Shares and Taxation E-Book

Jimmy B. Prince

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 214

Veröffentlichungsjahr: 2010

Beschreibung

The tax issues associated with owning shares can at times be mind-boggling and difficult to understand. This immensely practical guide unravels all of the umpteen taxation rulings that you'll need to comply with the moment you start buying shares. The book explains in simple terms core tax principles with numerous tax tips, potential traps and practical case studies to reinforce the learning process. So why pay a registered tax agent $250 an hour to solve a problem when you can read this book and find the answer yourself?

Leseprobe

Shares and Taxation: A Practical Guide to Saving Tax on your Shares

Table of Contents

Chapter 1: The Australian tax system and shares

Investing in shares: back to basics

How the Australian tax system works

At a glance: how you’re taxed

Coming to terms with self-assessment

Getting professional help

At a glance: shares and tax

Checklist

Useful references

Australian Taxation Office publications

Chapter 2: Share trader or share investor: why all the fuss?

Defining who you are

Share trader

Share investor

Carrying on a share trading business: the tests you had to have

Share trader

Share investor

Share trader versus share investor

Checklist: share trader versus share investor

Useful references

Australian Taxation Office publications

Australian Taxation Office interpretative decisions

Other taxation rulings

Chapter 3: Contract notes: the foundations of your taxation records

Transaction costs and tax

Buy contract notes

Sell contract notes

Useful references

Chapter 4: Taxation and ownership structures

Individual ownership

At a glance: how individuals are taxed

Limitations

Shares in the name of a child

Joint ownership

At a glance: how joint ownership of shares is taxed

Limitations

Managed funds (share trusts)

Limitations

Company structure

Limitations

Trust structure

Limitations

At a glance: how trusts are taxed

Self managed superannuation funds

At a glance: how complying superannuation funds are taxed

Useful references

Australian Taxation Office publications

Australian Taxation Office interpretative decisions

Other taxation rulings

Chapter 5: Taxing your share transactions

At a glance: tax and shares

Dividends

Franking credits

Dividend reinvestment plans

Foreign dividends

Taxing your profits and losses

Claiming a tax deduction

What is tax deductible?

Share trader

Less common share transactions and taxation issues

Share buyback offer

Bonus shares

Scrip-for-scrip rollover

Demergers

Rights issues

Employee share schemes

Shares from a deceased estate

How to complete your tax return

Useful references

Australian Taxation Office publications

Australian Taxation Office interpretative decisions

Other taxation rulings

Chapter 6: Taxing your capital gains and losses

How a capital gain is calculated

Shares bought after 21 September 1999

Shares bought between 20 September 1985 and 21 September 1999

Unrealised capital gains

Capital loss

Claiming a capital loss

A capital loss has value

Wash sale arrangements

Identifying individual shares within a holding of identical shares

Non-capital costs

Useful references

Australian Taxation Office publications

Australian Taxation Office interpretative decisions

Chapter 7: Tax-effective borrowing to buy shares

Borrowing costs

Negative gearing

Positive gearing

Personal loans

Margin lending

Line of credit

Capital protection loans

At a glance: capital protection loans

Instalment warrants

Useful references

Australian Taxation Office publications

Australian Taxation Office interpretative decisions

Other taxation rulings

Chapter 8: Taxation treatment of derivatives

Exchange traded options

Buying and selling a call and put option

At a glance: key elements of an exchange traded option

Taxation treatment of exchange traded options

Warrants

Equity warrants

Taxation treatment of warrants

Contracts for difference

Taxation treatment of contracts for difference

Useful references

Australian Taxation Office publications

Australian Taxation Office interpretative decisions

Other taxation rulings

Chapter 9: Keeping proper records and tax audits

Record-keeping

What you’ll need to keep

Shareholder dividend statements

Buy contract notes

Holding statements

Deductible expenses

Calculations

Sell contract notes

Tax audits

Useful references

Australian Taxation Office publications

Other taxation rulings

Appendix A: Key historic dates: shares and taxation

Appendix B: Taxing non-residents of Australia

A Practical Guide to Saving Tax on your Shares

Jimmy B. Prince

First published 2010 by Wrightbooks

an imprint of John Wiley & Sons Australia, Ltd

42 McDougall Street, Milton Qld 4064

Office also in Melbourne

Typeset in Adobe Garamond 12.5/15.5pt

© Jimmy B. Prince 2010

The moral rights of the author have been asserted

National Library of Australia Cataloguing-in-Publication data:

Author: Prince, Jimmy B.

