Document ID: chunk:federal_register_of_legislation:C2004C00958:clause:1_8:p7
Version: federal_register_of_legislation:C2004C00958
Segment Type: clause
Provision Reference: sch 1 cl 8 (pt 7/14)
Character Range: 496533–499176

in relation to the entity's shares.

 (4) An entity works out what the consequences of the *share value shift are by disregarding all *shares in the company owned by other entities.

Example: Bill and Bevan are the only shareholders in a company and are associates. They own one post‑CGT share each. The shares are fully paid and each has a market value of $120,000. The company issues one new share to Bill and Bevan for $100,000 each. After the new shares are issued, each share in the company has a market value of $110,000. The total decrease in the market value of the original shares equals the total discount given in relation to the new shares.

 Apart from this section, Bill and Bevan would make a capital gain based on the value shifted from their existing share into the new share of the other.

 Bill and Bevan will not make a capital gain from the share value shift, although cost base adjustments will be required under this Subdivision.

Value shifted to shares acquired on or after 20 September 1985

140‑55  Making a capital gain

 (1) This section sets out what happens if a *share value shift results in *shares that were *acquired on or after 20 September 1985 becoming *increased value shares.

Example: The ownership of shares in a company looks like this:

                  * a controller (for CGT purposes) of the company owns 800 class A shares and 200 class B shares;

                  * the controller's associate owns 100 class A shares and 700 class B shares;

                  * a third party owns 100 class A shares and 100 class B shares.

 All shares were acquired in 1999. A share value shift causes the market value of all class A shares to fall from $100 to $50 and the market value of all class B shares to increase from $100 to $150.

 (2) An entity owning *decreased value shares that have *materially decreased in market value makes a capital gain if the *shift proceeds are more than the part of those shares' *cost base worked out under subsection (5).

Note: The entity cannot make a capital loss.

 (3) The shift proceeds are:

Example: To continue the example, the total of the decreases in the market value of the controller's shares is $40,000.

 The only increased value shares owned by other entities are the class B shares of the controller's associate. The total increase in their market value is $35,000.

 The total share value increase is the increase in market value of all shares. This is $50,000.

 The controller's shift proceeds are:

Note: This represents the decrease in the market value of the controller's shares which has shifted into shares owned by the