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Media Release - ATO moves with the times
Media Release - Nat 96/02
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The ATO has issued a Taxation Ruling that will allow taxpayers who acquire shares or other securities listed and traded on the Stock Exchange, to specifically identify particular shares that are appropriated to a subsequent sale. The Commissioner of Taxation, Mr Michael Carmody, has reviewed his earlier position, having regard to commercial reality.

"The ATO now accepts that taxpayers who acquire shares as trading stock or for a profit-making purpose, rather than as a long term investment, should not be disadvantaged as a result of the introduction of technology that facilitates trading in shares and other securities through the Stock Exchange", Mr Carmody said.

"This Ruling reverses the approach previously taken by the ATO that, unless a taxpayer can identify particular shares either individually or by reference to share certificates issued by the company in which the shares are held, the taxpayer would have to calculate their profit or loss for taxation purposes by assuming that shares acquired first would be the ones that are sold (i.e. the first in-first out principle).

However, following the introduction of the Clearing House Electronic Subregister System (CHESS) by the Australian Stock Exchange, all securities traded through that system will be uncertificated. This means that taxpayers who buy shares through CHESS would not be able to specifically identify particular shares individually or by reference to share certificates. If the ATO maintained its previous view, taxpayers would have no choice but to apply the first in-first out principle in relation to all sale transactions.

"Taxpayers will now be able to select which shares will be appropriated to a particular sale. However, it will be necessary for taxpayers to maintain detailed accounting records for this purpose. Systems that satisfy the ATO's record-keeping requirements are commercially available and are already being used by some taxpayers", Mr Carmody concluded.

CANBERRA
7 February 1996