single one of the people on their platform. That's a lot. So a lot of work. For some share platforms, you will not see your tax statements till September. And that's okay. The ATO is not going to crucify you for that. But then come September. You can do your tax return. Yeah. And if you're going to book in to see somebody, because I always book in to see my tax agent ahead of time, because they obviously book out really quickly. Yeah. Don't be booking a, you know, a daily July one appointment and thinking you're so smart. Yeah. But push it out a little bit. Give yourself some room. You know, your report from your bail. Violent is going to be like, what are you doing here, Jess? You have not all got all your stuff. Yeah. You'll be like, I'm just really tenacious. It's just excited. So say if you bought shares directly and you just went straight through to the ASX and you actually have chess sponsored shares, which a lot of people talk about. And a platform like Perla has chess sponsored shares. I feel like there's like a very big conversation at the moment going on about like, whether it's chess sponsored or not. Personally, I don't mind. Like, I don't need chess sponsored shares. You might think it's important for you. Anyway, if you also have shares through like a privately owned company or like my husband has some shares from companies he used to work for. Yeah. And they were issued directly. There's actually a registry called computer share. And Jess, you've probably gotten letters from computer share before, where if you've bought an asset, then a letter turns up at home and it's like registry and you're like, wait, what? Why? Like, I don't know computer share. Computer share never heard of it. But computer share is actually like an all-rounder where you can access your information about the shares that you own, including earnings and things like that, that the ASX uses to register your information. So if you own anything directly and it's stamped with Jess's name, computer share kind of just gets the register to keep track of everything. Because otherwise, how do you know where all of this stuff that you're buying is going if not on a platform? And I might be handy. My partner has shares that I think were bought for him when he was young by his dad or his grandpa. And it's, you know, there's the paperwork back then, you didn't have the computer or the email. The computer. We didn't have the internet. Yeah, to send things on. And so it might be handy if there's things like that where you go, "Oh, I know I own something but I don't know what it is. You could jump on that registry and search up to find it." Yeah. Yeah, you should be able to do that. And if it's not on there, you can trace it through a platform like computer share. I do think it's so funny, though, because, you know, we now jump online and I say things so flippantly like, "Oh, you can invest for as little as one cent." And you just go, "Wow, that means, you know, that's quite incidental." Back in the day, Jess, you used to have to drop down to Colin Street and go to the Australian Stock Exchange to be like, "Hello, kindster. I would like to buy six sterlings worth of BHP." Yeah, wow. Like you had to physically turn up to the exchange and you would exchange your money for a share in a business. Wow. Talk about prohibitive. Yeah, I said, "What if you didn't live close to one?" That's not like that. That's not for you. No, I don't like leaving my house. No, you need that. So I now just invest from home and also I realised that I'm, I use this psychotic. The other day I was like, "Oh, I'd like some more VDHG." I was just sitting in bed at 11pm and so I put a little trade in to pick up some more VDHG when the market opened to the next day and I was like, "Past Victoria, like if we went back to high school, should be so confused." It's like the anti-thesis of late night shopping, but for a relatively kind. But I was like, "Oh, market's like a little bit." And you know what, I'll just do a little toppy, toppy up. That's so funny. That's how I talk about investing nowadays. The mediocre middle-aged white men are not going to like this. Well, speaking of the mediocre middle-aged white men, the latest budget did just drop. No, good segue. Thank you very much. That's full of mediocre middle-aged white men. Thank you. There were some new changes to CTT, which have just been announced and it seems like this has got everybody in all of a tizzy. When does this come into effect and can you explain what it might mean for, you know, everyday investors like me? Totally. Totally. And do you know what the first thing I'm going to say about this is, the budget is not actually written in stone. So this is a proposed budget. Yeah. So these CTT changes now have to be legislated. So nothing has been legislated yet. And I think that's a very important thing to be able to talk about it. It seems like it's done. Yeah, it's done. It's going to happen. There's still the potential. This will get chucked out of parliament and they go absolutely not. I mean, I'm not going to get too political, but right now Labour have so many seats that do this very unlikely that one of their proposed changes gets chucked out. But I mean, this is why it's so important to be vocal on changes that you don't particularly like because that's not a done deal. If you aren't happy with that, you can talk to your