Commonwealth Consolidated Acts Commonwealth Consolidated Acts
Income Tax Assessment Act 1997
1 At the end of subsection 104 - 25(5)
Add:
Note 4: A capital gain on the repayment of certain debt given to an ultimate holding company is disregarded where an entity obtains a roll - over under Subdivision 124 - M for interests acquired or cancelled: see section 124 - 784.
2 At the end of section 104 - 230
Add:
(10) A * capital gain is disregarded for a * share in a company or an interest in a trust to the extent that, had you * acquired it on or after 20 September 1985, you could have chosen a roll - over for the other * CGT event under Subdivision 124 - M (scrip for scrip roll - over).
Example: Bill owns a unit in a trust that he acquired before 20 September 1985. He exchanges the unit for a unit in another trust worth $60 and $40 cash. He makes a capital gain of $50 because of CGT event K6.
Had the unit been acquired after 20 September 1985, Bill would have been entitled to a partial roll - over of the capital gain under Subdivision 124 - M to the extent that his capital proceeds constituted a replacement unit.
Bill can therefore disregard 60 / 100 of the $50 gain ($30). The cost base of Bill's replacement unit is reduced by this amount. Bill must include the remaining $20 of the CGT event K6 gain in the calculation of his net capital gain or loss for the year.
3 After section 112 - 50
Insert:
112 - 53 Scrip for scrip roll - over
Scrip for scrip roll - over | |||
Item | In this situation: | Element affected: | See section: |
1 | Interest is acquired by an entity where there is a roll - over under Subdivision 124 - M and there is a significant or common stakeholder under an arrangement | First element of cost base and reduced cost base | 124 - 782 |
2 | Equity or debt is acquired by an ultimate holding company under that arrangement from a member of its wholly - owned group | First element of cost base and reduced cost base | 124 - 784 |
3 | You exchange an interest you acquired before 20 September 1985 for an interest in another entity | The total cost base and reduced cost base | 124 - 800 |
4 Section 124 - 780
Repeal the section, substitute:
124 - 780 Replacement of shares
(1) There is a roll - over if:
(a) an entity (the original interest holder ) exchanges:
(i) a * share (the entity's original interest ) in a company (the original entity ) for a share (the holder's replacement interest ) in another company; or
(ii) an option, right or similar interest (also the holder's original interest ) issued by the original entity that gives the holder an entitlement to acquire a share in the original entity for a similar interest (also the holder's replacement interest ) in another company; and
(b) the exchange is in consequence of a single * arrangement that satisfies subsection ( 2); and
(c) the conditions in subsection ( 3) are satisfied; and
(d) if subsection ( 4) applies, the conditions in subsection ( 5) are satisfied.
Note 1: There are some exceptions: see section 124 - 795.
Note 2: The original interest holder can obtain only a partial roll - over if the capital proceeds for its original interest includes something other than its replacement interest: see section 124 - 790.
Example 1: You can get a roll - over if you exchange your shares in one entity for shares in another entity or if you exchange options in one entity for options in another entity. You cannot get a roll - over if you exchange options for shares.
Example 2: Examples of arrangements that could be involved include:
Conditions for arrangement
(2) The * arrangement must:
(a) result in:
(i) a company (the acquiring entity ) that is not a member of a * wholly - owned group becoming the owner of 80% or more of the * voting shares in the original entity; or
(ii) a company (also an acquiring entity ) that is a member of such a group increasing the percentage of voting shares that it owns in the original entity, and that company or members of the group becoming the owner of 80% or more of those shares; and
(b) be one in which at least all owners of * voting shares in the original entity (except a company referred to in paragraph ( a)) could participate; and
(c) be one in which participation was available on substantially the same terms for all of the owners of interests of a particular type in the original entity.
Note 1: The 80% or more requirement is satisfied if the acquiring entity ends up owning at least 80% of the voting shares in the original entity. This may include shares held before the arrangement started.
Note 2: Participation will be on substantially the same terms if, for example, matters such as those referred to in subsections 619(2) and (3) of the Corporations Law affect the capital proceeds that each participant can receive.
Conditions for roll - over
(3) The conditions are:
(a) the original interest holder * acquired its original interest on or after 20 September 1985; and
(b) apart from the roll - over, it would make a * capital gain from a * CGT event happening in relation to its original interest; and
(c) its replacement interest is in a company (the replacement entity ) that is:
(i) the company referred to in subparagraph ( 2)(a)(i); or
(ii) in any other case--the * ultimate holding company of the * wholly - owned group; and
(d) the original interest holder chooses to obtain the roll - over or, if section 124 - 782 applies to it for the arrangement, it and the replacement entity jointly choose to obtain the roll - over; and
(e) if that section applies, the original interest holder informs the replacement entity in writing of the * cost base of its original interest worked out just before a CGT event happened in relation to it.
