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Income Tax Assessment Act 1997

Authoritative Version
  • - C2019C00113
  • In force - Superseded Version
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Act No. 38 of 1997 as amended, taking into account amendments up to Treasury Laws Amendment (Protecting Your Superannuation Package) Act 2019
An Act about income tax and related matters
Administered by: Treasury
General Comments: Division 40, Subdivision 40-D, Section 40-340, Subdivision 328-G and Sections 328-430 and 328-450 of this Act have been modified by the operation of the Commissioner’s Remedial Power, click here to see the modification
Registered 21 Mar 2019
Start Date 13 Mar 2019
End Date 31 Mar 2019

Commonwealth Coat of Arms of Australia

Income Tax Assessment Act 1997

No. 38, 1997

Compilation No. 191

Compilation date:                              13 March 2019

Includes amendments up to:            Act No. 16, 2019

Registered:                                         21 March 2019

This compilation is in 12 volumes

Volume 1:       sections 1‑1 to 36‑55

Volume 2:       sections 40‑1 to 67‑30

Volume 3:       sections 70‑1 to 121‑35

Volume 4:       sections 122‑1 to 197‑85

Volume 5:       sections 200‑1 to 253‑15

Volume 6:       sections 275‑1 to 313‑85

Volume 7:       sections 315‑1 to 420‑70

Volume 8:       sections 615‑1 to 721‑40

Volume 9:       sections 723‑1 to 855‑55

Volume 10:     sections 900‑1 to 995‑1

Volume 11:     Endnotes 1 to 3

Volume 12:     Endnotes 4 and 5

Each volume has its own contents

 

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 13 March 2019 (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 122—Roll‑over for the disposal of assets to, or the creation of assets in, a wholly‑owned company                                                                                                    1

Guide to Division 122                                                                                                1

122‑1..................... What this Division is about................................................. 1

Subdivision 122‑A—Disposal or creation of assets by an individual or trustee to a wholly‑owned company        2

Guide to Subdivision 122‑A                                                                                     2

122‑5..................... What this Subdivision is about........................................... 2

When is a roll‑over available                                                                                  3

122‑15................... Disposal or creation of assets—wholly‑owned company... 3

122‑20................... What you receive for the trigger event................................ 3

122‑25................... Other requirements to be satisfied....................................... 4

122‑35................... What if the company undertakes to discharge a liability (disposal case)   7

122‑37................... Rules for working out what a liability in respect of an asset is 8

Replacement‑asset roll‑over if you dispose of a CGT asset                             9

122‑40................... Disposal of a CGT asset..................................................... 9

Replacement‑asset roll‑over if you dispose of all the assets of a business   9

122‑45................... Disposal of all the assets of a business............................... 9

122‑50................... All assets acquired on or after 20 September 1985........... 10

122‑55................... All assets acquired before 20 September 1985................. 11

122‑60................... Assets acquired before and after 20 September 1985....... 12

Replacement‑asset roll‑over for a creation case                                              13

122‑65................... Creation of asset............................................................... 13

Same‑asset roll‑over consequences for the company (disposal case)          13

122‑70................... Consequences for the company (disposal case)................ 13

Same‑asset roll‑over consequences for the company (creation case)          14

122‑75................... Consequences for the company (creation case)................. 14

Subdivision 122‑B—Disposal or creation of assets by partners to a wholly‑owned company    15

Guide to Subdivision 122‑B                                                                                   15

122‑120................. What this Subdivision is about......................................... 15

When is a roll‑over available                                                                                16

122‑125................. Disposal or creation of assets—wholly‑owned company. 16

122‑130................. What the partners receive for the trigger event.................. 17

122‑135................. Other requirements to be satisfied..................................... 17

122‑140................. What if the company undertakes to discharge a liability (disposal case)   19

122‑145................. Rules for working out what a liability in respect of an interest in an asset is            21

Replacement‑asset roll‑over if partners dispose of a CGT asset                  22

122‑150................. Capital gain or loss disregarded........................................ 22

122‑155................. Disposal of post‑CGT or pre‑CGT interests..................... 22

122‑160................. Disposal of both post‑CGT and pre‑CGT interests.......... 22

Replacement‑asset roll‑over if the partners dispose of all the assets of a business        23

122‑170................. Capital gain or loss disregarded........................................ 23

122‑175................. Other consequences.......................................................... 24

122‑180................. All interests acquired on or after 20 September 1985....... 24

122‑185................. All interests acquired before 20 September 1985.............. 25

122‑190................. Interests acquired before and after 20 September 1985..... 26

Replacement‑asset roll‑over for a creation case                                              27

122‑195................. Creation of asset............................................................... 27

Same‑asset roll‑over consequences for the company (disposal case)          27

122‑200................. Consequences for the company (disposal case)................ 27

Same‑asset roll‑over consequences for the company (creation case)          29

122‑205................. Consequences for the company (creation case)................. 29

Division 124—Replacement‑asset roll‑overs                                                 30

Guide to Division 124                                                                                              31

124‑1..................... What this Division is about............................................... 31

124‑5..................... How to find your way around this Division..................... 31

Subdivision 124‑A—General rules                                                                      31

124‑10................... Your ownership of one CGT asset ends........................... 32

124‑15................... Your ownership of more than one CGT asset ends.......... 33

124‑20................... Share and interest sale facilities......................................... 35

Subdivision 124‑B—Asset compulsorily acquired, lost or destroyed         37

When a roll‑over is available                                                                                37

124‑70................... Events giving rise to a roll‑over........................................ 37

124‑75................... Other requirements if you receive money......................... 39

124‑80................... Other requirements if you receive an asset........................ 40

The consequences of a roll‑over being available                                             41

124‑85................... Consequences for receiving money.................................. 41

124‑90................... Consequences for receiving an asset................................. 43

124‑95................... You receive both money and an asset............................... 44

Subdivision 124‑C—Statutory licences                                                               47

124‑140................. New statutory licences...................................................... 47

124‑145................. Rollover consequences—capital gain or loss disregarded. 48

124‑150................. Rollover consequences—partial roll‑over......................... 48

124‑155................. Roll‑over consequences—all original licences were post‑CGT                49

124‑160................. Roll‑over consequences—all original licences were pre‑CGT 50

124‑165................. Roll‑over consequences—some original licences were pre‑CGT, others were post‑CGT       50

Subdivision 124‑D—Strata title conversion                                                      51

124‑190................. Strata title conversion........................................................ 51

Subdivision 124‑E—Exchange of shares or units                                            51

124‑240................. Exchange of shares in the same company......................... 52

124‑245................. Exchange of units in the same unit trust............................ 52

Subdivision 124‑F—Exchange of rights or options                                         53

124‑295................. Exchange of rights or option to acquire shares in a company.. 53

124‑300................. Exchange of rights or option to acquire units in a unit trust 54

Subdivision 124‑I—Change of incorporation                                                   56

Guide to Subdivision 124‑I                                                                                     56

124‑510................. What this Subdivision is about......................................... 56

Object of this Subdivision                                                                                       56

124‑515................. Object of this Subdivision................................................ 56

Change of incorporation without change of entity                                          57

124‑520................. Change of incorporation without change of entity............ 57

Old corporation wound up                                                                                     59

124‑525................. Old corporation wound up................................................ 59

Special consequences of some roll‑overs                                                            61

124‑530................. Shares in company replacing pre‑CGT and post‑CGT mix of interest and rights in body       61

124‑535................. Rights as member of Indigenous corporation replacing pre‑CGT and post‑CGT mix of interest and rights in body.................................................................................. 62

Subdivision 124‑J—Crown leases                                                                        62

Guide to Subdivision 124‑J                                                                                    62

124‑570................. What this Subdivision is about......................................... 62

Operative provisions                                                                                               63

124‑575................. Extension or renewal of Crown lease............................... 63

124‑580................. Meaning of Crown lease.................................................. 64

124‑585................. Original right differs in area from new right..................... 64

124‑590................. Part of original right excised............................................. 64

124‑595................. Treating parts of new right as separate assets................... 65

124‑600................. What is the roll‑over?........................................................ 65

124‑605................. Change of lessor............................................................... 66

Subdivision 124‑K—Depreciating assets                                                            67

124‑655................. Roll‑over for depreciating assets....................................... 67

124‑660................. Right granted to associate................................................. 68

Subdivision 124‑L—Prospecting and mining entitlements                            68

Guide to Subdivision 124‑L                                                                                   68

124‑700................. What this Subdivision is about......................................... 68

Operative provisions                                                                                               68

124‑705................. Extension or renewal of prospecting or mining entitlement 68

124‑710................. Meaning of prospecting entitlement and mining entitlement 69

124‑715................. Original entitlement differs in area from new entitlement.. 70

124‑720................. Part of original entitlement excised................................... 70

124‑725................. Treating parts of new entitlement as separate assets.......... 71

124‑730................. What is the roll‑over?........................................................ 71

Subdivision 124‑M—Scrip for scrip roll‑over                                                  72

Guide to Subdivision 124‑M                                                                                  72

124‑775................. What this Subdivision is about......................................... 72

Operative provisions                                                                                               73

124‑780................. Replacement of shares...................................................... 73

124‑781................. Replacement of trust interests........................................... 77

124‑782................. Transfer or allocation of cost base of shares acquired by acquiring entity etc.         80

124‑783................. Meaning of significant stakeholder, common stakeholder, significant stake and common stake             82

124‑783A.............. Rights that affect stakes.................................................... 84

124‑784................. Cost base of equity or debt given within acquiring group. 86

124‑784A.............. When arrangement is a restructure.................................... 86

124‑784B.............. What is the cost base and reduced cost base when arrangement is a restructure?     89

124‑784C.............. Cost base of equity or debt given within acquiring group. 93

124‑785................. What is the roll‑over?........................................................ 93

124‑790................. Partial roll‑over................................................................. 94

124‑795................. Exceptions........................................................................ 95

124‑800................. Interest received for pre‑CGT interest............................... 95

124‑810................. Certain companies and trusts not regarded as having 300 members or beneficiaries                96

Subdivision 124‑N—Disposal of assets by a trust to a company                  98

Guide to Subdivision 124‑N                                                                                   98

124‑850................. What this Subdivision is about......................................... 98

Operative provisions                                                                                               99

124‑855................. What this Subdivision deals with...................................... 99

124‑860................. Requirements for roll‑over................................................ 99

