Shareholders: some tips for preparing your income tax return

Want to make tax time easier? The key is to hit the record books nice and early. Here are our tips and tricks you might want to consider to get ahead.

If you’ve ever wondered about those people who seem to sail through tax time without breaking a sweat, chances are they’re good record-keepers. This might sound tedious but it’s a small investment of time that could pay off during tax season. That’s because detailed records might help you:

• To correctly report your income and capital gains or losses as you need detailed records of all your share transactions.
• Substantiate all allowable tax deductions. Tax deductions reduce your overall tax liability.
• In case of an audit by the Australian Taxation Office (ATO), thorough records provide proof of your transactions and supports your tax-return disclosures.

Checklist: the records that are useful to keep

• Purchase records - Keep details of all share purchases, including the date of purchase, purchase price, number of shares and any related costs – like brokerage fees. If you hold your assets on capital account, these costs are relevant to calculate the cost base of the assets.
• Sale records - Record the date, sale price and number of shares sold, along with any associated costs.
• Dividend statements - Keep all dividend statements showing the amounts received, any franking credits attached and any foreign taxes withheld.
• Capital gains tax records - Keep track of any changes to the cost of your shares due to events like mergers or stock splits.
• Annual tax statements - If you’re using a broker, they often provide an annual tax statement summarising your transactions, which may be useful for your income tax return.

How to keep good records

This habit is a lifesaver when it comes to managing your taxes. With everything documented, reporting gains and claiming deductions in your tax returns should become easier. Here are a few suggestions on keeping track of your transactions during the tax year.

• Tech is your friend here - Consider using financial software or apps that can help you track your share transactions automatically. Many tools sync with your brokerage account and keep your records up to date.
• For some, it may be time to make a spreadsheet - If you prefer manual tracking, set up a spreadsheet. Include columns for purchase and sale dates, prices, fees, dividend information and other relevant information.
• Get a folder for receipts and documents - Keep all physical receipts and documents in a folder. For digital records, create an organised folder on your computer or cloud storage then drag and drop everything relevant in there.
• Set regular dates in your diary for updates - Make it a habit to update your records to prevent you from getting overwhelmed at tax time and make sure nothing falls through the cracks.

Preparing your income tax return

When it’s time to lodge your income tax return, the following tips might help you get ready.

• Review your records and make sure they’re complete and correct. Check for any missing documents or transactions that need updating.
• Use your records to calculate your total gains or losses and dividend income for the year. For any gains on the sale of CGT assets, remember that you may be eligible for the CGT discount (e.g., if you’re an Australian tax resident and have held the shares for more than 12 months).
• Speak to a tax professional. They can provide advice and ensure your income tax return is accurate and compliant with ATO requirements.