Speaker 1: Hello.
Speaker 2: My name's Santasha Nabananga Bamblet. I'm a proud yr the
Speaker 2: Order Kerni Whoalbury and a waddery woman. And before we
Speaker 2: get started on She's on the Money podcast, I would
Speaker 2: like to acknowledge the traditional custodians of the land of
Speaker 2: which this podcast is recorded on a wondery country, acknowledging
Speaker 2: the elders, the ancestors and the next generation coming through
Speaker 2: as this podcast is about connecting, empowering, knowledge sharing and
Speaker 2: the storytelling of you to make a difference for today
Speaker 2: and lasting impact for tomorrow.
Speaker 1: Let's get into it.
Speaker 3: She's on the Money. She's on the Money.
Speaker 4: Hello, and welcome Money the podcast for millennials who want
Speaker 4: financial freedom. My name is Georgia King, and joining me
Speaker 4: as she always does, is Victoria Define. Actually, you weren't
Speaker 4: here last week, so I can't say that you can't.
Speaker 4: I was so sick last week. Laryng Idis really throws
Speaker 4: you under a bus. Are you feeling better? I'm feeling
Speaker 4: so much better. Can you hear my voice? I feel
Speaker 4: like there's like a slight pang of illness still. Okay,
Speaker 4: you know that kind where you like, here's someone and
Speaker 4: you just don't want to be in the same room
Speaker 4: as them that you are. They're locked in for the
Speaker 4: day already, guys. It is officially reporting season. So today
Speaker 4: we're going to discuss how to read a dividend statement,
Speaker 4: how to report any income from shares, and what exactly
Speaker 4: you should be looking for in a company's financials. That's overwhelming,
Speaker 4: g it is overwhelming, straight into the hard stuff. But
Speaker 4: before we get there, what the devil is reporting season?
Speaker 1: Oh you don't know?
Speaker 4: Well, I feel like I get the gist, But for
Speaker 4: anyone who's listening, it is like g in Layman's terms,
Speaker 4: it's basically when companies let all of their investors know
Speaker 4: how their business is going. Let's comeanes who outperform do
Speaker 4: a little bit of a victory lap around the office. Well,
Speaker 4: CEOs that miss expectations, they have to face the music.
Speaker 4: So it's a time of the year where everything kind
Speaker 4: of just like comes to a peak.
Speaker 1: We're talking about it.
Speaker 4: It does coincide with end of financial year because all
Speaker 4: of the finances have come through, and it's basically a
Speaker 4: time when a lot of financial advisors having a relook
Speaker 4: at people's portfolios to see if we should be rebalancing
Speaker 4: or taking some stuff out or putting some stuff in.
Speaker 1: It's just it's a time where you just have a
Speaker 1: lot of fresh data.
Speaker 4: Really obviously, you could do that at any point during
Speaker 4: the year and go, oh, well, I'll read their annual report.
Speaker 4: But it's basically when all the information is super fresh
Speaker 4: and super new and it's been a lot of people
Speaker 4: are making a lot of decisions. So is this when
Speaker 4: they put out their annual reports? That is that what
Speaker 4: it is?
Speaker 1: Yes, it is.
Speaker 4: Obviously companies can put out their annual reports whenever they
Speaker 4: want to, but end of financial year is pretty traditional
Speaker 4: when it comes to you know, reporting on business financials
Speaker 4: kind of makes sense. So when exactly is reporting season,
Speaker 4: V's like a week at the end of the financial year?
Speaker 4: Is it a day?
Speaker 1: Look like? So it's kind of like a whole season.
Speaker 4: So almost every company that is on the ASX is
Speaker 4: going to report they're half year financials. Keeping in mind
Speaker 4: half year is in of half financial year, not in
Speaker 4: a real year. So that's actually late January early February,
Speaker 4: and then their full year results are going to come
Speaker 4: out late August. And that's basically because in June thirty
Speaker 4: they have all of July and August to do some
Speaker 4: reporting and some analysis and then get it out to investors.
Speaker 4: So I think a lot of people actually expect it
Speaker 4: on June thirty. They're like, well, where's my income statement
Speaker 4: or where's my dividend statement, or you know, when can
Speaker 4: I download the tax report from my investor portal? And
Speaker 4: they're offended that it's not available on July the first,
Speaker 4: and it's like, well, actually, they need time to pull
Speaker 4: this stuff together and actually have those end of financial
Speaker 4: year numbers so that then they can run their report.
Speaker 4: So it does take a little bit longer than you
Speaker 4: would anticipate, which is why we're talking about it now,
Speaker 4: because people's expectations might be, Hey, I want it, it's
Speaker 4: going to be July really soon, and it's not actually
Speaker 4: that common to get your financial report. What's on the
Speaker 4: thirtieth of June, Okay if that makes sense, Yeah, yeah,
Speaker 4: because that's when the numbers are finally cut, right, Like
Speaker 4: that's the last day of reporting.
Speaker 1: And they need to analyze it.
Speaker 4: It's kind of like you're not able to do the
Speaker 4: union assignment until you have all the information, and you
Speaker 4: only get the information on the thirty of the June
Speaker 4: g A perfect analogy. But now we have covered this before,
Speaker 4: but we're gonna start with the basics today. Can you
Speaker 4: please run us through once again what a dividend is.
Speaker 4: A dividend g is sexy. It's sexy, it's a sexy thing.
Speaker 4: It's essentially when a company gives you a small portion
Speaker 4: of their profit. Like if you're a shareholder and you
Speaker 4: own a share you are entitled to one that tiny
Speaker 4: portion of that company, but also that tiny portion of
Speaker 4: that company's profit. So that's when you get your little profit.
Speaker 4: On the side, you get paid for being a little
Speaker 4: share owner. Stunning.
