Private ruling: Capital gains tax – disposal of shares – was it C1 event?
Date of advice: 27 September 2018
Published: November 2018
Ruling period: Year ended 30 June 2018
Date scheme commenced: 1 July 2017

Ruling: Q1: Has capital gains tax (CGT) event C1 happened on the disposal of the shares? | A1: No

Relevant facts and circumstances: You have reached your preservation age and retired from the work force. Your financial advisors had discussions with you and prepared a Statement of Advice (SOA) to restructure your affairs for retirement. You signed a pension switch form in 20XX. Your financial advisor included an extract of some of the relevant pages with this ruling request. Your financial advisor was mindful of the maximum limit to transfer and didn’t want to exceed this limit. The SOA advised you to sell your shares and roll these across to another program but retain it in your original program. The reason for this is that the investment is unitised and as a result the CGT is shared through the unit price. The SOA advised you to commence an Account Based Pension (ABP) with a provider but not until late in 20XX because your taxable income from employment in this financial year was high and it was not wished to add to your taxable income with the ABP payments. You completed an ABP application form in 20XX with the clear intention of commencing an ABP with this provider. Your financial advisor provided a copy of this form with this ruling request. You completed all of this documentation as soon as practical. Your financial advisor actioned the recommendations and sold the shares you were advised to retain. This resulted in a capital gain. It was not intended to avoid taxation. Your financial advisor advised the share firm of this error before all of the investments were sold. Your financial advisor asked the share firm to rectify the situation as it was an error but this did not happen. Your financial advisor believes that rollover relief may be applied where a CGT event C1 occurs. CGT event C1 occurs if a CGT asset is lost or destroyed. Your financial advisor believes where a third party disposes of assets on market in error, then the assets are considered ‘lost’ and a rollover may be available.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 102-20 | Income Tax Assessment Act 1997 section 104-10 | Income Tax Assessment Act 1997 section 104-20 | Income Tax Assessment Act 1997 section 108-5 | Income Tax Assessment Act 1997 section 110-25 | Income Tax Assessment Act 1997 section 124-70

Reasons for decision: Summary: CGT event A1 happened as a result of the disposal of the shares. You cannot choose to apply the roll-over provisions contained within Subdivision 124-B of the Income Tax Assessment Act 1997 (ITAA 1997) with respect to the capital gain. | Detailed Reasoning - Detailed reasoning: Taxation Determination TD 1999/79 says that for the purpose of CGT event C1 the expression ‘lost or destroyed’ applies to a voluntary loss or destruction or intangible assets. Shares are an intangible CGT asset. Paragraph 2 of TD 1999/79 states the word ‘lost’ does not take into consideration voluntary actions. In its context in a CGT event C1 suggests ‘lost’ as involuntary rather than voluntary. Paragraph 7 of TD 1999/79, does not distinguish between tangible and intangible assets. Your shares were sold instead of being retained, as per the financial advice you received from your financial advisor. In your case, your shares were disposed of voluntarily, as you authorised this action to be undertaken, by your written authority. CGT event C1 did not happen on this occasion. When you disposed of your shares, this triggered CGT event A1 under section 104-10 of the ITAA 1997.