Hello there
Just wondering if anyone has come up with a easy or at least straightforward way of calculating CGT on share sales, and most important, partial sales of shares?
It's kind of doing my head in.
I am contemplating moving my direct share investments to Vanguard ETFs or Life Strategy Funds (as detailed in another thread), but thought I'd do some administrative ground work first. To be honest, my inability to calculate CGT on partial share sales has resulted in me not selling out of some share holdings I have - this has actually resulted in both disastrous and wonderful consequences!
Lifestrategy will do all the calculations in house, but If I move to ETFs, this will continue to be an issue/problem/absorbing challenge.
But I'd like to sell down some of my holdings but for those that have done well, I'd like to keep a bit of a holding. I.e. If a share has gone up 100%, I'll sell half of it to put into indexes but as the share has paid for itself, I'll retain the remaining half in the company.
I have prepared some personalised excel spreadsheets for each holding I own. I'm thinking of building the calculation into that but would love to see anyone else's handiwork if they care to share it.
Just in case it might help other people, I've attached one of these spreadsheets for one of my (least successful) shareholdings, AMP.
For the benefit of Americans (and others) reading this thread, some context. The key to Australian CGT is that:
- it doesn't apply to assets bought prior to 1985 (not relevant to me, but certainly is for some)
- if you hold an asset for longer than 12 months, the government gives you a 50% discount on any CGT payable.
- Any profit on a capital gain is added to your income and taxed at your marginal tax rate (your personal income tax rate that increases on a sliding scale)
- Any capital losses in a given year can be offset against capital gains in that same year, or can be held indefinitely to offset against future gains. (I have capital losses that I've held onto since 2003, which have the same nominal value but obviously eroded in real value due to inflation!)
Just a note on my AMP investment. Again, for American readers, AMP was a mutual life insurance which was demutalised and floated and is now a large insurance and financial services company. It hasn't performed very well. A few lessons learnt.
- Just because a company has a share price of $20 doesn't mean its a bargain at $11!
- Just because a company drops down to $11 doesn't mean its going to rebound and it may well go down to $3.50, which it did!
- After holding a stock for 12 years, 10 years of terrible performance can be made up by 2 good years.
- Holding a stock for 12 years with a return of about 50% (including dividends) is a pretty miserable return given the risk. Cash would have performed the same. Indexes would have done a lot better!
- Steady dividends really can soften the blow of poor share price performance. Australian dividends often include a substantial tax credit (the company has already paid company tax @30% so you get effectively a rebate) so it can be somewhat tax effective. My table doesn't take into account the tax impact of 'franked' dividends when calculating a return. Its too complicated for this History major.
Anyway, thought I've give a little context above for a bit of fun. Look forward to any comments, suggestions.
Its a long weekend public holiday in Vic. Trying to get my house in order!