Possible Deductions
- Interest and borrowing costs on loans where the borrowed funds are used to buy shares.
- Ongoing management fees paid to financial planners, stock brokers, and investment managers.
- Travel expenses for going to visit investment managers, attend company meetings, etc.
- Investment journals, subscriptions, and training.
- Computer depreciation and software programmes.
- Telephone, internet and home office running costs.
Interest and Borrowing Costs
If you borrow money to buy a share portfolio, you can claim a tax deduction for the loan interest. However, if the loan has a private component, you will only be able to claim interest incurred on the part of the loan used to acquire the shares.
The benefit of such a strategy is that the interest expense can be used to offset any dividend income received, thus freeing up franking credits that can be offset against other taxable income.
Investors who use this strategy hope that their shares increase in value under this strategy and any capital gains are only realised in a later year when the taxpayer is on a lower tax rate, for example, in retirement.
However, be aware that borrowing is a good strategy in a rising market, but it can multiply any losses in a falling market. The last thing you want is a loan to repay but no shares to show for it. Don't consider borrowing if you are new to investing.
Records You Need To Keep
Proper records must be kept, regardless of whether you use a tax agent to prepare your tax return or do it yourself.
You must keep:
- your acquisition and disposal statements (your 'buy' and 'sell' contracts) - keep these records for five years from the date you dispose of your shares
- your dividend statements - keep these records for five years from 31 October or, if you lodge later, for five years from the date you lodge your tax return.
- invoices/receipts for all deductions claimed.
You will receive most of the records you need to keep from:
- the company that issued the shares
- your stockbroker or online share trading provider
- your financial institution, if you took out a loan to buy the shares.
ATO website:
Shares: helping you to avoid common mistakes
Unsure whether an expense which you incurred is tax deductible? Send us all your receipts when requesting for your tax return to be prepared. Our tax accountants will check and advise on tax deductibility. Contact us for assistance with your tax returns today!