ETF investors warned against rushing tax returns
The IPA has cautioned taxpayers with ETFs on the risks of lodging their tax return before receiving the necessary information from their fund.
While the ATO recently gave taxpayers the greenlight to lodge their tax returns, taxpayers with investments such as exchange-traded funds may not have yet received all the relevant information required for their return, the Institute of Public Accountants has warned.
Last week the ATO stated that taxpayers with simple financial affairs could now lodge their tax returns with the Tax Office having completed pre-filling with information from banks, employers, government agencies and private health insurers.
Greco said that some taxpayers may assume that means it's now safe to lodge a return when they don’t have all the information required.
While ETFs provide investors with a standard distribution statement that breaks down what they or their registered tax agent need to declare in their tax return, Greco said newer investors may not be aware that they need to wait for that statement before lodging their return.
Some investors may still not have received their annual statement at this point in the year, he said.
Greco said the type of ETF an investor buys will also affect how complex the reporting is for the tax return based on factors such as whether it is an Australian share market ETF, an overseas share market ETF, or an actively traded ETF with lots of capital gains and losses and also how they treat those gains.
“It can potentially introduce a lot more complexity in terms of the number of extra labels that are required to be filled in on the return,” Greco said.
In some cases where the investments are more complex or taxpayers are unsure of what they need to report they may be best seeking advice from a tax practitioner.
Greco cautioned that if information relating to these investments arises after the taxpayer has already lodged the return this could result in the ATO identifying a discrepancy with their return.
“They’ll be asking ‘how come you’ve left this out?’ and that’s always an unpleasant experience getting that letter and then having to understand what you need to do,” said Greco.
“There could also be penalties and interest applied depending on how the ATO wants to deal with those discrepancies.”
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