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There can be non-assessable payments for both shares and units.
Non-assessable payments from a company to a shareholder
Non-assessable payments to shareholders are sometimes called a return of capital. If you received a payment from a company in respect of your shares and it was not a dividend, you deduct the amount of the payment from both the cost base and the reduced cost base of your shares.
If the non-assessable payment is greater than the cost base of your shares, you include the excess as a capital gain. If you use the indexation method to work out the amount of this capital gain you cannot use the discount method to work out a capital gain when you later sell the shares or units.
Non-assessable payments from a managed fund to a unit holder
The treatment of these payments is similar to non-assessable payments from a company to a shareholder. For more information, see chapter C2.
Non-assessable payments under a demerger
If you receive a non-assessable payment under an eligible demerger, you do not deduct the payment from the cost base and reduced cost base of your shares or units. Instead, you make adjustments to your cost base and reduced cost base under the demerger rules. You may make a capital gain on the non-assessable payment if it exceeds the cost base of your original share or unit, although you will be able to choose rollover.
An eligible demerger is one that happens on or after 1 July 2002 and satisfies certain tests. The head entity will normally advise shareholders or unitholders if this is the case.
For more information, see Guide to capital gains tax 2006.
Last modified: 06 Oct 2009QC 27788