Correction and update:
It’s the other way round. The ATO prefers FIFO to LIFO as a method for costing shares sold.
Commit to memory by repeating to self 3 times: First-comers preferred, therefore FIFO over LIFO.
The average cost method is acceptable if FIFO is not possible.
Apparently, LIFO is viewed unfavourably because in a longterm inflationary environment it distorts the profit by understating it, which taxwise is to the advantage of the taxpayer.
But the ATO does’t address an environment of longterm falling prices where profits are overstated by using LIFO, which taxwise is to the advantage of the ATO.
So the explanation doesn’t make much sense because the LIFO method can benefit either the taxpayers or the ATO, depending on the price environment.
Furthermore, share prices do rise and fall far more frequently and in much greater magnitude than the CPI index. As such, to say that prices tend to go up rather than down is an invalid reasoning for preferring FIFO over LIFO.
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Correction and update:It’s the other way round. The ATO prefers...
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