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.