Speaker 1: I think it's stunning.
Speaker 4: So common shareholders of dividend paying companies are typically eligible
Speaker 4: as long as they own the stock before the ex
Speaker 4: dividend date. So you could technically go and purchase a
Speaker 4: dividend stock tomorrow G and have it pay a dividend
Speaker 4: for the next day, which is a bit of a
Speaker 4: money win. And why some people really I won't call
Speaker 4: it timing the market, because we all know we can't
Speaker 4: time the market, but some people time their purchasers with
Speaker 4: when dividend payouts are going to be, so you don't
Speaker 4: really want to go, oh, a dividend payout is going
Speaker 4: to happen in July, and then you're buying the share
Speaker 4: in August and have to wait nearly a full twelve
Speaker 4: months to get another dividend payout like that wouldn't make
Speaker 4: a lot of sense in the grand scheme of things.
Speaker 4: We don't often time it that way, but some people
Speaker 4: do want to take it into consideration. And dividends can
Speaker 4: either be paid out in cash, so it would be
Speaker 4: money that ends up back in your trading account, or
Speaker 4: it could be paid out in extra stock. So if
Speaker 4: you've got a dividend reinvestment plan ticked when you signed up,
Speaker 4: it would automatically mean that you would just be reissued
Speaker 4: a small amount of stock instead of some cash. And
Speaker 4: not all shares paid dividends, so right, no, so gee,
Speaker 4: they are not all created equal. And that's why when
Speaker 4: we are putting together an investing strategy, we really need
Speaker 4: to think that whether we want dividends or we're after
Speaker 4: capital growth, there are lots of different reasons why we
Speaker 4: would pick a particular shit, and actually, you know progress
Speaker 4: that into our portfolios. Some of us actually really want
Speaker 4: dividend shares more often than not. If you're a really
Speaker 4: conservative investor, that's probably what you're chasing, and dividend shares are.
Speaker 4: They're kind of like the Holy Grail, right, like you
Speaker 4: own something, it increases in value over time and it
Speaker 4: pays you like what a money win.
Speaker 1: So a lot of people want that.
Speaker 4: But you'll note that those good, consistent, trusty dividend shares
Speaker 4: are usually relatively expensive. So you're looking at a suite
Speaker 4: of shares that are usually referred to as blue chip stocks.
Speaker 4: So you've probably heard this before, and a blue chip
Speaker 4: stock is basically just a very conservative stock.
Speaker 1: It is tried and true in the market.
Speaker 4: It is a very large business that is very unlikely
Speaker 4: to go under, and they are usually commodities or banks
Speaker 4: or things like iron ore where you're going to you
Speaker 4: know what doesn't matter when this isn't an ethical argument.
Speaker 4: If you want to go and listen to one of
Speaker 4: our ethical podcasts, absolutely do. But we know Australia is
Speaker 4: going to continue to produce that because it's a very
Speaker 4: big commodity that comes out of Australia, and we know
Speaker 4: that that share is going to consistently perform because we
Speaker 4: know that that resource is not limited here in Australia.
Speaker 4: So for me, when I look at the portfolio, or
Speaker 4: I look at what I'm doing with a client's share
Speaker 4: portfolio and whether I want capital growth or dividend yield.
Speaker 4: It actually goes back to risk profile. And you know
Speaker 4: when we were talking ages ago on another episode about
Speaker 4: risk profile, it's really like, gee, do you want to
Speaker 4: take more risk or do you just want the tried
Speaker 4: and true and steady steed that like it's going to
Speaker 4: pay their dividend. Like if you look at a NAB share,
Speaker 4: I'm not saying go and buy NAB. This is not
Speaker 4: a recommendation. It's just an example because I was writing
Speaker 4: another chapter of my book last week and I was
Speaker 4: talking about dividend yield and I was talking about how
Speaker 4: it works, and I was like, how can I do this?
Speaker 1: I'm just going to pick NAB YEP. It was the
Speaker 1: first one that came to mind.
Speaker 4: And they have not not paid a dividend since like
Speaker 4: nineteen sixty four or something.
Speaker 1: That's ridiculous.
Speaker 4: So every single quarter they are paying their investors a dividend,
Speaker 4: whether it is big or small. They are just consistent.
Speaker 4: And that's why a lot of people just want to
Speaker 4: hold things like NAB and like Blue Scope Steel in
Speaker 4: their portfolios.
Speaker 1: Because they're like, do you know what.
Speaker 4: It might not rise in value significantly over time, but
Speaker 4: what I will do is start to generate an income.
Speaker 4: And a lot of people will really value income in
Speaker 4: a portfolio because they're like, well, that is the thing
Speaker 4: that I'm chasing anyway, Does that make sense? It does
Speaker 4: make sense. But you said that in your hypothetical that
Speaker 4: NAB might pay them quarterly their dividends. Is that like
Speaker 4: the standard if you are no, okay, So everybody does
Speaker 4: it differently. NAB pays once every six months or so.
Speaker 4: Sometimes they'll have a special dividend distribution, like if they've
Speaker 4: had a really big profit or there's been a really
Speaker 4: big event in the world and they want to distribute
Speaker 4: money to some investors, they will do what's called a
Speaker 4: special dividend run and they will then pay that out.
Speaker 4: Not very common, but important to know it exists. But
Speaker 4: usually it's either every six months or every year. Some
Speaker 4: companies do pay quarterly. That's why it's important to keep
Speaker 4: an eye on your share trading account and just see
Speaker 4: what's coming in and what's coming out, and if you
Speaker 4: are an individual share investor, knowing when that's going to
Speaker 4: happen is important. Because in the long run, that's actually
Speaker 4: going to become your income, like in the future. That's
Speaker 4: the point of investing. It's not to save up two
Speaker 4: million dollars George and go, oh my gosh, now I
Speaker 4: have a portfolio worth two million dollars. I'm going to
Speaker 4: start spending it and drawing it down, Like, that's not
Speaker 4: the point. The point is to keep that money invested.
