SPP with Free Attaching Option

[#1]

Hi There,

I recent particpated in a Share Purchase Plan (SPP) where an asx listed company gave existing shareholders the chance to buy shares as part of a capital raise.  For every two shares purchased, the company allocated a 'free' option eg. If someone purchased 10 shares (at $0.032), they would recieve 5 'free' options.

Can anyone confirm what the cost base (For capital gains puposes) for the options should be please?

Thanks in advance!

Regards,

Milk

[#2 · Accepted solution]

Hi @Milk,

Thanks for your post! If you receive an option for no cost, you're considered to have received them at the same time as you received the original shares.

If you've purchased your shares after 20 September 1985, you may make a capital gain on your options if you sell them or if they expire. When you receive an option for no payment, the market value substitution rule does not apply, and the first element of the cost base will be nil.

Hope that helps!

[#3]

Yes, that answers my question, thanks very much Amanda!