Flowchart 3.3

Treatment of rights or options:

• to acquire shares where the rights or options were issued directly to you by the company (but not under an employee share scheme) for no payment because you were a shareholder, or
   
• to acquire units where the rights or options were issued directly to you after 28 January 1988 by the trust for no payment because you were a unit holder.

1. Did you acquire the original shares or units before 20 September 1985?

2. Did you exercise the rights or options on or after 20 September 1985?

3. Did you exercise the rights or options?

Answer 1

1. The shares or units acquired on exercise of the rights or options are subject to capital gains tax.
2. The acquisition date of the shares or units is the date of exercise of the rights or options to acquire the shares or units.
3. The first element of the cost base and the reduced cost base of the shares or units is:
   • the market value of the rights or options at the time you exercise them, plus
   • the amount you pay for the shares or units on exercising the rights or options, plus
   • if the rights or options were exercised on or after 1 July 2001 and, as a result, an amount is included in your assessable income - that amount.
    

Note:

Although the shares or units are subject to capital gains tax, any capital gain or capital loss you make from exercising the rights or options to acquire those shares or units is disregarded.

Answer 2

1. If you did not exercise the rights or options, you disregard any capital gain or capital loss on the sale or expiry of the rights or options.
2. If you exercised the rights or options before that date, you disregard any capital gain or capital loss you make when you dispose of the shares or units that you acquired.

Answer 3

1. The shares or units acquired on exercise of the rights or options are subject to capital gains tax.
2. The acquisition date of the shares or units is the date of the exercise.
3. The first element of the cost base and the reduced cost base of the shares or units is
   • the cost base of the rights or options at the time of exercise, plus
   • the amount you pay for the shares or units on exercising the rights or options, plus
   • if the rights or options were exercised on or after 1 July 2001 and, as a result, an amount is included in your assessable income - that amount.
    

Note:

Although the shares or units are subject to capital gains tax, any capital gain or capital loss you make from exercising the rights or options to acquire those shares or units is disregarded.

Answer 4

If the capital proceeds on the sale or expiry of the rights or options are more than their cost base, you make a capital gain.

If the capital proceeds are less than their reduced cost base, you make a capital loss.