Commonwealth Consolidated Acts Commonwealth Consolidated Acts
Income Tax Assessment Act 1936
1 Subsection 26BB(1)
Insert:
"connected entity" has the same meaning as in the Income Tax Assessment Act 1997 .
2 At the end of section 26BB
Add:
(4) Subsection ( 2) does not apply to a gain on the disposal or redemption of a traditional security if:
(a) the disposal or redemption occurs because the traditional security is converted into ordinary shares in a company that is:
(i) the issuer of the traditional security; or
(ii) a connected entity of the issuer of the traditional security; and
(b) the traditional security was issued on the basis that it will or may convert into ordinary shares in:
(i) the issuer of the traditional security; or
(ii) the connected entity.
(5) Subsection ( 2) does not apply to a gain on the disposal or redemption of a traditional security if:
(a) the disposal or redemption is in exchange for ordinary shares in a company that is neither:
(i) the issuer of the traditional security; nor
(ii) a connected entity of the issuer of the traditional security; and
(b) in the case of a disposal--the disposal is to:
(i) the issuer of the traditional security; or
(ii) a connected entity of the issuer of the traditional security; and
(c) the traditional security was issued on the basis that it will or may be:
(i) disposed of to the issuer of the traditional security or to the connected entity; or
(ii) redeemed;
in exchange for ordinary shares in the company.
3 After subsection 70B(2A)
Insert:
(2B) A deduction is not allowable under subsection ( 2) for a loss on the disposal or redemption of a traditional security if:
(a) the disposal or redemption occurs because the traditional security is converted into ordinary shares in a company that is:
(i) the issuer of the traditional security; or
(ii) a connected entity of the issuer of the traditional security; and
(b) the traditional security was issued on the basis that it will or may convert into ordinary shares in:
(i) the issuer of the traditional security; or
(ii) the connected entity.
(2C) A deduction is not allowable under subsection ( 2) for a loss on the disposal or redemption of a traditional security if:
(a) the disposal or redemption is in exchange for ordinary shares in a company that is neither:
(i) the issuer of the traditional security; nor
(ii) a connected entity of the issuer of the traditional security; and
(b) in the case of a disposal--the disposal is to:
(i) the issuer of the traditional security; or
(ii) a connected entity of the issuer of the traditional security; and
(c) the traditional security was issued on the basis that it will or may be:
(i) disposed of to the issuer of the traditional security or to the connected entity; or
(ii) redeemed;
in exchange for ordinary shares in the company.
Income Tax Assessment Act 1997
4 Section 109 - 55 (after table item 11)
Insert:
11A | You acquire shares in a company in exchange for the disposal of an exchangeable interest, and the disposal of the exchangeable interest was to: (a) the issuer of the exchangeable interest; or (b) a connected entity of the issuer of the exchangeable interest | when the disposal of the exchangeable interest happened | section 130 - 105 |
11B | You acquire shares in a company in exchange for the redemption of an exchangeable interest | when the redemption of the exchangeable interest happened | section 130 - 105 |
5 After section 112 - 75
Insert:
112 - 77 Exchangeable interests
Exchangeable interests | |||
Item | In this situation: | Element affected: | See section: |
1 | You acquire shares in a company in exchange for the disposal of an exchangeable interest, and the disposal of the exchangeable interest was to: (a) the issuer of the exchangeable interest; or (b) a connected entity of the issuer of the exchangeable interest | First element of cost base and reduced cost base | 130 - 105 |
2 | You acquire shares in a company in exchange for the redemption of an exchangeable interest | First element of cost base and reduced cost base | 130 - 105 |
6 Paragraph 122 - 25(4)(a)
Omit "option or", substitute "option,".
7 Paragraph 122 - 25(4)(a)
Omit "; and", substitute "or * exchangeable interest; and".
8 At the end of paragraph 122 - 25(4)(b)
Add "or in exchange for the disposal or redemption of the exchangeable interest".
9 Paragraph 122 - 135(4)(a)
Omit "option or", substitute "option,".
10 Paragraph 122 - 135(4)(a)
Omit "; and", substitute "or * exchangeable interest; and".
11 At the end of paragraph 122 - 135(4)(b)
Add "or in exchange for the disposal or redemption of the exchangeable interest".
12 Paragraph 126 - 50(3)(a)
After "134", insert ", or an * exchangeable interest".
