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  • Obtaining shares

    You can obtain shares in several ways, most commonly by buying them. You should keep track of your share transactions so you can claim everything you're entitled to and work out your tax accurately.

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    How you obtain shares

    You can obtain shares through:

    Even if you didn't pay anything for your shares, you should find out the market value at the time you obtain them – otherwise, you may pay more tax than necessary when you dispose of them.

    In some circumstances, you may be considered the owner of shares even if they were purchased in your child's name.

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    Buying shares

    A common way to obtain shares is to buy them. Shares are usually purchased through a stockbroker. When you buy shares, you may decide to be a share trader or share investor.

    Share trader or share investor

    Depending on whether you are a share trader or a share investor, you will deal with income and expenses differently. A share trader conducts business activities for the purpose of earning income from buying and selling shares. A share investor invests in shares with the intention of earning income from dividends and capital growth, but does not carry on business activities.

    Inherited shares

    You may inherit shares as part of a deceased estate. In this case:

    • you treat inherited shares in the same way as any other capital gains tax assets
    • where the deceased acquired the shares before 20 September 1985, you must use the market value on the day the person died, not the market value on the day you received the shares.

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    Shares as a gift

    A family member may give shares to relatives, for example, a parent gives shares to their child. If you:

    • give shares as a gift, you
      • treat the shares as if you disposed of them at their market value on the day you gave them as a gift
      • may have a capital gain or a capital loss – you must include any applicable capital gain or loss in your tax return for the year you gave away the shares
       
    • receive shares as a gift, you treat shares as though you received them at their market value on the date you received them.

    Employee share scheme

    The tax law contains special rules for shares and rights acquired under employee share schemes, for both income tax and capital gains tax purposes.

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    Bonus shares

    Bonus shares are extra shares you receive for shares you already hold in a company. Receiving bonus shares can alter the cost base (costs of ownership) of both your original and bonus shares.

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    Demerger

    A demerger occurs when a company restructures by splitting its operations into two or more entities or groups. If you own shares in a company that demerges, you may:

    • receive new shares and/or cash
    • be entitled to a demerger rollover.

    Make sure you:

    • are entitled to a rollover before you choose to use it
    • declare any capital gains or losses you made under the demerger.

    In some demergers, you may be eligible to choose to rollover any capital gain or capital loss you make. This means you do not report your capital gain or capital loss the year the demerger occurs. Instead, you settle your tax obligations in the year that another CGT event happens to those shares.

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    Demutualisation of an insurance company

    If you hold a policy in an insurance company that demutualises, you may be subject to capital gains tax either at the time of the demutualisation or when you sell your shares.

    Deductions when obtaining shares

    Generally, you can only declare your dividends and claim a deduction for your expenses if your name is on the share purchase order.

    You can't claim a deduction for some costs related to purchasing your shares, such as brokerage fees and stamp duty. However, you can include them in the cost base (cost of ownership – which you deduct from what you receive when you dispose of the shares) to work out your capital gain or capital loss.

    You need to keep proof of all your share transactions from the beginning to ensure you can claim everything you're entitled to.

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    Investigate before investing

    There are a number of ways to check the legitimacy of an investment and its promoter:

    • check a promoter's licence: moneysmart.gov.au/investingExternal Link
    • check if the scheme has a Product ruling
    • read the product disclosure statement (PDS) or prospectus for the investment
    • get independent advice from an adviser who has no connection with the seller or the investment scheme.
    • check our taxpayer alerts to find out if the scheme has any of the characteristics described in the alerts.

    Next steps:

    Last modified: 01 Jul 2021QC 22811