Share traders need to follow these rules

The taxation office has signed a datasharing protocol with the Australian Securities and Investments Commission. This will give the ATO access to over 500 million items of data, including the price, quantity and time of individual share trades dating back to 2014. It will then be able to match the data with the information taxpayers disclose in their tax returns. Any mismatches are likely to generate a “please explain” letter to the taxpayer.

With over five million Australians holding shares, this exercise highlights the dangers of failing to correctly record the tax consequences of share transactions.

Here are three basic rules to follow if you buy and sell shares as an investment: •

Keep good records of purchase and sale prices, as well as costs such as brokerage. If you sold part of your shareholdings, you will need to keep records of the parcel you sold and the parcel you are still holding. This information is critical in calculating your capital losses or gains. •

If you sell shares and make a profit, declare your capital gains in your tax return. •

If you sell shares and make a capital loss, you cannot claim it as a deduction in your return. However, you can offset the loss against any capital gains you make this year, and if there is any loss remaining you can carry it forward to reduce any future capital gains you make.