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Re: Calculating Capital Gains Tax on Selling a portion of a share portfolio

Newbie

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Hello there: 

 

I just want to make sure my reasoning is correct on this topic. Suppose I purchase a $10,000 share portfolio and after 12 months its value increases to $11,000 - so $1,000 in unrealised capital gains, ignoring dividends for this example. I decide to sell $1000 worth of shares, which is about 9.09% of my portfolio. Would I only pay capital gains tax on the proportional realised capital gain? In other words, since I have only sold 9.09% of my portfolio, only 9.09% of my capital gains are technically realised, which comes to $90.90 (9.09% of $1000). 

 

I was doing a bit of 'theorycrafting' on my investments and wanted to confirm whether this is correct in terms of how the ATO treats realised capital gains tax on investments like exchange-traded funds. 

Thank you for your time. 

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Hi @Adien

 

Yes, but it's more simple than you're making it out to be. You're overthinking it!

 

As an investor, you get to decided which shares you're disposing of. You need to be able to individually identify them.

 

If you purchased all of your shares in one chunk, let's say you bought 1,000 shares at $10 each, and are disposing of $1,000 of them after their value increases to $11 each. You report the net gain on that portion you sell (your capital proceeds minus the cost base). Broadly this means your profit minus what it cost to make that profit (so $11 minus $10 and other costs to acquire the shares). You are only taxed on this amount.

 

You can read about identifying when shares are acquired and working out your net capital gain or loss on our website.

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Most helpful response

ATO Certified Response

ATO Community Support

Replies 1

Hi @Adien

 

Yes, but it's more simple than you're making it out to be. You're overthinking it!

 

As an investor, you get to decided which shares you're disposing of. You need to be able to individually identify them.

 

If you purchased all of your shares in one chunk, let's say you bought 1,000 shares at $10 each, and are disposing of $1,000 of them after their value increases to $11 each. You report the net gain on that portion you sell (your capital proceeds minus the cost base). Broadly this means your profit minus what it cost to make that profit (so $11 minus $10 and other costs to acquire the shares). You are only taxed on this amount.

 

You can read about identifying when shares are acquired and working out your net capital gain or loss on our website.

Newbie

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Thank you very much for your response! Very straightforward and clear. 

 

Kind regards, 

 

Adien