• ## Examples

### Example 1

Capital gain and no rollover

Sally acquired 500 ordinary shares in TNCL before 12 November 2003 - that is more than 12 months before the reincorporation. Each of the TNCL shares had a cost base (including purchase price and any brokerage and stamp duty) of \$10.50 on 12 November 2004.

Sally receives 250 NC voting CDIs (or one CDI for every two TNCL shares that she held) in the reincorporation. She does not choose scrip for scrip rollover for this exchange.

Calculating the capital gain

Sally calculates her capital gain by deducting the cost base of her TNCL shares from the capital proceeds (the value of the voting CDIs) she received in exchange for them.

Sally's cost base is \$5,250 (500 x \$10.50).

Her capital proceeds are \$5,820. This is the market value of the 250 NC voting CDIs she received (\$23.28 x 250).

Sally's capital gain is as follows:

 \$5,820 - \$5,250 = \$570 capital proceeds cost base capital gain

Recording the capital gain in the tax return

Assuming she has no other capital gains and capital losses and chooses the discount method, Sally will complete the capital gains question as follows:

Did you have a capital gains tax event during the year?: Yes

Net capital gain: \$285

Total current year capital gains: \$570

Calculating the cost base of the NC voting CDIs

Sally will use \$23.28 per voting CDI as the acquisition cost for her NC voting CDIs when working out the capital gains or losses from future CGT events that happen to them.

Sally can claim the CGT discount on disposal of her NC voting CDIs only if this happens after 12 November 2005.

Note: If Sally did not receive NC voting CDIs and instead elected to receive shares, she would calculate the cost base and reduced cost base of her replacement shares in the same way.

### Example 2

Capital gain where scrip for scrip rollover is chosen

Linus bought 1,000 TNCL shares in October 2002 - more than 12 months before the reincorporation. Each of the TNCL shares had a cost base (including purchase price and any brokerage and stamp duty) of \$10.30 on 12 November 2004.

Linus participated in the arrangement and received 500 NC CDIs (or one CDI for every two TNCL shares that he held). Linus made a capital gain from the cancellation of his shares in TNCL, however, he chose to apply scrip for scrip rollover to disregard the gain.

Calculating the cost base of the NC CDIs

As a result of choosing the rollover, the cost base and reduced cost base of Linus' NC CDIs will be the cost base of the TNCL shares that he gave up in exchange for them. In this case, the cost base and reduced cost base of each NC CDI is equal to the sum of the cost bases/reduced cost bases of the 2 TNCL shares that it replaced (that is, \$10.30 x 2, or \$20.60). Linus will use this amount to calculate any capital gain or loss he makes when he later sells his NC CDIs.

If Linus chooses to sell his NC CDIs within 12 months of acquiring them, he will still be entitled to use the CGT discount method to calculate any capital gain. This is because the combined period over which Linus held his TNCL shares and NC CDIs would be more than 12 months.

Note: If Linus did not receive NC CDIs and instead elected to receive shares, he would calculate the cost base and reduced cost base of his replacement shares in the same way.