Posted on April 4, 2020
ATO has announced a new data matching program as one of the strategies to ensure that Taxpayers are correctly meeting their taxation obligations in respect of their share transactions.
This matching program will source details of share acquisitions and sales from major Companies that offer share transaction services from 20 September l985 to 30 June 2016. It collects data that includes the name and address of the Taxpayer and the price & number of shares acquired or sold. The collection of data occurs twice annually covering the periods January to June and July to December, occurring during the quarter following the end of periods.
The date generated from this program will become available to Taxpayers on an annual basis at the time when they are lodging their tax returns via electronic pre-fill channels, which informs them of their obligations to report their capitol gains from share transactions;
Those that are not registered for their taxation obligation are more likely to be identified by the ATO through this program and accordingly, their taxation obligations will be required to be registered;
A minimum twenty-eight (28) days will be provided to Taxpayers for them to respond to any discrepancy matching obtained by the ATO before any administration action is taken. However, if Taxpayers foil lo comply with their taxation obligations after being reminded, prosecution action may be taken; and
This program also requires Taxpayers to comply with their taxation and superannuation obligations, including registration requirements, lodgment obligations and payment responsibilities.
This share transactions data matching program promotes the integrity of the taxation and superannuation systems and instils further community confidence. It further allows the ATO to be in a better position to identify non-complaint behaviours.
If you are uncertain about the share transactions undertaken in the past and whether they have been correctly disclosed in your tax returns, please call us and we will be happy to assist with your questions.
Posted on April 4, 2020
There is a restriction on claiming franking credits when shares are held for less than 45 days (or 90 days for preference shares) and the total credit entitlement of each individual is more than $5,000.
There has been some contention as to how this rule applies when the taxpayer already held shares in the company and acquired an additional parcel of shares.
The ATO has published an update on its website regarding the last-in first-out (LIFO) rule, which is relevant to establishing whether a taxpayer is a “qualified person” for the purpose of claiming franking credits.
Broadly, a taxpayer is a “qualified person” if they hold shares at risk for a continuous period of 45 days (or 90 days for preference shares) during a qualification period.
The LIFO rule applies so that shares purchased at different timing are brought together into a bundle to apply the holding period rule. Once this group is established, the sale of any shares from the group is taken to be on a LIFO basis.
This means that when a taxpayer sells a share that is included in the group within the relevant qualification period, the date that the share was acquired is taken to be the date on which the most recently acquired shares in the group were acquired. For example:
Jessica has held 10,000 shares in Mimosa Pty Ltd for 12 months. She purchased an additional 4,000 shares in Mimosa Pty Ltd 10 days before they became ex-dividend (the day after the last day on which acquisition of the shares will entitle you to receive a dividend) and then sold 4,000 shares 20 days after Mimosa Pty Ltd shares became ex-dividend. Her total franking credit entitlement for the income year was more than $5,000. The shares she sold are deemed to have been held for less than 45 days, based on the last in first out method. Jessica would not be entitled to the franking credits on the 4,000 shares sold.
Please note this rule only applies for claiming franking credits. For Capital Gains Tax purpose, specific identification or a first in first out basis can also be used to determine the shares sold.
Please contact our office if you require further assistance with the application of the LIFO rule.