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Edited version of private advice
Authorisation Number: 1051852553371
Date of advice: 25 June 2021
Ruling
Subject: Sale of company shares - additional payment arrangement
The Commissioner was asked two questions relating to the tax consequences of the sale of shares in an Australian resident company.
Question 1
Will any of the proceeds, comprised of an initial consideration of cash and shares in the company and additional earnout payments dependent on the performance of the company after completion of the share purchase agreement, from the sale of 100% of the shares in an Australian resident company be treated as ordinary income under section 6-5 of the ITAA 1997?
Answer
No.
Question 2
Will all of the proceeds, comprised of an initial consideration of cash and shares in the company and additional earnout payments dependent on the performance of the company after completion of the share purchase agreement, from the sale of 100% of the shares in an Australian resident company be treated as statutory income under the capital gains tax provisions in Parts 3-1 and 3-3 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
Yes.