124‑865................. Entities both choose the roll‑over.................................... 101

124‑870................. Roll‑over for owner of units or interests in a trust.......... 101

124‑875................. Effect on the transferor and transferee............................ 102

Subdivision 124‑P—Exchange of a membership interest in an MDO for a membership interest in another MDO                                                                                                       104

Guide to Subdivision 124‑P                                                                                  104

124‑975................. What this Subdivision is about....................................... 104

Operative provisions                                                                                             104

124‑980................. Exchange of membership interests in an MDO.............. 104

124‑985................. What the roll‑over is for post‑CGT interests................... 105

124‑990................. Partial roll‑over............................................................... 106

124‑995................. Pre‑CGT interests........................................................... 106

Subdivision 124‑Q—Exchange of stapled ownership interests for ownership interests in a unit trust     106

Guide to Subdivision 124‑Q                                                                                 106

124‑1040............... What this Subdivision is about....................................... 106

Operative provisions                                                                                             107

124‑1045............... Exchange of stapled securities........................................ 107

124‑1050............... Conditions...................................................................... 108

124‑1055............... Consequences of the roll‑over for exchanging members 109

124‑1060............... Consequences of the roll‑over for interposed trust......... 111

Subdivision 124‑R—Water entitlements                                                          112

Guide to Subdivision 124‑R                                                                                 112

124‑1100............... What this Subdivision is about....................................... 112

Replacement case                                                                                                   113

124‑1105............... Replacement water entitlements roll‑over........................ 113

124‑1110............... Roll‑over consequences—capital gain or loss disregarded 115

124‑1115............... Roll‑over consequences—partial roll‑over...................... 115

124‑1120............... Roll‑over consequences—all original entitlements post‑CGT  116

124‑1125............... Roll‑over consequences—all original entitlements pre‑CGT 117

124‑1130............... Roll‑over consequences—some original entitlements pre‑CGT, others post‑CGT  117

Reduction case                                                                                                         118

124‑1135............... Reduction in water entitlements roll‑over........................ 118

124‑1140............... Roll‑over consequences—capital gain or loss disregarded 118

124‑1145............... Roll‑over consequences—all original entitlements post‑CGT  118

124‑1150............... Roll‑over consequences—some original entitlements pre‑CGT, others post‑CGT  119

Variation to CGT asset case                                                                                120

124‑1155............... Roll‑over for variation to CGT asset............................... 120

124‑1160............... Roll‑over consequences.................................................. 120

124‑1165............... Roll‑over consequences—partial roll‑over...................... 120

Subdivision 124‑S—Interest realignment arrangements                             121

Guide to Subdivision 124‑S                                                                                  121

124‑1220............... What this Subdivision is about....................................... 121

Operative provisions                                                                                             121

124‑1225............... Disposals of interests under interest realignment arrangements               121

124‑1230............... Roll‑over consequences—partial roll‑over...................... 122

124‑1235............... Roll‑over consequences—all original interests were post‑CGT and pre‑UCA        123

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

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

124‑1250............... Roll‑over consequences—some original interests were pre‑UCA           125

Division 125—Demerger relief                                                                            127

Guide to Division 125                                                                                            127

125‑1..................... What this Division is about............................................. 127

Subdivision 125‑A—Object of this Division                                                    128

125‑5..................... Object of this Division.................................................... 128

Subdivision 125‑B—Consequences for owners of interests                         128

Guide to Subdivision 125‑B                                                                                 128

125‑50................... Guide to Subdivision 125‑B........................................... 128

Operative provisions                                                                                             129

125‑55................... When a roll‑over is available for a demerger................... 129

125‑60................... Meaning of ownership interest and related terms........... 130

125‑65................... Meanings of demerger group, head entity and demerger subsidiary      131

125‑70................... Meanings of demerger, demerged entity and demerging entity                132

125‑75................... Exceptions to subsection 125‑70(2)................................ 136

125‑80................... What is the roll‑over?...................................................... 139

125‑85................... Cost base adjustments where CGT event happens but no roll‑over chosen             141

125‑90................... Cost base adjustments where no CGT event................... 142

125‑95................... No other cost base adjustment after demerger................. 142

125‑100................. No further demerger relief in some cases........................ 142

Subdivision 125‑C—Consequences for members of demerger group      143

Guide to Subdivision 125‑C                                                                                 143

125‑150................. Guide to Subdivision 125‑C........................................... 143

Operative provisions                                                                                             143

125‑155................. Certain capital gains or losses disregarded for demerging entity              143

125‑160................. No CGT event J1............................................................ 144

125‑165................. Adjusted capital loss for value shift under a demerger.... 144

125‑170................. Reduced cost base reduction if demerger asset subject to roll‑over          144

Subdivision 125‑D—Public trading trusts                                                        145

Guide to Subdivision 125‑D                                                                                 145

125‑225................. Guide to Subdivision 125‑D........................................... 145

Operative provisions                                                                                             145

125‑230................. Application of Division to public trading trusts.............. 145

Subdivision 125‑E—Miscellaneous                                                                   145

125‑235................. Share and interest sale facilities....................................... 146

Division 126—Same‑asset roll‑overs                                                                148

Guide to Division 126                                                                                            148

126‑1..................... What this Division is about............................................. 148

Subdivision 126‑A—Marriage or relationship breakdowns                       148

126‑5..................... CGT event involving spouses......................................... 149

126‑15................... CGT event involving company or trustee....................... 151

126‑20................... Subsequent CGT event happening to roll‑over asset where transferor was a CFC or a non‑resident trust........................................................................................ 154

126‑25................... Conditions for the purposes of subsections 126‑5(3A) and 126‑15(5)    155

Subdivision 126‑B—Companies in the same wholly‑owned group            155

Guide to Subdivision 126‑B                                                                                 155

126‑40................... What this Subdivision is about....................................... 155

Operative provisions                                                                                             156

126‑45................... Roll‑over for members of wholly‑owned group............. 156

126‑50................... Requirements for roll‑over.............................................. 156

126‑55................... When there is a roll‑over................................................. 159

126‑60................... Consequences of roll‑over.............................................. 160

126‑75................... Originating company is a CFC....................................... 161

126‑85................... Effect of roll‑over on certain liquidations........................ 162

Subdivision 126‑C—Changes to trust deeds                                                    164

Guide to Subdivision 126‑C                                                                                 164

126‑125................. What this Subdivision is about....................................... 164

126‑130................. Changes to trust deeds.................................................... 164

126‑135................. Consequences of roll‑over.............................................. 165

Subdivision 126‑D—Small superannuation funds                                         166

126‑140................. CGT event involving small superannuation funds.......... 166

Subdivision 126‑E—Entitlement to shares after demutualisation and scrip for scrip roll‑over               170

Guide to Subdivision 126‑E                                                                                 170

126‑185................. What this Subdivision is about....................................... 170

Operative provisions                                                                                             170

126‑190................. When there is a roll‑over................................................. 170

126‑195................. Consequences of roll‑over.............................................. 171

Subdivision 126‑G—Transfer of assets between certain trusts                  172

Guide to Subdivision 126‑G                                                                                 172

126‑215................. What this Subdivision is about....................................... 172

Operative provisions                                                                                             172

126‑220................. Object of this Subdivision.............................................. 172

126‑225................. When a roll‑over may be chosen..................................... 173

126‑230................. Beneficiaries’ entitlements not be discretionary etc......... 174

126‑235................. Exceptions for roll‑over.................................................. 175

126‑240................. Consequences for the trusts............................................ 176

126‑245................. Consequences for beneficiaries—general approach for working out cost base etc.  178

126‑250................. Consequences for beneficiaries—other approach for working out cost base etc.     180

126‑255................. No other cost base etc. adjustment for beneficiaries........ 181

126‑260................. Giving information to beneficiaries................................. 181

126‑265................. Interest sale facilities....................................................... 183

Division 128—Effect of death                                                                              185

Guide to Division 128                                                                                            185

128‑1..................... What this Division is about............................................. 185

General rules                                                                                                           185

128‑10................... Capital gain or loss when you die is disregarded............ 185

128‑15................... Effect on the legal personal representative or beneficiary 186

128‑20................... When does an asset pass to a beneficiary?...................... 188

128‑25................... The beneficiary is a trustee of a superannuation fund etc. 189

Special rules for joint tenants                                                                              190

128‑50................... Joint tenants.................................................................... 190

Division 130—Investments                                                                                    192

Guide to Division 130                                                                                            192

130‑1..................... What this Division is about............................................. 192

Subdivision 130‑A—Bonus shares and units                                                   193

Guide to Subdivision 130‑A                                                                                 193

130‑15................... Acquisition time and cost base of bonus equities............ 193

Operative provisions                                                                                             194

130‑20................... Issue of bonus shares or units........................................ 194

Subdivision 130‑B—Rights                                                                                  198

130‑40................... Exercise of rights............................................................ 198

130‑45................... Timing rules.................................................................... 201

130‑50................... Application to options..................................................... 201

Subdivision 130‑C—Convertible interests                                                       201

130‑60................... Shares or units acquired by converting a convertible interest 201

Subdivision 130‑D—Employee share schemes                                               204

130‑75................... Objects of Subdivision................................................... 204

130‑80................... ESS interests acquired under employee share schemes... 205

130‑85................... Interests in employee share trusts................................... 206

130‑90................... Shares held by employee share trusts............................. 208

130‑95................... Shares and rights in relation to ESS interests.................. 209

130‑97................... Application of certain provisions of Division 83A......... 209

Subdivision 130‑E—Exchangeable interests                                                   209

130‑100................. Exchangeable interest...................................................... 210

130‑105................. Shares acquired in exchange for the disposal or redemption of an exchangeable interest         210

Subdivision 130‑F—Exploration investments                                                213

130‑110................. Reducing the reduced cost base before disposal............. 213

Division 132—Leases                                                                                                214

132‑1..................... Lessee incurs expenditure to get lease term varied or waived.. 214

132‑5..................... Lessor pays lessee for improvements............................. 214

132‑10................... Grant of a long‑term lease............................................... 214

132‑15................... Lessee of land acquires reversionary interest of lessor... 215

Division 134—Options                                                                                             217

134‑1..................... Exercise of options......................................................... 217

Division 149—When an asset stops being a pre‑CGT asset                220

Subdivision 149‑A—Key concepts                                                                     220

149‑10................... What is a pre‑CGT asset?............................................... 220

