FIFO, LIFO and min-gains: which parcels you are actually selling

Buy the same ticker three times and you do not own one holding. You own three parcels, each with its own purchase date and its own cost base, and each is a separate CGT asset. When you sell some of them, which parcels you sold changes the tax.

The rule people get backwards

FIFO is not the law. It is the fallback. Where your records let you identify the particular shares you disposed of, the Commissioner will accept your selection. Where you cannot identify them, you are required to use first-in first-out to work out the gain.

What the choice is worth

The smaller raw gain wins here even without the discount, because the parcels were bought at very different prices. Reverse the prices and FIFO wins instead. There is no method that is always better, which is the point — it depends on the parcels you actually hold, and it has to be worked out each time.

The three you will see named

• First in, first out — the oldest parcel goes first. Required when parcels cannot be identified, and more likely to reach the twelve-month mark.
• Last in, first out — the newest parcel goes first. Often the smallest raw gain in a rising market, and usually the one that misses the discount.
• Minimum gains — whichever parcel produces the smallest assessable amount after any discount is applied.