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Draft Taxation Determination

TD 93/D142

Income tax: is the amount received from the sale of vendor shares by a bona fide prospector, who received the shares as consideration for the sale of mining tenements, exempt in terms of paragraph 23(pa) or subsection 160L(7) of the Income Tax Assessment Act 1936 ?

  • Please note that the PDF version is the authorised version of this draft ruling.
    This document has been finalised by TD 93/176.

FOI status:

draft only - for comment

Preamble

Draft Taxation Determinations (TDs) represent the preliminary, though considered, views of the ATO. Draft TDs may not be relied on; only final TDs are authoritative statements of the ATO.

1. No. The provisions of paragraph 23(pa) or subsection 160L(7) do not apply to exempt the profit from the sale of vendor shares by the prospector.

2. Exemption under paragraph 23(pa) or sub section 160L(7) does apply in the case of income derived by a bona fide prospector from the sale, transfer or assignment of his or her rights to mine gold or any prescribed metal or mineral.

Example

Shawn Fox, a bona fide prospector, received 20,000 shares (par value $1 per share) on the float of Mining Company Ltd in August 1989, as consideration for the sale of his mining tenements. In May 1991 Shawn sold those shares for $27,000. Shawn had never owned shares in a company before. Shawn has made a capital gain of $5240 on the sale.

cost base * indexation factor = indexed cost base

$20,000 * 1.088 = $21,760

proceeds from sale - indexed cost base = net capital gain

$27,000 - $21,760 = $5420

Commissioner of Taxation
3 June 1993

References


BO CNN J36/355/6

ISSN: 1038-8982

Related Rulings/Determinations:

TR 92/19

Subject References:
Mining
Exempt income
Disposal of mining right

Legislative References:
ITAA 23(pa)
ITAA 160L(7)


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