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_dariusl(Newbie)Newbie
3 Mar 2021

I reigstered a company with 10 shares allocated for $10.

Subsequently, I have contributed 100K into the company, and would like to sell 50% of my company shares for 50K.

Does the Capital Gain Tax will be assessable at the value of $0 or $49990, if I sold 50% of my company shares for 50K?

The capital gain is the difference between your capital proceeds and the cost base of your CGT asset.

Which means,

Capital Proceeds - Cost Base = Capital Gains

$50k - $50k = $0 or,

$50k - $10 = $49990

According to Income Tax Assessment Act 1997, Section 110-25(5),

110-25(5)

The fourth element is capital expenditure you incurred:

(a) the purpose or the expected effect of which is to increase or preserve the asset ' s value; or

(b) that relates to installing or moving the asset.

Also, there is a ruling regarding Capital Contribution is part of Cost Base - National Mutual Life Association of Australia Ltd v Commissioner of Taxation [2009] FCAFC 96 (21 August 2009)

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TaxedoMask(Devotee)Devotee
4 Mar 2021

You can issue new shares and convert the loan to equity. I'd double check if there's any corporate law issues (depending on shareholding structure and company consitution etc - for example issuing shares dilutes the shareholder capital of other shareholders).

When you convert to equity, that's the date of acquisition for CGT purposes - so that when the clock starts for the 50% discount on those shares.

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TaxedoMask(Devotee)Devotee
3 Mar 2021

DId you acquire more shares / increase the share capital (and advise ASIC?).

If yes - taking the example 10 shares with $100,000 capital contribution = $10,000 per share so each share disposed will have a cost base of $10,000.

What you get per share is the capital proceeds and the difference is the Capital Gain or Loss

If not, its probably a loan in substance rather than equity so your cost base is $10 or $1 per share..

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Does Capital Contribution part of Cost Base - CGT | ATO Community