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Income Tax Assessment Act 1997

Authoritative Version
  • - C2016C00680
  • In force - Superseded Version
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Act No. 38 of 1997 as amended, taking into account amendments up to Tax Laws Amendment (Tax Incentives for Innovation) Act 2016
An Act about income tax and related matters
Administered by: Treasury
General Comments: This compilation is affected by a retrospective amendment. Please see the Tax and Superannuation Laws Amendment (2016 Measures No. 2) Act 2017 (Act No. 15, 2017) for details.
Registered 30 Jun 2016
Start Date 30 Jun 2016
End Date 30 Jun 2016

Income Tax Assessment Act 1997

No. 38, 1997

Compilation No. 157

Compilation date:                              30 June 2016

Includes amendments up to:            Act No. 54, 2016

Registered:                                         30 June 2016

This compilation is in 11 volumes

Volume 1:       sections 1‑1 to 36‑55

Volume 2:       sections 40‑1 to 55‑10

Volume 3:       sections 58‑1 to 122‑205

Volume 4:       sections 124‑1 to 152‑430

Volume 5:       sections 164‑1 to 220‑800

Volume 6:       sections 230‑1 to 312‑15

Volume 7:       sections 315‑1 to 420‑70

Volume 8:       sections 615‑1 to 727‑910

Volume 9:       sections 768‑1 to 995‑1

Volume 10:     Endnotes 1 to 3

Volume 11:     Endnote 4

Each volume has its own contents

 

This compilation includes a commenced amendment made by Act No. 118, 2009

About this compilation

This compilation

This is a compilation of the Income Tax Assessment Act 1997 that shows the text of the law as amended and in force on 30 June 2016 (the compilation date).

The notes at the end of this compilation (the endnotes) include information about amending laws and the amendment history of provisions of the compiled law.

Uncommenced amendments

The effect of uncommenced amendments is not shown in the text of the compiled law. Any uncommenced amendments affecting the law are accessible on the Legislation Register (www.legislation.gov.au). The details of amendments made up to, but not commenced at, the compilation date are underlined in the endnotes. For more information on any uncommenced amendments, see the series page on the Legislation Register for the compiled law.

Application, saving and transitional provisions for provisions and amendments

If the operation of a provision or amendment of the compiled law is affected by an application, saving or transitional provision that is not included in this compilation, details are included in the endnotes.

Editorial changes

For more information about any editorial changes made in this compilation, see the endnotes.

Modifications

If the compiled law is modified by another law, the compiled law operates as modified but the modification does not amend the text of the law. Accordingly, this compilation does not show the text of the compiled law as modified. For more information on any modifications, see the series page on the Legislation Register for the compiled law.

Self‑repealing provisions

If a provision of the compiled law has been repealed in accordance with a provision of the law, details are included in the endnotes.

  

  

  


Contents

Chapter 3—Specialist liability rules                                                           1

Part 3‑3—Capital gains and losses: special topics                                              1

Division 124—Replacement‑asset roll‑overs                                                   1

Guide to Division 124                                                                                                2

124‑1..................... What this Division is about................................................. 2

124‑5..................... How to find your way around this Division....................... 2

Subdivision 124‑A—General rules                                                                        2

124‑10................... Your ownership of one CGT asset ends............................. 3

124‑15................... Your ownership of more than one CGT asset ends............ 4

124‑20................... Share and interest sale facilities........................................... 6

Subdivision 124‑B—Asset compulsorily acquired, lost or destroyed           8

When a roll‑over is available                                                                                  8

124‑70................... Events giving rise to a roll‑over.......................................... 8

124‑75................... Other requirements if you receive money......................... 10

124‑80................... Other requirements if you receive an asset........................ 11

The consequences of a roll‑over being available                                             12

124‑85................... Consequences for receiving money.................................. 12

124‑90................... Consequences for receiving an asset................................. 14

124‑95................... You receive both money and an asset............................... 15

Subdivision 124‑C—Statutory licences                                                               18

124‑140................. New statutory licences...................................................... 18

124‑145................. Rollover consequences—capital gain or loss disregarded. 19

124‑150................. Rollover consequences—partial roll‑over......................... 19

124‑155................. Roll‑over consequences—all original licences were post‑CGT                20

124‑160................. Roll‑over consequences—all original licences were pre‑CGT 21

124‑165................. Roll‑over consequences—some original licences were pre‑CGT, others were post‑CGT       21

Subdivision 124‑D—Strata title conversion                                                      22

124‑190................. Strata title conversion........................................................ 22

Subdivision 124‑E—Exchange of shares or units                                            22

124‑240................. Exchange of shares in the same company......................... 23

124‑245................. Exchange of units in the same unit trust............................ 23

Subdivision 124‑F—Exchange of rights or options                                         24

124‑295................. Exchange of rights or option to acquire shares in a company.. 24

124‑300................. Exchange of rights or option to acquire units in a unit trust 25

Subdivision 124‑I—Change of incorporation                                                   27

Guide to Subdivision 124‑I                                                                                     27

124‑510................. What this Subdivision is about......................................... 27

Object of this Subdivision                                                                                       27

124‑515................. Object of this Subdivision................................................ 27

Change of incorporation without change of entity                                          28

124‑520................. Change of incorporation without change of entity............ 28

Old corporation wound up                                                                                     30

124‑525................. Old corporation wound up................................................ 30

Special consequences of some roll‑overs                                                            32

124‑530................. Shares in company replacing pre‑CGT and post‑CGT mix of interest and rights in body       32

124‑535................. Rights as member of Indigenous corporation replacing pre‑CGT and post‑CGT mix of interest and rights in body.................................................................................. 33

Subdivision 124‑J—Crown leases                                                                        33

Guide to Subdivision 124‑J                                                                                    33

124‑570................. What this Subdivision is about......................................... 33

Operative provisions                                                                                               34

124‑575................. Extension or renewal of Crown lease............................... 34

124‑580................. Meaning of Crown lease.................................................. 35

124‑585................. Original right differs in area from new right..................... 35

124‑590................. Part of original right excised............................................. 35

124‑595................. Treating parts of new right as separate assets................... 36

124‑600................. What is the roll‑over?........................................................ 36

124‑605................. Change of lessor............................................................... 37

Subdivision 124‑K—Depreciating assets                                                            38

124‑655................. Roll‑over for depreciating assets....................................... 38

124‑660................. Right granted to associate................................................. 39

Subdivision 124‑L—Prospecting and mining entitlements                            39

Guide to Subdivision 124‑L                                                                                   39

124‑700................. What this Subdivision is about......................................... 39

Operative provisions                                                                                               39

124‑705................. Extension or renewal of prospecting or mining entitlement 39

124‑710................. Meaning of prospecting entitlement and mining entitlement 40

124‑715................. Original entitlement differs in area from new entitlement.. 41

124‑720................. Part of original entitlement excised................................... 41

124‑725................. Treating parts of new entitlement as separate assets.......... 42

124‑730................. What is the roll‑over?........................................................ 42

Subdivision 124‑M—Scrip for scrip roll‑over                                                  43

Guide to Subdivision 124‑M                                                                                  43

124‑775................. What this Subdivision is about......................................... 43

Operative provisions                                                                                               44

124‑780................. Replacement of shares...................................................... 44

124‑781................. Replacement of trust interests........................................... 48

124‑782................. Transfer or allocation of cost base of shares acquired by acquiring entity etc.         51

124‑783................. Meaning of significant stakeholder, common stakeholder, significant stake and common stake             53

124‑783A.............. Rights that affect stakes.................................................... 55

124‑784................. Cost base of equity or debt given within acquiring group. 57

124‑784A.............. When arrangement is a restructure.................................... 57

124‑784B.............. What is the cost base and reduced cost base when arrangement is a restructure?     60

124‑784C.............. Cost base of equity or debt given within acquiring group. 64

124‑785................. What is the roll‑over?........................................................ 64

124‑790................. Partial roll‑over................................................................. 65

124‑795................. Exceptions........................................................................ 66

124‑800................. Interest received for pre‑CGT interest............................... 66

124‑810................. Certain companies and trusts not regarded as having 300 members or beneficiaries                67

Subdivision 124‑N—Disposal of assets by a trust to a company                  69

Guide to Subdivision 124‑N                                                                                   69

124‑850................. What this Subdivision is about......................................... 69

Operative provisions                                                                                               70

124‑855................. What this Subdivision deals with...................................... 70

124‑860................. Requirements for roll‑over................................................ 70

124‑865................. Entities both choose the roll‑over...................................... 72

124‑870................. Roll‑over for owner of units or interests in a trust............ 72

124‑875................. Effect on the transferor and transferee.............................. 73

Subdivision 124‑P—Exchange of a membership interest in an MDO for a membership interest in another MDO                                                                                                         75

Guide to Subdivision 124‑P                                                                                    75

124‑975................. What this Subdivision is about......................................... 75

Operative provisions                                                                                               75

124‑980................. Exchange of membership interests in an MDO................ 75

124‑985................. What the roll‑over is for post‑CGT interests..................... 76

124‑990................. Partial roll‑over................................................................. 77

124‑995................. Pre‑CGT interests............................................................. 77

Subdivision 124‑Q—Exchange of stapled ownership interests for ownership interests in a unit trust     77

Guide to Subdivision 124‑Q                                                                                   77

124‑1040............... What this Subdivision is about......................................... 77

Operative provisions                                                                                               78

124‑1045............... Exchange of stapled securities.......................................... 78

124‑1050............... Conditions........................................................................ 79

124‑1055............... Consequences of the roll‑over for exchanging members.. 80

124‑1060............... Consequences of the roll‑over for interposed trust........... 82

Subdivision 124‑R—Water entitlements                                                            83

Guide to Subdivision 124‑R                                                                                   83

124‑1100............... What this Subdivision is about......................................... 83

Replacement case                                                                                                     84

124‑1105............... Replacement water entitlements roll‑over.......................... 84

124‑1110............... Roll‑over consequences—capital gain or loss disregarded 86

124‑1115............... Roll‑over consequences—partial roll‑over........................ 86

124‑1120............... Roll‑over consequences—all original entitlements post‑CGT  87

124‑1125............... Roll‑over consequences—all original entitlements pre‑CGT 88

124‑1130............... Roll‑over consequences—some original entitlements pre‑CGT, others post‑CGT  88

Reduction case                                                                                                           89

124‑1135............... Reduction in water entitlements roll‑over.......................... 89

124‑1140............... Roll‑over consequences—capital gain or loss disregarded 89

124‑1145............... Roll‑over consequences—all original entitlements post‑CGT  89

124‑1150............... Roll‑over consequences—some original entitlements pre‑CGT, others post‑CGT  90

Variation to CGT asset case                                                                                  91

124‑1155............... Roll‑over for variation to CGT asset................................. 91

124‑1160............... Roll‑over consequences.................................................... 91

124‑1165............... Roll‑over consequences—partial roll‑over........................ 91

Subdivision 124‑S—Interest realignment arrangements                               92

Guide to Subdivision 124‑S                                                                                    92

124‑1220............... What this Subdivision is about......................................... 92

Operative provisions                                                                                               92

124‑1225............... Disposals of interests under interest realignment arrangements               92

124‑1230............... Roll‑over consequences—partial roll‑over........................ 93

124‑1235............... Roll‑over consequences—all original interests were post‑CGT and pre‑UCA        94

124‑1240............... Roll‑over consequences—all original interests were pre‑CGT 95

124‑1245............... Roll‑over consequences—original interests were of mixed CGT status, all were pre‑UCA    95

124‑1250............... Roll‑over consequences—some original interests were pre‑UCA           96

Division 125—Demerger relief                                                                              98

Guide to Division 125                                                                                              98

125‑1..................... What this Division is about............................................... 98

Subdivision 125‑A—Object of this Division                                                      99

125‑5..................... Object of this Division...................................................... 99

Subdivision 125‑B—Consequences for owners of interests                           99

Guide to Subdivision 125‑B                                                                                   99

125‑50................... Guide to Subdivision 125‑B............................................. 99

Operative provisions                                                                                             100

125‑55................... When a roll‑over is available for a demerger................... 100

125‑60................... Meaning of ownership interest and related terms........... 101

125‑65................... Meanings of demerger group, head entity and demerger subsidiary      102

125‑70................... Meanings of demerger, demerged entity and demerging entity                103

125‑75................... Exceptions to subsection 125‑70(2)................................ 107

125‑80................... What is the roll‑over?...................................................... 110

125‑85................... Cost base adjustments where CGT event happens but no roll‑over chosen             112

125‑90................... Cost base adjustments where no CGT event................... 113

125‑95................... No other cost base adjustment after demerger................. 113

125‑100................. No further demerger relief in some cases........................ 113

Subdivision 125‑C—Consequences for members of demerger group      114

Guide to Subdivision 125‑C                                                                                 114

125‑150................. Guide to Subdivision 125‑C........................................... 114

Operative provisions                                                                                             114

125‑155................. Certain capital gains or losses disregarded for demerging entity              114

125‑160................. No CGT event J1............................................................ 115

125‑165................. Adjusted capital loss for value shift under a demerger.... 115

125‑170................. Reduced cost base reduction if demerger asset subject to roll‑over          115

Subdivision 125‑D—Public trading trusts                                                        116

Guide to Subdivision 125‑D                                                                                 116

125‑225................. Guide to Subdivision 125‑D........................................... 116

Operative provisions                                                                                             116

125‑230................. Application of Division to public trading trusts.............. 116

Subdivision 125‑E—Miscellaneous                                                                   116

125‑235................. Share and interest sale facilities....................................... 117

Division 126—Same‑asset roll‑overs                                                                119

Guide to Division 126                                                                                            119

126‑1..................... What this Division is about............................................. 119

Subdivision 126‑A—Marriage or relationship breakdowns                       119

126‑5..................... CGT event involving spouses......................................... 120

126‑15................... CGT event involving company or trustee....................... 122

126‑20................... Subsequent CGT event happening to roll‑over asset where transferor was a CFC or a non‑resident trust........................................................................................ 125

126‑25................... Conditions for the purposes of subsections 126‑5(3A) and 126‑15(5)    126

Subdivision 126‑B—Companies in the same wholly‑owned group            126

Guide to Subdivision 126‑B                                                                                 126

126‑40................... What this Subdivision is about....................................... 126

Operative provisions                                                                                             127

126‑45................... Roll‑over for members of wholly‑owned group............. 127

126‑50................... Requirements for roll‑over.............................................. 127

126‑55................... When there is a roll‑over................................................. 130

126‑60................... Consequences of roll‑over.............................................. 131

126‑75................... Originating company is a CFC....................................... 132

126‑85................... Effect of roll‑over on certain liquidations........................ 133

Subdivision 126‑C—Changes to trust deeds                                                    135

Guide to Subdivision 126‑C                                                                                 135

126‑125................. What this Subdivision is about....................................... 135

126‑130................. Changes to trust deeds.................................................... 135

126‑135................. Consequences of roll‑over.............................................. 136

Subdivision 126‑D—Small superannuation funds                                         137

126‑140................. CGT event involving small superannuation funds.......... 137

Subdivision 126‑E—Entitlement to shares after demutualisation and scrip for scrip roll‑over               141

Guide to Subdivision 126‑E                                                                                 141

126‑185................. What this Subdivision is about....................................... 141

Operative provisions                                                                                             141

126‑190................. When there is a roll‑over................................................. 141

126‑195................. Consequences of roll‑over.............................................. 142

Subdivision 126‑G—Transfer of assets between certain trusts                  143

Guide to Subdivision 126‑G                                                                                 143

126‑215................. What this Subdivision is about....................................... 143

Operative provisions                                                                                             143

126‑220................. Object of this Subdivision.............................................. 143

126‑225................. When a roll‑over may be chosen..................................... 144

126‑230................. Beneficiaries’ entitlements not be discretionary etc......... 145

126‑235................. Exceptions for roll‑over.................................................. 146

126‑240................. Consequences for the trusts............................................ 147

126‑245................. Consequences for beneficiaries—general approach for working out cost base etc.  149

126‑250................. Consequences for beneficiaries—other approach for working out cost base etc.     151

126‑255................. No other cost base etc. adjustment for beneficiaries........ 152

126‑260................. Giving information to beneficiaries................................. 152

126‑265................. Interest sale facilities....................................................... 154

Division 128—Effect of death                                                                              156

Guide to Division 128                                                                                            156

128‑1..................... What this Division is about............................................. 156

General rules                                                                                                           156

128‑10................... Capital gain or loss when you die is disregarded............ 156

128‑15................... Effect on the legal personal representative or beneficiary 157

128‑20................... When does an asset pass to a beneficiary?...................... 159

128‑25................... The beneficiary is a trustee of a superannuation fund etc. 160

Special rules for joint tenants                                                                              161

128‑50................... Joint tenants.................................................................... 161

Division 130—Investments                                                                                    163

Guide to Division 130                                                                                            163

130‑1..................... What this Division is about............................................. 163

Subdivision 130‑A—Bonus shares and units                                                   164

Guide to Subdivision 130‑A                                                                                 164

130‑15................... Acquisition time and cost base of bonus equities............ 164

Operative provisions                                                                                             165

130‑20................... Issue of bonus shares or units........................................ 165

Subdivision 130‑B—Rights                                                                                  169

130‑40................... Exercise of rights............................................................ 169

130‑45................... Timing rules.................................................................... 172

130‑50................... Application to options..................................................... 172

Subdivision 130‑C—Convertible interests                                                       172

130‑60................... Shares or units acquired by converting a convertible interest 172

Subdivision 130‑D—Employee share schemes                                               175

130‑75................... Objects of Subdivision................................................... 175

130‑80................... ESS interests acquired under employee share schemes... 176

130‑85................... Interests in employee share trusts................................... 177

130‑90................... Shares held by employee share trusts............................. 179

130‑95................... Shares and rights in relation to ESS interests.................. 180

130‑97................... Application of certain provisions of Division 83A......... 180

Subdivision 130‑E—Exchangeable interests                                                   180

130‑100................. Exchangeable interest...................................................... 181

