Investor Behaviour in Response to Australia’s Capital Gains Tax

26 Pages Posted: 8 Nov 2010

See all articles by Philip R. Brown

Philip R. Brown

UWA Business School, M250; Financial Research Network (FIRN)

Andrew Ferguson

University of Technology, Sydney - Discipline of Accounting; Financial Research Network (FIRN); Centre for International Finance and Regulation (CIFR)

Sam Sherry

affiliation not provided to SSRN

Abstract

We calibrate the effect of Australia’s Capital Gains Tax (CGT) on share prices and market activity. Based on a large sample drawn from all listed Australian companies for the years 1994–2007, we find significant tax-loss selling (TLS) of shares that lost value over the financial year, which is reflected in unusually high trading volume and more sell orders in June and a rebound in July. There is some evidence that small mining stocks are particular targets for TLS. Interestingly, the 1999 CGT reforms, which introduced concessions for long-term capital gains, did not reduce the incidence of TLS.

Suggested Citation

Brown, Philip R. and Ferguson, Andrew and Sherry, Sam, Investor Behaviour in Response to Australia’s Capital Gains Tax. Accounting & Finance, Vol. 50, No. 4, pp. 783-808, December 2010. Available at SSRN: https://ssrn.com/abstract=1702594 or http://dx.doi.org/10.1111/j.1467-629X.2010.00352.x

Philip R. Brown

UWA Business School, M250 ( email )

Crawley, Western Australia 6009
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Andrew Ferguson

University of Technology, Sydney - Discipline of Accounting ( email )

P.O. Box 123 Broadway
Sydney, NSW 2007
Australia
02 9514 3565 (Phone)
02 9514 3669 (Fax)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Centre for International Finance and Regulation (CIFR) ( email )

Level 7, UNSW CBD Campus
1 O'Connell Street
Sydney, NSW 2000
Australia

Sam Sherry

affiliation not provided to SSRN

No Address Available

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