ETF tax question for last financial year

upended on 26/07/2021 - 15:02
Last edited 26/07/2021 - 15:02

I invested some money in ETFs last financial year. This is my first investment in ETFs ever. I purchased IXJ, NDQ and ETHI via CommSec Pocket app. Now that I am collating all the information for filing my tax returns, I went online to check if my tax statements are available.

It turns out that IXJ is managed by Computershare and the only documents I can find after I log into my Computershare account are the 2 payment advices for the distributions they made in the last financial year. There is also an option to purchase a tax pack, but that comes at a whopping price of $49. I found a consolidated statement on CommSec but they state that their EOFY statements are summary documents only and cannot be used for taxation purposes.

So here is my question to you - In the case of IXJ, do I have to purchase the tax pack for $49 or is there another way to get the tax statement?

Additionally, can someone also confirm if I need to include distributions for June 2021 (as income) even though they were technically paid out in July 2021. I definitely need to include distributions for December 2021, even though it was paid in January 2021 because that still falls with the same financial year.

Thank you!

Financial

Comments

  • Mr Haj on 26/07/2021 - 15:12
    +2

    What about NDQ and ETHI? I know Betashares send out a tax statement for their ETFs. I think it might be mandatory for all ETF providers.

    • upended on 26/07/2021 - 15:19

      Thanks! So should I expect a printed copy for IXJ sent to me via post? Any idea when they send these out?
      For NDQ and ETHI, these are managed by another registry - Link Market Services. Looks like their tax statements are not yet available.

      • Mr Haj on 26/07/2021 - 15:27
        +1

        https://images.ctfassets.net/91sm3pewxzag/6rJOSdqpNeo26WK2cc…

        You need to report as income from a managed fund and NOT income from dividends. The statement tells you each dollar amount for each label.

        Yeah it will probably be sent out via post. I have my communication preferences set to email only but they always send me stuff in the mail anyway haha.

  • thetrain on 26/07/2021 - 15:18
    +3

    Be patient, the tax statements haven't been released yet

    • upended on 26/07/2021 - 15:20

      Phew! That's good to know. I will check again in the first week of August; hopefully they are available (free of cost, I hope) by then.

      • thetrain on 26/07/2021 - 15:21
        +1

        By law they are free.

        Also if this is your first time expect more info than you realised you need to fill in =D

      • thetrain on 26/07/2021 - 15:22
        +1

        example guide from last year for Betashares (NDQ)

        https://www.betashares.com.au/files/collateral/BetaSharesTax…

      • andrek on 26/07/2021 - 17:16
        +1

        As thetrain mentioned, the statements are free for each ETF. However, what those share registries do is to collate all those statements into one "tax pack" which is not free. If you only have a few ETFs you should be able to just use each ETF's statement for your tax return. I have 10+ different ETFs and never needed that tax pack.

        Expect the statements to come out late Jul - early Aug. Last year it was on 8th of Aug, the year before - on 30th of July.

        • upended on 26/07/2021 - 17:52

          Cool, thanks for confirming!

    • xylarr on 29/07/2021 - 16:25

      Yup this - just wait. Unfortunately, once you have investments like these, you can't do you tax nice and early.

      I just had a look at my Vanguard tax statements. For me, since 2015, I have received them between 21 July and 15 August. Mostly though by the end of July.

      I also have other shares (not ETFs) which send out a tax statement. This is for stapled securities such as Sydney Airport. Back to 2012, I have always received this within a few days of 14 August each year.

      I generally don't even think about starting my tax until the beginning of September. I spend a weekend getting it all together and then email my accountant.

  • Digitalco on 26/07/2021 - 15:30
    +1

    How is commsec pocket is it good?

    • cheapisgood on 26/07/2021 - 15:49
      +2

      Good for newcomers and just want a set and forget ETF.

      Spaceship is pretty good too.

      • upended on 26/07/2021 - 15:51

        Yes, Spaceship and Raiz are good.

    • upended on 26/07/2021 - 15:49
      +1

      I like it. Yes, its $2 per trade, but the returns on the 3 ETFs I have invested so far have been good, so I don't really mind the $2 fee. Its better than paying $19 odd dollars via CommSec.

      • Digitalco on 26/07/2021 - 16:03

        This may seem like a silly question, but if i buy an etf, can we just set it and forget it and do the taxes when we sell it? planning to use commsec still a beginner

        • upended on 26/07/2021 - 16:10
          +3

          You can purchase ETFs and you don't really need to do much during the year. However, even if you don't sell them, you still need to know when distributions get paid out, so you can include this information in your tax returns. Its only when you sell that you will need to calculate your capital gains (or losses) and also include this information when you file your tax returns.

          • Digitalco on 26/07/2021 - 16:34

            @upended: What exactly is this distribution you're referring to? Reading the reviews, I find that individuals get roughly $30 or less from this distribution.

