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CGT Cost Base for Shares/MF

Discussion in 'Accounting, Tax & Legal' started by MrDarcy, 19th Sep, 2005.

  1. MrDarcy

    MrDarcy Well-Known Member

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    If shares (or MF units) are purchased in parcels over time, and then some are sold at a later date, how is the cost base worked out ? Choosing the cheapest purchase price will increase CGT, the larger the purchase price the less CGT. Does one get to choose which were sold or is it just FIFO (first in first out) ?

    For example, these may be the transactions:

    Jul 2000: buy 2000 shares/units at $1 each
    Jul 2001: buy 2000 at $1.20 each
    Jul 2002: buy 5000 at 1.40 each

    Jul 2005: sell 2000 at $1.50 each

    or

    Jul 2005: sell 7000 at $1.50 each
     
  2. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Very good question !

    Fortunately the ATO provides clear information on this.

    Identifying when shares or units were acquired
    Also read: Capital gains made by trusts

    CGT on shares or units

    ... and most importantly, the ATO booklet: You and your shares 2004-05

    I'll have to write this up as a series of FAQs I think.
     
  3. MrDarcy

    MrDarcy Well-Known Member

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    Thanks Sim, very complete reply.

    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.

    It does raise the question, how does one identify one share from another :rolleyes: anyhow ! I suppose if bought and sold in round numbers, such as 1000 etc, this would help.
     
  4. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    These days, with electronic trading of shares (CHESS), there are no share certificates issued, and it's generally pretty difficult to track exactly which shares you sell. Perhaps the CHESS system can manage it, but my understanding is that you usually sell shares in a FIFO manner.

    Perhaps someone with more share trading experience (or stock broking experience) could add more here ?