Private ruling: The pre-CGT status of certain shares
Date of advice: 5 August 2020
Published: September 2020

Ruling: Q1: For the purposes of section 109-5 of the ITAA 1997, did you acquire the shares in XCo of which you are the registered shareholder, and the shares in XCo in which you have an interest through TrusteeCo as trustee for the Trust, before 20 September 1985? | A1: Yes. Relevant facts and circumstances XCo is a company incorporated in NSW before 1985. The Trust is a trust established in NSW before 1985. The terms of the trust deed provided that you would become absolutely entitled to the property of the Trust when you turned 25. You became absolutely entitled to the property of the Trust before 1985. Before 1985, XCo issued shares to the Trust. These shares continue to be held in the Trust. Before 1985, XCo issued shares to you. You continue to hold these shares. Relevant legislative provisions Income Tax Assessment Act 1997 - subsection 106-50(1) Income Tax Assessment Act 1997 - section 109-5 Income Tax Assessment Act 1997 - section 109-10



Reasons for decision: Summary: Shares held directly Subsection 109-5(1) of the ITAA 1997 provides that, in general, you acquire a CGT asset when you become its owner. Specifically, item 2 in section 109-10 of the ITAA 1997 provides that when a company issues or allots equity interests (relevantly, shares) in the company to you, you are taken to acquire the asset when the relevant contract is entered into or, if no contract exists, when equity interests are issued or allotted. You acquired shares as a direct shareholder before 1985 when they were issued to you by XCo. Pursuant to item 2 in section 109-10 of the ITAA 1997, you are therefore taken to have acquired those shares on that day for the purposes of section 109-5 of the ITAA 1997. Shares held through the Trust The table in subsection 109-5(2) of the ITAA 1997 provides that when CGT event E5 occurs - that is, when you as beneficiary under a trust become absolutely entitled to a CGT asset of the trust as against the trustee (disregarding any legal disability) - you acquire the asset when you become absolutely entitled. The Trust was established before 1985. XCo issued shares to the Trust before 1985. The terms of the trust deed provided that you would become absolutely entitled to the property of the Trust when you turned 25. You became absolutely entitled to the property of the Trust before 1985. Under subsection 109-5(2), you are deemed to have acquired those shares on that date. It is irrelevant that you have not called for a transfer of the shares but have instead left them in the Trust. In this regard, subsection 106-50(1) of the ITAA 1997 provides that for the purposes of Part 3-1 and Part 3-3 of the ITAA 1997 ' from just after the time you become absolutely entitled to a CGT asset as against the trustee of a trust (disregarding any legal disability), the asset is treated as being your asset (instead of being an asset of the trust)'. You therefore acquired shares through the Trust before 1985 for the purposes of section 109-5 of the ITAA 1997.