Tax Considerations - Day Trade

[Iggy_Pop]

Thanks Julia, I thought this may be the case. Looks like I need to hold for 12 months as the best option, providing the share gain remains.

 

[bellenuit]

My understanding is I have no capital gain, and would not be obliged to pay capital gain until I sold some more of the shares which I have left??

Forget about the cost of the parcel compared to the cost of the portion sold. You split the parcel into two amounts, those you have retained and those you have sold and allocate transactions costs proportionately. You then work out the capital gain on the portion you have sold compared to the acquisition costs of the portion you have sold (not the acquisition costs of the complete parcel).

So assume you bought 100 shares at $0.90 each and the brokerage (inc GST) was $10 (or $0.10 per share). You sell 60 for $2 each and brokerage (inc GST) is $10.

The 60 you sold realised $110 ($120 - $10 costs).
The cost of those 60 were $60 ($54 + $6 costs).

Your capital gain is $50. As Julia says, if you held for more than a year, you only add 50% of the CG to your income for tax purposes (e.g. $25).

The remaining 40 shares have a cost base of $40 for CGT calculation when they are eventually sold.

If you sell in one transaction shares that were part of several different parcels when bought, you identify which parcel they come from when determining the cost base. You don't have to follow any FIFO or LIFO rule if it doesn't suit you, so long as your records can adequately identify the source of each share sold. So if you have bought several parcels of the same share at different times and then sell a portion, if you want to reduce tax in the current year you might nominate the most costly as the source used in the sale or if you already have CG losses you may choose the least costly to write off against those losses or combinations thereof depending on what works best for you. Always bear in mind the 1 year rule, as it is usually better to sell those that are older than 1 year to get the 50% discount.

 

[863]

With all the complexity of this taxation in mind, does anyone have a good accountant around Brisbane?

 

[burglar]

With all the complexity of this taxation in mind, does anyone have a good accountant around Brisbane?

Hi 863,
and welcome to ASF.
I believe a straight answer to your question would constitute financial advice.
Definately a no no at ASF.

 

[863]

Ah right, thanks for letting me know

 

[ls111]

Hi,

I have posted this query on another thread however I think it would be more appropriate to ask it here. Its quite similar to bellenuits example (posted on 15/01/2011).

Here is the scenario:

PARCEL 1. I buy 1000 shares in company AAA at $1. The brokerage is $20

PARCEL 2. I buy a further 2000 shares in AAA at $2. The brokerage is $30

PARCEL 3. I sell 2600 in AAA at $3. The brokerage is $40.

Because my parcels are all different sizes and different prices, I am wondering how to calculate the brokerage after the sale of parcel 3.

From my understanding I have 3 ways to account for this transaction.

Method 1. Assume I sell 1000 from parcel 1 and 1600 from parcel 2 (FIFO)

Method 2. Assume I sell 2000 from parcel 2 and 600 from parcel 1. (LIFO)

Method 3. Use the average purchase price.

Could someone please confirm if these are 3 ways to do it...and if possible, the mathematical calculations as to how to show the brokerage fee on the transaction?

Thanks Much

 

[ishakeel]