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ATO's guide to reporting investment returns

·3-min read
The ATO tax documents and Australian money
Whether you’re a day trader or a crypto investor this guide will help you determine how to report your investments to the ATO (Source: Getty)

If you have made a profit or a loss from investing in the last 12 months you need to disclose your that to the Australian Taxation Office (ATO).

You will need to disclose to the ATO what is known as Capital Gains Tax (CTG) and despite the name it is actually part of your income tax assessment, not a whole new tax.

What is CTG?

CGT is the tax you pay on any capital gain that you include on your annual income tax return, according to the ATO.

It is not a separate tax, merely a component of your income tax. You are taxed on your net capital gain at your marginal tax rate.

Defined by the ATO, your net capital gain is: “Your total capital gains for the year minus your total capital losses for the year and any unapplied net capital losses from earlier years minus any CGT discount and small business CGT concessions to which you are entitled.”

If you lose more money than you've made then your difference is the losses and that can be carried forward to later income years and be deducted from future gains.

That means even if you have lost money on investments this year, you can use that loss to pay less tax if you make a gain the following year - so make sure you keep note of all wins and losses.

Importantly, there is also no time limit on how long you can carry forward a net capital loss. You just need to apply your net capital losses in the order that you made them.

How to disclose CGT to the ATO

There are three main steps you need to take to disclose any CGT gains or losses each financial year, and the ATO has provided a thorough guide for personal investors to help you through it.

The three main steps to disclose CGT are:

  1. Decide what CGT event has happened - CGT events are the different types of transactions or events that may result in a capital gain or capital loss. For example, selling some shares would be a CGT event.

  2. Work out the time of the CGT event - The timing of a CGT event is important because it determines which income year you show your capital gain or capital loss in. If you sell or dispose of an asset to someone else, the CGT event happens when you enter into the contract of sale.

  3. Calculate your gain or loss - There are three ways to determine whether you have made a loss or gain: indexation method, discount method or other method. There is a specific reason for using each. Look at the ATO’s personal investor guide to determine which method applies to you.

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