Selling the same stock bought at different times

[Demux]

Hi can't seem to be able to search the information I am looking for in the forum.

The question I have is. Say I bought some shares of say 1000 RIO and that has been like 11 months, and I bought some more 200 RIO shares in say a few months ago and want to sell them. So the question is for capital gains purposes I want to sell the 200 RIO that I bought the 6months ago as I would like to keep the 1000 shares so that I get the 50% discount on the capital gains tax after it reaches 12 months. SO does buy and selling shares is first in first out? or it doesn't matter? As long as the shares I hold (say still 1000) never go less than that and I can buy and sell as many times as I want?

Thanks Demux.

 

[RamonR]

In the example you gave you could sell the 200 shares because it would be a like for like parcel.
Otherwise it does go as first in , first out.

 

[Demux]

Thanks for the quick reply RamonR so say I still keep the 1000 shares and buy other lots of 200 and 100 and I so I can sell the shares of 200 or 100 or 300 and it still wont affect the 1000 lot?

Thanks Demux

 

[nioka]

Thanks for the quick reply RamonR so say I still keep the 1000 shares and buy other lots of 200 and 100 and I so I can sell the shares of 200 or 100 or 300 and it still wont affect the 1000 lot?

Thanks Demux

You are entering a grey area and it would be best to get a ruling from the tax office. If you trade by buying and selling other parcels you may end up being classed as a trader and lose any capital gains advantage.

 

[adobee]

i think this would be only applicable if you bought all at the same price.. otherwise the cap gain would be reflected against the original purchase price or if against the current then you would be up for cgt..

i could be wrong .. ask your accountant..

 

[RamonR]

Thanks for the quick reply RamonR so say I still keep the 1000 shares and buy other lots of 200 and 100 and I so I can sell the shares of 200 or 100 or 300 and it still wont affect the 1000 lot?

Thanks Demux

I have done as you suggested and sold two parcels together.
Both added up to number of shares sold.

I have had no problems but should mention that I haven't been audited by the ATO so cannot state outright that this would be alright.

 

[cutz]

First in first out / matched to maximise loss / matched lots for ease of bookkeeping.

Can't see a problem with either method, just check with your tax professional just to make sure.

 

[So_Cynical]

In the example you gave you could sell the 200 shares because it would be a like for like parcel.
Otherwise it does go as first in , first out.

Wrong...

This has been discussed many times...you decide which shares your selling, you just have to keep track off what's what and what you paid for them and when.

 

[Julia]

In the example you gave you could sell the 200 shares because it would be a like for like parcel.
Otherwise it does go as first in , first out.

Not necessarily at all. You may choose to use first in, first out, but it's perfectly fine to sell whatever gives you the greatest tax advantage.

Example: you buy 1000 shares at $1 each - $1000

A few months later you buy more, a further 1000 @ $1.20 each - $1200

Eventually you sell 1000 at $1.50.

You can offset that 1000 against the 1000 you bought at $1.20, thus reducing your capital gain.
Obviously if you went for first in, first out, your capital gain would be greater so you'd be paying more tax.

Or alternatively, you may wish to sell just 500. You can still offset that 500 against 500 of the 1000 you bought at 1.20.

If a trade is several tens of thousands, then you'd be pretty silly not to use the most tax advantaged method, certainly not first in first out.


You should obviously keep clear records of what sales you are offsetting against what purchases.

 

[So_Cynical]

I just tonight put in a sell order for all my shares in XYZ and there's 3 tranches, brought over 2 years at 3 different prices....something like 3053 shares get the 50% CGT discount and 1254 don't.

Now i had to go look at my tax figures for last year to see what XYZ shares i sold last year, so i could figure out what shares i had left, and at what cost base.

 

[Wysiwyg]

Thanks Julia.

EXAMPLE:

Wysiwyg Vigevano is disposing of 3500 shares in "ZZZ", these are held in two separate purchases of 5000 shares each.

Stator can allocate the 3500 shares to the parcels as specified by the allocation method.

1. Oldest to Newest

Stator will allocate the 3500 shares to the oldest parcel.

2. Newest to Oldest

Stator will allocate the 3500 shares to the newest parcel.

3. Pro Rata

Stator will allocate 1750 shares to each parcel as this is based upon a pro rata formula.

4. Custom

You can nominate which parcel will be allocated the 3500 first. This is most powerful when you have multiple parcels and you can find the most tax effective way to dispose of your trade.

 

[jancha]

Spoke to my accountant about shares i've held for well over a year now for long term & was told that because i day trade as a living that these shares would still be taxed fully the same as the short term trades.
Any thoughts on this?

 

[So_Cynical]

Spoke to my accountant about shares i've held for well over a year now for long term & was told that because i day trade as a living that these shares would still be taxed fully the same as the short term trades.
Any thoughts on this?

Sounds about right, if your primary income is from trading...your a trader and selling shares is not really a CGT event...more like a daily event.

 

[jancha]

Sounds about right, if your primary income is from trading...your a trader and selling shares is not really a CGT event...more like a daily event.

Thanks for your response So Cynical.
I just wonder then if i decided to go back into the work force and no longer day traded.
Then would the shares i've retained for long term investment then come into effect after 12 months of holding with CGT?

 

[nioka]

Sounds about right, if your primary income is from trading...your a trader and selling shares is not really a CGT event...more like a daily event.

I can't agree. My main income wasn't from shares, trading or investing and I considered myself an investor that did trade some shares. The tax office declared that I was a trader as all the stocks were held in one account and that account did trade for profit. i lost all capital gains benefits. So that meant that it did not have to be your primary income.

I now have completely different accounts. One for trading and one for long term investments.

There seems to be some incorrect advice on this subject so anyone should get a tax office ruling IN WRITING. A public forum is no place to get this type of advice. Some tax accountants get it wrong, mine did, so get the advice from the horses mouth. Get it right first time.

 

[yonnie]

nioka,

so-cynical (about what?) might be right if jancha according to your example has only 1 account for trading AND investing.

 

[So_Cynical]

I can't agree. My main income wasn't from shares, trading or investing and I considered myself an investor that did trade some shares. The tax office declared that I was a trader as all the stocks were held in one account and that account did trade for profit. i lost all capital gains benefits. So that meant that it did not have to be your primary income.

So nokia your saying that you had an income for the relevant financial year that was greater than your trading income? more than 50% of your total income for the year...or that trading did not contribute the biggest single part of your income?

 

[nioka]

So nokia your saying that you had an income for the relevant financial year that was greater than your trading income? more than 50% of your total income for the year...or that trading did not contribute the biggest single part of your income?

Yes. Trading was not the biggest single part of my income in the year that I was judged to be a trader and not an investor. I did not even consider that I was a trader either. The fact that everything went through the same bank account and I used the same broker seemed to be the telling factor.

 

[So_Cynical]

Yes. Trading was not the biggest single part of my income in the year that I was judged to be a trader and not an investor. I did not even consider that I was a trader either.

Ok, wow very surprised to read that..the ATO must have some sort of threshold policy and you prob had trading income above that, i was always under the impression people were classified (for tax purposes) as whatever contributed the majority of their income.

 

[pixel]

.the ATO must have some sort of threshold policy and you prob had trading income above that,

not necessarily a threshold of income, but an assessment of the purpose and professional attitude:

http://www.ato.gov.au/businesses/content.asp?doc=/content/21749.htm&page=1#H1