Speaker 4: And if you have two million dollars invested and you
Speaker 4: are going off a five percent yield, and you go,
Speaker 4: I would hope to get five percent every year, you
Speaker 4: actually have one hundred thousand dollars in dividends coming in
Speaker 4: every single year. So like that sounds like the dream.
Speaker 4: Obviously that's a very large example, and that's not achievable
Speaker 4: for a lot of people. But if you created a
Speaker 4: two million dollar investment portfolio, you'd have one hundred grand
Speaker 4: a year coming in in dividends, and that would become
Speaker 4: your income, so you didn't have to go to work anymore,
Speaker 4: your passive income. You're learning on a little bit here
Speaker 4: Via it's tax time. I'm a new investor and I've
Speaker 4: just received my first ever dividend statement.
Speaker 1: Congratulations, Thank you so much.
Speaker 4: Break it down for me though, what does it tell me?
Speaker 4: What does it mean?
Speaker 1: Talk me through it.
Speaker 4: So, if an Australian company pays or credits you with
Speaker 4: a dividend or a non shared dividend, the company must
Speaker 4: also send you a dividend statement or a distribution statement.
Speaker 1: This is going to tell you a number of things.
Speaker 4: So it could tell you the name of the entity
Speaker 4: that is making the distribution, the date, the amount of
Speaker 4: the distribution, any amount of franking credits.
Speaker 1: So franking credits we can dive.
Speaker 4: Into a little bit later, but they are a massive
Speaker 4: money win and one of my favorite things about the
Speaker 4: super environment.
Speaker 1: We'll come back to that. They will tell you where
Speaker 1: the distribution.
Speaker 4: Is unfranked and a statement to that effect, and they
Speaker 4: will tell you the amount of tax that was withheld
Speaker 4: if you didn't give them your TFN. So it look
Speaker 4: there's a lot of information on these statements and regardless
Speaker 4: of whether you have been issued with a profit or not,
Speaker 4: you will get one to let you know how your
Speaker 4: shares are performing. I also think it's important to point
Speaker 4: out here because I'm talking a lot about distribution of
Speaker 4: dividends that's not a given like a lot of companies,
Speaker 4: and as we said before, NAB was a good example
Speaker 4: of a consistent dividend yielding share that's expensive to buy.
Speaker 4: That doesn't mean that every single other share that is
Speaker 4: classified as a dividend share is always going to pay
Speaker 4: you a dividend. Like if the company's not doing well,
Speaker 4: like you're not going to get some of their profit
Speaker 4: g because there's no profit to be shared. If they've
Speaker 4: just broken even, they might go, well, we don't have,
Speaker 4: you know, enough leftover to give to shareholders. Sometimes in smaller,
Speaker 4: like more growing companies, So you think about shares like,
Speaker 4: you know how last year our community were going wild
Speaker 4: for after pay. They were like, oh my god, after
Speaker 4: pay shares are so good. They've increased by xyz. Great,
Speaker 4: But they never paid a dividend and they didn't pay
Speaker 4: a dividend because that company is relatively new. And because
Speaker 4: they are relatively new, every single dollar in profit that
Speaker 4: they were making they were reinvesting back into the business
Speaker 4: to grow the business, which is why they had such
Speaker 4: good capital growth, both because they were able to reinvest
Speaker 4: in the business. So you've got to know the underlying
Speaker 4: strategy of the business that you're putting in your portfolio.
Speaker 4: Because a lot of people made a mistake when they
Speaker 4: looked at it and said, oh my god, but I'll
Speaker 4: put after paying my portfolio because they're performing so much
Speaker 4: better than something else. But they didn't take into consideration
Speaker 4: the dividend yield or the amount of passive income they'd
Speaker 4: make from that share all they got with an after
Speaker 4: pay share, not to throw them under of us, like
Speaker 4: we're not talking about the actual business here. No, no, no,
Speaker 4: we're not talking about the actual business here. We're talking
Speaker 4: about the share they would buy it. It would increase
Speaker 4: in value, but you only actually get to crystallize that
Speaker 4: value if you sell your share. And if we are
Speaker 4: you know, shees on the money investors and we are
Speaker 4: long term investors, why are you selling your share so
Speaker 4: quickly after buying it? So I think it's about buy
Speaker 4: and hold strategies from my perspective, because, as you guys know,
Speaker 4: I don't ever want you to invest for a short
Speaker 4: period of time because it's just too risky and a
Speaker 4: lot of things could happen. And do you know what
Speaker 4: did happen during that period of time where people were
Speaker 4: going a bit ham on after they were like, oh
Speaker 4: my god, I bought it and then I sold it
Speaker 4: for X they didn't take into consideration capital gains tax,
Speaker 4: and you get taxed at fifty percent. If you sell
Speaker 4: your share or your asset within the first twelve months,
Speaker 4: you have to hold it longer than twelve months to
Speaker 4: get your CGT discount. And if you didn't do that
Speaker 4: and you bought it and then you sold it and
Speaker 4: you thought you made this big profit, come June thirty,
Speaker 4: when tax time comes, the taxman comes knocking on your
Speaker 4: door and says, hey, gee, you actually bought and sold
Speaker 4: an asset, didn't hold it more than twelve months. You
Speaker 4: actually owe us some additional tax. And you go, what
Speaker 4: that's not thought you've been clever.
Speaker 1: You thought you'd being clever, but we got you.
Speaker 3: Yeah.