Note: If the original interest holder also exchanges a CGT asset that it acquired before 20 September 1985, the cost base of any interest received in exchange for it is worked out under section 124 - 800.
Further roll - over conditions in certain cases
(4) The conditions specified in subsection ( 5) must be satisfied if the original interest holder and an acquiring entity did not deal with each other at * arm's length and:
(a) neither the original entity nor the replacement entity had at least 300 * members just before the * arrangement started; or
(b) the original interest holder, the original entity and an acquiring entity were all members of the same * linked group just before that time.
Note: There are some cases where a company will not be regarded as having 300 members: see section 124 - 810.
(5) The conditions are:
(a) the market value of the original interest holder's * capital proceeds for the exchange is at least substantially the same as the market value of its original interest; and
(b) its replacement interest carries the same kind of rights and obligations as those attached to its original interest.
CUFS
(6) This section applies to the holder of a Chess Unit of Foreign Security as if the holder held the underlying interests that the unit represents.
Note: A Chess Unit of Foreign Security is an interest, traded on the Australian Stock Exchange, in a foreign share, unit or interest.
(7) A company is the ultimate holding company of a * wholly - owned group if it is not a * 100% subsidiary of another company in the group.
124 - 781 Replacement of trust interests
(1) There is a roll - over if:
(a) an entity (also the original interest holder ) exchanges:
(i) a unit or other interest (also the holder's original interest ) in a trust (also the original entity ) for a unit or other interest (also the holder's replacement interest ) in another trust (also the acquiring entity ); or
(ii) an option, right or similar interest (also the holder's original interest ) issued by the original entity that gives the holder an entitlement to acquire a unit or other interest in the original entity for a similar interest (also the holder's replacement interest ) in another trust (also the acquiring entity ); and
(b) entities have * fixed entitlements to all of the income and capital of the original entity and the acquiring entity; and
(c) the exchange is in consequence of an * arrangement that satisfies subsection ( 2); and
(d) the conditions in subsections ( 3) and (4) are satisfied.
Note 1: There are some exceptions: see section 124 - 795.
Note 2: The original interest holder can obtain only a partial roll - over if the capital proceeds for its original interest includes something other than its replacement interest: see section 124 - 790.
Conditions for arrangement
(2) The * arrangement must:
(a) result in the acquiring entity owning 80% or more of the * trust voting interests in the original entity or, if there are none, 80% or more of the units or other interests in the original entity; and
(b) be one in which at least all owners of trust voting interests (or of units or other interests) in the original entity (except the acquiring entity) could participate; and
(c) be one in which participation was available on substantially the same terms for all of the owners of interests or units of a particular type in the original entity.
Conditions for roll - over
(3) The conditions are:
(a) the original interest holder * acquired its original interest on or after 20 September 1985; and
(b) apart from the roll - over, it would make a * capital gain from a * CGT event happening in relation to its original interest; and
(c) it chooses to obtain the roll - over or, if section 124 - 782 applies to it for the * arrangement, it and the trustee of the acquiring entity jointly choose to obtain the roll - over; and
(d) if that section applies to it, it informs that trustee in writing of the * cost base of its original interest as at the time just before a CGT event happened in relation to it.
Note: If the original interest holder also exchanges a CGT asset that it acquired before 20 September 1985, the cost base of any interest received in exchange for it is worked out under section 124 - 800.
Further roll - over conditions in certain cases
(4) These conditions must be satisfied if the original interest holder and the trustee of the acquiring entity did not deal with each other at * arm's length and neither the original entity nor the acquiring entity had at least 300 beneficiaries just before the * arrangement started:
(a) the market value of the original interest holder's * capital proceeds for the exchange is at least substantially the same as the market value of its original interest; and
(b) its replacement interest carries the same kind of rights and obligations as those attached to its original interest.
Note: There are some cases where a trust will not be regarded as having 300 beneficiaries: see section 124 - 810.
CUFS
(5) This section applies to the holder of a Chess Unit of Foreign Security as if the holder held the underlying interests that the unit represents.
