So long as you can identify the shares sold you can decide which parcel or part of parcel has been sold. By identify, it means you have records showing the transaction date, quantity, price and brokerage cost of each parcel of shares bought. As far as the ATO is concerned, each individual share within a so identified parcel is a unique item in relation to CGT calculations, as you can apportion the brokerage cost to each individual share, thus establishing the cost base of each individual share and the date of acquisition. Your broker may or may not provide this granularity when it comes to identifying what is sold, but there is nothing stopping you maintaining your own records. In my case I use a spreadsheet to keep track of everything, in particular the actual units I am identifying as being sold. I use the broker confirmation records as independent proof of the purchase and sale dates, quantities, prices and costs. There is no conflict between my records and any records my broker could provide the ATO if audited.
Here is some stuff from the ATO website.
I am trying to confirm how I can allocate a share sale. I bought three parcels of 10,000 shares in an ASX listed company on different dates and at different prices. The shares are held via CHESS. I am now going to sell about some of the shares - probably 5,000 out of the 30,000.
For CGT purposes I will want to treat this as a sale of part of the last parcel I bought (as this will give me the lowest tax payable). I understand I can do this under specific identification, as i have all the necessary records and will maintain them so I can identify what has been sold and what is left.
Is that OK? It isn't going to be treated as tax evasion because I picked the ones that give me the best result?
Generally speaking Yes, using the ‘specific identification method’ is an acceptable approach. See identifying shares or units sold. Where, as with Chess, all of your share purchases are able to be identified, you can choose to decide to sell particular shares that you currently hold. An alternative method is the ‘first in first out’ method. It is recommended that you keep a record of your choices as the ATO may ask you how you calculated current or future CGT on your share transactions based on the cost bases of those particular shares that you have chosen to either sell or retain.
Sometimes taxpayers own shares or units that they may have acquired at different times. This can happen as people decide to increase their investment in a particular company or unit trust. A common question people ask when they dispose of only part of their investment is how to identify the particular shares or units they have disposed of.
This can be very important because shares or units bought at different times may have different amounts included in their cost base. In calculating the capital gain or capital loss when disposing of only part of an investment, you need to be able to identify which shares or units you have disposed of. Also, when you dispose of any shares or units you acquired before 20 September 1985, any capital gain or capital loss you make is generally disregarded.
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 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.
As I mentioned in previous posts, do not use this freedom of choice to try and cheat the ATO, particularly by trying to retrospectively pretend that a previous sale related to a different purchased parcel than originally used in your tax calculation.
