Personal investors guide to capital gains tax 2006
This version is no longer current. Please follow this link to view the current version. |
-
This document has changed over time. View its history.
Appendixes
Appendix 1: Some major share transactions
Company | Details of transaction |
AMP Ltd | Demutualisation
Demerger
2005 return of capital
|
Aristocrat Leisure Ltd | 2005 return of capital
Shareholders needed to reduce the cost base and reduced cost base of each share by $0.21. For each share that had a cost base of less than $0.21, the difference was a capital gain in 2005-06. See our fact sheet Aristocrat Leisure Limited (Aristocrat): 2005 return of capital . |
Australian Gas Light Company Ltd (AGL) | Return of capital
Shareholders needed to reduce the cost base and reduced cost base of each share by $0.50. For each share that had a cost base of less than $0.50, the difference was a capital gain in 2004-05. See our fact sheet Australian Gas Light Company (AGL) 2005 return of capital . |
Aviva Corporation Ltd | Demerger
The fact sheet 2004 Aviva Corporation Ltd demerger and the demergers calculator on our website at www.ato.gov.au/demergers (follow the link under 'Shareholder information') will help you work out the cost bases of your Aviva and NGM shares after the demerger. |
BHP Billiton Limited | Demerger
BHP Billiton has advised that BHP Steel represented 5.063% of the market value of the group as a whole just after the demerger. Shareholders who received BHP Steel shares should use this percentage to apportion the sum of the cost bases of their post-CGT BHP Billiton shares between these shares and the BHP Steel shares they received in relation to those post-CGT BHP Billiton shares. The fact sheet 2002 BHP Billiton Group demerger and the demergers calculator on our website at www.ato.gov.au/demergers (follow the link under 'Shareholder information') will help you work out the cost bases of your BHP Billiton and BlueScope shares after the demerger. 2006 share buy-back
For capital gains tax purposes, they are taken to have received $5.96 per share. The date the shares were sold under the buy-back was 3 April 2006. If the capital proceeds of $5.96 were more than the cost base of the share, the difference is a capital gain to the shareholder in 2004-05. If $5.96 was less than the share's reduced cost base, the difference is a capital loss. See our fact sheet BHP Billiton 2006 off-market share buy-back . |
BlueScope Steel Ltd | 2005 share buy-back
For capital gains tax purposes, they are taken to have received $4.79 per share. The date the shares were sold under the buy-back was 12 April 2005. If the capital proceeds of $4.79 was more than the cost base of the share, the difference is a capital gain to the shareholder in 2004-05. If $4.79 was less than the share's reduced cost base, the difference is a capital loss. See our fact sheet BlueScope Steel: 2005 off-market share buy-back . |
Coles Myer Ltd | 2005 share buy-back
For capital gains tax purposes, they are taken to have received $3.84 per share. The date the shares were sold under the buy-back was 23 May 2005. If the capital proceeds of $3.84 were more than the cost base of the share, the difference is a capital gain to the shareholder in 2004-05. If $3.84 was less than the share's reduced cost base, the difference is a capital loss. See our fact sheet Coles Myer 2005 off-market share buy-back . |
Commonwealth Bank of Australia Ltd | Public share offer
|
CSR Limited - Rinker Group Limited | Demerger
CSR has advised that Rinker represented 75% of the market value of the group as a whole just after the demerger. Shareholders who received Rinker shares should use this percentage to apportion the sum of the cost bases of their post-CGT CSR shares between these shares and the Rinker shares they received in relation to those post-CGT CSR shares. The demergers calculator on our website at www.ato.gov.au/demergers (follow the link under 'Shareholder information') will help you work out the cost bases of your Rinker and CSR shares after the demerger. Also see our fact sheet 2003 CSR demerger: impact on resident individual shareholders . |
