Commonwealth Consolidated Acts Commonwealth Consolidated Acts(1) This table sets out the modification to the rules about * cost base and * reduced cost base that happens if you * acquire * shares, or units in a unit trust, by converting a * convertible interest.
Conversion of a convertible interest | ||
Item | In this situation: | The modification is... |
1 | You * acquire * shares or units in a unit trust by converting a * convertible interest that is a * traditional security. | The first element of the * cost base of the shares or units is the sum of: (a) the cost base of the convertible interest at the time of conversion; and (b) any amount paid to convert the convertible interest, except to the extent that the amount is represented in the paragraph (a) amount; and (c) all the amounts to be added under subsection (1A). The first element of their * reduced cost base is worked out similarly. |
2 | You * acquire * shares (except shares acquired under an * employee share scheme) by converting a * convertible interest that is not a * traditional security. | The first element of the * cost base of the shares is the sum of: (a) the cost base of the convertible interest at the time of conversion; and (b) any amount paid to convert the convertible interest, except to the extent that the amount is represented in the paragraph (a) amount; and (c) all the amounts to be added under subsection (1A). The first element of their * reduced cost base is worked out similarly. |
3 | You * acquire units in a unit trust by converting a * convertible interest (except one that is a * traditional security) that was issued by the trustee of the unit trust after 28 January 1988. | The first element of the * cost base of the units is the sum of: (a) the cost base of the convertible interest at the time of conversion; and (b) any amount paid to convert the convertible interest, except to the extent that the amount is represented in the paragraph (a) amount; and (c) all the amounts to be added under subsection (1A). The first element of their * reduced cost base is worked out similarly. |
(1A) An amount is to be added under this subsection if a * capital gain from the * convertible interest has been reduced under section 118 - 20. This is so even though a capital gain that is made on conversion is disregarded under subsection (3). The amount to be added is the amount of the reduction.
Note: For example, a capital gain made on the conversion under section 118 - 20 may be reduced because an amount is included in the owner's assessable income under subsection 26BB(2) of the Income Tax Assessment Act 1936 (about assessing a gain on disposal or redemption of a traditional security) or section 159GS of that Act (about balancing adjustments on transfer of a qualifying security).
(1B) The payment to convert the convertible interest can include giving property (see section 103 - 5).
(2) You are taken to have * acquired the shares or units when the conversion of the convertible interest happened.
(3) A * capital gain or * capital loss you make from converting the convertible interest is disregarded.
Note 1: The conversion of the convertible interest would be an example of CGT event C2 (about a CGT asset ending).
Note 2: There are transitional rules for some convertible notes: see section 130 - 60 of the Income Tax (Transitional Provisions) Act 1997 .
Table of sections
130 - 75 Objects of Subdivision
130 - 80 ESS interests acquired under employee share schemes
130 - 85 Interests in employee share trusts
130 - 90 Shares held by employee share trusts
130 - 95 Shares and rights in relation to ESS interests
130 - 97 Application of certain provisions of Division 83A