Private ruling: Timing of a CGT event
Date of advice: 31 August 2016
Published: October 2016
Ruling period: 2015-16 income year
Date scheme commenced: 1 July 2015

Ruling: Q1: Did CGT event A1 occur during the 2015-16 income year, in relation to the compulsory acquisition of your shares? | A1: Yes

Relevant facts and circumstances: You own a shareholding in the target. During the 2015-16 income year the bidder undertook an off market takeover bid for the target, with the majority of the targets shareholders accepting the offer. You did not accept this offer. Later in the 2015-16, income year, the bidder announced that it would proceed to compulsorily acquire the remaining shares it did not hold in the target. The bidder compulsorily acquired the remaining share interest in the target before 30 June 2016. You are yet to receive consideration.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 104-10(6).

Reasons for decision: Summary: The most common CGT event is event CGT event A1, which occurs if you dispose of a CGT asset. You dispose of a CGT asset if a change of ownership occurs, whether because of some act, or event, or by operation of the law. The timing of the event is generally when the contract is entered into, or if none, when you stop being the asset's owner. In your situation, your shares in the target were compulsorily acquired by the bidder before 30 June 2016. While you are yet to receive consideration for this disposal, subsection 104-10(6) of the Income Tax Assessment Act 1997 determines the timing of a CGT event for a compulsory acquisition as the earliest of: • When you receive compensation; or • When the entity becomes the asset's owner; or • When the entity entered it under that power; or • When the entity took possession under that power. You ceased being the owner of the shares before 30 June 2016 therefore, the timing of the CGT event will be in the 2015-16 income tax year.