As we head into June it means one thing for ASX share investors: tax time.
This Australian financial year ends 30 June 2020 and investors need to start getting their affairs in order. That means buying and selling shares in the next month or so can have big implications for your tax.
So, how do your ASX share trades impact your FY 2020 tax? What can you do to get yourself into the best shape possible?
What selling ASX shares means at tax time
The biggest factors to consider for investors will likely be capital gains and income.
ASX dividends are counted as ordinary income, which means they will be assessed as part of your FY 2020 tax. Capital gains can be a real advantage to investors because you choose when you realise that gain.
A capital gains tax (CGT) event is realised when you sell your ASX shares. For instance, the Xero Limited (ASX: XRO) share price has climbed higher in recent years and long-term investors might be sitting on a healthy profit.
Selling shares for a capital loss like Woodside Petroleum Limited (ASX: WPL) could also have implications at tax time.
Keep track of your portfolio
While many companies have slashed dividends, it’s important to know what your reportable income from ASX shares is for the year.
All the relevant information is usually obtained fairly easily after 30 June 2020 from your broker or share registry.
In terms of capital gains and losses, this requires a bit more calculation. If you’ve held your ASX shares for over 12 months, those profits will be subject to 50% CGT.
If you’ve been buying and selling during the recent bear market, any shares held for less than 12 months would be subject to 100% CGT.
It’s worth noting that a capital loss cannot reduce your income but can be used to offset a capital gain. That means you can reduce your overall tax if you’re selling losing shares and offsetting tax on your winners.
Use a tax adviser
Clearly, this tax stuff can get pretty complicated. That’s why finding a qualified tax adviser is a great idea. These professions can make your life easier and might even save you more on tax than you otherwise would get.
More money saved on tax could be more money spent on ASX dividend shares like Fortescue Metals Group Limited (ASX: FMG) for the years ahead.