Henderson Group PLC (formerly HHG PLC) | Return of cash and reduction of investor base
There are capital gains tax consequences for shareholders. See our fact sheet HHG PLC capital reduction . |
Hibernian Friendly Society (NSW) Limited (now Aevum Limited) | Demutualisation
|
Insurance Australia Group (IAG) Limited | Share purchase plan
There are no CGT consequences at the time of purchase. However, there are tax consequences in relation to owning and disposing of the shares you purchase. |
IOOF Ltd | Demutualisation
|
Mayne Group Ltd | Demerger
Mayne Group has advised that Mayne Pharma represented 44.217% of the market value of the group as a whole just after the demerger. Shareholders who received Mayne Pharma shares should use this percentage to apportion the sum of the cost bases of their post-CGT Mayne Group shares between these shares and the Mayne Pharma shares they received in relation to those post-CGT Mayne Group shares. The fact sheet 2005 Mayne Group Ltd (renamed Symbion Health Ltd) demerger and the demergers calculator on our website at www.ato.gov.au/demergers (follow the link under 'Shareholder information') will help you work out the cost bases of your Mayne Group and Mayne Pharma shares after the demerger and to work out whether have made a capital gain under the demerger. |
Mincor Resources NL | Demerger
Mincor has advised that TCC represented 9.582% of the market value of the group as a whole just after the demerger. Shareholders who received TCC shares should use this percentage to apportion the sum of the cost bases of their post-CGT Mincor shares between these shares and the TCC shares they received in relation to those post-CGT Mincor shares. The demergers calculator on our website at www.ato.gov.au/demergers (follow the link under 'Shareholder information') will help you work out the cost bases of your Mincor and TCC shares after the demerger. See our fact sheet 2003 Mincor Resources NL demerger . |
Minotaur Resources Ltd | Demerger and takeover
For every Minotaur share owned, shareholders received one MinEx share. In conjunction with the demerger, Oxiana Limited (Oxiana) and Minotaur shareholders agreed to a takeover of Minotaur. Under the takeover, Minotaur shareholders received 1.85 new Oxiana shares for each of their Minotaur shares. The fact sheet 2005 Minotaur Resources Ltd demerger and the demergers calculator on our website at www.ato.gov.au/demergers (follow the link under 'Shareholder information') will help you work out the cost bases of your MinEX and Oxiana shares after the demerger and to work out whether you have made a capital gain under the demerger. |
MPI Mines Ltd | Demerger and takeover
In conjunction with the demerger, LionOre Australia Pty Ltd (LionOre) made a takeover offer for MPI shares. Under the takeover, MPI shareholders were offered $1 and 0.1675 of a LionOre share (in the form of a CHESS Depository Interest) for each of their MPI shares. The takeover offer was accepted by the majority of shareholders. Those who did not accept the offer then had their MPI shares compulsorily acquired by LionOre. Our fact sheet 2004 MPI Mines Ltd demerger and takeover - Impact on resident individual shareholders will help you work out the tax consequences of both the demerger and takeover. |
News Corporation Ltd | Reincorporation
If rollover is chosen, the first element of the cost base of each News Corporation share (including those represented by CDIs) is the sum of the cost base of the two News Corporation Ltd shares they exchanged for it, and shareholders are taken to have acquired their News Corporation shares or CDIs at the time they acquired the News Corporation Ltd shares they exchanged for them. See our fact sheet Newscorp reincorporation . |
NRMA Insurance Group Ltd (NIGL) | Demutualisation
The acquisition date was 19 June 2000. For additional shares purchased through the facility, the acquisition cost was $2.75 and the acquisition date was 6 August 2000. |
Over 50s Mutual Friendly Society Limited (OFM Ltd) | Demutualisation
|
