CGT events affecting shareholders

There are a number of capital gains tax (CGT) events that could affect you as a shareholder.

Capital gain tax (CGT) events include various transactions resulting in a capital gain or capital loss. CGT is the tax paid on any capital gain made. This is worked out by deducting capital losses and any CGT discounts from the total annual capital gains.

A CGT event occurs if you have sold (or otherwise disposed of) your share or units or other assets. However, there are a number of other CGT events that can result in capital gains or capital losses. According to the ATO, a CGT event may also occur where an individual:

• switches units between managed funds to redeem said units

• attains a distribution from either a managed fund or a unit trust (not including dividends)

• receives payments from a trust or company that are non-assessable

• is the owner of shares in a company where shares have been declared worthless

• owns shares in a company that are cancelled because the company is wound up.

Individuals must also consider whether they are entitled to any income tax deductions. This occurs when a listed investment company (LIC) pays a dividend where a LIC capital gain amount is indicated.

There are certain occurrences where special capital gains tax rules apply, including:

• attaining bonus shares and/or units and rights and/or options to acquire shares or units from a company or trust

• entering into employee share scheme or dividend reinvestment plan or through buying convertible notes.

If an individual has held a share for 12 months or more, they can use the ‘CGT discount method’ that allows them to reduce their capital gain currently by 50 per cent. In this instance, the cost base is subtracted from capital proceeds, then capital losses are deducted and then reduced by the relevant discount percentage.

If you have any queries in respect of the above please do not hesitate to contact our office on (03) 9728 1448.

Many thanks,
TAS Tailored Accounting Solutions
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This publication is for guidance only, and professional advice should be obtained before acting on any information contained herein. Neither the publishers nor the distributors can accept any responsibility for loss occasioned to any person as a result of action taken or refrained from in consequence of the contents of this publication.

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