Appendix 3 Flowcharts

Flowchart 3.1

Treatment of bonus shares issued on or after 20 September 1985

Flowchart 3.2

Treatment of bonus units issued on or after 20 September 1985

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.

Flowchart 3.4

Treatment of rights or options:

• to acquire shares where the rights or options were acquired by you from an individual or entity that acquired them as a shareholder in the company, or
  
• to acquire units where the rights or options were issued after 28 January 1988 and were acquired by you from an individual or entity that acquired them as a unit holder in the trust.

Flowchart 3.5

Treatment of rights or options to acquire shares or units:

• you paid for and which were issued directly to you from the company (but not under an employee share scheme) or trust, or
  
• you acquired from an individual or entity that was not a shareholder or unit holder.

Flowchart 3.6

The capital gains tax (CGT) main residence exemption rules when you sell a dwelling you inherited.

Real estate and main residence needs to be read with this flowchart.

Flowchart 3.1

Treatment of bonus shares issued on or after 20 September 1985

1. Did you acquire the original shares on or after 20 September 1985?

Yes	Read on from question 2.
No	Read on from question 4.

1. Is any part of the bonus shares a dividend or treated as a dividend?

Yes	Read on from question 3.
No	Read answer 1.

1. Were the bonus shares issued before 1 July 1987?

Yes	Read answer 1.
No	Read answer 3.

1. Is any part of the bonus shares a dividend or treated as a dividend?

Yes	Read on from question 5.
No	Read on from question 6.

1. Were the bonus shares issued before 1 July 1987?

Yes	Read on from question 6.
No	Read answer 3.

1. Are the bonus shares partly paid?

Yes	Read on from question 7.
No	Read answer 4.

1. Were the bonus shares issued before 10 December 1986?

Yes	Read answer 4.
No	Read on from question 8.

1. Before sale of the bonus shares, were any further call payments made to the company?

Yes	Read answer 5.
No	Read answer 4.

Answer 1:

1. The bonus shares are subject to capital gains tax.
2. The bonus shares are acquired when the original shares were acquired.
3. The cost base of each original and bonus share is equal to
   • the cost base of the original shares divided by the total number of original and bonus shares, plus  
   • any calls on partly paid bonus shares.
    

Answer 2

1. The bonus shares are subject to capital gains tax if issued on or after 20 September 1985.
2. The acquisition date of the bonus shares is their date of issue.
3. The cost base is the amount of the dividend plus any calls on partly paid bonus shares.

Answer 3

1. The bonus shares are subject to capital gains tax.
2. The acquisition date of the bonus shares is their date of issue.
3. The cost base is the amount of the dividend, plus any calls on partly paid bonus shares.

Answer 4

You are taken to have acquired the bonus shares before 20 September 1985 and they are not subject to capital gains tax.

Answer 5

1. The bonus shares are subject to capital gains tax.
2. The acquisition date of the bonus shares is the date when the liability to pay the first call arises.
3. The cost base is the market value of the bonus shares just before the liability to pay the first call arises, plus the amount of call payments made.

Flowchart 3.2

Treatment of bonus units issued on or after 20 September 1985

1. Did you acquire the original units on or after 20 September 1985?

Yes	Read on from question 2.
No	Read on from question 3.

1. Is any part of the bonus units included in your assessable income?

Yes	Read answer 1.
No	Read answer 2.

1. Is any part of the bonus units included in your assessable income?

Yes	Read on from question 4.
No	Read on from question 5.

1. Were the bonus units issued on or after 20 September 1985?

Yes	Read answer 1.
No	Read answer 4.

1. Are the bonus units partly paid?

Yes	Read on from question 6.
No	Read answer 4.

1. Were the bonus units issued before 10 December 1986?

Yes	Read answer 4.
No	Read on from question 7.

1. Before the sale of the bonus units were any further call payments made to the trust?

Yes	Read answer 3.
No	Read answer 4.

Answer 1

1. The bonus units are subject to capital gains tax.
2. The acquisition date of the bonus units is their date of issue.
3. The cost base is the amount included in assessable income, plus any calls on partly paid bonus units.

Answer 2

1. The bonus units are subject to capital gains tax.
2. The bonus units are acquired when the original units were acquired.
3. The cost base of each original and bonus unit is equal to

• the cost of the original units divided by the total number of original and bonus units, plus
  • any calls on partly paid bonus units.
   

Answer 3

1. The bonus units are subject to capital gains tax.
2. The acquisition date of the bonus units is the date when the liability to pay the first call arises.
3. The cost base is the market value of the bonus units just before the liability to pay the first call arises, plus the amount of call payments made.

Answer 4

You are taken to have acquired the bonus units before 20 September 1985 and they are not subject to capital gains tax.

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?

