$10 Billion Deal, page-12959

CGT applies to any securities on which you make a profit, ie a capital gain.

Options and fully paid shares are both types of securities. For most holders the options have a zero cost base because they were given for free when they purchased shares in the CR. Fully paid shares have a cost base of whatever price the holder paid (on a per parcel basis). Obviously the capital gain is calculated as the difference between your cost base and the sale price. If the securities are held for greater than 12 months then eligible holders get a 50% discount on the CGT payable. Basic tax knowledge that every investor should know.

So if options are exercised and the shareholder receives new shares issued by the company as a result of that exercise then that new parcel of shares has a cost base of 6c (ie the exercise price) and an acquisition date of the date of exercise. That new parcel of shares doesn't become eligible for the CGT discount for 12 months. This doesn't not impact the acquisition dates and CGT payable on other parcels already held.

The key point here is that for many the options have already been held for > 12 months and are for many eligible for the 50% CGT discount however if they are exercised that discount is lost because the options then cease to exist and the acquisition date starts again on the new parcel of shares issued. This is because options are never converted as some here who don't understand options like to believe, they are exercised. An option is a right to purchase a share at a fixed price and not something that morphs from one thing into another.

So lets say that tomorrow morning the SP rockets to $1 and the options go to 94c and you wanted to take some money off the table what would you do?

Would you pay the company 6c to exercise your options and receive new shares. Then a few days later sell those new shares @ $1? If you did this you would make a quick 94c profit but you would pay full tax on that profit because you held those new shares for less than 12 months.

On the other hand you could sell the options on market for 94c. That would achieve the same 94c profit since you paid zero. You don't need to wait for the new shares to be issued and most importantly you have held the options for more than 12 months so you get a 50% discount on the CGT payable for this parcel.

Ask yourself, which path would you chose?

PS. None of this impact the tax payable on other parcels of shares held.