Personal investors guide to capital gains tax 2007
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Appendixes
Appendix 1 - Some major share transactions
You can obtain information on key transactions involving major companies and other institutions from our website www.ato.gov.au. These transactions include mergers, takeovers, demergers, demutualisations, returns of capital, share buy-backs, and declarations by liquidators and administrators that shares are worthless.
Go to the 'Individuals' menu and choose 'Capital gains tax' from the drop-down menu and you will find this information on the 'Capital gains tax essentials' page under 'Key events for Australian shareholders', for 2006-07 and earlier years.
Check the website for a list of events that may affect your 2007 tax return.
The table below contains information on some major transactions that have given rise to a CGT event for many people. Remember to take into account any capital gains or capital losses from these transactions on your tax return for the relevant income year. Also, make sure you record any changes to the cost base of your shares or units. Check the website for a more complete list of events in earlier years.
If you are affected by a demerger there is a demerger calculator at www.ato.gov.au/demergers
Appendix 1 - Some major share transactions
Company | Details of transaction |
Alinta Ltd | Merger
Former Alinta Ltd shareholders transferred their Alinta Ltd shares to the New Alinta group in exchange for shares in New Alinta. Shareholders received one share in New Alinta for each former Alinta Ltd share exchanged. A CGT event happened as a result of the exchange of former Alinta Ltd shares for shares in New Alinta. However, shareholders can choose scrip for scrip rollover. See our fact sheet Alinta Ltd merger with Australian Gas Light Company (AGL) - October 2006 . ( AGL shareholders should refer to our fact sheet Merger of AGL and Alinta Ltd - October 2006 ) at www.ato.gov.au/CGT under the heading 'Special circumstances'. |
AMP Ltd | Demutualisation
Demerger
You can also work out the cost base of AMP and HHG shares after the demerger using the fact sheet or the AMP demerger calculator on our website at www.ato.gov.au/demergers (follow the link under 'Advanced' then 'Calculators'). 2005 return of capital
See our fact sheet AMP Limited (AMP): 2005 return of capital on our website at www.ato.gov.au/CGT (follow the link under 'View previous years' pages' then 'Advanced' followed by 'Publications'). |
AMP Ltd (continued) | 2006 return of capital
Shareholders needed to reduce the cost base and reduced cost base of each share by $0.40. For each share that had a cost base of less than $0.40, the difference was a capital gain in 2005-06. See our fact sheet AMP Limited (AMP): 2006 return of capital on our website at www.ato.gov.au/CGT under the heading 'Special circumstances'. |
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 at www.ato.gov.au/CGT under the heading 'Special circumstances'. |
Australian Gas Light Company Ltd (AGL) | Merger
Under the merger, former AGL shareholders transferred each AGL share to the New Alinta group, in exchange for 0.5775 of a New Alinta ordinary share and one New Alinta converting share. Immediately after the AGL shareholders received the New Alinta converting shares, they were bought back by New Alinta. As consideration for the buy-back of those converting shares, shareholders received one AGL Energy ordinary share for each converting share bought back. A CGT event happened as a result of both the exchange of AGL shares-for-shares in New Alinta and the buy-back of New Alinta converting shares for AGL Energy shares. In both cases, most AGL shareholders are eligible for CGT concessions that mean they may not need to include anything in their 2006-07 tax return from this transaction. See our fact sheet Merger of AGL and Alinta Ltd - October 2006 . (Alinta shareholders should refer to our fact sheet Alinta Ltd merger with Australian Gas Light Company (AGL) - October 2006 . ) These fact sheets are available at www.ato.gov.au/CGT under the heading 'Specific circumstances'. |
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 Ltd | 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 CGT 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 2005-06. 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 at www.ato.gov.au/CGT under the heading 'Special circumstances'. |
Commonwealth Bank of Australia Ltd | Public share offer
|
CSR Limited - Rinker Group Ltd | 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 under the heading 'Advanced' then 'Calculators' will help you work out the cost bases of your RInker and CSR shares after the demerger. Also see our fact sheet in 'Shareholder information' under CSR Ltd demerger of Rinker Group, Demergers: 2003 CSR demerger: impact on resident individual shareholders. 2005
return of capital
Shareholders needed to reduce the cost base and reduced cost base of each share by $0.20. For each share that had a cost base of less than $0.20, the difference was a capital gain in 2005-06. See our fact sheet CSR Limited (CSR): 2005 return of capital at www.ato.gov.au/CGT under the heading 'Special circumstances'. |
