What is FIFO cost basis?

FIFO (first-in, first-out) is a cost-base method that matches a sale to your oldest parcels first. When you sell only some of your shares, FIFO assumes the earliest ones you bought are the ones you sold, and uses their purchase cost to work out your capital gain.

Does the ATO require you to use FIFO?

No. The ATO lets you identify which specific parcels you sold, so you can choose the parcels that suit you. FIFO is a common and simple default, but you can also use methods like minimise-CGT or nominate specific parcels — provided you keep records of the choice.

How do you work out your cost base under FIFO?

Take the earliest parcels until they add up to the number of shares sold. Your cost base is the purchase cost of those parcels (including brokerage). Capital gain = sale proceeds − that cost base.

Can I choose a different method to FIFO?

Yes. Selling the highest-cost parcels first (minimise CGT) reduces this year's gain, and specific-parcel identification lets you nominate exactly which to sell. The right choice depends on each parcel's cost and holding period, since only parcels held more than 12 months qualify for the 50% CGT discount.

FIFO cost basis explained: how your share parcels are matched when you sell

29 June 2026 · Metrifly team

FIFO cost basis: a sale of 150 shares draws from the oldest parcels first, producing a cost base of $13,445 and a capital gain of $1,765.

When you buy the same share in several lots and later sell only some of them, a question quietly decides your tax bill: which shares did you sell? You can’t tell them apart on screen, but the cost base you use — and therefore your capital gain — depends entirely on the answer. FIFO is the most common way to settle it.

This is general information, not tax advice. Check your own situation with a registered tax agent or the ATO.

What is cost basis, and why parcels matter

Your cost base is what you paid for the shares, including brokerage. Capital gain is simply:

capital gain = sale proceeds − cost base

That’s easy when you bought once and sold the lot. It gets fiddly when you’ve built a position over time — a few hundred dollars here, a dividend reinvestment there — and then sell part of it. Each of those buys is a separate parcel with its own price and its own acquisition date. Sell 150 shares out of 300 and you have to decide which parcels those 150 came from.

How FIFO works

FIFO — first-in, first-out — matches the sale to your oldest parcels first. The earliest shares you bought are treated as the first ones out the door. It’s the intuitive default: you’re emptying the queue from the front.

A worked example

Say you bought the same ETF in three parcels and then sold 150 shares at $101.40:

Parcel	Bought	Shares	Buy price	Cost
1	Mar 2023	100	$88.20	$8,820
2	Aug 2023	100	$92.50	$9,250
3	Jan 2024	100	$96.10	$9,610

FIFO fills the 150-share sale from the top: all 100 of Parcel 1, then 50 from Parcel 2.

Step	Amount
Sold from Parcel 1	100 × $88.20 = $8,820
Sold from Parcel 2	50 × $92.50 = $4,625
Cost base	$13,445
Proceeds (150 × $101.40)	$15,210
Capital gain	$1,765

The remaining 50 shares of Parcel 2 and all of Parcel 3 stay in your portfolio with their original cost bases intact — that’s your open cost base going forward.

Sold vs. retained: the ledger view

The clearest way to see FIFO is as a ledger that allocates the sale down your parcels and stops once it’s filled the quantity sold:

FIFO allocation ledger showing which parcels a sale is matched against and the resulting capital gain

Everything above the line is sold and realised; everything below stays open. Keeping that ledger accurate across years of buys, DRPs and partial sells is exactly the kind of bookkeeping spreadsheets get wrong.

FIFO isn’t your only option

The order you sell parcels changes your gain, and the ATO lets you choose:

FIFO — oldest first. Simple, and the default many people assume.
Minimise CGT — sell the highest-cost parcels first to cut this year’s taxable gain.
Specific parcels — nominate exactly which parcels to sell.

There’s a catch worth knowing: the 50% CGT discount only applies to parcels held more than 12 months. Selling a newer parcel to book a smaller raw gain can sometimes cost you more once the discount is taken into account, so the best choice depends on both cost and holding period. Our guide to capital gains tax on shares covers the discount in detail.

How to track it without the spreadsheet

One sale: estimate the gain, the discount and the tax with our free CGT calculator.
Your whole portfolio: Metrifly’s tax reporting tracks every parcel’s cost base and acquisition date, lets you switch between FIFO, minimise-CGT and specific parcels, and recalculates the net taxable gain instantly. You can see exactly which parcels each sale was matched against — and set your default method in your tax settings.

For the income side of your return, see franking credits explained; when it’s time to lodge, the EOFY checklist walks through the rest.

Summary

FIFO cost basis matches a sale to your oldest parcels first, and that choice sets your cost base, your capital gain and — through the 12-month rule — whether the 50% discount applies. Understand it once, keep an accurate parcel ledger, and let your tracker do the allocation across every buy and DRP.

Start tracking for free.