149‑15................... Majority underlying interests in a CGT asset.................. 221

Subdivision 149‑B—When asset of non‑public entity stops being a pre‑CGT asset       222

149‑25................... Which entities are affected.............................................. 222

149‑30................... Effects if asset no longer has same majority underlying ownership         222

149‑35................... Cost base elements of asset that stops being a pre‑CGT asset  223

Subdivision 149‑C—When asset of public entity stops being a pre‑CGT asset               224

149‑50................... Which entities are affected.............................................. 224

149‑55................... Entity to give the Commissioner evidence periodically as to whether asset still has same majority underlying ownership....................................................................... 225

149‑60................... What the evidence must show......................................... 227

149‑70................... Effects if asset no longer has same majority underlying ownership         228

149‑75................... Cost base elements of asset that stops being a pre‑CGT asset  229

149‑80................... No more evidence needed after asset stops being a pre‑CGT asset          229

Subdivision 149‑F—How to treat a “demutualised” public entity             229

149‑162................. Subdivision applies only if entity gives sufficient evidence 229

149‑165................. Members treated as having underlying interests in assets until demutualisation       230

149‑170................. Effect of demutualisation of interposed company........... 231

Division 152—Small business relief                                                                   232

Guide to Division 152                                                                                            232

152‑1..................... What this Division is about............................................. 232

Subdivision 152‑A—Basic conditions for relief under this Division         233

Guide to Subdivision 152‑A                                                                                 233

152‑5..................... What this Subdivision is about....................................... 233

Basic conditions for relief                                                                                    235

152‑10................... Basic conditions for relief............................................... 235

152‑12................... Special conditions for CGT event D1............................. 240

Maximum net asset value test                                                                              240

152‑15................... Maximum net asset value test......................................... 240

152‑20................... Meaning of net value of the CGT assets......................... 241

Active asset test                                                                                                       244

152‑35................... Active asset test.............................................................. 244

152‑40................... Meaning of active asset.................................................. 245

152‑45................... Continuing time periods for involuntary disposals......... 248

Treatment of passively held CGT assets                                                          250

152‑47................... Spouses or children taken to be affiliates for certain passively held CGT assets      250

152‑48................... Working out an entity’s aggregated turnover for passively held CGT assets           252

152‑49................... Businesses that are winding up....................................... 252

Significant individual test                                                                                    253

152‑50................... Significant individual test................................................ 253

152‑55................... Meaning of significant individual................................... 253

CGT concession stakeholder                                                                               254

152‑60................... Meaning of CGT concession stakeholder....................... 254

Small business participation percentage                                                          254

152‑65................... Small business participation percentage.......................... 254

152‑70................... Direct small business participation percentage................ 254

152‑75................... Indirect small business participation percentage.............. 257

Nomination of controllers of discretionary trust                                           258

152‑78................... Trustee of discretionary trust may nominate beneficiaries to be controllers of trust 258

CGT event happens to asset or interest within 2 years of an individual’s death             259

152‑80................... CGT event happens to an asset or interest within 2 years of individual’s death       259

Subdivision 152‑B—Small business 15‑year exemption                              260

Guide to Subdivision 152‑B                                                                                 260

152‑100................. What this Subdivision is about....................................... 260

152‑105................. 15‑year exemption for individuals.................................. 262

152‑110................. 15‑year exemption for companies and trusts................... 262

152‑115................. Continuing time periods for involuntary disposals......... 263

152‑125................. Payments to company’s or trust’s CGT concession stakeholders are exempt          265

Subdivision 152‑C—Small business 50% reduction                                      267

Guide to Subdivision 152‑C                                                                                 267

152‑200................. What this Subdivision is about....................................... 267

152‑205................. You get the small business 50% reduction..................... 268

152‑210................. You may also get the small business retirement exemption and small business roll‑over relief               268

152‑215................. 15‑year rule has priority.................................................. 268

152‑220................. You may choose not to apply this Subdivision............... 268

Subdivision 152‑D—Small business retirement exemption                         269

Guide to Subdivision 152‑D                                                                                 269

152‑300................. What this Subdivision is about....................................... 269

152‑305................. Choosing the exemption................................................. 270

152‑310................. Consequences of choice.................................................. 271

152‑315................. Choosing the amount to disregard.................................. 272

152‑320................. Meaning of CGT retirement exemption limit.................. 273

152‑325................. Company or trust conditions........................................... 273

152‑330................. 15‑year rule has priority.................................................. 276

Subdivision 152‑E—Small business roll‑over                                                 276

Guide to Subdivision 152‑E                                                                                 276

152‑400................. What this Subdivision is about....................................... 276

Operative provisions                                                                                             277

152‑410................. When you can obtain the roll‑over.................................. 277

152‑415................. What the roll‑over consists of......................................... 277

152‑420................. Rules where an individual who has obtained a roll‑over dies.. 278

152‑430................. 15‑year rule has priority.................................................. 279

Part 3‑5—Corporate taxpayers and corporate distributions                  280

Division 164—Non‑share capital accounts for companies                   280

Guide to Division 164                                                                                            280

164‑1..................... What this Division is about............................................. 280

Operative provisions                                                                                             281

164‑5..................... Object............................................................................. 281

164‑10................... Non‑share capital account............................................... 281

164‑15................... Credits to non‑share capital account................................ 282

164‑20................... Debits to non‑share capital account................................. 284

Division 165—Income tax consequences of changing ownership or control of a company        286

Guide to Division 165                                                                                            286

165‑1..................... What this Division is about............................................. 286

Subdivision 165‑A—Deducting tax losses of earlier income years           287

Guide to Subdivision 165‑A                                                                                 287

165‑5..................... What this Subdivision is about....................................... 287

Operative provisions                                                                                             288

165‑10................... To deduct a tax loss........................................................ 288

165‑12................... Company must maintain the same owners...................... 288

165‑13................... Alternatively, the company must satisfy the same business test               290

165‑15................... The same people must control the voting power, or the company must satisfy the same business test    291

165‑20................... When company can deduct part of a tax loss.................. 292

Subdivision 165‑B—Working out the taxable income and tax loss for the income year of the change   293

Guide to Subdivision 165‑B                                                                                 293

165‑23................... What this Subdivision is about....................................... 293

165‑25................... Summary of this Subdivision......................................... 294

165‑30................... Flow chart showing the application of this Subdivision. 296

When a company must work out its taxable income and tax loss under this Subdivision            297

165‑35................... On a change of ownership, unless the company satisfies the same business test     297

165‑37................... Who has more than a 50% stake in the company during a period           297

165‑40................... On a change of control of the voting power in the company, unless the company satisfies the same business test.................................................................................. 299

Working out the company’s taxable income                                                   300

165‑45................... First, divide the income year into periods....................... 300

165‑50................... Next, calculate the notional loss or notional taxable income for each period            301

165‑55................... How to attribute deductions to periods........................... 301

165‑60................... How to attribute assessable income to periods................ 303

165‑65................... How to calculate the company’s taxable income for the income year       304

Working out the company’s tax loss                                                                  305

165‑70................... How to calculate the company’s tax loss for the income year  305

Special rules that apply if the company is in partnership                            306

165‑75................... How to calculate the company’s notional loss or notional taxable income for a period when the company was a partner............................................................................. 306

165‑80................... How to calculate the company’s share of a partnership’s notional loss or notional net income for a period if both entities have the same income year.......................... 307

165‑85................... How to calculate the company’s share of a partnership’s notional loss or notional net income for a period if the entities have different income years................................ 308

165‑90................... Company’s full year deductions include a share of partnership’s full year deductions            309

Subdivision 165‑CA—Applying net capital losses of earlier income years 310

Guide to Subdivision 165‑CA                                                                              310

165‑93................... What this Subdivision is about....................................... 310

Operative provisions                                                                                             310

165‑96................... When a company cannot apply a net capital loss............. 310

Subdivision 165‑CB—Working out the net capital gain and the net capital loss for the income year of the change                                                                                                       311

Guide to Subdivision 165‑CB                                                                              311

165‑99................... What this Subdivision is about....................................... 311

When a company must work out its net capital gain and net capital loss under this Subdivision              312

165‑102................. On a change of ownership, or of control of voting power, unless the company satisfies the same business test........................................................................................ 312

Working out the company’s net capital gain and net capital loss              312

165‑105................. First, divide the income year into periods....................... 312

165‑108................. Next, calculate the notional net capital gain or notional net capital loss for each period            312

165‑111................. How to work out the company’s net capital gain............ 313

165‑114................. How to work out the company’s net capital loss............ 314

Subdivision 165‑CC—Change of ownership or control of company that has an unrealised net loss        315

Guide to Subdivision 165‑CC                                                                              315

165‑115................. What this Subdivision is about....................................... 315

165‑115AA........... Special rules to save compliance costs............................ 315

Operative provisions                                                                                             316

165‑115A.............. Application of Subdivision............................................. 316

165‑115B.............. What happens when the company makes a capital loss or becomes entitled to a deduction in respect of a CGT asset after a changeover time........................................... 319

165‑115BA........... What happens when a CGT event happens after a changeover time to a CGT asset of the company that is trading stock................................................................... 321

165‑115BB............ Order of application of assets: residual unrealised net loss 322

165‑115C.............. Changeover time—change in ownership of company..... 324

165‑115D.............. Changeover time—change in control of company.......... 325

165‑115E............... What is an unrealised net loss......................................... 326

165‑115F............... Notional gains and losses............................................... 329

Subdivision 165‑CD—Reductions after alterations in ownership or control of loss company   331

Guide to Subdivision 165‑CD                                                                              331

165‑115GA........... What this Subdivision is about....................................... 331

165‑115GB........... When adjustments must be made.................................... 331

165‑115GC........... How adjustments are calculated...................................... 332

165‑115H.............. How this Subdivision applies......................................... 333

Operative provisions                                                                                             336

165‑115J............... Object of Subdivision..................................................... 336

165‑115K.............. Application and interpretation......................................... 337

165‑115L............... Alteration time—alteration in ownership of company..... 338

165‑115M............. Alteration time—alteration in control of company.......... 340

165‑115N.............. Alteration time—declaration by liquidator or administrator 341

165‑115P............... Notional alteration time—disposal of interests in company within 12 months before alteration time       341

165‑115Q.............. Notional alteration time—disposal of interests in company earlier than 12 months before alteration time........................................................................................ 342

