Tax advice

[Jay]

On a similar note and maybe a nob question, just can't think at the moment , how do you normally treat the following scenario (Treated as a trader (individual) and filing tax returns declaring profits and losses)

You buy shares in XYZ in several tranches - e.g 1000 @ $5.00, another $500 @ 4.00 and another 500 @ 4.50

You then decide to sell say 750 and get $4.45 for them. The rest you do not sell until the following financial year

What do you declare as your cost of the shares/ on your tax return; do you: a) Base on the average price overall
b) Treat each transaction separately
c) as above usng FIFO basis
d) doesn't make any difference
e) something else - who cares all works out the same in the end??
I have never done this so far in my Trading history - Only ever sold all at once and therefore used the total cost as a basis.

[Aaron]

You buy shares in XYZ in several tranches - e.g 1000 @ $5.00, another $500 @ 4.00 and another 500 @ 4.50

You then decide to sell say 750 and get $4.45 for them. The rest you do not sell until the following financial year

What do you declare as your cost of the shares/ on your tax return; do you: a) Base on the average price overall
b) Treat each transaction separately
c) as above usng FIFO basis
d) doesn't make any difference
e) something else - who cares all works out the same in the end??
I have never done this so far in my Trading history - Only ever sold all at once and therefore used the total cost as a basis.

I will have a go at this one but don't take my word for it.

I thought you had to use FIFO or a Weighted Average Cost to value shares considered trading stock.

Sales 3,337.50 (750*$4.45)
Less Purchases 9,250.00 ((1000*5.00)+(500*4.00)+(500*4.50))
Plus Closing Stock FIFO 5,500.00(1,250*5)+(500*4)+(500*4.50)
Loss 412.50

Or Weighted Average 5,775.00 (4.62*1,250)
Loss 137.50

Correct me if I am wrong on anything but the result is significantly different.
I understand that you need to be consistent once a valuation option is selected as changes in valuation methods need to be justified by sound commercial reasons. Advancing or deferring income tax liability is apparently not a sound commercial reason.

[Harvey Specter]

I thought you had to use FIFO or a Weighted Average Cost to value shares considered trading stock.

Looks like you may be right. Not an authoritative soucre but good enough for me. Extracts from the Mater Tax guide:

Excepted financial arrangements

Last reviewed: 08 October 2013

IT07 ss EA 1, EB 3(3), ED 1

An excepted financial arrangement that is held as trading stock or revenue account property must be valued at cost. This category includes shares (other than a share acquired under a share-lending arrangement or a share-lending right), options, short-term trade credits, annuities, insurance contracts, gaming and lottery bets, emissions units and various agreements for the sale or lease of property. See s EW5
..., the value must be calculated using the first-in first-out (FIFO) method or weighted average cost method. In the case of shares, these methods apply on the basis of share types rather than across an entire share portfolio, eg where more than one parcel of the same type of shares is held.