Note: A Chess Unit of Foreign Security is an interest, traded on the Australian Stock Exchange, in a foreign share, unit or interest.
Meaning of trust voting interest
(6) A trust voting interest in a trust is an interest in the trust that confers rights of the same or a similar kind as the rights conferred by a * voting share in a company.
124 - 782 Transfer or allocation of cost base of shares acquired by acquiring entity etc.
Transfer of cost base
(1) The * cost base of an original interest * acquired by an acquiring entity under the * arrangement from an original interest holder becomes the first element of the cost base and * reduced cost base of the acquiring entity for the interest if:
(a) the original interest holder obtains a roll - over; and
(b) the holder is a * significant stakeholder or a * common stakeholder for the arrangement.
Note 1: For other interests, for example, interests for which the roll - over is not chosen, the cost base will be worked out under the ordinary cost base rules in Divisions 110 and 112.
Note 2: There is a special rule to determine the cost base of equity or debt given to an ultimate holding company by an acquiring entity under an arrangement: see section 124 - 784.
Allocation of cost base in cancellation case
(2) The * cost base and * reduced cost base of any interests (the new interests ) issued by the original entity to an acquiring entity under the * arrangement is worked out under subsection ( 3) if:
(a) original interests of an original interest holder are cancelled under the arrangement; and
(b) the holder obtains a roll - over for the cancellation; and
(c) the holder is a * significant stakeholder or a * common stakeholder for the arrangement.
(3) The first element of the * cost base and * reduced cost base of the new interests of an acquiring entity is that part of the cost base of the cancelled interests as can be reasonably allocated to the new interests, having regard to:
(a) the nature of the * arrangement; and
(b) the number, type and relative market values of the cancelled interests and the new interests; and
(c) any other relevant matters.
Example: Robert Co has 3 shareholders: Antill Co with 300 shares, Rachael Co 400 shares and Margaret Co 300 shares. The cost base of each share is $1 and market value is $2. Margaret Co is owned by two shareholders, John and Paul, who each have 50 shares. The market value of each share is $20.
Under an arrangement, Robert Co cancels the shares of Antill Co and Rachael Co. They receive 30 and 40 shares respectively in Margaret Co, which becomes the sole shareholder in Robert Co. The market value of Antill Co's and Rachael Co's shares in Margaret Co is equivalent to the market value of their cancelled shares in Robert Co.
Robert Co also issues 700 shares to Margaret Co, reflecting the $1,400 total market value of the shares issued by Margaret Co to Antill Co and Rachael Co. Before and after the arrangement, Margaret Co's shares in Robert Co were worth $2 each.
It is necessary to reasonably allocate the cost bases of the cancelled shares (700 x $1) to the 700 shares issued by Robert Co to Margaret Co. In this case, an allocation of $1 per share would be reasonable.
Note: If no new shares are issued by Robert Co, the cost base of the original shares that Margaret Co holds would not be adjusted.
(4) The amount allocated to a new interest under subsection ( 3) must not be more than its market value just after the arrangement was completed.
Significant stakeholder
(1) An original interest holder is a significant stakeholder for an * arrangement if it had:
(a) a * significant stake in the original entity just before the arrangement started; and
(b) a significant stake in the replacement entity just after the arrangement was completed.
(2) Also, if an original interest holder is an acquiring entity, any other original interest holder is a significant stakeholder for an * arrangement if it:
(a) had a * significant stake in the original entity just before the * arrangement started; and
(b) is an * associate of the replacement entity just after the arrangement was completed.
Certain companies and trusts not required to trace interests
Common stakeholder
(3) An original interest holder is a common stakeholder for an * arrangement if it had:
(a) a * common stake in the original entity just before the arrangement started; and
(b) a common stake in the replacement entity just after the arrangement was completed.
(4) If an acquiring entity for an * arrangement is an original interest holder, each other original interest holder that has a replacement interest is a common stakeholder for the arrangement.
(5) No original interest holder is a common stakeholder for an * arrangement if either the original entity or the replacement entity had at least 300 * members (for a company) or 300 beneficiaries (for a trust) just before the arrangement started.
Significant stake
(6) An entity has a significant stake in a company at a time if the entity, or the entity and the entity's * associates between them:
(a) have at that time * shares carrying 30% or more of the voting rights in the company; or
(b) have at that time the right to receive for their own benefit 30% or more of any * dividends that the company may pay; or
(c) have at that time the right to receive for their own benefit 30% or more of any distribution of capital of the company.
Note: The tests are applied to interests held directly by an entity and its associates.
