CGT on partial sale

[MACCA350]

I've just sold a portion of a few stocks that are around double what I entered so I can retain the initial capital outlay and ride the profits.

Since this is my first financial year of trading I have yet to deal with CGT.
My question is: Is the CGT applied on a per share basis or on a per trade basis?

For example(ignoring trade costs) here are two versions that I can see, which one is more correct?

1) per share:
buy 100 @ $1 = $100
sell 50 @ $2 = $100
CGT = $50

2) per trade:
buy 100 @ $1 = $100
sell 50 @ $2 = $100
CGT = $0

One other thing, how does the fact I have previously averaged down on a couple of shares affect things? Is my cost base simply the averaged price?
And which buy date is used for CGT timing? Is it the original buy date or the last averaged down date?

cheers

[clayton4115]

I've just sold a portion of a few stocks that are around double what I entered so I can retain the initial capital outlay and ride the profits.

Since this is my first financial year of trading I have yet to deal with CGT.
My question is: Is the CGT applied on a per share basis or on a per trade basis?

For example(ignoring trade costs) here are two versions that I can see, which one is more correct?

1) per share:
buy 100 @ $1 = $100
sell 50 @ $2 = $100
CGT = $50

2) per trade:
buy 100 @ $1 = $100
sell 50 @ $2 = $100
CGT = $0

One other thing, how does the fact I have previously averaged down on a couple of shares affect things? Is my cost base simply the averaged price?
And which buy date is used for CGT timing? Is it the original buy date or the last averaged down date?

cheers

hi

CGT is calculated per share basis, for your second question, CGT is calculated as per the share price of that particular trade and not an average price on a FIFO basis (First In First Out)

i.e if you both ABX shares at $1.00 one year ago, and again ABX shares at $1.50 six months ago and now sell today at $2 you would chose the $1.00trade, you cannot average the trade and use that average figure for CGT purposes.

[MACCA350]

Also, I've been using an Excel based spreadsheet I made to track my trading and report a few bits of infomation, while this has been fine so far, is there anything around that would make tracking simpler and that can accommodate more complex trades(ie averaging down and partial sales)

What do you guys use?

cheers

[nomore4s]

Also, I've been using an Excel based spreadsheet I made to track my trading and report a few bits of infomation, while this has been fine so far, is there anything around that would make tracking simpler and that can accommodate more complex trades(ie averaging down and partial sales)

What do you guys use?

cheers

I use stator (http://www.stator-afm.com/) it is very good, makes things very simple at tax time.

Thread on it here. (http://www.aussiestockforums.com/forums/showthread.php?t=2270&highlight=stator)

[MACCA350]

hi

CGT is calculated per share basis, for your second question, CGT is calculated as per the share price of that particular trade and not an average price on a FIFO basis (First In First Out)

i.e if you both ABX shares at $1.00 one year ago, and again ABX shares at $1.50 six months ago and now sell today at $2 you would chose the $1.00trade, you cannot average the trade and use that average figure for CGT purposes.How do they determine which buy date is used? or is that something you choose when calculating the total CGT to report?

So in the case of the example:

1) per share:
buy 100 @ $1 = $100
sell 50 @ $2 = $100
CGT = $50
Even though there has only been a return of capital(ie no physical profit yet, the physical profit take would occur when the remaining shares are sold) you still have to pay CGT on the $50?

That's a worry as I have returned about $85k of capital and allowing the profits to ride. Based on what you are saying I will end up with about half of that capital return being shown as a CGT event, even though I haven't actually realised those profits in real reality........at least that's how I look at it

cheers

[MACCA350]

I use stator (http://www.stator-afm.com/) it is very good, makes things very simple at tax time.

Thread on it here. (http://www.aussiestockforums.com/forums/showthread.php?t=2270&highlight=stator)Thanks for the link, I'll give it a demo:cool:

cheers

[clayton4115]

what do you mean by return of capital, your explanation indicates to me a CGT event has occured ,if you have not held the share for more than 12 months there is no CGT discount

for your first question, its on a FIFO basis,

First in First Out of when you bought your shares and when you sold them, thats how they work out your cost base for CGT purposes.