165‑115R.............. When company is a loss company at first or only alteration time in income year     344

165‑115S............... When company is a loss company at second or later alteration time in income year 346

165‑115T............... Reduction of certain amounts included in company’s overall loss at alteration time 348

165‑115U.............. Adjusted unrealised loss................................................. 348

165‑115V.............. Notional losses............................................................... 351

165‑115W............. Calculation of trading stock decrease.............................. 352

165‑115X.............. Relevant equity interest................................................... 353

165‑115Y.............. Relevant debt interest...................................................... 356

165‑115Z............... What constitutes a controlling stake in a company.......... 359

165‑115ZA............ Reductions and other consequences if entity has relevant equity interest or relevant debt interest in loss company immediately before alteration time................... 360

165‑115ZB............ Adjustment amounts for the purposes of section 165‑115ZA  364

165‑115ZC............ Notices to be given......................................................... 367

165‑115ZD............ Adjustment (or further adjustment) for interest realised at a loss after global method has been used       371

Subdivision 165‑C—Deducting bad debts                                                        375

Guide to Subdivision 165‑C                                                                                 375

165‑117................. What this Subdivision is about....................................... 375

Operative provisions                                                                                             376

165‑119................. Application of Subdivision............................................. 376

165‑120................. To deduct a bad debt....................................................... 376

165‑123................. Company must maintain the same owners...................... 378

165‑126................. Alternatively, the company must satisfy the same business test               380

165‑129................. Same people must control the voting power, or the company must satisfy the same business test           381

165‑132................. When tax losses resulting from bad debts cannot be deducted 382

Subdivision 165‑D—Tests for finding out whether the company has maintained the same owners          383

The primary and alternative tests                                                                      384

165‑150................. Who has more than 50% of the voting power in the company 384

165‑155................. Who has rights to more than 50% of the company’s dividends               384

165‑160................. Who has rights to more than 50% of the company’s capital distributions                385

165‑165................. Rules about tests for a condition or occurrence of a circumstance            386

165‑175................. Tests can be satisfied by a single person......................... 388

Rules affecting the operation of the tests                                                          388

165‑180................. Arrangements affecting beneficial ownership of shares.. 388

165‑185................. Shares treated as not having carried rights...................... 389

165‑190................. Shares treated as always having carried rights................ 389

165‑200................. Rules do not affect totals of shares, units in unit trusts or rights carried by shares and units   390

165‑202................. Shares held by government entities and charities etc....... 391

165‑203................. Companies where no shares have been issued................ 391

165‑205................. Death of share owner...................................................... 391

165‑207................. Trustees of family trusts................................................. 392

165‑208................. Companies in liquidation etc........................................... 393

165‑209................. Dual listed companies..................................................... 395

Subdivision 165‑E—The same business test                                                    395

165‑210................. The test........................................................................... 395

165‑212D.............. Restructure of MDOs etc................................................ 396

165‑212E............... Entry history rule does not apply for the purposes of section 165‑210    396

Subdivision 165‑F—Special provisions relating to ownership by non‑fixed trusts       397

165‑215................. Special alternative to change of ownership test for Subdivision 165‑A   397

165‑220................. Special alternative to change of ownership test for Subdivision 165‑B    399

165‑225................. Special way of dividing the income year under Subdivision 165‑B         400

165‑230................. Special alternative to change of ownership test for Subdivision 165‑C    401

165‑235................. Information about non‑fixed trusts with interests in company 403

165‑240................. Notices where requirements of section 165‑235 are met. 405

165‑245................. When an entity has a fixed entitlement to income or capital of a company               406

Subdivision 165‑G—Other special provisions                                                406

165‑250................. Control of companies in liquidation etc........................... 406

165‑255................. Incomplete periods.......................................................... 407

Division 166—Income tax consequences of changing ownership or control of a widely held or eligible Division 166 company                                                                    409

Guide to Division 166                                                                                            409

166‑1..................... What this Division is about............................................. 409

Subdivision 166‑AA—The object of this Division                                          410

166‑3..................... The object of this Division.............................................. 410

Subdivision 166‑A—Deducting tax losses of earlier income years           410

166‑5..................... How Subdivision 165‑A applies to a widely held or eligible Division 166 company              411

166‑15................... Companies can choose that this Subdivision is not to apply to them        412

Subdivision 166‑B—Working out the taxable income, tax loss, net capital gain and net capital loss for the income year of the change                                                                    413

166‑20................... How Subdivisions 165‑B and 165‑CB apply to a widely held or eligible Division 166 company           413

166‑25................... How to work out the taxable income, tax loss, net capital gain and net capital loss  415

166‑35................... Companies can choose that this Subdivision is not to apply to them        415

Subdivision 166‑C—Deducting bad debts                                                        416

166‑40................... How Subdivision 165‑C applies to a widely held or eligible Division 166 company              416

166‑50................... Companies can choose that this Subdivision is not to apply to them        418

Subdivision 166‑CA—Changeover times and alteration times                  418

166‑80................... How Subdivision 165‑CC or 165‑CD applies to a widely held or eligible Division 166 company         418

166‑90................... Companies can choose that this Subdivision is not to apply to them        420

Subdivision 166‑D—Tests for finding out whether the widely held or eligible Division 166 company has maintained the same owners                                                                        420

Guide to Subdivision 166‑D                                                                                 420

166‑135................. What this Subdivision is about....................................... 420

The ownership tests: substantial continuity of ownership                            421

166‑145................. The ownership tests: substantial continuity of ownership 421

166‑165................. Relationship with rules in Division 165.......................... 423

Corporate change in a company                                                                        423

166‑175................. Corporate change in a company...................................... 423

Subdivision 166‑E—Concessional tracing rules                                            424

Guide to Subdivision 166‑E                                                                                 424

166‑215................. What this Subdivision is about....................................... 424

Application of this Subdivision                                                                           426

166‑220................. Application of this Subdivision...................................... 426

Stakes of less than 10% in the tested company                                               426

166‑225................. Direct stakes of less than 10% in the tested company..... 426

166‑230................. Indirect stakes of less than 10% in the tested company... 428

166‑235................. Voting, dividend and capital stakes................................. 430

Stakes held directly and/or indirectly by widely held companies              432

166‑240................. Stakes held directly and/or indirectly by widely held companies              432

166‑245................. Stakes held by other entities............................................ 434

When identity of foreign stakeholders is not known                                     437

166‑255................. Bearer shares in foreign listed companies....................... 437

166‑260................. Depository entities holding stakes in foreign listed companies                439

Other rules relating to voting power and rights                                             441

166‑265................. Persons who actually control voting power or have rights are taken not to control power or have rights........................................................................................ 441

166‑270................. Single notional entity stakeholders taken to have minimum voting control, dividend rights and capital rights........................................................................................ 442

166‑272................. Same shares or interests to be held................................. 443

When the rules in this Subdivision do not apply                                             446

166‑275................. Rules in this Subdivision intended to be concessional.... 446

166‑280................. Controlled test companies............................................... 447

Division 167—Companies whose shares carry unequal rights to dividends, capital distributions or voting power                                                                                                      449

Guide to Division 167                                                                                            449

167‑1..................... What this Division is about............................................. 449

Subdivision 167‑A—Rights to dividends or capital distributions              449

Guide to Subdivision 167‑A                                                                                 449

167‑5..................... What this Subdivision is about....................................... 449

167‑7..................... Simplified outline of this Subdivision............................. 450

Operative provisions                                                                                             451

167‑10................... When this Subdivision applies........................................ 451

167‑15................... First way—disregard debt interests................................ 453

167‑20................... Second way—also disregard secondary share classes.... 453

167‑25................... Third way—treat remaining shares as having fixed rights to dividends and capital distributions             454

167‑30................... Fixing rights if practicable to work out market values.... 455

167‑35................... Fixing rights if impracticable to work out market values etc. 455

167‑40................... The valuing times for conditions listed in subsection 167‑10(1)              456

Subdivision 167‑B—Voting power                                                                     457

Guide to Subdivision 167‑B                                                                                 457

167‑75................... What this Subdivision is about....................................... 457

Operative provisions                                                                                             457

167‑80................... When this Subdivision applies........................................ 457

167‑85................... Different method for working out voting power............. 458

167‑90................... Dual listed companies..................................................... 459

Division 170—Treatment of certain company groups for income tax purposes              460

Subdivision 170‑A—Transfer of tax losses within certain wholly‑owned groups of companies                460

Guide to Subdivision 170‑A                                                                                 460

170‑1..................... What this Subdivision is about....................................... 460

170‑5..................... Basic principles for transferring tax losses..................... 461

Effect of transferring a tax loss                                                                         462

170‑10................... When a company can transfer a tax loss......................... 462

170‑15................... Income company is taken to have incurred transferred loss 462

170‑20................... Who can deduct transferred loss..................................... 463

170‑25................... Tax treatment of consideration for transferred tax loss... 463

Conditions for transfer                                                                                         464

170‑30................... Companies must be in existence and members of the same wholly‑owned group etc.             464

170‑32................... Tax loss incurred by the loss company because of a transfer under Subdivision 707‑A          465

170‑33................... Alternative test of relations between the loss company and other companies           466

170‑35................... The loss company........................................................... 468

170‑40................... The income company...................................................... 469

170‑42................... If the income company has become the head company of a consolidated group or MEC group              470

170‑45................... Maximum amount that can be transferred....................... 471

170‑50................... Transfer by written agreement........................................ 474

170‑55................... Losses must be transferred in order they are incurred..... 474

170‑60................... Income company cannot transfer transferred tax loss..... 475

Effect of agreement to transfer more than can be transferred                  475

170‑65................... Agreement transfers as much as can be transferred........ 475

170‑70................... Amendment of assessments............................................ 476

Australian permanent establishments of foreign financial entities           476

170‑75................... Treatment like Australian branches of foreign banks...... 476

Subdivision 170‑B—Transfer of net capital losses within certain wholly‑owned groups of companies  477

Guide to Subdivision 170‑B                                                                                 477

170‑101................. What this Subdivision is about....................................... 477

170‑105................. Basic principles for transferring a net capital loss........... 478

Effect of transferring a net capital loss                                                            479

170‑110................. When a company can transfer a net capital loss.............. 479

170‑115................. Who can apply transferred loss....................................... 479

170‑120................. Gain company is taken to have made transferred loss..... 480

170‑125................. Tax treatment of consideration for transferred tax loss... 480

