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  • Exercise of an option


    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

    End of attention

    If the option you granted is later exercised any capital gain or capital loss you made from the grant, renewal or extension is ignored. You may have to amend your income tax assessment for an earlier income year.

    Similarly, any capital gain or capital loss that the grantee would otherwise make from the exercise of the option is disregarded.

    The effect of the exercise of an option depends on whether the option was a call option or a put option. A call option is one that binds the grantor to dispose of an asset. A put option binds the grantor to acquire an asset.

    Example: Granting of an option (cont):

    On 1 February 2003, Colleen exercises the option. The capital gain that you made in 2002 is disregarded and you request an amendment of your income tax assessment to exclude that amount. The $10,000 you received for the grant of the option is considered to be part of the capital proceeds for the sale of your property in the 2002-03 income year. You capital gain/ loss from the property is the difference between its cost base/ reduced cost base and $210,000.

    End of example
    Last modified: 25 Feb 2020QC 27448