local member of parliament and have them maybe change their mind on it. So when it comes to voting, your votes matter. Yeah. Anyway, talking about CTT or capital gains tax, that's the tax applied when you sell an asset like an ETF or a share or even property when you make a profit. So you're not ever going to pay capital gains tax if you don't make a gain. Yeah. It's not just like a tax you pay when you sell something. It's only a tax you pay when you profit from it. So to date, if you have held an asset for more than a year, like 366 days, and then you sell it and you've made a profit, you would only be taxed on 50% of that profit. So let's say you made a $10,000 profit on an asset. Go me. The ATO is going to go great, nori's. You actually only have to pay tax on $5,000 worth of that. That sounds like a money win, right? So that was the 50% CGT discount. And if you didn't know about this, I'm really sorry. But if you held that asset for less than a year and then you sold that asset, you would actually be taxed on that full $10,000 profit. So you're 100% of the profit that you made. So this is also why long-term investment makes a little bit more sense at this point in time. Hilariously. Do you remember back when during COVID, everyone was talking about crypto? Yes. And there were like the crypto bro's being like, I made massive profit and I just sold out. And like I was laughing so hard because they were Australian. They were definitely under our tax laws. And they were like, in the last six months, I made X profit. And I'm like, bro, hold it for another six months and then sell it. You just paid 100% CGT. Yeah. You potato. Be strategic. Tell me you don't know what you're talking about without telling me. Anyway, in the recent budget, the government announced that it was going to propose to make some changes to CGT and take away our 50% discount and replace it with something different and replace it with what they're calling a discount based on inflation, plus a minimum of 30% on gains from the 1st of July, 2027. So anything that you've gained before next July, next tax time won't be affected. No. And that's called grand fathering. And you've probably heard that term floating around the media. Yeah. And basically, grand fathering is where if you own an asset dress and you purchased it with certain rules and regulations, they're not going to pull the blanket out from under you. They're not going to go, oh, well, Jess, times have changed. Your tax rules have changed. They're going to go, all right, Jess, we're not going to like change the game for you too much. We're going to let you have the old rules on the assets that you purchased before, but going forward, the new assets that you have will be taxed in this different way. So grand fathering is basically where the old rules still apply because like, it's basically unfair to take it away from you at this point. So hypothetically, Jess, if you bought a Vanguard ETF tomorrow, and you sold it next June, and you make a profit, you would still get your 50% CGT discount. But if you sold it after July 1, the ATO would look at the profits after July 1, and would look at how inflation indexing applies to your gains before applying a minimum of 30% tax on them. And I've got, and I won't go too deep into it because I did it in our the budget episodes so people can go back to that. But there is a difference, and it depends on what your marginal tax rate was, how it impacts you, and I can make some examples for socials because I think people will care a lot. But for me right now, it's more about this is like hypothetical. I'm not going to keep creating content on things that haven't happened yet. I will do so and jump up and down if it does get legislated though on how you can be the smartest with your money. Yeah. Right. So if your marginal tax rate is above 30%, this could really impact you. And most of our listeners who are gainfully employed pay more than 30% tax, then you will pay your marginal tax rate on those gains. Interesting. Somebody puts a little bit away every month or every week towards the same ETF so shares. It can be hard to see how long you've owned each share for. Like I can look at, I own, I own X amount of dollars of a specific share. But it's hard for me to tell what percentage of that I bought before a certain date. Is there an easy way to find that out? Yes, thank God. Thank God. Because back when I was a financial advisor, yes, there was a client that came to me and I had to back date their share portfolio to calculate the CGT because they had owned shares that were owned by a grandparent and BHP shares were literally bought in British sterling. Wow. Because we didn't have the Australian dollar when they started investing in them. That. So not only did I have to calculate the CGT on that, I had to do the currency exchange for what that would actually mean. And I'm telling you right now, if there was every day where I wanted to quit being a financial advisor before I did, it was that day. I can imagine. Anyway, so whether you're with shares is or you've got computer share, you'll actually be able to see which shares were purchased and when so that you can make more strategic decisions. Like if you choose to sell, obviously what we're going to do is sell the oldest ones first, right? We are going to take a very quick break. But when we return, we're going to be