            • upended on 26/07/2021 - 16:44

              @Digitalco: Distributions from ETFs are the same as dividends from shares. As Jessica Irvine recently explained in one of her articles on Sydney Morning Herald, ETF owners, like me, get paid “distributions” – essentially a bundle of the dividends paid out by each of the underlying companies in your ETF holding.

              The amount you receive depends on the number of ETFs you have purchased in the first place. So no, it won't be capped at $30 in my opinion.

              • dust on 26/07/2021 - 17:25

                @upended: Why would it be capped at $30?

                • upended on 26/07/2021 - 17:51

                  @dust: @dust, I never said they will be capped at $30; if anything I am saying they are not. I was just responding to @Digitalco who had read elsewhere that individuals get roughly $30 or less.

                • Seraphin7 on 26/07/2021 - 18:48
                  +1

                  @dust: The distribution will be $x.xx per ETF unit held. More units = bigger distribution.

          • andrek on 27/07/2021 - 13:27

            @upended: If ETF is Australia based, like VAS, and TFN was provided, all distributions will be prepopulated in your tax return, so literally nothing extra to do.

            In a rare case of ETF restructure (IXJ in 2019 for example) this might trigger a capital gains event so you'll have to pay CG.

            • Sweetnsour on 28/07/2021 - 02:04

              @andrek: Supplying TFN allows the ETF to keep tax withheld to minimum and ATO to audit.

              So are you sure it's prepopulated? It still requires you to declare in your tax return or to your accountant.

              • andrek on 28/07/2021 - 17:51

                @Sweetnsour: By providing TFN in the share registry you make it easier for ATO to track you, but also to make it easier to submit tax return by automatically populating necessary fields with reported dividends and credits.

                Looking at my tax return draft in myTax now - some dividends are already pre-populated, but I did notice that they are from companies, not from ETFs. But I do remember that some other distributions were also included in the draft last year. Probably I need to wait until those are actually reported to the ATO before they appear in myTax.

  • pencilman on 26/07/2021 - 18:53
    +1

    So let me get this right.

    If I buy the ETFs using a broker, eg Selfwealth, and hold the ETFs for a few years (is. no selling), then for the tax return I only need the following to give to my accountant:

    A tax statement for each ETF which will be sent out in Aug or Sep.

    So just like investing in managed funds through Colonial or BT.

    • Lurk Hartog on 27/07/2021 - 08:05
      +1

      Correct. You need to pay tax on dividends/distributions, whether you take them as cash or reinvest them. Nothing else needs to be done until you sell.

      • oblivianz on 27/07/2021 - 11:46

        Are you able to enlighten on what we need to provide to the accountant when we sell?

        I've been buying an ETF on Selfwealth and have selected the reinvesting DRP option. Sold this FY and have yet to do the tax return.

        • andrek on 27/07/2021 - 13:45
          +3

          Each time you trade you should be getting trade confirmation letters, usually a day or two after the transaction. If with SelfWealth - look for emails with "Contract Note" subject line. Keep those PDFs and bring them to accountant at tax return.

        • Lurk Hartog on 27/07/2021 - 14:13
          +1

          You basically need a record of each of your purchases (including DRP purchases) and of the sale. You'll have to pay capital gains tax on whatever profit you made from the sale. 50% discount if you held for more than a year.

          And if you made a loss you can carry that forward to offset future losses.

  • Daniel Plainview on 26/07/2021 - 19:02
    +6

    OP (and others).

    Consider signing up for an account to track your portfolio at Sharesight. It's free if you have less than 10 holdings - and I use for my long term ETF's - makes it SO much easier come tax time or just to see how things are tracking i.e Div reinvestment etc.

    I used to do semi manually but this is much superior and you can even integrate with your broker, one of the better free things Ive found in quite a while.

    • upended on 26/07/2021 - 21:05

      Thank you!

    • cashless on 26/07/2021 - 23:42

      Thanks for the tip Nikko. I'll be checking this out as getting all those individual statements together each TY is a real pain. I see that Sharesight also tracks your CGT if you sell as well. This could just be my find of the month!

      • Kenb0 on 27/07/2021 - 02:49

        Just be aware that the current distribution breakdowns in sharesight are only estimates and shouldn’t be used for taxation purposes. Once you get your etf statements, you can use those statements to enter the right figures in OR wait for sharesight to update it themselves around September from the etf annual statement data. Note that sharesight don’t get ALL etf statement data so if one or more of the ETFs you own isn’t on their list, then you need to manually correct it on sharesight anyway

        https://www.sharesight.com/blog/australian-etf-distribution-…

  • hoju83 on 27/07/2021 - 08:10
    +2

    Additionally, can someone also confirm if I need to include distributions for June 2021 (as income) even though they were technically paid out in July 2021.

    I didn't see anyone answer this but yes you do need to include it in this year's tax return.

    For ETFs at least, even though the distribution is paid out in July it was still technically income earnt in June so it falls within this FY for tax purposes.

