Managing your investment income and understanding your tax obligations is essential. Let’s explore the different aspects of investment income and what you need to declare.
When You Should Declare Investment Income?
It all starts with understanding when to declare investment income, whether it’s interest, dividends, rental income or capital gains, you must declare income earned from your investments. You’re responsible for reporting these incomes, whether you receive payments directly or through a partnership or trust.
Income from Jointly Held Assets
If you jointly own assets with someone, the income is typically divided equally unless you can prove otherwise, make sure to document your shared ownership accurately.
Now let’s talk about interest income. If you’re an Australian resident and earn interest, it must be declared as income. This includes:
- interest from financial institution accounts and term deposits
- interest from any other source, including the penalty interest you get on an investment
- and, even interest from children’s savings accounts
- interest the ATO pays or credits to you – for instance, interest on overpayments, interest on early payments and delayed refunds
- life insurance bonuses
- interest from foreign sources.
You need to declare interest the ATO has imposed if it is recouped or remitted and you’ve claimed a deduction for the interest. You mention these amounts as other income in your tax return.
You need to declare interest income in the same year you received it. If you decide to rollover your investment or if the financial institution reinvests the term deposits automatically at maturity, you will have to declare the interest received as at the rollover date. This amount is considered the amount that you received if the investment was not reinvested.
Similarly, you may have the interest from term deposits, kept for over 12 months, credited to a different account at regular intervals throughout the lifespan of the investment.
Dividend payments are a common type of investment income. Often from shares. You must declare dividend income from:
- listed investment companies
- public trading trust
- corporate unit trust
- corporate limited partnership
Some dividends come with imputation or franking credits, which you need to report accurately.
Rental Property Income
If you own rental properties, declaring rental income is crucial. Report the full amount of rent, any rental bond and other related payments you receive. Remember to include income from overseas properties and goods and services received.
Managed Investment Trusts
You need to show any income you receive from any trust investment product in your tax return. It includes credits or income from a:
- unit trust
- cash management trust
- money market trust
- mortgage trust.
When you sell or dispose of managed investment trust units, you need to report capital gains or losses.
Crypto Asset Income
You need to declare rewards received for staking crypto assets. This is in the form of extra tokens from holding the original tokens. You must check the money value of the extra tokens and convert the amounts into Australian dollars when you receive them.
You need to declare any capital gains you receive when you sell capital assets. Usually, your capital gain is the difference between:
- cost base of your assets
- your capital proceeds.
If a managed fund or other unit divides a capital gain to you, then you can make a capital gain. You need to declare capital gains and capital losses in your tax return. You are allowed to offset any permissible capital losses against your capital gains to check your net capital gain or loss. On a net capital gain, you pay tax. On the other hand, you can hold the loss to offset capital gains in upcoming years if you have a net capital loss.
Managing your investment income and understanding tax obligations is a vital part of your financial journey. Always stay informed and get professional help when required. Remember that accurate reporting ensures financial stability, and secures your financial future and stay informed for more detailed guidance from Reliable Melbourne Accountants.
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