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Edited version of your written advice
Authorisation Number: 1012855758777
Date of advice: 7 August 2015
Ruling
Subject: Capital gains tax - capital loss - shares
Question 1:
Did capital gains tax (CGT) event A1 happen to you when your shares in company X were transferred to company Y?
Answer:
Yes.
Question 2:
Is your brokerage costs included in the reduced cost base of the shares?
Answer:
Yes.
This ruling applies for the following periods:
Year ending 30 June 2015
The scheme commenced on:
1 July 20ZZ
Relevant facts
You acquired a number of ordinary fully paid shares in X over a period of time.
You incurred brokerage costs in relation to the purchase of the shares.
The shares were transferred in 20ZZ to company Y pursuant to Section 444GA of the Corporations Act 2001 (cth) for no consideration.
You have made a capital loss.
You have provided a number of documents which forms part of and should be read in conjunction with this private ruling:
Relevant legislative provisions:
Income Tax Assessment Act 1997 Section 102-10.
Income Tax Assessment Act 1997 Section 102-15.
Income Tax Assessment Act 1997 Section 102-20.
Income Tax Assessment Act 1997 Section 104-10.
Income Tax Assessment Act 1997 Section 110-25.
Reasons for decision
You can make a capital gain or capital loss if and only if a CGT event happens. The gain or loss is made at the time of the event. CGT event A1 happened when your shares were transferred to another company in the 2014-15 income year.
When CGT event A1 happens, you make a capital loss if the capital proceeds are less than the asset's reduced cost base. In your case, you received no capital proceeds as a result of the transfer of your shares. You will therefore make a capital loss on the transfer of the shares and will need to calculate the reduced cost base of your shares.
When working out capital gain or capital loss for an asset, a cost base needs to be established. The cost base of a CGT asset is generally the cost of the asset when it was bought. It also includes certain other costs associated with acquiring, holding and disposing of the asset.
The reduced cost base of a CGT asset is made up of five elements, which are added together to work out the reduced cost base of your CGT asset. The brokerage costs form part of the reduced cost base.
The capital loss you made will be the reduced cost base of the shares as they were transferred for no consideration.
Note: You can apply the resulting capital loss against your capital gains for the income year. Any unapplied net capital loss for the year can be carried forward to later income years to be deducted from future capital gains.