Commonwealth Consolidated Acts Commonwealth Consolidated Acts
Income Tax Assessment Act 1997
1 Section 112 - 115 (after table item 14)
Insert:
14A | Scrip for scrip | Subdivision 124 - M |
2 Subsection 124 - 5(1)
Omit "124 - L", substitute "124 - M".
3 After subsection 124 - 5(2)
Insert:
Note: The consequences of a scrip for scrip roll - over are set out in Subdivision 124 - M.
4 After Subdivision 124 - L
Insert:
Subdivision 124 - M -- Scrip for scrip roll - over
124 - 775 What this Subdivision is about
This Subdivision allows you to choose a roll - over where post - CGT shares or trust interests you own are replaced with other shares or trust interests, for example, where there is a company takeover.
You can only choose the roll - over if you would have made a capital gain from the exchange.
Table of sections
Operative provisions
124 - 780 Replacement of shares or trust interest
124 - 785 What is the roll - over
124 - 790 Partial roll - over
124 - 795 Exceptions
124 - 800 Cost base of interest received for pre - CGT interest
124 - 805 Meaning of trust voting interest
124 - 810 Certain companies and trusts not regarded as having 300 members or beneficiaries
[This is the end of the Guide.]
124 - 780 Replacement of shares or trust interest
(1) You can choose to obtain a roll - over if:
(a) you own:
(i) a * share that you * acquired on or after 20 September 1985 or an interest in such a share (your original interest ) in a company (the original entity ); or
(ii) a unit or other interest that you acquired on or after that day or an interest in such a unit or interest (also your original interest ) in a trust (also the original entity ); and
(b) an entity (the acquiring entity ) makes an offer to all of the holders of interests in the original entity to * acquire:
(i) if the original entity is a company-- * voting shares; and
(ii) if the original entity is a trust-- * trust voting interests in the trust or, if there are none, units or other fixed interests in the trust; and
(c) you exchange your original interest as mentioned in subsection ( 2); and
(d) in consequence of the offer, the acquiring entity has:
(i) if the original entity is a company--at least 80% of the voting shares in the original entity; or
(ii) if the original entity is a trust--at least 80% of the trust voting interests in the original entity or, if there are none, interests in the trust carrying entitlements to at least 80% of the income and capital of the trust; and
(e) apart from the roll - over, you would make a * capital gain from the exchange.
Note 1: There are some exceptions: see section 124 - 795.
Note 2: If you also exchange a CGT asset that you acquired before 20 September 1985, the cost base of any interest received in exchange for it is worked out under section 124 - 800.
(2) You must exchange your original interest in consequence of the offer for:
(a) if your original interest was a * share or interest in a share in a company:
(i) a share or interest in a share (your replacement interest ) in another company that is the acquiring entity; or
(ii) a share or interest in a share in the acquiring entity (also your replacement interest ) and something else; or
(b) if your original interest was a unit or other interest in a trust or an interest in such a unit or interest:
(i) a unit or other interest, or an interest in it (your replacement interest ) in another trust that is the acquiring entity; or
(ii) a unit or interest of that kind in the acquiring entity (also your replacement interest ) and something else.
Note: If you receive something else, you can obtain only a partial roll - over: see section 124 - 790.
Rolling - over options, rights etc.
(3) Subsections ( 1) and (2) also allow you to choose to obtain a roll - over if you exchange an option, right or similar interest issued by the original entity that enables you to * acquire another interest in that entity for the same kind of option, right or similar interest issued by the acquiring entity.
Example: 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.
Other requirements in certain cases
(4) The conditions specified in subsection ( 5) must exist if you and the acquiring entity did not deal with each other at arm's length and:
(a) neither the original entity nor the acquiring entity has at least 300 members (for a company) or 300 beneficiaries (for a trust) just before you stop owning your original interest; or
(b) you, the original entity and the acquiring entity are all members of the same * linked group just before that time.
Note: There are some cases where a company or trust will not be regarded as having 300 members or beneficiaries: see section 124 - 810.
(5) The conditions are:
(a) the market value of your * capital proceeds for the exchange must be substantially the same as the market value of your original interest; and
(b) each of the interests you acquire in the acquiring entity must carry the same rights and obligations as those attached to interests of that kind you had in the original entity.
124 - 785 What is the roll - over?
(1) A * capital gain you make from your original interest is disregarded.
(2) You work out the first element of the * cost base of each * CGT asset you received as a result of the exchange by reasonably attributing to it the cost base (or the part of it) of your original interest for which it was exchanged and for which you obtained the roll - over.
(3) In applying subsection ( 2), you reduce the * cost base of your original interest (just before you stop owning it) by so much of that cost base as is attributable to an ineligible part (see section 124 - 790).
(4) The first element of the * reduced cost base is worked out similarly.
Example 1: Lyn exchanges 1 share with a cost base of $10 for another share. The cost base of the new share is $10.
Example 2: Glenn exchanges 2 shares with cost bases of $10 and $11 respectively for one new share. The cost base of the new share is $21.
