Private ruling: Capital gains tax - cost base - deductions - disposal
Published: August 2013
Ruling period: Year ended 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Q1: Are your Company X shares acquired after 19 September 1985? | A1: Yes. | Q2: Are a number of your Company Y shares acquired prior to 19 September 1985? | A2: Yes. | Q4: Are a number of your Company Z shares acquired prior to 19 September 1985? | A3: Yes. | Q5: Are a number of your Company Z shares acquired after 19 September 1985? | A4: Yes. | Q6: Are your cost base calculations correct? | A5: Yes.


Relevant legislative provisions: Income Tax Assessment Act 1997 Section 104-10, | Income Tax Assessment Act 1997 Section 104-135 | Income Tax Assessment Act 1997 Section 116-20, | Income Tax Assessment Act 1997 Section 116-30, | Income Tax Assessment Act 1997 Section 115-25 | Income Tax Assessment Act 1997 Section 110-25, | Income Tax Assessment Act 1997 Section 110-55, | Income Tax Assessment Act 1997 Subsection 130-45(2)

Reasons for decision: Detailed Reasoning - Company Z shares: Generally, any capital gain you make on an asset you acquired prior to 20 September 1985 (pre CGT) is disregarded. You purchased your original Company shares, prior to the introduction of CGT and therefore any capital gain made on the sale of those shares will be disregarded. You have also received bonus shares which relate to these pre CGT shares. Where the original shares were pre-CGT and the bonus shares are fully paid and are not a dividend or otherwise assessable, the acquisition date of those bonus shares will be the date the original shares were acquired. The Company shares you purchased after 20 September 1985 are subject to CGT. Any bonus shares issued in respect of these shares are deemed to be acquired on the same date and will be subject to CGT. Of the Company Z shares you own a specified number are subject to CGT. Taking into account the return of capital and script for script rollover relief the cost base of these shares is $x,xxx. | Detailed Reasoning - Company X shares: The first Company X shares were acquired as the result of the dividends paid by the Company in Late October 20AA. As such these shares are acquired after 20 September 1985 and are subject to CGT. The remaining Company X shares acquired as part of a dividend reinvestment plan are also subject to CGT. All of your Company X shares are subject to CGT. Their cost base is $Z,ZZZ. | Detailed Reasoning - Company Y: You acquired shares in Company Y as a result of the demerger in mid-July 20CC. As you have chosen roll over relief a number of these shares are deemed to be acquired prior to 20 September 1985. The remaining Company Y shares are deemed to be acquired in July 20CC and their Cost base is taken to be a percentage of the cost base of your post CGT Company Z shares. Due to additional purchases and the consolidation the number of Company Y shares subject to CGT is a specified number. The cost base of these shares is $Y,YYY

Question 3: Are a number of your Company Y shares acquired after 19 September 1985? | Relevant facts: You purchased a number of shares prior to 19 September 1985. | You have received a number of bonus shares on various dates since the original purchase, so that as at 30/10/2000 you owned an amount of shares. | You acquired additional shares and you received bonus shares in respect of these original shares. | In late October 20AA the Company returned to shareholders B cents per share. | The return of capital was used to acquire shares in a demerged entity - Company X. | You received one Company X share for every C Company shares held. | As a result you acquired an amount of Company X shares at a cost base of an amount. | You have reinvested your Company X dividends to acquire additional Company X shares and you now own an amount of shares in Company Xl with a cost base of an amount. | Early July 20BB, the Company merged with Company Z and you received a bonus issue of W share for each Company share owned. As a result you received a number of bonus shares under this merger. | Mid July 20CC, Company Z demerged its wholly owned subsidiary Company Y to Company Z shareholders. Under the demerger, shareholders of Company Z received a capital return amount of D cents per ordinary share which was applied towards the acquisition Company Y shares. Company Z shareholders received a Company Y share for each E number of Company Z shares owned at the time of the demerger. | Under the demerger you received a number of Company Y shares. | Company Z has advised that the percentages used to apportion the total cost base of post-CGT Company Z shares (Company Z shares acquired on or after 20 September 1985) to the remaining post-CGT Company Z shares and the new post-CGT Company Y shares are: | A percentage to Company Z shares, and | A percentage to Company Y shares. | You have chosen rollover relief under section 125-55 of the Income Tax Assessment Act 1997 (ITAA 1997) for the CGT event that happened to your Company Z shares under the Company Y demerger. | You acquired additional Company Y shares by purchase and re-investment of dividends. Just before the consolidation you held a number of Company Y shares with a cost base of an amount. | In mid-December 20FF Company Y consolidated on a one for six basis.