Document ID: chunk:federal_register_of_legislation:C2025C00029:section:3:p1
Version: federal_register_of_legislation:C2025C00029
Segment Type: section
Provision Reference: s 3 (pt 1/2)
Character Range: 2750693–2754408

3                                    You exercise rights issued to you to *acquire the *shares, units or options, and you acquired the original shares or *convertible interests, or the original units or convertible interests, before 20 September 1985.  The first element of your *cost base for the shares, units or options is the sum of:
                                                                                                                                                                                                                                                             (a) the *market value of the rights when they were exercised; and
                                                                                                                                                                                                                                                             (b) any amount paid to exercise the rights, except to the extent that the amount is represented in the paragraph (a) amount; and
                                                                                                                                                                                                                                                             (c) all the amounts to be added under subsection (6A).
                                                                                                                                                                                                                                                             The first element of their *reduced cost base is worked out similarly.

 (6A) An amount is to be added under this subsection if a *capital gain made from the right has been reduced under section 118‑20. This is so even though a capital gain that is made on exercise is disregarded under subsection (7). The amount to be added is the amount of the reduction.
Note: For example, a capital gain made on the exercise of the right under section 118‑20 may be reduced because an amount is included in the owner's assessable income under subsection 26BB(2) of the Income Tax Assessment Act 1936 (about assessing a gain on disposal or redemption of a traditional security) or section 159GS of that Act (about balancing adjustments on transfer of a qualifying security).
 (7) A *capital gain or *capital loss you make from the exercise of the rights is disregarded.
Note 1: The exercise of the rights would be an example of CGT event C2 (about a CGT asset ending).
Note 2: There are transitional rules for some rights: see section 130‑40 of the Income Tax (Transitional Provisions) Act 1997.
Note 3: The effect of this Subdivision is modified in 2 cases by sections 102AAZBA (about non‑resident trusts) and 414 (about CFC's) of the Income Tax Assessment Act 1936.

130‑45  Timing rules

Acquisition of rights
 (1) If you *acquired the rights from the company or trustee, you are taken to have acquired the rights when you acquired the original shares or interests or the original units or interests.

Acquisition of shares, units or options on exercise of rights
 (2) You are taken to have *acquired the new *shares, units or options when you exercise the rights.

130‑50  Application to options
  This Subdivision applies to options in the same way that it applies to rights.

Subdivision 130‑C—Convertible interests

130‑60  Shares or units acquired by converting a convertible interest
 (1) This table sets out the modification to the rules about *cost base and *reduced cost base that happens if you *acquire *shares, or units in a unit trust, by converting a *convertible interest.

Conversion of a convertible interest