sharing the finer details around how you can minimize your tax if you have been investing. Welcome back my friends. And this week, Jess and I are chatting tax time and it's implication on investors, which sounds a lot sexier to me than it probably does to our listeners, but it's really important that you get this. So if you've become a share market girl in the last 12 months or you're planning on starting, you're probably going to want to tune in for the tips that we have on how savvy investors are minimizing their tax this end of financial year. Miss Jessica, what do you do personally before tax time when it comes to investing? Don't say listen to Victoria. Because I would never give you advice. Absolutely not. No, I like to get my house in. In order, I like to download all of my statements. I look at my tax holistically because obviously I freelance in addition to my PA wage income. - Okay, it does. - And I look at me go. My, I have earned a profit or dividends on my shares. And so I have to factor in all of the money that I've earned. And I look at that for me personally to see what tax bracket I'm sitting in and do some calculations around whether or not there's anything I can do to drop that. - Oh, I'm just thinking about that. - And you might be, you might be screwed. - This is not a great year for me, everybody, playing along at home because I wrote on. - Because I released my first home super savings scheme and a lot of things have been happening. So we're really crunching the numbers this year. - Oh, Violeta's got to cut out for me. - Yes, my queen's gonna be working hard this year. But yes, so I like to look at it because, you know, we've spoken about before, general tax stuff. - Yeah. - There are lots of things that you can do to reduce your tax will income that might be contributing to Super or your first home super savings scheme if you're saving to buy a house. It might be making charitable contributions. There are lots of different things that you can do. And if you're sitting right on the precipice of the next tax bracket up, it might be worth pulling it down. Because I obviously own my own business. I can also make purchases for the business that I need to make anyway. And those then can help offset some of my income. - Yeah. - So having a look at how much I've earned holistically, specifically including any dividends or payments that have come from my investments, I mean that I can plan as best I can to put myself in. - The most positive position when it comes to my tax bracket. - Yeah, it'll lead. And then, yeah, you can just hand all of that information over to your accountant. But if you do happen to be doing your tax yourself, which a lot of people in the She's on the Money community do, and like we encourage, 'cause the ATO has a really good system that makes it, I don't wanna say fail safe, 'cause it's not, 'cause you have to dot all your eyes and cross all your teeth. But it is quite self-directed. Like it is very easy to upload information and access it. But if you're doing your tax yourself, it really does pay to keep records relating to your shares and ETFs, but your statement from your platform will show the following things, right? It'll have the date and the price or reinvestments that have been made, the date and sale and sale price. Like if you sold things, it will actually break down your brokerage, cost or commissions paid to brokers when you buy and sell, which is something a lot of people are able to claim on their tax. Other expenses you incur to purchase them, like loan interest, the date and amount of any distributions you've received, even for ETFs, and the details of any non-assessible payments that have been made to you, then it will also have the details of other CGT events. Like if there have been units splits, and this is where it starts to get-- - And converts, yeah. - It starts to get a little bit complex, but you don't have to stress because your platform will do this for you. But things like units splits or unit consolidations or returns of capitals or takeovers or mergers or demurgers or like bonus unit issues, which can happen. - Yeah. - That sounds complex, but it's usually just broken down in your statement, and then details of capital losses made in other years. And now no one wants to loss, but losses can be used because you might be able to use that loss and say, well, actually, Victoria, last year, I lost some money. I'm gonna put my hand up and tell the ATO about that. And then you might be able to offset these losses against your future gains. - That's a fact. - That means, TLDR, you will pay less tax on your gains because you made a loss prior. - Yeah. - So we don't worry, our head in the sand, when we have a loss, we are allowed to be a little bit annoyed rightly so, but just pop that one in your back pocket because then when you have a gain, you're paying less tax. - Yeah. - So here's where you can make a quick win when it comes to minimizing your tax. Things like investment platform fees, brokerage cost or commissions paid to brokers during buying or selling, all of those can be claimed against your earnings. These are things that usually, I guess, are reported in platforms, so just make sure you're taking a closer look at your dashboard and your confirmation emails or statements to find these. And just remember that while you can't claim, like if you go see a financial