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Edited version of private advice
Authorisation Number: 1052045136630
Date of advice: 13 October 2022
Ruling
Subject: CGT event A1 - disposal of shares
Question 1
Did CGT event A1 occur on Day Month Year when you accepted the takeover offer?
Answer
Yes.
Question 2
Are the capital proceeds received for the disposal of your ABC Ltd shares the market value of the XYZ Ltd shares at the time of the CGT event?
Answer
Yes.
This ruling applies for the following period:
Year ended 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
ABC Ltd, an ASX listed stock, was taken over by XYZ Ltd which is also an ASX listed stock.
XYZ Ltd acquired less than 80% of ABC LTD's shares.
Prior to the takeover XYZ Ltd made an unconditional takeover offer to all ABC Ltd shareholders.
You accepted the takeover offer on Day Month Year and elected to receive scrip consideration for your ABC Ltd shares.
At the time, you owned (number) ABC Ltd shares, and received (number) WAM shares as consideration for those ABC Ltd shares.
On Day Month Year the last closing price for the XYZ Ltd shares on the ASX was $X.XX
Relevant legislative provisions
Income Tax Assessment Act 1997 section 104-10
Income Tax Assessment Act 1997 section 116-20
Reasons for decision
Question 1
Summary
Yes, CGT event A1 happened to your ABC Ltd shares when you accepted the takeover offer from XYZ Ltd on Day Month Year.
Detailed reasoning
Section 104-10 of the Income Tax Assessment Act 1997 (ITAA 1997) is about CGT event A1.
CGT event A1 happens if you dispose of a CGT asset. You dispose of a CGT asset if a change of ownership occurs from you to another entity. The time of the event is when you enter into the contract for the disposal.
In your circumstances, you entered the contract for the disposal of your ABC Ltd shares when you accepted the XYZ Ltd takeover offer, under which XYZ Ltd would acquire all of your ABC Ltd shares for consideration.
Therefore, CGT event A1 occurred on Day Month Year when you accepted the takeover offer.
Question 2
Summary
Yes, your capital proceeds on the disposal of your ABC Ltd shares is equal to the market value of the XYZ Ltd shares you received as scrip consideration, on the date of the CGT event.
Detailed reasoning
Section 116-20 of the ITAA 1997 contains the general rules about capital proceeds. The capital proceeds from a CGT event are the total of the money you have received, and the market value of any other property you have received in respect of the event happening. The market value of property is to be worked out at the time of the CGT event.
In your circumstances, you received property in respect of CGT event A1 happening to you ABC Ltd shares. In particular, the property you received was shares in XYZ Ltd. Therefore, your capital proceeds on the disposal of your ABC Ltd shares is the market value of the XYZ Ltd shares you received. The capital proceeds will be market value of the XYZ Ltd shares on Day Month Year.