I'm thinking of it this way:You sell an asset that you have...

I'm thinking of it this way:

You sell an asset that you have purchased for $x and spent $x dollars on to develop, improve and manage. The purchase price of $x is a capital expenditure but the costs to develop, improve and manage may either be a claimable operating cost or perhaps they are added to the purchase price and form the overall Capital cost of the Asset.

You then sell the Asset and make a $100 million Capital Gain.

If you put this down on the books as a Capital Gain then surely you pay Tax on that gain on whatever your Tax rate is. The profit from that is then either retained in part for future operating costs for the company or distributed to Shareholders as a Dividend. Along with the Dividend comes imputation credits that individual shareholders might get a percentage back because they are on a lower tax rate than that paid by CFE.

If on the other hand CFE says Yes we made a Capital Gain of $100 million and we didn't keep any of it. The entire $100 million was distributed to our Shareholders as a Capital Return on their initial investment and Mr Tax Office you can claim the Tax from them should the individual Shareholders have made a Capital Gain on their share Transaction.

As I understand it the individual Shareholder simply reduces the cost base of their investment and pays no tax on it. So for example if you paid 20 cents for your shares and you get a 5 cent Capital Return then your cost base is now 15 cents per CFE share. Should you sell them in the future at 55 cents then your Capital Gain is 40 cents per share and you pay tax on that at that time.

So am I right. Have I got it right? With a Capital Return on the sale of an Asset I'm thinking CFE pays no tax and Shareholders pay no tax (now) and there is no way that the ATO can do an amended tax notice in the future for unpaid taxes and penalties on CFE.