Australia: Guidance on LIFO method for securities holding period requirement
Guide on applying “last-in first-out” method to determine which shares or interests in shares are subject to testing for holding period requirement
February 12, 2024
The Australian Taxation Office (ATO) updated its guide on applying the “last-in first-out” (LIFO) method to determine which shares or interests in shares are subject to testing for the holding period requirement for a franking offset entitlement.
The LIFO method groups together the primary securities and related securities a taxpayer holds in a company and prevents taxpayers from manipulating the period they held shares at-risk by buying new shares and selling other shares held in the company for a longer period.
- The guide covers the interpretation of “primary securities” and “related securities” when it comes to franking credit trading, what not to include in a grouping of securities, and what are considered “connected entities.”
- The guide also requires that the LIFO method be applied consistently across the taxpayer’s portfolio to “determine the respective purchase dates of shares or interests in shares that form part of your group at the ex-dividend date and for any sales of shares after the ex-dividend date.”