130‑105................. Shares acquired in exchange for the disposal or redemption of an exchangeable interest         181

Division 132—Leases                                                                                                185

132‑1..................... Lessee incurs expenditure to get lease term varied or waived.. 185

132‑5..................... Lessor pays lessee for improvements............................. 185

132‑10................... Grant of a long‑term lease............................................... 185

132‑15................... Lessee of land acquires reversionary interest of lessor... 186

Division 134—Options                                                                                             188

134‑1..................... Exercise of options......................................................... 188

Division 149—When an asset stops being a pre‑CGT asset                191

Subdivision 149‑A—Key concepts                                                                     191

149‑10................... What is a pre‑CGT asset?............................................... 191

149‑15................... Majority underlying interests in a CGT asset.................. 192

Subdivision 149‑B—When asset of non‑public entity stops being a pre‑CGT asset       193

149‑25................... Which entities are affected.............................................. 193

149‑30................... Effects if asset no longer has same majority underlying ownership         193

149‑35................... Cost base elements of asset that stops being a pre‑CGT asset  194

Subdivision 149‑C—When asset of public entity stops being a pre‑CGT asset               195

149‑50................... Which entities are affected.............................................. 195

149‑55................... Entity to give the Commissioner evidence periodically as to whether asset still has same majority underlying ownership....................................................................... 196

149‑60................... What the evidence must show......................................... 198

149‑70................... Effects if asset no longer has same majority underlying ownership         199

149‑75................... Cost base elements of asset that stops being a pre‑CGT asset  200

149‑80................... No more evidence needed after asset stops being a pre‑CGT asset          200

Subdivision 149‑F—How to treat a “demutualised” public entity             200

149‑162................. Subdivision applies only if entity gives sufficient evidence 200

149‑165................. Members treated as having underlying interests in assets until demutualisation       201

149‑170................. Effect of demutualisation of interposed company........... 202

Division 152—Small business relief                                                                   203

Guide to Division 152                                                                                            203

152‑1..................... What this Division is about............................................. 203

Subdivision 152‑A—Basic conditions for relief under this Division         204

Guide to Subdivision 152‑A                                                                                 204

152‑5..................... What this Subdivision is about....................................... 204

Basic conditions for relief                                                                                    206

152‑10................... Basic conditions for relief............................................... 206

152‑12................... Special conditions for CGT event D1............................. 209

Maximum net asset value test                                                                              209

152‑15................... Maximum net asset value test......................................... 209

152‑20................... Meaning of net value of the CGT assets......................... 210

Active asset test                                                                                                       213

152‑35................... Active asset test.............................................................. 213

152‑40................... Meaning of active asset.................................................. 214

152‑45................... Continuing time periods for involuntary disposals......... 218

Treatment of passively held CGT assets                                                          220

152‑47................... Spouses or children taken to be affiliates for certain passively held CGT assets      220

152‑48................... Working out an entity’s aggregated turnover for passively held CGT assets           221

152‑49................... Businesses that are winding up....................................... 222

Significant individual test                                                                                    223

152‑50................... Significant individual test................................................ 223

152‑55................... Meaning of significant individual................................... 223

CGT concession stakeholder                                                                               223

152‑60................... Meaning of CGT concession stakeholder....................... 223

Small business participation percentage                                                          223

152‑65................... Small business participation percentage.......................... 223

152‑70................... Direct small business participation percentage................ 224

152‑75................... Indirect small business participation percentage.............. 226

Nomination of controllers of discretionary trust                                           228

152‑78................... Trustee of discretionary trust may nominate beneficiaries to be controllers of trust 228

CGT event happens to asset or interest within 2 years of an individual’s death             228

152‑80................... CGT event happens to an asset or interest within 2 years of individual’s death       228

Subdivision 152‑B—Small business 15‑year exemption                              230

Guide to Subdivision 152‑B                                                                                 230

152‑100................. What this Subdivision is about....................................... 230

152‑105................. 15‑year exemption for individuals.................................. 231

152‑110................. 15‑year exemption for companies and trusts................... 232

152‑115................. Continuing time periods for involuntary disposals......... 233

152‑125................. Payments to company’s or trust’s CGT concession stakeholders are exempt          234

Subdivision 152‑C—Small business 50% reduction                                      236

Guide to Subdivision 152‑C                                                                                 236

152‑200................. What this Subdivision is about....................................... 236

152‑205................. You get the small business 50% reduction..................... 237

152‑210................. You may also get the small business retirement exemption and small business roll‑over relief               237

152‑215................. 15‑year rule has priority.................................................. 237

152‑220................. You may choose not to apply this Subdivision............... 238

Subdivision 152‑D—Small business retirement exemption                         238

Guide to Subdivision 152‑D                                                                                 238

152‑300................. What this Subdivision is about....................................... 238

152‑305................. Choosing the exemption................................................. 239

152‑310................. Consequences of choice.................................................. 240

152‑315................. Choosing the amount to disregard.................................. 241

152‑320................. Meaning of CGT retirement exemption limit.................. 242

152‑325................. Company or trust conditions........................................... 242

152‑330................. 15‑year rule has priority.................................................. 245

Subdivision 152‑E—Small business roll‑over                                                 246

Guide to Subdivision 152‑E                                                                                 246

152‑400................. What this Subdivision is about....................................... 246

Operative provisions                                                                                             246

152‑410................. When you can obtain the roll‑over.................................. 246

152‑415................. What the roll‑over consists of......................................... 247

152‑420................. Rules where an individual who has obtained a roll‑over dies.. 247

152‑430................. 15‑year rule has priority.................................................. 248


Chapter 3Specialist liability rules

Part 3‑3Capital gains and losses: special topics

Division 124Replacement‑asset roll‑overs

Table of Subdivisions

             Guide to Division 124

124‑A   General rules

124‑B    Asset compulsorily acquired, lost or destroyed

124‑C    Statutory licences

124‑D   Strata title conversion

124‑E    Exchange of shares or units

124‑F    Exchange of rights or options

124‑I     Change of incorporation

124‑J     Crown leases

124‑K   Depreciating assets

124‑L    Prospecting and mining entitlements

124‑M   Scrip for scrip roll‑over

124‑N   Disposal of assets by a trust to a company

124‑P    Exchange of a membership interest in an MDO for a membership interest in another MDO

124‑Q   Exchange of stapled ownership interests for ownership interests in a unit trust

124‑R    Water entitlements

124‑S    Interest realignment arrangements


Guide to Division 124

124‑1  What this Division is about

A replacement‑asset roll‑over allows you, in special cases, to defer the making of a capital gain or loss from one CGT event until a later CGT event happens. It involves your ownership of one CGT asset ending and you acquiring another one.

124‑5  How to find your way around this Division

             (1)  First, find out if you can obtain a roll‑over when your ownership of one or more CGT assets ends and you acquire one or more CGT assets: see Subdivisions 124‑B to 124‑R.

Note:          If you carry on a small business, you may also be able to obtain a roll‑over under Subdivision 152‑E.

             (2)  Second, find out what the consequences are for being able to obtain a roll‑over: see Subdivision 124‑A.

Note:          The consequences of a scrip for scrip roll‑over are set out in Subdivision 124‑M. The consequences of replacing a statutory licence by a new statutory licence are set out in Subdivision 124‑C. The consequences of an exchange of a membership interest in an MDO are set out in Subdivision 124‑P. The consequences of an exchange of stapled ownership interests are set out in Subdivision 124‑Q. The consequences of a roll‑over for water entitlements are set out in Subdivision 124‑R.

             (3)  Third, find out if there are any special rules relevant to your situation: see the Subdivision under which you can get the roll‑over.

Subdivision 124‑AGeneral rules

Table of sections

124‑10      Your ownership of one CGT asset ends

124‑15      Your ownership of more than one CGT asset ends

124‑20      Share and interest sale facilities

124‑10  Your ownership of one CGT asset ends

             (1)  There are these consequences (in most cases) if you can obtain a roll‑over when your ownership of a *CGT asset (the original asset) ends and you *acquire one or more CGT assets (the new assets) in a situation covered by this Division.

          (1A)  A *car, motor cycle or similar vehicle must not be one of the new assets.

             (2)  A *capital gain or a *capital loss you make from the original asset is disregarded.

             (3)  If you *acquired the original asset on or after 20 September 1985, the first element of each new asset’s *cost base is:

The first element of each new asset’s *reduced cost base is worked out similarly.

Note 1:       In some cases the amount you paid to acquire the new asset also forms part of the first element: see Subdivision 124‑D (about strata title conversion).

Note 2:       There are modifications to the consequences in Subdivision 124‑B (about compulsory acquisition, loss or destruction), Subdivision 124‑C (about statutory licences), Subdivision 124‑J (about Crown leases) and Subdivision 124‑L (about prospecting and mining).

Note 3:       No other elements of the cost base of the new asset are affected by the roll‑over.

Note 4:       There are special indexation rules for roll‑overs: see Division 114.

Note 5:       The reduced cost base may be modified for a roll‑over happening after a demerger: see section 125‑170.

             (4)  If you *acquired the original asset before 20 September 1985, you are taken to have acquired each new asset before that day.

Note:          A capital gain or loss you make from a CGT asset you acquired before 20 September 1985 is generally disregarded: see Division 104. This exemption is removed in some situations: see Division 149.

             (5)  However, subsection (4) is taken never to have applied to a *share to which subsection 104‑195(6) applies (CGT event J4).

124‑15  Your ownership of more than one CGT asset ends

             (1)  There are these consequences (in most cases) if you can obtain a roll‑over when your ownership of more than one *CGT asset (the original assets) ends and you acquire one or more CGT assets (the new assets) in a situation covered by this Division.

Example:    You own 100 shares in a company. The company cancels these shares and issues you with 10 shares in return.

          (1A)  A *car, motor cycle or similar vehicle must not be one of the new assets.

             (2)  A *capital gain or a *capital loss you make from each original asset is disregarded.

             (3)  If you *acquired all the original assets on or after 20 September 1985, the first element of each new asset’s cost base is:

The first element of each new asset’s *reduced cost base is worked out similarly.

Note 1:       No other elements of the cost base of the new asset are affected by the roll‑over.

Note 2:       There are special indexation rules for roll‑overs: see Division 114.

             (4)  If you *acquired all the original assets before 20 September 1985, you are taken to have acquired each new asset before that day.

Note:          A capital gain or loss you make from a CGT asset you acquired before 20 September 1985 is generally disregarded: see Division 104. This exemption is removed in some situations: see Division 149.

             (5)  If you *acquired some of the original assets before 20 September 1985, you are taken to have acquired a number of new assets before that day. It is the maximum possible that does not exceed:

If the result is less than one, none of the new assets are taken to have been *acquired before 20 September 1985.

Example:    To continue the example, suppose you acquired 67 of the 100 original shares before 20 September 1985. The number of new shares that you are taken to have acquired before that day cannot exceed:

                   So, you are taken to have acquired 6 of the 10 shares before that day.

             (6)  These rules are relevant to each remaining new asset. The first element of each one’s *cost base is:

The first element of each one’s *reduced cost base is worked out similarly.

Note:          There are special indexation rules for roll‑overs: see Division 114.

Example:    To continue the example, suppose the total of the cost bases of the 33 shares you acquired on or after 20 September 1985 is $400.

                   The first element of the cost base of each of the remaining 4 shares is:

                   The first element of the reduced cost base of those 4 shares is worked out similarly.

             (7)  However, subsections (4) and (5) are taken never to have applied to a *share to which subsection 104‑195(6) applies (CGT event J4).

124‑20  Share and interest sale facilities

Share and interest sale facilities

             (1)  An entity (the investor) is treated as owning an *ownership interest (the roll‑over interest) in a company or trust (the issuer) at a time (the deeming time), if:

                     (a)  the investor owned an ownership interest (the original interest) in a company or trust; and

                     (b)  a transaction happened in relation to the original interest; and

                     (c)  because:

                              (i)  a *foreign law impedes the ability of the issuer to issue or transfer the roll‑over interest to the investor; or

                             (ii)  it would be impractical or unreasonably onerous to determine whether a foreign law impedes the ability of the issuer to issue or transfer the roll‑over interest to the investor;

                            it is *arranged that the issuer will issue or transfer the roll‑over interest to another entity (the facility) under the transaction instead of to the investor; and

                     (d)  in accordance with that arrangement and as a result of the transaction, the facility:

                              (i)  becomes the owner of the roll‑over interest; and

                             (ii)  owns the roll‑over interest at the deeming time; and

                     (e)  under the arrangement, the investor is entitled to receive from the facility:

                              (i)  an amount equivalent to the *capital proceeds of any *CGT event that happens in relation to the roll‑over interest (less expenses); or

                             (ii)  if a CGT event happens in relation to the roll‑over interest together with CGT events happening in relation to other ownership interests—an amount equivalent to the investor’s proportion of the total capital proceeds of the CGT events (less expenses).

             (2)  The facility is treated as not owning the roll‑over interest at the deeming time.

             (3)  This section applies for the purposes of:

                     (a)  applying one of the following provisions (the roll‑over provision) in relation to the transaction:

                            (iii)  Subdivision 124‑I (Change of incorporation);

                            (iv)  Subdivision 124‑N (Disposal of assets by a trust to a company);

                             (v)  Subdivision 124‑Q (Exchange of stapled ownership interests for ownership interests in a unit trust);

                            (vi)  Division 615 (Roll‑overs for business restructures); and

                     (b)  the following provisions, to the extent that they relate to a roll‑over under the roll‑over provision that involves the transaction:

                              (i)  item 2 of the table in subsection 115‑30(1);

                             (ii)  sections 124‑10 and 124‑15.

Incorporated bodies

             (4)  Without limiting this section, it also has effect, in a case covered by subparagraph (3)(a)(iii) (about Subdivision 124‑I), as if each reference in this section to an *ownership interest in a company or trust were a reference to:

                     (a)  an interest in an incorporated body; and

                     (b)  any rights relating to the body owned by the entity that owns that interest.

             (5)  This section applies, in a case covered by subparagraph (3)(a)(iii) (about Subdivision 124‑I), in relation to rights as a *member of a company incorporated under the Corporations (Aboriginal and Torres Strait Islander) Act 2006 in the same way as it applies in relation to *shares in a company.

Subdivision 124‑BAsset compulsorily acquired, lost or destroyed

Table of sections

When a roll‑over is available

124‑70      Events giving rise to a roll‑over

124‑75      Other requirements if you receive money

124‑80      Other requirements if you receive an asset

The consequences of a roll‑over being available

124‑85      Consequences for receiving money

124‑90      Consequences for receiving an asset

124‑95      You receive both money and an asset

When a roll‑over is available

124‑70  Events giving rise to a roll‑over

             (1)  You may be able to choose a roll‑over if one of these events happens to a *CGT asset (the original asset) you own:

                     (a)  it is compulsorily *acquired by an *Australian government agency;

                    (aa)  it is compulsorily acquired by an entity (other than an Australian government agency or a *foreign government agency) under a power of compulsory acquisition conferred by a law covered under subsection (1A);

                     (b)  it, or part of it, is lost or destroyed;

                     (c)  you *dispose of it to an entity (other than a foreign government agency) in circumstances meeting all of these conditions:

                              (i)  the disposal takes place after a notice was served on you by or on behalf of the entity;

                             (ii)  the notice invited you to negotiate with the entity with a view to the entity acquiring the asset by agreement;

                            (iii)  the notice informed you that if the negotiations were unsuccessful, the asset would be compulsorily acquired by the entity;

                            (iv)  the compulsory acquisition would have been under a power of compulsory acquisition conferred by a law covered under subsection (1A);

                    (ca)  you dispose of it to an entity (other than a foreign government agency) in circumstances meeting all of these conditions:

                              (i)  the asset is land over which a mining lease was compulsorily granted;

                             (ii)  the lease significantly affected your use of the land;

                            (iii)  the lease was in force just before the disposal;

                            (iv)  the entity to which you dispose of the land was the lessee under the lease;

                   (cb)  you dispose of it to an entity (other than a foreign government agency) in circumstances meeting all of these conditions:

                              (i)  the asset is land over which a mining lease would have been compulsorily granted if you had not disposed of it;

                             (ii)  that lease would have significantly affected your use of the land;

                            (iii)  the entity to which you dispose of the land would have been the lessee under the lease.

                     (d)  if it is a lease granted to you by an *Australian government agency under an *Australian law—the lease expires and is not renewed.

Note 1:       There are no roll‑over consequences if you make a capital loss from the event.

Note 2:       Section 103‑25 tells you when you have to make the choice.

          (1A)  A law is covered under this subsection if it is:

                     (a)  an *Australian law (other than Chapter 6A of the Corporations Act 2001); or

                     (b)  a *foreign law (other than a foreign law corresponding to Chapter 6A of the Corporations Act 2001).

             (2)  You must receive money or another *CGT asset (except a *car, motor cycle or similar vehicle), or both:

                     (a)  as compensation for the event happening; or

                     (b)  under an insurance policy against the risk of loss or destruction of the original asset.

Note:          There are other requirements that must be satisfied if:

•       you receive money: see section 124‑75; or

•       you receive another CGT asset: see section 124‑80.

             (3)  The requirement in subsection (4) must be satisfied if:

                     (a)  you are a foreign resident just before the event happens; or

                     (b)  you are the trustee of a trust that is a *foreign trust for CGT purposes for the income year in which the event happens.

             (4)  The original asset must be *taxable Australian property just before the event happens. The other asset must be taxable Australian property just after you *acquire it.

124‑75  Other requirements if you receive money

             (1)  If you receive money for the event happening, you can choose to obtain a roll‑over only if these other requirements are satisfied.

Note:          The roll‑over consequences are set out in section 124‑85.

             (2)  You must:

                     (a)  incur expenditure in *acquiring another *CGT asset (except a *depreciating asset whose decline in value is worked out under Division 40 or deductions for which are calculated under Division 328); or

                     (b)  if part of the original asset is lost or destroyed—incur expenditure of a capital nature in repairing or restoring it.