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 Demergers: 2005 Mayne Group Ltd (renamed Symbion Health Ltd) demerger and the demergers calculator on our website at www.ato.gov.au/demergers will help you work out the cost bases of your Mayne Group and Mayne Pharma shares after the demerger and to work out whether you have made a capital gain under the demerger. |
Minotaur Resources Ltd | Demerger and takeover
For every Minotaur share owned, shareholders received one MinEx share. In conjunction with the demerger, Oxiana Ltd (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 Demergers: 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 to calculate 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. |
Patrick Corporation Ltd | Takeover
Patrick shareholders who accepted the offer received $3 cash plus 0.4 Toll shares for each Patrick share. Patrick shareholders who did not accept the offer before 7.00pm (Melbourne time) on 25 May 2006 had their shares compulsorily acquired on 1 July 2006 and received the same number of Toll shares and cash as the other shareholders. The disposal of your Patrick shares is a CGT event. You can choose a scrip-for-scrip rollover and disregard the capital gains on the disposal of your Patrick shares to the extent you received Toll shares (but not cash) for them. Shareholders who accepted Toll's offer, made a capital gain or capital loss in the 2005-06 year. Shareholders whose Patrick shares were compulsorily acquired made a capital gain or capital loss in the 2006-07 year. See our fact sheet Patrick Corporation Limited takeover by Toll Holdings Limited at www.ato.gov.au/CGT under the heading 'Advanced' then 'Publications' will help you work out the tax consequences of the takeover. |
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 at www.ato.gov.au/CGT under the heading 'Special circumstances'. |
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 (Promina) 2005 return of capital at www.ato.gov.au/CGT (follow the link under 'View previous years' pages' then 'Advanced' then 'Publications'). 2006 return of capital
Shareholders needed to reduce the cost base and reduced cost base of each share by $0.15. For each share that had a cost base of less than $0.15, the difference was a capital gain in 2005-06. See our fact sheet Promina Group Ltd (Promina): 2006 return of capital at www.ato.gov.au/CGT under the heading 'Special circumstances'. |
St George Bank | 2006 share buy-back
For CGT purposes, they are taken to have received $10.59 per share as the capital component of the buy-back price. The date the shares were sold under the buy-back was 21 February 2006. If the capital proceeds of $10.59 per share were more than the cost base of the share, the difference is a capital gain to the shareholder in 2005-06. If $10.59 was less than the share's reduced cost base of each share, the difference is a capital loss. See our fact sheet St George Bank: 2006 off-market share buy-back at www.ato.gov.au/CGT under the heading 'Special circumstances'. |
Westpac | 2005 share buy back
For capital gains tax purposes, they are taken to have received $5.18 per share as the capital component of the buy-back price. The date the shares were sold under the buy-back was 19 December 2005. If the capital proceeds of $5.18 were more than the cost base of the share, the difference is a capital gain to the shareholder in 2005-06. If $5.18 was less than the share's reduced cost base, the difference is a capital loss. See our fact sheet Westpac: 2005 off-market share buy-back at www.ato.gov.au/CGT under the heading 'Special circumstances'. |
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 2007 .
CGT-concession amount
This amount is 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. We 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
An income year is the same as a financial year - a period of 12 months beginning on 1 July and ending on the next 30 June - and is the period covered by your tax return. (In particular circumstances, the Commissioner may allow a company or other entity to adopt another 12-month period).
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 2007 or question 8 in Retirees TaxPack 2007 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 write the result at A item 17 on your tax return (supplementary section), or A 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, managed funds and companies. For more information see Chapter B3 - Non-assessable payments .
'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 the asset, such as interest on monies borrowed to buy it.
Rollover
A 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 us.
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 or merged and you received new shares in the takeover or merged company, you may be entitled to a scrip-for-scrip rollover.
If the scrip-for-scrip rollover 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
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