CGT Parcel Selection Methods Explained for Australian Investors
When you sell shares in Australia, the way you calculate your capital gains tax depends on which parcels of shares are treated as sold. This decision is called CGT parcel selection, and it can make a significant difference to your tax outcome.
Most investors never think about it — their broker applies FIFO by default, and that's that. But the ATO doesn't require FIFO. There is a choice. The difference in tax outcome between parcel selection methods can be hundreds or even thousands of dollars.
This guide covers every CGT parcel selection method available to Australian investors, explains when each works best, and shows you exactly how the numbers change depending on the method you choose.
What is CGT parcel selection?
Every time you buy shares, you create a parcel (also called a lot). Each parcel has its own purchase date, cost base, and quantity. If you've bought the same company multiple times, you hold multiple parcels — each at a different price.
When you sell, you're not selling “your shares” as a single block. For CGT purposes, you're selling specific parcels. The question is: which ones?
CGT parcel selection is the process of deciding which parcels are treated as disposed of. Different parcels have different cost bases, different purchase dates, and therefore produce different capital gains (or losses). The method you choose directly affects your tax.
The three CGT parcel selection methods
Australian investors have three main approaches to CGT parcel selection:
1. FIFO (First In, First Out)
The oldest parcels are sold first. This is the default method used by most brokers and trading platforms. You don't need to do anything — your broker assumes FIFO unless you maintain your own records.
Best for: Investors who don't want to manage parcel-level records, or when the oldest parcels have the highest cost base (bought at higher prices).
2. LIFO (Last In, First Out)
The newest parcels are sold first. This is less common but can be useful when recent purchases were at higher prices and you want to maximise your cost base to reduce the capital gain.
Best for: When recent parcels have a higher cost base than older ones, or when you want to preserve older parcels that may qualify for the 50% CGT discount.
3. Specific parcel selection
You choose exactly which parcels are treated as sold. This gives you maximum control over your CGT outcome. You can target the parcels that produce the lowest gain (or largest loss) for each disposal.
Best for: Active investors managing their CGT exposure, especially those with multiple parcels at different prices and holding periods.
CGT parcel selection in practice: a worked example
Let's say you hold three parcels of XYZ Ltd and want to sell 200 shares at $10.00 each:
| Parcel | Date Purchased | Shares | Cost per Share | Discount Eligible |
|---|---|---|---|---|
| A | Feb 2023 | 200 | $6.00 | Yes |
| B | Nov 2024 | 200 | $11.00 | Yes |
| C | Jan 2026 | 200 | $9.50 | No |
On 15 March 2026, 200 shares are sold at $10.00 each ($2,000 proceeds). Here's how each CGT parcel selection method changes the result:
| Method | Parcel Sold | Cost Base | Gain/Loss | Discount Eligible |
|---|---|---|---|---|
| FIFO | A ($6.00) | $1,200 | +$800 | Yes (held 12+ months) |
| LIFO | C ($9.50) | $1,900 | +$100 | No (held <12 months) |
| Specific | B ($11.00) | $2,200 | -$200 | Yes (held 12+ months) |
Same sale. Three completely different outcomes — from an $800 gain down to a $200 capital loss. That's the power of CGT parcel selection.
Is CGT parcel selection allowed by the ATO?
Yes. The ATO's published guidance on identifying shares for CGT purposes explicitly allows investors to select specific parcels, provided they can identify which shares were sold and maintain adequate records.
The key point: FIFO is the fallback, not the rule. The ATO applies FIFO only when a taxpayer cannot identify which parcels were disposed of. If you can identify them — with clear, documented records — you are free to use any CGT parcel selection method.
Source: ATO — Identifying shares and units for CGT
CGT parcel selection for US shares
If you hold US stocks through an Australian broker, the same CGT parcel selection guidance applies — but with an extra layer of complexity.
Each parcel's cost base must be converted to AUD using the exchange rate at the time of purchase. This means two parcels bought at the same USD price but different dates can have different AUD cost bases due to FX movements.
CGT parcel selection for US shares involves considering both the share price difference and the exchange rate difference between parcels.
