Average Cost Basis: Essential 2025 Guide for Aussie Investors

Every Australian investor, from casual ETF holders to seasoned share traders, knows that tax time can bring a tangle of numbers and paperwork. One concept that can either simplify or complicate your investment returns is the average cost basis. In 2025, with ATO digital tax reporting evolving and markets as dynamic as ever, understanding how to calculate and use your average cost basis is more valuable than ever.

What is Average Cost Basis and Why Does It Matter?

The average cost basis is a method used to calculate the cost of your investments for tax purposes. In simple terms, it’s the average price you paid for all your units or shares in a particular asset, like shares or managed funds, factoring in multiple purchases over time. When you sell, the difference between the average cost and your sale price determines your capital gain or loss—and ultimately, how much you’ll owe the ATO.

• Example: Say you bought 100 shares of an ASX-listed company at $10 each, then later bought another 100 at $15 each. Your average cost basis is $12.50 per share. If you sell 50 shares at $20 each, you’ll pay capital gains tax on a $7.50 per share gain—not the full $10 per share, nor the lower $5, but the average.
• Why it matters: The method you choose affects your tax bill. The ATO allows the average cost method for managed funds and ETFs (often called the ‘weighted average’), but for direct shares, the ‘first in, first out’ (FIFO) or specific identification methods are more common. With more Australians investing via ETFs and micro-investing platforms, average cost basis is increasingly relevant.

2025 Policy Updates and Digital Tracking

This year, the ATO rolled out enhancements to its pre-fill and digital reporting tools. Many Australian investment platforms now automatically calculate your average cost basis for each asset, making tax time less stressful. However, errors can still creep in, especially if you transfer holdings between platforms or have corporate actions (like splits or mergers) affecting your cost base.

• New ATO guidance (2025): The ATO clarified that investors must adjust their average cost basis for events like dividend reinvestment plans (DRPs) and stock splits. If you receive extra shares through a DRP, you need to include the cost of those shares in your average.
• Platform integrations: Major brokers and micro-investing apps like CommSec, Stake, and Raiz now offer downloadable tax summaries that use average cost calculations. But investors should always double-check for missing data, especially if they’ve switched platforms or transferred assets.
• Real-world tip: If you bought Afterpay shares before the Block merger, your average cost basis needs to account for the scrip-for-scrip rollover relief—a detail that caught many off guard in the 2024-25 tax season.

Smart Strategies for Tracking and Minimising Tax

Staying on top of your average cost basis isn’t just a paperwork exercise—it can save you real money. Here’s how savvy investors are staying ahead in 2025:

• Keep digital records: Use investment tracking tools (like Sharesight or spreadsheets) to record every purchase, sale, and dividend reinvestment. Don’t rely solely on your broker’s reports, especially if you use multiple platforms.
• Plan your sales: Knowing your average cost basis lets you time your sales for optimal tax outcomes. For example, if you’re approaching a higher income year, delaying a sale could reduce your CGT burden.
• Understand capital losses: If your average cost basis is higher than your sale price, you can use the loss to offset gains elsewhere. This is particularly useful for rebalancing portfolios in volatile markets.
• Don’t forget corporate actions: Mergers, splits, bonus issues, and DRPs all impact your cost base. Check your broker’s records against ATO guidance, especially for assets held long-term.

Conclusion: Make Average Cost Basis Work for You

Average cost basis isn’t just a tax calculation—it’s a tool for making smarter, more confident investment decisions. With 2025’s digital tools and clearer ATO guidance, Australians have more power than ever to track, optimise, and defend their investment returns. Take a proactive approach, and you’ll spend less time at tax time—and keep more of your hard-earned gains.