Example 3: Wayne exchanges 1 share with a cost base of $9 for share A with a market value of $5 and share B with a market value of $10. The cost base of share A is $3 and the cost base of share B is $6.
(1) You can obtain only a partial roll - over if you receive something other than your replacement interest (the ineligible proceeds ). There is no roll - over for that part (the ineligible part ) of your original interest for which you received ineligible proceeds.
(2) The * cost base of the ineligible part is that part of the cost base of your original interest as is reasonably attributable to it.
Example: Ken owns 100 shares in Aim Ltd. Those shares have a cost base of $2.
Ken accepts an offer from LBZ Ltd to acquire those shares. The offer is 1 share in LBZ (market value $4) plus $1 for each Aim share.
Ken chooses the roll - over to the extent that he can.
The cost base of the ineligible part is [$100  $200]  $500  $40.
Ken makes a capital gain of $100 ï€- $40  $60.
(3) The * reduced cost base of the ineligible part is worked out similarly.
(1) You cannot obtain the roll - over if, just before you stop owning your original interest, you are not an Australian resident unless, just after you * acquire your replacement interest, the acquiring entity is an Australian resident or a * resident trust for CGT purposes.
Note: If you are not an Australian resident and the acquiring entity is, the replacement interest has the necessary connection with Australia : see Division 136.
(2) You cannot obtain the roll - over if:
(a) any * capital gain you might make from your replacement interest would be disregarded (except because of a roll - over); or
(b) you and the acquiring entity are members of the same * wholly - owned group just before you stop owning your original interest.
Example: An example of a capital gain or loss being disregarded as mentioned in paragraph ( 2)(a) is because the asset is trading stock.
Note: A roll - over may be available under Subdivision 126 - B in the circumstances mentioned in paragraph ( 2)(b).
(3) You cannot obtain the roll - over if:
(a) the original entity or the acquiring entity is a trust; and
(b) entities do not have * fixed entitlements to all of the income and capital of the trust.
124 - 800 Cost base of interest received for pre - CGT interest
If, as part of the exchange for which you obtain the roll - over, an interest that you acquired before 20 September 1985 is * acquired by the acquiring entity, the first element of the * cost base of any * CGT asset you acquire that is attributable to that interest is its market value just after you acquired it.
124 - 805 Meaning of trust voting interest
A trust voting interest in a trust is an interest in the trust that confers rights of the same or similar kind as the rights conferred by a * voting share in a company.
124 - 810 Certain companies and trusts not regarded as having 300 members or beneficiaries
(1) For the purposes of paragraph 124 - 780(4)(a), a company is treated as if it did not have at least 300 * members if subsection ( 3) or (5) applies to it.
(2) For the purposes of paragraph 124 - 780(4)(a), a trust is treated as if it did not have at least 300 beneficiaries if subsection ( 4) or (5) applies to it.
Concentrated ownership
(3) This subsection applies to a company if an individual owns, or up to 20 individuals own between them, directly or indirectly (through one or more interposed entities) and for their own benefit, * shares in the company:
(a) carrying fixed entitlements to:
(i) at least 75% of the company's income; or
(ii) at least 75% of the company's capital; or
(b) carrying at least 75% of the voting rights in the company.
(4) This subsection applies to a trust if an individual owns, or up to 20 individuals own between them, directly or indirectly (through one or more interposed entities) and for their own benefit, units or other fixed interests in the trust:
(a) carrying * fixed entitlements to:
(i) at least 75% of the trust's income; or
(ii) at least 75% of the trust's capital; or
(b) if beneficiaries of the trust have a right to vote in respect of activities of the trust--carrying at least 75% of those voting rights.
Possible variation of rights etc.
(5) This subsection applies to a company or trust if, because of:
(a) any provision in the entity's constituent document, or in any contract, agreement or instrument:
(i) authorising the variation or abrogation of rights attaching to any of the * shares, units or other fixed interests in the entity; or
(ii) relating to the conversion, cancellation, extinguishment or redemption of any of those interests; or
(b) any contract, * arrangement, option or instrument under which a person has power to acquire any of those interests; or
(c) any power, authority or discretion in a person in relation to the rights attaching to any of those shares, units or interests;
it is reasonable to conclude that the rights attaching to any of those interests are capable of being varied or abrogated in such a way (even if they are not in fact varied or abrogated in that way) that, directly or indirectly, subsection ( 3) or (4) would apply to the entity.
Single individual
(6) For the purposes of subsections ( 3) and (4), all of the following are taken to be a single individual:
(a) an individual, whether or not the individual holds * shares, units or other interests in the entity concerned;
(b) the individual's * associates;
(c) for any shares, units or interests in respect of which other individuals are nominees of the individual or of the individual's associates--those other individuals.
5 Section 136 - 25
Omit "8 categories", substitute "9 categories".
6 Section 136 - 25 (at the end of the table)
Add:
9 | A * share in a company or a unit or 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 share, unit or 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 |
7 Application of amendments
The amendments made by this Schedule apply to CGT events happening on or after the day on which this Act receives the Royal Assent.