Conditions for transfer                                                                                         481

170‑130................. Companies must be in existence and members of the same wholly‑owned group etc.             481

170‑132................. Net capital loss made by the loss company because of a transfer under Subdivision 707‑A    482

170‑133................. Alternative test of relations between the loss company and other companies           483

170‑135................. The loss company........................................................... 485

170‑140................. The gain company........................................................... 486

170‑142................. If the gain company has become the head company of a consolidated group or MEC group   487

170‑145................. Maximum amount that can be transferred....................... 488

170‑150................. Transfer by written agreement........................................ 491

170‑155................. Losses must be transferred in order they are made......... 492

170‑160................. Gain company cannot transfer transferred net capital loss 492

Effect of agreement to transfer more than can be transferred                  492

170‑165................. Agreement transfers as much as can be transferred........ 492

170‑170................. Amendment of assessments............................................ 493

Australian permanent establishments of foreign financial entities           493

170‑174................. Treatment like Australian branches of foreign banks...... 493

Subdivision 170‑C—Provisions applying to both transfers of tax losses and transfers of net capital losses within wholly‑owned groups of companies                                     494

Guide to Subdivision 170‑C                                                                                 494

170‑201................. What this Subdivision is about....................................... 494

Operative provisions                                                                                             495

170‑205................. Object of Subdivision..................................................... 495

170‑210................. Transfer of tax loss: direct and indirect interests in the loss company      495

170‑215................. Transfer of tax loss: direct and indirect interests in the income company 498

170‑220................. Transfer of net capital loss: direct and indirect interests in the loss company           501

170‑225................. Transfer of net capital loss: direct and indirect interests in the gain company           503

Subdivision 170‑D—Transactions by a company that is a member of a linked group 506

Guide to Subdivision 170‑D                                                                                 506

170‑250................. What this Subdivision is about....................................... 506

Operative provisions                                                                                             507

170‑255................. Application of Subdivision............................................. 507

170‑260................. Linked group.................................................................. 509

170‑265................. Connected entity............................................................. 510

170‑270................. Immediate consequences for originating company.......... 511

170‑275................. Subsequent consequences for originating company........ 512

170‑280................. What happens if certain events happen in respect of the asset  513

Division 175—Use of a company’s tax losses or deductions to avoid income tax            516

Guide to Division 175                                                                                            516

175‑1..................... What this Division is about............................................. 516

Subdivision 175‑A—Tax benefits from unused tax losses                           516

175‑5..................... When Commissioner can disallow deduction for tax loss 517

175‑10................... First case: income or capital gain injected into company because of available tax loss             517

175‑15................... Second case: someone else obtains a tax benefit because of tax loss available to company      518

Subdivision 175‑B—Tax benefits from unused deductions                         519

175‑20................... Income or capital gain injected into company because of available deductions         519

175‑25................... Deduction injected into company because of available income or capital gain          520

175‑30................... Someone else obtains a tax benefit because of a deduction, income or capital gain available to company........................................................................................ 521

175‑35................... Tax loss resulting from disallowed deductions............... 522

Subdivision 175‑CA—Tax benefits from unused net capital losses of earlier income years      523

175‑40................... When Commissioner can disallow net capital loss of earlier income year                523

175‑45................... First case: capital gain injected into company because of available net capital loss   524

175‑50................... Second case: someone else obtains a tax benefit because of net capital loss available to company           525

Subdivision 175‑CB—Tax benefits from unused capital losses of the current year     525

175‑55................... When Commissioner can disallow capital loss of current year 526

175‑60................... Capital gain injected into company because of available capital loss        526

175‑65................... Capital loss injected into company because of available capital gain        527

175‑70................... Someone else obtains a tax benefit because of capital loss or gain available to company         527

175‑75................... Net capital loss resulting from disallowed capital losses. 528

Subdivision 175‑C—Tax benefits from unused bad debt deductions        529

175‑80................... When Commissioner can disallow deduction for bad debt 529

175‑85................... First case: income or capital gain injected into company because of available bad debt            529

175‑90................... Second case: someone else obtains a tax benefit because of bad debt deduction available to company    530

Subdivision 175‑D—Common rules                                                                  531

175‑95................... When a person has a shareholding interest in the company 531

175‑100................. Commissioner may disallow excluded losses etc. of insolvent companies               532

Division 180—Information about family trusts with interests in companies      533

Guide to Division 180                                                                                            533

180‑1..................... What this Division is about............................................. 533

Subdivision 180‑A—Information relevant to Division 165                         533

180‑5..................... Information about family trusts with interests in companies 533

180‑10................... Notice where requirements of section 180‑5 are met...... 535

Subdivision 180‑B—Information relevant to Division 175                         538

180‑15................... Information about family trusts with interests in companies 538

180‑20................... Notice where requirements of section 180‑15 are met.... 539

Division 195—Special types of company                                                        542

Subdivision 195‑A—Pooled development funds (PDFs)                               542

Guide to Subdivision 195‑A                                                                                 542

195‑1..................... What this Subdivision is about....................................... 542

Working out a PDF’s taxable income and tax loss                                        543

195‑5..................... Deductibility of PDF tax losses...................................... 543

195‑10................... PDF cannot transfer tax loss........................................... 543

195‑15................... Tax loss for year in which company becomes a PDF..... 543

Working out a PDF’s net capital gain and net capital loss                          544

195‑25................... Applying a PDF’s net capital losses............................... 544

195‑30................... PDF cannot transfer net capital loss................................ 544

195‑35................... Net capital loss for year in which company becomes a PDF 544

Subdivision 195‑B—Limited partnerships                                                      546

Guide to Subdivision 195‑B                                                                                 546

195‑60................... What this Subdivision is about....................................... 546

Operative provisions                                                                                             546

195‑65................... Tax losses cannot be transferred to a VCLP, an ESVCLP, an AFOF or a VCMP  546

195‑70................... Previous tax losses can be deducted after ceasing to be a VCLP, an ESVCLP, an AFOF or a VCMP   547

195‑75................... Determinations to take account of income years of less than 12 months  547

Division 197—Tainted share capital accounts                                            548

Guide to Division 197                                                                                            548

197‑1..................... What this Division is about............................................. 548

Subdivision 197‑A—What transfers into a company’s share capital account does this Division apply to?            549

197‑5..................... Division generally applies to an amount transferred to share capital account from another account         549

197‑10................... Exclusion for amounts that could be identified as share capital                550

197‑15................... Exclusion for amounts transferred under debt/equity swaps 550

197‑20................... Exclusion for amounts transferred leading to there being no shares with a par value—non‑Corporations Act companies....................................................................... 550

197‑25................... Exclusion for transfers from option premium reserves... 551

197‑30................... Exclusion for transfers made in connection with demutualisations of non‑insurance etc. companies       551

197‑35................... Exclusion for transfers made in connection with demutualisations of insurance etc. companies              553

197‑37................... Exclusion for transfers made in connection with demutualisations of private health insurers  554

197‑38................... Exclusion for transfers connected with demutualisations of friendly society health or life insurers         555

197‑40................... Exclusion for post‑demutualisation transfers relating to life insurance companies   556

197‑42................... Exclusion for exploration credits.................................... 558

Subdivision 197‑B—Consequence of transfer: franking debit arises       558

197‑45................... A franking debit arises in relation to the transfer............ 558

Subdivision 197‑C—Consequence of transfer: tainting of share capital account          559

197‑50................... The share capital account becomes tainted (if it is not already tainted)     559

197‑55................... Choosing to untaint a tainted share capital account......... 560

197‑60................... Choosing to untaint—liability to untainting tax............... 560

197‑65................... Choosing to untaint—further franking debits may arise. 563

197‑70................... Due date for payment of untainting tax........................... 564

197‑75................... General interest charge for late payment of untainting tax 564

197‑80................... Notice of liability to pay untainting tax........................... 564

197‑85................... Evidentiary effect of notice of liability to pay untainting tax 565


Chapter 3Specialist liability rules

Part 3‑3Capital gains and losses: special topics

Division 122Roll‑over for the disposal of assets to, or the creation of assets in, a wholly‑owned company

Table of Subdivisions

             Guide to Division 122

122‑A   Disposal or creation of assets by an individual or trustee to a wholly‑owned company

122‑B    Disposal or creation of assets by partners to a wholly‑owned company

Guide to Division 122

122‑1  What this Division is about

A roll‑over can delay the making of a capital gain or loss if:

         you dispose of a CGT asset, or all the assets of a business, to a company in which you own all the shares; or

         you create a CGT asset in such a company; or

         all the partners in a partnership dispose of partnership property to a company in which they own all the shares; or

         the partners create a CGT asset in such a company.

Subdivision 122‑ADisposal or creation of assets by an individual or trustee to a wholly‑owned company

Guide to Subdivision 122‑A

122‑5  What this Subdivision is about

This Subdivision sets out when you can obtain a roll‑over if you transfer a CGT asset, or all the assets of a business, to a company. It also deals with the creation of a CGT asset in a company. There are consequences for the company also.

Table of sections

When is a roll‑over available

122‑15      Disposal or creation of assets—wholly‑owned company

122‑20      What you receive for the trigger event

122‑25      Other requirements to be satisfied

122‑35      What if the company undertakes to discharge a liability (disposal case)

122‑37      Rules for working out what a liability in respect of an asset is

Replacement‑asset roll‑over if you dispose of a CGT asset

122‑40      Disposal of a CGT asset

Replacement‑asset roll‑over if you dispose of all the assets of a business

122‑45      Disposal of all the assets of a business

122‑50      All assets acquired on or after 20 September 1985

122‑55      All assets acquired before 20 September 1985

122‑60      Assets acquired before and after 20 September 1985

Replacement‑asset roll‑over for a creation case

122‑65      Creation of asset

Same‑asset roll‑over consequences for the company (disposal case)

122‑70      Consequences for the company (disposal case)

Same‑asset roll‑over consequences for the company (creation case)

122‑75      Consequences for the company (creation case)

When is a roll‑over available

122‑15  Disposal or creation of assets—wholly‑owned company

                   If you are an individual or a trustee, you can choose to obtain a roll‑over if one of the *CGT events (the trigger event) specified in this table happens involving you and a company in the circumstances set out in sections 122‑20 to 122‑35.

 

Relevant *CGT events

Event No.