Speaker 4: And in the same thing happened with bitcoin because so
Speaker 4: many people burned and churned through bitcoin that they were like,
Speaker 4: oh my god, I made so much money and then
Speaker 4: they had to like lose half of their profit to tax. Yeah,
Speaker 4: so people forget about TAT sucks.
Speaker 1: That sucks. That's why we're talking about it. That's why
Speaker 1: we're like, oh, let's talk about reporting season.
Speaker 4: That's why we're here.
Speaker 1: Because Victoria thinks it's really sexy.
Speaker 4: So on the tax theme. B I think I know
Speaker 4: the answer to this. But when it comes to dividends,
Speaker 4: they're technically a form of income. They are a form
Speaker 4: of income, So I'm assuming we need to pay tax
Speaker 4: on them. Yes, you do so, magical cotes. So it
Speaker 4: depends on how you're holding your shares. Let's just say
Speaker 4: you're a salary and way journing employee. You have a
Speaker 4: few thousand dollars worth of shares. You are going to
Speaker 4: pay tax on that income at your marginal tax rate.
Speaker 4: So are they's thirty two and a half cents on
Speaker 4: the dollar or not, It doesn't matter. It will just
Speaker 4: be at your marginal tax rate. In saying that, that's
Speaker 4: a good thing. Like a lot of people are like,
Speaker 4: oh my god, I don't know if I want to
Speaker 4: invest because I just don't want the tax implications. My friends,
Speaker 4: if you are paying tax, you are making money. We
Speaker 4: just need to plan for it. Yeah, we just need
Speaker 4: to plan for it. And I get a bit frustrated
Speaker 4: about tax And I've been having this conversation with a
Speaker 4: few people in our community recently because they're so quote
Speaker 4: frustrated or annoyed by the tax system and how much
Speaker 4: money they lose like that money was never yours, Like
Speaker 4: the entire time you have ever worked here in Australia,
Speaker 4: if you are listening to this podcast, you have paid
Speaker 4: some form of tax, and we have note about it.
Speaker 4: Like if you say, G, I earn eighty grand a year,
Speaker 4: No you don't. That is your pre tax income. Let's
Speaker 4: just look at post tax, because I think too many
Speaker 4: times people get so caught up on oh but I
Speaker 4: had to pay this, No, like that was a given.
Speaker 4: We've always had to pay tax. It is a privilege
Speaker 4: to live in a country where we pay tax and
Speaker 4: have the support system and the infrastructure around us that
Speaker 4: enables us to live in such a free country. I'm
Speaker 4: a bit triggered by it this week, G because I
Speaker 4: do genuinely want to change people's mindsets around paying tax
Speaker 4: and see it as a privilege. We just need to
Speaker 4: full plan for it. And that just means having a
Speaker 4: good banking system in place. That just means putting money
Speaker 4: aside when it comes in and not going, oh my gosh,
Speaker 4: I got paid twenty dollars in dividends and then twenty
Speaker 4: dollars go straight out, Like we do need to make
Speaker 4: sure that we're putting some money aside for tax and
Speaker 4: being smart about it, because I think we get the
Speaker 4: most frustrated with tax when it pops up at tax
Speaker 4: time and you just forgotten. It's really exaustrating, and we
Speaker 4: can actually avoid that with some good planning. Yeah, so
Speaker 4: when you have to pay that bulk sum, it's much
Speaker 4: more intimidating. Yeah, plugging away as you go exactly. But
Speaker 4: you mentioned before Franked difends. They're the sexiest kind of dividends.
Speaker 4: G Tell me why, because every time it comes up
Speaker 4: for some reason, I just I never remember. All I
Speaker 4: can think of is like a frankfurt That's literally what
Speaker 4: is in my brain is like a mini sausage. That's
Speaker 4: all any sausage. I never remember what they are.
Speaker 1: Growing up, my mum used to call them little boys. Yeah, okay,
Speaker 1: I just should we put that on the podcast? I
Speaker 1: don't know.
Speaker 4: Now I think about that, and it's twenty twenty two,
Speaker 4: I'm like, that's suspicious.
Speaker 1: That is not okay. Also, what are they made of?
Speaker 4: I don't think we want to know.
Speaker 1: I don't think, like, how are they so read on
Speaker 1: the outside?
Speaker 4: I don't at I don't know nothing like a frank dividend, though,
Speaker 4: tell me about those. So, a franked dividend is an
Speaker 4: arrangement that was introduced into Australia to eliminate double tax.
Speaker 4: It means that you're not g going to have to
Speaker 4: pay double tax. It means it's kind of like you
Speaker 4: get given you a dividend and it has a little
Speaker 4: flag on it that says, hey, ge, I've already paid tax,
Speaker 4: Please don't tax me again, and you get to put
Speaker 4: that on your tax return so that you don't end
Speaker 4: up having to pay the tax that was paid on
Speaker 4: that share. And that tax is paid at thirty percent
Speaker 4: usually because that is business tax.
Speaker 1: So you get a.
Speaker 4: Little bit of a refund, which is a bit of
Speaker 4: a money in. And as I said before, I love
Speaker 4: it in Super. And do you know why I love
Speaker 4: it in Super? Because Gee, stop looking at me like
Speaker 4: you have no idea what I'm talking about.
Speaker 1: I talk about Super all the time. What's the tax
Speaker 1: rate in Super?
Speaker 4: I don't know the exifteen. I'm going to say that
Speaker 4: it's just comparis myself, but I should.
Speaker 1: Have back no no, no self gift.
Speaker 4: You have been listening to my rants for so long,
Speaker 4: arguably longer than anybody else on the podcast. So the
Speaker 4: tax rate inside superannuation is fifteen percent. But if a
Speaker 4: company has paid tax on a particular share at thirty percent,
Speaker 4: that's a different rate.
