Private ruling: Capital Gains Tax - Disposal of rights
Published: February 2013
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q2: Are you entitled to the 50 percent discount on the disposal of your rights? Yes

Relevant facts and circumstances: You own X shares. In the relevant year the company authorised a rights issue. You did not take up the rights issue on any of your entitlements. They were sold and you received the proceeds. You held the shares for more than 12 months

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 104-10 | Income Tax Assessment Act 1997 Subection 130-45(1) | Income Tax Assessment Act 1997 Section 115-25(1) | Income Tax Assessment Act 1997 Section 115 -40

Reasons for decision: Summary: Capital gains tax (CGT) event A1 happens when there is a change of ownership of an asset from one entity to another (section 104-10 of the Income Tax Assessment Act 1997 (ITAA 1997)). CGT event A1 happens on the sale of a right. Subdivision 130-B of the ITAA 1997 deals with rights issued to a taxpayer by a company where the taxpayer did not pay or give anything to acquire them. Specifically, subsection 130-45(1) of the ITAA 1997 provides that rights acquired from a company in these circumstances are taken to have been acquired at the date when the original shares were acquired. A capital gain will be a discount capital gain if it results from a CGT event happening to a CGT asset that was acquired at least 12 months before the CGT event (subsection 115-25(1) and section 115-40 of the ITAA 1997). | Detailed Reasoning - Your case: You have acquired rights at no cost directly from a company in which you had acquired shares. The rights issued directly to you by the company are considered to have been acquired on the same date as the shares to which they relate. CGT event A1 happened under section 104-10 of the ITAA 1997 when the rights were sold on your behalf by the company underwriters. Therefore you will need to include the capital gain you made when calculating your assessable income for the subsequent income year. As the rights related to shares that were acquired at least 12 months before the CGT event you are therefore eligible to use the discount method of calculating the capital gain on the sale of these rights.

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. | Question 1: Are you entitled to disregard a capital gain on the disposal of your rights?