Title: Shares and taxation: a practical guide to saving tax on your shares / Jimmy B Prince.

ISBN: 9781742469560 (pbk.)

Notes: Includes index.

Subjects: Investments — Taxation — Australia.

Dividends — Taxation — Australia.

Capital gains tax — Australia.

Value-added tax — Australia.

Stockholders — Australia.

Corporations — Investor relations — Australia.

Dewey Number: 332.6042

All rights reserved. Except as permitted under the Australian Copyright Act 1968 (for example, a fair dealing for the purposes of study, research, criticism or review), no part of this book may be reproduced, stored in a retrieval system, communicated or transmitted in any form or by any means without prior written permission. All inquiries should be made to the publisher at the address above.

Cover image ($100 note) © iStockphoto.com/robynmac

Printed in Australia by McPherson’s Printing Group

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Disclaimer

The material in this publication is of the nature of general comment only, and does not represent professional advice. It is not intended to provide specific guidance for particular circumstances and it should not be relied on as the basis for any decision to take action or not take action on any matter which it covers. Readers should obtain professional advice where appropriate, before making any such decision. To the maximum extent permitted by law, the author and publisher disclaim all responsibility and liability to any person, arising directly or indirectly from any person taking or not taking action based upon the information in this publication.

About the author

Jim Prince is a fellow of CPA Australia and a tax specialist. He is a former lecturer and tutor in income tax law at LaTrobe University, and teaches a number of wealth creation courses for the CAE in Melbourne. He has authored several investment books including Tax for Australians For Dummies and Building Wealth & Loving It, and has written articles for Your Mortgage magazine and http://thebull.com.au. In 2000 Jim was nominated for an Adult Learners Week 2000 outstanding tutor award.

In his earlier years Jim worked for the Australian Taxation Office and also consulted to CPA Australia ‘Technicall’.

Preface

When you invest in the sharemarket you will be relying on major public companies listed on the Australian Securities Exchange (ASX) running profitable businesses for steady income and capital growth. Unfortunately, when you receive a dividend or make a capital gain on sale of your shares, you’re legally obligated to share the spoils of your good fortune with the Australian Taxation Office (ATO).

The tax issues associated with owning shares can at times be mind-boggling and difficult to understand. There are specific tax laws in respect of how dividends and franking credits are taxed, what you can and can’t claim as a tax deduction, and how to calculate a capital gain or capital loss. There are also numerous taxation rulings you’ll need to comply with the moment you start buying shares. To complicate matters further you’ll need to establish at the outset whether you’re carrying on a business as a share trader or you’re a share investor, as different tax rules apply to share traders and share investors. Unfortunately, when it comes to tax you simply can’t guess whether you’re one or the other, and if you get it wrong the Tax Office could impose stiff penalties. The good news is you can always go to a registered tax agent if you get into difficulty. But don’t give up all hope just yet!

The purpose of writing this book is to give you the basic skills (and confidence) for dealing with the taxation of shares. The book explains in simple terms core tax principles with numerous tax tips, potential tax traps and practical case studies to reinforce the learning process. Emphasis is placed on the following core tax principles:

• how share traders and share investors are taxed

• owning shares in different legal structures

• dividends and franking credits

• what expenses are tax deductible

• how to calculate a capital gain and capital loss

• borrowing to buy shares

• taxation of derivatives

• record-keeping and tax audits.

Throughout the book you’ll find at your fingertips numerous references to taxation publications, tax rulings and tax determinations that the tax professionals use to solve specific problems. You can quickly find these publications and tax rulings on the ATO website. The book also provides a historic timeline of major events in shares and taxation. So why pay someone $250 an hour to solve a problem when you can read this book and find the answer yourself? This practical guide can continue to be used to help you find a particular publication or tax ruling you may wish to consult from time to time.

Chapter 1: The Australian tax system and shares

If you want to make money investing in shares it’s essential that you have a general understanding of how the sharemarket operates and how your share transactions are taxed. In this chapter I cover the basics and guide you through the key taxation issues associated with investing in shares.