With the tax return due date fast approaching, it’s important we get all our documents sorted. While your employer income is usually simple, it’s those investment earnings the Australian Taxation Office (ATO) is paying extra attention to.
It’s important you don’t miss any of your investment income. The ATO uses sophisticated data-matching programs, so they’ll likely know about your earnings from banks, share registries, and even cryptocurrency exchanges. Getting it right now saves you hassle later.
Here are some of the most common types of investment income that people sometimes forget to include.
Rental Income
Rental properties are a major focus for the ATO. We know interest rates are high, so you want to claim every deduction you can, but it’s easy to make mistakes in a few areas.
- Interest on Loans: You can only claim interest on the portion of your loan that relates to the rental property. If you refinanced and took out extra money for a private expense — say, a holiday or a new car — you can’t claim a deduction on the interest for that extra amount. You’ll need to work out the private and investment proportions of the loan.
- Repairs versus Capital Works: This is where most people get tripped up.
- Repairs (like fixing a broken hot water system or replacing a few cracked tiles) are generally deductible in the year you pay for them.
- Improvements (like adding a deck or installing a brand-new kitchen) are considered capital in nature. You must depreciate these costs over several years. Initial repairs right after buying a property are also considered capital and must be depreciated.
Shares and Dividends
If you own Australian shares, you’ll need to declare any dividends you received.
The key thing to look out for here is the franking credit. This is a credit for the tax the company has already paid on the profits it’s distributing to you.
- You must declare the full amount of the dividend plus the franking credit as income.
- The franking credit then acts as a tax offset (a reduction in the tax you pay). For most people, this is a great benefit, as it means you won’t pay tax again on profits already taxed by the company.
- Make sure you have your dividend statements ready, as they’ll show both the cash you received and the franking credits you’re entitled to.
Cryptocurrency and Other Digital Assets
For the ATO, cryptocurrency is an asset, just like a rental property or a share. This means when you dispose of it, the transaction is treated as a Capital Gains Tax (CGT) event.
- When is it taxable? You incur a CGT event when you sell it for cash, swap it for another crypto or asset, or gift it. Simply holding it is not a CGT event.
- The 50% Discount: If you held a crypto asset for 12 months or more before selling it, you’re generally entitled to the 50% CGT discount. This means you only pay tax on half of the profit (capital gain).
- Keep Your Records: You’ll need records for every transaction: the date you acquired it, the purchase cost (in Australian dollars), the date you disposed of it, and the sale proceeds (in Australian dollars). The ATO is focusing heavily on this area, so clear records are a must.
The Capital Loss Benefit
If you sold any shares, property, or crypto for a loss this financial year, you should still declare it. A capital loss can’t be used to reduce your regular salary income, but you can use it to offset any capital gains you make this year or carry it forward to offset future capital gains. It’s a key part of managing your long-term investment tax position.
Conclusion
Reviewing your investment records now is the most efficient way to ensure your return is accurate before the deadline. Getting these details right means you won’t miss out on eligible offsets or face future ATO audits. If you have any questions or would like to discuss your specific investment position, please reach out to us.
