Issue
When did CGT event A1, in section 104-10 of the Income Tax Assessment Act 1997 (ITAA 1997), happen in relation to the exchange of the taxpayer's C & W Optus shares for SingTel shares?
Decision
CGT event A1 happened on 22 August 2001 when the contract for the disposal of the shares was made (subsection 104-10(3) of the ITAA 1997). Although the taxpayer completed and mailed the offer acceptance form in May 2001, the contract was subject to a condition precedent that the Treasurer raise no objections to the takeover. This condition was not satisfied until 22 August 2001.
Facts
The taxpayer acquired C & W Optus shares in the initial public offering.
SingTel Australia made an offer to acquire those C & W Optus shares and provided a number of options. The taxpayer accepted offer CWO-202 to receive $2.25 plus 0.8 SingTel shares for each C & W Optus share.
The taxpayer mailed the acceptance form in May 2001.
The takeover offer was subject to a condition precedent that the Treasurer raise no objections to the takeover under foreign investment policy. This condition was satisfied on 22 August 2001 when the Treasurer issued Press Release No. 60.
Reasons for Decision
Class Ruling CR2001/17 indicates at paragraph 15(b) that only a partial scrip for scrip roll-over is available for shareholders who accept consideration option CWO-202 ($A2.25 plus 0.8 SingTel shares for every C & W Optus share). Roll-over is not available to the extent that a C & W Optus shareholder received cash (ineligible proceeds): subsection 124-790(1).
A capital gain relating to the ineligible proceeds is made in the income year that a CGT event happened to the C & W Optus shares. For shareholders who accepted this option CGT event A1 is the most relevant CGT event because it required the shareholders to dispose of their C & W Optus shares to SingTel.
CGT event A1 happens when you enter into a contract for the disposal of an asset. If the contract is subject to a condition precedent, the contract is not made until the condition precedent is satisfied.
The SingTel offer was subject to a condition precedent that a notice in writing be issued by or on behalf of the Australian Treasurer stating that the Treasurer consents, or that the Treasurer does not have any objections, under the Australian Government's foreign investment policy, to the acquisition by SingTel Australia of all of the Optus shares the subject of the offer.
On 22 August 2001 the Treasurer released Press Release No. 60 stating that he had no objections under foreign investment policy to the proposed takeover of C & W Optus by SingTel.
CGT event A1 happened on 22 August 2001 even though the taxpayer had mailed an acceptance of the offer to SingTel in May 2001.