13 At the end of paragraph 126 - 50(3)(b)
Add "or in exchange for the disposal or redemption of the exchangeable interest".
14 Section 130 - 1
Repeal the section, substitute:
130 - 1 What this Division is about
This Division sets out the rules for these kinds of investments:
• bonus shares and units; and
• rights; and
• convertible interests; and
• shares acquired under an employee share scheme; and
• exchangeable interests.
Most are about modifying the cost base and reduced cost base of a CGT asset.
15 After section 130 - 90
Insert:
Subdivision 130 - E -- Exchangeable interests
Table of sections
130 - 100 Exchangeable interest
130 - 105 Shares acquired in exchange for the disposal or redemption of an exchangeable interest
130 - 100 Exchangeable interest
An exchangeable interest is a * traditional security that:
(a) was issued on the basis that it will or may be:
(i) disposed of to the issuer of the traditional security or to a * connected entity of the issuer of the traditional security; or
(ii) redeemed;
in exchange for * shares in a company that is neither:
(iii) the issuer of the traditional security; nor
(iv) a connected entity of the issuer of the traditional security; and
(b) was issued on or after 1 July 2001.
130 - 105 Shares acquired in exchange for the disposal or redemption of an exchangeable interest
Cost base and reduced cost base
(1) The table has effect:
Exchange of an exchangeable interest | ||
Item | In this situation: | The rules about cost base and reduced cost base are modified in this way... |
1 | You * acquire shares in a company in exchange for the disposal of an * exchangeable interest, and the disposal of the exchangeable interest was to: (a) the issuer of the exchangeable interest; or (b) a * connected entity of the issuer of the exchangeable interest. | The first element of the * cost base of the shares is the sum of: (a) the cost base of the exchangeable interest at the time of the disposal; and (b) any amount paid for the exchange, except to the extent that the amount is represented in the paragraph ( a) amount; and (c) all the amounts to be added under subsection ( 2). The first element of their * reduced cost base is worked out similarly. |
2 | You * acquire shares in a company in exchange for the redemption of an * exchangeable interest. | The first element of the * cost base of the shares is the sum of: (a) the cost base of the exchangeable interest at the time of the redemption; and (b) any amount paid for the exchange, except to the extent that the amount is represented in the paragraph ( a) amount; and (c) all the amounts to be added under subsection ( 2). The first element of their * reduced cost base is worked out similarly. |
(2) An amount is to be added under this subsection if a * capital gain on the disposal or redemption of the exchangeable interest has been reduced under section 118 - 20. This is so even though a capital gain that is made on the disposal or redemption of the exchangeable interest is disregarded under subsection ( 4). The amount to be added is the amount of the reduction.
(3) The payment for the exchange can include giving property (see section 103 - 5).
Other CGT consequences
(4) The table has effect:
Exchange of an exchangeable interest | ||
Item | In this situation: | This is the result: |
1 | You * acquire shares in a company in exchange for the disposal of an * exchangeable interest, and the disposal of the exchangeable interest was to: (a) the issuer of the exchangeable interest; or (b) a * connected entity of the issuer of the exchangeable interest. | (a) you are taken to have acquired the shares when the disposal of the exchangeable interest happened; and (b) a * capital gain or * capital loss you make from the disposal of the exchangeable interest is disregarded. |
2 | You * acquire shares in a company in exchange for the redemption of an * exchangeable interest. | (a) you are taken to have acquired the shares when the redemption of the exchangeable interest happened; and (b) a * capital gain or * capital loss you make from the redemption of the exchangeable interest is disregarded. |
Application
(5) This section applies to the disposal or redemption of an * exchangeable interest on or after 1 July 2001.
16 Subsection 995 - 1(1)
Insert:
"exchangeable interest" has the meaning given by section 130 - 100.
17 Application of amendments
(1) The amendments of sections 26BB and 70B of the Income Tax Assessment Act 1936 made by this Schedule apply to the disposal or redemption of a traditional security if the traditional security was issued after 7.30 pm, by legal time in the Australian Capital Territory, on 14 May 2002.
(2) The amendments of sections 122 - 25, 122 - 135 and 126 - 50 of the Income Tax Assessment Act 1997 made by this Schedule apply to the disposal or redemption of an exchangeable interest on or after 1 July 2001.