Management Fees
Where you pay ongoing management fees or retainers to investment advisers, you will be able to claim
the expenditure as an allowable deduction. Only a proportion of the fee is deductible if the advice covers
non-investment matters or relates in part to investments that do not produce assessable income. You
cannot claim a deduction for a fee paid for drawing up an initial investment plan.
Interest
If you borrowed money to buy shares, you will be able to claim a deduction for the interest incurred
on the loan, provided it is reasonable to expect that assessable dividends will be derived from your
investment in the shares. Where the loan was also used for private purposes, you will be able to claim
only interest incurred on that part of the loan used to acquire the shares.
Interest on Capital Protected Borrowings
A capital protected borrowing is an arrangement under which listed shares, units or stapled securities
are acquired using a borrowing, where the borrower is wholly or partly protected against a fall in the
market value of the listed shares, units or stapled securities.
Interest attributable to capital protection under a capital protected borrowing arrangement for shares,
units or stapled securities entered into, or extended, on or after 1 July 2007 is not deductible. The interest is treated as if it were a payment for a put option. This treatment applies where the shares, units or
stapled securities are held on capital account for investment purposes.
Travel Expenses
You may be able to claim a deduction for travel expenses where you need to travel to service your investment portfolio. For example, to consult with a broker or to attend a stock exchange or company meeting. You can claim a deduction for the full amount of your expenses where the sole purpose of the travel relates to the share investment. Where the travel is predominantly of a private nature, only the expenses which relate directly to servicing your portfolio will be allowable deductions.
Cost of Journals and Publications
You may be able to claim the cost of purchasing specialist investment journals and other publications, subscriptions or share market information services which you use to manage your share portfolio.
Internet Access and Computers
You may be able to claim some of the cost of internet access in managing your portfolio. For example,
if you use an internet broker to buy and sell shares, the cost of internet access will be deductible to the
extent you use the internet for this purpose. You cannot claim a deduction for the private use portion.
You can also claim a capital allowance (previously known as depreciation) for the decline in value of your
computer equipment to the extent that it has been used for income-producing purposes. You cannot
claim a capital allowance for the private use portion.
Borrowing Expenses
You may be able to claim expenses you incurred directly in taking out a loan for purchasing shares
which can reasonably be expected to produce assessable dividend income. The expenses may include
establishment fees, legal expenses and stamp duty on the loan.
If you incurred deductible expenses of this kind totalling more than $100, they must be apportioned over five years or the term of the loan, whichever is less. If your expenses are $100 or less, they are fully deductible in the year you incur them.
Dividends that include Listed Investment Company Capital Gain Amounts
If a Listed Investment Company (“LIC”) pays a dividend to you that includes a LIC capital gain amount, you may be entitled to an income tax deduction. You can claim a deduction if:
- You are an individual;
- You were an Australian resident when a LIC paid you a dividend;
- The dividend was paid to you after 1 July 2001; and
- The dividend included a LIC capital gain amount and the capital gain resulted from a CGT (Capital
- Gains Tax”) event happening to a CGT asset owned by the LIC for at least twelve months.
Other Deductions
Any other expenses you incur which relate directly to maintaining your portfolio are also deductible.
These could include bookkeeping expenses and postage.
Non-deductible Expenses
Unless you are carrying on a business of share trading, you cannot claim a deduction for the cost of
acquiring shares (for example, expenses for brokerage and stamp duty). These will form part of the cost
base for CGT purposes when you dispose of the shares. Unless you are carrying on a business of share
trading, you cannot claim a deduction for a loss on the disposal of shares. The loss is a capital loss for
CGT purposes.
