When I hold several parcels of shares in a particular company - bought at different times and at different prices - I have always chosen which parcel to sell based on maximising my return. I have not used FIFO or LIFO.
Enter new accountant who says I must use FIFO as I am not able to identify the specific parcel being sold (i.e. I am no longer returning a certificate). He says the ATO go by the Chess Statement which does not identify specific parcels.
I say I sold e.g. 4000 of the 5000 ABC Co. shares which I purchased on 23rd October 2009 via contract #12345 with Westpac Broking at a cost of $3.78 each plus $24.95 brokerage giving me a cost for the 2000 I'm selling of $7569.98. That strikes me as pretty solid identification.
I have found the following in the GUIDE TO CAPITAL GAINS TAX 2006 (page37)
"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 of Taxation will accept your selection of the identity of shares disposed of.
Alternatively, you may wish to use a ‘first in, first out’ basis where you treat the first shares or units you bought as being the first you disposed of...."
I have found nothing further in subsequent GUIDES to CGT, but am weary of searching.
From the above it would seem to me that I am well able to identify the particular shares I am selling, but the Guide continues with an example of "Boris" who
"....bought 1,000 shares in WOA Ltd on 1 July 1997. He bought another 3,000 shares in the company on 1 July 2002.
In December 2002, WOA Ltd issued Boris with a CHESS statement for his 4,000 shares. When he sold 1,500 of the shares on 1 January 2006, he was not sure whether they were the shares he bought in 2002 or whether they included the shares bought in 1997.
Because Boris could not identify when he bought the particular shares he sold, he decided to use the ‘first in, first out’ method and nominated the 1,000 shares bought in 1997 plus 500 of the shares bought in 2002."
What do they mean "Boris could not identify when he bought the particular shares he sold" " ...nominated the 1,000 shares bought in 1997" To calculate the capital gains tax owed he must know the date of purchase and the cost, and if that doesn't identify each parcel owned - what does?
If I accept the accountant's interpretation, I should contact the ATO and advise them that I am adjusting my tax returns (personal, discretionary trust and SMSF) going back (how many?) years. Not only does the Capital gains tax payable alter drastically if FIFO is applied, but all dividends will need to be reexamined in the light of the 45 day rule disallowing imputation credits. I'll often buy an extra parcel to ride the run up to dividend and sell on the last day cum div. I'm certainly not going to sell before exdiv day a parcel I've held longterm which is entitled to the imputation credits when I've bought a parcel specifically for the short term gain and am selling it cum div.
Have there been changes since the 2006 Guide?
Can anyone make sense of Boris's inability to identify the particular shares he sold, and why he could not as well have nominated the 1500 shares as being from his 2002 purchase?
Any one able to shed some light???
Enter new accountant who says I must use FIFO as I am not able to identify the specific parcel being sold (i.e. I am no longer returning a certificate). He says the ATO go by the Chess Statement which does not identify specific parcels.
I say I sold e.g. 4000 of the 5000 ABC Co. shares which I purchased on 23rd October 2009 via contract #12345 with Westpac Broking at a cost of $3.78 each plus $24.95 brokerage giving me a cost for the 2000 I'm selling of $7569.98. That strikes me as pretty solid identification.
I have found the following in the GUIDE TO CAPITAL GAINS TAX 2006 (page37)
"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 of Taxation will accept your selection of the identity of shares disposed of.
Alternatively, you may wish to use a ‘first in, first out’ basis where you treat the first shares or units you bought as being the first you disposed of...."
I have found nothing further in subsequent GUIDES to CGT, but am weary of searching.
From the above it would seem to me that I am well able to identify the particular shares I am selling, but the Guide continues with an example of "Boris" who
"....bought 1,000 shares in WOA Ltd on 1 July 1997. He bought another 3,000 shares in the company on 1 July 2002.
In December 2002, WOA Ltd issued Boris with a CHESS statement for his 4,000 shares. When he sold 1,500 of the shares on 1 January 2006, he was not sure whether they were the shares he bought in 2002 or whether they included the shares bought in 1997.
Because Boris could not identify when he bought the particular shares he sold, he decided to use the ‘first in, first out’ method and nominated the 1,000 shares bought in 1997 plus 500 of the shares bought in 2002."
What do they mean "Boris could not identify when he bought the particular shares he sold" " ...nominated the 1,000 shares bought in 1997" To calculate the capital gains tax owed he must know the date of purchase and the cost, and if that doesn't identify each parcel owned - what does?
If I accept the accountant's interpretation, I should contact the ATO and advise them that I am adjusting my tax returns (personal, discretionary trust and SMSF) going back (how many?) years. Not only does the Capital gains tax payable alter drastically if FIFO is applied, but all dividends will need to be reexamined in the light of the 45 day rule disallowing imputation credits. I'll often buy an extra parcel to ride the run up to dividend and sell on the last day cum div. I'm certainly not going to sell before exdiv day a parcel I've held longterm which is entitled to the imputation credits when I've bought a parcel specifically for the short term gain and am selling it cum div.
Have there been changes since the 2006 Guide?
Can anyone make sense of Boris's inability to identify the particular shares he sold, and why he could not as well have nominated the 1500 shares as being from his 2002 purchase?
Any one able to shed some light???
