Private ruling: Assessable income of an Employee Share Trust
Published: October 2014
Ruling period: Years ending 30 June 2015 - 30 June 2019

Ruling: Q1: Will the irretrievable contributions made pursuant to the Original Option Plan and the Option Plan (the Option Plans) to the Trustee of the EST for the Company A Employee Share Plan Trust (the EST) to fund the acquisition of Company A shares (Shares) by the EST in accordance with the EST deed, be assessable income of the EST under sections 6-5 or 6-10 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: No. | Q2: Will a capital gain or capital loss that arises for the Trustee of the EST at the time the Participants become absolutely entitled to the Shares under the Option Plans be disregarded under section 130-90 of the ITAA 1997 if the Participants acquire the Shares for the same or less than the cost base of the Shares in the hands of the Trustee? | A2: Yes. | Q3: Will the EST's assessable income include an amount relating to dividends for the purposes of subsection 44(1) of the Income Tax Assessment Act 1936 (ITAA 1936)? | A3: No. | Q4: Will the EST's assessable income include an amount relating to CGT events C2 or H2 (under sections 104-25 and 104-155 of the ITAA 1997 respectively)? | A4: No.

Relevant facts and circumstances: Company A provides a diversified range of services and is listed on the ASX. Its executive remuneration generally comprises: • fixed remuneration (including super and benefits set at marketplace levels); and • long-term equity linked performance incentives. Company A's Board, considers that the use of options is the most appropriate form of long term equity-based performance incentive to reinforce alignment with shareholder interests. The Executive Option Plan Some years ago, Company A executed the Company A Executive Option Plan (Original Option Plan). Company A recently evaluated ways to improve the scope and implementation of its incentive programmes, which resulted in; • the establishment of the Company A Employee Share Plan Trust (EST) to facilitate the provision of Company A shares to Participants of the Original Option Plan • amending the Original Option Plan in order to facilitate its operation through an employee share trust (the Amended Option Plan) (together, 'the Option Plans'), The Option Plans' objectives are to provide an incentive for employees to remain in their employment in the long term, and to recognise their ongoing ability and contribution to the performance and success of Company A and its subsidiaries (the Group). The incentive offered is the opportunity to acquire options, and ultimately shares, in Company A. The Option Plans broadly operate as follows: • Eligible Employees are invited to apply for an issue of options (Options) under the Option Plans, through the issue of a valid offer (Offer). • An 'Eligible Employee' is an employee the Board determines should receive an Offer. An 'employee' of Company A can include: - an individual in the part or full time employment of the Group; - a director who holds a salaried office in a body corporate in the Group; - an individual who provides services to a body corporate in the Group, or who is otherwise in the employment of a body corporate in the Group, whom the Board determines to be an Employee for the purposes of the Option Plans, and - an individual, company or trustee of a trust (other than a super fund) who or which is an associate (as defined in section 995-1) of an individual who provides services to a body corporate in the Group, which individual the Board determines to be an Employee for the purposes of the Option Plans. • A valid Offer includes, among other things, the number of Options offered to that particular Eligible Employee as determined by the Board. • The Eligible Employee may accept the invitation by giving Company A an application form within the period specified in the Offer. Such acceptance will confer on the Eligible Employee (now called a Participant) an entitlement to be issued or transferred one fully paid share in Company A (a Share) at the exercise price, where certain conditions are satisfied. • An Offer must not be made if the total number of Shares which would be issued if those Options were exercised, plus: - the total number of Shares which would be issued under all outstanding Options which have been granted but not exercised, lapsed or expired; and - the number of Shares issued during the previous five years pursuant to any employee share plan of Company A; but - disregarding any Offer made to persons situated outside Australia at the time of receipt, an Offer under a disclosure document or an Offer that did not need disclosure because of section 708 of the Corporations Act ; would exceed 5% of the total number of Shares on issue at the time of the Offer. • A Participant may exercise their Options subject to: - satisfying any Performance or Exercise Conditions specified in the Offer or the Option Plans, and - paying an Exercise Price as determined by the Board at the date of grant . However, the Board may reduce or waive the Performance or Exercise Conditions at its discretion. • Subject to satisfying any Performance or Exercise conditions (or the Board's discretion being exercised to reduce those conditions), a Participant can exercise an Option at any time during the 'Exercise Period' for that Option, by paying the Exercise Price. The 'Exercise Period' is defined in the Option Plans as commencing on the day the Options vest and concluding seven years after the date of grant. • An accelerated vesting date may occur where there is a death or permanent disability of a Participant (a Special Circumstance), or one of a number of corporate events such as a takeover (Corporate Control Event). • Participants may choose to exercise vested Options at any time, subject to Company A's Securities Trading Policy, prior to their lapsing. Options will lapse on the earlier of: - forfeiture of the Option because a performance condition is not satisfied; - the date of termination of employment if that date is prior to the vesting date of an Option; - two months after the date of termination of employment if