Capital Gains Tax Report

The Capital Gains Tax (CGT) Report calculates capital gains made on shares as per Australian Tax Office rules. The report is based on the ‘discount method’ for shares that were held for more than 1 year and the ‘other method’ for shares held for less than one year. The discount rate used can be set via the settings tab for each portfolio (the default rate is 50%).

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The report may be run over any date range. For more detail about Australian Capital Gains tax rules, please refer to the ATO website.

Running the CGT Report

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  1. Use the date range selector to specify the period for which you wish to run the report. Click the show button to update the report for the selected date rangeCGTReportscreenshot2DateRange
  2. Choose your sale allocation method for each shareholding by clicking the ‘Change Sale Allocation Method’ link at the top right hand side of the report. You can experiment with different sale allocation methods in order to optimise your CGT position. Refer to the Sale Allocation Methods section below for a detailed description of the different sale allocation methods availableCGTReportscreenshot3SaleAllocationButtonCGTReportscreenshot4ModifySaleAllocation
  3. Once your sale allocations are set correctly, use the Lock button at the bottom of the report to save the sale allocations for the period. This means that you can alter the sale allocation methods again in the next reporting period without invalidating the CGT result for a previous period.CGTReportscreenshot10LockReport

Note: CGT positions must be locked in chronological order. Make sure that you have locked the positions for the previous reporting period before you alter the sale allocations for the current period.

Losses carried forward

Any carry-forward losses from the previous reporting period may be entered next to the date range selector before running the report. The carry-forward loss will be included in the losses section of the report.

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Note that the carry-forward amount is not saved and must be re-entered if you re-run the report.

Sale allocation methods

To calculate capital gains Sharesight allows you to choose one of the following sale allocation methods:

First in, first out – Sharesight assumes that you sell your longest held shares first.

First in, last out – Sharesight assumes that you sell your most recently purchased shares first.

Minimise capital gain – Sharesight assumes that you sell shares with the highest purchase price first.

Maximise capital gain – Sharesight assumes that you sell shares with the lowest purchase price first.

Minimise CGT – Sharesight assumes that you sell shares that will result in the lowest capital gains tax first. This method is more sophisticated than the ‘Minimise capital gain’ method because it takes into account the Australian CGT discounting rules.

The following information is taken from the ATO website, and provides important information on the sale allocation method:

To calculate the capital gain or capital loss when disposing of only part of an investment in shares or units, you need to be able to identify which ones you have disposed of. This can be very important because shares or units bought at different times may have different amounts included in their cost and can alter the amount of tax you may need to pay. You may own shares or units that you acquired at different times, which happens if you increase your investment in a particular company or unit trust and these may need to be treated in different ways. For example, when you dispose of any shares or units you acquired before 20 September 1985, any capital gain or capital loss you make is generally disregarded.A common question people ask when they dispose of only part of their investment is – ‘How do I identify the particular shares or units I have disposed of’. If you have the relevant records (for example, share certificates), you may be able to identify which particular shares or units you have disposed of. In other cases, the Commissioner of Taxation will accept your selection of the identity of shares disposed of. Alternatively, you may wish to use a ‘first in, first out’ basis where you treat the first shares or units you bought as being the first you disposed of.

Source: http://www.ato.gov.au/individuals/content.asp?doc=/content/36687.htm

Report Tables

Short Term Capital Gains

This table lists capital gains that have been made during the period on shares held for less than 12 months. Note that quantities and cost bases are adjusted by Sharesight to allow for any capital returns and capital reconstructions.

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Long Term Capital Gains

This table lists any capital gains during the selected period on shares held for more than 12 months. Note that quantities and cost bases will be adjusted by Sharesight to allow for any capital returns and capital reconstructions. Shares purchased prior to 20 September 1985 are not subject to CGT and therefore excluded from the report.

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Capital Losses

This table lists any capital losses during the period. Note that quantities and cost bases will be adjusted by Sharesight to allow for any capital returns and capital reconstructions.

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CGT Summary

This summary section details the taxable income calculation for the period.

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The following methodology is used to calculate taxable income:

  1. The cost base of the shares is adjusted for any capital returns or capital reconstructions.
  2. If there are any capital losses during the period, these are deducted from any gains made on shares held for less than 12 months. Any residual losses are then deducted from capital gains on shares held for more than 12 months.
  3. The capital gains made on shares held for more than 12 months (less any losses if applicable) are discounted by your discount rate (this can be changed under the settings menu for your portfolio).
  4. Any capital gains on shares held for less than 12 months (as calculated in (2) above) are added to any discounted capital gains on shares held for more than 12 months (as calculated in (3) above). This amount is the capital gain for the period.

Note1: Returns of capital give rise to a capital gain where the amount of the capital returned exceeds the cost base of the share, or where the shares to which the return of capital relates are sold before the return of capital is received. In either of these cases an ‘unallocated capital return’ is added to either the capital gain on shares held for less than 12 months or the capital gain on shares held for more than 12 months as appropriate. Please see here for a worked example: http://www.ato.gov.au/individuals/content.asp?doc=/content/61358.htm&page=5&H5

Note2: Sharesight does not account for any capital losses in previous tax years. Capital losses to be carried forward must be accounted for manually.

Editing the sale allocation methods within a locked reporting period

It’s still possible to edit transactions and sale allocating methods within a locked reporting period; however you should not do this if you have used the information in the Sharesight CGT report to prepare a previous tax return. A warning message is displayed if you attempt to edit data relating to a locked reporting period.

To alter the sale allocation methods used for a previous locked period, click the current lock date that is displayed at the top of the report to reveal a list of locked reporting periods. Use the edit link next to the reporting period to edit the sale allocations for this period.

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WARNING: Altering the sale allocation method for a previous reporting period will alter the CGT result for the period that is being edited and any subsequent reporting periods.

You can also click the remove link to ‘unlock’ the most recently locked reporting period and remove the sale allocation methods that were saved against the period. If you wish to unlock multiple reporting periods you must do so in reverse chronological order.

 An important note for Xero users.

The specified sale allocation method is used when calculating the realised gain component and cost base reduction on sell trades that are synchronised to Xero. If you alter the sale allocation method via the CGT report after you have synchronised sell trades to Xero, you will be presented with an option to resynchronise any transactions that have altered line item amounts (note that the total invoice value will not change but the split between capital gain and the reduction of the asset cost base may be different).

Please note that Xero does not allow a reconciled transaction to be modified, so we recommend that you run your CGT report for the period and optimise your CGT positions as appropriate before you reconcile the sell trades for the period in Xero.

Last modified on June 2, 2016