Tax Reporting - 'specific identification method'

In the Tax Report settings it offers two methods for determining which parcel of shares you sold.
1)First in First out.
2)Last in First out.

Could the specific identification method be added?

Hi @Ljfillmore24292 do you mean where you can select the exact parcel of shares being sold?

Exactly. See this ato certified comment on it. Answered: CGT - Selecting share parcels I sold - ATO Community

Perhaps if that is your selected technique each sale has a marker hover like the dividend ‘verification’ and you just go in and link it to the right purchase parcels?

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Hey @Ljfillmore24292. This feature is something @Navarre and I have discussed in the past. It does add an order of complexity across the platform, so it isn’t super high on the priority list… But it is on “the list”

I agree that would be a great feature, but I certainly wouldn’t want to be the guy to have to write the code for it!
FiFo is good enough for the most part - it is mainly if I have the same stock across multiple brokers (and thus HIN’s) but still within the same tax entity/Navexa portfolio that the specific identification method would be nice to have, but it is certainly not an essential feature to me.

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Spot on Tony- same stock across two brokers- good pick up.

Marinate on it Navexa. I have faith :wink:

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@ Ljfillmore24292
+1 for this feature, need to optimise your tax exposure meaning more $$$$ in your pocket (or to reinvest)

There are a few things to note…

There are 5 Methods for CGT Calculation that will each produce a slightly different result and therefore a different tax outcome for the holder.

  1. LIFO
  2. FIFO
  3. Min CGT
  4. Max CGT
  5. Hand Pick a parcel

LIFO/FIFO are date driven, Min Gain/Max Gain are cost driven. Hand Pick a parcel is your unique choice.

The first thing you have to do in your overall calculation of CGT is to sort out any losses made before apply indexes or discounts. As losses can be carried over from year to year you need to be able to put in a carry over loss balance within the calculation. (or have calculated that from a prior period) but shares may not be the only assets within the entity that you can carry a capital loss over from period to period. So a user defined number is perhaps the best solution. Your CGT loss is not the same as your trading loss. It’s specific to capital losses on disposal of capital assets.More information on losses

You could use the index method but generally the discount methods will produce a better result these days after many years of low/no inflation. The discount varies depending on the type of entity holding the asset. This is topical as the commentary is now about returning to inflation. The index method is worked off CPI increase for the asset.

When CGT came in Sept 1985 we were in a period of higher inflation (9.1% 1985-1986) compared to current low inflation (0.8% 2019-2020) source RBA Inflation Calculator So the index method may yet become of value if we return to a period of high inflation but it only seems to last short term. So if we entered a period of high inflation 2022-2024 and you bought your asset today and sold in 2024 the index method may give a better result over time the discount method generally wins out.

Importantly you would want to “LOCK” a period for CGT so that you can change method to produce the result most effective for you. The method needs to be recorded against the asset being sold as you can use different methods for different assets within the 1 tax year.

The different methods are only important on larger holdings where you dispose of parts of the asset over multiple tax periods. Therefore it only an issue when you sell. If you sell in a single event or sell within a single tax year then it won’t matter which method you choose the result will be the same. It’s only vital over a holding where the disposal is split over multiple tax years.

One thing many systems lack is an ability to calculate to a result. Say you have a tax loss you are ether carrying forward or in the current year (MFG for example) and you want to consume the loss with a share held over many years with a large capital gain (BHP). The question I would ask is either what is the least number of shares I can sell in BHP to cover a set gain (least shares would be Max Gain) and the opposite position what is the most number of shares I could sell (Min Gain). Depending on the size of the BHP Holding I may want to rebalance the portfolio weighting. The other consideration I would have is the CGT answers would give very different capital outcomes (The amount I can reinvest in something else). It gets more complicated if I have several options of assets that I could dispose of (ANZ, CBA or BHP) and then I have to consider the size of the parcel that I am left with in the holding and what its tax consequences are. Hence a planing tool can become very valuable in analysing which asset to sell.

There is quite a good summary of the CGT Considerations of shares within the ATO here

Note: This is not tax advice, I’m not a registered tax agent. I’ve just paid enough accountants, enough money over many multiple years to understand the system! It is complex and not everyone can get it correct.

Great summary Mike, I guess the main message to the Navexa colleagues is that the tax reporting can use some TLC to fine tune your tax exposure in line with ATO CGT rules.
Note sure about other Navexa users but tax reporting is the second most important feature of a portfolio tracker for me (tracking returns is #1).

Just for fun the late Kerry Packer’s views on Tax Minimisation :joy: Kerry Packer On Minimising Your Tax - YouTube