• Using the Capital gain or capital loss worksheet for shares

    Attention

    Warning:

    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

    End of attention

    In the examples on the following pages, Tony uses the indexation method, the discount method and the 'other' method to calculate his capital gain so he can decide which method gives him the best result. This example shows you how to complete the Capital gain or capital loss worksheet to calculate your capital gain when you acquire or dispose of shares.

    Refer to chapter 2 for a description of each method and when you can use each one.

    Remember that if you bought and sold your shares within 12 months, you must use the 'other' method to calculate your capital gain. If you owned your shares for 12 months or more, you may be able to use either the discount method or the indexation method, whichever gives you the better result.

    Because each share in a parcel of shares is a separate CGT asset, you can use different methods to work out the amount of any capital gain for shares within a parcel. This may be to your advantage if you have capital losses to apply.

    For example, Belinda acquired a parcel of 1000 shares on 1 December 1992. She sold them on 31 July 2001. Because she has capital losses, Belinda chooses to work out her capital gain from 460 of her shares using the indexation method. She uses the discount method to work out the capital gain from the other 540 shares.

    Example

    Using all 3 methods to calculate a capital gain

    On 1 July 1993, Tony bought 10,000 shares in Kimbin Ltd for $2 each. He paid stockbrokers fee of $250 and stamp duty of $50.

    On 1 July 2001, Kimbin Ltd offered each of its shareholders one right for each 4 shares owned to acquire shares in the company for $1.80 each. The market value of the shares at the time was $2.50.

    On 1 August 2001, Tony exercised all rights and paid $1.80 per share.

    On 1 December 2001, Tony sold all his shares in Kimbin Ltd for $3.00 each. He incurred stockbrokers fee of $500 and stamp duty of $50.

    Note-Separate records

    Tony has 2 parcels of shares-those he acquired on 1 July 1993 and those he acquired at the time he exercised all rights, 1 August 2001. He needs to keep separate records for each parcel and apportion the stockbrokers fee of $500 and stamp duty of $50.

    The completed Capital gain or capital loss worksheets show how Tony can evaluate which method gives him the best result.

    He uses the 'other' method for the shares he owned for less than 12 months, as he has no choice:

    $7,500 -$4,610 = $2,890

    For the shares he has owned for 12 months or more, his capital gain using the indexation method would be:

    $30,000 -$23,257 = $6,743

    This means his net capital gain would be:

    $2,890

    +

    $6,743

    =

    $9,633

    ('other' method)

     

    (indexation method)

     

    (net capital gain)

    If Tony uses the discount method instead (assuming he has no losses), his capital gain would be:

    $30,000 -$20,740 = $9,260

    He applies the CGT discount of 50 per cent:

    $9,260 X 50% = $4,630

    This means his net capital gain would be:

    $2,890

    +

    $4,630

    =

    $7,520

    ('other' method)

     

    (discount method)

     

    (net capital gain)

    In this case he would choose the discount method rather than the indexation method, as it gives him the better result (less capital gains).

    Last modified: 06 Oct 2009QC 27417