Private ruling: Capital gains tax
Published: November 2014
Ruling period: Year ending 30 June 2015
Date scheme commenced: 1 July 2014

Ruling: Questions and answers | 1. Did a capital gains event occur when you sold your shares? | Yes. | 2. Can you apply the 50% discount to the capital gain? | Yes.

Relevant facts and circumstances: You are a resident of Australia for taxation purposes. You purchased shares overseas. You have sold the shares. You used daily conversion rates to calculate your cost base and capital proceeds. You made a capital gain on the sale of the shares.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5. | Income Tax Assessment Act 1997 Section 102-5. | Income tax Assessment Act 1997 Section 102-20. | Income Tax Assessment Act 1997 Section 104-25. | Income Tax Assessment Act 1997 Section 115-15.

Reasons for decision: Summary: Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that where you are a resident of Australia for taxation purposes, your assessable income includes income gained from all sources, whether in or out of Australia. | Detailed Reasoning - Capital gains tax: Section 102-20 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that you make a capital gain or loss when a CGT event happens to a CGT asset you own. Shares acquired on or after 20 September 1985 are CGT assets. Any net capital gain made during an income year as a result of a CGT event is included in your assessable income by section 102-5 of the ITAA 1997. You are taxed on your net capital gain at your marginal tax rate. CGT event A1 occurred when you sold the shares. You will make a capital gain if the capital proceeds from the sale of the shares is more than the cost base of those shares. A capital loss will arise if the capital proceeds of the shares sold is less than the reduced cost base of those shares (subsection 104-25(3) of the ITAA 1997). | Detailed Reasoning - CGT discount: An individual taxpayer is entitled to discount a capital gain by 50% if the capital gain: • resulted from a CGT event which occurred after 11.45am on 21 September 1999 (section 115-15 of the ITAA 1997); and • resulted from a CGT event happening to a CGT asset that was acquired by the entity making the capital gain at least 12 months before the CGT event (section 115-25 of the ITAA 1997). You have held the shares for more than 12 months; you are therefore entitled to apply the 50% discount to the capital gain made on the shares. | Detailed Reasoning - Conversion to Australian dollars: As you acquired the shares with a foreign currency and received foreign currency when you sold the shares each amount must be converted to Australian dollars to calculate your capital gain or loss. Division 960 of the ITAA 1997 sets out the rules for translating foreign currency into Australian dollars for taxation purposes. Item 5 of subsection 960-50(6) has application to CGT events. You correctly applied these rules to your calculations.