Private ruling: Selling shares
Published: March 2015
Ruling period: Year ending 30 June 2015
Date scheme commenced: 1 July 2014

Ruling: Q1: Where you have the same class of shares in the same company purchased with different cost bases, can you nominate which shares to dispose of rather than dispose of shares on a first-in-first-out basis? | A1: Yes.

Relevant facts and circumstances: You own multiple shares of the same class in the same company. These shares have been purchased on different dates for different prices. You intend to sell some of these shares.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 102-5

Reasons for decision: Summary: CGT Determination Number 33 is applicable to taxpayers who acquire shares as capital assets. It states: …on the disposal of shares which form part of a holding of identical shares i.e. of the same class and in the same company, which are acquired over a period of time, it may not always be possible for a taxpayer to distinguish or identify the particular shares that have been disposed of. In these circumstances, the taxpayer will need to decide which particular shares are being disposed of. Taxpayers in this situation will need to keep adequate records of the transaction so that the decision can be supported should the income tax return be subject to Tax Office scrutiny at a later date. In the past, where unidentifiable shares have been disposed of, the Commissioner has accepted 'first-in first-out' as a reasonable basis of identification. For CGT purposes, the Commissioner will also accept the taxpayer's selection of the identity of shares disposed of. In your case, you have purchased the same class of shares in a company on different dates at varying costs. When you dispose of some of these assets, you are entitled to decide which particular shares are being disposed of. Note that you will need to keep adequate records of the transaction so that the decision can be supported should your income tax return be subject to a review at a later date.