Tax Time – Forgotten or Lost Share Trading Records

It happens to all of us – you sell some shares, get excited, the money gets deposited into your account and … all the documentation gets thrown in a drawer. The attitude of “oh, I’ll remember it’s there” comes into play and life moves on. Now of course, its tax time and your accountant asks you – “So have you disposed of any shares this year?” and you say “Yes, I have”. The next logical question is “OK, so can you send me the trading information for capital gains purposes?” and then you think to yourself “oh shit, we threw out that desk!!!”. Yep, it happens to the best of us. So, what to do ?

Well, not all is lost. The Australian Taxation Office requires that you have to pay tax on any capital gain (or claim a capital loss) on what you make when you sell shares or you give them away. It is critical that you provide this information in your taxation return – otherwise you are effectively avoiding tax. Of course, why data sharing services haven’t been introduced into the ATO so this information can be automatically extracted is beyond me – so for now, it is up to you to record this information.

What records do you need?

So the records that the ATO generally requires to work out your Capital Gains Tax (CGT) when you dispose of shares or give them away is the information that is given to you by the company that issued you the shares, your stockbroker or some online trading facility that you transacted over. It really is critical to keep this information handy and not to store it away and forget about it. The most important records to have include:

• date of sale
• date of purchase
• any broker or commission paid
• amount paid for purchase
• stamp duty paid
• amount received on sale

For advanced share trading instruments – you might even need more information:

• options information – the date & amount of calls
• whether the shares were partly or fully paid
• dividend reinvestment information
• margin lending implications
• superannuation
• merger and acquisition information

The list goes on for more advanced share trading instruments – but most of you will fall into the first category. By law, all information related to CGT events should be kept for at least 5 years after the related CGT event – this is primarily required incase the taxation office decides to audit you. In this event, your will need to recall this information and prove to the taxation office the relevant claims under you tax filing.

I’ve lost my records … ?

So it’s its all great to say what you should have done! Now let’s look to reality. If you have lost any of the above records (simple trading only) then you really need to be able to get this information since it is required by law for a CGT event. The best place to start is:

1. The Companies Share Registry – You need to really get the volume of shares and pricing information as a priority. If your shares are held by a company register – then you need to check with this company and see the amount of shares disposed. Computer Share is the most used vehicle in Australia for this and can typically, at a minimum, provide share volume information.

2. Stockbroker or Investment Guru – This is the next port of call if you cant get the information. If you have a regular stockbroker or investment guru – chances are you don’t even need to worry about this as they should be doing this for you. Just ring them and ask for the related information.

3. Bank Statements - This is an often forgotten gem. Most online banking systems now days provide around 2-3 years data – so you should, at the very least be able to figure out the date of sale – which can then lead you to establishing the amount deposited into your accounts and being able to use reverse logic to establish the amount of shares sold.

4. Online Data – Yahoo & Google Finance are great tools for showing historical share trading data. You might be able to get onto these services and access pricing information for historical sale transactions.

5. Online Stock Broker – Yep, if you are using one of these services you are laughing. All your share trading information is easily stored in these services and you can quickly print off the required information.

The key information in my mind is:

1. The date of the transaction & the sale price

2. Any parties involved in the transaction

3. The relevant CGT amount (i.e. the amount received)

If you get this information at the very least, if all else fails, you tax accountant will should be able to manage.

Prevention Methods

Some of the best ways to avoid losing share trading information in my mind include:

1. Excel Spreadsheet – Setup an Excel Spread Sheet and store this either on your home PC or – even better – store it online in a free email account or backup storage hosting service. Each time you dispose of shares, record this information inside this and resend it to yourself. This way – if you PC dies, you loose the hard copies – you can quickly access this information from anyway.

2. Scanning Documents – Scan the trading information provided by your broker into your PC – and, as suggested above, store it online in a free email account or backup storage hosting service. Each time you dispose of shares, scan this information onto your PC send it to yourself. This way – if you PC dies, you loose the hard copies – you can quickly access this information from anyway.

3. Dedicated Share Folder – Have a dedicated folder just for share trading information … it sound simple, rarely happens and is probably not the best method in this day and age.

Conclusion

Keeping this information handy often a pain – but can have serious consequences if you loose it. The beauty of online services now is that it makes it really simple to store this information online, so you can access it from anywhere at anytime.