the Option had vested prior to termination; - a determination that the Option should lapse because the Participant, in the Board's opinion, has acted fraudulently, or - the last Exercise Date. • Where a Participant exercises a vested Option, Company A must issue, or cause to be transferred, a Share to the Participant. The Share will rank equally with all existing shares on issue. • In circumstances where the Board has specified in the Offer that the Shares will be subject to a disposal restriction (Restricted Shares), they may only be dealt with subject to Company A's Securities Trading Policy. • A holder of Restricted Shares may apply to Company A to withdraw their Restricted Shares, and the Board may, in its absolute discretion, accept or reject such an application. Notwithstanding, the Board must reject the request if certain events have occurred, i.e. if there is a black out period or if the Participant owes debts to any member of the Group. • If Company A makes a bonus issue of Shares to existing Shareholders (whether before or during the Exercise Period), and no Share has been issued in respect of an Option before the record date for determining entitlements to bonus issues, then the number of underlying Shares over which the Option is exercisable is increased by the number of Shares which the Participant would have received if they had exercised the Option prior to the record date. • The Option Plans are administered by the Board and at its discretion, may use an employee share trust for the purposes of holding Shares (whether on an allocated or unallocated basis) and/or fulfilling awards made under the Option Plans. Employee Share Plan Trust Company A established the EST pursuant to the Company A Trust Deed (Trust Deed) between Company A and the Trustee. The establishment and operation of the EST will provide Company A with: • greater flexibility to accommodate the long term incentive arrangements of Company A; • capital management flexibility, (in that the EST can use the contributions made by Company A either to acquire Shares on-market, or alternatively to subscribe for newly issued Shares), and • an arm's length vehicle through which Shares can be acquired and held on trust on behalf of Participants. In effect, this final aspect will allow Company A to satisfy its trading policy and Corporations Law requirements relating to companies dealing in their own shares. Operation of the EST Broadly, the EST is intended to operate as follows: • Pursuant to the Recitals of the Trust Deed, the EST has been established for the purposes of holding Shares in Company A for the benefit of Participants who are, or will become, the beneficial owners of those Shares pursuant to a 'Company Plan'. The Company Plans include the Option Plans. • As directed by the Board, the Trustee must acquire: - Shares in the ordinary course of trading on the ASX - Shares by way of an off-market transaction; and/or - new Shares issued by Company A for the purpose of enabling Company A to satisfy its obligations to allocate Shares under a Company Plan, either at that time or in the future. • Company A must provide the Trustee with any funds it requires to comply with its obligations (after application of any capital of the EST). If the Trustee does not receive sufficient payment from Company A, it is not required to acquire Shares. • Funds received by the Trustee from Company A (except where the Trustee subscribes for Shares or receives reimbursement of expenses) will constitute accretions to the corpus of the EST and will not be repaid to Company A. • In the event of the EST's termination, the Trustee can only apply that part of the EST's capital to which no Participant is entitled for the benefit of certain beneficiaries, of which Company A is not one. • Company A intends that contributions will only be made to the EST to satisfy Options under the Option Plans that have already been granted to Participants and are likely to vest, i.e. there will be a link between the amount of the contributions and the need to apply the funds to acquire Shares to satisfy Options that have been or are likely to be exercised by Participants. • Company A will annually consider how many Options on issue are likely to vest and be exercised in a particular year, and then determine the corresponding amount of contributions necessary to enable the Trustee to acquire the Shares to satisfy those Options. • Company A has no intention of accumulating contributions in the EST. • Unless and until Shares are allocated or transferred to a Participant, the Trustee will hold them on trust for the benefit of Participants generally. The Trustee is precluded from exercising voting rights in relation to the unallocated Shares. • When the Board directs it to do so, the Trustee must allocate a number of Shares held by the Trustee to a nominated Participant (Allocated Shares). Shares which have been so allocated are held by the Trustee on behalf of that particular Participant, who becomes the beneficial owner of those Shares, and is recorded as such in the Trustee's books. • If the Trustee holds Allocated Shares on a Participant's behalf, the Participant is entitled to receive all cash dividends paid in respect of their Allocated Shares. Further, the Participant will be presently entitled to so much of the net income of the EST which is attributable to their Allocated Shares, including transactions related to their Allocated Shares (including sale etc). • Where a Participant forfeits Allocated Shares, the Trustee must reallocate those forfeited Shares to one or more other Participants or to the benefit of a Company Plan, as instructed by the Board. • Subject to Company A's Securities Trading Policy, if the Board directs it to do so, the Trustee must transfer a specified number of Allocated Shares to a Participant. Once the Trustee has registered them as the holder of those Shares, the Participant will be absolutely legally and beneficially entitled to them. • Company A and the Trustee agree that the EST will be administered so that it satisfies the definition of 'employee share trust' for the purposes of subsection 130-85(4) of the ITAA 1997.

