Whether you’re part of the massive amount of Australians who started investing during the pandemic, or ‘ETF’ is practically your middle name by this point, investing in the sharemarket often has tax implications that you gotta know (especially at tax time).

Just like other assets, if you’ve sold your shares and made a delicious profit from the sale, it’s likely you’ll need to pay capital gains tax (CGT) on it.

Why do I need to pay CGT on my shares?!

A capital gains tax ‘event’ occurs when you ‘dispose of’ an asset. For shares, that means selling them. It can also happen when a company you’re invested in merges or demerges. 

If you’re not sure whether this applies to you, ya might want to ask a registered tax agent for some advice.

‍How do I figure out what my capital gain is?

1. Work out how much your shares cost at the time of purchase
2. Add any costs like brokerage fees… Now you’ve got your ‘cost base’.
3. Work out how much you received when you disposed of the shares… that’s your ‘capital proceeds’.

Then, do this simple calculation:

• Capital proceeds - cost base = capital gain (or loss)

And this applies for your crypto, too. Check out more on that here.

Example plz

Let’s say you purchased 100 Commonwealth Bank shares (ASX:CBA) in March 2020 for $57 each plus $20 brokerage fee. Your cost base will be $5,720.

If you sold your 100 CBA shares for $90 each, then your capital proceeds will be $9,000 (less $20 brokerage)

Quick maths: $8,980 - $5,720 = $3,260 

If you have a capital gain, you need to include this as income in your tax return. If you have a capital loss, you can use this to offset present or future capital gains.

Can I get a discount?

Surprisingly, yes! If you sell your shares at a profit after keeping them for more than 12 months, you qualify for a whopping 50% discount on the usual capital gains tax. That’s more than a year, so at least a year and a day.

So this means you’ll only need to pay tax on half your $3,260 capital gain from CBA shares.

What if I invest in ETFs?

Things are a little more complicated if you invest in ETFs. Even if your dividends are automatically reinvested and you haven’t seen any money hit your bank account, you’re still gonna need to keep track of the transactions in your tax return.

The good news is that ETFs will send you a report specifically for tax time, filled to the brim with all the info you need.

All information contained in the Flux app is for education and entertainment purposes only. It is not intended as a substitute for professional financial, legal or tax advice. While we do our best to provide accurate information on the podcast, we accept no responsibility for any inaccuracies that may be communicated.