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This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4.

Edited version of your written advice

Authorisation Number: 1012858856354

Date of advice: 12 August 2015

Ruling

Subject: Capital gains tax and cost base

Questions and answers:

    1. Is the first element of the cost base for the Y shares $X.XX each?

    Yes.

    2. Is the first element of the cost base for the Z shares $XXX each?

    Yes.

This ruling applies for the following periods:

Year ending 30 June 2015

The scheme commenced on:

1 July 2014

Relevant facts and circumstances

Your understanding that the Y and Z preference shares were purchased at the initial float.

The Y shares were not valued at a lower amount between the initial float and X.

The Z shares were not valued at a lower amount between the initial float and Z.

Relevant legislative provisions:

Income Tax Assessment ACT 1997 Section 102-20

Income tax Assessment ACT 1997 Section 110-25

Reasons for decision
A capital gain or capital loss is made as a result of a capital gains tax (CGT) event happening to a CGT asset (section 102-20 of the Income Tax Assessment Act 1997 (ITAA 1997). The most common CGT event is CGT event A1 the disposal of a CGT asset.

The cost base of a CGT asset is generally the cost of the asset when a taxpayer bought it. However, it also includes certain other costs associated with acquiring, holding and disposing of the asset.

In order to work out how much a taxpayer's capital gain or capital loss is, a taxpayer must first establish the cost base or reduced cost base of a taxpayer's ownership interest in the property.

Section 110-25 of the ITAA 1997 states that the cost base of a CGT asset is made up of five elements.

    1. Money you paid for the asset.

    2. Incidental costs of acquiring the property,

    3. Costs of owning the asset

    4. Capital costs to increase or preserve the value of your asset or install or move it

    5. Capital costs of preserving or defending your ownership of or rights to the asset.

The Commissioner accepts that the first element of the cost base for the Y shares is $XXX and the first element of the cost base for the Z shares is $XXX.


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