June and winter are upon us and that means tax time is, too. If you currently own ASX shares, you’re likely looking for tax tips for investors. Doing our taxes each year can be time-consuming and expensive, depending on how you choose to have your tax affairs managed. But it’s an important time, nonetheless, and one that can have some serious impacts on your finances.
Successful investing normally comes with a bittersweet reality – we have to share our success with the taxman. It’s the price we all pay for a civilised society, as they say.
But that doesn’t mean there’s not a right way and a wrong way to doing our taxes. So below I’ve listed 3 tax tips for investors! Remember, this is all just general advice, make sure to check with a licensed tax professional regarding your own situation.
Tip 1) Claim all the deductions you are entitled to
Investing can take up a lot of time and money. Staying on top of things in the investing world can often cost you some serious coin. Newspaper subscriptions, investing memberships or accounting software fees are some of the many costs one can occur in managing an investment portfolio. Luckily, most costs that are directly applicable to running your investments are usually tax-deductible. So make sure you’re claiming all relevant costs that you might incur as part of your investing activities, including any capital losses.
Tip 2) Detail all of your income
There are many different ways you can make money in the course of an investment. There’s buying and selling shares and receiving dividends for one. But there are also managed fund distributions and foreign currency gains as well. Not to mention trading cryptocurrencies or options.
To the chagrin of some, no matter where or how you get the money in the course of your investing activities, it’s probably taxable. So don’t get yourself into a sticky situation with our friends at the Australian Taxation Office (ATO) and make sure you report any and all income you earn from your investments.
Tip 3) Earmark your return for ASX shares
Many of us will be entitled to a refund of some tax when we eventually receive our tax returns. Whilst it’s very easy to go out and splash this money on some new clothes, a fancy dinner or a holiday (domestic this year), it’s an even better idea to earmark the cash as ‘investing money’ before you even get it. That way, you can give your ASX shares portfolio a major boost without blinking an eye.
Of course, if you would rather top up your savings for a rainy day then that’s completely fine. But think twice about how best to use a windfall this tax time. You might find that a new outfit or a night out on the town can wait.