Speaker 1: You should have only been paid fifteen. So what do
Speaker 1: you get.
Speaker 4: You get a fifteen percent tax rebate, which means that
Speaker 4: share is already profiting more and above and beyond what
Speaker 4: it would have been profiting if it went into your
Speaker 4: back pocket at your marginal tax.
Speaker 2: Right.
Speaker 4: So that's why I think that the power of franked
Speaker 4: dividends is actually in superinuation because it kind of compounds
Speaker 4: over time, and it's kind of like even if that
Speaker 4: company only returned like one or two percent, it instantly
Speaker 4: goes even higher because you actually get franking credits back
Speaker 4: and you end up making money that way as well.
Speaker 4: So I think it's important to know those things. But
Speaker 4: essentially it is a bit of a money win. It
Speaker 4: is a really good system to make sure that you
Speaker 4: don't pay tax on a share that's already had its
Speaker 4: tax paid for it. So what then is an unfranked
Speaker 4: dividend fee? And how do we handle that at tax time?
Speaker 4: My friend, an unfranked dividend is a dividend that doesn't
Speaker 4: have a tax credit attached to it, so it doesn't
Speaker 4: come with its little flag, and unfranked dividends mean that
Speaker 4: you are possibly going to have to pay some tax
Speaker 4: on it and make sure you declare it on your
Speaker 4: tax return. So it's not actually a bad thing. It's
Speaker 4: just about doing the right thing and knowing whether you're
Speaker 4: getting franked or unfranked dividends and how that actually plays
Speaker 4: into your portfolio and how you do your tax And
Speaker 4: it sounds very confusing, but when you have a good
Speaker 4: investing platform, that'll all be on yours so it's really clear.
Speaker 1: Yeah, it is really clear.
Speaker 4: It sounds not clear, and it sounds like you're going
Speaker 4: to have to do some backflips and work out what's
Speaker 4: franked and what's unfranked and how that works. But essentially,
Speaker 4: when you're putting your portfolio together and you're actually constructing
Speaker 4: it for the first time, that's when I'd be like, oh,
Speaker 4: let's have a look, gee, have you got a good
Speaker 4: amount of unfranked and frank dividends? Like are we actually
Speaker 4: really comfy with this?
Speaker 1: Yes or no?
Speaker 4: And then it'll all be on your reports. Like, honestly,
Speaker 4: it's twenty twenty two. Everything is super easy. All we
Speaker 4: have to do is make sure we know in the
Speaker 4: background what our obligations are. And you don't have to
Speaker 4: stress about your superannuation either because it will all be
Speaker 4: done inside super. Anyway, last question here v before we
Speaker 4: head to a little break cute, I need a coffee.
Speaker 4: What happens if I sell my shares? Do I pay tax? Then?
Speaker 2: Yes?
Speaker 4: Yes, yes, because if you own an asset, I mean
Speaker 4: you'll only have to pay tax on something you made
Speaker 4: money on. Let's remember that, like, there's not going to
Speaker 4: be some kind of tax consequence if you are losing money. Well,
Speaker 4: actually there will be. It'll mean that you probably get
Speaker 4: a bit of a refund. Nice. But it's called capital
Speaker 4: gains tax, and that's the tax you pay on profits
Speaker 4: from selling an asset. So it could be property or shares,
Speaker 4: hot tip or not hot tip, but interesting points complete
Speaker 4: tangent here. I was talking to somebody the other day
Speaker 4: and we were talking about CGT and what it means.
Speaker 4: So essentially, capital gains tax is a tax you pay
Speaker 4: when you make money on an asset. So you can't
Speaker 4: just go all right, well I just bought this house.
Speaker 4: It increased in value by five hundred thousand dollars I'm
Speaker 4: going to sell it, and that five hundred thousand dollars
Speaker 4: is clean mine. No, it is not, because you earned
Speaker 4: money from that, so therefore you need to pay tax
Speaker 4: because it was like your income.
Speaker 1: Right.
Speaker 4: I got a new client the other day. Shout out
Speaker 4: to my new client. Not going to call you by
Speaker 4: name because that would be wildly inappropriate. But they collect
Speaker 4: vintage and like, you know, quite expensive cars.
Speaker 2: Do you know what?
Speaker 1: You don't pay capital gains tax on cars?
Speaker 4: Are you joking?
Speaker 3: Yeah?
Speaker 4: So he is buying and selling cars and they just
Speaker 4: don't have capital gains tax associated with them. It's not
Speaker 4: me saying go and invest in cars, because you do
Speaker 4: actually have to get to a level where you're buying
Speaker 4: very expensive cars that then increase significantly in value. And
Speaker 4: you know, he is like a professional at what he does,
Speaker 4: because he actually is like in Automtori of engineering, and
Speaker 4: like he buys these cars and flips them and updates
Speaker 4: them and then sells them.
Speaker 1: But like CGT exempt.
Speaker 4: What because I actually don't know about that. No, so
Speaker 4: I'm only talking about it because it's you know, just
Speaker 4: interesting hot tip and something to take away.
Speaker 1: But cars are exempt.
Speaker 4: And I was like, what I did know that, but
Speaker 4: I'd never run into someone who, you know, was at
Speaker 4: a wealth status where they were buying and selling like
Speaker 4: half a million dollar cars and walking away clean of
Speaker 4: the profits. That's weird. It's kind of weird, but it's
Speaker 4: also kind of interesting how all of that works and
Speaker 4: how wealth seems to start benefiting the wealthy ex that level. Yeah,
Speaker 4: like I'm mad about that. Look, females are flipping cars.
Speaker 4: Not many, I bit, not many many for me.
