×

Company shares: three questions and the general discount

You might automatically assume that your individual or trustee clients are eligible for the 50% general CGT discount (“General Discount”) when they dispose of private company shares they’ve held for 12 months or more. Unfortunately, this is simply not the case.

The good news is there are three initial questions that will assist you and your clients in determining their eligibility for the General Discount in this particular scenario.


If your client answers NO to any one of the these questions at the time of the share disposal then the General Discount may be available:

  1. Do you and your associates together beneficially own at least 10% (by value) of the equity in the relevant company?
  2. Are the total cost bases for CGT assets held by the relevant company for less than 12 months, more than half the total cost base of all the company’s CGT assets?
  3. Is the notional capital gain on all CGT assets owned by the relevant company for less than 12 months, more than half of the notional capital gain on all CGT assets held by the relevant company?

From a practical standpoint, the General Discount is often lost in situations where the relevant company holds a significant quantity of newly acquired assets.

If your client proposes to carry out a restructure or sell shares in a company which holds assets it has acquired recently, you should turn your mind to this quick checklist as a starting point in your wider advice.

There are, of course, subtle nuances contained in the provisions and some situations will require other surrounding tests.

If you’re unsure about the application of the General Discount, or would like to confirm the advice you are providing your clients, please contact us on (07) 3223 6100 or at tax@redchip.com.au.

Back to Articles
Redchip

Recent Articles

kaitlyn-baker-vZJdYl5JVXY-unsplash (1)
It’s official – Electronic Signing for Companies is here to stay!

Thankfully, on 22 February 2022, the Corporations Amendment (Meetings and Documents) Act 2022 (Cth) (the Act) received assent, amending the Corporations Act 2001 (Cth) (Corporations Act). This legislation clarifies and makes permanent the temporary relief measures which had in place 2020. The Act establishes a permanent mechanism which allows for: The electronic execution of documents […]

Read more
Untitled design
Who is responsible to repair damage following a natural disaster?

1. Rent Abatement In most cases, a lease will contain a clause whereby the tenant’s obligation to pay rent and other money under the lease (such as outgoings) is abated (either partially or completely) while the Premises are inaccessible or incapable of being occupied. 2. Reinstatement The Lease may contain specific obligations on the Landlord […]

Read more
pexels-nothing-ahead-4502492
Significant Changes to Residential Contracts

What are the changes?   Extension of Settlement Date Recently, there have been media reports of buyers losing their deposits because of a failure of their financial institutions to be able to settle on the settlement date. This change allows for either party to extend settlement date by up to 5 business days from the […]

Read more