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How capital gains tax affects shares and units

Last updated 3 March 2016

For CGT purposes, shares in a company or units in a unit trust are treated in the same way as any other assets.

As a general rule, if you acquire any shares or units on or after 20 September 1985, you may have to pay tax on any capital gain you make when a CGT event happens to them. This would usually be when you sell or otherwise dispose of them. In this case, CGT event A1 would happen. You will find a list of all CGT events at appendix 1.

Unfamiliar terms

There may be terms in this chapter that are not familiar to you. Refer to chapter 1 in part A for more information or to Explanation of terms.

A CGT event might happen to shares even if a change in their ownership is involuntary – for example, if the company in which you hold shares is taken over or merges with another company. This may result in a capital gain or capital loss.

This chapter also deals with the receipt of non-assessable payments from a company (CGT event G1) while chapter 4 deals with non-assessable payments from a trust (CGT event E4). If you own shares in a company that has been placed in liquidation, CGT event G3 explains how you can choose to make a capital loss when the liquidator declares the shares worthless.

There are a number of special CGT rules if you receive such things as bonus shares, bonus units, rights, options or non-assessable payments from a company or trust. Special rules also apply if you buy convertible notes or participate in an employee share scheme or a dividend reinvestment plan.

The rest of this chapter explains these rules and contains examples showing how they work in practice. The flowcharts at appendix 3 will also help you work out whether the special rules apply to you.

If you need more information about how other income tax provisions affect your share investments, get the publication You and your shares.