Pasminco Limited | Declaration that shares are worthless made by administrators
See our fact sheet Capital losses on Pasminco Ltd shares . Creation of a trust over shares
|
Pivot Ltd | Merger
Shareholders of Pivot who acquired their shares before 20 September 1985 made a capital gain under CGT event K6 if their capital proceeds per share was more than $15.08 and they disposed of them after 28 July 2003. The capital gain is equal to 70% of the difference between the capital proceeds and $15.08. (No capital loss is available under CGT event K6.) See our fact sheet Pivot merger with Incitec - CGT on sale of pre-CGT shares . |
Promina Group Ltd | 2005 return of capital
Shareholders needed to reduce the cost base and reduced cost base of each share by $0.23. For each share that had a cost base of less than $0.23, the difference was a capital gain in 2004-05. See our fact sheet Promina Group Ltd 2005 return of capital . |
Rio Tinto Ltd | 2005 share buy-back
For capital gains tax purposes, they are taken to have received $6.44 per share. The date the shares were sold under the buy-back was 9 May 2005. If the capital proceeds of $6.44 was more than the cost base of the share, the difference is a capital gain to the shareholder in 2004-05. If $6.44 was less than the share's reduced cost base, the difference is a capital loss. See our fact sheet Rio Tinto Ltd 2005 share buy-back . |
Telstra | Public share offer 1
Public share offer 2
|
Virtualplus Holdings Ltd | Demerger
The demerger involved a return of capital of $0.02162 per share in VHL. This amount was compulsorily applied as a consideration for the acquisition of shares in NHL. VHL shareholders were entitled to one NHL share for every 10 of their VHL shares. The fact sheet 2005 Virtualplus Holdings Ltd demerger and the demergers calculator on our website at www.ato.gov.au/demergers (follow the link under 'Shareholder information') will help you work out the cost bases of your VHL and NHL shares after the demerger and to work out whether you have made a capital gain under the demerger. |
Western Mining Corporation Limited - WMC Resources Limited | Demerger
Alumina has advised that WMCR represented 46.30% of the market value of the group as a whole just after the demerger. Shareholders who received WMCR shares should use this percentage to apportion the sum of the cost bases of their post-CGT Alumina shares between these shares and the WMCR shares they received in relation to those post-CGT Alumina shares. The demergers calculator on our website at www.ato.gov.au/demergers (follow the link under 'Shareholder information') will help you work out the cost bases of your Alumina and WMCR shares after the demerger. Takeover
If the capital proceeds of $7.85 per share was more than the cost base of the share, the difference is a capital gain in 2004-05. If $7.85 was less than the share's reduced cost base, the difference is a capital loss in 2004-05. See our fact sheet WMC Resources Ltd takeover by BHP Billiton Ltd . Shareholders who did not accept the offer by 17 June 2005 should also see the fact sheet. |
Westfield | Capital restructure
Participants received Westfield Group stapled securities through either a stapling arrangement or a sale facility. They also had the option of receiving cash under the sale facility. The tax consequences of these transactions vary depending on whether the shareholder or unit holder chose the 'cash alternative' or 'exchange by sale alternative' or did nothing. See our fact sheets Westfield Group (Westfield): 2004 Restructure: Tax consequences for Westfield Limited shareholders ; Westfield 2004 Restructure: Tax consequences for Westfield Trust unit holders ; Westfield 2004 Capital Restructure: Tax consequences for Westfield America Trust unit holders . |
To obtain a copy of a fact sheet referred to in this appendix, visit our website at www.ato.gov.au or, if you do not have internet access, phone our Publications Distribution Service on 1300 720 092 .
Further fact sheets may be on our website which do not appear in this appendix.
For more information about share transactions in earlier years, visit our website.