             (3)  At least some of the expenditure must be incurred:

                     (a)  no earlier than one year, or within such further time as the Commissioner allows in special circumstances, before the event happens; or

                     (b)  no later than one year, or within such further time as the Commissioner allows in special circumstances, after the end of the income year in which the event happens.

Special rules if you acquire another asset

             (4)  If just before the event happened the original asset:

                     (a)  was used in your *business; or

                     (b)  was *installed ready for use in your business; or

                     (c)  was in the process of being *installed ready for use in your business;

the other asset must be used in the business, or be installed ready for use in the business, for a reasonable time after you *acquired it.

                   Otherwise, you must use the other asset (for a reasonable time after you *acquired it) for the same purpose as, or for a similar purpose to, the purpose for which you used the original asset just before the event happened.

             (5)  The other asset cannot become an item of your *trading stock just after you *acquire it, nor can it be a *depreciating asset whose decline in value is worked out under Division 40 or deductions for which are calculated under Division 328.

             (6)  The other asset cannot become a *registered emissions unit *held by you just after you *acquire it.

124‑80  Other requirements if you receive an asset

             (1)  If you receive another *CGT asset for the event happening, you can choose to obtain a roll‑over only if these other requirements are satisfied.

Note:          The roll‑over consequences are set out in section 124‑90.

             (2)  The other asset cannot become an item of your *trading stock just after you *acquire it, nor can it be a *depreciating asset whose decline in value is worked out under Division 40 or deductions for which are calculated under Division 328 nor can it be a *registered emissions unit.

             (3)  The *market value of the other asset (when you *acquire it) must be more than the *cost base of the original asset just before the event happens.

The consequences of a roll‑over being available

124‑85  Consequences for receiving money

             (1)  If you receive money for the event happening, there are these consequences if you choose to obtain a roll‑over.

Original asset acquired on or after 20 September 1985

             (2)  If you make a *capital gain from the event, this table sets out in what situations the gain is reduced, not reduced or disregarded.

                   It also sets out in what situations the expenditure you incurred to *acquire another *CGT asset or to repair or restore the original asset is reduced.

 

You make a capital gain from the event

Item

In this situation:

There are these consequences

1

The money exceeds the expenditure you incurred to *acquire another CGT asset or to repair or restore the original asset

If the gain is more than the excess:

(a) the gain is reduced to the amount by which the money exceeds that expenditure; and

(b) that expenditure is reduced by the amount by which the gain (before it is reduced) is more than the excess

2

The money exceeds that expenditure

If the gain is less than or equal to the excess, the gain is not reduced

3

The money does not exceed that expenditure

The gain is disregarded in working out your *net capital gain or *net capital loss for the income year. That expenditure is reduced by the amount of the gain

Example:    In 1999 Simon bought a small factory. In 2000 a fire destroys part of it. He receives $100,000 under an insurance policy.

                   The capital gain is worked out under section 112‑30.

                   Suppose the factory’s cost base at the time of the fire is $75,000 and the market value of the part that is not destroyed is $150,000. The cost base of the part that is destroyed is:

                   The capital gain is:

                   Case 1

                   Suppose Simon spent $80,000 on repairing the factory. The money he received under the insurance policy exceeds the repair cost by $20,000. The gain exceeds that by $50,000.

                   The result is that the gain is reduced to $20,000 and the $80,000 he spent on repairs is reduced to $30,000.

                   Case 2

                   Suppose Simon spent $15,000 on repairs instead. The money he received under the policy exceeds that amount by $85,000. This is more than the gain he made.

                   The gain is relevant to working out Simon’s net capital gain or loss for the income year and the $15,000 he spent on repairs forms part of the factory’s cost base.

                   Case 3

                   Suppose Simon spent $120,000 on repairs instead. The gain is disregarded and the $120,000 is reduced to $50,000.

Original asset acquired before 20 September 1985

             (3)  If you *acquired the original asset before 20 September 1985 and you incurred expenditure in acquiring another *CGT asset, you are taken to have acquired the other asset before that day if:

                     (a)  the expenditure is not more than 120% of the *market value of the original asset when the event happened; or

                     (b)  a natural disaster happened so that the original asset, or part of it, is lost or destroyed and it is reasonable to treat the other asset as substantially the same as the original asset.

             (4)  If you *acquired the original asset before 20 September 1985 and you incurred expenditure of a capital nature in repairing or restoring it, you are taken to have acquired the original asset (as repaired or restored) before that day.

124‑90  Consequences for receiving an asset

             (1)  If you receive another *CGT asset for the event happening, there are these consequences if you choose to obtain a roll‑over.

             (2)  A *capital gain you make from the original asset is disregarded.

             (3)  If you *acquired the original asset on or after 20 September 1985:

                     (a)  the first element of the other asset’s *cost base is the original asset’s cost base at the time of the event; and

                     (b)  the first element of the other asset’s *reduced cost base is the original asset’s reduced cost base at the time of the event.

Note:          There are special indexation rules for roll‑overs: see Division 114.

Example:    Steven bought land in 1999 for $100,000. In 2001 the government compulsorily acquires the land and gives him new land in return.

                   A capital gain he makes from the original land is disregarded. Suppose the original land’s cost base when it is acquired is $120,000. The first element of the new land’s cost base becomes $120,000.

             (4)  If you acquired the original asset before 20 September 1985, you are taken to have *acquired the other asset before that day.

124‑95  You receive both money and an asset

             (1)  If you receive both money and another *CGT asset for the event happening and choose to obtain a roll‑over, the requirements and consequences are different for each part of the compensation attributable to the original asset (having regard to the amount of money and the *market value of the other asset).

The other asset as a part of compensation

             (2)  The *market value of the other asset (when you *acquire it) must be more than that part of the *cost base of the original asset that is attributable to the new asset.

Note:          This requirement is different to that in subsection 124‑80(3). It requires a proportional attribution of the cost base of the original asset.

             (3)  If you *acquired the original asset on or after 20 September 1985:

                     (a)  the first element of the other asset’s *cost base is that part of the original asset’s cost base at the time of the event that is attributable to the new asset; and

                     (b)  the first element of the other asset’s *reduced cost base is worked out similarly.

Note:          These consequences are different to those in subsection 124‑90(3). They require a proportional attribution of the cost base of the original asset.

             (4)  If you *acquired the original asset before 20 September 1985, you are taken to have acquired the new asset before that day.

Money as a part of compensation

             (5)  If you make a *capital gain from the event, this table sets out in what situations that part of the gain on the original asset that is attributable to the amount of money you received is reduced, not reduced or disregarded.

                   It also sets out in what situations the expenditure you incurred to *acquire another *CGT asset or to repair or restore the original asset is reduced.

 

You make a capital gain from the event

Item

In this situation:

There are these consequences

1

The money exceeds the expenditure you incurred to *acquire another CGT asset or to repair or restore the original asset

If that part of the gain that is attributable to the amount of money is more than the excess:

(a) that part of the gain is reduced to the amount by which the money exceeds that expenditure; and

(b) that expenditure is reduced by the amount by which that part of the gain (before it is reduced) is more than the excess

2

The money exceeds that expenditure

If that part of the gain that is attributable to the amount of money is less than or equal to the excess, the gain is not reduced

3

The money does not exceed that expenditure

That part of the gain that is attributable to the amount of money is disregarded in working out your *net capital gain or *net capital loss for the income year. That expenditure is reduced by the amount of that part of the gain

Note:          These consequences are different to those in subsection 124‑85(2). They require a proportional attribution of capital gain on the original asset.

             (6)  If you *acquired the original asset before 20 September 1985 and you incurred expenditure in acquiring another *CGT asset, you are taken to have acquired the other asset before that day if:

                     (a)  the expenditure you incurred in acquiring the other asset is not more than 120% of the *market value of that part of the original asset that is attributable to the other asset when the event happened; or

                     (b)  a natural disaster happened so that the original asset, or part of it, is lost or destroyed and it is reasonable to treat the other asset as substantially the same as that part of the original asset that is attributable to the new asset.

Note 1:       The consequences in paragraph (6)(a) are different to those in paragraph 124‑85(3)(a). They require a proportional attribution of the market value of the original asset.

Note 2:       The consequences in paragraph (6)(b) are different to those in paragraph 124‑85(3)(b). They require a proportional attribution of the original asset.

Example:    Kris owns land, which he acquired in 1998. It is compulsorily acquired, and Kris receives $80,000 in cash and replacement land with a market value of $80,000.

                   The cost base of the original land is $150,000.

                   Kris buys additional land for $80,000.

                   Subsection (2) is satisfied because the market value of the replacement land ($80,000) is more than the part of the cost base of the original land that is attributable to the replacement land:

                   Applying subsection (5), the other part of the gain is disregarded, and the first element of the cost base of the replacement land is the part of the cost base of the original land that is attributable to the replacement land:

                   Applying subsection (3), the money he received ($80,000) is the same as the expenditure he incurred to buy the additional land. Item 3 in the table applies. The part of the gain that is attributable to that money is disregarded:

                   The expenditure is reduced by $5,000.

Subdivision 124‑CStatutory licences

124‑140  New statutory licences

             (1)  There is a roll‑over if:

                     (a)  your ownership of one or more *statutory licences (each of which is an original licence) ends, resulting in *CGT event C2 happening to the licence (or to each of the licences as part of an *arrangement); and

                     (b)  as a result of the CGT event or events, you are issued one or more new licences (each of which is a new licence) for the original licence (or original licences); and

                     (c)  the new licence authorises (or the new licences taken together authorise) substantially similar activity as that authorised by the original licence (or by the original licences taken together).

Note 1:       If there has been a capital improvement to the original licence: see section 108‑75.

Note 2:       Subdivision 124‑C of the Income Tax (Transitional Provisions) Act 1997 modifies this roll‑over for certain water‑related licences. A separate roll‑over for other water entitlements is provided in Subdivision 124‑R of this Act.

          (1A)  If:

                     (a)  you are a foreign resident just before the *CGT event happens (or just before one or more of the CGT events happens); or

                     (b)  you are the trustee of a trust that is a *foreign trust for CGT purposes for the income year in which the event happens (or for an income year in which one or more of those events happens);

there is no roll‑over under this section unless the conditions in subsection (1B) are satisfied.

          (1B)  The conditions are that:

                     (a)  if there was only one original licence—the licence must be *taxable Australian property just before the *CGT event happens; and

                     (b)  if there was more than one original licence—each original licence must be taxable Australian property just before the CGT event in relation to it happens; and

                     (c)  if there is only one new licence—the licence must be taxable Australian property just after you *acquire it; and

                     (d)  if there is more than one new licence—each new licence must be taxable Australian property just after you acquire it.

             (2)  The first element of the *cost base and *reduced cost base of the new licence includes any amount you paid to get it (which can include giving property: see section 103‑5).

             (3)  A statutory licence is an authority, licence, permit or quota (except a lease or a *mining entitlement or *prospecting entitlement) granted by:

                     (a)  an *Australian government agency under an *Australian law; or

                     (b)  a *foreign government agency under a *foreign law.

124‑145  Rollover consequences—capital gain or loss disregarded

                   A *capital gain or *capital loss you make from the original licence (or from each of the original licences) is disregarded.

124‑150  Rollover consequences—partial roll‑over

             (1)  You can obtain only a partial roll‑over in relation to an original licence if the *capital proceeds for that licence includes something (the ineligible proceeds) other than a new licence or new licences. There is no roll‑over for that part (the ineligible part) of the licence for which you received the ineligible proceeds.

Note:          If there is more than one original licence, some or all of those original licences may each have an ineligible part.

             (2)  The *cost base of the ineligible part is that part of the cost base of the original licence as is reasonably attributable to the ineligible part.

             (3)  The *reduced cost base of the ineligible part is that part of the reduced cost base of the original licence as is reasonably attributable to the ineligible part.

             (4)  For the purposes of sections 124‑155 and 124‑165, for each original licence that has an ineligible part:

                     (a)  reduce the *cost base of that licence (just before the *CGT event that happened in relation to it) by so much of that cost base as is attributable to that ineligible part; and

                     (b)  reduce the *reduced cost base of that licence (just before the CGT event that happened in relation to it) by so much of that reduced cost base as is attributable to that ineligible part.

124‑155  Roll‑over consequences—all original licences were post‑CGT

             (1)  This section applies if you *acquired the original licence (or all of the original licences) on or after 20 September 1985.

             (2)  The first element of the *cost base of the new licence (or of each of the new licences) is such amount as is reasonable having regard to:

                     (a)  the total of the cost bases of all the original licences; and

                     (b)  the number, *market value and character of the original licences; and

                     (c)  the number, market value and character of the new licences.

             (3)  The first element of the *reduced cost base of the new licence (or of each of the new licences) is such amount as is reasonable having regard to:

                     (a)  the total of the reduced cost bases of all the original licences; and

                     (b)  the number, *market value and character of the original licences; and

                     (c)  the number, market value and character of the new licences.

124‑160  Roll‑over consequences—all original licences were pre‑CGT

                   If you *acquired the original licence (or all of the original licences) before 20 September 1985, you are taken to have acquired the new licence (or all of the new licences) before that day.

124‑165  Roll‑over consequences—some original licences were pre‑CGT, others were post‑CGT

             (1)  This section applies if:

                     (a)  there was more than one original licence; and

                     (b)  you *acquired one or more of the original licences before 20 September 1985; and

                     (c)  you acquired one or more of the original licences on or after that day.

             (2)  Each new licence is taken to be 2 separate *CGT assets that are both *statutory licences:

                     (a)  one (which you are taken to have *acquired on or after 20 September 1985) representing the extent to which you acquired the original licences on or after that day; and

                     (b)  another (which you are taken to have acquired before that day) representing the extent to which you acquired the original licences before that day.

             (3)  The first element of the *cost base and *reduced cost base of the *CGT asset mentioned in paragraph (2)(a) in relation to a new licence is worked out under the formula:

where:

market value of all new licences is the total of the *market values of all of the new licences.

market value of new licence is the *market value of the new licence to which the *CGT asset mentioned in paragraph (2)(a) relates.

total post‑CGT cost base is the total of the *cost bases of all the original licences that you *acquired on or after 20 September 1985.

Subdivision 124‑DStrata title conversion

124‑190  Strata title conversion

             (1)  You can choose to obtain a roll‑over if:

                     (a)  you own property that gives you a right to occupy a unit in a building; and

                     (b)  the building’s owner subdivides it into *stratum units; and

                     (c)  the owner transfers to you the stratum unit that corresponds to the unit you had the right to occupy just before the subdivision.

Note 1:       The roll‑over consequences are set out in section 124‑10. The original asset is the property that gave you the right to occupy a unit in the building. The new asset is the stratum unit.

Note 2:       Section 103‑25 tells you when you have to make the choice.

             (2)  The first element of the *cost base and *reduced cost base of the *stratum unit includes any amount you paid to get it (which can include giving property: see section 103‑5).

Note:          The rest of the first element is worked out under Subdivision 124‑A.

             (3)  A stratum unit is a lot or unit (however described in an *Australian law or a *foreign law relating to strata title or similar title) and any accompanying common property.

Subdivision 124‑EExchange of shares or units

Table of sections

124‑240    Exchange of shares in the same company

124‑245    Exchange of units in the same unit trust

124‑240  Exchange of shares in the same company

                   You can choose to obtain a roll‑over if:

                     (a)  you own *shares (the original shares) of a certain class in a company; and

                     (b)  the company redeems or cancels all shares of that class; and

                     (c)  the company issues you with new shares (and you receive nothing else) in substitution for the original shares; and

                     (d)  the *market value of the new shares just after they were issued is at least equal to the market value of the original shares just before they were redeemed or cancelled; and

                     (e)  the *paid‑up share capital of the company just after the new shares were issued is the same as just before the original shares were redeemed or cancelled; and

                      (f)  one of these requirements is satisfied:

                              (i)  you are an Australian resident at the time of the redemption or cancellation; or

                             (ii)  if you are a foreign resident at that time—the original shares were *taxable Australian property just before that time and the new shares are taxable Australian property when they are issued.

Note 1:       The roll‑over consequences are set out in Subdivision 124‑A. The original assets are the original shares. The new assets are the new shares.

Note 2:       Section 103‑25 tells you when you have to make the choice.

124‑245  Exchange of units in the same unit trust

                   You can choose to obtain a roll‑over if:

                     (a)  you own units (the original units) of a certain class in a unit trust; and

                     (b)  the trustee redeems or cancels all units of that class; and

                     (c)  the trustee issues you with new units (and you receive nothing else) in substitution for the original units; and

                     (d)  the *market value of the new units just after they were issued is at least equal to the market value of the original units just before they were redeemed or cancelled; and

                     (e)  one of these requirements is satisfied:

                              (i)  you are an Australian resident at the time of the redemption or cancellation; or

                             (ii)  if you are a foreign resident at that time—the original units were *taxable Australian property just before that time and the new units are taxable Australian property when they are issued.

Note:          The roll‑over consequences are set out in Subdivision 124‑A. The original assets are the original units. The new assets are the new units.

Subdivision 124‑FExchange of rights or options

Table of sections

124‑295    Exchange of rights or option to acquire shares in a company

124‑300    Exchange of rights or option to acquire units in a unit trust

124‑295  Exchange of rights or option to acquire shares in a company

             (1)  You can choose to obtain a roll‑over if:

                     (a)  you own rights (the original rights) to *acquire *shares in a company or to acquire an option to acquire *shares in a company; or

                     (b)  you own an option (the original option) to acquire *shares in a company;

and these other requirements are satisfied.

Note:          Section 103‑25 tells you when you have to make the choice.

             (2)  The *shares must:

                     (a)  be consolidated and divided into new shares of a larger amount; or

                     (b)  be subdivided into new shares of a smaller amount.

             (3)  The company must cancel the original rights or original option because of the consolidation or subdivision.

             (4)  The company must:

                     (a)  issue you with new rights (relating to the new *shares) in substitution for the original rights; or

                     (b)  issue you with a new option (relating to the new shares) in substitution for the original option.

             (5)  You must receive nothing else in substitution for the original rights or original option.

             (6)  The *market value of the new rights or new option just after it was issued must be at least equal to the market value of the original rights or original option just before it was cancelled.

             (7)  One of these requirements must be satisfied:

                     (a)  you must be an Australian resident at the time of the cancellation; or

                     (b)  if you are a foreign resident at that time:

                              (i)  the original rights or original option were *taxable Australian property just before that time; and

                             (ii)  the new rights or new option are taxable Australian property when they are issued.

Note:          The roll‑over consequences are set out in Subdivision 124‑A. The original asset is the original rights or original option. The new asset is the new rights or new option.

124‑300  Exchange of rights or option to acquire units in a unit trust

             (1)  You can choose to obtain a roll‑over if:

                     (a)  you own rights (the original rights) to *acquire units in a unit trust or to acquire an option to acquire units in a unit trust; or

                     (b)  you own an option (the original option) to acquire units in a unit trust;

and these other requirements are satisfied.

Note:          Section 103‑25 tells you when you have to make the choice.

             (2)  The units must:

                     (a)  be consolidated and divided into new units of a larger amount; or

                     (b)  be subdivided into new units of a smaller amount.

             (3)  The trustee must cancel the original rights or original option because of the consolidation or subdivision.

             (4)  The trustee must:

                     (a)  issue you with new rights (relating to the new units) in substitution for the original rights; or

                     (b)  issue you with a new option (relating to the new units) in substitution for the original option.

             (5)  You must receive nothing else in substitution for the original rights or original option.

             (6)  The *market value of the new rights or new option just after it was issued must be at least equal to the market value of the original rights or original option just before it was cancelled.

             (7)  One of these requirements must be satisfied:

                     (a)  you must be an Australian resident at the time of the cancellation; or

                     (b)  if you are a foreign resident at that time:

                              (i)  the original rights or original option were *taxable Australian property just before that time; and

                             (ii)  the new rights or new option are taxable Australian property when they are issued.

Note:          The roll‑over consequences are set out in Subdivision 124‑A. The original asset is the original rights or original option. The new asset is the new rights or new option.

Subdivision 124‑IChange of incorporation

Guide to Subdivision 124‑I

124‑510  What this Subdivision is about

Roll‑over relief is available for members of a body that is incorporated under one law and is converted to, or replaced with, a body incorporated under another law.

Table of sections

Object of this Subdivision

124‑515    Object of this Subdivision

Change of incorporation without change of entity

124‑520    Change of incorporation without change of entity

Old corporation wound up

124‑525    Old corporation wound up

Special consequences of some roll‑overs

124‑530    Shares in company replacing pre‑CGT and post‑CGT mix of interest and rights in body

124‑535    Rights as member of Indigenous corporation replacing pre‑CGT and post‑CGT mix of interest and rights in body

Object of this Subdivision

124‑515  Object of this Subdivision

                   The object of this Subdivision is to ensure that CGT considerations for *members of a body incorporated under a law do not impede a change of incorporation involving converting the body to, or replacing it with, a company incorporated under:

                     (a)  the Corporations Act 2001 or a similar *foreign law; or

                     (b)  the Corporations (Aboriginal and Torres Strait Islander) Act 2006.

Note:          Subdivision 620‑A provides a roll‑over for the assets of the body.

Change of incorporation without change of entity

124‑520  Change of incorporation without change of entity

             (1)  This section applies if:

                     (a)  you are a *member of a body incorporated under a law described in column 1 of an item of the table; and

                     (b)  the body is converted into a company incorporated under a law described in column 2 of the item, without creating a new legal entity; and

                     (c)  it is reasonable to conclude that there is no significant difference:

                              (i)  between the ownership of the body, and of rights relating to the body held by entities that owned the body, just before the conversion and the ownership of the company just after the conversion; or

                             (ii)  between the mix of ownership of the body, and of rights relating to the body held by entities that owned the body, just before the conversion and the mix of ownership of the company just after the conversion.

Note:       See section 124‑20 if an entity uses a share or interest sale facility.

 

Laws the body and company are incorporated under

 

Column 1

Body incorporated under this law

Column 2

Company incorporated under this law

1

A law other than the Corporations Act 2001 and a similar *foreign law relating to companies

The Corporations Act 2001 or a similar foreign law relating to companies

2

A law other than the Corporations (Aboriginal and Torres Strait Islander) Act 2006

The Corporations (Aboriginal and Torres Strait Islander) Act 2006

             (2)  You can choose to obtain a roll‑over if:

                     (a)  as a result of the conversion you are issued with *shares in the company and you receive nothing else; and

                     (b)  either you are an Australian resident at the time of the conversion or, if you are a foreign resident at that time:

                              (i)  each of your interest and your other rights (if any) relating to the body was *taxable Australian property just before that time; and

                             (ii)  the shares are taxable Australian property when they are issued.

Note 1:       The roll‑over consequences are set out in Subdivision 124‑A and section 124‑530.

Note 2:       Section 103‑25 tells you when you have to make the choice.

             (3)  If the company is incorporated under the Corporations (Aboriginal and Torres Strait Islander) Act 2006, subsection (2) applies in relation to rights as a *member of the company in the same way as that subsection applies to *shares in a company.

Note:          This may allow you to choose to obtain a roll‑over. The roll‑over consequences are set out in Subdivision 124‑A and section 124‑535.

Exception for demutualisation of certain bodies

             (4)  This section does not apply to demutualisation of a body if Division 326 in Schedule 2H to the Income Tax Assessment Act 1936 applies to the demutualisation.

Note:          That Division deals with demutualisation of entities other than insurance companies and health insurers.

Old corporation wound up

124‑525  Old corporation wound up

             (1)  This section applies if:

                     (a)  a body is incorporated under a law described in column 1 of an item of the table; and

                     (b)  a company is incorporated under a law described in column 2 of the item; and

                     (c)  the body ceases to exist, but the company continues to exist, after the time (the switch time) the *members of the body receive *shares in the company, or rights as members of it if it is incorporated under the Corporations (Aboriginal and Torres Strait Islander) Act 2006, on account of:

                              (i)  their interests in the body; and

                             (ii)  their other rights (if any) relating to the body; and

                     (d)  the members of the body do not receive anything else on account of the expected ending of those interests and rights; and

                     (e)  it is reasonable to conclude that there is no significant difference:

                              (i)  between the ownership of the body, and of rights relating to the body held by entities that owned the body, just before the switch time and the ownership of the company just after the switch time; or

                             (ii)  between the mix of ownership of the body, and of rights relating to the body held by entities that owned the body, just before the switch time and the mix of ownership of the company just after the switch time; and

Note:       See section 124‑20 if an entity uses a share or interest sale facility.

                      (f)  the body *disposes of all its *CGT assets to the company, except any assets expected to be needed to meet the body’s existing or expected liabilities before it ceases to exist.

 

Laws the body and company are incorporated under

 

Column 1

Body incorporated under this law

Column 2

Company incorporated under this law

1

A law other than the Corporations Act 2001 and a similar *foreign law relating to companies

The Corporations Act 2001 or a similar foreign law relating to companies

2

A law other than the Corporations (Aboriginal and Torres Strait Islander) Act 2006

The Corporations (Aboriginal and Torres Strait Islander) Act 2006

             (2)  You can choose to obtain a roll‑over if:

                     (a)  you were a *member of the body just before the switch time; and

                     (b)  your ownership of your interest in the body ends at a time (the end time) after the switch time; and

                     (c)  at the end time you have the *shares in the company that you received at the switch time; and

                     (d)  either you are an Australian resident at the end time or, if you are a foreign resident at the end time:

                              (i)  each of your interest in the body and your other rights (if any) relating to the body was *taxable Australian property just before the end time; and

                             (ii)  the shares in the company that you received at the switch time are taxable Australian property at the end time.

Note 1:       The roll‑over consequences are set out in Subdivision 124‑A and section 124‑530.

Note 2:       Section 103‑25 tells you when you have to make the choice.

             (3)  If the company is incorporated under the Corporations (Aboriginal and Torres Strait Islander) Act 2006, subsection (2) applies in relation to rights as a *member of the company in the same way as that subsection applies to *shares in a company.

Note:          This may allow you to choose to obtain a roll‑over. The roll‑over consequences are set out in Subdivision 124‑A and section 124‑535.

Special consequences of some roll‑overs

124‑530  Shares in company replacing pre‑CGT and post‑CGT mix of interest and rights in body

             (1)  This section applies if:

                     (a)  you choose to obtain a roll‑over under section 124‑520 or 124‑525 relating to *shares you have in the company on account of the following (your original assets):

                              (i)  your interest in the body mentioned in that section;

                             (ii)  your other rights relating to the body mentioned in that section; and

                     (b)  you *acquired some of your original assets before 20 September 1985 and the rest of them on or after that day.

             (2)  You are taken to have *acquired so many of the *shares before 20 September 1985 as is reasonable, having regard to:

                     (a)  the number and *market value of your original assets; and

                     (b)  the number and market value of the shares.

             (3)  The first element of the *cost base of each of the *shares not taken by subsection (2) to have been *acquired before 20 September 1985 (your post‑CGT shares) is such amount as is reasonable having regard to:

                     (a)  the total of the cost bases of your original assets that you acquired on or after 20 September 1985; and

                     (b)  the number and *market value of your post‑CGT shares.

             (4)  The reduced cost base of each of your post‑CGT shares is worked out similarly.

             (5)  This section has effect despite subsections 124‑15(5) and (6).

124‑535  Rights as member of Indigenous corporation replacing pre‑CGT and post‑CGT mix of interest and rights in body

             (1)  This section applies if:

                     (a)  you choose to obtain a roll‑over under section 124‑520 or 124‑525 relating to rights (the replacement rights) you have as a *member of a company incorporated under the Corporations (Aboriginal and Torres Strait Islander) Act 2006 on account of the following (your original assets):

                              (i)  your interest in the body mentioned in that section;

                             (ii)  your other rights relating to the body mentioned in that section; and

                     (b)  you *acquired any of your original assets before 20 September 1985.

             (2)  You are taken to have *acquired the replacement rights before 20 September 1985.

             (3)  This section has effect despite subsection 124‑15(5).

Subdivision 124‑JCrown leases

Guide to Subdivision 124‑J

124‑570  What this Subdivision is about

This Subdivision sets out the situations in which the holder of a Crown lease over land obtains a replacement asset roll‑over when the lease is, among other things, renewed, extended or converted to an estate in fee simple.

Table of sections

Operative provisions

124‑575    Extension or renewal of Crown lease

124‑580    Meaning of Crown lease

124‑585    Original right differs in area from new right

124‑590    Part of original right excised

124‑595    Treating parts of new right as separate assets

124‑600    What is the roll‑over?

124‑605    Change of lessor

Operative provisions

124‑575  Extension or renewal of Crown lease

             (1)  There is a roll‑over if:

                     (a)  you hold one or more *CGT assets that are *Crown leases over land (the original right); and

                     (b)  the original right expires or you surrender it; and

                     (c)  you are granted one or more new Crown leases over land or one or more estates in fee simple in land, or both (the new right); and

                     (d)  the new right relates to the same land as the original right.

Note 1:       The roll‑over consequences are set out in Subdivision 124‑A. They might be modified: see section 124‑600.

Note 2:       If there has been a capital improvement to the Crown lease: see section 108‑75.

             (2)  The new right must have been granted in one of these ways:

                     (a)  by renewing or extending the term of the original right where the renewal or extension is mainly due to your having held the original right; or

                     (b)  by changing the purpose for which the land to which the original right related can be used; or

                     (c)  by converting the original right to a *Crown lease in perpetuity; or

                     (d)  by converting the original right to an estate in fee simple; or

                     (e)  by consolidating, or consolidating and dividing, the original right; or

                      (f)  by subdividing the original right; or

                     (g)  by excising or relinquishing a part of the land to which the original right related; or

                     (h)  by expanding the area of that land.

124‑580  Meaning of Crown lease

                   A Crown lease is:

                     (a)  a lease of land granted by the Crown under an *Australian law (other than the common law); or

                     (b)  a similar lease granted under a *foreign law.

124‑585  Original right differs in area from new right

             (1)  Even if the new right relates to different land to that to which the original right related, this Subdivision applies as if it relates to the same land in these cases:

                     (a)  the difference in area is not significant;

                     (b)  the difference in *market value is not significant;

                     (c)  the new right was granted to correct errors in or omissions from the original right;

                     (d)  the new right relates to a significantly different area of land but you had made reasonable efforts to ensure that the area was the same;

                     (e)  it is otherwise reasonable for this Subdivision to apply in that way.

             (2)  However, the rule in subsection (1) does not apply if section 124‑590 applies.

124‑590  Part of original right excised

             (1)  There is a partial roll‑over if you *acquired the original right on or after 20 September 1985 and:

                     (a)  the land to which the new right relates is different in area to the land the subject of the original right because a part (the excised part) of the land to which the original right related was excised or you relinquished it; and

                     (b)  you received a payment for the expiry or surrender of the original right.

The payment can include giving property: see section 103‑5.

Note:          Section 124‑600 sets out the effect on your cost base.

             (2)  There is no roll‑over for the excised part. The *cost base of the excised part is so much of the *cost base of the relevant *Crown lease as is attributable to the excised part.

                   Its *reduced cost base is worked out similarly.

Note:          You may make a capital gain or loss on the excised part because of CGT event C2.

124‑595  Treating parts of new right as separate assets

             (1)  Each part of a *Crown lease or an estate in fee simple that is part of the new right is taken to be a separate *CGT asset to the extent that it relates to:

                     (a)  land to which a Crown lease (that was part of the original right) related where you *acquired the lease before 20 September 1985; and

                     (b)  land to which a Crown lease (that was part of the original right) related where you acquired the lease on or after 20 September 1985; and

                     (c)  other land.

             (2)  You are taken to have *acquired each asset that is a separate *CGT asset because of paragraph (1)(a) before 20 September 1985.

124‑600  What is the roll‑over?

             (1)  The roll‑over is mainly as specified in Subdivision 124‑A.

             (2)  However, you work out the *cost base and *reduced cost base of *CGT assets (that you are not taken to have *acquired before 20 September 1985) and that are part of the new right a bit differently where section 124‑590 or 124‑595 applies.

             (3)  The first element of your *cost base for each of those assets is:

where:

CB of post‑CGT original right is the sum of the *cost bases of the *Crown leases (that were part of the original right) and that you *acquired on or after 20 September 1985 (just before the original right expired or was surrendered) reduced, if there is an excised part, by so much of those cost bases as is attributable to the excised part.

market value of all new assets is the *market value of all *CGT assets (that you are not taken to have *acquired before 20 September 1985) that are part of the new right just after you acquired them.

market value of separate asset is the *market value of the particular asset just after you *acquired it.

             (4)  The first element of the *reduced cost base of each of those assets is worked out similarly.

124‑605  Change of lessor

             (1)  You treat a lease of land (whether or not it is a *Crown lease) granted to you (the fresh lease) as being a renewal of your original right if:

                     (a)  after the grant of the original right, the land (the original land) to which it related became vested in an *Australian government agency (other than the one that granted the original right); and

                     (b)  the second agency granted you the fresh lease over:

                              (i)  the original land; or

                             (ii)  the original land less an excised area; or

                            (iii)  the original land and other land; and

                     (c)  the fresh lease was granted under an *Australian law (other than the common law).

             (2)  You do this even if there is a period between the end of the original right and the grant of the fresh lease if you continued to occupy the original land during that period under a permission, licence or authority granted by the second agency.

Subdivision 124‑KDepreciating assets

Table of sections

124‑655    Roll‑over for depreciating assets

124‑660    Right granted to associate

124‑655  Roll‑over for depreciating assets

                   There is a roll‑over for a *depreciating asset if:

                     (a)  the asset is attached to land you hold under a *quasi‑ownership right granted by an *exempt Australian government agency or an *exempt foreign government agency; and

                     (b)  you *hold the asset because of section 40‑40; and

                     (c)  the quasi‑ownership right expires or is terminated or you surrender it; and

                     (d)  you are granted a new quasi‑ownership right over the land or an estate in fee simple in the land; and

                     (e)  there is no roll‑over for you under Subdivision 124‑J (about Crown leases) or Subdivision 124‑L (about prospecting and mining entitlements).

Note 1:       The roll‑over consequences are set out in Subdivision 124‑A.

Note 2:       This section provides a roll‑over for a depreciating asset in the limited circumstances where Subdivision 124‑J cannot because a quasi‑ownership right over land covers situations that a Crown lease does not (for example, an easement over land).

Note 3:       If there has been a capital improvement to the quasi‑ownership right: see section 108‑75.

124‑660  Right granted to associate

                   If the *quasi‑ownership right or estate in fee simple is instead granted to an *associate or an *associated government entity of yours:

                     (a)  your *reduced cost base of the *depreciating asset is reduced by the *adjustable value of the asset just before the original quasi‑ownership right expired or was surrendered or terminated; and

                     (b)  there is no roll‑over.

Subdivision 124‑LProspecting and mining entitlements

Guide to Subdivision 124‑L

124‑700  What this Subdivision is about

This Subdivision sets out the situations in which there is a roll‑over if a prospecting or mining entitlement expires or is surrendered and it is replaced by a new one.

Table of sections

Operative provisions

124‑705    Extension or renewal of prospecting or mining entitlement

124‑710    Meaning of prospecting entitlement and mining entitlement

124‑715    Original entitlement differs in area from new entitlement

124‑720    Part of original entitlement excised

124‑725    Treating parts of new entitlement as separate assets

124‑730    What is the roll‑over?

Operative provisions

124‑705  Extension or renewal of prospecting or mining entitlement

             (1)  There is a roll‑over if:

                     (a)  you hold one or more *CGT assets that are *prospecting entitlements or *mining entitlements (the original entitlement); and

                     (b)  the original entitlement expires or you surrender it; and

                     (c)  you are granted one or more new prospecting entitlements or mining entitlements (the new entitlement); and

                     (d)  the new entitlement relates to the same land as the original entitlement.

Note 1:       The roll‑over consequences are set out in Subdivision 124‑A. They might be modified: see section 124‑730.

Note 2:       If there has been a capital improvement to the entitlement: see section 108‑75.

             (2)  The new entitlement must have been granted in one of these ways:

                     (a)  by renewing or extending the term of the original entitlement where the renewal or extension is mainly due to your having held the original entitlement; or

                     (b)  by consolidating, or consolidating and dividing, the original entitlement; or

                     (c)  by subdividing the original entitlement; or

                     (d)  by converting a *prospecting entitlement to a *mining entitlement, or a mining entitlement to a prospecting entitlement; or

                     (e)  by excising or relinquishing a part of the land to which the original entitlement related; or

                      (f)  by expanding the area of that land.

124‑710  Meaning of prospecting entitlement and mining entitlement

             (1)  A prospecting entitlement is:

                     (a)  an authority, licence, permit or entitlement under an *Australian law or *foreign law to prospect or explore for *minerals in an area; or

                    (aa)  an authority, licence, permit or entitlement under an Australian law to prospect or explore for *geothermal energy resources in an area; or

                     (b)  a lease of land that allows the lessee to prospect or explore for minerals or geothermal energy resources on the land; or

                     (c)  an interest in a thing referred to in paragraph (a), (aa) or (b).

             (2)  A mining entitlement is:

                     (a)  an authority, licence, permit or entitlement under an *Australian law or *foreign law to mine for *minerals in an area; or

                    (aa)  an authority, licence, permit or entitlement under an Australian law to extract energy from *geothermal energy resources in an area; or

                     (b)  a lease of land that allows the lessee to mine for minerals, or extract energy from geothermal energy resources, on the land; or

                     (c)  an interest in a thing referred to in paragraph (a), (aa) or (b).

124‑715  Original entitlement differs in area from new entitlement

             (1)  Even if the new entitlement relates to different land to that to which the original entitlement related, this Subdivision applies as if it relates to the same land in these cases:

                     (a)  the difference in area is not significant;

                     (b)  the difference in *market value is not significant;

                     (c)  the new entitlement was granted to correct errors in or omissions from the original entitlement;

                     (d)  it is otherwise reasonable for this Subdivision to apply in that way.

             (2)  However, the rule in subsection (1) does not apply if section 124‑720 applies.

124‑720  Part of original entitlement excised

             (1)  There is partial roll‑over if you *acquired the original entitlement on or after 20 September 1985 and:

                     (a)  the land to which the new entitlement relates is different in area to the land the subject of the original entitlement because a part (the excised part) of the land to which the original entitlement related was excised or you relinquished it; and

                     (b)  you received a payment for the expiry or surrender of the original entitlement.

The payment can include giving property: see section 103‑5.

Note:          Section 124‑730 sets out the effect on your cost base.

             (2)  There is no roll‑over for the excised part. The *cost base of the excised part is so much of the *cost base of the original entitlement as is attributable to the excised part.

                   Its *reduced cost base is worked out similarly.

Note:          You may make a capital gain or loss on the excised part because of CGT event C2.

124‑725  Treating parts of new entitlement as separate assets

             (1)  Each part of a *prospecting entitlement or *mining entitlement that is part of the new entitlement is taken to be a separate *CGT asset to the extent that it relates to:

                     (a)  land to which a prospecting entitlement or mining entitlement (that was part of the original entitlement) related where you *acquired the entitlement before 20 September 1985; and

                     (b)  land to which a prospecting entitlement or mining entitlement (that was part of the original entitlement) related where you acquired the entitlement on or after 20 September 1985; and

                     (c)  other land.

             (2)  You are taken to have *acquired each asset that is a separate *CGT asset because of paragraph (1)(a) before 20 September 1985.

124‑730  What is the roll‑over?

             (1)  The roll‑over is mainly as specified in Subdivision 124‑A.

             (2)  However, you work out the *cost base and *reduced cost base of *CGT assets (that you are not taken to have *acquired before 20 September 1985) and that are part of the new entitlement a bit differently where section 124‑720 or 124‑725 applies.

             (3)  The first element of your *cost base for each of those assets is:

where:

CB of post‑CGT original entitlement is the sum of the *cost bases of the prospecting entitlements or mining entitlements (that were part of the original entitlement) and that you *acquired on or after 20 September 1985 (just before the original entitlement expired or was surrendered) reduced, if there is an excised part, by so much of those cost bases as is attributable to the excised part.

market value of all new assets is the *market value of all *CGT assets (that you are not taken to have *acquired before 20 September 1985) that are part of the new entitlement just after you acquired them.

market value of separate asset is the *market value of the particular asset just after you *acquired it.

             (4)  The first element of the *reduced cost base of each of those assets is worked out similarly.

Subdivision 124‑MScrip for scrip roll‑over

Guide to Subdivision 124‑M

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

124‑781    Replacement of trust interests

124‑782    Transfer or allocation of cost base of shares acquired by acquiring entity etc.

124‑783    Meaning of significant stakeholder, common stakeholder, significant stake and common stake

124‑783A Rights that affect stakes

124‑784    Cost base of equity or debt given within acquiring group

124‑784A When arrangement is a restructure

124‑784B  What is the cost base and reduced cost base when arrangement is a restructure?

124‑784C  Cost base of equity or debt given within acquiring group

124‑785    What is the roll‑over?

124‑790    Partial roll‑over

124‑795    Exceptions

124‑800    Interest received for pre‑CGT interest

124‑810    Certain companies and trusts not regarded as having 300 members or beneficiaries

Operative provisions

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) or (2A); 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 include something other than its replacement interest: see section 124‑790.

Note 3:       A trustee who gets a roll‑over under this Subdivision for an original interest consisting of shares issued as part of a demutualisation may be eligible for a further roll‑over under Subdivision 126‑E when a beneficiary becomes absolutely entitled to the replacement shares.

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:

•       a company takeover, whether or not it is regulated by the Corporations Act 2001, resulting in a company owning 80% or more of another company’s shares.

•       a scheme of arrangement governed by the Corporations Act 2001 that involves a cancellation of some interests in an original entity resulting in another entity owning 80% or more of the interests in the original entity.

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 Act 2001 affect the capital proceeds that each participant can receive.

Conditions for arrangement—takeover bids and arrangements

          (2A)  The *arrangement must:

                     (a)  satisfy paragraph (2)(a); and

                     (b)  be, be part of, or include one or more of the following:

                              (i)  a takeover bid (within the meaning of the Corporations Act 2001) for the original interests by the acquiring entity that is not carried out in contravention of the provisions mentioned in paragraphs 612(a) to (g) of that Act;

Note:       For exemption and modification of provisions by ASIC (and review by the takeovers panel) see Part 6.10 of the Corporations Act 2001. For Court declarations excusing contraventions see section 1325D of that Act.

                             (ii)  a compromise or arrangement entered into by the original entity under Part 5.1 of the Corporations Act 2001, approved by order of a court made for the purposes of paragraph 411(4)(b) of that Act.

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; and

                      (f)  if an acquiring entity is a member of a wholly‑owned group—no member of the group issues equity (other than a replacement interest), or owes new debt, under the arrangement:

                              (i)  to an entity that is not a member of the group; and

                             (ii)  in relation to the issuing of the replacement interest.

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 stock market operated by ASX Limited, 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 and the replacement 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 the replacement 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) or (2A); 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 include 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 arrangement—takeover bids

          (2A)  The *arrangement must:

                     (a)  satisfy paragraph (2)(a); and

                     (b)  be, be part of, or include a takeover bid (within the meaning of the Corporations Act 2001) for the original interests by the acquiring entity that is not carried out in contravention of the provisions mentioned in paragraphs 612(a) to (g) of that Act.

Note:       For exemption and modification of provisions by ASIC (and review by the takeovers panel) see Part 6.10 of the Corporations Act 2001. For Court declarations excusing contraventions see section 1325D of that Act.

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 stock market operated by ASX Limited, 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 a member of an acquiring wholly‑owned group by another member of the group 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.

124‑783  Meaning of significant stakeholder, common stakeholder, significant stake and common stake

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.

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 30% or more of any *dividends that the company may pay; or

                     (c)  have at that time the right to receive 30% or more of any distribution of capital of the company.

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 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 replacement 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 replacement 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 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 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 replacement 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 replacement 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 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 80% or more of any distribution to beneficiaries of the replacement entity of income or capital of that entity.

124‑783A  Rights that affect stakes

             (1)  An entity has a significant stake in another entity if:

                     (a)  the first entity has one or more *stake options in the other entity; and

                     (b)  the first entity would have such a stake (under section 124‑783) if the first entity acquired *stake interests in the other entity under any of those stake options.

Note:       Paragraph (b) is satisfied if there are any circumstances (e.g. the first entity exercises some but not all of the stake options) in which the first entity would have a significant stake in the other entity, even if in other circumstances the first entity would not have such a stake.

             (2)  An entity, or 2 or more entities, have a common stake in the original entity just before the *arrangement started and in the replacement entity just after the arrangement was completed if:

                     (a)  the entities:

                              (i)  had one or more *stake options in the original entity before the arrangement started; or

                             (ii)  have one or more stake options in the replacement entity; and

                     (b)  the entities would have such stakes (under section 124‑783) if:

                              (i)  the entities had acquired *stake interests in the original entity under any of the stake options mentioned in subparagraph (a)(i); or

                             (ii)  the entities acquired stake interests in the replacement entity under some or all of the stake options mentioned in subparagraph (a)(ii).

             (3)  Something is a stake option an entity has in another entity if it gives the first entity, or its *associates, a right to acquire the following (stake interests):

                     (a)  if the other entity is a company:

                              (i)  voting rights in the company; or

                             (ii)  the right to receive any part of any *dividends that the company may pay; or

                            (iii)  the right to receive any part of any distribution of capital of the company;

                     (b)  if the other entity is a trust—the right to receive any part of any distribution to beneficiaries of the trust of income or capital of the trust;

and the acquisition could occur before the end of 5 years after the *arrangement was completed.

Example 1: An option.

Example 2: A share that gives a voting right that is temporarily supressed.

             (4)  For the purposes of subsection (1), treat the reference in subparagraph (3)(a)(i) to voting rights as being a reference to *shares carrying voting rights.

             (5)  This section does not limit subsections 124‑783(6) to (10).

124‑784  Cost base of equity or debt given within acquiring group

Purpose

             (1)  This section allocates an appropriate *cost base to equity issued, or new debt owed, under the *arrangement, by a member of a *wholly‑owned group to another member (the recipient) of the group, if:

                     (a)  the acquiring entity is a member of the group; and

                     (b)  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 recipient 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.

124‑784A  When arrangement is a restructure

             (1)  This section applies in relation to a single *arrangement if:

                     (a)  the replacement entity for the arrangement knows, or could reasonably be expected to know:

                              (i)  that a roll‑over under section 124‑780 or 124‑781 has been, or will be, obtained in relation to the arrangement; and

                             (ii)  that there is a *common stakeholder for the arrangement (disregarding subsections 124‑783(4) and (5)); and

                     (b)  subsection (2) is satisfied for the arrangement.

Note:          If this section applies, the first element of the cost base and reduced cost base of interests in the original entity acquired under the arrangement is worked out under section 124‑784B.

             (2)  This subsection is satisfied for the *arrangement if the result of step 2 is more than 80% of the result of step 3.

Method statement

Step 1.   Add up the *market value just after the *arrangement was completed (the completion time) of all of the replacement interests issued by the replacement entity under the arrangement in exchange for the following interests (the qualifying interests):

               (a)     original interests in the original entity;

              (b)     any interests issued by the original entity to an acquiring entity under the arrangement in respect of other original interests in the original entity cancelled under the arrangement.

Step 2.   Add to the result of step 1 the *market value at the completion time of all of the replacement interests issued by the replacement entity under any earlier arrangement for which this section applied in exchange for qualifying interests in the original entity.

Step 3.   Add up the *market value at the completion time of all of the:

               (a)     if the replacement entity is a company—*shares *on issue by the replacement entity; and

              (b)     if the replacement entity is a company—options, rights and similar interests issued by the replacement entity that give the holder an entitlement to acquire a share in the replacement entity at or after the completion time; and

               (c)     if the replacement entity is a trust—units or other interests in the replacement entity; and

              (d)     if the replacement entity is a trust—options, rights or similar interests issued by the replacement entity that gives the holder an entitlement to acquire a unit or other interest in the replacement entity at or after the completion time.

Application if an entity is listed

             (3)  For the purposes of:

                     (a)  subsection (2); and

                     (b)  step 5 of the method statement in subsection 124‑784B(2);

if interests in an entity are listed for quotation in the official list of an *approved stock exchange at the completion time, then the replacement entity may choose that the *market value at that time of an interest in the first‑mentioned entity is taken to be the *officially quoted price of the interest at that time.

Application if more than one original entity

             (4)  If qualifying interests in more than one original entity are *acquired under the *arrangement, then, for the purposes of subsections (1) and (2):

                     (a)  those interests of each of those original entities are taken to have been acquired under separate arrangements; and

                     (b)  those separate arrangements are taken to have happened in the same order as the acquisitions.

             (5)  If qualifying interests in more than one original entity:

                     (a)  would be taken by subsection (4) to have been *acquired under separate *arrangements happening at the same time; or

                     (b)  are acquired under separate arrangements that commence at the same time;

then, for the purposes of subsections (1) and (2), the replacement entity must choose the order in which those separate arrangements are to have happened.

Meaning of officially quoted price

             (6)  An interest in an entity has an officially quoted price at a particular time if, during the one week period starting on the day in which that time occurred, there was at least one transaction on the relevant stock exchange in interests of that class. That price is the weighted average of the prices at which those interests were traded on that stock exchange during that period.

             (7)  For the purposes of subsection (6), if an interest is quoted on 2 or more *approved stock exchanges on that day, the officially quoted price of the interest is determined under subsection (6) in respect of whichever of those the entity chooses.

124‑784B  What is the cost base and reduced cost base when arrangement is a restructure?

             (1)  This section applies in relation to each qualifying interest in the original entity:

                     (a)  *acquired by an acquiring entity under an *arrangement to which section 124‑784A applies; and

                     (b)  for which the first element of the *cost base of the acquiring entity is not worked out under section 124‑782.

Note:          Section 124‑782 applies when an original interest holder is a significant stakeholder or a common stakeholder.

First element of cost base—qualifying interests acquired in exchange for replacement interests only

             (2)  The first element of the *cost base of the acquiring entity for the qualifying interest in the original entity is worked out as follows:

Method statement

Step 1.   Add up:

               (a)     the *market value, at the completion time, of the original entity’s *pre‑CGT assets (except *trading stock); and

              (b)     the *cost bases, at the completion time, of the original entity’s *post‑CGT assets (except trading stock); and

               (c)     for the original entity’s *CGT assets (except trading stock) that had no cost base—the maximum amount of consideration the original entity would need to receive if it were to dispose, at the completion time, of those assets without an amount being assessable income of, or deductible to, the original entity; and

              (d)     the amount worked out under steps 2 and 3.

Step 2.   For the original entity’s *trading stock, add up:

               (a)     the *value of the trading stock at the start of the income year containing the completion time; and

              (b)     for *livestock acquired by natural increase during that income year but before the completion time—the *cost of that livestock; and

               (c)     the amount of any outgoing incurred in connection with acquiring an item of trading stock during that income year but before the completion time (except livestock acquired by natural increase); and

              (d)     the amount of any outgoings forming part of the cost of the trading stock incurred by the entity during its current holding of the trading stock but before the completion time.

Step 3.   For any asset of the original entity not covered by steps 1 and 2, work out the amount that would be the asset’s *cost base at the completion time if it were a *CGT asset.

Step 4.   Subtract from the result of step 1 the original entity’s liabilities (if any) at the completion time in respect of those assets.

Step 5.   If there is one class of *membership interests in the original entity, divide the result of step 4 by the total number of those membership interests at the completion time.

              If there are 2 or more classes of membership interests in the original entity, allocate a portion of the result of step 4 to each class in proportion to the *market value of all the membership interests in that class and divide that result by the total number of membership interests in that class at the completion time.

Note 1:       For the purposes of this subsection, Division 701 (Core rules for consolidated groups) is disregarded for an original entity that becomes a subsidiary member of a consolidated group or MEC group under the arrangement (see paragraph 715‑910(1)(a)).

Note 2:       If the original entity is the head company of a consolidated group or MEC group, then subsection 701‑1(1) (the single entity rule) and section 701‑5 (the entry history rule) apply in relation to that group when working out steps 1 and 2 (see subsection 715‑910(2)).

Note 3:       For step 5, the replacement entity may choose to use the officially quoted price of the qualifying interests as their market value (see subsection 124‑784A(3)).

First element of cost base—interests acquired in exchange for replacement interests and cash etc.

             (3)  However, if the qualifying interest was acquired under the *arrangement partly in exchange for one or more replacement interests and partly for something else, subsection (2) applies only for working out the first element of that part of the *cost base of the qualifying interest that is attributable to the replacement interests.

Note 1:       This means that the acquiring entity will have to apportion the cost base amount worked out under subsection (2) according to the relative values of the replacement interests and the other component.

Note 2:       The first element of that part of the cost base, and reduced cost base, of the qualifying interest that is attributable to cash etc. is worked out using the general rules about cost base.

Liabilities

             (4)  For the purposes of step 4 of subsection (2), a liability of the original entity that is not a liability in respect of a specific asset or assets of the entity is taken to be a liability in respect of all the assets of the entity.

             (5)  If a liability is in respect of 2 or more assets, the proportion of the liability that is in respect of any one of those assets is equal to:

First element of reduced cost base

             (6)  The first element of the *reduced cost base of the acquiring entity for the qualifying interest in the original entity is worked out similarly.

Rights and options to acquire membership interests

             (7)  For the purposes of step 5 of subsection (2), if at the completion time a person holds an option, right or similar interest (including a contingent option, right or interest), created or issued by the original entity, to acquire a *membership interest in the original entity, that option, right or interest is treated as if it were a membership interest in the original entity.

124‑784C  Cost base of equity or debt given within acquiring group

Purpose

             (1)  This section allocates an appropriate *cost base to equity issued, or new debt owed, under the *arrangement by a member of a *wholly‑owned group to another member (the holder) of the group, if:

                     (a)  an acquiring entity is a member of the group; and

                     (b)  the cost base of the acquiring entity for a qualifying interest was worked out under section 124‑784B.

Allocation of cost base

             (2)  The first element of the *cost base of the equity or debt for the holder is that part of the cost base of the qualifying interest worked out under section 124‑784B 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 at the completion time.

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.

124‑790  Partial roll‑over

             (1)  The original interest holder can obtain only a partial roll‑over if its *capital proceeds for its original interest include 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.

             (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 - $40 = $60.

124‑795  Exceptions

             (1)  You cannot obtain the roll‑over if, just before you stop owning your original interest, you are a foreign resident unless, just after you *acquire your replacement interest, the replacement interest is *taxable Australian property.

             (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 and the acquiring entity is a foreign resident.

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 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 615 for that event.

Note:          Division 122 deals with the disposal of assets to a wholly‑owned company, and Division 615 deals with business restructures.

             (4)  You cannot obtain the roll‑over for the *CGT event happening in relation to the exchange of your qualifying interest if:

                     (a)  the replacement entity makes a choice to that effect under this subsection; and

                     (b)  that entity or the original entity notifies you in writing of the choice before the exchange.

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.

124‑810  Certain companies and trusts not regarded as having 300 members or beneficiaries

             (1)  For the purposes of this Subdivision, 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 this Subdivision, 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.

Subdivision 124‑NDisposal of assets by a trust to a company

Guide to Subdivision 124‑N

124‑850  What this Subdivision is about

Entities can choose to obtain a roll‑over if:

               (a)     a trust disposes of all of its assets to a company; and

              (b)     units and interests in the trust are replaced by shares in the company.

The roll‑over may also be available for 2 or more trusts disposing of all their assets to a single company.

Note:          The effect of the roll‑over may be reversed if the trust does not cease to exist within 6 months: see section 104‑195.

Table of sections

Operative provisions

124‑855    What this Subdivision deals with

124‑860    Requirements for roll‑over

124‑865    Entities both choose the roll‑over

124‑870    Roll‑over for owner of units or interests in a trust

124‑875    Effect on the transferor and transferee

Operative provisions

124‑855  What this Subdivision deals with

             (1)  A roll‑over may be available for a restructuring (a trust restructure) if:

                     (a)  a trust, or 2 or more trusts, (the transferor) *dispose of all of their *CGT assets to a company limited by *shares (the transferee); and

                     (b)  *CGT event E4 is capable of applying to all of the units and interests in the transferor; and

                     (c)  the requirements in section 124‑860 are met.

Note:          A roll‑over is not available for a restructure undertaken by a discretionary trust.

             (2)  For 2 or more transferors, units and interests in each transferor must be owned in the same proportions by the same beneficiaries.

Example:    Matthew and Jaclyn each own 50% of the units in the Spring Unit Trust and the Dale Unit trust. All of the assets of both trusts are disposed of to Jonathon Pty Ltd. A roll‑over for a trust restructure is available if the other requirements of this Subdivision are met.

124‑860  Requirements for roll‑over

             (1)  All of the *CGT assets owned by the transferor must be disposed of to the transferee during the *trust restructuring period. However, ignore any CGT assets retained by the transferor to pay existing or expected debts of the transferor.

             (2)  The trust restructuring period for a trust restructure:

                     (a)  starts just before the first *CGT asset is *disposed of to the transferee under the trust restructure, which must happen on or after 11 November 1999; and

                     (b)  ends when the last CGT asset of the transferor is disposed of to the transferee.

             (3)  The transferee must not be an *exempt entity.

             (4)  The transferee must be a company that:

                     (a)  has never carried on commercial activities; and

                     (b)  has no *CGT assets, other than any or all of the following:

                              (i)  small amounts of cash or debt;

                             (ii)  its rights under an *arrangement, if (collectively) those rights only facilitate the transfer of assets to the transferee from the transferor; and

                     (c)  has no losses of any kind.

Example:    It could be a shelf company.

             (5)  Subsection (4) does not apply to a transferee that is the trustee of the transferor.

             (6)  Just after the end of the *trust restructuring period:

                     (a)  each entity that owned interests in a transferor just before the start of the trust restructuring period must own replacement interests in the transferee in the same proportion as it owned those interests in that transferor; and

                     (b)  the *market value of the replacement interests each of those entities owns in the transferee must be at least substantially the same as the market value of the interests it owned in the transferor or transferors just before the start of the trust restructuring period.

Note 1:       Any assets in the company just before the start of the trust restructuring period may affect the ability of owners of units or interests to comply with paragraph (6)(b).

Note 2:       See section 124‑20 if an entity uses an interest sale facility.

             (7)  For the purposes of subsection (6), ignore any *shares in the transferee that:

                     (a)  just before the start of the *trust restructuring period, were owned by entities who together owned no more than 5 shares; and

                     (b)  just after the end of that period, represented such a low percentage of the total *market value of all the shares that it is reasonable to treat other entities as if they owned all the shares in the transferee.

Example:    To continue the example in subsection 124‑855(2), assume that Jonathon Pty Ltd was a shelf company organised for Matthew and Jaclyn by their solicitor, Indira.

                   Indira owned the 2 shares in Jonathon Pty Ltd before the trust restructuring period. The company issues Matthew and Jaclyn 5,000 shares each.

                   In these circumstances, it is reasonable to treat Matthew and Jaclyn as if they owned all the shares in Jonathon Pty Ltd.

124‑865  Entities both choose the roll‑over

                   A roll‑over is only available for the transferor and transferee if both the transferor and transferee choose to obtain it.

Note 1:       If they do so, the consequences for the transferor and transferee are set out in section 124‑875.

Note 2:       An entity that owns a unit or interest in the transferor can also choose to obtain a roll‑over: see section 124‑870.

124‑870  Roll‑over for owner of units or interests in a trust

             (1)  You can choose to obtain a roll‑over (whether or not the transferor and transferee choose to obtain a roll‑over, and even if *CGT event J4 applies) if:

                     (a)  you own units or interests in the transferor (your original interests); and

                     (b)  the ownership of all your units or interests ends under a trust restructure in exchange for *shares in the transferee (your replacement interests).

Note 1:       The roll‑over consequences are set out in Subdivision 124‑A. The original assets are your units and interests in the transferor. The new assets are your shares in the transferee.

Note 2:       The effect of the roll‑over may be reversed if the transferor does not cease to exist within 6 months: see section 104‑195.

             (2)  You must make the choice for each of your original interests.

             (3)  An entity that is a foreign resident cannot choose a roll‑over under this section unless the replacement interests the entity *acquires in the transferee are *taxable Australian property just after their acquisition.

             (4)  If you choose a roll‑over, you cannot make a *capital loss from a *CGT event that happens to your original interests during the *trust restructuring period.

Note:          The rule in subsection (4) prevents a capital loss arising on your units or interests after the trust assets have been disposed of to the company but before your shares are issued to you.

Exception: trading stock

             (5)  This section does not apply to your ownership of an original interest ending if:

                     (a)  the interest was an item of your *trading stock and the corresponding replacement interest becomes an item of your trading stock when you *acquire it; or

                     (b)  the interest was not an item of your trading stock but the corresponding replacement interest becomes an item of your trading stock when you acquire it.

124‑875  Effect on the transferor and transferee

Capital gains and losses disregarded

             (1)  Any *capital gain or *capital loss from *CGT event A1 happening to the transferor under the trust restructure is disregarded (even if *CGT event J4 applies).

Note:          The effect of the roll‑over may be reversed if the transferor does not cease to exist within 6 months: see section 104‑195.

Cost base is transferred

             (2)  The first element of the *cost base and *reduced cost base (for the transferee) of each *CGT asset that the transferee *acquires under the trust restructure is the same as the cost base and reduced cost base of that asset (for the transferor) just before that acquisition.

Note:          For the cost base and reduced cost base of interests in the transferee: see Subdivision 124‑A.

Pre‑CGT assets retain their status

             (3)  If the transferor *acquired any of the *CGT assets *disposed of to the transferee under the trust restructure before 20 September 1985, the transferee is taken to have acquired it before that day.

             (4)  However, subsection (3) is taken never to have applied to such an asset of the transferee if subsection 104‑195(4) (CGT event J4) applies to the transferee in relation to the asset.

Exception: trading stock

             (5)  This section does not apply to a *CGT asset if:

                     (a)  the asset was an item of *trading stock of the transferor and becomes an item of trading stock of the transferee; or

                     (b)  the asset was not an item of trading stock of the transferor but becomes an item of trading stock of the transferee when the transferee *acquires it.

Exception: asset must be taxable Australian property for foreign resident transferee

             (6)  For a transferee that is a foreign resident, this section only applies to a *CGT asset that is *taxable Australian property just after the transferee *acquires it under the trust restructure.

Subdivision 124‑PExchange of a membership interest in an MDO for a membership interest in another MDO

Guide to Subdivision 124‑P

124‑975  What this Subdivision is about

You can choose a roll‑over if you exchange your interest as a member of an MDO for an interest as a member of another MDO.

You can only choose the roll‑over if you would have made a capital gain from the exchange.

Table of sections

Operative provisions

124‑980    Exchange of membership interests in an MDO

124‑985    What the roll‑over is for post‑CGT interests

124‑990    Partial roll‑over

124‑995    Pre‑CGT interests

Operative provisions

124‑980  Exchange of membership interests in an MDO

             (1)  There is a roll‑over if:

                     (a)  an entity exchanges:

                              (i)  an interest (the original interest) in an *MDO (the original MDO) as a member of the original MDO; for

                             (ii)  a similar interest (the replacement interest) in another MDO (the new MDO) as a member of the new MDO; and

                     (b)  both the original MDO and the new MDO are companies limited by guarantee; and

                     (c)  the exchange is in consequence of a single *arrangement that satisfies subsection (3); and

                     (d)  apart from the roll‑over, the entity would make a *capital gain from a *CGT event happening in relation to its original interest; and

                     (e)  the entity chooses to obtain the roll‑over; and

                      (f)  the entity acquired the original interest on or after 20 September 1985.

Note:          The entity can obtain only a partial roll‑over if the capital proceeds for its original interest include something other than its replacement interest: see section 124‑990.

             (2)  In working out whether an original interest is exchanged for a similar interest, disregard a difference that consists only of a right to receive distributions of income or capital.

Conditions for arrangement

             (3)  The *arrangement must:

                     (a)  result in the new *MDO becoming the sole *member of the original MDO; and

                     (b)  be one in which participation was available on substantially the same terms for all of the holders of interests as members of the original MDO of a particular type.

124‑985  What the roll‑over is for post‑CGT interests

             (1)  A *capital gain the entity makes from an original interest *acquired on or after 20 September 1985 is disregarded.

             (2)  The entity works out the first element of the *cost base of each replacement interest the entity received as a result of the exchange by reasonably attributing to it the cost base (or the part of it) of the entity’s original interest for which it was exchanged and for which the entity obtained the roll‑over.

             (3)  In applying subsection (2), the entity reduces (but not below zero) the *cost base of the original interest (just before stopping owning it) by so much of that cost base as is attributable to an ineligible part (see section 124‑990).

             (4)  The first element of the *reduced cost base of a replacement interest is worked out similarly.

124‑990  Partial roll‑over

             (1)  The entity can obtain only a partial roll‑over if its *capital proceeds for its original interest include 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.

             (2)  The *cost base of the ineligible part is that part of the cost base of the original interest as is reasonably attributable to it.

124‑995  Pre‑CGT interests

                   If the entity exchanges an original interest that the entity *acquired before 20 September 1985 for its replacement interest, the first element of the *cost base and *reduced cost base of the replacement interest is zero.

Subdivision 124‑QExchange of stapled ownership interests for ownership interests in a unit trust

Guide to Subdivision 124‑Q

124‑1040  What this Subdivision is about

There is a roll‑over if you own ownership interests that are stapled and, as a result of a reorganisation, you stop owning those interests and you acquire or own ownership interests in an interposed unit trust.

Table of sections

Operative provisions

124‑1045  Exchange of stapled securities

124‑1050  Conditions

124‑1055  Consequences of the roll‑over for exchanging members

124‑1060  Consequences of the roll‑over for interposed trust

Operative provisions

124‑1045  Exchange of stapled securities

             (1)  There is a roll‑over if:

                     (a)  you own *ownership interests in 2 or more trusts, or in one or more companies and one or more trusts, and those interests are stapled together to form stapled securities; and

                     (b)  at least one of the trusts is a trust whose trustee is not assessed and liable to pay tax under Division 6C of Part III of the Income Tax Assessment Act 1936; and

                     (c)  if no company is involved—at least one of the trusts is a trust whose trustee is assessed and liable to pay tax under Division 6C of Part III of that Act; and

                     (d)  under a *scheme for reorganising the affairs of the relevant *stapled entities, you and the other entities that own the ownership interests in the stapled entities (together the exchanging members):

                              (i)  stop being the owner of those ownership interests and acquire ownership interests in a new unit trust (the interposed trust) and nothing else (a new trust case); or

                             (ii)  retain their ownership interests in one of those trusts (also the interposed trust), stop being the owner of the remaining ownership interests that form the stapled securities and receive nothing other than ownership interests in the interposed trust, or an increase in value of their existing ownership interests in the interposed trust, or both (an existing trust case); and

Note:       See section 124‑20 if an exchanging member uses an interest sale facility.

                     (e)  under the scheme, the interposed trust becomes the owner of:

                              (i)  for a new trust case—all of the ownership interests in the stapled entities; or

                             (ii)  for an existing trust case—all of the ownership interests in the other stapled entities; and

                      (f)  the conditions in section 124‑1050 are satisfied.

Note:          Division 6C of Part III of the Income Tax Assessment Act 1936 deals with taxing public trading trusts in the same way as companies.

             (2)  An entity is a stapled entity in relation to stapled securities if *ownership interests in the entity form part of the stapled securities.

             (3)  Ignore for the purposes of subsection (1) *ownership interests held by one *stapled entity in another stapled entity as at the start of the day on which the Bill for this Act was introduced into the Parliament.

124‑1050  Conditions

             (1)  Just after the *scheme is completed (the completion time), each exchanging member must own a percentage of the *ownership interests in the interposed trust that reasonably equates to the percentage of the ownership interests that the member owned in the *stapled entities.

Example:    Public Company A, Unit Trust No. 1 and Unit Trust No. 2 are stapled entities. Each stapled entity has 4,000 ownership interests on issue. There are no ownership interests in any of the stapled entities other than shares in the company and units in the trusts.

                   Under a scheme for reorganising the stapled entities, Unit Trust No. 3 is interposed between the stapled entities and the owners of the interests in those entities. Unit Trust No. 3 (the interposed trust) becomes the owner of all of the interests in each of the three stapled entities. Exchanging members receive one unit in the interposed trust for each stapled security they owned. All units in the interposed trust are of the same class.

                   Naomi owned 200 shares in Public Company A, 200 units in Unit Trust No. 1 and 200 units in Unit Trust No. 2. Naomi therefore owned 5% of the ownership interests in each of the stapled entities. Under the scheme, Naomi receives 100 units in Unit Trust No. 3 (out of a total of 2,000 units) in exchange for her ownership interests in the stapled entities. Naomi now owns 5% of the ownership interests in the interposed trust and meets the condition in subsection (1).

             (2)  Just after the completion time, each exchanging member must have the same, or as nearly as practicable the same, proportionate *market value of *ownership interests in the interposed trust as the member had in the *stapled entities just before that time.

             (3)  In working out whether an exchanging member complies with subsection (2), an anticipated reasonable approximation of the *market value of *ownership interests just after the completion time is sufficient.

Note:          An anticipated reasonable approximation of market values of ownership interests may include valuations provided to exchanging members in scheme documents.

             (4)  You must be an Australian resident at the completion time or, if you are a foreign resident at that time:

                     (a)  some or all of your *ownership interests in the *stapled entities must have been *taxable Australian property just before that time; and

                     (b)  your ownership interests in the interposed trust must be taxable Australian property just after that time.

124‑1055  Consequences of the roll‑over for exchanging members

             (1)  A *capital gain or *capital loss you make as a result of the *scheme from each of your *ownership interests is disregarded.

             (2)  If you *acquired all of your *ownership interests in the *stapled entities on or after 20 September 1985, the first element of the *cost base and *reduced cost base of each of your ownership interests in the interposed trust is such amount as is reasonable having regard to:

                     (a)  the total of the *cost bases of all of your ownership interests in the *stapled entities; and

                     (b)  the number, *market value and character of your ownership interests in the interposed trust.

Example:    Naomi had a cost base of $2.00 for each of her 200 Public Company A shares, $1.50 for each of her 200 Unit Trust No. 1 units and $0.50 for each of her 200 Unit Trust No. 2 units. The total of the cost bases of all of her membership interests is $800.00.

                   It is reasonable to allocate $8.00 to each of the 100 units in the interposed trust that she receives under the reorganisation.

             (3)  If you *acquired all of your *ownership interests in the *stapled entities before 20 September 1985, you are taken to have acquired all of your ownership interests in the interposed trust before that day.

             (4)  If you *acquired some of your *ownership interests in the *stapled entities before 20 September 1985, you are taken to have acquired so many of your ownership interests in the interposed trust as is reasonable before that day having regard to:

                     (a)  the number, *market value and character of your ownership interests in the stapled entities; and

                     (b)  the number, market value and character of your ownership interests in the interposed trust.

Note:          Generally, a capital gain or capital loss from a CGT asset acquired before 20 September 1985 can be disregarded: see Division 104.

             (5)  The first element of the *cost base and *reduced cost base of each of your *ownership interests in the interposed trust that is not taken by subsection (4) to have been *acquired before 20 September 1985 (your post‑CGT interests) is such amount as is reasonable having regard to:

                     (a)  the total of the cost bases of your ownership interests in the *stapled entities that you acquired on or after 20 September 1985; and

                     (b)  the number, *market value and character of your post‑CGT interests.

124‑1060  Consequences of the roll‑over for interposed trust

             (1)  Apply this section separately for the interposed trust in relation to the *ownership interests in each *stapled entity that the trustee of the interposed trust *acquires under the *scheme.

             (2)  A whole number of *ownership interests in a *stapled entity that the trustee *acquires under the *scheme are taken to have been acquired before 20 September 1985 if any of the stapled entity’s assets as at the completion time were acquired by it before that day.

Note:          Generally, a capital gain or capital loss from a CGT asset acquired before 20 September 1985 can be disregarded: see Division 104.

             (3)  The number (worked out as at the completion time) is the greatest possible that (when expressed as a percentage of all the *ownership interests in the *stapled entity *acquired by the trustee) does not exceed:

                     (a)  the *market value of the stapled entity’s assets that it acquired before 20 September 1985; less

                     (b)  its liabilities (if any) in respect of those assets;

expressed as a percentage of the market value of all the stapled entity’s assets less all of its liabilities. The amounts in paragraphs (a) and (b) are to be worked out as at the completion time.

             (4)  The first element of the *cost base and *reduced cost base of each of the trustee’s *ownership interests in that *stapled entity that are not taken by subsection (3) to have been *acquired before 20 September 1985 is such proportion as is reasonable of the total of the cost bases (as at the completion time) of that stapled entity’s assets that it acquired on or after that day less its liabilities (if any) in respect of those assets.

             (5)  In applying this section:

                     (a)  a liability of a *stapled entity that is not a liability in respect of a specific asset or assets of the stapled entity is a liability in respect of all the assets of the stapled entity; and

                     (b)  if a liability is in respect of 2 or more assets, the proportion of the liability that is in respect of any one of those assets is such amount as is reasonable having regard to the *market values of each of those assets.

Subdivision 124‑RWater entitlements

Guide to Subdivision 124‑R

124‑1100  What this Subdivision is about

There is a roll‑over if a CGT event happens to you because of something occurring in relation to one or more water entitlements. You do not need to own water entitlements for the event to happen to you.

Table of sections

Replacement case

124‑1105  Replacement water entitlements roll‑over

124‑1110  Roll‑over consequences—capital gain or loss disregarded

124‑1115  Roll‑over consequences—partial roll‑over

124‑1120  Roll‑over consequences—all original entitlements post‑CGT

124‑1125  Roll‑over consequences—all original entitlements pre‑CGT

124‑1130  Roll‑over consequences—some original entitlements pre‑CGT, others post‑CGT

Reduction case

124‑1135  Reduction in water entitlements roll‑over

124‑1140  Roll‑over consequences—capital gain or loss disregarded

124‑1145  Roll‑over consequences—all original entitlements post‑CGT

124‑1150  Roll‑over consequences—some original entitlements pre‑CGT, others post‑CGT

Variation to CGT asset case

124‑1155  Roll‑over for variation to CGT asset

124‑1160  Roll‑over consequences

124‑1165  Roll‑over consequences—partial roll‑over

Replacement case

124‑1105  Replacement water entitlements roll‑over

Automatic roll‑over for single water entitlements

             (1)  There is a roll‑over if:

                     (a)  your ownership of a *water entitlement (the original entitlement) ends, resulting in a *CGT event happening; and

                     (b)  as a result of your ownership of the original entitlement ending, you *acquire one or more water entitlements (each of which is a new entitlement); and

                     (c)  if you are a foreign resident just before your ownership of the original entitlement ends, or you are the trustee of a trust that is a *foreign trust for CGT purposes for the income year in which your ownership of the original entitlement ends:

                              (i)  the original entitlement was *taxable Australian property just before you stopped owning it; and

                             (ii)  if there is only one new entitlement—the new entitlement is taxable Australian property just after you acquire it; and

                            (iii)  if there is more than one new entitlement—each new entitlement is taxable Australian property just after you acquire it; and

                     (d)  you have not chosen a roll‑over in relation to the original entitlement under subsection (2).

Elective roll‑over for bundled water entitlements

             (2)  There is a roll‑over if:

                     (a)  your ownership of more than one *water entitlement (each of which is an original entitlement) ends, resulting in a *CGT event happening; and

                     (b)  as a result of your ownership of the original entitlements ending, you *acquire one or more water entitlements (each of which is a new entitlement); and

                     (c)  if you are a foreign resident just before your ownership of the original entitlements ends, or you are the trustee of a trust that is a *foreign trust for CGT purposes for the income year in which your ownership of the original entitlements ends:

                              (i)  each original entitlement was *taxable Australian property just before you stopped owning it; and

                             (ii)  if there is only one new entitlement—the new entitlement is taxable Australian property just after you acquire it; and

                            (iii)  if there is more than one new entitlement—each new entitlement is taxable Australian property just after you acquire it; and

                     (d)  you choose to obtain the roll‑over.

Note:          Section 103‑25 tells you when the choice must be made.

No roll‑over if Subdivision 124‑C applies

             (3)  However, there is no roll‑over in relation to a *water entitlement under this section if there is a roll‑over in relation to the water entitlement under Subdivision 124‑C (statutory licences).

Meaning of water entitlement

             (4)  A water entitlement is a legal or equitable right that an entity owns that relates to water, including a right to:

                     (a)  receive water; or

                     (b)  take water from a water resource; or

                     (c)  have water delivered; or

                     (d)  deliver water;

and includes a right that must be owned by the entity in order to own a right covered by paragraph (a), (b), (c) or (d).

Example:    Philip owns a share in Big Pump Irrigation Ltd. The share provides Philip with the right to receive dividends, to participate in the running of the company and to have a separate contractual agreement with Big Pump Irrigation Ltd for the delivery of 1 megalitre of water. Philip has such an agreement. Philip’s agreement is a water entitlement. Philip’s share is also a water entitlement because he must own the share in order to have a contractual arrangement with Big Pump Irrigation Ltd for the delivery of water.

124‑1110  Roll‑over consequences—capital gain or loss disregarded

                   Disregard a *capital gain or *capital loss you make from each original entitlement that qualifies for a roll‑over.

124‑1115  Roll‑over consequences—partial roll‑over

             (1)  You can obtain only a partial roll‑over in relation to an original entitlement if the *capital proceeds for that entitlement includes something (the ineligible proceeds) other than a new entitlement or new entitlements. There is no roll‑over for that part (the ineligible part) of the entitlement for which you received the ineligible proceeds.

Note:          If the roll‑over is under subsection 124‑1105(2), some or all of the original entitlements may each have an ineligible part.

             (2)  The *cost base of the ineligible part is that part of the cost base of the original entitlement as is reasonably attributable to the ineligible part.

             (3)  The *reduced cost base of the ineligible part is worked out similarly.

             (4)  In working out what is reasonably attributable to the ineligible part for the purposes of subsections (2) and (3), have regard to the *market value of the new entitlement relative to the market value of the ineligible proceeds.

             (5)  If the roll‑over is under subsection 124‑1105(2), for the purposes of sections 124‑1120 and 124‑1130, for each original entitlement that has an ineligible part:

                     (a)  reduce the *cost base of that entitlement (just before you stopped owning it) by so much of that cost base as is attributable to that ineligible part; and

                     (b)  reduce the *reduced cost base of that entitlement similarly.

124‑1120  Roll‑over consequences—all original entitlements post‑CGT

             (1)  In a situation covered by subsection 124‑1105(1), if you *acquired the original entitlement on or after 20 September 1985, the first element of the *cost base of the new entitlement (or of each of the new entitlements) is such amount as is reasonable having regard to:

                     (a)  the cost base and *market value of the original entitlement; and

                     (b)  the number and market value of the new entitlements; and

                     (c)  any amount you paid to get the new entitlement (which can include giving property: see section 103‑5).

             (2)  In a situation covered by subsection 124‑1105(2), if you *acquired the original entitlements on or after 20 September 1985, the first element of the *cost base of the new entitlement (or of each of the new entitlements) is such amount as is reasonable having regard to:

                     (a)  the total of the cost bases of all the original entitlements; and

                     (b)  the number and *market value of the original entitlements; and

                     (c)  the number and market value of the new entitlements; and

                     (d)  any amount you paid to get the new entitlements (which can include giving property: see section 103‑5).

             (3)  In the situation covered by subsection 124‑1105(1) or (2), the first element of the *reduced cost base of the new entitlement (or of each of the new entitlements) is worked out similarly.

             (4)  For the purposes of paragraphs (1)(b) and (2)(c), the *market value of the new entitlements is their market value at the time you *acquired them.

124‑1125  Roll‑over consequences—all original entitlements pre‑CGT

             (1)  In the situation covered by subsection 124‑1105(1), if you *acquired the original entitlement before 20 September 1985, you are taken to have acquired the new entitlement (or all of the new entitlements) before that day.

             (2)  In the situation covered by subsection 124‑1105(2), if you *acquired the original entitlements before 20 September 1985, you are taken to have acquired the new entitlement (or all of the new entitlements) before that day.

124‑1130  Roll‑over consequences—some original entitlements pre‑CGT, others post‑CGT

             (1)  This section applies if:

                     (a)  the roll‑over is under subsection 124‑1105(2); and

                     (b)  you *acquired one or more of the original entitlements before 20 September 1985; and

                     (c)  you acquired one or more of the original entitlements on or after that day.

             (2)  You are taken to have *acquired so many of your new entitlements before 20 September 1985 as is reasonable, having regard to:

                     (a)  the number and *market value of your original entitlements; and

                     (b)  the number and market value of your new entitlements.

             (3)  The first element of the *cost base of each of your new entitlements that are not taken by subsection (2) to have been *acquired before 20 September 1985 (your post‑CGT entitlements) is such amount as is reasonable having regard to:

                     (a)  the total of the cost bases of the original entitlements you acquired on or after 20 September 1985; and

                     (b)  the number and *market value of your post‑CGT entitlements; and

                     (c)  any amount you paid to get the new entitlements (which can include giving property: see section 103‑5).

             (4)  The reduced cost base of each of your post‑CGT entitlements is worked out similarly.

Reduction case

124‑1135  Reduction in water entitlements roll‑over

                   There is a roll‑over if:

                     (a)  you own more than one *water entitlement; and

                     (b)  under an *arrangement:

                              (i)  your ownership of one or more of the water entitlements (each of which is an original entitlement) ends, resulting in a *CGT event happening; and

                             (ii)  you do not receive anything for the original entitlement or entitlements; and

                            (iii)  you retain one or more of your original entitlements (the retained entitlements); and

                     (c)  the total of the *market values of all of the retained entitlements immediately after the CGT event happens is substantially the same as the total of the market values of all of the original entitlements immediately before the CGT event happened.

124‑1140  Roll‑over consequences—capital gain or loss disregarded

                   A *capital gain or *capital loss you make from your ownership of the original entitlements ending is disregarded.

124‑1145  Roll‑over consequences—all original entitlements post‑CGT

             (1)  This section applies if you *acquired the original entitlement (or all of the original entitlements) on or after 20 September 1985.

             (2)  The first element of the *cost base of the retained entitlement (or of each of the retained entitlements) is such amount as is reasonable having regard to:

                     (a)  the total of the cost bases of all the original entitlements; and

                     (b)  the number and *market value of the original entitlements; and

                     (c)  the number and market value of the retained entitlements.

             (3)  The first element of the *reduced cost base of the retained entitlements is worked out similarly.

             (4)  For the purposes of paragraph (2)(c), the *market value of the retained entitlements is their market value just after the *CGT event referred to in section 124‑1135 happens.

124‑1150  Roll‑over consequences—some original entitlements pre‑CGT, others post‑CGT

             (1)  This section applies if:

                     (a)  you *acquired one or more of the original entitlements before 20 September 1985; and

                     (b)  you acquired one or more of the original entitlements on or after that day.

             (2)  You are taken to have *acquired so many of your retained entitlements before 20 September 1985 as is reasonable, having regard to:

                     (a)  the number and *market value of your original entitlements; and

                     (b)  the number and market value of your retained entitlements.

             (3)  The first element of the *cost base of each of your retained entitlements that are not taken by subsection (2) to have been *acquired before 20 September 1985 (your post‑CGT entitlements) is such amount as is reasonable having regard to:

                     (a)  the total of the cost bases of the original entitlements you acquired on or after 20 September 1985; and

                     (b)  the number and *market value of the your post‑CGT entitlements.

             (4)  The reduced cost base of each of your post‑CGT entitlements is worked out similarly.

Variation to CGT asset case

124‑1155  Roll‑over for variation to CGT asset

                   There is a roll‑over if:

                     (a)  a *CGT event happens to a *CGT asset that you own; and

                     (b)  the CGT event happens as a direct result of the circumstances that gave rise to a roll‑over under section 124‑1105; and

                     (c)  you continue to be the owner of the asset (the retained asset) immediately after the CGT event has happened.

124‑1160  Roll‑over consequences

                   A *capital gain or *capital loss you make from the *CGT event is disregarded.

124‑1165  Roll‑over consequences—partial roll‑over

             (1)  You can obtain only a partial roll‑over in relation to a *CGT asset if the *capital proceeds for that asset includes something (the ineligible proceeds) other than your retained asset. There is no roll‑over for that part (the ineligible part) of the asset for which you received the ineligible proceeds.

             (2)  The *cost base of the ineligible part is that part of the cost base of the *CGT asset as is reasonably attributable to the ineligible part.

             (3)  The *reduced cost base of the ineligible part is worked out similarly.

             (4)  In working out what is reasonably attributable to the ineligible part for the purposes of subsections (2) and (3), have regard to the *market value of the retained asset relative to the market value of the ineligible proceeds.

Subdivision 124‑SInterest realignment arrangements

Guide to Subdivision 124‑S

124‑1220  What this Subdivision is about

There is roll‑over relief if an interest in a mining, quarrying or prospecting right is disposed of under an interest realignment arrangement.

Table of sections

Operative provisions

124‑1225  Disposals of interests under interest realignment arrangements

124‑1230  Roll‑over consequences—partial roll‑over

124‑1235  Roll‑over consequences—all original interests were post‑CGT and pre‑UCA

124‑1240  Roll‑over consequences—all original interests were pre‑CGT

124‑1245  Roll‑over consequences—original interests were of mixed CGT status, all were pre‑UCA

124‑1250  Roll‑over consequences—some original interests were pre‑UCA

Operative provisions

124‑1225  Disposals of interests under interest realignment arrangements

             (1)  There is a roll‑over if:

                     (a)  *CGT event A1 happens because you *dispose of one or more assets each of which:

                              (i)  is an interest (an original interest) in a *mining, quarrying or prospecting right; and

                             (ii)  is an interest that you started to *hold before 1 July 2001; and

                     (b)  the disposal occurs under an *interest realignment arrangement.

             (2)  The first element of the *cost base and *reduced cost base of an interest (a new interest) in a *mining, quarrying or prospecting right that you acquire under the *interest realignment arrangement includes any amount you paid to acquire the new interest.

Note 1:       The rest of the first element is worked out under Subdivision 124‑A.

Note 2:       Under subsections 124‑10(2) and 124‑15(2), a capital gain or capital loss you make from the original interest is disregarded.

             (3)  The amount can include giving property: see section 103‑5. However, it does not include a *mining, quarrying or prospecting right that you dispose of under the *interest realignment arrangement.

124‑1230  Roll‑over consequences—partial roll‑over

             (1)  You can obtain only a partial roll‑over in relation to an original interest if the *capital proceeds for that interest includes something (the ineligible proceeds) other than a new interest or new interests. There is no roll‑over for that part (the ineligible part) of the interest for which you received the ineligible proceeds.

Note:          If there is more than one original interest, some or all of those original interests may each have an ineligible part.

             (2)  The *cost base of the ineligible part is that part of the cost base of the original interest as is reasonably attributable to the ineligible part.

             (3)  The *reduced cost base of the ineligible part is that part of the reduced cost base of the original interest as is reasonably attributable to the ineligible part.

             (4)  For the purposes of sections 124‑1235 and 124‑1245, for each original interest that has an ineligible part:

                     (a)  reduce the *cost base of that interest (just before the *CGT event that happened in relation to it) by so much of that cost base as is attributable to that ineligible part; and

                     (b)  reduce the *reduced cost base of that interest (just before the CGT event that happened in relation to it) by so much of that reduced cost base as is attributable to that ineligible part.

124‑1235  Roll‑over consequences—all original interests were post‑CGT and pre‑UCA

             (1)  If you acquire the new interest in exchange for:

                     (a)  one original interest that you started to *hold on or after 20 September 1985 and before 1 July 2001; or

                     (b)  2 or more original interests, each of which you started to hold on or after 20 September 1985 and before 1 July 2001;

you are taken to have started to hold the new interest (or all of the new interests) on or after 20 September 1985 and before 1 July 2001.

             (2)  The first element of the *cost base of the new interest (or of each of the new interests) is such amount as is reasonable having regard to:

                     (a)  the total of the cost bases of all the original interests; and

                     (b)  the number, *market value and character of the original interests; and

                     (c)  the number, market value and character of the new interests.

             (3)  The first element of the *reduced cost base of the new interest (or of each of the new interests) is such amount as is reasonable having regard to:

                     (a)  the total of the reduced cost bases of all the original interests; and

                     (b)  the number, *market value and character of the original interests; and

                     (c)  the number, market value and character of the new interests.

124‑1240  Roll‑over consequences—all original interests were pre‑CGT

                   If you acquire the new interest in exchange for:

                     (a)  one original interest that you started to *hold before 20 September 1985; or

                     (b)  2 or more original interests, each of which you started to hold before 20 September 1985;

you are taken to have started to hold the new interest (or all of the new interests) before that day.

