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Edited version of your written advice
Authorisation Number: 1012758732379
Ruling
Subject: cost base of shares
Question
Is the cost base of the bonus shares $X as you did not pay any amount to acquire them?
Answer
No.
This ruling applies for the following period
Year ended 30 June 2014
The scheme commences on
1 July 2013
Relevant facts and circumstances
You and your spouse owned shares in a company.
The shares were acquired on various dates after 20 September 1985.
You and your spouse were issued with a number of bonus shares.
No part of the value of the bonus shares was assessed as a dividend and you did not pay anything to acquire the bonus shares.
You and your spouse sold all of your shares in the company in the 2013-14 financial year.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 130-20
Income Tax Assessment Act 1997 subsection 130-20(3)
Reasons for decision
Section 130-20 of the Income Tax Assessment Act 1997 (ITAA 1997) sets out what happens if you own shares in a company and the company issues other shares (bonus equities) to you in relation to the original equities.
Item 1 of the table in subsection 130-20(3) of the ITAA 1997 explains what happens if none of the shares are a dividend and you acquired the original equities on or after 20 September 1985. In these circumstances, you are taken to have acquired the bonus equities when you acquired the original equities. You are required to apportion the first element of you cost base and reduced cost base for the original equities in a reasonable way over both the original and bonus equities.
If you acquired your original shares at different times, you will have to work out how many of your bonus shares are taken to have been acquired at each of those times.
Application to your circumstances
In this case, you and your spouse acquired shares after 20 September 1985. In 2001, you and your spouse were issued bonus shares. No part of the value of the bonus shares was assessed as a dividend. As per subsection 130-20(3) of the ITAA 1997, you and your spouse are required to apportion the first element of your cost base and reduced cost for the original shares in a reasonable way over both the original and bonus shares.