Relevant legislative provisions: Income Tax Assessment Act 1936 Section 44 | Income Tax Assessment Act 1936 Section 95 | Income Tax Assessment Act 1997 Section 6-5 | Income Tax Assessment Act 1997 Section 6-10 | Income Tax Assessment Act 1997 Section 83A-10 | Income Tax Assessment Act 1997 Section 83A-20 | Income Tax Assessment Act 1997 Section 104-25 | Income Tax Assessment Act 1997 Section 104-75 | Income Tax Assessment Act 1997 Section 104-85 | Income Tax Assessment Act 1997 Section 104-155 | Income Tax Assessment Act 1997 Section 106-50 | Income Tax Assessment Act 1997 Section 130-85 | Income Tax Assessment Act 1997 Section 130-90 | Income Tax Assessment Act 1997 Section 995-1

Reasons for decision: Summary: Section 95 of the Income Tax Assessment Act 1936 (ITAA 1936) defines net income in relation to a trust as follows, insofar as it is relevant: net income , in relation to a trust estate, means the total assessable income of the trust estate calculated under this Act as if the trustee were a taxpayer in respect of that income and were a resident, less all allowable deductions … Subsection 6-5(1) states that your assessable income includes: income according to ordinary concepts, which is called ordinary income Further, subsection 6-10(1) states: Your assessable income also includes some amounts that are not ordinary income. Note: These are included by provisions about assessable income. For a summary list of these provisions, see section 10-5. None of the provisions listed in section 10-5 are relevant in this situation. Therefore irretrievable contributions made by Company A to the Trustee will not be assessable income under section 6-10. They will only be included in the calculation of the net income of the EST under section 95 of the ITAA 1936 if they are assessable as income according to ordinary concepts under section 6-5. The Recitals of the Trust Deed confirm that Company A established the EST for the purpose of holding Shares for the benefit of Participants who are, or will become, the beneficial owners of Shares pursuant to a Company Plan. Clause 6.3(b) of the Trust Deed confirms that all contributions by Company A to the Trustee for the purpose of acquiring Shares, constitute accretions to the corpus of the EST. Further, pursuant to the Trust Deed the Trustee must, when directed by the Board, acquire shares for the purpose of enabling Company A to satisfy its obligations to allocate Shares to Participants. All the documentation provided demonstrates that the contributions received from Company A must only be used to acquire Shares in accordance with the terms of the Trust Deed and the Option Plans. Accordingly, the irretrievable contributions made by Company A to the Trustee to acquire Shares will not be assessable income under section 6-5, but will constitute capital receipts of the Trustee, and not be assessable income of the EST pursuant to sections 6-5 or 6-10. This accords with the view expressed in ATO ID 2002/965. Note that the Trust Deed provides that whilst the Trustee is not entitled to receive any fees, commissions or remuneration in respect of the performance of its obligations as Trustee, Company A must pay to the Trustee such fees and reimburse such expenses incurred by the Trustee as Company A and the Trustee agree. Such receipts will be assessable income of the Trustee in contrast to the irretrievable contributions made to facilitate the acquisition of Shares. Note also that income derived by the employment of the property that is the fund or corpus of the EST, and which the Trustee holds on trust will be income according to ordinary concepts (See Federal Commissioner of v. Everett (1980) 143 CLR 440; (1980) 10 ATR 608; 80 ATC 4076 for a discussion of the distinction between the trust income and corpus). Subsection 104-75(1) provides that CGT event E5 happens if a beneficiary becomes absolutely entitled to a CGT asset of a trust (except a unit trust or a trust to which Division 128 applies), as against the trustee. Subsection 104-75(3) provides that the trustee will make a capital gain if the market value of the asset (at the time of the event) is more than its cost base, but will make a capital loss if that market value is less than the asset's reduced cost base. Accordingly, where a Participant becomes absolutely entitled to Shares as against the Trustee, CGT event E5 will occur, and pursuant to subsection 104-75(3), the Trustee will make a capital gain or loss. However, section 130-90 operates to disregard that gain or loss where specified conditions are satisfied. It states: | Detailed Reasoning - 130-90(1): Disregard any *capital gain or *capital loss made by an *employee share trust, or a beneficiary of the trust, to the extent that it results from a *CGT event, if: (a) the CGT event is CGT event E5 or E7; and (b) the CGT event happens in relation to a *share; and (c) the beneficiary had acquired a beneficial interest