EOFY checklist for investors

With the Australian 2019 financial year rapidly drawing to a close, the month of June presents one last opportunity to get on top of your investments — before the year ends.

For tax purposes, each financial year is seen as a snapshot in time used to assess the tax payable by individual Australians. Because of this, the timing of when investment income is earned, or when investors realise capital gains has important tax implications.

This means prepared investors, armed with the full picture of their investment situation, are in a position to decide whether to bring forward the sale of particular investments to realise a capital gain or loss in the current financial year (to offset existing losses or gains), or to hold off a sale to fall in the subsequent financial year.

Are you a prepared investor? If not, there’s still time to paint the full picture of your investments and make the most of the opportunities it presents this financial year — here’s how:

Take stock of your stocks (and unlisted investments)

First, you need to find out what investments you own, and the number of shares/units you own in each.

You could turn to your broker or fund manager for this information, and if you only own investments through a single entity that makes it easy. But for investors who trade across multiple brokers, or who also own unlisted investments, it’s best to consult Australia’s share registries (Link Market, Computershare and Boardroom being the most common) for records of the investments you own.

Once you have this information, you’ll need to put it together in one place. Many investors build a spreadsheet to track their portfolio, or you could use an online portfolio tracker like Sharesight or Yahoo Finance to view all your investments in a single place.

Paint your financial picture

Now you need to understand your income and capital gains made on your investments during the current financial year.

Share dividend and fund distributions are often a significant stream of income for Australian investors, particularly among self-funded retirees. Records of the income paid will be available from the same registries consulted earlier, or through a portfolio tracking tool. Once you have this information, you can calculate the total income received.

Have you sold investments this financial year? There are capital gains tax implications if you realised capital gains or losses on the sales. To find out, you’ll need to find the cost price of any investments sold, and the price / quantity sold during the year from the broker or fund manager involved.

Calculating the capital gains from this point is where it starts getting more difficult.

Australia permits multiple methods to calculate capital gains tax. Using different methods such as first-in first-out (FIFO) and last-in first-out (LIFO) can impact the cost price of the asset sold (and thus the capital gain made) particularly if multiple parcels were purchased over time at different prices.

Additionally, accounting for unlisted investments, distributions and distribution reinvestment schemes as well as the various types of possible corporate transactions that could occur can make your overall position more difficult to understand.

EOFY doesn’t have to be a nightmare

Whether you’re working with an accountant or not, it’s important to be a prepared investor. That means taking ownership of your investment decisions, tracking your own investment portfolio, and implementing strategies to ensure you meet your tax obligations and comply with the law. Fortunately, with the proliferation of online tools — from your fund manager, to share registries and dedicated portfolio trackers — this is easier than ever.

By David Olsen
David Olsen works at Sharesight, an investment portfolio tracker that provides reliable tax and performance reporting to self-directed investors and financial professionals.
Sharesight does not provide tax or investment advice. The buying of shares can be complex and varies by individual. Seek tax and investment advice specific to your situation before acting on any information in this article.