What you do

A1

*Dispose of a CGT asset, or all the assets of a business, to the company

D1

Create contractual or other rights in the company

D2

Grant an option to the company

D3

Grant the company a right to income from mining

F1

Grant a lease to the company, or renew or extend a lease

Note 1:       The roll‑over starts at section 122‑40.

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

Note 3:       A roll‑over may also be available under Subdivision 328‑G (Restructures of small businesses).

Example:    Gavin runs a plumbing business. He wants to incorporate it so he disposes of all its assets to a company. He becomes the sole shareholder of the company.

122‑20  What you receive for the trigger event

             (1)  The consideration you receive for the trigger event happening must be only:

                     (a)  *shares in the company; or

                     (b)  for a *disposal of a *CGT asset, or all the assets of a business, to the company (a disposal case)—shares in the company and the company undertaking to discharge one or more liabilities in respect of the asset or assets of the *business (as appropriate).

Note:          There are rules for working out what are the liabilities in respect of an asset: see section 122‑37.

             (2)  The *shares cannot be *redeemable shares.

             (3)  The *market value of the *shares you receive for the trigger event happening must be substantially the same as:

                     (a)  for a disposal case—the market value of the asset or assets you disposed of, less any liabilities the company undertakes to discharge in respect of the asset or assets (as appropriate); or

                     (b)  for another trigger event (a creation case)—the market value of the CGT asset created in the company (the created asset).

             (4)  In working out if the requirement in paragraph (3)(a) is satisfied, if the *market value of the *shares is different to what it would otherwise be only because of the possibility of liabilities attaching to the asset or assets, disregard the difference.

Note:          The company may have to pay income tax if an amount is included in its assessable income because of a CGT event happening to an asset you disposed of, or it may have a liability because of accrued leave entitlements of employees. The market value of the shares will reflect these contingent liabilities.

122‑25  Other requirements to be satisfied

             (1)  You must own all the *shares in the company just after the time of the trigger event.

Note:          You must own the shares in the same capacity as you owned or created the assets that the company now owns.

             (2)  This Subdivision does not apply to the *disposal or creation of any of the assets specified in this table:

 

Assets to which Subdivision does not apply

Item

In this situation:

This Subdivision does not apply to:

1

You *dispose of a *CGT asset to the company or create a CGT asset in the company

(a) a *collectable or a *personal use asset; or

(b) a decoration awarded for valour or brave conduct (except if you paid money or gave any other property for it); or

(c)  a *precluded asset; or

(d) an asset that becomes *trading stock of the company just after the *disposal or creation; or

(e)  an asset that becomes a *registered emissions unit *held by the company just after the *disposal or creation

2

You *dispose of all the assets of a *business to the company

(a) a *collectable or a *personal use asset; or

(b) a decoration awarded for valour or brave conduct (except if you paid money or gave any other property for it); or

(c)  an asset that becomes *trading stock of the company just after the disposal or creation (unless it was your trading stock when you disposed of it); or

(d) an asset that becomes a *registered emissions unit *held by the company just after the *disposal or creation (unless it was a registered emissions unit held by you when you disposed of it)

             (3)  A precluded asset is:

                     (a)  a *depreciating asset; or

                     (b)  *trading stock; or

                     (c)  an interest in the copyright in a *film referred to in section 118‑30; or

                     (d)  a *registered emissions unit.

             (4)  If:

                     (a)  the *CGT asset or any of the assets of the *business is a right, option, *convertible interest or *exchangeable interest; and

                     (b)  the company *acquires another CGT asset by exercising the right or option or by converting the convertible interest or in exchange for the disposal or redemption of the exchangeable interest;

the other asset cannot become *trading stock of the company just after the company acquired it.

             (5)  The *ordinary income and *statutory income of the company must not be exempt from income tax because it is an *exempt entity for the income year of the trigger event.

             (6)  If you are an individual at the time of the trigger event, either:

                     (a)  you and the company must both be Australian residents at that time; or

                     (b)  both of the following requirements must be satisfied:

                              (i)  each asset must be *taxable Australian property at that time;

                             (ii)  the shares in the company mentioned in subsection 122‑20(1) must be taxable Australian property just after that time.

             (7)  If you are a trustee of a trust at the time of the trigger event, either:

                     (a)  at that time, the trust must be a *resident trust for CGT purposes and the company must be an Australian resident; or

                     (b)  both of the following requirements must be satisfied:

                              (i)  each *CGT asset must be a CGT asset of the trust that is *taxable Australian property at that time; and

                             (ii)  the shares in the company mentioned in subsection 122‑20(1) must be taxable Australian property just after that time.

122‑35  What if the company undertakes to discharge a liability (disposal case)

Disposal of a CGT asset

             (1)  One of the requirements in this table must be satisfied if:

                     (a)  you *dispose of a *CGT asset; and

                     (b)  the company undertakes to discharge one or more liabilities in respect of it.

                   (The *market value, or the *cost base, of an asset is worked out when you disposed of it.)

 

*What amount the liabilities cannot exceed

Item

In this situation:

the liabilities cannot exceed:

1

You *acquired the asset on or after 20 September 1985

The *cost base of the asset

2

You *acquired the asset before 20 September 1985

The *market value of the asset

Note:          There are rules for working out what are the liabilities in respect of an asset: see section 122‑37.

Disposal of all the assets of a business

             (2)  One of the requirements in this table must be satisfied if:

                     (a)  you *dispose of all the assets of a *business; and

                     (b)  the company undertakes to discharge one or more liabilities in respect of the assets of the business.

                   (The *market value, or the *cost base, of an asset is worked out when you disposed of it.)

 

What amount the liabilities cannot exceed

Item

In this situation:

The liabilities cannot exceed:

1

You *acquired all the assets on or after 20 September 1985

The sum of the *market values of the *precluded assets and the *cost bases of the other assets

2

You *acquired all the assets before 20 September 1985

The sum of the *market values of the assets

3

You *acquired at least one asset on or after 20 September 1985 and at least one before that day

For liabilities in respect of assets you *acquired on or after that day—the sum of the *market values of the *precluded assets and the *cost bases of the other assets;

For liabilities in respect of assets you *acquired before that day—the sum of the market values of those assets

122‑37  Rules for working out what a liability in respect of an asset is

             (1)  These rules are relevant to working out what are the liabilities in respect of an asset.

             (2)  A liability incurred for the purposes of a *business that is not a liability in respect of a specific asset or assets of the business is taken to be a liability in respect of all the assets of the business.

Note:          An example is a bank overdraft.

             (3)  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:

Replacement‑asset roll‑over if you dispose of a CGT asset

122‑40  Disposal of a CGT asset

             (1)  If you choose a roll‑over, a *capital gain or *capital loss you make from the trigger event is disregarded.

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

                     (a)  the first element of each *share’s *cost base is the asset’s cost base when you *disposed of it (less any liabilities the company undertakes to discharge in respect of it) divided by the number of shares; and

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

Note 1:       There are rules for working out what are the liabilities in respect of an asset: see section 122‑37.

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

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

Replacement‑asset roll‑over if you dispose of all the assets of a business

122‑45  Disposal of all the assets of a business

             (1)  If you choose a roll‑over for *disposing of all the assets of a *business to the company, a *capital gain or *capital loss you make from each of the assets of the business is disregarded.

             (2)  The other consequences relate to the *shares you receive and depend on when you *acquired the assets of the *business.

Note 1:       There are 3 possible cases:

•       you acquired all the assets on or after 20 September 1985: see section 122‑50;

•       you acquired all the assets before that day: see section 122‑55;

•       you acquired some of the assets on or after that day: see section 122‑60.

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

Note 3:       There are other consequences for you and the company if you dispose of trading stock: see Division 70.

122‑50  All assets acquired on or after 20 September 1985

             (1)  If you *acquired all of the assets of the *business on or after 20 September 1985:

                     (a)  the first element of each *share’s *cost base is the sum of the *market values of the *precluded assets and the cost bases of the other assets (less any liabilities the company undertakes to discharge in respect of all of those assets) divided by the number of shares; and

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

Note 1:       There are rules for working out what are the liabilities in respect of an asset: see section 122‑37.

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

Example:    Nick is a small trader. He wants to incorporate his business. He disposes of all its assets to a company and receives 10 shares in return.

                   Nick acquired all the assets of the business after 20 September 1985.

                   Trading stock, plant and equipment and office furniture are precluded assets.

                   The market value of Nick’s trading stock when he disposed of it is $20,000. The market value of his plant and equipment at that time is $50,000 and the market value of his office furniture at that time is $10,000.

                   The cost bases of Nick’s land and buildings at that time total $120,000.

                   Nick has a business overdraft of $15,000. It is taken to be a liability in respect of all the assets of his business.

                   The first element of the cost base of the 10 shares is:

                   The first element of the reduced cost base of the 10 shares is worked out similarly.

             (2)  The *market value of an asset is worked out when you *disposed of it. The *cost base or *reduced cost base of an asset is worked out at the same time.

122‑55  All assets acquired before 20 September 1985

             (1)  You are taken to have *acquired all of the *shares before 20 September 1985 if you acquired all the assets of the *business before that day and none of the assets is a *precluded asset.

             (2)  However, if at least one of the assets is a *precluded asset, you are taken to have *acquired a whole number of the *shares (but not all of them) before that day. The number is the greatest possible that (when expressed as a percentage of all the shares) does not exceed:

   the total of the *market values of the assets that are not *precluded assets, less any liabilities the company undertakes to discharge in respect of those assets;

expressed as a percentage of:

   the total of the market values of all the assets, less any liabilities the company undertakes to discharge in respect of those assets.

Note:          There are rules for working out what are the liabilities in respect of an asset: see section 122‑37.

             (3)  The first element of each other *share’s *cost base and *reduced cost base is the total of the *market values of the *precluded assets (less any liabilities the company undertakes to discharge in respect of those assets) divided by the number of those other shares.

             (4)  The *market value of an asset is worked out when you *disposed of it. The *cost base or *reduced cost base of an asset is worked out at the same time.

122‑60  Assets acquired before and after 20 September 1985

             (1)  If you *acquired some of the assets on or after 20 September 1985, you are taken to have acquired a whole number of the *shares (but not all of them) before that day. The number is the greatest possible that (when expressed as a percentage of all the shares) does not exceed:

   the total of the *market values of the assets (except any *precluded assets) that you acquired before that day, less any liabilities the company undertakes to discharge in respect of those assets;

expressed as a percentage of:

   the total of the market values of all the assets, less any liabilities the company undertakes to discharge in respect of those assets.

             (2)  The first element of each other *share’s *cost base is the sum of the *market values of the *precluded assets and the cost bases of the other assets that you *acquired on or after that day (less any liabilities the company undertakes to discharge in respect of all of those assets) divided by the number of those other shares.

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

             (3)  The first element of each other *share’s *reduced cost base is worked out similarly.

             (4)  The *market value of an asset is worked out when you *disposed of it. The *cost base or *reduced cost base of an asset is worked out at the same time.

Replacement‑asset roll‑over for a creation case

122‑65  Creation of asset

             (1)  If you choose a roll‑over, a *capital gain or *capital loss you make from the trigger event is disregarded.

             (2)  The first element of each *share’s *cost base is the amount applicable under this table divided by the number of shares. The first element of each share’s *reduced cost base is worked out similarly.

 

Creation case

Event No.

Applicable amount

D1

the *incidental costs you incurred that relate to the trigger event

D2

the expenditure you incurred to grant the option

D3

the expenditure you incurred to grant the right

F1

the expenditure you incurred on the grant, renewal or extension of the lease

                   The expenditure can include a transfer of property: see section 103‑5.

Example:    Bill grants a licence (CGT event D1) to Tiffin Pty Ltd (a company he owns). The company issues him with 2 additional shares. He incurs legal expenses of $1,000 to grant the licence.

                   Bill’s cost base for each of the shares is $500.

Same‑asset roll‑over consequences for the company (disposal case)

122‑70  Consequences for the company (disposal case)

             (1)  There are these consequences for the company in a disposal case if you choose to obtain a roll‑over. They are relevant for each *CGT asset (except a *precluded asset) that you *disposed of to the company.

Note:          A capital gain or loss from a precluded asset can be disregarded: see Subdivision 118‑A.

Asset acquired on or after 20 September 1985

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

                     (a)  the first element of the asset’s *cost base (in the hands of the company) is the asset’s cost base when you disposed of it; and

                     (b)  the first element of the asset’s *reduced cost base (in the hands of the company) is the asset’s reduced cost base when you disposed of it.

Note 1:       There are special indexation rules for roll‑overs: see Division 114.

Note 2:       The reduced cost base may be modified for a roll‑over happening after a demerger: see section 125‑170.

Asset acquired before 20 September 1985

             (3)  If you *acquired the asset before 20 September 1985, the company is taken to have acquired it before that day.

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

Same‑asset roll‑over consequences for the company (creation case)

122‑75  Consequences for the company (creation case)

             (1)  There are these consequences for the company in a creation case if you choose to obtain a roll‑over.

             (2)  The first element of the created asset’s *cost base (in the hands of the company) is the applicable amount from the table in subsection 122‑65(2).

Example:    To continue the example in section 122‑65, the cost base of the licence in Tiffin Pty Ltd’s hands is $1,000.

             (3)  The first element of the created asset’s *reduced cost base (in the hands of the company) is worked out similarly.

Subdivision 122‑BDisposal or creation of assets by partners to a wholly‑owned company

Guide to Subdivision 122‑B

122‑120  What this Subdivision is about

This Subdivision sets out when the partners in a partnership can obtain a roll‑over on transferring a CGT asset, or all the assets of a business, to a company. It also deals with the creation of a CGT asset in a company. There are consequences for the company also.

Table of sections

When is a roll‑over available

122‑125    Disposal or creation of assets—wholly‑owned company

122‑130    What the partners receive for the trigger event

122‑135    Other requirements to be satisfied

122‑140    What if the company undertakes to discharge a liability (disposal case)

122‑145    Rules for working out what a liability in respect of an interest in an asset is

Replacement‑asset roll‑over if partners dispose of a CGT asset

122‑150    Capital gain or loss disregarded

122‑155    Disposal of post‑CGT or pre‑CGT interests

122‑160    Disposal of both post‑CGT and pre‑CGT interests

Replacement‑asset roll‑over if the partners dispose of all the assets of a business

122‑170    Capital gain or loss disregarded

122‑175    Other consequences

122‑180    All interests acquired on or after 20 September 1985

122‑185    All interests acquired before 20 September 1985

122‑190    Interests acquired before and after 20 September 1985

Replacement‑asset roll‑over for a creation case

122‑195    Creation of asset

Same‑asset roll‑over consequences for the company (disposal case)

122‑200    Consequences for the company (disposal case)

Same‑asset roll‑over consequences for the company (creation case)

122‑205    Consequences for the company (creation case)

When is a roll‑over available

122‑125  Disposal or creation of assets—wholly‑owned company

                   All of the partners in a partnership can choose to obtain a roll‑over if one of the *CGT events (the trigger event) specified in this table happens involving the partners and a company in the circumstances set out in sections 122‑130 to 122‑140.

 

Relevant *CGT events

Event No.

What the partners do

A1

*Dispose of their interests in a *CGT asset of the partnership, or all the assets of a business carried on by the partnership, to the company

D1

Create contractual or other rights in the company

D2

Grant an option to the company

D3

Grant the company a right to income from mining

F1

Grant a lease to the company, or renew or extend a lease

Note 1:       The roll‑over starts at section 122‑150.

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

Example:    Michael and Sandra operate a fish shop in partnership. They agree to incorporate the business so they dispose of their interests in all its assets to a company. They are the only shareholders of the company.

122‑130  What the partners receive for the trigger event

             (1)  The consideration the partners receive must be only:

                     (a)  *shares in the company; or

                     (b)  for a *disposal of their interests in a *CGT asset, or in all the assets of a business, to the company (a disposal case)—shares in the company and the company undertaking to discharge one or more liabilities in respect of their interests.

Note:          There are rules for working out what are the liabilities in respect of an interest in an asset: see section 122‑145.

             (2)  The *shares cannot be *redeemable shares.

             (3)  The *market value of the *shares each partner receives for the trigger event happening must be substantially the same as:

                     (a)  for a disposal case—the market value of the interests in the asset or assets the partner disposed of, less any liabilities the company undertakes to discharge in respect of the interests in the asset or assets (as appropriate); or

                     (b)  for another trigger event (a creation case)—the market value of what would have been the partner’s interest in the *CGT asset created in the company (the created asset) if it were an asset of the partnership.

             (4)  In working out if the requirement in paragraph (3)(a) is satisfied, if the *market value of the *shares is different to what it would otherwise be only because of the possibility of liabilities attaching to the asset or assets, disregard the difference.

Note:          The company may have to pay income tax if an amount is included in its assessable income because of a CGT event happening to an asset a partner disposed of, or it may have a liability because of accrued leave entitlements of employees. The market value of the shares will reflect these contingent liabilities.

122‑135  Other requirements to be satisfied

             (1)  The partners must own all the *shares in the company just after the time of the trigger event.

             (2)  Each partner must own the *shares the partner received for the trigger event happening in the same capacity that the partner:

                     (a)  owned the partner’s interests in the assets that the company now owns; or

                     (b)  participated in the creation of the asset in the company.

Note:          If a partner’s interests were owned as trustee, the partner must receive shares as trustee.

             (3)  This Subdivision does not apply to the *disposal or creation of any of the assets specified in this table:

 

Assets to which Subdivision does not apply

Item

In this situation:

This Subdivision does not apply to:

1

The partners *dispose of their interests in a *CGT asset to, or create a CGT asset in, the company

(a) a *collectable or a *personal use asset; or

(b) a decoration awarded for valour or brave conduct (except if a partner paid money or gave any other property for it); or

(c)  a *precluded asset; or

(d) an asset that becomes *trading stock of the company just after the *disposal or creation

2

The partners *dispose of their interests in all the assets of a business

(a) a *collectable or a *personal use asset; or

(b) a decoration awarded for valour or brave conduct (except if a partner paid money or gave any other property for it); or

(c)  an asset that becomes *trading stock of the company just after the disposal or creation (unless it was trading stock of the partnership when it was disposed of)

             (4)  If:

                     (a)  the *CGT asset or any of the assets of the *business is a right, option, *convertible interest or *exchangeable interest; and

                     (b)  the company *acquires another CGT asset by exercising the right or option or by converting the convertible interest or in exchange for the disposal or redemption of the exchangeable interest;

the other asset cannot become *trading stock of the company just after the company acquired it.

             (5)  The *ordinary income and *statutory income of the company must not be exempt from income tax because it is an *exempt entity for the income year of the trigger event.

             (6)  For a partner who is not a trustee of a trust at the time of the trigger event, either:

                     (a)  the partner and the company must both be Australian residents at that time; or

                     (b)  both of the following requirements must be satisfied:

                              (i)  each asset must be *taxable Australian property at that time; and

                             (ii)  the shares in the company mentioned in subsection 122‑130(1) must be taxable Australian property just after that time.

             (7)  For a partner who is a trustee of a trust at the time of the trigger event, either:

                     (a)  at that time, the trust must be a *resident trust for CGT purposes and the company must be an Australian resident; or

                     (b)  both of the following requirements must be satisfied:

                              (i)  each *CGT asset must be a CGT asset of the trust that is *taxable Australian property at that time; and

                             (ii)  the shares in the company mentioned in subsection 122‑130(1) must be taxable Australian property just after that time.

122‑140  What if the company undertakes to discharge a liability (disposal case)

Disposal of a CGT asset

             (1)  One of these requirements must be satisfied (for each partner) if:

                     (a)  the partners *dispose of their interests in a *CGT asset; and

                     (b)  the company undertakes to discharge one or more liabilities in respect of the interests in the asset.

                   (The *market value, or the *cost base, of an interest is worked out at the time of the disposal.)

 

What amount the liabilities cannot exceed

Item

In this situation:

the liabilities cannot exceed:

1

A partner *acquired the interest on or after 20 September 1985

The *cost base of the interest

2

A partner *acquired the interest before 20 September 1985

The *market value of the interest

Note:          There are rules for working out what are the liabilities in respect of an interest in an asset: see section 122‑145.

Disposal of all the assets of a business

             (2)  One of these requirements must be satisfied (for each partner) if:

                     (a)  the partners *dispose of their interests in all the assets of a *business; and

                     (b)  the company undertakes to discharge one or more liabilities in respect of the interests in the assets.

                   (The *market value, or the *cost base, of an interest is worked out at the time of the disposal.)

 

What amount the liabilities cannot exceed

Item

In this situation:

the liabilities cannot exceed:

1

A partner *acquired all the interests on or after 20 September 1985

The sum of the *market values of the partner’s interests in *precluded assets and the *cost bases of the partner’s interests in other assets

2

A partner *acquired all the interests before 20 September 1985

The sum of the *market values of the interests

3

A partner *acquired at least one interest on or after 20 September 1985 and at least one before that day

For liabilities in respect of interests *acquired on or after that day—the sum of the *market values of the partner’s interests in *precluded assets and the *cost bases of the partner’s interests in other assets

For liabilities in respect of interests *acquired before that day—the sum of the market values of those interests

122‑145  Rules for working out what a liability in respect of an interest in an asset is

             (1)  These rules are relevant to working out what are the liabilities in respect of a partner’s interests in an asset.

             (2)  A liability incurred for the purposes of a *business that is not a liability in respect of interests in a specific asset or assets of the business is taken to be a liability in respect of the partner’s interests in all the assets of the business.

Note:          An example is a bank overdraft.

             (3)  If a liability is in respect of both:

                     (a)  the partner’s interests in one or more assets that the partner *acquired on or after 20 September 1985; and

                     (b)  the partner’s interests in one or more assets that the partner acquired before that day;

the proportion of the liability that is in respect of the partner’s interests that the partner acquired on or after that day is equal to:

Replacement‑asset roll‑over if partners dispose of a CGT asset

122‑150  Capital gain or loss disregarded

                   If the partners choose a roll‑over for *disposing of their interests in a CGT asset to the company, a *capital gain or *capital loss any partner makes from the disposal is disregarded.

122‑155  Disposal of post‑CGT or pre‑CGT interests

             (1)  If a partner *acquired all the partner’s interests in the asset on or after 20 September 1985:

                     (a)  the first element of each *share’s *cost base is the sum of the cost bases of the interests when the partner *disposed of them (less any liabilities the company undertakes to discharge in respect of them) divided by the number of the partner’s shares; and

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

Note 1:       There are rules for working out what are the liabilities in respect of an interest in an asset: see section 122‑145.

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

             (2)  If a partner *acquired all the partner’s interests in the asset before 20 September 1985, the partner is taken to have acquired the *shares before that day.

122‑160  Disposal of both post‑CGT and pre‑CGT interests

             (1)  If a partner *acquired some of the partner’s interests in the asset on or after 20 September 1985 and some before that day, the partner is taken to have acquired a whole number of the *shares (but not all of them) before that day. The number is the greatest possible that (when expressed as a percentage of all the shares the partner acquires) does not exceed:

   the *market value of the interests in the asset that the partner acquired before that day;

expressed as a percentage of:

   the total of the market values of all the partner’s interests in the asset.

             (2)  The first element of each other *share’s *cost base is the sum of the cost bases of the partner’s interests that the partner *acquired on or after that day (less any liabilities the company undertakes to discharge in respect of all of those interests) divided by the number of the other shares.

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

             (3)  The first element of each other *share’s *reduced cost base is worked out similarly.

             (4)  The *market value of an interest in an asset is worked out when the partner *disposed of it. The *cost base or *reduced cost base of an interest in an asset is worked out at the same time.

Replacement‑asset roll‑over if the partners dispose of all the assets of a business

122‑170  Capital gain or loss disregarded

                   If the partners choose a roll‑over for *disposing of their interests in all the assets of a *business to the company, a *capital gain or *capital loss any partner makes from the disposal is disregarded.

122‑175  Other consequences

                   The other consequences relate to the *shares the partners receive and depend on when they *acquired their interests in the assets of the *business.

Note 1:       There are 3 possible cases:

•       a partner acquired all the interests on or after 20 September 1985: see section 122‑180;

•       a partner acquired all the interests before that day: see section 122‑185;

•       a partner acquired some of the interests on or after that day: see section 122‑190.

Note 2:       There are other consequences for the partnership and the company if the partners dispose of their interests in trading stock of the partnership: see Division 70.

122‑180  All interests acquired on or after 20 September 1985

             (1)  If a partner *acquired all of the partner’s interests in the assets of the *business on or after 20 September 1985:

                     (a)  the first element of the partner’s *cost base of each *share is the sum of the *market values of the partner’s interests in the *precluded assets and the cost bases of the partner’s interests in the other assets (less any liabilities the company undertakes to discharge in respect of all of those interests) divided by the number of the partner’s shares; and

                     (b)  the first element of the partner’s *reduced cost base of each *share is worked out similarly.

Note 1:       There are rules for working out what are the liabilities in respect of interests: see section 122‑145.

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

             (2)  The *market value of an interest in an asset is worked out when the partner *disposed of it. The *cost base or *reduced cost base of an interest is worked out at the same time.

122‑185  All interests acquired before 20 September 1985

             (1)  A partner is taken to have *acquired all of the *shares before 20 September 1985 if the partner acquired all the partner’s interests in the assets of the *business before that day and none of the assets is a *precluded asset.

             (2)  However, if at least one of the assets is a *precluded asset, the partner is taken to have *acquired a whole number of the *shares (but not all of them) before that day. The number is the greatest possible that (when expressed as a percentage of all the shares) does not exceed:

   the total of the *market values of the partner’s interests in the assets that are not *precluded assets, less any liabilities the company undertakes to discharge in respect of those interests;

expressed as a percentage of:

   the total of the market values of the partner’s interests in all the assets, less any liabilities the company undertakes to discharge in respect of those interests.

Note:          There are rules for working out what are the liabilities in respect of an interest: see section 122‑145.

             (3)  The first element of the partner’s *cost base and *reduced cost base of each other *share is the total of the *market values of the partner’s interests in the *precluded assets (less any liabilities the company undertakes to discharge in respect of those interests) divided by the number of the other shares.

             (4)  The *market value of an interest in an asset is worked out when the partner *disposed of it. The *cost base or *reduced cost base of an interest is worked out at the same time.

122‑190  Interests acquired before and after 20 September 1985

             (1)  If a partner *acquired some of the interests in the assets on or after 20 September 1985, the partner is taken to have acquired a whole number of the *shares (but not all of them) before that day. The number is the greatest possible that (when expressed as a percentage of all the shares) does not exceed:

   the total of the *market values of the partner’s interests in the assets (except any *precluded assets) that the partner acquired before that day, less any liabilities the company undertakes to discharge in respect of those interests;

expressed as a percentage of:

   the total of the market values of all the partner’s interests in the assets, less any liabilities the company undertakes to discharge in respect of those interests.

             (2)  The first element of the partner’s *cost base of each other *share is the sum of the *market values of the partner’s interests in the *precluded assets and the cost bases of the partner’s interests in the other assets that the partner *acquired on or after that day (less any liabilities the company undertakes to discharge in respect of all of those interests) divided by the number of the other shares.

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

             (3)  The first element of the partner’s *reduced cost base of each other *share is worked out similarly.

             (4)  The *market value of an interest in an asset is worked out when the partner *disposed of it. The *cost base or *reduced cost base of an interest in an asset is worked out at the same time.

Replacement‑asset roll‑over for a creation case

122‑195  Creation of asset

             (1)  If the partners choose a roll‑over, a *capital gain or *capital loss any partner makes from the trigger event is disregarded.

             (2)  The first element of the partner’s *cost base of each *share is the amount applicable under this table divided by the number of shares. The first element of each share’s *reduced cost base is worked out similarly.

 

Creation case

Event No.

Applicable amount

D1

the partner’s share of the *incidental costs incurred that relate to the trigger event

D2

the partner’s share of the expenditure incurred to grant the option

D3

the partner’s share of the expenditure incurred to grant the right

F1

the partner’s share of the expenditure incurred on the grant, renewal or extension of the lease

                   The expenditure can include a transfer of property: see section 103‑5.

Same‑asset roll‑over consequences for the company (disposal case)

122‑200  Consequences for the company (disposal case)

             (1)  There are these consequences for the company in a disposal case if the partners choose to obtain a roll‑over. They are relevant for interests in each *CGT asset (except a *precluded asset) that the partners *disposed of to the company.

Note 1:       A capital gain or loss from a precluded asset can be disregarded: see Subdivision 118‑A.

Note 2:       The reduced cost base (as determined under this section) may be modified for a roll‑over happening after a demerger: see section 125‑170.

Interests acquired on or after 20 September 1985

             (2)  If all of the partners’ interests in an asset were *acquired on or after 20 September 1985:

                     (a)  the first element of the asset’s *cost base (in the hands of the company) is the sum of the cost bases of the partners’ interests in the asset when it was disposed of; and

                     (b)  the first element of the asset’s *reduced cost base (in the hands of the company) is the sum of the reduced cost bases of the partners’ interests in the asset when it was disposed of.

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

Interests acquired before 20 September 1985

             (3)  If all of the partners’ interests in an asset were *acquired before 20 September 1985, the company is taken to have acquired it before that day.

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

Interests acquired on or after and before 20 September 1985

             (4)  If some of the partners’ interests in an asset (the original asset) were *acquired on or after 20 September 1985 and some before that day, the company is taken to have acquired 2 separate *CGT assets:

                     (a)  one (which the company is taken to have acquired on or after 20 September 1985) representing the extent to which the partners’ interests in the original asset were acquired by the partners on or after that day; and

                     (b)  another (which the company is taken to have acquired before that day) representing the extent to which the partners’ interests in the original asset were acquired by the partners before that day.

             (5)  The first element of the *cost base of the separate asset that the company is taken to have *acquired on or after 20 September 1985 is the sum of the cost bases of the partners’ interests in the original asset that they acquired on or after that day.

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

             (6)  The first element of its *reduced cost base is worked out similarly.

Same‑asset roll‑over consequences for the company (creation case)

122‑205  Consequences for the company (creation case)

             (1)  There are these consequences for the company in a creation case if the partners choose to obtain a roll‑over.

             (2)  The first element of the created asset’s *cost base (in the hands of the company) is the applicable amount from this table.

 

Creation case

Event No.

Applicable amount

D1

the total *incidental costs incurred that relate to the trigger event

D2

the total expenditure incurred to grant the option

D3

the total expenditure incurred to grant the right

F1

the total expenditure incurred on the grant, renewal or extension of the lease

                   The expenditure can include a transfer of property: see section 103‑5.

             (3)  The first element of the created asset’s *reduced cost base (in the hands of the company) is worked out similarly.


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 *Cro