Private ruling: Retail premium payment
Date of advice: 26 September 2016
Published: November 2016
Ruling period: Year ended 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Q1: Does the amount you receive form part of the capital proceeds, from a capital gains tax (CGT) event? | A1: Yes.

Relevant facts and circumstances: You received a payment from a company. The company completed the retail component of their pro rata accelerated renounceable entitlement offer. You received a retail entitlement offer premium payment for the sale of your entitlements for your benefit in a Retail Shortfall Bookbuild. The payments were for eligible retail shareholders who elected not to take up their entitlements and ineligible retail shareholders.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 104-10

Reasons for decision: Summary: A capital gain or capital loss may be made if a CGT event happens to the asset. The most common CGT event is event A1. CGT event A1 happens if you dispose of a CGT asset. The time of the event is when you enter into the contract for the disposal or if there is no contract when change of ownership occurs. An individual makes a capital gain if the capital proceeds from the disposal are more than the asset's cost base. An individual makes a capital loss if those capital proceeds are less than the asset's reduced cost base. The disposal of the rights into the Retail Shortfall Bookbuild is a CGT event and a Retail Premium should be treated as capital proceeds for the rights sold on a shareholder's behalf via the Retail Shortfall Bookbuild. In your case, you received a Retail Entitlement Offer premium payment after your rights were sold as part of a Retail Shortfall Bookbuild. Therefore, the retail premium received is considered to be capital proceeds from the sale of the rights into the Retail Bookbuild. Consequently, you will derive a capital gain for CGT purposes equal to the amount of the Retail Premium received.