Have you sold shares recently?
If a taxpayer who is not a share trader sells shares that were held as an investment, chances are such a taxpayer would either have made a capital gain or loss on the sale (equal to the difference between the cost of the shares and the amount received on their disposal).
If the shares were held for longer than 12 months, 50% of the capital gain made will be included in the taxpayer’s assessable income in their income tax return. Companies are not entitled to the 50% general CGT discount on the sale of any CGT asset.
Other concessions in the CGT law are:
- scrip for scrip rollover relief when receiving shares instead of cash in a company takeover or merger situation;
- special concessions on the disposal of assets or shares used in a business (e.g. small business CGT concessions).
If a capital loss is made on the sale of shares (i.e. the acquisition cost exceeds the sale price), such a loss can only be used to reduce capital gains (and not other income such as salary, investment income or business income). Red flags that attract the ATO’s attention are when capital losses have been artificially created to offset capital gains or where capital losses have been reclassified as revenue losses.
The ATO can usually identify errors in income tax returns and the CGT schedules through various data matching programs.
Record keeping (e.g. of purchase and sale prices and brokerage fees) is also very important to substantiate the amounts declared in your tax return.
Employee share scheme reporting obligations coming up
Companies that have employee share schemes (ESS)must provide information about the ESS to both:
- the employee by Monday 16 July 2018 – in the form of an ESS statement that contains information necessary to for the employees to complete their tax returns.
- the ATO by Tuesday 14 August 2018 – in the form of an ESS annual report that contains more information regarding the ESS plan and the employees partaking in the ESS plan.
Speak to Nexia so that we can help you with these reporting obligations.
Beware of tax time scams
During tax time, there is usually a sharp spike in the number of email and telephone scams doing the rounds (e.g. a fraudster, claiming to be from the ATO, may call you and request some personal information or demand payment of an outstanding tax debt).
If you receive any such suspicious phone calls (or emails) claiming to be from the ATO, please do not provide any information. The ATO does not send people emails requesting the payment of debts. We would strongly suggest that you hang up immediately (if contacted by phone) and contact us as soon as possible so that we can bring this to the attention of the ATO.
Please also be aware that your Nexia advisor can, at any time, ascertain what taxes are owed and the relevant payment date(s). If you are unsure about the amount of tax you owe, please check with your Nexia advisor before payment.