How Does Specific Parcel Selection Work for CGT in Australia?

If you've sold shares on the ASX (or US stocks through an Australian broker), chances are your broker calculated your capital gains using FIFO — First In, First Out. It's the default, it's automatic, and many investors never consider whether an alternative method might produce a different result.

But FIFO isn't the only option. The ATO allows investors to choose which specific parcels of shares are disposed of when they sell — a method known as specific parcel selection (sometimes called specific identification or specific lot selection).

This article explains how it works, when it matters, and why most investors never realise they have a choice.

What is a “parcel” of shares?

Every time you buy shares, you create a parcel (also called a “lot”). Each parcel has its own:

• Purchase date — which determines whether you qualify for the 50% CGT discount (held for 12+ months)
• Cost base — the price you paid, including brokerage
• Quantity — the number of shares in that buy

If you've bought the same company multiple times, you'll have multiple parcels at different prices and dates. When you sell, the question becomes: which parcel are you selling?

How FIFO works (the default)

FIFO assumes you're selling your oldest shares first. Most brokers and trading platforms apply this automatically.

Example: You hold three parcels of XYZ Ltd:

You sell 500 shares at $5.00 each.

Under FIFO, you're selling Parcel 1 (bought at $2.00). That's a capital gain of $3.00 per share, or $1,500 total before any CGT discount.

How specific parcel selection works

Instead of automatically selling the oldest shares, specific parcel selection lets you choose which parcel is treated as disposed of.

Using the same example, if you select Parcel 3 (bought at $6.00), you'd have a capital loss of $1.00 per share, or -$500 total.

Same sale. Same shares. Completely different tax outcome.

That's a $2,000 difference in taxable capital gains from the exact same transaction.

Is this actually 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 relevant ATO guidance states that where a taxpayer can identify the specific shares or units disposed of, those are the ones treated as having been sold. Where parcels cannot be identified, the ATO applies a default first-in, first-out rule.

The key requirement is record-keeping. The investor must be able to demonstrate which parcels were selected and maintain a clear audit trail. This is where most investors fall down — not because the method isn't available, but because they don't have the documentation to support it.

Source: ATO — Identifying shares and units for CGT

When does specific parcel selection make a difference?

The difference between methods tends to be most noticeable when:

• The same stock has been purchased at different prices over time (dollar-cost averaging, multiple entries, etc.)
• A portfolio contains unrealised losses that could be offset against gains elsewhere
• Some parcels have been held for over 12 months and may qualify for the 50% CGT discount, while others have not
• End-of-financial-year modelling is being used to compare the impact of different approaches
• US stocks are held through an Australian broker where the AUD/USD exchange rate adds another variable to cost base calculations

For investors with multiple parcels of the same stock, it's worth being aware that different methods can produce different outcomes.

For investors holding US shares, FX conversion adds another layer of complexity to cost base calculations. See our article: How to Calculate Capital Gains Tax on US Shares in Australia

Why don't more investors use it?

Three reasons:

1. Brokers default to FIFO. Your trading platform doesn't ask which parcel you're selling. The confirmation note just shows the sale. Most investors assume that's the end of the story.
2. The record-keeping is painful. Manually tracking parcels across multiple buys, sells, corporate actions, and financial years in a spreadsheet is tedious and error-prone. One mistake in a formula and your audit trail falls apart.
3. Most people don't know it's an option. CGT education in Australia is thin. Unless your accountant proactively raises it (and many don't, because they're working from whatever your broker gives them), you'd never know there was a choice.

What records do you need?

To use specific parcel selection, the ATO expects you to maintain records that 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 relevant adjustments to cost base (corporate actions, return of capital, etc.)
• For US shares: the AUD equivalent using ATO-published monthly 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).

How CGT Strategist helps

CGT Strategist is an Australian-built tool designed specifically for this problem. Upload your broker CSV, and the platform lets you:

• Compare FIFO against specific parcel selection instantly, using your actual trade data
• See the dollar difference between methods for each financial year
• Generate an Evidence Pack — a structured report showing every parcel allocation, cost base calculation, and FX conversion, ready to share with your accountant or keep with your tax records

Modelling is free and unlimited. You only pay ($79.99 incl. GST) when you want to export your Evidence Pack report 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.

Related: all CGT parcel selection methods

This article focused on specific parcel selection, but it's one of several CGT parcel selection methods available to Australian investors. For a complete comparison of FIFO, LIFO, and specific parcel selection — including worked examples — see our guide: CGT Parcel Selection Methods Explained for Australian Investors

Summary

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