For a detailed walkthrough of how FX conversion affects CGT, see: How to Calculate Capital Gains Tax on US Shares in Australia
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How the 50% CGT discount interacts with parcel selection
The 50% CGT discount applies to capital gains on assets held for at least 12 months. This makes CGT parcel selection even more important, because the holding period of each parcel is different.
Consider a scenario where you have two parcels:
- Parcel X: Held for 14 months, small gain — discount applies, so taxable gain is halved
- Parcel Y: Held for 10 months, small loss — no discount, but the loss offsets other gains at full value
Depending on your other capital gains for the year, either parcel could be the better choice. Selling Parcel X gives you a discounted gain. Selling Parcel Y gives you a full-value loss to offset against other gains. The right CGT parcel selection depends on your overall position for the financial year.
What records do you need for CGT parcel selection?
To use any method other than FIFO, the ATO expects you to maintain records that clearly show:
- The date and cost of each parcel acquired
- Which specific parcels were selected for each disposal
- The sale price and date of each disposal
- Any adjustments to cost base (corporate actions, return of capital, etc.)
- For US shares: the AUD equivalent using ATO-published exchange rates
These records should be kept for at least five years after the relevant CGT event (or longer if the asset is still held). Without adequate records, the ATO may default your CGT parcel selection to FIFO.
CGT parcel selection: FIFO vs specific — side by side
| FIFO | Specific Parcel Selection | |
|---|---|---|
| How it works | Sells oldest parcels first | You choose which parcel to allocate |
| ATO compliant? | Yes (default fallback) | Yes, with adequate records |
| Record-keeping | Minimal (broker handles it) | Detailed parcel-level trail required |
| CGT discount control | No — oldest parcels may or may not qualify | Yes — choose parcels based on holding period |
| Tax outcome | Fixed — no flexibility | Varies depending on which parcel is selected |
| Best for | Passive, long-term holders | Active investors managing CGT exposure |
For a deeper dive into how specific parcel selection works step-by-step, see: How Does Specific Parcel Selection Work for CGT in Australia?
How CGT Strategist helps with parcel selection
CGT Strategist was built specifically to make CGT parcel selection easy. Upload your broker CSV, and the platform lets you:
- Compare FIFO, LIFO, and specific parcel selection instantly using your actual trade data
- See the dollar difference between CGT parcel selection methods for each disposal and financial year
- Lock in your choices and generate an Evidence Pack — a structured PDF and Excel report showing every parcel allocation, cost base calculation, and FX conversion
- Handle US shares automatically — FX conversion using ATO monthly rates is built in, so your CGT parcel selection accounts for exchange rate differences
Modelling is free and unlimited. You only pay ($79.99 incl. GST) when you want to export your Evidence Pack for a given financial year.
Important: CGT Strategist is a calculation tool, not a tax agent. Results are based on the data you provide and should be reviewed by a registered tax professional.
No subscription, ever.
Upload your broker CSV and model your parcels free.
Unlock your Evidence Pack for $79.99 and regenerate it as many times as you need.
Frequently asked questions
What is CGT parcel selection?
CGT parcel selection is the process of choosing which parcels (lots) of shares are treated as sold when you dispose of shares for capital gains tax purposes. The ATO allows Australian investors to use different methods including FIFO, LIFO, and specific parcel selection.
Which CGT parcel selection method saves the most tax?
It depends on your portfolio. In a rising market, selling higher-cost parcels first (specific parcel selection) can reduce your capital gain. In a falling market, FIFO may produce a smaller gain. The only way to know is to compare the methods using your actual trade data.
Does the ATO require you to use FIFO for CGT parcel selection?
No. The ATO does not mandate FIFO. If you can identify which specific parcels were sold and maintain adequate records, you are free to use specific parcel selection. FIFO is the default only when parcels cannot be identified.
Can I change my CGT parcel selection method between sales?
Yes. There is no requirement to use the same method for every disposal. You can use FIFO for one sale and specific parcel selection for another, even within the same financial year, provided you maintain clear records for each.
Does CGT parcel selection apply to US shares?
Yes. The same ATO guidance applies. For US shares, the additional complexity is that each parcel's cost base must be converted to AUD using the exchange rate at the time of purchase, which means both the share price and the FX rate affect your CGT parcel selection decision.