Appendix 2: Consumer Price Index (CPI)
All groups - weighted average of eight capital cities
Year | Quarter ending | |||
31 Mar. | 30 Jun. | 30 Sep. | 31 Dec. | |
1985 | - | - | 71.3 | 72.7 |
1986 | 74.4 | 75.6 | 77.6 | 79.8 |
1987 | 81.4 | 82.6 | 84.0 | 85.5 |
1988 | 87.0 | 88.5 | 90.2 | 92.0 |
1989 | 92.9 | 95.2 | 97.4 | 99.2 |
1990 | 100.9 | 102.5 | 103.3 | 106.0 |
1991 | 105.8 | 106.0 | 106.6 | 107.6 |
1992 | 107.6 | 107.3 | 107.4 | 107.9 |
1993 | 108.9 | 109.3 | 109.8 | 110.0 |
1994 | 110.4 | 111.2 | 111.9 | 112.8 |
1995 | 114.7 | 116.2 | 117.6 | 118.5 |
1996 | 119.0 | 119.8 | 120.1 | 120.3 |
1997 | 120.5 | 120.2 | 119.7 | 120.0 |
1998 | 120.3 | 121.0 | 121.3 | 121.9 |
1999 | 121.8 | 122.3 | 123.4 | N/A* |
* If you use the indexation method to calculate your capital gain, the indexation factor is based on increases in the CPI up to September 1999 only. | ||||
Definitions
Capital gain
You may make a capital gain from a CGT event such as the sale of an asset. Generally, your capital gain is the difference between your asset's cost base (what you paid for it) and your capital proceeds (what you received for it). You can also make a capital gain if a managed fund or other unit trust distributes a capital gain to you.
Capital gains tax
Capital gains tax (CGT) refers to the income tax you pay on any net capital gain you make. You include the net capital gain on your annual income tax return. For example, when you sell (or otherwise dispose of) an asset as part of a CGT event, you are subject to CGT.
Capital loss
Generally, you may make a capital loss as a result of a CGT event if you received less capital proceeds for an asset than its reduced cost base (what you paid for it). Your capital loss is your reduced cost base less your capital proceeds.
Capital proceeds
Capital proceeds is the term used to describe the amount of money or the value of any property you receive or are entitled to receive as a result of a CGT event. For shares or units, capital proceeds may be:
- the amount you receive from the purchaser
- the value of shares or units you receive on a demerger
- the value of shares or units and the amount of cash you receive on a merger/takeover, or
- the market value if you give the shares or units away.
CGT asset
The CGT assets covered by this guide are shares and units. However, CGT assets also include collectables (such as jewellery), assets for personal use (such as furniture or a boat) and other assets (such as an investment property, vacant land or a holiday home). If you have made a capital gain from the sale of one or more of these assets, you may need to read the Guide to capital gains tax 2006 .
CGT-concession amounts
These amounts are the CGT discount component of any actual distribution from a managed fund.
CGT event
A CGT event happens when a transaction takes place such as the sale of a CGT asset. The result is usually a capital gain or capital loss.
Cost base
The cost base of an asset is generally what it costs you. It is made up of five elements:
- money you paid or property you gave for the asset
- certain incidental costs of acquiring or selling it (for example, brokerage, stamp duty, investment consultants fees and legal fees)
- the costs of owning it (generally this will not apply to shares or units because you will usually have claimed or be entitled to claim these costs as tax deductions)
- costs associated with increasing or preserving its value or installing or moving it, and
- what it has cost you to establish, preserve or defend your ownership or rights to it (for example, if you paid a call on shares).
The cost base for a share or unit may need to be reduced by the amount of any non-assessable payment you receive from the company or fund.
Demerger rollover
This may apply to CGT events that happen on or after 1 July 2002 to interests that you own in the head entity of a demerger group where a company or fixed trust is demerged from the group. Generally, the head entity undertaking the demerger will advise owners whether demerger rollover is available but you should seek our advice if you are in any doubt. The Tax Office may have provided advice in the form of a class ruling on a specific demerger, confirming that the rollover is available.
This rollover allows you to defer your CGT obligation until a later CGT event happens to your original or your new shares or units.
Demutualisation
A company demutualises when it changes its membership interests to shares. If you received shares as part of a demutualisation of an Australian insurance company (for example, AMP, IOOF or NRMA), you are not subject to CGT until you sell the shares or another CGT event happens.
