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A convertible note is another type of investment you can make in a company or unit trust. A convertible note earns interest on the amount you pay to acquire the note until the note's expiry date. On expiry of the note, you can either ask for the return of the money paid or convert that amount to acquire new shares or units.
The amount of capital gain or capital loss you make when you convert or dispose of a convertible note is the difference between the cost of the note and the sale price (or value) of the shares or units you received.
If you acquired convertible notes between 20 September 1985 and 10 May 1989 inclusive, these are generally subject to CGT if you make a capital gain or capital loss when you convert or dispose of the notes. However, this is not the case if that capital gain or capital loss is included in other parts of your income or deductions.
If you acquired any convertible notes after 10 May 1989, they will generally not be subject to CGT. Instead, any capital gain or capital loss you make is included under a provision dealing with the disposal of securities.
Last modified: 06 Oct 2009QC 27417