Private ruling: Capital gains tax - disposal of shares held for less than 12 months.
Published: January 2012
Ruling period: Year ended 30 June 2011
Date scheme commenced: 1 July 2010

Ruling: Q1:  | A1:  | Q2:  | A2: 

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. Mid 2010, you acquired shares on the Australian Stock Exchange (ASX) for $X. This amount included brokerage and GST charges. The average price for each share was $X. You have been in the business of buying and selling shares as a share trader. You normally do not hold shares for longer than one month. However, your normal practice has varied from time to time. You purchased the shares on capital account with the intention of holding them for a period of at least 12 months. You had some personal debts to family members and had hoped that from the disposal of the shares that you would make a capital gain which would be used to alleviate some of this debt. Your plan came unstuck with all the instability that has haunted the ASX since the global financial crisis. The share price of your shares dropped markedly within a week of your acquisition. You believed that you had no other choice but to cut your losses and dispose of your shares. A month after acquisition you disposed of your shares for $X including brokerage and GST charges. You made a capital loss of $X.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 104-10 | Income Tax Assessment Act 1997 Section 110-25 | Income Tax Assessment Act 1997 Section 102-10 | Income Tax Assessment Act 1997 Section 102-15

Reasons for decision: Summary: While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision. CGT is the tax you pay on certain capital gains you make. You may make a capital gain or capital loss as a result of a CGT event. The most common CGT event (CGT event A1) occurs if you dispose of an asset to another entity, for example, if you dispose of your shares. The time of the event is when you enter into the contract for the disposal or if there is no contract when the change of ownership occurs. A CGT event A1 occurred upon the disposal of your shares. Generally, you make a capital gain if the capital proceeds from the disposal are more than the asset's cost base. You make a capital loss if the capital proceeds from the disposal are less than the asset's reduced cost base You made a capital loss on the disposal of your shares. The reduced cost base of a CGT asset is made up of five elements. The relevant elements of the cost base in your situation are: 1. money or property given for the asset, and 2. incidental costs of acquiring the CGT asset or that relate to the CGT event, such as remuneration for the services of a broker, agent or valuer and costs of transfer. You need to work out the amount for each element then add the amounts together to find out your reduced cost base for the relevant CGT asset. If you are registered for GST, you reduce each element of the reduced cost base of the asset by the amount of any GST net input tax credits in relation to that element. If you are not registered for GST, you do not make any adjustment and the GST paid is included You must apply your current year capital losses against any capital gain you made during the year to determine your net capital gain or net capital loss. If your total capital losses for the year are more than your total capital gains, the difference is your net capital loss for the year. This capital loss can be carried forward and deducted from capital gains you make in later years. There is no time limit on how long you can carry forward a net capital loss. For further information is available on our website - www.ato.gov.au.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet. | Subject: Capital gains tax - disposal of shares held for less than 12 months.: Question 1: Did a capital gains tax (CGT) event occur when you disposed of your shares? | Question 2: Did a capital loss occur when you disposed of your shares?