CGT and Different Parcels of the Same Shares

Discussion in 'Accounting & Tax' started by Terry_w, 19th Dec, 2016.

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  1. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    What happens if you buy shares of the same company at different stages and then sell some of your holdings? How do you know which shares you have sold?

    Example
    X buys 500 ANZ shares on 1 Jan 2012 for $20 each and 500 ANZ shares on 01 Feb 2015 for $22 each.

    On 19 Dec 2016 he sells 500 ANZ shares for $24 each.

    The CGT consequences will be different for each lot, so how do we know which lot he as sold?

    If the shares can be distinguished then it is possible to work out which lot has been sold.

    If they cannot be distinguished then the ATO will accept the 'first in first out' rule. this means X would be considered to have sold the first lot of 500 shares - the ones he acquired for $20 each.
     
    Terry_w, 19th Dec, 2016
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  2. Redwing

    Redwing Well-Known Member

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    Hi Terry

    Is there a proven/accepted method of showing which were sold to provide to an accountant?
     
    Redwing, 13th Jan, 2017
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  3. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Only if you can prove which shares were sold. What evidence do you have?
     
    Terry_w, 14th Jan, 2017
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  4. Simon Hampel

    Simon Hampel Founder Staff Member

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    I assume some trading platforms are sophisticated enough to allow you to sell specific parcels of stocks - but from memory with Commsec (it's been a while since I made any trades), there was no option to specify - it was assumed FIFO (well, more specifically, there was no choice, so your only option is FIFO).
     
    Simon Hampel, 18th Jan, 2017
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  5. Nodrog

    Nodrog Well-Known Member

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    I didn't think it mattered whether the share trading platform could identify specific parcels of shares. One just sells x number of shares then uses historical transaction records to match the sale with selected parcels of shares. Reckon Personal Plus which I use to record share transactions allows me to identify specific parcels of shares purchased. When selling one can select the specific parcel of shares to match the number of shares sold to give the best tax outcome.

    @Terryw does this sound correct? Thanks
     
    Nodrog, 18th Jan, 2017
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  6. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    I don't know, but you would have to be able to prove which lot you sold if audited by the ATO.
     
    Terry_w, 30th Jan, 2017
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  7. Nodrog

    Nodrog Well-Known Member

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    Nodrog, 31st Jan, 2017
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  8. Simon Hampel

    Simon Hampel Founder Staff Member

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    I've read that page on the ATO website and find it a bit vague as to exactly what is considered acceptable.

    Sure, if you have actual share certificates - it is likely to be fairly straight forward - but in an era of CHESS and electronic settlements, surely it's practically impossible to identify specifically which shares have been sold?

    "If you have the relevant records (for example, share certificates), you may be able to identify which particular shares or units you have disposed of. In other cases, the Commissioner will accept your selection of the identity of shares disposed of."

    This highlighted sentence is what concerns me the most. On the surface that implies that you can choose which ever shares you like. But can you? If it really is possible, then why is this question even an issue - they should just say "do it however you choose, the Commissioner will just accept it". But they don't say that, so I'm operating on the assumption it isn't that simple.

    I think the issue is that you can't actually "identify" individual shares purchased via CHESS. You have no way of specifying exactly which parcel will be sold when actually performing the transaction (at least, I've never seen that option in Commsec).
     
    Simon Hampel, 13th Feb, 2017
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  9. Nodrog

    Nodrog Well-Known Member

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    One is just selling x number of shares. In Reckon Personal Plus you can choose fifo, lifo, minimum/maximum gain, specific lots or total holdings. Sharesight also allows you to do the same. I doubt the ATO would be expecting brokers to enable you to choose specific lots. Besides when you change brokers the history is lost.

    I keep all share transactions in Personal Plus, broker and Chess statements. I can identify all lots. Hence I would think that being able to show ATO the lots you chose to sell would be sufficient to keep them happy.

    I just did a search of various sites, the consensus seems to support what my understanding is.

    However surely there's an accountant here who can answer this. It happens all the time.
     
    Nodrog, 14th Feb, 2017
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