in the share by exercising a right; and (d) the beneficiary's beneficial interest in the right was an *ESS interest to which Subdivision 83A-B or 83A-C (about employee share schemes) applied. | Detailed Reasoning - 130-90(2): Subsection (1) does not apply if the beneficiary acquired the beneficial interest in the *share for more than its *cost base in the hands of the *employee share trust at the time the *CGT event happens. Employee share trust The term 'employee share trust' referred to in subsection 130-90(1) is defined in subsection 995-1 as having the meaning given by subsection 130-85(4). Subsection 130-85(4) provides that an employee share trust for an employee share scheme (having the meaning given by subsection 83A-10(2)) is a trust whose sole activities are: (a) obtaining shares or rights in a company; and (b) ensuring that ESS interests in the company that are beneficial interests in those shares or rights are provided under the employee share scheme to employees, or to associates of employees, of: (i) the company; or (ii) a subsidiary of the company; and (c) other activities that are merely incidental to the activities mentioned in paragraphs (a) and (b). The right to acquire a share and the beneficial interest in the share that is acquired pursuant to the exercise of the right are both ESS interests within the meaning of subsection 83A-10(1). An employee share scheme is defined in subsection 83A-10(2) as a scheme under which ESS interests in a company are provided to employees, or associates of employees (including past or prospective employees) in relation to the employees' employment. The Option Plans are employee share schemes within the meaning of subsection 83A-10(2) because they are schemes under which rights to acquire shares in Company A (Options) are provided to employees in relation to their employment (see further discussion of term 'employee share scheme' under the heading 'Paragraph 130-90(1)(d) of the ITAA 1997' below). Company A established the EST to facilitate the Option Plans by acquiring Shares and allocating those Shares to Participants, in order to satisfy the Options acquired under the employee share scheme. The beneficial interest in the Share is itself provided under an employee share scheme because it is provided under the same scheme under which the Options to acquire the Shares are provided to the Participant in relation to the Participant's employment, being an employee share scheme as defined in subsection 83A-10(2). Therefore, paragraphs 130-85(4)(a) and (b) are satisfied because: • the Trustee acquires Shares, and • the Trustee ensures that ESS interests as defined in subsection 83A-10(1) of the ITAA 1997, being beneficial interests in those shares, are provided under an ESS, as defined in subsection 83A-10(2) of the ITAA 1997, by allocating those Shares to the Participants in accordance with the governing documents of the scheme. Undertaking the activities mentioned in paragraphs 130-85(4)(a) and 130-85(4)(b) will require a trustee to undertake incidental activities that are a function of managing the employee share scheme and administering the trust. For the purposes of paragraph 130-85(4)(c), activities which are merely incidental, as set out in ATO Interpretative Decision ATO ID 2010/108 Income Tax - Employee share trust that acquires shares to satisfy rights provided under an employee share scheme and engages in other incidental activities , include: • the opening and operation of a bank account to facilitate the receipt and payment of money • the receipt of dividends in respect of shares held by the trust on behalf of an employee, and their distribution to the employee; • the receipt of dividends in respect of unallocated shares and using those dividends to acquire additional shares for the purposes of the employee share scheme; • dealing with shares forfeited under an employee share scheme including the sale of forfeited shares and using the proceeds of sale for the purposes of the employee share scheme • the transfer of shares to employee beneficiaries or the sale of shares on behalf of an employee beneficiary and the transfer to the employee of the net proceeds of the sale of those shares • the payment or transfer of trust income and property to the default beneficiary on the winding up of the trust where there are no employee beneficiaries • receiving and immediately distributing shares under a demerger. Activities that result in employees being provided with additional benefits (such as the provision of financial assistance, including a loan to acquire the shares) are not considered merely incidental. As mentioned previously, the Trust Deed is entitled 'Sole activities test' and provides that Company A and the Trustee agree that the Trust will be: managed and administered so that it satisfies the definition of 'employee share trust' for the purposes of section 130-85(4) of the ITAA 1997. For the