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ATO Interpretative Decision

ATO ID 2001/541

Income Tax

Capital Gains Tax: Options: effect of sale
FOI status: may be released

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CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

This ATOID provides you with the following level of protection:

If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.

Issue

Does CGT event A1 (in section 104-10 of the Income Tax Assessment Act 1997 (ITAA 1997)) happen when a taxpayer sells an exchange traded option?

Decision

Yes, CGT event A1 (in section 104-10 of the ITAA 1997) does happens when a taxpayer sells an exchange traded option.

Facts

The taxpayer has purchased and sold exchange traded options.

Reasons for Decision

An exchange traded option is a type of futures contract entered into on a futures market of a futures exchange, under which a party acquires an option or right which can be exercised at or before a specified time. An exchange traded option gives the party the right to either:

•
purchase from, or sell to, the other party a specified quantity of a commodity at a price specified in, or determined in accordance with, the contract; or
•
be paid by the other party an amount of money which reflects the amount by which a specified number is greater or less than the number of a specified index at the time the option or right is exercised. The index may be either the Australian Stock Exchanges All Ordinaries Price Index or a prescribed index.

CGT event A1 happens when there is a change of ownership of an asset from one entity to another (subsections 104-10(1)and (2) of the ITAA 1997). CGT event A1 happens on the sale of an exchange traded option.

A CGT A1 event will therefore occur when the taxpayer sells the options.

Note: Subdivision 130-B of the ITAA 1997 deals with rights and options issued to a taxpayer by a company or trust where the taxpayer did not pay or give anything to acquire them.

Date of decision:  15 August 2001

Year of income:  Year ended 30 June 2001

Legislative References:
Income Tax Assessment Act 1997
   subsection 104-10(1)
   subsection 104-10(2)
   Subdivision 130-B

Related ATO Interpretative Decisions
ATO ID 2001/539 ATO ID 2001/540

Keywords
Capital gains tax
Capital losses
CGT assets
CGT capital proceeds
CGT cost base
Futures markets
Securities rights & options

Business Line:  Small Business/Individual Taxpayers

Date of publication:  26 October 2001

ISSN: 1445-2782

history
  Date: Version:
You are here 15 August 2001 Original statement
  17 June 2005 Archived

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