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18 Feb 088 CGT market value substitution rule for widely held entities

The ATO has noted that on 16 October 2007, the then Minister for Revenue and Assistant Treasurer, Peter Dutton, announced changes to the capital gains tax (CGT) legislation that will reduce compliance costs for taxpayers when an asset, such as a share in a company, or a unit in a unit trust, is cancelled or otherwise comes to an end. The market value substitution rule will be amended so that it no longer applies when CGT event C2 occurs (about cancellation and similar endings) in relation to interests in widely held entities.

Under the existing law, the market value substitution rule replaces the capital proceeds actually received with the market value of the asset that has come to an end. The ATO has advised that it will apply the existing law in the period between the announcement and enactment of the proposed law.

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