Commonwealth Consolidated Acts Commonwealth Consolidated ActsPart 1 -- Removing trust cloning exception
Income Tax Assessment Act 1997
1 Subsection 104 - 55(5)
Repeal the subsection, substitute:
Exceptions
(5) CGT event E1 does not happen if you are the sole beneficiary of the trust and:
(a) you are absolutely entitled to the asset as against the trustee (disregarding any legal disability); and
(b) the trust is not a unit trust.
2 Subsection 104 - 60(5)
Repeal the subsection, substitute:
Exceptions
(5) CGT event E2 does not happen if you are the sole beneficiary of the trust and:
(a) you are absolutely entitled to the asset as against the trustee (disregarding any legal disability); and
(b) the trust is not a unit trust.
3 Application provision
The amendments made by this Part apply to CGT events happening on or after 1 November 2008.
Part 2 -- Roll - over for certain trusts
Income Tax Assessment Act 1997
4 Subsection 40 - 340(1 ) (a t the end of the table)
Add:
5 | * Disposal of asset between certain trusts | The trustees of the trusts choose to obtain a roll - over under Subdivision 126 - G in relation to the disposal. |
5 Section 109 - 55 (after table item 8F)
Insert:
8G | You hold a membership interest in the receiving trust involved in a roll - over under Subdivision 126 - G | when you acquired the corresponding membership interest in the transferring trust involved in the roll - over | section 115 - 30 |
6 After section 112 - 54
Insert:
112 - 54A Transfer of assets between certain trusts
Transfer of assets between certain trusts | |||
Item | In this situation: | Element affected: | See sections: |
1 | There is a roll - over under Subdivision 126 - G relating to the transfer of a CGT asset between certain trusts | First element of cost base and reduced cost base of the CGT asset | 126 - 240 |
2 | There is a roll - over under Subdivision 126 - G relating to the transfer of a CGT asset between certain trusts | Cost base and reduced cost base of membership interests in each trust | 126 - 245 and 126 - 250 |
7 Section 112 - 150 (at the end of the table)
Add:
10 | Transfer of a CGT asset between certain trusts | Subdivision 126 - G |
8 Subsection 115 - 30(1 ) (a t the end of the table)
Add:
9 | A * CGT asset that: (a) is a * membership interest in the receiving trust involved in a roll - over under Subdivision 126 - G; and (b) is held by the acquirer just after the transfer time for the roll - over | (a) when the acquirer * acquired the corresponding membership interest (or membership interests) in the transferring trust involved in the roll - over; or (b) if the roll - over asset for the roll - over has been involved in an unbroken series of roll - overs under Subdivision 126 - G--when the acquirer acquired the corresponding membership interest (or membership interests) in the transferring trust involved in the first roll - over in the series |
9 At the end of Division 126
Add:
Subdivision 126 - G -- Transfer of assets between certain trusts
126 - 215 What this Subdivision is about
Roll - overs may be available when CGT assets are transferred between certain trusts.
Table of sections
Operative provisions
126 - 220 Object of this Subdivision
126 - 225 When a roll - over may be chosen
126 - 230 Beneficiaries' entitlements not be discretionary etc.
126 - 235 Exceptions for roll - over
126 - 240 Consequences for the trusts
126 - 245 Consequences for beneficiaries--general approach for working out cost base etc.
126 - 250 Consequences for beneficiaries--other approach for working out cost base etc.
126 - 255 No other cost base etc. adjustment for beneficiaries
126 - 260 Giving information to beneficiaries
126 - 220 Object of this Subdivision
The object of this Subdivision is to ensure that CGT considerations are not an impediment to the restructure of trusts, whilst ensuring that subsequent changes to the manner and extent to which beneficiaries can benefit from the trusts are subject to appropriate tax consequences.
126 - 225 When a roll - over may be chosen
( 1 ) A roll - over may be chosen for a * CGT asset (the roll - over asset ) if:
( a ) the trustee of a trust (the transferring trust ):
( i ) creates a trust (the receiving trust ), by declaration or settlement, over one or more CGT assets that include the roll - over asset; or
( ii ) transfers the roll - over asset to an existing trust (the receiving trust );
at a particular time (the transfer time ); and
( b ) if subparagraph ( a)(ii) applies--the receiving trust has no CGT assets, other than small amounts of cash or debt, just before the transfer time; and
(c) just after the transfer time:
(i) each of the trusts has the same beneficiaries; and
(ii) the receiving trust has the same * classes of * membership interests that the transferring trust had just before, and has just after, the transfer time; and
(iii) the sum of the * market values of each beneficiary's membership interests of a particular class in both trusts is substantially the same as the sum of the market values, just before the transfer time, of the beneficiary's membership interests of that class in both trusts; and
(d) the requirement in section 126 - 230 is met; and
(e) the exceptions in section 126 - 235 do not apply.
Exception if other roll - over assets already transferred
(2) However, paragraph ( 1)(b) does not apply if:
(a) the roll - over asset is transferred to the receiving trust under an * arrangement; and
(b) the roll - over asset was an asset of the transferring trust just before the arrangement was made; and
(c) at least one other asset of the receiving trust:
(i) is an asset for which a roll - over was obtained under this Subdivision for the trusts; and
(ii) is an asset over which the receiving trust was created, or was transferred by the transferring trust to the receiving trust under the arrangement; and
(d) the transfer time is in the income year for the transferring trust that includes the earliest transfer time (the start time ) for the assets covered by paragraph ( c).
Obtaining the roll - over
(3) The roll - over only happens if both the trustee of the transferring trust and the trustee of the receiving trust choose to obtain it.
126 - 230 Beneficiaries' entitlements not be discretionary etc.
(1) The conditions in subsections ( 2) and (3) must be met:
(a) if subsection 126 - 225(2) applies--at all times during the period:
(i) starting at the start time; and
(ii) ending at the transfer time; and
(b) otherwise--at the transfer time.
CGT event E4 is capable of happening
(2) The first condition is met at a particular time if, at that time, * CGT event E4 is capable of happening to all of the * membership interests in each of the trusts.
Note: A roll - over cannot be chosen if either trust is a discretionary trust.
Beneficiaries' entitlements not discretionary
(3) The second condition is met at a particular time if, at that time, the manner or extent to which each beneficiary of each trust can benefit from the trust is not capable of being significantly affected by the exercise, or non - exercise, of a power.
(4) However, if both trusts are * managed investment trusts, disregard a power if the power's existence at that time does not significantly affect the * market value at that time of each * membership interest in each of the trusts.
126 - 235 Exceptions for roll - over
Foreign trusts
(1) An exception applies for a * CGT asset if:
(a) the receiving trust is a * foreign trust for CGT purposes for the income year that includes the transfer time; and
(b) the roll - over asset is not * taxable Australian property just after the transfer time.
Corporate unit trusts and public trading trusts
(2) Another exception applies if either trust is a trust to which section 102K or 102S of the Income Tax Assessment Act 1936 applies for the income year that includes the transfer time.
Choices
(3) Another exception applies if, just after the transfer time:
(a) a choice (however described) under a provision of a * taxation law is in force for either of the trusts in relation to particular circumstances; and
(b) the same choice (however described) under that provision for the other trust in relation to those circumstances (a mirror choice ) is not also in force; and
(c) the absence of a mirror choice would or could have an ongoing effect on the calculation of an entity's * net income, or taxable income, for:
(i) the entity's income year that includes the transfer time; or
(ii) a later income year.
(4) However, the exception in subsection ( 3) does not apply if:
(a) the other trust makes a mirror choice before the first time after the transfer time when the absence of the mirror choice would affect the calculation of an entity's * net income, or taxable income, for an income year; or
(b) it would not be reasonable for subsection ( 3) to apply.
Note: For paragraph ( a), the other trust must still be able, under the relevant provision of the taxation law, to make the mirror choice.
(5) If, just after the transfer time:
(a) a choice (however described) referred to in paragraph ( 3)(a) is in force for either of the trusts (the first choice ); and
(b) a provision of a * taxation law:
(i) prevents the revocation or variation of that choice; or
(ii) sets out a consequence for an entity if that choice is revoked or varied;
that provision is taken to apply for a mirror choice, in force for the other trust at or after that time, in a way corresponding to the way in which it applies for the first choice.
Note: For example, if the provision sets out consequences that flow from the revocation of the first choice, then those consequences will also flow if the mirror choice is revoked.
126 - 240 Consequences for the trusts
Disregard any capital gain or loss
(1) If the roll - over is chosen, disregard any * capital gain or * capital loss the trustee of the transferring trust makes from:
(a) creating the receiving trust over the roll - over asset; or
(b) transferring the roll - over asset to the receiving trust;
at the transfer time.
Adjust roll - over asset's cost base and reduced cost base
(2) If the roll - over is chosen:
(a) the first element of the roll - over asset's * cost base, in the hands of the receiving trust, is its cost base just before the transfer time; and
(b) the first element of the roll - over asset's * reduced cost base is worked out similarly.
Any pre - transfer losses of receiving trust cannot be utilised
(3) If the roll - over is chosen:
(a) any * net capital loss of the receiving trust for an income year ending before the transfer time cannot be applied after the transfer time to reduce an amount of that trust's * capital gains; and
(b) the sum of the receiving trust's * capital losses for the income year that includes the transfer time (the transfer year ) is reduced by an amount equal to any net capital loss that the trust would have had for that year had that year ended just before the transfer time; and
(c) any * tax loss of the receiving trust for an income year ending before the transfer time cannot be deducted after the transfer time from an amount of that trust's assessable income or * net exempt income; and
(d) the sum of the receiving trust's deductions for the transfer year is reduced by an amount equal to any tax loss that the trust would have had for that year had that year ended just before the transfer time.
References in this subsection to the transfer time are to be read as references to the start time if subsection 126 - 225(2) applies.
Note: Subsection 126 - 225(2) applies if the roll - over asset is transferred to the receiving trust after an earlier roll - over under this Subdivision, for another asset, was obtained for the trusts.
Pre - CGT assets
(4) If:
(a) the roll - over is chosen; and
(b) the transferring trust last * acquired the roll - over asset before 20 September 1985;
the receiving trust is taken to have acquired it before that day.
126 - 245 Consequences for beneficiaries--general approach for working out cost base etc.
(1) If the roll - over is chosen, each of the following:
(a) the * cost base and * reduced cost base of each of a beneficiary's * membership interests in each trust;
(b) the time each of the beneficiary's membership interests in the receiving trust is treated as having been * acquired;
is adjusted under this section for the transfer time unless the beneficiary has chosen for them to be adjusted under section 126 - 250.
Note: The beneficiary can choose for these things to be adjusted once for several consecutive transfer times (for multiple roll - over assets) if the beneficiary owned the interests at all of those times (see section 126 - 250).
First element of cost base of interests in transferring trust
(2) The first element of the * cost base, just after the transfer time, of each of the beneficiary's * membership interests in the transferring trust is an amount equal to such proportion of the interest's cost base just before the transfer time as is reasonable having regard to:
(a) the * market value of the interest just after the transfer time, or a reasonable approximation of that market value; and
(b) the market value of the interest just before the transfer time, or a reasonable approximation of that market value.
First element of cost base of interests in receiving trust
(3) The first element of the * cost base, just after the transfer time, of each of the beneficiary's * membership interests in the receiving trust is such amount so that the sum of:
(a) the cost base, just before the transfer time, of that membership interest in the receiving trust; and
(b) if, just after the transfer time, that interest in the receiving trust corresponds to at least one of the beneficiary's membership interests in the transferring trust--the cost base, just before the transfer time, of each of those corresponding membership interests in the transferring trust; and
(c) if, just after the transfer time, that interest in the receiving trust corresponds to a proportion of one of the beneficiary's membership interests in the transferring trust--that proportion of the cost base, just before the transfer time, of that corresponding membership interest in the transferring trust;
reasonably approximates:
(d) if paragraph ( b) applies--the sum of the cost bases, just after the transfer time, of each of the interests referred to in paragraphs ( a) and (b); and
(e) if paragraph ( c) applies--the sum of:
(i) the cost base, just after the transfer time, of the interest referred to in paragraph ( a); and
(ii) the proportion of the cost base, just after the transfer time, of the interest referred to in paragraph ( c).
First element of reduced cost base of interests in each trust
(4) The first element of the * reduced cost base, just after the transfer time, of each of the beneficiary's * membership interests in each trust is worked out similarly.
Time of acquisition for interests in the receiving trust
(5) Each of the beneficiary's * membership interests in the receiving trust is treated as having been * acquired just after the transfer time.
Time of acquisition for pre - CGT interests in the receiving trust
(6) However, if one or more of the beneficiary's * membership interests in the transferring trust were * pre - CGT assets just before the transfer time, the beneficiary is treated as having * acquired before 20 September 1985 its interests in the receiving trust that correspond to those interests in the transferring trust.
126 - 250 Consequences for beneficiaries--other approach for working out cost base etc.
(1) This section applies if the beneficiary owns one or more * membership interests in the transferring trust at all times during the period:
(a) starting just before this time (the starting time ):
(i) the transfer time; or
(ii) the transfer time for an asset referred to in paragraph 126 - 225(2)(c ) ( assuming subsection 126 - 225(2) applies); and
(b) ending just after this time (the ending time ):
(i) the transfer time (assuming this is not also the starting time); or
(ii) a later time in the transfer year that is the transfer time for another asset for which a roll - over is obtained under this Subdivision for the trusts.
Note: Subsection 126 - 225(2) applies if the roll - over asset is transferred to the receiving trust after an earlier roll - over under this Subdivision, for another asset, was obtained for the trusts.
(2) The beneficiary may choose for each of the following:
(a) the * cost base and * reduced cost base of each of those * membership interests and of the beneficiary's corresponding membership interests in the receiving trust;
(b) the time each of those corresponding interests in the receiving trust is treated as having been * acquired;
to be adjusted under subsection ( 3) for the period.
(3) For each of the interests referred to in subsection ( 2), subsections 126 - 245(2), (3), (4), (5) and (6) apply as if:
(a) references in those subsections to just before the transfer time were references to just before the starting time; and
(b) references in those subsections to just after the transfer time were references to just after the ending time.
126 - 255 No other cost base etc. adjustment for beneficiaries
If a beneficiary of the trusts makes adjustments under section 126 - 245 or 126 - 250 to the * cost base and * reduced cost base of the beneficiary's * membership interests in relation to the * CGT event that is:
(a) the creation of the receiving trust over the roll - over asset; or
(b) the transfer of the roll - over asset to the receiving trust;
no other adjustment is to be made under this Act to those cost bases and reduced cost bases because of something that happens in relation to that event.
Note: This section prevents the general value shifting regime from applying in relation to the event because sections 126 - 245 and 126 - 250 deal with any value shift that might occur.
126 - 260 Giving information to beneficiaries
Beneficiaries must be given particulars of the roll - over
(1) If the roll - over is chosen, the trustee of the transferring trust must, within 3 months after the end of the transfer year, send written notice of the particulars set out in subsection ( 2) to each of the trust's beneficiaries:
(a) by post to the address most recently notified by the beneficiary as the beneficiary's address; or
(b) by any other means notified by the beneficiary for receiving correspondence from the trust.
Note: The trustee may also notify beneficiaries of other details of the roll - over.
The particulars that must be given
(2) The particulars are as follows:
(a) the roll - over asset's transfer time;
(b) sufficient information to enable a beneficiary to work out which of the beneficiary's * membership interests in the receiving trust correspond to each of the beneficiary's membership interests in the transferring trust;
(c) the * market value of each of the membership interests held by the beneficiary in the transferring trust just after the roll - over asset's transfer time, or a reasonable approximation of that market value;
(d) the market value of each of the membership interests held by the beneficiary in the transferring trust just before the roll - over asset's transfer time, or a reasonable approximation of that market value.
Offence
(3) A trustee commits an offence if the trustee contravenes subsection ( 1).
Penalty: 30 penalty units.
(4) An offence against subsection ( 3) is an offence of strict liability.
Note: For strict liability, see section 6.1 of the Criminal Code .
If the transferring trust has multiple trustees
(5) If the transferring trust has 2 or more trustees, the obligation imposed by subsection ( 1) is imposed on each of the trustees, but may be discharged by any of the trustees.
Note: Each of the trustees commits an offence against subsection ( 3) if none of them discharges the obligation imposed by subsection ( 1).
(6) In a prosecution of a trustee for an offence against subsection ( 3) for an act or omission contravening subsection ( 1), it is a defence if the trustee proves that the trustee:
(a) did not aid, abet, counsel or procure the act or omission; and
(b) was not in any way knowingly concerned in, or party to, the act or omission (whether directly or indirectly and whether by any act or omission of the trustee).
Note: A defendant bears a legal burden in relation to the matters in subsection ( 6): see section 13.4 of the Criminal Code .
Obligations of beneficiary unaffected if not notified of roll - over
(7) A failure by a trustee to comply with subsection ( 1) does not affect the application of section 126 - 245 to the beneficiary.
10 Subsection 995 - 1(1 ) (d efinition of class ) (s econd occurring)
After "company", insert "or trust".
11 Application provision
The amendments made by items 4 to 9 apply to CGT events happening on or after 1 November 2008.
12 Transitional: time for making mirror choices
(1) Subsection 126 - 235(3) of the Income Tax Assessment Act 1997 does not apply if the other trust makes a mirror choice under a provision of a taxation law by:
(a) 6 months after the day this Act receives the Royal Assent; or
(b) a later day allowed by the Commissioner of Taxation.
Note: For this item to have effect, the other trust must still be able, under that provision of the taxation law, to make the mirror choice.
(2) This item has effect in addition to subsection 126 - 235(4) of the Income Tax Assessment Act 1997 .
13 Transitional: deadline for giving information to beneficiaries
(1) This item applies in relation to a roll - over chosen under Subdivision 126 - G of the Income Tax Assessment Act 1997 if the transfer year for the roll - over is the transferring trust's 2008 - 09 income year.
(2) Subsection 126 - 260(1) of that Act has effect, in relation to the roll - over, as if the reference in that subsection to 3 months after the end of the transfer year were a reference to 6 months after the day this Act receives the Royal Assent.
A New Tax System (Goods and Services Tax) Act 1999
14 Subsection 184 - 1(2 ) ( note)
Omit "Note", substitute "Note 1".
15 At the end of subsection 184 - 1(2)
Add:
Note 2: The entity that is the trustee of a trust or fund does not change merely because of a change in the person who is the trustee of the trust or fund, or persons who are the trustees of the trust or fund.
Income Tax Assessment Act 1997
16 Subsection 104 - 10(2)
Repeal the subsection, substitute:
(2) You dispose of a * CGT asset if a change of ownership occurs from you to another entity, whether because of some act or event or by operation of law. However, a change of ownership does not occur if you stop being the legal owner of the asset but continue to be its beneficial owner.
Note: A change in the trustee of a trust does not constitute a change in the entity that is the trustee of the trust (see subsection 960 - 100(2)). This means that CGT event A1 will not happen merely because of a change in the trustee.
17 At the end of subsection 104 - 55(1)
Add:
Note: A change in the trustee of a trust does not constitute a change in the entity that is the trustee of the trust (see subsection 960 - 100(2)). This means that CGT event E1 will not happen merely because of a change in the trustee.
18 At the end of subsection 104 - 60(1)
Add:
Note: A change in the trustee of a trust does not constitute a change in the entity that is the trustee of the trust (see subsection 960 - 100(2)). This means that CGT event E2 will not happen merely because of a change in the trustee.
19 Subsection 960 - 100(2 ) ( note)
Omit "Note", substitute "Note 1".
20 At the end of subsection 960 - 100(2)
Add:
Note 2: The entity that is the trustee of a trust or fund does not change merely because of a change in the person who is the trustee of the trust or fund, or persons who are the trustees of the trust or fund.