avoidance of doubt, this statement is supported by Recitals A and B of the Trust Deed which provide that the Trust was established by Company A to facilitate the 20XX Option Plan and for the purposes of holding Shares for the benefit of Participants who are, or will become, the beneficial owners of Shares pursuant to a Company Plan. The Trust Deed makes it clear that the Trustee can only use the contributions received from Company A for the acquisition of Shares for Participants in accordance with the Option Plans. To this end, all other duties/general powers listed in the Trust Deed are considered to be merely incidental to the functions of the Trustee in relation to its dealing with the Shares to be acquired for Participants of the Option Plans. Accordingly, paragraph 130-85(4)(c) is also satisfied because the EST satisfies the definition of an employee share trust in subsection 130-85(4), as the Trust Deed does not provide for the Trustee to participate in any activities which are not considered merely incidental to a function of managing the employee share scheme and administering the trust. Therefore, the EST is an employee share trust, as defined in subsection 995-1(1), as the activities of the EST in acquiring and allocating ESS interests meet the requirements of paragraphs 130-85(4)(a) and 130-85(4)(b) and its other activities (general powers) are merely incidental to those activities in accordance with paragraph 130-85(4)(c). Paragraph 130-90(1)(a) CGT event E5 is the CGT event that will apply under the terms of the Option Plans at the time the Participant becomes absolutely entitled to the Shares as against the Trustee. Therefore paragraph 130-90(1)(a) will be satisfied. Paragraph 130-90(1)(b) Section 995 defines a share to mean a share in the capital of a company. An ordinary share in Company A held by the Trustee and to which a participant is entitled upon exercise of an Option is a share in the capital of a company i.e. Company A. Accordingly, paragraph 130-90(1)(b) is satisfied as CGT event E5 happens in relation to a share for the purposes of that paragraph. Paragraph 130-90(1)(c) Paragraph130-90(1)(c) is satisfied as a participant will have acquired a beneficial interest in a share (in Company A) by exercising an Option (right) granted under the Option Plans. Paragraph 130-90(1)(d) Subsection 83A-20(1) of Subdivision 83A-B states: This Subdivision applies to an *ESS interest if you acquire the interest under an *employee share scheme at a discount. The term 'employee share scheme' is defined in subsection 83A-10(2). Subsection 83A-10(2) states: An employee share scheme is a *scheme under which *ESS interests in a company are provided to employees, or *associates of employees, (including past or prospective employees) of: (a) the company;…. in relation to the employees' employment. For the purposes of subsection 83A-10(2), section 995 defines the term 'scheme' as follows: scheme means: (a) any *arrangement; or (b) any scheme, plan, proposal, action, course of action or course of conduct, whether unilateral or otherwise. The Option Plans are an employee share scheme for the purposes of Division 83A as they are an arrangement/plan (scheme) under which an ESS interest i.e. a beneficial interest in a right to acquire a beneficial interest in a Share, is provided to Participants in relation to their employment by the Group. The Options are acquired at no cost, however to exercise the Option a Participant must (among other things) pay an exercise price which is less than the market value of a Share. Accordingly, prima facie Subdivision 83A-B of the ITAA 1997 will apply to Options acquired under the Option Plans as pursuant to subsection 83A-20(1) the ESS interest (i.e. Options issued under the Option Plans) will be acquired under an employee scheme (for the reasons stated immediately in the preceding paragraph) at a discount. It should be noted however that whether a Participant is ultimately taxed upfront on some or all of any discount received (under Subdivision 83A-B) or is able to defer the timing of the inclusion of an amount in their assessable income (under Subdivision 83A-C), will depend on which of the additional requirements in subdivision 83A-B or subdivision 83A-C have been satisfied. Under either circumstance subparagraph 130-90(d) will be satisfied. Accordingly, all the conditions in subsection 130-90(1) have been satisfied. Provided that the Participant does not acquire the beneficial interest in the Share for more than its cost base in the hands of the EST at the time that CGT event E5 happens, subsection 130-90(1) will apply. Under these circumstances, section 130-90 operates to disregard any capital gain or loss made by the Trustee on any Share when a Participant becomes absolutely entitled to that Share. CGT Event E7 Subsection 104-85(1) provides that CGT event E7 happens if the trustee of a trust (except a unit trust or a trust