If you've picked up eToro in the last 12 months, or you're new to investing generally, you might not be aware you might have to pay tax associated with the earnings you've made.
Here we'll help cut through the noise to demystify the process for you ahead of 30 June.
When you make the decision to invest in a position the ultimate goal is, of course, to realise some impressive gains.
While securing those gains might feel fantastic,there's always one constant to keep in mind: paying taxes.
If you've decided to take the plunge and download eToro in the last 12 months you might have to pay tax on some profits you've made this financial year.
This concept isn't localised to just eToro of course, any investment you make is subject to capital gains tax (CGT), and the rules work differently for different products.
Even if you make a loss, you still need to report that to the Australian Tax Office (ATO).
So when you make a capital gain (like a profit on eToro) you're going to have to pay CGT. As tax is not withheld for capital gains, like it is with your regular income, you might want to work out how much tax you will owe come June 30 and set that money aside.
The same goes for the flip side if you make a capital loss (or a loss on eToro) you can't claim it against your other income but it can be used to reduce a capital gain.
For simplicity's sake, the government considers gains made on investments the same way it does your income.
How does CGT work?
CGT is calculated when you sell or otherwise dispose of an asset - called a CGT event.
These events all come together when calculating your capital gain or loss. Ultimately, if you have both gains and losses it's worth figuring out the net capital gain or loss for the year.
Another rule that comes into play when making this calculation is a government incentive designed to encourage holding onto investments. Individuals and businesses are generally allowed to discount capital gain by 50 percent if the asset is held for more than one year - this applies to cryptoassets as well.
Working out net capital gain
A capital gain is the difference between what you paid for an asset and the proceeds you received when the asset is sold or otherwise disposed of.
To work out your capital gain simply subtract the cost base from the capital proceeds, deduct any capital losses, apply the 50 per cent discount if relevant and you'll end up with the capital gain.
However, if you've sold an asset for less than what it cost, you usually have made a capital loss. Like the method above, the difference between the two amounts is the capital loss.
Once you've applied these methods to your assets you need to work out the net capital gain or loss for the year.
The equation here is as simple as A minus B minus C where 'A' represents the total capital gains for the year, 'B' is your total capital losses and 'C' is any CGT discount concessions you're entitled to.
From here, just declare the CGT to the ATO and you should be in the clear!
How to find your eToro account statement
If you've been using eToro to manage your positions on stock markets or cryptoassets there's a pretty easy way to find out your profits and losses on each position. Simply access your account statement.
In order to see your statement follow these easy steps:
Click on the Portfolio tab in the left-hand sidebar and then click on the clock icon to access your History view.
Click on the blue settings icon in the top right hand corner and select Account Statement from the menu.
Choose the time frame for your account statement and click on the tick button to generate the account statement.
At the bottom of the main page, you can click the links to go to the different sections of the account statement:
- Closed Positions - shows details of all closed manual and copied trades
- Transactions Report - shows details of all transactions (deposits, withdrawals, positions opened and closed, fees, dividends, etc.).
- Financial Summary - shows a summary of your profit/loss, fees and commissions that you can use to calculate the taxable income that you may need to include in your tax return
You can save your account statement as a PDF or Excel file by clicking on the relevant icon:
