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Calculating CGT

Discussion in 'Accounting, Tax & Legal' started by _Sharon_, 29th Jan, 2007.

  1. _Sharon_

    _Sharon_ Active Member

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    Hi,

    I was wondering what I need to supply to my accountant for this. Having sold a large number of my late husbands shares I'm not sure if I can just let my accountant know what I sold and he can get the necessary paperwork from...?...the Share Registries? Or do I have to do it? Does it cost anything?


    Thanks
    Sharon
     
  2. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Whenever a share transaction takes place (purchase / sale / dividend / reinvested dividend), there will be documentation mailed to the account holder.

    Did your husband have all of these records on file somewhere ?

    You (or your accountant) should be able to reconstruct the entire history of ownership from that documentation.
     
  3. _Sharon_

    _Sharon_ Active Member

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    Thanks Sim,

    Yes I know of these notifications. I have a feeling though that alot of them have been filed in each years tax return filing, so I might have alot of paperwork to go though.

    (This would have to be a late night after little ones are in bed job, else I'll have paper not only all over my office but all though the house too!)

    Is this to only way...probably most cost effective...but is there another way...like if someone lost everything in a fire there must be another way?



    Thanks
    Sharon
     
  4. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Were the shares purchased and sold through a broker (eg Commsec) or direct from the issuer ? If through a broker, you may be able to get historical records of shares purchases / sales from them perhaps ? Otherwise, you'd need to contact the share registry for each share to ask them if they can supply copies of transaction records (I have no idea whether they can and whether it would cost).

    I've just spent the last 6 weeks getting my bookkeeping up to date (was about 15 months behind), including a lot of share and managed fund transactions (with CGT calculations too !!) ... so I can empathise with the work you have ahead of you !!!

    I've come to the conclusion that automatic share dividend reinvestment and managed fund distribution reinvestment are evil devices invented by bookkeepers to generate more work for themselves. Life is much easier without these hundreds of small transactions !!!!!!

    Fortunately I've gone mostly paperless (I scan everything to PDF as I receive it and have a logical filing system on my PC) ... so it's relatively easy to track down records as I need them.
     
  5. _Sharon_

    _Sharon_ Active Member

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    Hi Sim,

    WOW 6 weeks to do 15 months! I might have to put aside 6 months to do it!

    I think there have been more than one broker which adds to the complexity. I did find some spreadsheets that my husband had been keeping records of some of the shares. I will have to dig though some more files to see what else I can find.

    I also rang one of the share registries (Computershare) and got some free help there. WOW (Woolworths) will issue transaction histories for free and for others as long as it hasn't been archived it's free too but once it is archived it costs $275 (each share holding) to retrieve it.

    I won't ring any other registries until I know exactly what I am missing now. Just wanted a feel for what they could do and for how much.

    Maybe I should rethink my DRP for my WOW shares!



    Sharon
     
  6. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    I was being a bit facetious about the DRP comments :D it does serve a purpose ... and one could always employ a bookkeeper if it becomes too much work on an ongoing basis (which it shouldn't - since the hard work only happens when you sell shares).

    My wife owns WOW shares she bought at IPO as well - and has been reinvesting the dividends via DRP ever since.

    An alternative strategy is to take dividends / distributions as cash and then reinvest them in larger amounts - perhaps in other shares or funds for diversification. This does take more work though - DRP is quite effortless and works well for compounding returns without thinking about it.
     
  7. _Sharon_

    _Sharon_ Active Member

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    Sim, I like the idea of DRP's, if BHP offered it too I would probably do it also provided I didn't need the cash dividend.


    Just wanting to make sure I have got this correct in my head. If anyone could please confirm or correct me, thanks.

    For example if I had sold shares in two different complanies, say QANTAS and TELSTRA would this be correct:

    QANTAS
    Cost 9000 @ $1ps = $9000 (held more than 12 mths)
    Cost 1000 @ $1ps = $1000 (held less than 12 mths)
    Total Cost $10000
    Sold all for $15000 ($1.50ps)

    CGT due on 50% of profit of 9000 shares sold and 100% of profit of 1000 shares sold

    Profit of 9000 is ($1.5 x 9000)- $9000 = $4500/2 = $2250
    Profit of 1000 is ($1.5 x 1000)- $1000 = $500

    Therefore tax payable on $2750?

    Then if I sold TELSTRA (held for more than 12 mths) for a loss of $1000

    So $2750 - $1000 = $1750?

    So tax is due on $1750 at marginal rates?

    Is this how it is calculated? Also do I use the sale price alone or the sale price net of brokerage fees?

    Thanks

    Sharon
     
  8. NickM

    NickM Co-founder Staff Member

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    Hi Sharon
    Not quite. Have to work out total capital gains then subtract capital losses before applying discounts.
    You choose which gain to apply first against the loss. Obviously the non discounted gain will give you a better result

    ie $1000 gain - $1000 loss = nil
    balance of gains 4500 /2 = $2250 taxable
    Nickm
     
  9. _Sharon_

    _Sharon_ Active Member

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    OK, thanks Nick.

    I understand now.
     
  10. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Nick - if you have a net capital loss, does this effectively negate the benefit of any CGT discount because you apply the undiscounted gains to the loss before you get to discount them ?

    Eg. If you have a carried forward capital loss of, say, $5,000
    A new capital gain (asset held more than 12 months) of $2,000

    Net position: capital loss carried forward = $3,000 ... ie. no benefit from discount ?
     
  11. Tim77

    Tim77 Member

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    Sharon? How did you go?

    I'm in a similar boat to you. My mum lives interstate and as a recently widowed 60yr old she's getting rid of her direct shares. Of course now she has to go through the process of working out the CGT on the dozen or so shares she's had for years, and after many years of dividend reinvestments as well.

    I've searched the WWW high and low for a really good, detailed yet easy to follow example of how to put the info into a spreadsheet and I've found nothing. The ATO website provides only basic examples so they're not much help to me.

    How have you gone, can you provide any assistance?
     
    Last edited by a moderator: 12th Mar, 2007
  12. NickM

    NickM Co-founder Staff Member

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    yes Sim that is correct.
     
  13. _Sharon_

    _Sharon_ Active Member

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    Hi Tim,

    I have yet to have my accountant have a look at what I've done to see if it is all ok but basically I had the following columns:

    *Date *Purch/DRP/Sold *Price p/s *TotalCost *Balance (of shares)

    I could then tally up the total cost column to give me my costs to then take away from the sale price to give me my profit (or loss in the case of telstra:( ). I just did a little tally box at the bottom with notes etc to explain my workings, in some cases there had been shares sold at an earlier date that I can only assume were the first purchased ones but I don't know for sure and this is something else I need to clarify somehow (?). I'm also not sure how to deal with the brokerage fees and will query this with my accountant (ie, do you take them off your sale price before applying it to work out your profit/loss?).

    Some of the more complicated areas for me were working out mergers and demergers. I had to deal with AGL and Alinta merger but got help from the ATO website for that (they have instructions there). BHP was another but my husband had some info kept on that and the share registry was a great help too. WOW was really easy as you can just request the history from the share registry.

    I found the best thing to do was a simple spreadsheet like the above and enter in all the info you have before ringing the share registries, so you know excactly what info you are missing and where you need help, especially as it can be quite costly if they have to go back into archives. In the end I only had to ring one registry (Computershare) and they were very helpful.

    I hope this has been of some help Tim. I will know better how I've done when my accountant has a look at it all.


    Maybe there is another member with more experience who can give an example of their spreadsheet?



    Cheers
    Sharon
     
    Last edited by a moderator: 13th Mar, 2007