Private ruling: Capital gains tax - bonus shares
Published: June 2012
Ruling period: Year ended 30 June 2012.
Date scheme commenced: 1 July 2011.

Ruling: Q1: Is the calculation methodology you have used to calculate the number of pre and post capital gains tax shares correct? | A1: No. | Q2: Will the cost base for each post CGT share be nil? | A2: No.


Relevant legislative provisions: Income Tax Assessment Act 1997 - Section 104-10 | Income Tax Assessment Act 1997 - Section 108-5 | Income Tax Assessment Act 1997 - Section 130-20

Reasons for decision: Detailed Reasoning - Dividend Reinvestment Plan:: The Guide to capital gains tax 2010-11 (NAT 4151-6.2011) contains the Commissioners view on how capital gains tax (CGT) works and provides assistance in calculating a net capital gain or net capital loss. For dividend investment plans (also known as a dividend reinvestment plan) after 30 June 1987, shares issued under the dividend investment plan are acquired for capital gains purposes on the date of issue with a cost base equal to the amount of the dividends used to fund them. Bonus share plan (and dividend investment plan before 1 July 1987) shares issued under the bonus share plan are not dividends. As bonus shares, they are apportioned over all of the shares owned by the shareholder at that time (that relate to the issue of the bonus shares). Dividend investment plan shares issued before 1 July 1987 are also apportioned over a shareholder's shares in this way. In this case the deceased participated in a bonus share plan. The deceased acquired shares as part of the dividend investment plan over several years prior to 1 July 1987. As these shares were issued before 1 July 1987, you will apportion them over the shares the deceased owned at that time. Therefore the bonus shares issued under the dividend reinvestment plan acquired before 1 July 1987 will be pre CGT. The shares acquired under the dividend investment plan after 1 July 1987, for CGT purposes are acquired on the date of issue. Therefore these shares will be post CGT. | Detailed Reasoning - Cost base:: If your bonus shares relate to original shares that you acquired on or after 20 September 1985, your bonus shares are taken to have been acquired on the date you acquired your original shares. Calculate the cost base and reduced cost base of the bonus shares by apportioning the cost base and reduced cost base of the original shares over both the original and the bonus shares. Effectively, this results in a reduction of the cost base and reduced cost base of the original shares. In this case the deceased originally acquired several post CGT shares as part of the dividend reinvestment plan. After apportioning the subsequent bonus shares between pre and post CGT, several shares will have been acquired after 1 July 1987. Therefore the shares must be apportioned over the original cost of the shares acquired under the dividend reinvestment plan. Please note; the estate will acquire the pre CGT shares for their market value on the date of the deceased's death.

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. | The deceased participated in a company's bonus share plan. | The deceased acquired a number of pre and post CGT shares acquired through purchasing shares, a bonus share plan or dividend reinvestment plan. | The bonus shares issued to the deceased were issued from the company's share premium account excluding the dividend reinvestment plan shares which were assessed as dividends. | The deceased held several hundred shares on their date of death. | The several hundred shares were later sold by the executors.