Example: There are 4 shareholders in YZT Company: Sonja has 60%, Mario has 20%, Peter has 10% and Dave has 10%.
Sonja, Mario and Peter are associates. They each have a significant stake in YZT because, on an associate inclusive basis, they each have a 90% stake in YZT. Dave does not have a significant stake because his total stake, on an associate inclusive basis, is 10%.
(7) An entity has a significant stake in a trust at a time if the entity, or the entity and the entity's * associates between them, had at that time the right to receive for their own benefit 30% or more of any distribution to beneficiaries of the trust of income or capital of the trust.
(8) No original interest holder has a significant stake in a company that has at least 300 * members or a trust that has at least 300 beneficiaries if it is reasonable for the company or the trustee of the trust to conclude that this is the case on the information available to it.
Note: There are some cases where a company or trust will not be regarded as having 300 members or beneficiaries: see section 124 - 810.
Common stake
(9) If the original entity and the acquiring entity are companies, an entity, or 2 or more entities, have a common stake in the original entity just before the * arrangement started and in the acquiring entity just after the arrangement was completed if the entity or entities, and their * associates, between them:
(a) had 80% or more of:
(i) the voting rights in the original entity just before the arrangement started; and
(ii) the voting rights in the replacement entity just after the arrangement was completed; or
(b) had the right to receive for their own benefit 80% or more of:
(i) any * dividends that the original entity may pay just before the arrangement started; and
(ii) any dividends that the replacement entity may pay just after the arrangement was completed; or
(c) had the right to receive for their own benefit 80% or more of:
(i) any distribution of capital of the original entity just before the arrangement started; and
(ii) any distribution of capital of the replacement entity just after the arrangement was completed.
(10) If the original entity and the acquiring entity are trusts, an entity, or 2 or more entities, have a common stake in the original entity just before the * arrangement started and in the acquiring entity just after the arrangement was completed if the entity or entities, and their * associates, between them:
(a) had, just before the arrangement started, the right to receive for their own benefit 80% or more of any distribution to beneficiaries of the original entity of income or capital of the original entity; and
(b) had, just after the arrangement was completed, the right to receive for their own benefit 80% or more of any distribution to beneficiaries of the replacement entity of income or capital of that entity.
124 - 784 Cost base of equity or debt given by acquiring entity to ultimate holding company
Purpose
(1) This section allocates an appropriate * cost base to equity issued, or new debt owed, by an acquiring entity under the * arrangement to the * ultimate holding company where the cost base of an original interest was transferred or allocated under section 124 - 782 because the original interest holder is a * significant stakeholder or a * common stakeholder for the arrangement.
Allocation of cost base
(2) The first element of the * cost base of the equity or debt for the * ultimate holding company is that part of the cost base of the original interest transferred or allocated under section 124 - 782 as:
(a) may be reasonably allocated to the equity or debt; and
(b) is not more than the market value of the equity or debt just after the arrangement was completed.
No capital gain on debt repayment
(3) Any * capital gain of the * ultimate holding company from the repayment of new debt owed by an acquiring entity under the * arrangement is disregarded to the extent that it relates to the difference between the part of the * cost base transferred or allocated under section 124 - 782 and the market value of the debt just after the arrangement was completed.
Note: If the debt is assigned or exchanged, there may be a capital gain.
5 Subsection 124 - 790(1)
Repeal the subsection, substitute:
(1) The original interest holder can obtain only a partial roll - over if its * capital proceeds for its original interest includes something (the ineligible proceeds ) other than its replacement interest. There is no roll - over for that part (the ineligible part ) of its original interest for which it received ineligible proceeds.
6 Subsection 124 - 790(3)
Repeal the subsection.
7 Subsection 124 - 795(1)
Omit "the acquiring entity", substitute "the replacement entity".
8 Subsection 124 - 795(3)
Repeal the subsection, substitute:
(3) You cannot obtain the roll - over for the * CGT event happening in relation to the exchange of your original interest if you can choose a roll - over under Division 122 or Subdivision 124 - G for that event.
Note: Division 122 deals with the disposal of assets to a wholly - owned company, and Subdivision 124 - G deals with company reorganisation.
