If you own shares, you will have tax entitlements and tax obligations.

Don't pay more tax than you need to

• Acquisition or Buying
      
• Ownership & Owning
      
• Disposal or Selling

What you do during each stage of the life of your shares can affect your tax for years to come.

Acquisition/Buying

You can acquire shares :

• by buying
      
• by inheriting
      
• as a gift
     
• on the breakdown of a marriage
      
• through employee share schemes
      
• through a conversion of notes to shares
     
• through demutualisation
     
• through bonus share schemes
     
• through dividend reinvestment plans
     
• through mergers, takeovers and demergers
     

Do You Know?

• Generally, the names you put on the purchase order determine who must declare the dividends and who can claim the expenses
     
• If you hold a policy in an insurance company that demutualises, you may be subject to capital gains tax either at the time of the demutualisation or when you sell your shares
     
• Even if you did not pay anything for your shares, you should find out the market value at the time you acquired them
      
• In some circumstances, you may be the owner of shares purchased in your child's name
     
• Costs associated with buying your shares such as brokerage fees and stamp duty are not deductible, however, they may form part of the "cost base" (costs of ownership) for capital gains tax purposes

 

Ownership & Owning

The following activities can affect your tax :

• receiving dividends
     
• dividend reinvestment plans
     
• bonus share schemes
     
• call payments on bonus share schemes
     
• receiving non-assessable payments
     
• mergers, takeovers and demergers
       

Do you know?

• You need to declare all of your dividend income on your tax return, even if you use your dividend to purchase more shares (for example through a dividend reinvestment plan)
     
• Tax deductions on shares can include management fees, specialist journals and interest on monies borrowed to buy them
     
• Receiving bonus shares can alter the capital gains tax cost base (costs of ownership) of both your original and bonus shares
     
• You may choose to roll over any capital gain or capital loss you make under an eligible demerger
     
• The Tax Office produces an information fact sheet for each major takeover, merger or demerger
     
• Payments or other benefits you obtain from a private company in which you are a shareholder may be treated as if they were a taxable dividend paid to you
     

Disposal or Selling

Disposing of your shares can affect your tax.

You can dispose of your shares :

• by selling
     
• by giving them away
      
• on the breakdown of a marriage
      
• through compulsory liquidation
     
• through share buy backs
      
• through mergers, takeovers and demergers
       

Do you know?

• When you dispose of your shares, you may make a capital gain or a capital loss
     
• Your capital gain is the difference between your "cost base" (costs of ownership) and your "capital proceeds" (what you receive when you sell your shares)
     
• The Tax Office provides a number of calculators to assist you in working out your capital gain or capital loss
     
• The law has been changed so that an administrator as well as a liquidator can declare that a company's shares are worthless
     
• If you have owned your shares for more than 12 months, you may be able to reduce your capital  gain by the capital gains tax discount of 50%
     
• Simply transferring your shares into someone else's name may mean you have to pay capital gains tax

BE PREPARED :

Keep proof of all your share transactions from the beginning to ensure you don't pay more tax than you need to over the years.
    
For more information about shares please visit http://www.taxwise-australia.com/taxinfo.html
   

 

 About The Author

Warren Kruger is an Australian Tax Specialist and Advisor.

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