Usually the company will advise you of your cost base for the shares you received. The company may give you the choice of keeping the shares they have given you or of selling them and giving you the capital proceeds.
If you hold a policy in an overseas insurance company that demutualises, you may be subject to CGT at the time of the demutualisation.
Discount method
The discount method is one of the ways to calculate your capital gain if:
- the CGT event happened after 11.45am (by legal time in the ACT) on 21
September 1999, and
- you acquired the asset at least 12 months before the CGT event.
If you use the discount method, you do not index the cost base but you can reduce your capital gain by the CGT discount of 50%. However, you must first reduce your capital gains by the amount of any capital losses made in the year and any unapplied net capital losses from earlier years. You discount any remaining capital gain.
If you acquired the asset before 11.45am (by legal time in the ACT) on 21 September 1999, you can choose either the discount method or the indexation method, whichever gives you the better result.
The examples in part B of this guide show you how the discount method works.
Discounted capital gain
A discounted capital gain is a capital gain that has been reduced by the CGT discount. If the discounted capital gain has been received from a managed fund, you will need to gross up the amount before you apply any capital losses and the CGT discount.
Dividend reinvestment plans
Under these plans, shareholders can choose to use their dividend to acquire additional shares in the company instead of receiving a cash payment. For CGT purposes, you are treated as if you received a cash dividend and then used it to buy additional shares. Each share (or parcel of shares) received in this way is treated as a separate asset when the shares are issued to you.
Gross up
Grossing up applies to unit holders who are entitled to a share of the fund's income that includes a capital gain reduced by the CGT discount. In this case, you 'gross up' your capital gain by multiplying by two your share of any discounted capital gain you have received from the fund.
Income year
The income year is the same as the financial year relating to your current income tax return.
Indexation factor
The indexation factor is worked out based on the consumer price index (CPI) in appendix 2 .
The indexation of the cost base of an asset is frozen as at 30 September 1999. For CGT events after that time the indexation factor is the CPI for the September 1999 quarter (123.4) divided by the CPI for the quarter in which you incurred costs relating to the asset. The result is rounded to three decimal places. You may have different indexation factors for different amounts included in your cost base.
Indexation method
The indexation method is one of the ways to calculate your capital gain if you bought a CGT asset before 11.45am (by legal time in the ACT) on 21 September 1999. This method allows you to increase the cost base by applying an indexation factor to each item of expenditure in your cost base (based on increases in the CPI up to September 1999).
Some examples in part B of this guide show you how the indexation method works.
You may prefer to use the discount method for CGT events after 11.45am (by legal time in the ACT) on 21 September 1999 if that method gives you a better result.
LIC capital gain amount
This is an amount notionally included in a dividend from a listed investment company (LIC) which represents a capital gain made by that company. The amount is not included as a capital gain at item 17 on the tax return, or item 9 if you use the tax return for retirees. (See the instructions for dividend income at question 11 in TaxPack 2006 or question 8 in Retirees TaxPack 2006 and example 20 .)
Net capital gain
A net capital gain is the difference between your total capital gains for the year and the total of your capital losses for the year and unapplied net capital losses from earlier years, less any CGT discount and small business CGT concession to which you are entitled.
You show the result at A item 17 on your tax return (supplementary section), or item 9 if you use the tax return for retirees.
Net capital loss
If your total capital losses for the year are more than your total capital gains, the difference is your net capital loss for the year. This loss can be carried forward and deducted from capital gains you make in later years. There is no time limit on how long you can carry forward a net capital loss.
You can only use capital losses from collectables to reduce capital gains from collectables. If your total capital losses from collectables for the year are more than your total capital gains from collectables, you have a net capital loss from collectables for the year. This loss is carried forward and deducted from capital gains from collectables in later years. There is no time limit on how long you can carry forward a net capital loss from collectables.