9 At the end of section 124 - 795
Add:
(4) Unless a condition in subsection ( 5) is satisfied, you cannot obtain the roll - over for an original interest in an original entity that is a company if:
(a) just before the * arrangement started, the original entity:
(i) was not an Australian resident; and
(ii) did not have at least 300 * members; and
(b) just after the arrangement was completed:
(i) if the acquiring entity is not a member of a * wholly - owned group at that time--the acquiring entity was not an Australian resident and * acquired an interest of the kind referred to in paragraph 124 - 780(1)(a) in the original entity as a result of the arrangement; or
(ii) if it was a member of such a group at that time--a member of that group was not an Australian resident and acquired an interest of the kind referred to in paragraph 124 - 780(1)(a) in the original entity as a result of the arrangement.
Note: There are some cases where a company will not be regarded as having 300 members: see section 124 - 810.
(5) You can obtain the roll - over for the original interest if:
(a) if the acquiring entity was not a member of a * wholly - owned group just after the * arrangement was completed--the acquiring entity had at least 300 * members just before the arrangement started; or
(b) if it was a member of such a group just after the arrangement was completed:
(i) the * ultimate holding company of the group had at least 300 members just before the arrangement started; and
(ii) the ultimate holding company was not an Australian resident just after the arrangement was completed.
10 Section 124 - 800
Repeal the section, substitute:
124 - 800 Interest received for pre - CGT interest
(1) If, in consequence of the * arrangement, you exchange an interest that you * acquired before 20 September 1985 for an interest in the replacement entity, the first element of the * cost base and * reduced cost base of the interest in the replacement entity is its market value just after you acquired it.
(2) The * cost base and * reduced cost base of the interest in the replacement entity is reduced if all or part of a * capital gain from * CGT event K6 happening is disregarded because of subsection 104 - 230(10). The amount of the reduction is the amount of the * capital gain you disregard under that subsection.
Note 1: The full list of CGT events is in section 104 - 5.
Note 2: Subsection 104 - 230(10) provides that a capital gain from CGT event K6 is disregarded to the extent that you could have chosen a roll - over under this Subdivision if your original interest had been post - CGT.
11 Section 124 - 805
Repeal the section.
12 Subsections 124 - 810(1) and (2)
Omit "paragraph 124 - 780(4)(a)", substitute "this Subdivision".
13 Section 136 - 10 (table item A1)
Omit "8", substitute "9".
14 Section 136 - 10 (table item C2)
Omit "8", substitute "9".
15 Section 136 - 10 (table item E1)
Omit "8", substitute "9".
16 Section 136 - 10 (table item E2)
Omit "8", substitute "9".
17 Section 136 - 10 (table item E3)
Omit "8", substitute "9".
18 Section 136 - 10 (table item E4)
After "6", insert ", 9".
19 Section 136 - 10 (table item E5)
Omit "8", substitute "9".
20 Section 136 - 10 (table item E6)
Omit "8", substitute "9".
21 Section 136 - 10 (table item E7)
Omit "8", substitute "9".
22 Section 136 - 10 (table item E8)
After "4", insert ", 9".
23 Section 136 - 10 (table item G1)
After "8", insert ", 9".
24 Section 136 - 10 (table item G2)
After "8", insert ", 9".
25 Section 136 - 10 (table item G3)
After "8", insert ", 9".
26 Section 136 - 10 (table item H1)
Omit "8", substitute "9".
27 Section 136 - 10 (table item H2)
Omit "8", substitute "9".
28 Section 136 - 10 (table item K3)
Omit "8", substitute "9".
29 Section 136 - 10 (table item K4)
Omit "8", substitute "9".
30 Section 136 - 25 (table item 9)
Repeal the item, substitute:
9 | A * share, option, right or similar interest in a company or a unit, option, right or similar interest in a trust you * acquire where: (a) you choose a scrip for scrip roll - over under Subdivision 124 - M for your acquisition of the interest; and (b) your original interest had the necessary connection with Australia; and (c) you are not an Australian resident at the time you acquire it; and (d) the company is an Australian resident, or the trust is a * resident trust for CGT purposes, at that time |
31 Transitional
If you obtain a roll - over under Subdivision 124 - M for a CGT event that happened before the day on which this Act received the Royal Assent, the requirement to inform a replacement entity about the cost base of your original interest must be complied with within 28 days after that day.
Income Tax Assessment Act 1936
32 Subsection 396(3)
After "category 8", insert "or 9".
33 Subsection 406(3)
After "category 8", insert "or 9".
34 Application of amendments
(1) Subject to subitem ( 2), the amendments made by this Schedule apply to CGT events happening on or after 10 December 1999.
(2) The amendment made by item 9 applies to CGT events happening on or after 13 April 2000.