124‑1245  Roll‑over consequences—original interests were of mixed CGT status, all were pre‑UCA

             (1)  This section applies if:

                     (a)  you acquire the new interest in exchange for more than one original interest; and

                     (b)  you started to *hold one or more of the original interests before 20 September 1985; and

                     (c)  you started to hold one or more of the original interests on or after that day; and

                     (d)  you did not start to hold any of the original interests on or after 1 July 2001.

             (2)  Each new interest is taken to be 2 separate *CGT assets that are both new interests:

                     (a)  one (which you are taken to have started to *hold on or after 20 September 1985 and before 1 July 2001) representing the extent to which you started to hold the original interests on or after 20 September 1985 and before 1 July 2001; and

                     (b)  another (which you are taken to have started to hold before 20 September 1985) representing the extent to which you started to hold the original interests before that day.

             (3)  The first element of the *cost base and *reduced cost base of the *CGT asset mentioned in paragraph (2)(a) in relation to a new interest is worked out under the formula:

where:

market value of all new interests is the total of the *market values of all of the new interests.

market value of new interest is the *market value of the new interest to which the *CGT asset mentioned in paragraph (2)(a) relates.

total post‑CGT cost base is the total of the *cost bases of all the original interests that you started to *hold on or after 20 September 1985.

124‑1250  Roll‑over consequences—some original interests were pre‑UCA

             (1)  This section applies if:

                     (a)  you acquire the new interest in exchange for more than one original interest; and

                     (b)  you started to *hold one or more of the original interests (pre‑UCA interests) before 1 July 2001; and

                     (c)  you started to hold one or more of the original interests (post‑UCA interests) on or after that day.

             (2)  If you started to *hold all of the pre‑UCA interests on or after 20 September 1985, each new interest is taken to be 2 separate assets that are both new interests:

                     (a)  one (which you are taken to have started to hold on or after that day and before 1 July 2001) representing the extent to which the original interests are pre‑UCA interests; and

                     (b)  another (which you are taken to have started to hold on or after 1 July 2001) representing the extent to which the original interests are post‑UCA interests.

Apply section 124‑1235 to the interest referred to in paragraph (a) as if the pre‑UCA interests were the only original interests. Apply Division 40 to the interests referred to in paragraph (b).

             (3)  If you started to *hold all of the pre‑UCA interests before 20 September 1985, each new interest is taken to be 2 separate assets that are both new interests:

                     (a)  one (which you are taken to have started to hold before that day) representing the extent to which the original interests are pre‑UCA interests; and

                     (b)  another (which you are taken to have started to hold on or after 1 July 2001) representing the extent to which the original interests are post‑UCA interests.

Apply section 124‑1240 to the new interest referred to in paragraph (a) as if the pre‑UCA interests were the only original interests. Apply Division 40 to the new interest referred to in paragraph (b).

             (4)  If you started to *hold one or more of the pre‑UCA interests before 20 September 1985 and one or more of the pre‑UCA interests on or after that day, each new interest is taken to be 3 separate assets that are all new interests:

                     (a)  one (which you are taken to have started to hold on or after 20 September 1985 and before 1 July 2001) representing the extent to which the original interests that you started to hold on or after 20 September 1985 are pre‑UCA interests; and

                     (b)  another (which you are taken to have started to hold before 20 September 1985) representing the extent to which the original interests that you started to hold before 20 September 1985 are pre‑UCA interests; and

                     (c)  another (which you are taken to have started to hold on or after 1 July 2001) representing the extent to which the original interests are post‑UCA interests.

Apply section 124‑1245 to the new interests referred to in paragraphs (a) and (b) as if the pre‑UCA interests were the only original interests. Apply Division 40 to the new interest referred to in paragraph (c).

Division 125Demerger relief

  

Table of Subdivisions

             Guide to Division 125

125‑A   Object of this Division

125‑B    Consequences for owners of interests

125‑C    Consequences for members of demerger group

125‑D   Public trading trusts

125‑E    Miscellaneous

Guide to Division 125

125‑1  What this Division is about

Entities can obtain CGT relief for a demerger.

Owners of ownership interests in the head entity of a demerger group can obtain a roll‑over to defer CGT consequences for the CGT events that happen to their interests under the demerger (see Subdivision 125‑B).

Capital gains and capital losses made by members of the demerger group from certain CGT events that happen under the demerger are disregarded (see Subdivision 125‑C).

Note:          Dividend relief is also available: see section 44 of the Income Tax Assessment Act 1936.

Subdivision 125‑AObject of this Division

Table of sections

125‑5        Object of this Division

125‑5  Object of this Division

                   The object of this Division is to facilitate the demerging of entities by ensuring that capital gains tax considerations are not an impediment to restructuring a *business.

Subdivision 125‑BConsequences for owners of interests

Guide to Subdivision 125‑B

125‑50  Guide to Subdivision 125‑B

You can choose to obtain a roll‑over if a CGT event happens to your interests in a company or trust because of a demerger of an entity from the group of which the company or trust is the head entity.

There are cost base adjustments if you receive new interests under a demerger and no CGT event happens to your original interests.

Table of sections

Operative provisions

125‑55      When a roll‑over is available for a demerger

125‑60      Meaning of ownership interest and related terms

125‑65      Meanings of demerger group, head entity and demerger subsidiary

125‑70      Meanings of demerger, demerged entity and demerging entity

125‑75      Exception: employee share schemes

125‑80      What is the roll‑over?

125‑85      Cost base adjustments where CGT event happens but no roll‑over chosen

125‑90      Cost base adjustments where no CGT event

125‑95      No other cost base adjustment after demerger

125‑100    No further demerger relief in some cases

Operative provisions

125‑55  When a roll‑over is available for a demerger

             (1)  You can choose to obtain a roll‑over if:

                     (a)  you own an *ownership interest in a company or trust (your original interest); and

                     (b)  the company or trust is the *head entity of a *demerger group; and

                     (c)  a *demerger happens to the demerger group; and

                     (d)  under the demerger, a *CGT event happens to your original interest and you *acquire a new or replacement interest (your new interest) in the *demerged entity.

Note 1:       Section 125‑80 sets out what the roll‑over is.

Note 2:       You have to make cost base adjustments even if there is no CGT event: see section 125‑90.

Example:    Peter owns shares (his original interests) in Company A, a public company. Company B is a wholly owned subsidiary of Company A. Company A announces a demerger utilising a proportionate capital reduction and the disposal of all its shares in Company B to its 320,000 shareholders. Following the demerger all of the shareholders in Company A, including Peter, will own all of the shares in Company B (their new interests).

             (2)  You cannot choose to obtain a roll‑over under this Subdivision for an original interest if:

                     (a)  you are a foreign resident; and

                     (b)  the new interest you *acquire under the *demerger in exchange for that original interest is not *taxable Australian property just after you acquire it.

Note:          For taxable Australian property, see section 855‑15.

125‑60  Meaning of ownership interest and related terms

             (1)  An ownership interest in a company or trust is:

                     (a)  for a company, a *share in the company or an option, right or similar interest issued by the company that gives the owner an entitlement to *acquire a share in the company; and

                     (b)  for a trust, a unit or other interest in the trust or an option, right or similar interest issued by the trustee that gives the owner an entitlement to acquire a unit or other interest in the trust.

             (2)  However, this Subdivision applies to a *dual listed company voting share in a company that is the *head entity of a *demerger group as if it were not an ownership interest if there are not more than 5 of those *shares in the company.

             (3)  A dual listed company voting share is a *share in a company:

                     (a)  issued:

                             (ii)  as part of a *dual listed company arrangement; and

                            (iii)  mainly for the purpose of ensuring that shareholders of both companies involved in the arrangement vote as a single decision‑making body on matters affecting them; and

                     (b)  that does not carry rights to financial entitlements (except the return of the amount paid up on the share and a dividend that is the equivalent of a dividend paid on an ordinary share).

             (4)  A dual listed company arrangement is an *arrangement under which 2 publicly listed companies, while maintaining their separate legal entity status, shareholdings and listings, align their strategic directions and the economic interests of their respective shareholders through:

                     (a)  the appointment of common (or almost identical) boards of directors, except where the effect of the relevant regulatory requirements prevents this; and

                     (b)  management of the operations of the 2 companies on a unified basis; and

                     (c)  the shareholders of both companies voting in effect as a single decision‑making body on substantial issues affecting their combined interests; and

                     (d)  equalised distributions to shareholders in accordance with an equalisation ratio applying between the 2 companies, both generally and in the event of a winding up of one or both of the companies; and

                     (e)  cross‑guarantees as to, or similar financial support for, each other’s substantial obligations or operations, except where the effect of the relevant regulatory requirements prevents those guarantees or that financial support.

             (5)  However, an arrangement is not a dual listed company arrangement unless one but not both of the companies is an Australian resident.

125‑65  Meanings of demerger group, head entity and demerger subsidiary

             (1)  A demerger group comprises the *head entity of the group and one or more *demerger subsidiaries.

Note:          An entity may be a member of one or more demerger groups.

             (2)  A trust cannot be a member of a demerger group unless *CGT event E4 is capable of applying to all of the units and interests in the trust.

Note:          A discretionary trust cannot be a member of a demerger group.

          (2A)  Neither a corporation sole nor a *complying superannuation entity is a member of a *demerger group.

             (3)  A company or trust is the head entity of a *demerger group if no other member of the group owns *ownership interests in the company or trust.

             (4)  If apart from this subsection, a company or trust would be the *head entity of a *demerger group and the company or trust, and all of its *demerger subsidiaries, are also demerger subsidiaries of another company or trust in another demerger group, the first‑mentioned company or trust is not the head entity of a demerger group.

             (5)  A company or trust (the first company or trust) that would, apart from this subsection, be a member of a demerger group is not a member of the demerger group if:

                     (a)  the first company or trust owns, either alone or together with another company or trust that would, apart from this subsection, be a member of the *demerger group, more than 20% but less than 80% of the *ownership interests in a *listed public company or *listed widely held trust; and

                     (b)  the listed public company or listed widely held trust chooses that the first company or trust not be a member of the demerger group.

             (6)  A company is a demerger subsidiary of another company or a trust that is a member of a *demerger group if the other company or the trust, either alone or together with other members of the group, owns, or has the right to *acquire, *ownership interests in the company that carry between them:

                     (a)  the right to receive more than 20% of any distribution of income or capital by the company; or

                     (b)  the right to exercise, or control the exercise of, more than 20% of the voting power of the company.

             (7)  A trust is a demerger subsidiary of another trust or a company that is a member of a *demerger group if the other trust or the company, either alone or together with other members of the group, owns, or has the right to *acquire, *ownership interests in the trust that carry between them the right to receive more than 20% of any distribution of income or capital by the trustee.

125‑70  Meanings of demerger, demerged entity and demerging entity

             (1)  A demerger happens to a *demerger group if:

                     (a)  there is a restructuring of the demerger group; and

                     (b)  under the restructuring:

                              (i)  members of the demerger group *dispose of at least 80% of their total *ownership interests in another member of the demerger group to owners of original interests in the *head entity of the demerger group; or

                             (ii)  at least 80% of the total ownership interests of members of the demerger group in another member of the demerger group end and new interests are issued to owners of original interests in the head entity; or

                            (iii)  the demerged entity issues sufficient new ownership interests in itself with the result that owners of original interests in the head entity own at least 80% of the total ownership interests in the demerged entity; or

                            (iv)  some combination of the processes referred to in subparagraphs (i), (ii) and (iii) happens with the effect that members of the demerger group stop owning at least 80% of the total ownership interests owned by members of the demerger group in another member of the group; and

Note:       CGT event C2 and CGT event C3 are the only relevant CGT events in a subparagraph (ii) case.

                     (c)  under the restructuring:

                              (i)  a *CGT event happens to an original interest owned by an entity in the head entity of the group and the entity *acquires a new interest and nothing else; or

                             (ii)  no CGT event happens to an original interest owned by an entity in the head entity of the group and the entity acquires a new interest and nothing else; and

                     (d)  the acquisition by entities of new interests happens only because those entities own or owned original interests; and

                     (e)  the new interests acquired are:

                              (i)  if the head entity is a company—ownership interests in a company; or

                             (ii)  if the head entity is a trust—ownership interests in a trust; and

                     (g)  neither the original interests nor the new interests are in a trust that is a *non‑complying superannuation fund; and

                     (h)  the requirements of subsection (2) are met.

Example:    To continue the example from subsection 125‑55(1), Peter owns 400 post‑CGT shares in Company A. Companies A and B are both members of a demerger group. Company A is the head entity of the demerger group and Company B is a demerger subsidiary.

                   Company A proceeds to demerge 100% of its shares in Company B to its shareholders.

                   Company A enters into a proportionate capital reduction, returning 40 cents per share to its ordinary shareholders. Peter is entitled to $160 (40c times 400 shares) under the capital reduction.

                   For Peter, the capital reduction amount of $160 is compulsorily applied to acquire Company A’s shares in Company B, at $6.75 (a discount of 10% to current market value). Company A rounds up the fractional amounts in calculating the number of whole shares to be distributed to each shareholder. This gives Peter 24 shares in Company B (160 divided by 6.75, rounded up to the nearest whole number).

Note:          Acquiring new interests by an owner of original interests may include the allocation of the owner’s entitlement to new interests to a nominee:

•       to sell on the owner’s behalf; or

•       to hold pending the owner being located.

             (2)  Each owner (an original owner) of original interests in the *head entity of the *demerger group must:

                     (a)  *acquire, under the *demerger, the same proportion, or as nearly as practicable the same proportion, of new interests in the *demerged entity as the original owner owned in the head entity just before the demerger; and

                     (b)  just after the demerger, have the same proportionate total *market value of *ownership interests in the head entity and demerged entity as the original owner owned in the head entity just before the demerger.

Note 1:       There is an exception: see section 125‑75.

Note 2:       Dual listed company voting shares are not treated as ownership interests: see section 125‑60.

Note 3:       Fractional interests will generally not affect your ability to choose a roll‑over.

Example:    To continue the example from subsection (1), Company A concludes, given the circumstances of the demerger, that the market values of Peter’s and the other shareholders’ shares in A and B are expected to be in proportion with their original interests in Company A, and advises the shareholders of this position.

             (3)  In working out whether an original owner complies with subsection (2):

                     (a)  disregard *ownership interests that are original interests the owner owns in the *demerged entity; and

                     (b)  an anticipated reasonable approximation of the *market value of ownership interests is sufficient.

Example:    An anticipated reasonable approximation of market values of ownership interests may include:

•       valuations provided to shareholders in scheme documents;

•       the price selected for use under a sale facility;

                   and may be made by reference to long‑term value.

Exception: off‑market buy‑backs

             (4)  A buy‑back of *shares that is an off‑market purchase for the purposes of Division 16K of Part III of the Income Tax Assessment Act 1936 is not a *demerger.

Exception: roll‑over available under another provision

             (5)  Circumstances where an owner of original interests can obtain a roll‑over under a provision of this Act outside this Division for all of the CGT events that happened to the owner’s original interests under the circumstances cannot be a demerger.

Note:          An owner might be able to obtain a roll‑over for the CGT events under Subdivision 124‑E, or 124‑M or Division 615.

Meaning of demerged entity

             (6)  An entity that is a former member of a *demerger group is a demerged entity if, under a *demerger that happens to the group, *ownership interests in the entity are acquired by:

                     (a)  shareholders in the *head entity of the group; or

                     (b)  unitholders or holders of interests in the head entity of the group.

Meaning of demerging entity

             (7)  An entity that is a member of a *demerger group just before the *CGT event referred to in section 125‑155 happens is a demerging entity if, under a *demerger that happens to the group:

                     (a)  the entity (either alone or together with other members of the demerger group)*dispose of at least 80% of their total *ownership interests in another member of the demerger group to owners of original interests in the *head entity of the demerger group; or

                     (b)  at least 80% of the total ownership interests of that entity and of other members of the demerger group in another member of the demerger group end and new interests are issued to owners of original interests in the head entity; or

Note:       CGT event C2 and CGT event C3 are the only relevant CGT events.

                     (c)  the demerged entity issues sufficient new ownership interests in itself with the result that owners of original interests in the head entity own at least 80% of the total ownership interests in the demerged entity; or

                     (d)  some combination of the processes referred to in paragraphs (a), (b) and (c) happens with the effect that members of the demerger group stop owning at least 80% of the total ownership interests owned by members of the demerger group in another member of the group.

125‑75  Exceptions to subsection 125‑70(2)

Employee share schemes

             (1)  In working out whether the requirements in subsection 125‑70(2) are met, disregard each of the *ownership interests described in subsections (2) and (3) if, just before the *demerger, those interests (taking into account either or both of their number and value) represented not more than 3% of the total *ownership interests in the entity.

             (2)  An *ownership interest, in a company, that is owned by an entity is disregarded under subsection (1) if:

                     (a)  the entity acquired a beneficial interest in the ownership interest under an *employee share scheme; and

                     (b)  these provisions apply to the beneficial interest:

                              (i)  Subdivision 83A‑B and the provisions referred to in paragraphs 83A‑33(1)(a) to (c); or

                             (ii)  Subdivision 83A‑B and the provisions referred to in paragraphs 83A‑35(1)(a) and (b); or

                            (iii)  Subdivision 83A‑C; and

                     (c)  the ownership interest is not a fully‑paid ordinary *share.

             (3)  An *ownership interest, in a trust, that is owned by an entity is disregarded under subsection (1) if:

                     (a)  both of the following would apply if Division 83A (about employee share schemes) applied to ownership interests in trusts in the same way as it applies to *shares:

                              (i)  the entity acquired a beneficial interest in the ownership interest under an *employee share scheme;

                             (ii)  the provisions referred to in subparagraph (2)(b)(i), (ii) or (iii) apply to the beneficial interest; and

                     (b)  the ownership interest is not a fully‑paid unit.

Adjusting instruments

             (4)  In working out whether the requirements in subsection 125‑70(2) are met, disregard each of the *ownership interests described in subsection (5) (adjusting instruments) if, just before