The methods
- First in, first out (FIFO): the oldest parcels are sold first. Simple, and the oldest parcels are the most likely to have been held over 12 months.
- Last in, first out (LIFO): the newest parcels are sold first.
- Highest cost first: the most expensive parcels are sold first, minimising the gross gain.
- Specific identification: you nominate which parcels were sold, as the ATO allows when your records identify them.
A worked example
You hold three parcels of the same shares: 100 bought in January 2022 at $10, 100 in June 2023 at $20, and 100 in March 2024 at $15. In September 2024 you sell 150 at $25.
| Method | Parcels sold | Gross gain | Discountable? |
|---|---|---|---|
| FIFO | 100 × Jan 2022, 50 × Jun 2023 | $1,500 + $250 = $1,750 | All (both over 12 months) |
| LIFO | 100 × Mar 2024, 50 × Jun 2023 | $1,000 + $250 = $1,250 | Only the $250 |
| Highest cost first | 100 × Jun 2023, 50 × Mar 2024 | $500 + $500 = $1,000 | Only the $500 |
After the 50% discount the net capital gains are: FIFO $875; LIFO $1,000 + $125 = $1,125; highest cost first $500 + $250 = $750. Here, highest cost first wins even though half its gain misses the discount, because the gross gain is so much lower. With different prices FIFO can win; the calculator recomputes instantly when you switch.
Remaining parcels matter too
Whatever you sell now changes what is left. Selling the cheapest parcels first (FIFO in a rising market) leaves expensive parcels for later, which means smaller gains when you sell them. Over the life of a holding, the total gain is the same; the method shifts it between years and between discounted and undiscounted treatment.
Evidence
Specific identification needs records that tie each sale to a parcel. For CHESS-sponsored holdings that are all on one HIN, the shares are interchangeable, and your contract notes and a contemporaneous note of which parcels you are selling are your evidence. Shares held on different HINs or with different brokers are easier to identify. Decide and record the parcels at the time of sale, not at tax time.
Using the calculator
Enter or import your trades, then switch the parcel matching method. With Specific parcels, each sale lists the parcels it came from and you can type how many units came from each; anything you do not specify is matched first in, first out.
ETFs and managed funds
The same rules apply to exchange-traded funds. Regular investors who buy an ETF every month build up dozens of parcels, often with DRP allotments in between. When you sell part of the holding, the method decides which of those parcels go. Managed funds held directly (not on the ASX) are similar, but the fund manager's statements show units issued and redeemed; check whether the fund applies its own method on redemption. ETFs also make annual tax statements with cost base adjustments (AMIT), which change your parcels' cost bases; this calculator does not apply those adjustments automatically, so adjust the purchase prices if they are material.
Choosing a method
- If you just want a simple, defensible answer, use FIFO and apply it every year.
- If a sale falls near the 12-month mark for some parcels, check FIFO against specific identification of the oldest parcels; they are often the same.
- If you have a large loss on a recent parcel and a large gain on an old one, specific identification can realise the loss to offset other gains. Make the decision at the time of the sale and record it.
Whatever you choose, the remaining parcels carry the consequences into future years, so compare methods over the whole holding, not just this year's sale.