[MACCA350]

what do you mean by return of capital, your explanation indicates to me a CGT event has occured ,if you have not held the share for more than 12 months there is no CGT discountI meant the recovering of capital outlay


for your first question, its on a FIFO basis,

First in First Out of when you bought your shares and when you sold them, thats how they work out your cost base for CGT purposes.Ok.

cheers

[So_Cynical]

First in First Out of when you bought your shares and when you sold them, thats how they work out your cost base for CGT purposes.

That sucks...seems stupid to pay capital gains tax when u haven't made a
capital gain....will certainly make tax time interesting for me. :banghead:

[surfingman]

You can sell a number of different ways:

FIFO First in First Out
LILO Last in Last Out
Or if you keep the correct records select from the purchases.

From memory it's different for a trader to investor.

I have a good TR on my pc at work.

[Julia]

First in First Out of when you bought your shares and when you sold them, thats how they work out your cost base for CGT purposes.
I disagree about this. Unless there has been some change in the rules you can choose which Buy price you offset a Sale against.

Say you did the following:
Buy 100 ABC @ $1.00 on 1 January 2008

Buy 100 ABC @ $1.50 on 1 July 2008

Sell 100 ABC @ $2 on 1 July 2009


You can choose whether to calculate the CGT against the 1 July 2008 purchase or the 1 January purchase. Obviously you will choose the July Buy as your c gain is only 50c per share.

[nomore4s]

That sucks...seems stupid to pay capital gains tax when u haven't made a
capital gain....will certainly make tax time interesting for me. :banghead:

But you have made a capital gain:confused:.

The capital gains/loses are worked out on each share purchased not each parcel.

[gooner]

I disagree about this. Unless there has been some change in the rules you can choose which Buy price you offset a Sale against.

Say you did the following:
Buy 100 ABC @ $1.00 on 1 January 2008

Buy 100 ABC @ $1.50 on 1 July 2008

Sell 100 ABC @ $2 on 1 July 2009


You can choose whether to calculate the CGT against the 1 July 2008 purchase or the 1 January purchase. Obviously you will choose the July Buy as your c gain is only 50c per share.

Unless of course you have not used your tax free allowance in which case you may choose the outcome that gives you the biggest capital gain, as this will mean lower tax bills in future tax returns.

I have heard of people using a choice of buy price (I use FIFO), but can not find an ATO reference allowing it. Do you have an ATO or other reputable tax company reference?

[So_Cynical]

But you have made a capital gain:confused:.

The capital gains/loses are worked out on each share purchased not each parcel.

Buy 1000 XYZ @ $1.00 on 1 January 2009

Sell 500 XYZ @ $2.00 on 1 June 2009

Capital = money, so no capital gain - that's what i find stupid...don't make sense to me.

[nunthewiser]

Buy 1000 XYZ @ $1.00 on 1 January 2009

Sell 500 XYZ @ $2.00 on 1 June 2009

Capital gain = $0

lol see an accountant m8 :D.u have made a 100% gain on EACH share purchased

[MACCA350]

I guess the reason they've decided to calculate CGT on a per share basis instead of a per trade basis is because otherwise I could sell out enough to recover my capital and leave the profits to ride(at no capital risk) until the 12 month period is up for the discount on CGT............at least that's the only tax reason they could have because otherwise there is really no difference how it's worked out.

The way they have done it means I'm paying CGT on no real world capital gain since my profits are still riding in the stockmarket and I've sold enough to reimburse what I put in those particular stocks...........basically I'll be paying CGT out of my original capital:sly:

Oh well, that's the way the cookie crumbles:rolleyes:

[MACCA350]

Ordered and paid for Stator two days ago and have since sent two emails but have had no reply with my user licence:confused:

How long does in usually take these guys to communicate with customers?

My patients is wearing thin, anyone have their phone number?

cheers

[nomore4s]

Macca, mine took about half an hour to come back. Try sending a PM and an email to Anthony (user name - Stator) on the Stator thread and see if you can get a reply of him. He was last on the site on the 12.04.09 though so not sure how often he logs on.

