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Tax for Australians for Dummies, 2014 - 15 Edition by Jimmy B. Prince

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Chapter 9

Owning Part of the Company: Investing in Shares

In This Chapter

arrow Understanding shares, dividends and possible deductions

arrow Paying tax on capital gains and losses

W hen you invest in the share market, you’re pinning your hopes for income and capital growth on the business operations of publicly listed companies such as CBA, Qantas and Woolworths. In this chapter, I explain the unique taxation issues associated with this category of investment.

Sharing the Profits: Dividends

When you buy shares in a company, you become a part owner — a shareholder — of the company. This status means you can vote at the annual general meeting and give your two bob’s worth of advice to the company directors. One tangible benefit of being a shareholder is the right to receive a share of the profits, referred to as dividends. Companies ordinarily pay dividends to you twice a year, and dividends are normally liable to tax when they’re paid.

warning.png When you buy shares, quote your tax file number (TFN — refer to Chapter 5) to the company. Otherwise, the company is liable to withhold 47 per cent tax (plus the 2 per cent Medicare levy) on your dividend payment (referred to as TFN amounts withheld from dividends ...

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