Yes	Read question 2.
No	The acquisition date of the rights or options is the date of acquisition of the original shares or units. Read question 3.

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

Yes	Read answer 1.
No	Read answer 2.

1. Did you exercise the rights or options?

Yes	Read answer 3.
No	Read answer 4.

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
   • any amount that was included in your assessable income as a result of the rights or options being exercised on or after 1 July 2001.
    

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
   • any amount that was included in your assessable income as a result of the rights or options being exercised on or after 1 July 2001.
    

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.

Flowchart 3.4

Treatment of rights or options:

• to acquire shares where the rights or options were acquired by you from an individual or entity that acquired them as a shareholder in the company, or
• to acquire units where the rights or options were issued after 28 January 1988 and were acquired by you from an individual or entity that acquired them as a unit holder in the trust.

1. Did you acquire the rights or options before 20 September 1985?

Yes	Read question 3.
No	The acquisition date of the rights or options was the date of the contract to acquire the rights or options or, if there was no contract, the date the other individual or entity stopped being the owner of the rights or options. Read question 2.

1. Did you exercise the rights or options?

Yes	Read answer 4.
No	Read answer 1.

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

Yes	Read answer 3.
No	Read answer 2.

Answer 1

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.

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 when you dispose of the shares or units that you acquired.

Answer 3

1. The shares acquired on exercise of the rights or options are subject to capital gains tax.
2. The acquisition date of the shares 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 is:
   • the market value of the rights or options at the time you exercise them, plus
   • the amount you pay for the shares 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

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.
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 paid for the shares or units on exercising the rights or options, plus
   • any amount that was included in your assessable income as a result of the rights or options being exercised on or after 1 July 2001.
    

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.

Flowchart 3.5

Treatment of rights or options to acquire shares or units:

• you paid for and which were issued directly to you from the company (but not under an employee share scheme) or trust, or
• you acquired from an individual or entity that was not a shareholder or unit holder.

Note

This flowchart does not apply to rights or options for the issue of units by the grantor of the rights or options if they were exercised before 27 May 2005.

1. Did you acquire the rights or options before 20 September 1985?

Yes	Read question 2.
No	Read question 4.

1. Did you exercise the rights or options?

Yes	Read question 3.
No	Read answer 1.

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

Yes	Read question 5.
No	Read answer 4.

1. Did you exercise the rights or options?

Yes	Read answer 3.
No	Read answer 2.

1. Were the rights or options ones which were renewed or extended after 20 September 1985?
2. Were they exercised before 27 May 2005?

Yes	Read question 6.
No	Read answer 5.

Yes	Read answer 5.
No	Read answer 3.

Answer 1

You disregard any capital gain or capital loss you make on the sale or expiry of the rights or options.

Answer 2

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.

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 exercise of the rights or options.
3. The first element of the cost base and the reduced cost base of the shares or units is:
   • the amount you paid for the rights or options, plus
   • the amount you paid for the shares or units on exercising the rights or options.
    

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

You disregard any capital gain or capital loss on the shares or units acquired from the exercise of the rights or options because the shares or units were acquired before 20 September 1985.

Answer 5

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.
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 exercised them, plus
   • the amount you paid for the shares on exercising the rights or options.
    

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.

Flowchart 3.6

The capital gains tax (CGT) main residence exemption rules when you sell a dwelling you inherited.

Real estate and main residence needs to be read with this flowchart.

1. Did the deceased person acquire the dwelling before 20 September 1985?

Yes

Read question 2.

No

Read question 3.

1. Did settlement of your contract to sell the dwelling happen within two years of the person dying?

Yes

Read answer 1.

No

Read question 5.

1. Was the dwelling the deceased person’s main residence just before they died?

Yes

Read question 4.

No

Read answer 2.

1. Just before they died, was the dwelling being used to produce income

Yes

Read answer 2.

No

Read question 2.

1. From the deceased person’s death until settlement of your contract to sell the inherited dwelling, was it your main residence (or the main residence of an individual who had a right to occupy it under the will or the spouse of the deceased person)?

Yes

Read question 6.

No

Read answer 2.

1. From the deceased person’s death until settlement of your contract to sell the inherited dwelling, was any part of the dwelling used to produce income?

Yes

Read answer 2.

No

Read answer 1.

Answer 1

Dwelling is fully exempt

Answer 2

Dwelling is not fully exempt (but you may qualify for a part exemption)

• Dwellings that passed to you before 21 August 1996

This flowchart does not apply to a dwelling that passed to you before 21 August 1996. Real estate and main residence sets out the rules that apply in that situation.

• Where the deceased person died before 20 September 1985

If the deceased person died before 20 September 1985, the dwelling is fully exempt when you sell it. However, if you made a major capital improvement to the dwelling on or after 20 September 1985 and have used it to produce assessable income it may be subject to CGT (see Real estate and main residence).