This section explains your CGT obligations if you sold or otherwise disposed of any shares or units in a unit trust (including a managed fund) in the 2018–19 income year. It also explains what happens when you have a CGT event under a demerger. For information about distributions from a unit trust (other than under a demerger) in the 2018–19 income year, see Trust distributions.
Managed fund
A managed fund is a unit trust. Where we refer to a unit trust in this guide we are also referring to a managed fund.
How capital gains tax affects shares and units
For CGT purposes, shares in a company or units in a unit trust are treated in the same way as any other assets.
As a general rule, if you acquired any shares or units on or after 20 September 1985, you may have to pay tax on any capital gain you make when a CGT event happens to them. This would usually be when you sell or otherwise dispose of them. It also includes where you redeem units in a managed fund by switching them from one fund to another. In these cases, CGT event A1 happens. There is a list of all CGT events at appendix 1.
Profits on the sale of shares held in carrying on a business of share trading are included as ordinary income rather than as capital gains. In addition, if the TOFA rules apply to you and you have elected to have certain tax-timing methods apply, gains and losses from trading of shares and units will be brought to account under those rules rather than as capital gains or capital losses.
Capital gains or losses made in respect of certain CGT events happening to shares held by an Australian resident company that represents a non-portfolio interest in foreign companies may be reduced under Subdivision 768-G of ITAA 1997 depending on the Active foreign business asset percentage of the foreign company.
A CGT event might happen to shares even if a change in their ownership is involuntary, for example, if the company in which you hold shares is taken over or merges with another company. This may result in a capital gain or capital loss.
This section also deals with the receipt of non-assessable payments from a company (CGT event G1) while Trust distributions deals with non-assessable payments from a trust (CGT event E4 or E10).
If you own shares in a company that has been placed in liquidation or administration, CGT event G3 lets you choose to make a capital loss when the liquidator or administrator declares the shares (or other financial instruments) worthless.
There are a number of special CGT rules if you receive such things as bonus shares, bonus units, rights, options or non-assessable payments from a company or trust. Special rules also apply if you buy convertible notes or participate in an employee share scheme or a dividend reinvestment plan.
The rest of this section explains these rules and has examples showing how they work in practice. The flowcharts at appendix 3 will also help you work out whether the special rules apply to you.
See also: