How is CGT calculated on options and warrants in Australia?

Options and warrants are CGT assets in Australia, and the tax treatment depends on whether you are granting (writing) or acquiring them, and whether they are exercised, expired, or sold.

Acquiring an option: The cost base of an acquired option is the premium you paid plus any transaction costs. If you later sell the option, a capital gain or loss arises on the difference between your cost base and the sale proceeds. If the option expires worthless, you have a capital loss equal to your cost base.

Exercising an option: When you exercise a call option to buy shares, no CGT event occurs at the time of exercise. Instead, the cost base of the shares you acquire is the sum of the exercise price plus the premium you originally paid for the option. The 12-month CGT discount clock starts from when you exercise the option (i.e. acquire the shares), not when you bought the option.

Writing (granting) an option: When you write (sell) an option, the premium you receive is not immediately taxable income — it is brought into account only when a CGT event occurs. If the option is exercised against you, the premium received is included in your sale proceeds for the underlying asset. If the option expires unexercised, you have a capital gain equal to the premium received.

Exchange-traded vs. OTC options: The principles are the same, but record-keeping may differ. For employee share scheme options, different rules apply under the employee share scheme (ESS) provisions, which are separate from the general CGT rules.