In summary, I'm trying to understand how a transaction which triggers both a 'disposal event' and 'acquire event' in relation to CGT assets, should use the brokerage fees when calculating the cost basis (for subsequent capital gains / losses). In particular, whether it is permittable in both, only one, or in an apportioned manner?
I have a series of transactions and I'm trying to work out how my brokerage fees should be included within the cost base. For the purposes of this scenario, assume the classification is 'shareholding as an investor' (not a sole trader or business), all occur within the same financial year (so no overlap and all < 12 months) and that the nature of the transactions pertain to using the 'other' method of determining CGT obligations.
- Purchase 100 shares of ABC for $5 USD each, incurring a total brokerage of $1 (0.2% fee) USD with AUDUSD conversion rate of 0.78.
- Dispose of 100 shares of ABC for $10 USD each, incurring a brokerage of $2 (0.2% fee) USD with AUDUSD conversion rate of 0.76.
- Purchase 125 shares of ABC for $8 USD each, incurring a brokerage of $2 (0.2% fee) USD with AUDUSD conversion rate of 0.80.
My understanding of each of the transactions would be as follows:
- A CGT asset, namely stock ABC, is acquired
- A 'disposal' event for the CGT asset and thus we need to work out the capital gain or loss - foreign currency is also a CGT asset, so effectively we are acquiring USD at the same time
- A 'disposal' event occurs in relation to the USD and a CGT asset, stock ABC, is acquired
Transaction II - Calculations
Cost Base = (100 * 5 / 0.78) + (1 / 0.78) + (2 / 0.76) = $644.94 AUD
Proceeds = (100 * 10 / 0.76) = $1,315.79 AUD
Capital Gain = $670.85 AUD
Transaction III - Calculations
Cost Base = 1315.79 + (2 / 0.76) + (2 / 0.8) = $1,320.92
Proceeds = (1000 / 0.80) = $1,250
Capital Gain = -$70.92 (i.e. capital loss - reduced cost base delivers same result)
I understand that I can include the brokerage fees within my cost base and understand that everything needs to be in terms of AUD. My issue occurs in Transaction III - firstly, is it applicable to apply the CGT provisions or are there forex realisation events (namely II and IV) involved here? Secondly, the brokerage fee in the sale of stock 'ABC' is also included in the cost base of the USD acquired (as underlined) - is this approach valid, should it only be included in Transaction II, should it be apportioned or some other approach?
Thanks in advance
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