Purchase of shares by instalments



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Shares purchased from the Government in the Commonwealth Bank of Australia (CBA) and Telstra were paid for over 2 instalments. Until the final instalment was paid, Instalment Receipts - themselves CGT assets - were issued as evidence that you owned a beneficial interest in the shares.

If the capital proceeds from selling the Instalment Receipts or shares are more than the amount you paid for them, you may have to pay capital gains tax on the difference.

To determine the cost base of the Instalment Receipts or shares, you need to index the acquisition cost from the date when the shares were allocated to you. This is the date when your offer to purchase them was accepted and the contract for the purchase was made. Remember that the cost base can only be indexed if you are disposing of the Instalment Receipts or the shares 12 months or more after you acquired them. This information is only relevant to the first public float of Telstra. If you subscribed for the second issue of Telstra shares, the Instalment Receipts and the shares were acquired after 21 September 1999 and therefore indexation of the cost base is not available.

For the CBA share sale, the allocation of shares occurred on 13 July 1996 and indexation of the first instalment is available from that date. For the Telstra share sale, indexation is available from 15 November 1997.

The final instalment is taken to have been paid when it was received by the relevant trustee on behalf of the Government as vendor. Indexation of the final instalment is available from that time.

For the CBA share sale, receipt of the payment by the trustee occurred on or around 14 November 1997 or the earlier date on which the trustee received a discounted sum paid in satisfaction of the final instalment. For the Telstra share sale, receipt of the payment by the trustee and transfer of title to the shares occurred on or around 17 November 1998.

Last modified: 18 Sep 2009QC 18323