Speaker 1: Yeah, you're a bit salted. Let's move on from that,
Speaker 1: because I just thought it was a hot tip.
Speaker 4: But essentially, if you have a capital gain, it will
Speaker 4: increase the tax that you need to pay. You'll also
Speaker 4: need to pay it if you have, like I've got
Speaker 4: a laundry list, they'll go through. Because like I'm still
Speaker 4: caught on how triggered I am by the car thing.
Speaker 4: But if you redeem units in a managed fund by
Speaker 4: switching them from one fund to another, if you make
Speaker 4: an n species transfer, so if you transfer your shareholding
Speaker 4: from one holding to another holding, it's kind of like
Speaker 4: a selldown, like you sold it and then you reborught it.
Speaker 4: So you need to be really careful around that. So
Speaker 4: that's where I always suggest, you know, talking to your
Speaker 4: share trading platform or talking to your financial advisor when
Speaker 4: you're going to make any serious changes to your portfolio,
Speaker 4: especially if you've owned it for a few years, because
Speaker 4: you don't want to end up going, oh, my gosh,
Speaker 4: this makes so much sense. I'm going to transfer all
Speaker 4: my shares over to this brand new platform. This sounds
Speaker 4: really fun, this sounds really sexy, and then you end
Speaker 4: up with a tax obligation because of it, and you
Speaker 4: just didn't know that's what was going to happen. There
Speaker 4: are a number of them, but essentially, if you sell
Speaker 4: your shares or you have some kind of CGT event occur,
Speaker 4: you need to calculate your CGT and they're on your
Speaker 4: tax return. And then remember you might be able to
Speaker 4: reduce your CGT by literally fifty percent if you hold
Speaker 4: your shares more than twelve months. It's just why we
Speaker 4: always talk about long term investing strategies. Well, it's not
Speaker 4: actually why we talk about it. I obviously believe very
Speaker 4: vehemently in long term investing, but it's just not smart
Speaker 4: to buy and sell shares within twelve months, which is
Speaker 4: really important to remember as well. G Because I think
Speaker 4: so many of us have been buying and selling and
Speaker 4: you know, playing on like micro investing platforms. In a
Speaker 4: twelve month period, you're like, you know, go and raise
Speaker 4: or go on Spaceship or go on Clover or whatever
Speaker 4: you're downloading. Go oh my god, my money is not
Speaker 4: doing anything and rip it straight out within three or
Speaker 4: four months because a quote wasn't performing.
Speaker 1: Like, guys, don't do that. Yeah, I just want to
Speaker 1: shake you.
Speaker 4: Okay, interesting, let's pop a pin in it their VD.
Speaker 4: But on the other side of the break, we're going
Speaker 4: to be talking about how to actually read these documents,
Speaker 4: which I think will hopefully I help these And we're
Speaker 4: also going to chat about what happens if you muck
Speaker 4: up your tax return? Will you go to jail? We
Speaker 4: find out on the other side of.
Speaker 1: The probably don't know, you won't know, you won't.
Speaker 4: Alright, ev we are back. As we mentioned before, as
Speaker 4: a shareholder, I am entitled sure for information from the company.
Speaker 4: I feel like the little shareholders are entitled like well, right,
Speaker 4: you know, just like telling people that their shareholders. Let's
Speaker 4: talk about how to pick apart these documents because it
Speaker 4: can get dense, especially for newbies like my good self
Speaker 4: let's start with a profit and loss statement. Look, not
Speaker 4: all of you are into spreadsheets in the way that
Speaker 4: I am into spreadsheets. Surprise.
Speaker 1: You know what most people do.
Speaker 4: They just look at their profit and lost statement that
Speaker 4: gets emailed to them as a PDF, and they don't
Speaker 4: open the PDF.
Speaker 2: Me.
Speaker 1: I'm like, oh, can that be converted to EXCEL? I
Speaker 1: wonder if I could have a look at XYS.
Speaker 4: Like I'm a psycho, but I don't expect other people
Speaker 4: to be as psychotic as I am when looking at
Speaker 4: profit and loss statements. But essentially, the profit and loss
Speaker 4: statement is a financial statement that summarizes the revenue and
Speaker 4: how much money they've made in the cop and expenses
Speaker 4: incurred during a specific period of time. That could be
Speaker 4: a couple of months if it was generated for that,
Speaker 4: It could be an entire financial year. It could be
Speaker 4: the entire history of the company. The profit and loss statement,
Speaker 4: which is sometimes just called the P and L, is
Speaker 4: one of three financial statements that every single public company
Speaker 4: issues quarterly and annually, along with the balance sheet and
Speaker 4: the cash flow statement. So these are three separate documents
Speaker 4: that all work together, but all tell you different things.
Speaker 4: And if you put them side by side, and you
Speaker 4: are not a finance person, you'll be like, what on
Speaker 4: earth and why am I looking at these? But it's
Speaker 4: a super helpful financial statement in a business plan that
Speaker 4: basically shows how much profit and loss was generated by
Speaker 4: a business. And that's basically the P and L. Look
Speaker 4: that sounds pretty simple. P and L is profit and lost.
Speaker 4: Look it is, and it's always broken down into two sections,
Speaker 4: just assets and liabilities and what's outstanding. So basically it
Speaker 4: is just literally the profit of the business and how
Speaker 4: much it's potentially lost. Beautiful. Okay, let's move on now
Speaker 4: to balance sheets. Soft What are they?
Speaker 1: What is a balance sheet? Yes, think of it like
Speaker 1: a balancing act.
Speaker 4: It's kind of like two sides of a company where
Speaker 4: it has its assets, so the things that it owns,
Speaker 4: and then its liabilities, so the things that it owes
Speaker 4: and the things that it might have outstanding. So it
Speaker 4: might have a number of different things. And you might
Speaker 4: think liabilities is that just debt?
