Dispose and re-acquire = tax avoidance?

I have a share that has suffered a bit lately, and I can realise a useful capital loss to offset against other gains for the upcoming tax year.

But I still see excellent value in the company, and would like to maintain my position.

Does selling the entire share holding and then re-acquiring them constitute a tax avoidance scheme?

Put another way, what is the minimum time I would need to have between the sale & purchase to suitably separate the transactions? Or is this likely to be based on the individual share, eg due to the timing of announcements to the ASX?

Or, can I buy a second parcel equal to the first, and then sell the first, and assume a FIFO basis?

 

Crystalising losses is a fairly common practice. My understanding is that the ATO stance is that it is OK to create a capital loss. Just have to be careful of the holding period (45 day rule) for franking credits.

 

So do you reckon selling then re-acquiring the shares (even same day?) simply tax loss selling?

 

No issue with the 45 day rule, I have held them for 18 months.

 

I can't see a problem as long as its done in the open market, ie at arms length etc.

 

I agree with Matt. This is a common strategy.

Cheers
N.

 

Thanks all, appreciate your thoughts.

Just thinking further (always a dangerous thing...), the cost base will be reset to the new (and lower) purchase price, affecting any future CGT. But as a buy'n'hold investor I look forward to deferring my CGT liability for many years, so there's not much pain in that ...

Does this mean that I should be 'tax loss recycling' every loser available? (obviously no need to 'recycle' below the nil CGT liability, and no need to recycle dogs - just dump those).

Mind you, this is a bad year for CGT for me (what a sweet flipside!). Recently closed a couple of long winners, and only have one outstanding loser - which I want to keep!

 

Rod

Your last question is a bit like how long is a piece of string. However some things to consider or question, capital losses can only be offset against capital gains (otherwise you can carry them forward), and what assessable (and taxable) income do you expect to earn in the future (ie. do you want to crystalise losses this year when next year you expect a low income year anyway).

 

also, capital losses are offset against gains before they come discounted... so if all your losses are discounted it may not be the best strategy...

however if you have 10k gain (non discountable) 20k discountable and have losses of 10k, you can still fully discount the 20k.....