to which Division 128 applies) disposes of a CGT asset of the trust to a beneficiary in satisfaction of the beneficiary's interest, or part of it, in the trust capital. However, section 106-50 provides: If you are absolutely entitled to a CGT asset as against the trustee of a trust (disregarding any legal disability), this Part and Part 3-3 apply to an act done by the trustee in relation to the asset as if you had done it. The Participant, on allocation of the Shares by the Trustee, becomes absolutely entitled to those Shares. In accordance with the Trust Deed each Participant is absolutely entitled to any Allocated Shares held by the Trustee on their behalf, and is entitled to the same rights in respect of those Shares as if he or she was the legal owner of the shares (subject to the relevant Option Plans and terms of participation). Once the Participants are absolutely entitled to the Shares held on their behalf by the EST, section 106-50 will deem the disposal of the Shares by the Trustee to be done by the Participants. Therefore, section 106-50 will apply, such that if the Trustee disposes of the Shares under the relevant Option Plans (by way of transfer to Participants), the Trustee will not make a capital gain or capital loss under CGT Event E7. | Detailed Reasoning - Question 3: Section 95 of the ITAA 1936 defines net income in relation to a trust as follows, insofar as it is relevant: net income , in relation to a trust estate, means the total assessable income of the trust estate calculated under this Act as if the trustee were a taxpayer in respect of that income and were a resident, less all allowable deductions … Subparagraph 44(1)(a)(i) of the 1936 Act provides that the assessable income of a shareholder in a company includes dividends (other than non-share dividends) that are paid to the shareholder. Subsection 6(1) of the ITAA 1936 defines 'paid', in relation to dividends or non-share dividends, as including 'credited' or 'distributed'. 'Credited' and 'distributed' are not defined in the ITAAs and therefore take their ordinary meaning. In Industrial Equity Limited v Blackburn [1977] HCA 59, Mason J stated that a declaration of a final dividend gives rise to a debt payable by the company to the shareholder immediately or from the date stipulated. Generally then, when a final dividend is declared, a debt arises to all shareholders. The assessable income includes dividends where the dividends are paid, credited or distributed. | Detailed Reasoning - Question 4: CGT Event C2 Subsection 104-25(1) provides that CGT Event C2 happens if your ownership of an intangible CGT asset ends by the asset: (a) being redeemed or cancelled; or (b) being released, discharged or satisfied; or (c) expiring; or (d) being abandoned, surrendered or forfeited; or (e) if the asset is an option - being exercised; or (f) if the asset is a convertible interest - being converted. At paragraphs 32-33 of Taxation Ruling TR 94/30 Income Tax: Capital Gains Tax Implications of Varying Rights Attaching to Shares (TR 94/30),consideration is given to whether a right attaching to a share is a CGT asset. It states: 32. In considering the nature of a share, it has been the prevailing view of the courts that the rights attaching to shares cannot be dealt with separately from the share itself. It is clear that these rights were not assets under the definition of 'asset' in section 160A as it existed before being amended by the TLAA (No 4) 1992. 33. We also consider that the current extended definition of 'asset' in section 106A, which applies to the construction or creation of assets after 25 June 1992, does not alter this position. The expression 'any other right' is a general provision which, under the rules of statutory interpretation, does not take precedence over a more specific provision. As a share is a chose in action, subparagraph 160A(a)(iii) takes precedence over subparagraph 160A(a)(iv) to the effect that a share itself is the asset and not its constituent rights… CGT event C2 does not occur if the ownership of an intangible asset does not end. CGT Event H2 Subsection 104-155(1) provides that CGT Event H2 happens if: (a) an act, transaction or event occurs in relation to a *CGT asset that you own; and (b) the act, transaction or event does not result in an adjustment being made to the asset's *cost base or *reduced cost base. Subsection 104-155(3) provides that you make a capital gain if the capital proceeds because of the CGT event are more than the incidental costs you incurred that relate to the event, and you make a capital loss if those proceeds are less. CGT event H2 does occur if an act, transaction or event occurs in relation to a CGT asset and which does not result in an adjustment being made to the assets cost base or reduced cost base, but no capital gain or capital loss arises if no capital proceeds are received and there is no cost base or reduced cost base.