Speaker 1: Yes? But did you know and a.
Speaker 4: Liability on a balance sheet in a company's suite of
Speaker 4: financial reports actually includes all of their outstanding annual leave
Speaker 4: for all of their employees.
Speaker 1: Really, yeah, because they've got to pay it back if
Speaker 1: you leave me.
Speaker 4: Yeah, So if you leave me, ge, I've got to
Speaker 4: pay out all of your anual leave and that sits
Speaker 4: as a liability on my balance sheet because at some
Speaker 4: point I'm going to have to pay that, so we
Speaker 4: keep track of it.
Speaker 1: So it's actually quite nitty gritty.
Speaker 4: It essentially provides a snapshot of what a company owns
Speaker 4: and owes, as well as the amount that is currently
Speaker 4: infested by shareholders. So you can essentially get a snapshot
Speaker 4: of this company's well being by using a number of
Speaker 4: ratios that can be derived from the balance sheet, including
Speaker 4: a formula called the debt to equity ratio and the
Speaker 4: acid tests ratio, among a number of other things, and
Speaker 4: I won't go into them, but essentially debt to equity
Speaker 4: ratio sounds confusing when you say it really quickly, but
Speaker 4: it's basically how much debt to how much stuff do
Speaker 4: you own? And what does that ratio look like like?
Speaker 1: Is it positive? Is it negative?
Speaker 4: What does that look like? How does that impact me?
Speaker 4: I get really into this just because I'm really excited,
Speaker 4: But move on to the next one so we don't
Speaker 4: get too confused. Perfect, let's chat about cash flow statements.
Speaker 4: What are they?
Speaker 1: What do you reckon? A cashlow statement?
Speaker 4: Is ja a statement of a company is cash flow?
Speaker 2: Right?
Speaker 1: Well, you don't even need me, But what does it
Speaker 1: look like?
Speaker 4: What does it tell us?
Speaker 2: All Right?
Speaker 4: So, the cashlow statement, or the CFS if you want
Speaker 4: to be a fancy lady, summarizes the movement of cash
Speaker 4: and cash equivalents that come in and out of a company.
Speaker 4: So the CFS measures how well a company manages its
Speaker 4: cash position, meaning how well a company generates cash to
Speaker 4: pay its debt obligations and fund its operating expenses. So
Speaker 4: if we break that down a little bit more, let's
Speaker 4: look at she's on the money, Like, am I making
Speaker 4: enough money each month to pay all of my rent
Speaker 4: and to pay for this very fancy studio and to
Speaker 4: pay YUG and to pay JEF and to pay everybody?
Speaker 1: Or am I cutting it real fine? Does that make sense?
Speaker 4: So like, do we have enough money in the bank
Speaker 4: to make sure that things are consistently moving and we
Speaker 4: can invest in the business and we can grow, Like
Speaker 4: this is what's going to show you its ability to
Speaker 4: you know, fund new purchases or make new investments. So essentially,
Speaker 4: the main components of the cfs are cash from three
Speaker 4: different areas, so operating activities, investing activities, and financing activities.
Speaker 4: Does the CFO of a company put this together?
Speaker 1: Yes?
Speaker 4: Actually, or an accountant so for me, we want to
Speaker 4: know about the finances if she's on the money. We
Speaker 4: have a bookkeeper, Hi, Helen, love you. She does everything
Speaker 4: for us every single month to make sure that I'm
Speaker 4: on top of what's going on. And then we have
Speaker 4: Louis who is our accountant, and he makes sure that
Speaker 4: every single year all of my reporting comes in so
Speaker 4: that I can look at the business as a whole.
Speaker 4: So we do that on a monthly basis with a bookkeeper,
Speaker 4: and then we do it with an accountant, and then
Speaker 4: I would basically be the CFO because we're not big
Speaker 4: enough to be able to afford that yet. George Kiss okay,
Speaker 4: very good. We were talking about different levels of investing
Speaker 4: a little while back. What sort of reporting do the
Speaker 4: different methods and platforms actually provide me? At tax? Oh
Speaker 4: my gosh, guys, I've said it before. It's twenty twenty two.
Speaker 4: We can expect a lot, and when it comes to
Speaker 4: picking a platform, I do think reporting really should come
Speaker 4: into it because that's actually quite a heavy task if
Speaker 4: you're not into it. So we've talked about our friends
Speaker 4: from Sharess. They basically provide you everything like they will
Speaker 4: just send you a statement. I know Rays do the
Speaker 4: same thing. I know Spaceship, which are both micro investing
Speaker 4: platforms that are very popular in our community. They will
Speaker 4: send you your tax statement to make sure that you've
Speaker 4: got everything you need to submit to the ATO to
Speaker 4: make sure that you're doing your tax properly. Six Park,
Speaker 4: which is the robo advice platform we talk about a lot,
Speaker 4: and I have a very big affiliation with Obviously, I
Speaker 4: need to disclaim it that every time I talk about it,
Speaker 4: it's because I'm biased because I love them, But that's okay.
Speaker 4: But they will send you absolutely everything as well. And
Speaker 4: then if you're an individual share investor across a number
Speaker 4: of different platforms, it's very likely you're going to have
Speaker 4: to do that yourself. So if you own a number
Speaker 4: different shares on a lot of different smaller platforms, you're
Speaker 4: probably going to have to pull it together. But most
Speaker 4: platforms these days have some form of very clear tax
Speaker 4: reporting that you would then take and input into your
Speaker 4: tax return. The other thing that is, I believe got sexy.
