Capital gain on the return of capital
You made a capital gain if your cost base per share on 2 December 2011 was less than the amount of $0.02 you received for each UXC share. For each of these shares, you made a capital gain of $0.02 minus the cost base of the share.
If you had owned your UXC shares for more than 12 months, you can apply the CGT discount to reduce the capital gain by half.
For shares with a cost base equal or greater than $0.02, you have made no capital gain as a result of the return of capital.
For information about how to work out the cost base (and reduced cost base) for shares, refer to Guide to capital gains tax (NAT 4151).
If you did not make a capital gain on the return of capital, you do not need to include anything in your 2011-12 tax return about this CGT event.
If you made a capital gain on this CGT event, you must include it in your calculations when completing the CGT item on your 2011-12 tax return (supplementary section).
Adjusting the cost base (and reduced cost base) of shares
Where you have made a capital gain, you reduce the cost base (and reduced cost base) of your UXC shares to nil.
Where you have not made a capital gain, you reduce the cost base (and reduced cost base) of each of your UXC shares by $0.02.
If any of your shares had a cost base of exactly $0.02, their new cost base and reduced cost base is nil.
Elliot purchased 5,000 UXC shares in March 2009. The cost base of his shares was the price he paid for them plus brokerage - this was $1,500 or $0.30 per share.
There were no CGT events affecting the cost base of his shares before the return of capital on 7 December 2011.
Elliot was entitled to receive the capital return because he owned UXC shares on 2 December 2011. Elliot still owned his 5,000 UXC shares on 7 December 2011.
Elliot received a total of $100 (5,000 x $0.02) in the return of capital.
Elliot has not made a capital gain on his shares because the return of capital amount of $100 he received is less than their cost base of $1,500. Elliot does not have to include anything on his tax return about this return of capital.
Elliot must adjust the cost base (and reduced cost base) of his UXC share by subtracting the amount of the return of capital.
The new cost base for his share parcel is $1,400 ($1,500 - $100), or $0.28 per share (1,400 divided by 5,000 shares).