[nathanblack]

Buy 1000 XYZ @ $1.00 on 1 January 2009

Sell 500 XYZ @ $2.00 on 1 June 2009

Capital = money, so no capital gain - that's what i find stupid...don't make sense to me.

i understand what your trying to say. Because you havent locked in the gain, it is possible that :
-$1000 BUY 1000 xyz@ $1.00
+$1000 SELL 0500 xyz@ $2
_______
$0.00

But you still own 500 xyz shares. If those shares then became worthless, you have gained nothing. Consisting of a $500 capital gain, followed by a $500 capital loss.

Your cash position is currently same as before share purchases(you sold enough shares to cover the initial outlay). So you have effectively got same cash plus some free shares out of it.

Problem is you will now pay CGT out of your cash position, so if you required that balance to generate return you are now hampered by a lower capital base. Could be crippling. You should have sold additional shares to also cover you CGT liability.

[So_Cynical]

i understand what your trying to say. Because you havent locked in the gain, it is possible that :
-$1000 BUY 1000 xyz@ $1.00
+$1000 SELL 0500 xyz@ $2
_______
$0.00

But you still own 500 xyz shares. If those shares then became worthless, you have gained nothing. Consisting of a $500 capital gain, followed by a $500 capital loss.


Very little chance of that Nathan...i don't buy into rubbish....ive been tempted, and
come close a couple of times, anyway i spread my money after the initial big risk.

What i have actually been doing since Feb is more along the lines of

Buy 10000 XYZ @ 1.00 each = 10k
sell 8000 XYZ @ 1.12 each = 9K

Leaving 2000 XYZ @ 0.50 each ( 50 cents free carry approx) as a longer term hold, at
least that's the way ive been looking at it...and working fine so far.

Very little risk of losing my capital longer term...capital well spread out and low entry's
achieved, plan to do this 10 more times before Xmas, with no realized gains.

[Julia]

Buy 1000 XYZ @ $1.00 on 1 January 2009

Sell 500 XYZ @ $2.00 on 1 June 2009

Capital = money, so no capital gain - that's what i find stupid...don't make sense to me.


lol see an accountant m8 :D.u have made a 100% gain on EACH share purchased
Nun is right, unless I'm completely misunderstanding your post, So Cynical.

For tax purposes it's irrelevant that you still have 500 XYZ shares.
You bought the 500 which you subsequently sold, so you have to pay tax on the capital gain on those 500.

[So_Cynical]

Nun is right, unless I'm completely misunderstanding your post, So Cynical.

For tax purposes it's irrelevant that you still have 500 XYZ shares.
You bought the 500 which you subsequently sold, so you have to pay tax on the capital gain on those 500.

Ah Julia...its appears that is not so. (cant believe i just actually found something
official explaining this) i somehow knew the ATO wasn't insane.

http://www.ato.gov.au/individuals/content.asp?doc=/content/36687.htm

Quote
A common question people ask when they dispose of only part of their investment
is – ‘How do I identify the particular shares or units I have disposed of’.

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.

[Julia]

Ah Julia...its appears that is not so.
Um, what is not so? Your sentence above is a bit ambiguous.
The Tax Office reference confirms what Nun and I have said, doesn't it?

And back to how to calculate the capital gain:

if you bought 1000 at $1 on 1 January, then a further 1000 at $1.50 on 1 March, then sold 1000 at $2 on 1 May, you'd choose the calculation of the purchase on 1 March at $1.50 to offset the sale, wouldn't you?

[Amor_Fati]

So_Cynical, I think you have destroyed your own argument. The ATO is only discussing identifying individual shares because you work out the capital gain realised on each share sold.

And Julia yes absolutely, you would only choose the lower buy price ones if perhaps they would get the the discount and the others wouldn't. Identifying the parcels of shares is always better than FIFO, LIFO or weighted average cost assuming you work it out correctly, because it will either be the same or better from a tax perspective.

[So_Cynical]

Um, what is not so? Your sentence above is a bit ambiguous.
The Tax Office reference confirms what Nun and I have said, doesn't it?

And back to how to calculate the capital gain:

if you bought 1000 at $1 on 1 January, then a further 1000 at $1.50 on 1 March, then sold 1000 at $2 on 1 May, you'd choose the calculation of the purchase on 1 March at $1.50 to offset the sale, wouldn't you?

Yes sorry i had a brain meltdown...got so exited about being able to choose which shares i
sell from a holding of multiple purchases....FIFO is out the door. :dance:

Anyway agreed CGT must be payed on the example in question.