When it comes to tax time, many investors focus on reporting dividends and capital gains, which we discussed in an earlier article. But just as important is knowing what deductions, other than franking credits, you can claim that are related to your stock market investments; these may also help to reduce your taxable income.
Below are the key deductions that Australian investors should be aware of when it comes to tax time reporting.
Platform and brokerage fees
If purchasing or selling shares through an online trading platform, investors can generally claim ongoing account fees associated with managing their investments (Tiger Trade don't charge account keeping fees).
Brokerage fees can't be claimed on buying and selling shares as they're included in the cost base (for CGT purposes).
However, if there are ongoing platform fees or administrative charges associated with managing investor portfolios, these may be deductible in the financial year they’re incurred.
Investment subscriptions and market data
Costs for subscriptions to investment newsletters, stock screeners, charting tools, or financial publications that help you make investment decisions can usually be claimed as a tax deduction, provided they are directly related to earning investment income. Keep a record of these and check with your accountant to see if they can be claimed.
Examples include:
Paid stock market newsletters or reports,
Real-time market data feeds (where paid for),
Premium stock analysis tools.
Financial advice fees
Fees paid to a licensed financial adviser may be deductible if the advice relates directly to maintaining and managing existing investments.
You cannot claim:
The portion of advice that relates to establishing an investment strategy
Initial fees or fees related to buying investments (these may instead form part of the cost base for CGT)
But you can claim:
Ongoing fees for portfolio management
Fees related to preparing reports on existing investments
Ask your adviser for a breakdown of deductible vs. non-deductible components on your annual invoice.
Interest on margin loans
If you borrow money to invest in shares or managed funds through a margin loan, the interest on that loan is generally tax-deductible, provided the investment is intended to generate assessable income (e.g., dividends or capital gains).
When working out if your loan can be deducted, it's important to consider:
If part of the loan is used for personal purposes, such as paying off a car or home renovation, then only the investment-related portion may be eligible for deduction.
If your shares become suspended or the dividends dry up, you may need to justify how the investment is still aimed at producing income.
ATO guidelines and record-keeping
The Australian Taxation Office (ATO) requires that all deductions be verified with proper records. Proper verification can include:
Receipts or invoices
Statements from advisers or platforms
Loan documents for margin loans
A written explanation - if the purpose of the expense isn’t obvious
Keeping track of expenses can get complicated if you let things pile up. An idea would be to keep a spreadsheet of all your expenses and invoices that are investment-related and provide it to your accountant or financial advisor when lodging your tax return. Remember to always speak to a financial professional to ensure that you are meeting the requirements based on your personal financial situation.
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