• I sold my shares before receiving the capital return on 21 July 2011

    Did I make a capital gain on the sale of my nib shares?

    A CGT event happened when you sold your nib shares.

    You made a capital gain if your cost base per share at the time you sold them was less than the amount you received for each share.

    If you had owned your nib shares for more than 12 months you can apply the CGT discount to reduce the capital gain by half.

    Did I make a capital gain on the capital return?

    Another CGT event happened on 21 July 2011 when you received the capital return on the nib shares you owned on 13 July 2011.

    Your capital gain is the amount of the capital return you received.

    If you had owned your nib shares for more than 12 months you can apply the CGT discount to reduce the capital gain by half.

    Example 2

    Janet purchased 1,000 nib shares in August 2009. She paid $800 for the shares ($0.80 per share) plus $20 brokerage so her cost base (and reduced cost base) when she purchased them is $820.

    As Janet still owned her 1,000 nib shares on 13 July 2011 she was entitled to receive the capital return.

    Janet sold her 1,000 nib shares on 19 July 2011 for $1.24 per share. She received $1,240 and paid $25 brokerage.

    Janet received a total capital return of $160.70 (1,000 x $0.1607) in the capital return.

    Calculating the capital gain on the sale of her shares

    Capital proceeds

     

    $1,240

    Cost base

    amount paid for the shares, plus

    $820

     

    brokerage on purchase, plus

    $20

     

    brokerage on sale

    $25

    Total cost base

     

    $865

    * Capital gain
    (capital proceeds minus total cost base)

    $1,240 - $865 =

    $375

    As Janet owned her nib shares for more than 12 months she can apply the CGT discount to reduce her gain by half to $187.50.

    Janet must take the $187.50 into account in working out her total net capital gains to include at the CGT item of her 2011-12 tax return (supplementary section).

    The capital gain on the capital return

    Because Janet had sold all of her nib shares by 21 July 2011 when she was paid the capital return, she has made a capital gain of $160.70 (the capital return amount).

    As Janet had owned her nib shares for more than 12 months she can apply the CGT discount to reduce her gain by half to $80.35.

    Recording the capital gains on the tax return

    Assuming that Janet has no other capital gains or capital losses for the 2011-12 year, she will include at the CGT item in her tax return (supplementary section):

    • total current year capital gains of $535 (the $375 capital gain she made on the sale of her nib shares plus the capital gain of $160.70 on the capital return), and
    • total net capital gains of $267 (the $187.50 net capital gain she made on the sale of her nib shares plus the net capital gain of $80.35 on the capital return).
      Last modified: 03 Feb 2016QC 25067