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Edited version of your written advice
Authorisation Number: 1012928534910
Date of advice: 15 December 2015
Ruling
Subject: CGT on shares
Questions and answers
Are the shares you received from your family company still pre CGT shares?
No
This ruling applies for the following periods:
Year ending 30 June 20XX
The scheme commenced on:
The scheme has commenced
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
In 19XX shares in company A were purchased by your family company.
The family company shares were held equally by you and your siblings.
Some time ago the family company was liquidated and assets were divided equally among shareholders.
You did not wish to liquidate but agreed to in order to maintain family harmony.
You received all of the company A shares that the family company held soon after.
The company A shares had a change in ownership from the family company to you.
You believe there has been no disposal or purchase of a pre CGT asset.
Reasons for decision
Section 109-5 of the ITAA 1997 advises that you acquire a CGT asset when you become its owner. For example when acquired as a distribution by the liquidator of a company.
In your case you and your siblings held equal numbers of shares in a family company which in turn owned shares in company A. You did not hold any specific entitlement to the company A shares prior to your family company being liquidated.
Voluntary liquidation occurs when shareholders agree amongst each other to wind up an entity. This differs from a compulsory winding up of an entity as it is initiated by its members rather than via a court. A voluntary liquidation is only possible for solvent companies and the winding up process itself is subject to the control of the company members.
Involuntary liquidation is legally enforceable and usually as a result of insolvency or bankruptcy. A compulsory winding up of a company is the result of a court order on the grounds of Corporations Law, where a court will direct the process of liquidating a company's assets and winding up its affairs to begin.
Rollover relief is made available to defer or disregard CGT from a capital gain event in the case of some transactions, and entity restructures where specific conditions are met.
Acquisition of shares as a distribution by the liquidator of another company does not fall within any of the rollover provisions whether the liquidation is a voluntary or involuntary liquidation.
You acquired the shares on the date the liquidator transferred the shares to you, and they are not pre-CGT shares as they were when in the hands of the family company.