Private ruling: CGT event A1
Date of advice: 25 July 2025
Published: 29 September 2025
Ruling period: Income year ended 30 June 20XX

Ruling: Q1: Did CGT event A1 under section 104-10 of the Income Tax Assessment Act 1997 (ITAA 1997) happen to the trustee of the family trust (the Trust) in respect of the transfer of its shares in Company A pursuant to the terms of the orders made by the Court (Orders), and was the amount of $X the Majority Shareholders paid the Trust in accordance with the Orders the capital proceeds received by the Trust from that transfer? | A1: Yes | Q2: Is the capital gain made by the Trust from the transfer of its shares in Company A pursuant to the Orders a discount capital gain under Subdivision 115-A of the ITAA 1997? | A2: Yes

Relevant facts and circumstances: Company B (the Trustee) is the trustee for the Trust. The beneficiaries of the Trust include Person A and Person B. Company A was registered in 20XX. Its share capital at the time consisted of X ordinary shares, 50% of which was owned by the Trust and the other 50% of which was owned by a non-associated trust (Trust B). The total amount paid for the shares was $X ($X per share). Person A and B were the founding directors. Before its deregistration in 20XX, Company A was an Australian resident for tax purposes and operated a business. Company A wholly owned Company C which operated a business and was deregistered in 20XX. The directors of Company C were Person A and B. Company A and Company C were consolidated for income tax purposes. In 20XX, Company A split its share capital, increasing the number of ordinary shares from X to X. The Trust held X ordinary shares in Company A at this point, at a cost of $X per share. In 20XX the Trust's shareholding in Company A increased from X ordinary shares to X ordinary shares. The total amount paid by the Trust for those ordinary shares was $X ($X per share). Further investments in Company A were made by investors. The share capital of Company A as at 30 September 20XX has been provided to the Commissioner. An independent valuer undertook a valuation to assess the fair market value of the equity of Company A as at 30 September 20XX (the Valuation). In doing so, he assessed the fair market value of Company A's equity at that time at approximately $XX. Based on the Valuation, the fair market value of the X ordinary shares held by the Trust on 30 September 20XX was $X. The Trustee and Person A filed a number of court proceedings against the other directors of Company A with respect to particular allegations of misconduct. In December 20XX Person A, Person A, the Trust and others signed the Orders made by the Supreme Court of New South Wales presiding over the Proceedings. Among other things, the Orders provided as follows: • that Trust B and other specified shareholders in Company A (together the Majority Shareholders) pay the Trustee a total of $X within X days of the date of the orders; • that upon receipt of the $X payment by the Trustee: - the Trustee must transfer all of its shares in Company A to the Majority Shareholders, no later than X days from the date of receipt of the payment and in the proportions nominated by the Majority Shareholders; - Person B resigns as a director from the boards of Company A and Company C as soon as practicable; and - Person A resigns as an alternate director from the boards of Company A and Company C as soon as practicable; • that the Oppression Proceedings filed by the Trustee be discontinued with no order as to costs; • that all parties take all steps reasonably necessary for the Federal Court Proceedings to be dismissed with no order as to costs; and • that all parties release one another from any and all claims on and from the date of the payment. The Orders did not specify how the $X payment amount was calculated.

Relevant legislative provisions: Income Tax Assessment Act 1997 Part 3-1 | Income Tax Assessment Act 1997 section 102-20 | Income Tax Assessment Act 1997 section 104-10 | Income Tax Assessment Act 1997 subsection 104-10(1) | Income Tax Assessment Act 1997 subsection 104-10(2) | Income Tax Assessment Act 1997 subsection 104-10(3) | Income Tax Assessment Act 1997 subsection 104-10(4) | Income Tax Assessment Act 1997 section 108-5 | Income Tax Assessment Act 1997 Subdivision 115-A | Income Tax Assessment Act 1997 section 115-5 | Income Tax Assessment Act 1997 section 115-10 | Income Tax Assessment Act 1997 section 115-15 | Income Tax Assessment Act 1997 section 115-20 | Income Tax Assessment Act 1997 section 115-25 | Income Tax Assessment Act 1997 subsection 116-20(1) | Income Tax Assessment Act 1997 paragraph 116-20(1)(a) | Income Tax Assessment Act 1997 section 118-20 | Income Tax Assessment Act 1997 subsection 118-20(2)

Reasons for decision: Summary: All subsequent legislative references are to the ITAA 1997 . Question 1 CGT event A1 under section 104-10 happened to the Trust in respect of the transfer of its shares in Company A pursuant to the terms of the Orders. The amount of $X paid by the Majority Shareholders in accordance with the Orders are the capital proceeds received by the Trust from that transfer pursuant to paragraph 116-20(1)(a). | Detailed Reasoning - Detailed reasoning: Section 102-20 states that a capital gain or capital loss is made only if a CGT event happens. The gain or loss is made at the time of the CGT event. Subsection 104-10(1) provides that CGT event A1 happens if you dispose of a CGT asset and subsection 104-10(2) provides that you dispose of a CGT asset if a change of ownership occurs from you to another entity. The time of a CGT event A1 is when you enter into the contract for the disposal or, if there is no contract, when the change of ownership occurs (subsection 104-10(3)). A capital gain is made from CGT event A1 happening if the capital proceeds from the disposal are more than the asset's cost base (subsection 104-10(4)). Subsection 116-20(1) states that the capital proceeds from a CGT event are the total of: (a) the money you have received, or are entitled to receive, in respect of the event happening; and (b) the market value of any other property you have received, or are entitled to receive, in respect of the event happening (worked out as at the time of the event). The Trust's ordinary shares in Company A are a CGT asset under section 108-5. CGT event A1 under section 104-10 happened to the Trust upon the transfer of those shares by the Trustee to the Majority Shareholders (as provided for in the orders made by the Supreme Court of New South Wales presiding over the Proceedings), in the 20XX income year. The Commissioner is satisfied that the entirety of the payment received by the Trustee from the Majority Shareholders in accordance with the Orders was money received in respect of the disposal of the Company A shares to the Majority Shareholders. The Trust's capital proceeds from the CGT event were therefore $X pursuant to paragraph 116-20(1)(a). Section 118-20 provides that a capital gain made from a CGT event will be reduced if, because of the event, the amount is otherwise assessable under another provision of the ITAA (outside of Part 3-1). The gain will be reduced to zero if it doesn't exceed the amount otherwise assessable (subsection 118-20(2)). The payment received by the Trustee from the Majority Shareholders in accordance with the Orders is not otherwise assessable under another provision of the Income Tax Assessment Act. | Summary: The capital gain made by the Trust from the disposal of its ordinary shares in Company A to the Majority Shareholders pursuant to the Orders is a discount capital gain under Subdivision 115-A. | Detailed Reasoning - Detailed reasoning: Section 115-5 provides as follows: A discount capital gain is a capital gain that meets the requirements of sections115-10 , 115-15 , 115-20and115-25 . The capital gain made by the Trust from the disposal of its ordinary shares in Company A to the Majority Shareholders is a discount capital gain under section 115-5 as: • for the purposes of section 115-10, the capital gain was made by the Trust, a trust; • for the purposes of section 115-15, the capital gain resulted from a CGT event which happened after 21 September 1999; • for the purposes of section 115-20, the capital gain was worked out using a cost base calculated without reference to indexation; and • for the purposes of section 115-25, the capital gain resulted from a CGT event happening to a CGT asset that was acquired by the Trustee at least 12 months before the CGT event.