advisor, this is so dumb, I need to talk to someone at the government in our least, 'cause I just have a personal gripe with this, right? So you can't claim your initial statement of advice or initial advice session if you've seen a financial advisor but you can claim your ongoing investment or your sessions, they are claimable. Does the government not want me to be self-funded in retirement? - Yeah. - Like if you want me to be self-funded in retirement, which is gonna take like a big rant coming, we'll cut myself off. You want me to be self-funded in retirement so that I can help the economy keep moving forward and that you don't have to budget as much for me because I'm not relying on a pension or government assistance. Why would you not make me getting advice in the first place deductible on my tax? - It really doesn't make sense. And especially because I think a lot of people will just get their initial statement of advice and that will be their touch point and that's it. - Yeah, that's like the thing that gets the ball rolling and investing for myself sometimes. Why can't I claim that on tax? - It just makes sense. - Because I'm gonna save you so much down the line. - And especially because you can claim if you see an accountant like I do, you can claim that for your tax. - Yes. But like you just can't claim your statement of advice from a financial advisor. You can claim like any subsequent appointments about managing your money. - Yeah. - Like that you've already invested, but like to set you up, they're like no go. - So, is that rude? - Yeah. - Anyway, you can also claim some of your personal and insurance as on tax if they aren't in your sub-renuations. So for example, like income protection and like maybe trauma could be claimed outside, which is kind of nice. Also, franking credits. Those little IOUs. If you're ETF investing companies that have already paid tax in Australia, any of those statements that show that you've received franking credits and income need to be documented because they're gonna offset the tax that you pay. And I think that that's really sexy too. - So lots of bits and pieces. - Yeah, and we're putting this episode out now because we want you to start getting all your ducks in a row, get coordinated and organized. You still got a little bit of time to pull it all together. So you can take a look at everything and make sure that you set yourself up to be in the best possible position. - Exactly. - One of the things that you're taxing. - Exactly. And there are a few decent levers that you can pull to get your balance down, but I think the biggest tip of all is like, not selling assets if you don't have to. So that means that you don't have to pay CGT. Like you are only ever gonna pay CGT when you sell an asset and dispose of it. And I guess that's another benefit of going, "Well, I have a long term portfolio." Like for me personally, everything that I invest in shares, I don't plan to sell down. I plan to leave off the dividends and the money that that money makes. And then hopefully one day I've made myself wealthy enough that I can, and don't get me started on inheritance, tax that's a whole other dam podcast. But I can hopefully pass those down to my children and they also won't have to sell my shares and they can just live off the profit that that share portfolio generates. And thus I hope to create intergenerational wealth. - Don't we all? - Wouldn't that be sexy? - It would be amazing. - Anyway, money can be sexy. Taxi is not. So, you know what, having your finger on the pulse is gonna mean that you're paying less of it. And that is such a money win. I think we're done here though, Jess, 'cause I don't wanna keep talking about tax and I'm just thinking about coffee. So, I really do hope that this episode has helped ease your woes or at least answer those niggling questions when it comes to tax stuff and investing. - I was a really good reminder to me, especially around why waiting that 12 month period is really the hack to getting the most out of your investments, may I say, before you take them out, if that is of course your plan, not personal advice. - Never, I just told you what I would want to do personally. And what do we say? Time in the market beats timing the market every single time. Well, my friends, as I said before, that is all we have time for today. But as always, if you have any follow-up questions, please hit us up in the Spotify comments. Thank you so much as well to Sharesys for making this episode possible. And if you enjoyed this episode, please leave us a glowing review wherever you get your podcasts, leave a comment in Spotify, make sure you subscribe, so you never miss a tax time tip. And follow us on Facebook, on Instagram, we love hanging out with you guys there as well. We'll catch you later in the week for Friday drinks. Take care, bye. (upbeat music) The advice shared on She's on the Money is generally nature and does not consider your individual circumstances. She's on the Money exists purely for educational purposes and should not be relied upon to make an investment or financial decision. If you do choose to buy a financial product, read the PDF, TMD, and obtain appropriate financial advice tailored towards your needs. Victoria Devine and She's on the Money are authorised representatives of Money Shepa PTY LTD ABN 321649-27708, AFSL 451-289. (upbeat music)