Non-assessable payment
A non-assessable payment is a payment received from a company or fund that is not assessed as part of your income on your income tax return. This includes some distributions from unit trusts and managed funds and, less commonly, from companies.
'Other' method
To calculate your capital gain using the 'other' method, you subtract your cost base from your capital proceeds. You must use this method for any shares or units you have bought and sold within 12 months (that is, when the indexation and discount methods do not apply).
Reduced cost base
The reduced cost base is the amount you take into account when you are working out whether you have made a capital loss when a CGT event happens. The reduced cost base may need to have amounts deducted from it such as non-assessable payments. The reduced cost base does not include indexation or costs of owning, such as interest on monies borrowed to buy the asset.
Rollover
Rollover allows a capital gain to be deferred or disregarded until a later CGT event happens.
Scrip-for-scrip rollover
This can apply to CGT events that happen on or after 10 December 1999 in the case of a takeover or merger of a company or fund in which you have holdings. The company or fund would usually advise you if the rollover conditions have been satisfied. This rollover allows you to defer your CGT obligation until a later CGT event happens to your shares or units.
You may only be eligible for partial rollover if you received shares (or units) plus cash for your original shares. In that case, if the information provided by the company or fund is not sufficient for you to calculate your capital gain, you may need to seek advice from the Tax Office.
Share buy-backs
If you disposed of shares back to a company under a buy-back arrangement, you may have made a capital gain or capital loss.
Some of the buy-back price may have been treated as a dividend for tax purposes. The time you make the capital gain or capital loss will depend on the conditions of the particular buy-back offer.
Takeovers and mergers
If a company in which you held shares was taken over and you received new shares in the takeover company, you may be entitled to scrip-for-scrip rollover.
If the scrip-for-scrip conditions were not satisfied, your capital proceeds for your original shares will be the total of any cash and the market value of the new shares you received.
Tax-deferred amounts
These amounts include indexation received by a managed fund on its capital gains and accounting differences in income. Tax-deferred amounts reduce both the cost base and reduced cost base of your units in a managed fund.
Tax-exempted amounts
These amounts are generally made up of exempt income of the managed fund - such as amounts on which the fund has already paid tax or income you had to repay to the fund. Tax-exempted amounts do not affect the cost base and reduced cost base of your units in a managed fund.
Tax-free amounts
These amounts allow the managed fund to pay a greater distribution to its unit holders. This is due to certain tax concessions funds can receive. Tax-free amounts affect the reduced cost base but not the cost base of your units in a managed fund.
Unapplied net capital losses from earlier years
This is the amount of net capital losses from earlier years remaining after you have deducted any capital gains made between the year(s) when the losses were made and the current year.
You use unapplied net capital losses from earlier years to reduce capital gains in the current year (after those capital gains have been reduced by any capital losses in the current year).
You can only use unapplied net capital losses from collectables from earlier years to reduce capital gains from collectables in the current and future years.
ATO references:
NO NAT 4152
| Date: | Version: | |
| 1 July 2000 | Original document | |
| 1 July 2001 | Updated document | |
| 1 July 2002 | Updated document | |
| 1 July 2003 | Updated document | |
| 1 July 2004 | Updated document | |
| You are here | 1 July 2005 | Updated document |
| 1 July 2006 | Updated document | |
| 1 July 2007 | Updated document | |
| 1 July 2008 | Updated document | |
| 1 July 2009 | Updated document | |
| 1 July 2010 | Updated document | |
| 1 July 2011 | Updated document | |
| 1 July 2012 | Updated document | |
| 1 July 2013 | Updated document | |
| 1 July 2014 | Updated document | |
| 1 July 2015 | Updated document | |
| 1 July 2016 | Updated document | |
| 1 July 2017 | Updated document | |
| 1 July 2018 | Updated document | |
| 1 July 2019 | Updated document | |
| 1 July 2020 | Updated document | |
| 1 July 2021 | Updated document | |
| 1 July 2022 | Updated document | |
| 1 July 2023 | Current document |