    I think it's mentioned by Jessica Irvine in that article you quoted in one of your responses.

    • upended on 27/07/2021 - 11:32

      Thanks! Glad you answered this question. Yes, Jessica had also said that it must be included but a quick google search seems to give mixed responses. That said, I'd expect the distributions paid out in July included in the tax statements from Computershare and Link Market Services.

      • andrek on 27/07/2021 - 14:18
        +1

        I was about to post that hoju83's reply was incorrect. I remember my accountant mentioning that I need to declare dividends in the year it was paid, not in a year it was issued. Also, The God in these matters seems to agree with that.

        However, that's all about company dividends and Jessica mentioned that different rules apply to company shares vs ETFs and ETF distributions should be declared in the year they are issued. Adding another question to the list of questions to ask my accountant next time I meet him to confirm this ;)

        • Sweetnsour on 28/07/2021 - 02:11

          Technically you're correct that the dividend tax is paid in July. But you are allowed to declare it in June. Though it's the minority, most accountants recommend tax in July to avoid confusion.

    • xylarr on 29/07/2021 - 16:41
      +1

      Just wait for your tax statement - it will have it all laid out.

      It gets tricky with things like stapled securities where you have a company stapled to a trust - eg Sydney Airport.
      Income is declared at a particular date and then paid at a later date.
      For trusts, the tax year is the year in which it is declared, even if paid the following year. Trusts pay distributions.
      For companies, the tax year is the year in which it is paid (receive by you), even if it is declared in the previous financial year. Companies pay dividends.
      Just to be really ugly, I have had stapled securities which declare a dividend/distribution effective 30 June, but pay out on (say) 15 July.
      For example, I might receive $200, with $100 attributable to the company part, and $100 attributable to the trust part. Only the trust part is immediately taxable, the company part waits until next year's tax.

      Anyway, you don't have to work all this out for yourself. If a company has this kind of structure (stapled share/trust), they will send you an annual tax summary. During the year they may send you other distribution notices, but you can effectively ignore them - just wait for the annual tax statement.

  • Lurk Hartog on 27/07/2021 - 08:14
    +2

    I may have missed it but if nobody answered your final question…

    Yes, you must include those final distributions in last year's tax return. They are taxed on the date they are "issued" (I can't recall the correct financial term), not on the date that you receive the payment.

    Also, +1 to Sharesight! If you sign up now or will be relatively simple to backdate your investments.

  • sosleepy on 27/07/2021 - 11:00

    I recently made a first-time investment in ETFs using commsec pocket and have been holding them for a few months and plan to hold them for much longer. Do I need to include this in my tax return if the distribution was less than $50, or do I need to wait for the tax statement for both ETF and hand it over to the tax accountant?

    • upended on 27/07/2021 - 11:30
      +1

      If you ask me, I would just include it. ATO already automatically includes savings interest paid by banks (which in my case is mostly in cents); there is no way they will allow us to exclude distribution earnings that were less than $50. All earnings are treated as income. That's my view. What does your tax accountant think?

    • brad1-8tsi on 27/07/2021 - 12:17

      yes, you need to include any amount in your income tax.

  • upended on 27/07/2021 - 11:42

    For those who are new to ETFs, I recommend the article from Jessica Irvine that I have quoted in an earlier response.
    https://www.smh.com.au/money/investing/6-things-i-ve-learnt-…

  • brad1-8tsi on 27/07/2021 - 12:16
    +1

    If they are Australian domiciled you need to wait for the tax statements that they will send you via email if you have registered properly with the appropriate share registry.

    These tax statements usually come out in August. You really need them as an ETF is treated as a trust/managed fund so there may be franked & unfranked dividend components, capital gains, foreign income, foreign tax withheld etc

    If they are foreign domiciled like VTS you need to go through your statements and work out the distribution and tax withheld

    • cashless on 28/07/2021 - 22:39

      That was going to be my question. If I haven’t sold ETF over the year, how come I still have CGT liabilities? I think that you explain it by saying that some ETFs attract CGT because of the way the portfolio changes as a result of the way it is managed(some selling activity within the fund). True also for foreign income in some cases. All complicated stuff which still causes a headache when filling in the TR

      • brad1-8tsi on 29/07/2021 - 09:36

        It isn't a headache if, when doing MyTax you tick the box that says "managed fund" and then it all downloads automatically. If you don't use MyTax the tax statement tells you exactly where to put the figures.

      • xylarr on 29/07/2021 - 16:47

        ETFs are managed funds, not companies. They are usually structured as a trust for tax purposes. A trust does not pay tax itself, the beneficiaries (owners) of the trust do - tax passes though the trust.

        ETFs are managed funds (i.e the "F" in ETF). During the year they buy and sell various shares. Doing so attracts capital gains which must be paid by all the holders of the trust. It's exactly the same as if you yourself held all the individual shares that the managed fund holds, and traded them in the same way - you get the same tax outcome.

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