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Thanks for that mate,The NAB reference was only due to the fact...

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Zestfulmocha

2,311 Posts.

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15/10/18

09:04

Post #: 36121537
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Originally posted by bellenuit: ↑

I am using NabTrade and as far as I can see this does not exist, so I've built a spreadsheet to do this for me... and as far as i'm aware you can calculate your holding at the end of a FY on one of two ways (and you must apply one OR the other to ALL positions, not pick and choose for each holding as it best suits you;
1. Cost of goods held = purchase price
2. Cost of goods held = market price as of COB 30 June

I am not sure if you are saying that you must value your closing inventory using either of two methods but then must use the chosen method for all of your holdings is a nabtrade restriction or an ATO restriction. I trade with nabtrade but I use a spreadsheet to prepare my tax.

The ATO rule is that as long as each batch of shares is uniquely identifiable (quantity, date purchased, ticker and price), you can value that batch at year end whatever way you like, cost price or market price. What's more, each identifiable batch can be valued differently from the others and you can also value each batch differently the following year. This is at a batch level, not at a holding level.

So if I have two batches of BHP in my holdings, one for 100 shares and one for 150 shares, at the end of the year I can value the batch of 100 shares at cost and the batch of 150 shares at market price. The next year I can value the 100 shares at market and the 150 shares at cost. The restriction is the opening value the following year MUST equal the closing value the previous year.

Let's say I buy something at $1 and it falls to $0.50, I wrote it off as a 'loss' (by using the 'market price' for inventory value method), now that I have sold in the following FY, let's say for $0.75... I cannot double dip another loss, so unsure if I just make a 'fake buy' in my spreadsheet for 0.50 and then match it against the 0.75 sell for a profit? (but then this creates other reporting issues). OR, do I just sell against the original buy line and claim another loss (seems illegal, and double dipping). OR, has my accountant given me wrong information and I should never have claimed a loss because the asset was never sold.... (I'm not sure where this 'declaring inventory' thing came from, but he seemed pretty convinced, maybe deals with a lot of small businesses).

The key is looking at the complete formula and the rule that opening value in one year MUST equal the closing value of the previous year.

The formula for profit (or loss) is:

Profit/Loss = Sales - (Opening Value + Purchases - Closing Value)

The term in brackets is commonly referred to as Cost Of Goods Sold.

In your example, your profit for the first year (assuming a quantity of 1 purchased during the year and closing stock valued at market) is:

Profit/Loss = $0 - ($0 + $1 - $0.50) = -$0.50 loss which you report in your tax return and if that represents the total of your taxable income you can carry that loss forward to later years.

The next year, when you sell the share for $0.75, your profit/loss for that year will be:

Profit/Loss = $0.75 - ($0.50 + $0 - $0) = $0.25 profit, but you will be able to write off $0.25 of the carried forward loss of $0.50 against it (leaving $0.25 to be carried forward to the 3rd year)

So the first year you claimed a loss of $0.50 and the second year you claimed a profit of $0.25, overall a loss of $0.25.

If you had valued using the cost method, you would have had $0 profit/loss the first year [$0 - ($0 +$1 - $1)] and a loss of $0.25 the second year [$0.75 - ($1 + $0 - $0)], but overall your loss is the same as the first method. And like the first method at the end of year 2 you have a carry forward loss of $0.25 to year 3.

Note how both methods have the opening value for year 2 equal the closing value for year 1. It MUST be done that way.

In my spreadsheet, for each batch of shares I own I have a column that shows the value of the batch at cost price, a column that shows the value of the batch at market price and a third column that shows the lower of the first two values. This is what I use to value my closing inventory, namely the lower of cost or market. This means some batches may be valued at market and others at cost.

The lower the value of your closing stock the lower the profit for the year, but you are just pushing profits back to later years (it will all equal out when you sell the batch). So if you want to defer profits so that you have more cash to trade with, value using the lower of each method. You might want to value at the higher of the two methods if you expect to have low income from other sources for this year but not the next, so that will bring profits forward to this year when your marginal tax rate may be lower.

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Thanks for that mate,

The NAB reference was only due to the fact I know ANZ (and maybe other brokers) offer a 'tax summary' type function within their platforms, but I haven't seen anything for NAB - so yes was referring to ATO restrictions/guidelines (as advised by my accountant), but appears he was wrong! Good to know you can give a valuation at batch level instead of holding/HIN level, so thank you for clarifying that i'll be sure to chat to him about that one.

"The key is looking at the complete formula and the rule that opening value in one year MUST equal the closing value of the previous year."

The formulas I am okay with, although in your formulas I assume you're just looking at P&L for a single line item/batch, not account level? Either way, I think i'm comfortable on this front. My biggest issue is how do you change the 'opening price' without over-writing the buy price, however as I read your post and think about this a bit more, perhaps the issue is i'm trying to keep it in one sheet, perhaps I just need a clear slate - new spreadsheet for every FY instead of trying to run the filter on on master sheet... this would allow for different opening rates in each FY and make reporting easier (But it would destroy my formula for calculating time held and auto calculating taxable income on capital gains, but maybe can live without that...

"n my spreadsheet, for each batch of shares I own I have a column that shows the value of the batch at cost price, a column that shows the value of the batch at market price and a third column that shows the lower of the first two values. This is what I use to value my closing inventory, namely the lower of cost or market. This means some batches may be valued at market and others at cost.

I do similar, I assume you manually do this at EOFY for all open positions, or do you do it for all positions throughout the year? (Do you sue excel or google sheets? Do you have addons/formula to scrape ASX prices?)

Appreciate your time typing out such a detailed response - if you would be able to send me a wiped copy of your spreadsheet that would be hugely appreciated!
I'm happy to flick you through what i'm using too if it's of any interest, here's a snip of some of the formula's I've built in to help with my reviews (The third column will check IF position has been open 365 days AND position has been closed AND position is in profit, it reduces the profit amount by 50% so that the totals are only displaying taxable profit as opposed to all profit, otherwise will just display full profit amount if criteria are not met (maybe helpful for investors or those with a lot of positions claiming CGT, or a mix of those that are and aren't) Formula is .....=IF(AND('days open'>365,'profit'>0,('sell date'-'buy date'+1)>0),'profit or loss'/2,'profit or loss')..... Hopefully that is useful to someone here lol, took me long enough to figure out how to do it properly

Cheers,
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