Document ID: chunk:federal_register_of_legislation:C2010C00608:clause:4_35
Version: federal_register_of_legislation:C2010C00608
Segment Type: clause
Provision Reference: sch 4 cl 35
Character Range: 10952–12511

35  At the end of section 114‑15
Add:

 (4) Despite subsection (2), there are different rules for the exercise of an option or the conversion of a *convertible note.

Exercise of options

 (5) The amount you paid for the option, and the amount you paid to exercise it, are indexed from the quarter in which the liabilities to pay the amounts were incurred.

Example: On 1 April 1997, Robyn grants Andrew an option to buy land she owns. The option fee is $10,000, and the option is to buy the land on 30 June 1998 for $100,000.

 Andrew exercises the option and acquires the land on 30 June 1998. To work out whether there is a capital gain when Andrew disposes of the land, indexation is available if the land is disposed of 12 months or more after its acquisition.

 The $10,000 option fee can be indexed from 1 April 1997 (when the liability to pay it was incurred). The $100,000 exercise price can be indexed from 30 June 1998 (when the liability to pay the price was incurred).

Convertible notes

 (6) If you *acquire *shares in a company or units in a unit trust by converting a *convertible note, the amount paid for the convertible note, and the amount paid to convert it, are indexed from the quarter in which the liabilities to pay the amounts were incurred.

Note: If shares or units are acquired as a result of the exercise of the option or the conversion of the note, and an amount is paid to the company or trust on the shares or units after the day of acquisition, that amount is indexed from the time it is paid: see subsection 960‑275(3).