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Re: How to treat certain share buy/sell instances (for the purposes of calculating capital gains/...

Enthusiast

Views 128

Replies 3

Hi there again @Jodie_ATO, and other contributors Smiley Happy

Thank you again for your help last week. I wanted to check in today with some an additional query.

I am in the process of undertaking some amendments to capital loss/gains reporting in my previous tax returns, to correct for any human error (I had previously been manually calculating via a spreadsheet, and have now moved to using 'ShareSight' to remove human error from the equation).

 

However, I also want to check on how to interpret a few specific transactions from one income year, to ensure my future reporting and current amendment/review process is correct. Please see below an illustration for one financial year that it would be great to receive advice on:

In one financial year I recorded capital gains from disposal of shares of shares of $14,904. I also recorded capital losses for the year of $58,846 from the disposal of shares.

 

Of the calculated capital losses, $15,973 arose from the disposal of short term share positions, and these losses were used to offset my capital gains for the FY in full, with a small figure remaining to be carried over as a loss to following years.

 

The remaining capital losses recorded that year of $42,873 arose from the disposal of longer term share positions, and were also carried over to the following year.

However, I want to check on the nature of how these latter losses were generated, to ensure the calculations via ShareSight are correct. Each loss was generated when disposing of a stock that was falling in price (and I feared would continue to fall). After each disposal event, the stock was then rebought at a significant premium over the following days, as my thesis was incorrect and the price began to appreciate significantly. 

 

My question is, am I correct to have recorded a capital loss for these share disposal events? From my research, I believe this is correct, though I am checking in to ensure I am recording things correctly, and doing the right thing tax wise. Please note that the capital loss was not utilised in the FY, nor was there any indication it would be utlised in following years (and it is still 'rolling' to this day). The sells were prompted purely via a concern that the stock would depreciate further in price.

Please find below illustrations of two of the disposal/purchase events for a clearer picture (note that all buy/sells are for the same company/asx ticker):

  • Instance 1:
  • 24/12 - Sell of 285,000 shares @ 0.03 (originally acquired in various parcels between 10 & 12c)
  • 28/12 - Buy of 150,560 shares @ 0.0427
  • 28/12 - Buy of 34,440 shares @ 0.044
  • 28/12 - Buy of 50,000 shares @ 0.045
  • 31/12 - Buy of 50,000 shares @ 0.049c
  • Full buyback of 285,000 shares complete, requiring additional material capital input of $3343

 

  • Instance 2:
  • 18/1 - Sell of 300,000 shares @ 0.055 (originally acquired in various parcels between 8 and 12c)
  • 18/1 - Buy of 200,000 shares @ 0.0573
  • 18/1 - Buy of 34,482 shares @ 0.058
  • 11/2 - Buy of 17,857 shares @ 0.056
  • 12/2 - Buy of 47,661 shares @ 0.061
  • Full buyback of 285,000 shares complete, requiring additional material capital input of $984

 

Thank you for your time, and I look forward to hearing your advice.

All the best

 

1 ACCEPTED SOLUTION

Accepted Solutions

Most helpful response

ATO Community Support

Replies 2

Hi @Tas_musician,

 

You are correct if you reported $14904 at TOTAL capital gain label. Thereafter you would deduct this amount away from your CGT losses, so $58846 - $14904 = $43942 (loss amount). So zero or blank at NET capital gain label and $43942 at Net capital loss carried forward label. 

 

As soon as you sell or dispose of the shares this is considered a reportable CGT event. If you then purchased shares from the same share company this would be viewed as a new purchase and not reportable until such time that you sell or dispose of those shares.

 

Please use the links provided for further assistance.   

 

All the best.

 

3 REPLIES 3

Most helpful response

ATO Community Support

Replies 2

Hi @Tas_musician,

 

You are correct if you reported $14904 at TOTAL capital gain label. Thereafter you would deduct this amount away from your CGT losses, so $58846 - $14904 = $43942 (loss amount). So zero or blank at NET capital gain label and $43942 at Net capital loss carried forward label. 

 

As soon as you sell or dispose of the shares this is considered a reportable CGT event. If you then purchased shares from the same share company this would be viewed as a new purchase and not reportable until such time that you sell or dispose of those shares.

 

Please use the links provided for further assistance.   

 

All the best.

 

Enthusiast

Replies 1

Hi @Jodie_ATO,

 

Thank you for your advice Jodie, I really appreciate it.

I am glad to have this cleared up with your help. I was unsure how to treat the share disposal events illustrated, since the shares were repurchased a few days after (at a premium to the sale price requiring significant additional capital). I wasn't sure if there was a different method where the cost base is consolidated for instance, since the shares were reaquired. However, it makes sense that upon disposal a CGT event is triggered, and that the repurchasing of the shares at a higher price point is a 'new purchase' and as such not relevant until disposed of in the future.

 

I think my confusion came from seeing some examples of 'wash sale events,' and was concerned this might fit that criteria, despite being motivated not by a desire to offset capital gains, but by a fear of a falling stock price. On close inspection it seems that in my case, there was no 'washing,' or 'scheme to offset grains,' as my capital gains for the year were already offset for the FY by separate capital loss share disposal events. As such, the sale events in the illustration for the one share/ticker simply generated a capital loss that has not been utilised, and instead carried forward to future years.

 

Thank you for clearing this up. I can now confidently proceed with my tax return amendments. I am looking forward to making the amendments and ensuring everything is correct! Great to have removed human error from the process by no longer doing manual calculations. 

 

Wishing you well Smiley Happy

ATO Community Support

Replies 0

Hi @Tas_musician,

 

Thank you for your feedback. I understand reporting CGT events can be daunting if you are doing this without assistance. We are happy to provide you with help and guidance when you need it. Sounds like you have your previous years amendments under control. You will also be well prepared for the current FY reporting which is almost upon us. 

 

If you need further assistance please let us know.

 

Till next time, all the best.