Investment income

When to declare investment income

You must declare income you earn from investments and assets in your tax return. Investment income may include amounts from interest, dividends, rental income, managed investment trust credits, crypto assets and capital gains.

You need to declare investment income whether you receive payments directly or through a distribution for a partnership (such as a share club) or trust.

Income from jointly held assets

If you hold assets jointly with another person, it is assumed that income of the asset is divided equally. That is, unless you can show that you hold the asset in unequal proportions.

Interest income

If you’re an Australian resident and you receive interest, you must declare it as income. Interest income includes:

• interest you earn from financial institution accounts and term deposits
• interest you earn from any other source including penalty interest you receive on an investment
• interest you earn from children’s savings accounts, if you
  • open or operate an account for a child and the funds in the account belong to you
  • spent or use the funds in the account
• interest the ATO pays or credits to you – for example, interest on early payments, interest on overpayments and delayed refunds
• life insurance bonuses (you may be entitled to a tax offset equal to 30% of any bonus amounts you include in your income)
• interest from foreign sources (you can claim a foreign income tax offset for any tax paid on this income).

You must also declare interest the ATO has imposed if it is remitted or recouped and you have claimed (or can claim) a deduction for the interest. You declare these amounts as other income in your tax return.

Term deposits

You must declare interest income in the year it is credited or received. For term deposits this usually means you should declare interest in the year the investment matures.

If you elect to rollover your investment or if the financial institution automatically reinvests the term deposit at maturity, you will need to declare the interest earned as at the rollover or reinvestment date. This is the amount you would have received if the investment was not rolled over or reinvested.

Similarly, you may choose to have the interest from a term deposit, held for more than 12 months, credited to a different account periodically throughout the life of the investment. In this case, the interest is assessable at the dates of payment (which is before the date of maturity). You are taken to have received the amount as soon as it is applied or dealt with in any way on your behalf or as you direct.

Dividends

Dividend payments can be money or other property, including shares. If you receive bonus shares instead of money, the company issuing the shares should give you a statement that shows if the bonus shares are a dividend.

Dividend income may come from a:

• listed investment company
• public trading trust
• corporate unit trust
• corporate limited partnership (in the form of a distribution).

Some dividends have imputation or franking credits attached.

If you receive franking credits on your dividends, you must declare in your tax return both your:

• franked amount
• franking credit.

If a company pays or credits you with dividends that have been franked, you’ll generally claim a franking tax offset.

When you sell or dispose of your shares, you need to declare capital gains or losses.

Rental property income

You must declare the full (gross) amount of any rent and rent-related payments that you receive. This includes amounts you receive from overseas properties.

If you receive goods and services instead of rent, you must work out and declare the monetary value.

Payments that relate to your rental property include:

• rent
  • report the gross amount of rent paid by the tenant, not the amount you receive from your managing agent after deducting fees
  • report rent in the income year the tenant pays it, this may be before your managing agent pays it to you
• rental bond, money you retain or keep – for example, because
  • a tenant defaults on the rent
  • of damage to your rental property requiring repairs
• an insurance payout to compensate you for lost rent
• a letting or booking fee
• a reimbursement or recoupment for deductible expenditure, such as an amount from a tenant to cover the cost of repairing damage to your rental property. Include the whole amount you receive from the tenant in your income and you can claim a deduction for the cost of the repairs
• rent you receive through the sharing economy (renting out a room or a whole house or unit on a short-term basis, through a website or app).

When you sell or dispose of your rental property, you need to declare capital gains or losses.

Co-ownership

Only include your share of rental income and expenses in your tax return, if you:

• own a rental property jointly or in common with another person
• have an interest in a partnership that carries on a rental property business.

Managed investment trusts

You must show any income or credits you receive from any trust investment product in your tax return. This includes income or credits from a:

• cash management trust
• money market trust
• mortgage trust
• unit trust
• managed fund – such as a property trust, share trust, equity trust, growth trust, imputation trust or balanced trust.

When you sell or dispose of your managed investment trust units, you need to declare capital gains or losses.

Crypto asset income

You must declare the rewards you receive from staking crypto assets. These are often in the form of additional tokens from holding the original tokens. You need to work out the money value of the additional tokens and convert the amounts into Australian dollars at the time you receive them. Report them at ‘other income’ in your tax return.

Some crypto projects ‘airdrop’ new tokens to existing token holders as a way of increasing the supply of tokens. The money value of established tokens you receive by airdrop is income at the time you receive them. You need to convert these amounts into Australian dollars and declare them as other income.

When you sell or dispose of a crypto asset, a CGT event happens. At this time, you may make either a capital gain or capital loss that you need to declare in your tax return. If you make a capital gain, you may pay tax on it.

Capital gains

You must declare any capital gains you make when you sell or dispose of capital assets, such as investment property, shares or crypto assets. Generally, your capital gain is the difference between:

• your asset’s cost base (what you paid for it)
• your capital proceeds (the amount you receive for it).

You can also make a capital gain if a managed fund or other unit trust distributes a capital gain to you.

We treat capital gains as part of your total income.

Report capital gains and capital losses in your tax return. You can offset any allowable capital losses against your capital gains to work out your net capital gain or loss. You pay tax on a net capital gain. If you have a net capital loss, you can retain the loss to offset capital gains in future years.

Source: ato.gov.au June 2024
Reproduced with the permission of the Australian Tax Office. This article was originally published on https://www.ato.gov.au/individuals-and-families/income-deductions-offsets-and-records/income-you-must-declare/investment-income

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