Speaker 4: George is data feeds. So these days, if you have
Speaker 4: provided your TFN to your investing platform, example here, you've
Speaker 4: given your TFN to Sharz's Shares, is then able to
Speaker 4: share that information with the ATO. So it's very likely
Speaker 4: that you will be able to log into your tax
Speaker 4: return portal. Then information's already there. All you have to
Speaker 4: do is cross check it with the financial reports that
Speaker 4: came into your email or came into your mailbox, and
Speaker 4: you can go, all right, well that's good, I'm going
Speaker 4: to submit that.
Speaker 1: So it makes your life even easier.
Speaker 4: We love that v I've loved today's chat.
Speaker 1: Have you no doubt? Oh you're a liar. Well, it's
Speaker 1: been I'm just calling you for what it is. A distance.
Speaker 1: It's made me feel a little bit dry.
Speaker 4: But I guess what I wanted to ask you is
Speaker 4: if there's a way that we can kind of simplify
Speaker 4: all of this when it comes to tax time and
Speaker 4: reporting my shares because I don't know, today's been a lot. Look,
Speaker 4: if you have a shared trading platform, you are going
Speaker 4: to be sent reports. I think it's important to understand
Speaker 4: that it is as easy or as hard as you
Speaker 4: want to make it. Understanding the report and where it
Speaker 4: goes is probably the most important thing.
Speaker 1: Nowadays doing your own.
Speaker 4: Tax is quite step by step, so it's quite easy
Speaker 4: for you to do. I'm not saying go and do it. Obviously,
Speaker 4: there are accountants that can do it for you, so
Speaker 4: if you are overwhelmed by this, I would be just
Speaker 4: going to your accountant and saying, what do you need
Speaker 4: from me, and they will literally collect all the information.
Speaker 4: But it's quite clear nowadays. I feel like reporting has
Speaker 4: progressed significantly, even in the last five years, from what
Speaker 4: I used to get and what I used to have
Speaker 4: to calculate and workout. Now it's basically spoon fed, and
Speaker 4: a lot of companies have blogs and resources that you
Speaker 4: can go to. So let's say Chazy sends out their
Speaker 4: reports and you haven't understood it. It's very likely that there's
Speaker 4: an associated blog or website or something that goes alongside that,
Speaker 4: so you can go I don't get it like and
Speaker 4: have a bit of a look. So it's quite easy
Speaker 4: in comparison to how hard it used to be. Finally,
Speaker 4: V my last question for you today, what are the
Speaker 4: implications if we do stuff this up?
Speaker 1: Oh, you're going to jail.
Speaker 4: No, I feel like I will go to jail.
Speaker 1: You're not going to go to jail. You're not going
Speaker 1: to go to jail.
Speaker 4: There's obviously a fair bit riding on it when it
Speaker 4: comes to tax and if you do stuff it up,
Speaker 4: there could be fines involved, like you could have a
Speaker 4: penalty to pay. In saying that, I think it's always
Speaker 4: about being open and honest and transparent and getting advice
Speaker 4: where you need it. If you do have a more
Speaker 4: complex tax situation, I would be reaching out to an
Speaker 4: accountant and finding someone that you trust that can give
Speaker 4: you some advice, and remembering that usually advice pays for
Speaker 4: itself in dividends. Nice. Well, that's probably the perfect place
Speaker 4: to finish today's episode. B. Although it does say play
Speaker 4: it VI's TikTok video about the ATO on our little
Speaker 4: shared dock here? Does that mean? Oh, I did a
Speaker 4: ATO video a couple of years ago, A couple years
Speaker 4: maybe twelve years ago, maybe last year? Sure, not even
Speaker 4: a couple of years ago. And it was just like
Speaker 4: me being a past Do you want me to play
Speaker 4: it for you? Here? Go on, Hey, guys, I'm here
Speaker 4: to pay my taxes.
Speaker 1: How much do I owe Oh, I don't know. You'll
Speaker 1: have to figure it out yourself. Like you don't know
Speaker 1: or you don't want to tell me.
Speaker 4: Oh, we don't know. Okay, but what if I just
Speaker 4: don't pay my taxes this year and we'll just issue
Speaker 4: you with a fine.
Speaker 1: It's fine, But how would you know how much I owe?
Speaker 1: If you just told me that you don't know what
Speaker 1: I owe? Oh, we know how much you are? Oh
Speaker 1: so you know how much I owe? Can you tell me?
Speaker 2: No?
Speaker 4: What that was? It was like a piece of art, mate.
Speaker 4: I love the language. Brilliant, She's a genius.
Speaker 1: Yeah, I am the paid actor, all right.
Speaker 4: I think that is enough from me and my very
Speaker 4: bland TikTok Like I am definitely too old to be
Speaker 4: on TikTok, But I'm not leaving. I came to that
Speaker 4: party and I am staying for the dream. I support you, doll.
Speaker 4: The advice sheed on She's on the money is general
Speaker 4: in nature and does not consider your individual circumstances. She's
Speaker 4: on the money exists purely for educational per and should
Speaker 4: not be relied upon to make an investment or a
Speaker 4: financial decision. And we promise Victoria divine, And she's on
Speaker 4: the Money are authorized representatives in Focus Securities Australia Proprietary
Speaker 4: Limited ABN four seven zero ninety seven seven nine seven
Speaker 4: zero four nine AFSL two three six five two three
Speaker 4: And as always, we would love it if you joined
Speaker 4: our Facebook group where our community shares money tips and
Speaker 4: tricks every single day of the week, free of judgment,
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Speaker 4: on Facebook and join us Facebook to thing. You can
Speaker 4: find us on Instagram where She's on the Money a
Speaker 4: US and as you heard just before, g also on TikTok,
Speaker 4: but I do not recommend you check that out. See
Speaker 4: you next week, guys, by guys,