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Edited version of private advice
Authorisation Number: 1051909584693
Date of advice: 15 October 2021
Ruling
Subject: CGT - capital proceeds - equalisation payment
Question
Will the funds received from other shareholders as an equalisation adjustment form part of the capital proceeds received from the sale of the shares?
Answer
Yes, Section 116-20 of the Income Tax Assessment Act 1997 provides the general rules about capital proceeds. Subsection 116-20(1) provides that capital proceeds from a Capital Gains Tax (CGT) event are the total of:
a) the money you have received, or are entitled to receive, in respect of the event happening; and
b) the market value of any other property you have received, or are entitled to received, in respect of the event happening.
The equalisation payment is included in the capital proceeds for the sale of your shares as it is an amount received in respect of the CGT event happening, that is the disposal of the property.
This ruling applies for the following period:
Year ended 30 June 20XX
The scheme commences on:
31 March 20XX
Relevant facts and circumstances
You acquired an amount of shares
You disposed an amount of shares
You received an amount in proceeds from the share purchaser
You received an additional payment as an equalisation adjustment from other shareholders
Relevant legislative provisions
Income Tax Assessment Act 1997 section 116-20
Income Tax Assessment Act 1997 section 116-20(1)