I have sold all my ADO shares and bought the equivalent amount of ADOO to take advantage of the disparity between th two.
I contacted the ATO to confirm the CGT outcome of doing this and the confirmed that the exercising of an option like such as ADOO to acquire the shares is NOT a CGT event. The following is a copy of the relevant parts of the information on the ATO website at http://www.ato.gov.au/print.asp?doc=/content/00191831.htm
Exercising rights or options to acquire shares or units
Many people decide to exercise their rights or options to acquire new shares or units rather than sell them. In most cases, no CGT is payable at the time you exercise the rights or options.
The acquisition date of the shares or units is the date of exercise of the rights or options to acquire the shares or units.
If you exercise the rights or options on or after 20 September 1985, some special rules apply for calculating the cost base and reduced cost base of shares or units acquired as a result.
The rules outlined below do not apply to rights or options to acquire shares under an employee share scheme.
Rights or options issued directly to you for no cost from a company or trust in which you are a shareholder or unit holder
The amount included in the cost base and reduced cost base of the shares or units you acquire on exercise of the rights or options depends on when you acquired your original shares or units. The following rules do not apply to rights or options to acquire units issued before 29 January 1988.....................
Original shares or units acquired on or after 20 September 1985
The first element of the cost base and reduced cost base for the shares or units you acquire on exercising your rights or options is:
* the cost base of the rights or options at the time you exercised them plus
* the amount you paid to exercise the rights or options (except to the extent that the amount is represented in the cost base of the rights or options at the time of exercise) plus
* if the rights or options were exercised on or after 1 July 2001 and, as a result, an amount was included in your assessable income ? that amount.
So it appears that if I exercise the ADOOs that I bought today and hold the shares until after 5 March 2011 I will be able to enjoy the 50% CGT rule with the cost base being the price I paid today for the options plus the exercise price.
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