Issue
When did CGT event A1 in section 104-10 of the Income Tax Assessment Act 1997 (ITAA 1997) happen for a taxpayer who owned shares in MIM Holdings Ltd (MIM) and disposed of them to Xstrata Holdings Pty Ltd under the scheme of arrangement?
Decision
CGT event A1 in section 104-10 of the ITAA 1997 happened when the change of ownership of the taxpayer's shares occurred. This occurred on 24 June 2003, the date when the shares were transferred to Xstrata Holdings Pty Ltd.
Facts
A taxpayer purchased fully paid ordinary shares in MIM on 17 June 2002.
On 7 April 2003 Xstrata Plc via a wholly owned subsidiary, Xstrata Holdings Pty Ltd, launched a takeover of MIM.
The takeover was implemented by way of a scheme of arrangement. A copy of the approved court order was lodged with the Australian Securities and Investment Commission on 16 June 2003. For the purposes of section 411 of the Corporations Act 2001 the scheme became effective on that date.
Under the terms of the scheme, all of the taxpayer's MIM shares were transferred to Xstrata Holdings Pty Ltd on 24 June 2003. On that date the taxpayer received $1.72 cash for each MIM share held.
Reasons for Decision
CGT event A1 happens if you dispose of a CGT asset (subsection 104-10(1) of the ITAA 1997). You dispose of a CGT asset if a change of ownership occurs from you to another entity, whether because of some act or event or by operation of law (subsection 104-10(2) of the ITAA 1997).
CGT event A1 happens either when you enter into the contract for the disposal of the asset or, if there is no contract, when the change of ownership occurs (paragraph 104-10(3)(b) of the ITAA 1997).
In this case, the shares were disposed of in accordance with the terms of a scheme of arrangement. As the disposal did not occur under a contract, CGT event A1 happened when the change of ownership of the shares occurred.
The scheme provided that all of the MIM shares were to be transferred to Xstrata Holdings Pty Ltd on 24 June 2003 and that the shareholders were to receive their capital proceeds on that date. Consequently, CGT event A1 happened then.
Because the taxpayer owned the MIM shares for at least 12 months any capital gain made from their disposal may be reduced by the CGT discount.